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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 2000.
Registration Statement No.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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ENTERBANK HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 6022 43-1706259
(State or (Primary Industrial (IRS Employer
Other Jurisdiction Classification Code Number) Identification No.)
of Incorporation
or Organization)
150 NORTH MERAMEC, CLAYTON, MISSOURI 63105
(314) 725-5500
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------------------
JAMES C. WAGNER
CHIEF FINANCIAL OFFICER
ENTERBANK HOLDINGS, INC.
150 NORTH MERAMEC
CLAYTON, MISSOURI 63105
(314) 725-5500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------------------
COPIES TO:
JOHN L. GILLIS, JR., ESQ. C. ROBERT MONROE, ESQ.
ARMSTRONG TEASDALE LLP STINSON, MAG & FIZZELL, P.C.
ONE METROPOLITAN SQUARE, SUITE 2600 1201 WALNUT, SUITE 2800
ST. LOUIS, MISSOURI 63102-2740 KANSAS CITY, MISSOURI 64106-2150
(314) 621-5070 (816) 842-8600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE 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. [ ]
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CALCULATION OF REGISTRATION FEE
==========================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED<F1> PRICE PER UNIT<F1> OFFERING PRICE<F1> REGISTRATION FEE<F2>
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Common Stock, $0.01 par value per share 2,049,135 $18.91 $38,749,142 $10,230
==========================================================================================================================
<FN>
<F1> This Registration Statement relates to securities of the Registrant
issuable to holders of common stock of Commercial Guaranty
Bancshares, Inc., a Kansas corporation ("CGB"), in the proposed
merger of CGB with a subsidiary of the Registrant. Represents the
approximate number of shares of common stock of the Registrant to be
issued upon the consummation of the merger, based upon the number of
shares of CGB common stock outstanding on April 26, 2000 (including
shares issuable upon the exercise of options pursuant to CGB's stock
option plans), all as provided in the Agreement and Plan of Merger
attached as Annex A to the attached Joint Proxy Statement/Prospectus.
<F2> Pursuant to Rule 457(f), the registration fee was computed on the
basis of $18.91, the book value of the common stock of CGB to be
exchanged in the merger, computed as of April 26, 2000, and 2,049,135,
the maximum number of shares of CGB which may be received by the
Registrant and cancelled upon consummation of the merger described
herein.
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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.
==============================================================================
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THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROXY STATEMENT--SUBJECT TO COMPLETION
Enterbank Holdings, Inc.
150 North Meramec
Clayton, Missouri 63105
, 2000
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the
Shareholders of Enterbank Holdings, Inc. ("Enterbank") to be held
at , St. Louis, Missouri,
at a.m., local time, on , 2000.
At the meeting, Enterbank shareholders will be asked to consider and vote
upon a proposal to approve the principal terms of the Agreement and Plan of
Merger dated as of January 5, 2000, as amended, by and between Enterbank and
Commercial Guaranty Bancshares, Inc. ("CGB"), as more fully described in the
accompanying joint proxy statement/prospectus. The merger agreement is
attached to this document as Annex A. No other business will be transacted at
the meeting other than matters incidental to the conduct of the meeting.
In the merger, Enterbank Acquisition Corp. I, a wholly-owned subsidiary of
Enterbank, will be merged into CGB and CGB will become a wholly-owned
subsidiary of Enterbank. As a result of the merger, each share of CGB common
stock outstanding at the effective time of the merger, other than shares with
respect to which dissenters' rights are perfected, will be converted into
2.1429 shares of Enterbank common stock, subject to certain potential
adjustments described in the merger agreement and the accompanying joint
proxy statement/prospectus. No fractional shares of Enterbank common stock
will be issued to holders of shares of CGB common stock, and, in lieu of such
fractional shares, cash will be paid to CGB shareholders in accordance with
the merger agreement.
The Delaware General Corporation Law does not require that holders of
shares of Enterbank common stock approve the merger agreement in order for
the merger to be consummated. However, because of the significance of the
proposed merger to Enterbank and its shareholders, the Board of Directors of
Enterbank has determined that the merger will not be consummated unless the
merger agreement is first approved by the affirmative vote of the holders of
a majority of the outstanding shares of Enterbank common stock present and
voting at the special meeting. Shareholders of record at the close of
business on , 2000 are entitled to notice of the
special meeting and to vote at the special meeting or any adjournment or
postponement of the special meeting. The consummation of the proposed merger
also requires that certain regulatory approvals be received and that the
conditions contained in the merger agreement be satisfied.
THE ENTERBANK BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING THE MERGER, AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT, INCLUDING THE MERGER, AT THE MEETING.
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The accompanying notice and joint proxy statement/prospectus describe the
matters to be acted upon at the meeting. Shareholders are urged to review
carefully the attached document, including its annexes. Such documents
contain a detailed description of the merger, its terms and conditions and
the transactions which are proposed.
Your continuing interest in the business of Enterbank is appreciated, and
we hope you will attend the meeting in person. It is important that your
shares be represented at the meeting. Accordingly, whether or not you plan to
attend the meeting, please sign, date and return the enclosed proxy promptly
in the postage-paid envelope that has been provided to you for your
convenience.
Sincerely,
_____________________________________
Fred H. Eller,
President and Chief Executive Officer
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THIS TRANSACTION OR THE SHARES OF ENTERBANK COMMON
STOCK 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 SHARES OF ENTERBANK COMMON STOCK OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS
OF ANY BANK OR NONBANK SUBSIDIARY OF ANY OF THE PARTIES AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
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For a discussion of certain risk factors which you should consider in
evaluating the merger, see "Risk Factors" beginning on page 22.
The date of this joint proxy statement/prospectus is ,
2000, and is first being mailed to Enterbank shareholders on or about
, 2000.
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PRELIMINARY PROXY STATEMENT--SUBJECT TO COMPLETION
Commercial Guaranty Bancshares, Inc.
12695 Metcalf Avenue
Overland Park, Kansas 66213
, 2000
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the
Shareholders of Commercial Guaranty Bancshares, Inc. ("CGB") to be held at
, at a.m., local
time, on , 2000.
At the meeting, CGB shareholders will be asked to consider and vote upon a
proposal to approve the principal terms of the Agreement and Plan of Merger
dated as of January 5, 2000, as amended, by and between CGB, and Enterbank
Holdings, Inc. ("Enterbank"), as more fully described in the accompanying
joint proxy statement/prospectus. The merger agreement is attached to this
document as Annex A. No other business will be transacted at the meeting
other than matters incidental to the conduct of the meeting.
In the merger, Enterbank Acquisition Corp. I, a wholly-owned subsidiary of
Enterbank, will be merged into CGB and CGB will become a wholly-owned
subsidiary of Enterbank. As a result of the merger, each share of CGB common
stock outstanding at the effective time of the merger, other than shares with
respect to which dissenters' rights are perfected, will be converted into
2.1429 shares of Enterbank common stock, subject to certain potential
adjustments described in the merger agreement and the accompanying joint
proxy statement/prospectus. No fractional shares of Enterbank common stock
will be issued to holders of shares of CGB common stock, and, in lieu of such
fractional shares, cash will be paid to CGB shareholders in accordance with
the merger agreement.
Under the Kansas General Corporation Code, the approval of the merger
agreement and the merger requires the affirmative vote of the holders of a
majority of the outstanding shares of CGB common stock. Shareholders of
record at the close of business on , 2000, are
entitled to notice of the special meeting and to vote at the special meeting
or any adjournment or postponement of the special meeting. The consummation
of the proposed merger also requires that certain regulatory approvals be
received and that the conditions contained in the merger agreement be
satisfied.
THE CGB BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE
MERGER, AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING THE MERGER, AT THE MEETING.
The accompanying notice and joint proxy statement/prospectus describe the
matters to be acted upon at the meeting. Shareholders are urged to review
carefully the attached document, including its annexes. Such documents
contain a detailed description of the merger, its terms and conditions and
the transactions which are proposed.
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Your continuing interest in the business of CGB is appreciated, and we hope
you will attend the meeting in person. It is important that your shares be
represented at the meeting. Accordingly, whether or not you plan to attend
the meeting, please sign, date and return the enclosed proxy promptly in the
postage-paid envelope that has been provided to you for your convenience.
Sincerely,
______________________________
Joe C. Morris,
Chairman
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THIS TRANSACTION OR THE SHARES OF ENTERBANK COMMON
STOCK 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 SHARES OF ENTERBANK COMMON STOCK OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS
OF ANY BANK OR NONBANK SUBSIDIARY OF ANY OF THE PARTIES AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
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The date of this joint proxy statement/prospectus is ,
2000, and is first being mailed to CGB shareholders on or about
, 2000.
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TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS ABOUT THE MERGER 10
SUMMARY 12
The Special Meetings 12
Information Regarding Enterbank, CGB and Enterbank Acquisition
Corp. I 12
Reasons for the Merger; Recommendations of the Boards of Directors 13
Recommendations to Shareholders 13
Opinion of Enterbank's Financial Advisor 14
Opinion of CGB's Financial Advisor 14
What CGB Shareholders will Receive 14
Conditions to the Merger 14
Termination of the Merger Agreement 15
Termination Fees 15
Required Regulatory Approvals 16
Fees and Expenses of the Merger 16
Income Tax Consequences of the Merger 17
Accounting Treatment 17
Dissenters' Rights of Appraisal 17
Enterbank 17
CGB 17
Share Ownership of Management 17
Comparative Per Share Price Information 18
Comparison of Shareholder Rights 18
Description of Enterbank Capital Stock 18
Selected Historical and Pro Forma Financial Data 19
Historical and Pro Forma Per Share Data for Enterbank and CGB 21
RISK FACTORS 22
Merger Risk Factors 22
The Financial Condition of Enterbank and CGB May Be Negatively
Impacted by Worsening Economic Conditions, Rising Interest
Rates or Acts of Nature 22
Customers and Employees of First Commercial Bank, N.A. May Not
Be Retained 22
The Price of Enterbank Common Stock May Decline 22
There Has Not Been an Active Public Market for the Enterbank
Common Stock, and an Active Trading Market May Not Develop 23
The Combined Companies Will Be Impacted By Competition From Many
Others 23
Additional Shares of Enterbank Common Stock Could Be Issued Which
Could Result in a Decline in the Market Price of Such Stock 23
Banking Industry Risk Factors 24
Any Changes in Interest Rates or the Cost of Funds May Adversely
Affect the Combined Companies' Earnings and Financial Condition 24
If Borrowers Do Not Repay Loans it Will Adversely Affect the
Combined Companies 25
The Success of the Combined Companies Will Be Dependent Upon the
Future Success of Certain of Our Subsidiaries 25
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If There are Adverse Conditions in the Combined Companies'
Geographic Areas or With a Few Customers, There May Be
a Disproportionately Large Effect on the Combined Companies'
Financial Results 25
We Will Be Dependent on Key Personnel 25
The Business of the Combined Companies Will Be Subject to
Significant Government Regulation 26
Significant Costs May Be Incurred if the Combined Companies
Foreclose on Environmentally Contaminated Real Estate 26
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS 27
INTRODUCTION 28
The Special Meetings: Dates, Times and Places 28
Enterbank 28
CGB 28
Matters to be Considered at the Special Meetings 28
Enterbank 28
CGB 28
Record Date; Stock Entitled to Vote; Quorum 28
Enterbank 28
CGB 28
Votes Required 28
Enterbank 28
CGB 29
Share Ownership of Management 29
Enterbank 29
CGB 31
Voting of Proxies 33
Submitting Proxies 33
Revoking Proxies 33
Abstentions and Broker Non-Votes 34
Recommendation of the Enterbank Board of Directors and CGB
Board of Directors 35
ENTERBANK HOLDINGS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION 36
COMMERCIAL GUARANTY BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION 38
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 40
Notes to Unaudited Pro Forma Condensed Combined Financial Statements 45
MANAGEMENT'S DISCUSSION OF THE FORMATION AND EXPANSION OF
COMMERCIAL GUARANTY BANCSHARES, INC.
AND THE RELATED ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 46
General 46
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Fiscal 1999 Compared to Fiscal 1998 47
Financial Condition 47
Results of Operations 48
Net Interest Income 48
Fiscal 1998 Compared to Fiscal 1997 48
Financial Condition 48
Results of Operations 49
Net Interest Income 49
Loan Portfolio 54
Provision for Loan Losses 55
Non-interest Income 59
Non-interest Expense 59
Income Taxes 60
Liquidity and Interest Rate Sensitivity 61
Qualitative and Quantitative Disclosures About Market Risk 62
Balance Sheet Trend 63
Short-term Borrowings 67
Capital Adequacy 67
Year 2000 68
Effect of Inflation 68
Supervision and Regulation 69
Federal Bank Holding Company Regulation 69
Bank Regulation 70
Dividends 72
Capital Regulations 72
INFORMATION ABOUT ENTERBANK AND ITS AFFILIATES 73
INFORMATION ABOUT CGB AND FIRST COMMERCIAL BANK, N.A. 74
THE MERGER 75
Background of the Merger 75
Reasons for the Merger; Recommendations of the Boards of Directors 76
Enterbank 76
Opinion of Enterbank's Financial Advisor 78
CGB 85
Opinion of CGB's Financial Advisor 86
Effective Date and Time of the Merger 91
Purchase Price and Potential Adjustments 92
Conversion of Shares of CGB Common Stock 93
Exchange of CGB Stock Certificates; Fractional Interests 93
Treatment of Stock Options 94
Conduct of Business Pending the Merger 94
Additional Agreements 98
Special Shareholders' Meetings 98
No Solicitations 98
Filings and Other Actions 98
Employee Benefit Plans 99
Indemnification; Directors' And Officers' Insurance 99
Representations and Warranties 99
Conditions to the Completion of the Merger 100
Termination of the Merger Agreement 102
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Fees and Expenses 105
Termination Fees 105
General Expenses 105
Reimbursement Expenses 106
Amendment 106
Extension; Waiver 106
Management and Operations Following the Merger 107
Required Regulatory Approvals 107
Certain Federal Income Tax Consequences 108
Accounting Treatment 110
Trading Markets for Stock 111
Resales of Enterbank Common Stock 111
DISSENTERS' RIGHTS OF APPRAISAL 112
Appraisal Rights of Enterbank Shareholders 112
Appraisal Rights of CGB Shareholders 112
MARKET PRICE AND DIVIDEND INFORMATION 116
Market Price Data 116
Dividends and Dividend Policy 117
Enterbank 117
CGB 117
COMPARISON OF SHAREHOLDER RIGHTS 119
General 119
Certain Anti-Takeover Measures 119
Quorum Requirements 120
Indemnification of Directors and Executive Officers 120
Enterbank 121
Overview of Kansas Law 122
CGB 122
Overview of Federal Law 122
Shareholder Meetings and Action by Written Consent 123
Cumulative Voting 123
Amendment of Bylaws; Number of Directors 123
Enterbank 123
CGB 123
Filling Vacancies on the Board of Directors 124
Enterbank 124
CGB 124
Call of Annual or Special Meeting of Shareholders and Action by
Shareholders Without a Meeting 124
Enterbank 124
CGB 124
Classified Board Provisions 125
Enterbank 125
CGB 125
DESCRIPTION OF ENTERBANK CAPITAL STOCK 125
Common Stock 125
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DESCRIPTION OF CGB CAPITAL STOCK 125
EXPERTS 126
LEGAL MATTERS 126
SOLICITATION OF PROXIES 126
WHERE YOU CAN FIND MORE INFORMATION 127
Annex A Agreement and Plan of Merger, as amended
Annex B Fairness Opinion of Fister & Associates, Inc.
Annex C Fairness Opinion of Stifel, Nicolaus & Company, Inc.
Annex D Kansas General Corporation Code K.S.A. 17-6712
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QUESTIONS AND ANSWERS
ABOUT THE MERGER
Q: Why is this merger proposed?
A: Each of the Boards of Directors of Enterbank and CGB believes the merger
to be in the best interests of their respective institutions, shareholders,
communities and customers. Each Board expects that the combined companies
will be stronger in terms of growth opportunities and profitability than
either institution is at present. Furthermore, it is believed that the
combined companies, as a stronger independent financial institution with a
primary market area covering a greater geographic area, will be better able
to compete with major banks and financial service companies in the
communities now served by each company.
Q: What will I receive in this merger?
A: Under the merger agreement, CGB shareholders will have the right to
receive 2.1429 shares of Enterbank common stock for each share of CGB common
stock that they own. Enterbank shareholders will continue to own their
existing shares.
Q: What will happen to CGB in this merger?
A: Following the merger, CGB will be a wholly-owned subsidiary of Enterbank.
Q: Will the merger be tax free to me?
A: The merger is intended to be a tax-free reorganization for federal income
tax purposes for the companies and their shareholders. In general, CGB
shareholders will not recognize gain or loss on the exchange of their stock,
other than on account of cash received for a fractional share or dissenting
shares. Enterbank shareholders will not recognize any gain or loss in
connection with the merger. To review the tax consequences to Enterbank and
CGB shareholders in greater detail, see "The Merger--Certain Federal Income
Tax Consequences," on page 108.
Q: How do I vote?
A: Simply indicate on your proxy card how you want to vote and then sign and
mail your proxy card in the enclosed return envelope as soon as possible so
that your shares may be represented at your special meeting.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: Your broker will not vote your shares for you unless you provide
instructions to your broker on how to vote. It is important that you follow
the directions provided by your broker regarding how to instruct your broker
to vote your shares. If you are a CGB shareholder, your failure to instruct
your broker on how to vote your shares will have the same effect as a vote
against the merger. Broker non-votes will not have the effect of establishing
dissenters' rights of CGB shareholders. See "Introduction--Voting of
Proxies--Abstentions and Broker Non-Votes" on page 33.
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. You may change your vote at any time before your proxy is voted at
the special meeting. If your shares are held in your name, you may do this in
one of three ways. First, you may send a
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written notice stating that you would like to revoke your proxy. Second, you
may complete and submit a new proxy card. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy card to
the address at the top of the notice of the special meeting for CGB or
Enterbank and it must be received prior to the special meeting. Third, you
may attend the meeting and vote in person if you tell the Secretary that you
want to cancel your proxy and vote in person. Simply attending the special
meeting, however, will not revoke your proxy. If you have instructed a broker
to vote your shares, you must follow directions received from your broker to
change your vote or to vote in person at the special meeting.
Q: Should I send in my CGB stock certificates now?
A: No. After the merger is completed, Enterbank will send you written
instructions for exchanging your CGB stock certificates.
Q: When do you expect this merger to be completed?
A: We are working toward completing this merger as quickly as possible. We
currently expect to complete this merger in June, 2000.
Q: Why have you sent me this document?
A: This joint proxy statement/prospectus contains important information
regarding the proposed merger, as well as information about Enterbank and
CGB. It also contains important information about what the Enterbank and CGB
boards of directors and management considered in evaluating this proposed
merger. We urge you to read this document carefully, including its annexes.
You may also want to review the documents listed under "Where You Can Find
More Information" on page 127.
Q: Whom should I contact with questions or to obtain additional copies of
this joint proxy statement/prospectus?
A: You may contact either:
Enterbank Holdings, Inc.
150 North Meramec
Clayton, Missouri 63105
Attention: James C. Wagner
(314) 725-5500
or
Commercial Guaranty Bancshares, Inc.
12695 Metcalf Avenue
Overland Park, Kansas 66213
Attention: Robert P. Wray
(913) 663-5526
This joint proxy statement/prospectus incorporates by reference important
business and financial information about Enterbank that is not included in or
delivered with this document. The information incorporated by reference is
available without charge to shareholders upon written or oral request to the
persons identified above.
In order to ensure timely delivery of the information incorporated by
reference, shareholder requests should be received by , 2000.
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SUMMARY
This summary highlights certain information in this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the proposed merger fully and for a more
complete description of the terms of the proposed merger, you should
carefully read this entire document and the other documents to which we have
referred you. See "Where You Can Find More Information" (page 127). The
merger agreement is attached as Annex A to this document. We encourage you to
read the merger agreement. It is the legal document that governs the proposed
merger.
THE SPECIAL MEETINGS (PAGE 28)
Enterbank Shareholders. You can vote at the meeting of Enterbank
----------------------
shareholders if you owned Enterbank common stock at the close of business
on , 2000. You can cast one vote for each share of
Enterbank common stock that you owned at that time. In order to approve the
merger of CGB with Enterbank and the issuance of Enterbank common stock to
CGB's shareholders, the holders of a majority of the shares of Enterbank
common stock cast at the meeting must vote in its favor. You can vote your
shares by attending the Enterbank meeting and voting in person, or you can
mark the enclosed proxy card with your vote, sign it and mail it in the
enclosed return envelope. You can revoke your proxy as late as the date of
the special meeting by submitting a written revocation, sending in a new
proxy or by attending the meeting and voting in person.
CGB Shareholders. You can vote at the meeting of CGB shareholders if you
----------------
owned CGB common stock at the close of business on , 2000.
You can cast one vote for each share of CGB common stock that you owned at that
time. In order to approve the merger of CGB with Enterbank, the holders of at
least a majority of the outstanding shares of CGB common stock must vote in its
favor. You can vote your shares by attending the CGB meeting and voting in
person, or you can mark the enclosed proxy card with your vote, sign it and
mail it in the enclosed return envelope. You can revoke your proxy as late as
the date of the special meeting by submitting a written revocation, sending in
a new proxy or by attending the meeting and voting in person.
INFORMATION REGARDING ENTERBANK, CGB AND ENTERBANK ACQUISITION CORP. I
(PAGES 73-74)
Enterbank Holdings, Inc.
150 North Meramec
Clayton, Missouri 63105
Attention: James C. Wagner
(314) 725-5500
Enterbank is a bank holding company incorporated under the laws of the
State of Delaware and registered under the Bank Holding Company Act of 1956,
as amended. Enterbank's principal banking subsidiary, Enterprise Bank, is a
bank organized under the laws of the Missouri. Enterprise presently operates
three banking offices in St. Louis County, Missouri. Enterprise conducts a
commercial and retail banking business, which includes accepting demand,
savings and time deposits and making commercial, real estate and consumer
loans, and provides a variety of banking services to businesses and
individuals.
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Commercial Guaranty Bancshares, Inc.
12695 Metcalf Avenue
Overland Park, Kansas 66213
Attention: Robert P. Wray
(913) 663-5525
CGB is a bank holding company incorporated under the laws of the State of
Kansas and registered under the Bank Holding Company Act of 1956, as amended.
CGB Acquisition Corporation is a wholly owned subsidiary of CGB formed
specifically to acquire all of the common stock of Humboldt Bancshares, Inc.,
a bank holding company which owned 100% of Humboldt National Bank in
Humboldt, Kansas, in December 1997. CGB's principal banking subsidiary,
First Commercial Bank, N.A., is a commercial bank chartered under the laws of
the United States. First Commercial Bank, N.A. opened for business in
February 1996, merged with Humboldt National in December 1997 and presently
operates four banking offices. Its main office is in Overland Park, (Johnson
County) Kansas, and it has branch offices in Humboldt and Iola, (Allen
County) Kansas and Chanute, (Neosho County) Kansas. First Commercial Bank,
N.A. conducts a commercial, agricultural and retail banking business, which
includes accepting demand, savings and time deposits and making commercial,
agricultural, real estate and consumer loans, and provides a variety of
banking services to businesses and individuals.
Enterbank Acquisition Corp. I
c/o Enterbank Holdings, Inc.
150 North Meramec
Clayton, Missouri 63105
Attn: James C. Wagner
(314) 725-5500
Enterbank Acquisition Corp. I ("Acquisition Corp.") is a corporation
incorporated under the laws of the State of Kansas which was formed as a
wholly-owned subsidiary of Enterbank solely to facilitate the merger.
Acquisition Corp. will not survive the merger.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
(PAGES 76-78)
Each of the Boards of Directors of Enterbank and CGB believes the merger to
be in the best interests of their respective institutions, shareholders,
communities and customers. Each Board expects that the combined companies
will be stronger in terms of growth opportunities and profitability than is
either institution at present. Furthermore, it is believed that the combined
companies, as a stronger independent financial institution with a primary
market area covering a greater geographic area, will be better able to
compete with major banks and financial service companies in the communities
now served by each company.
RECOMMENDATIONS TO SHAREHOLDERS (PAGES 76-78 AND 85-86)
Enterbank Shareholders. The Board of Directors of Enterbank believes that
----------------------
the merger is fair to you and in your best interest and unanimously
recommends that you vote "FOR" the proposal to approve the merger and the
issuance of shares of Enterbank common stock in connection with the merger.
CGB Shareholders. The Board of Directors of CGB believes that the merger is
----------------
fair to you and in your best interest and unanimously recommends that you
vote "FOR" the proposal to approve the merger.
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In evaluating the recommendations of the boards of directors summarized
above, shareholders should carefully consider the matters described under
"Risk Factors" and "The Merger--Background of the Merger" and "The
Merger--Reasons for the Merger; Recommendations of the Boards of Directors."
OPINION OF ENTERBANK'S FINANCIAL ADVISOR (PAGES 78-85)
Stifel, Nicolaus & Company, Inc. has delivered its opinion to the Enterbank
Board of Directors that, as of , 2000, the exchange
ratio is fair to the holders of shares of Enterbank common stock from a
financial point of view. Stifel Nicolaus' opinion is attached to this joint
proxy statement/prospectus as Annex D. We encourage you to read the opinion
carefully and the description under "The Merger--Opinion of Enterbank's
Financial Advisor" to understand the matters considered, assumptions made and
qualifications and limitations on the review undertaken by Stifel Nicolaus in
rendering the opinion. Enterbank has agreed to pay Stifel Nicolaus a fee of
$50,000 for rendering its opinion. If Stifel Nicolaus does not render an
updated fairness opinion dated the date of this joint proxy
statement/prospectus, the merger agreement can be terminated.
OPINION OF CGB'S FINANCIAL ADVISOR (PAGES 86-91)
Fister & Associates, Inc. has delivered an opinion, dated January 5, 2000,
to the CGB Board of Directors that the merger is fair, from a financial point
of view, to the shareholders of CGB, as of the date of such opinion. The
Fister & Associates fairness opinion, which sets forth certain assumptions
made, matters considered and limits of review undertaken, by Fister &
Associates, is attached to this joint proxy statement/prospectus as Annex C.
CGB shareholders are urged to read this fairness opinion in its entirety. See
"The Merger--Opinion of CGB's Financial Advisor," which also contains a
discussion of the fees to be paid to Fister & Associates. CGB has agreed to
pay Fister & Associates a fee of $35,000 for rendering its opinion. If
Fister & Associates does not render an updated fairness opinion dated the
date of this joint proxy statement/prospectus, the merger agreement can be
terminated.
WHAT CGB SHAREHOLDERS WILL RECEIVE (PAGE 92)
When the merger is completed, it is expected that CGB shareholders will
receive 2.1429 shares of Enterbank common stock for each share of CGB common
stock held. Cash will be paid instead of fractional shares of Enterbank
common stock. For example, if you hold 100 shares of CGB common stock, you
will have the right to receive 214.29 shares of Enterbank common stock in the
merger. Since cash will be paid instead of a fractional share, you would
receive 214 shares of Enterbank common stock and a check in an amount equal
to 0.29 of a share multiplied by the average closing price of Enterbank
common stock for the twenty (20) days on which the New York Stock Exchange is
open for trading preceding the second business day prior to the closing date
of the merger.
CONDITIONS TO THE MERGER (PAGES 100-102)
We will not complete the merger unless a number of conditions are
satisfied. These include:
* approval of the principal terms of the merger agreement by both
Enterbank and CGB shareholders;
* receipt of all required regulatory approvals;
* absence of any restraining order, injunction or other court order
prohibiting the merger;
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* receipt of tax opinions to the effect that the merger will be treated
as a tax-free reorganization under the Internal Revenue Code;
* absence of any orders suspending the effectiveness of the registration
statement filed by Enterbank to register the shares to be issued to
CGB shareholders;
* receipt of an opinion of independent public accountants to Enterbank
that the merger will qualify for "pooling of interests" accounting
treatment and of a poolability letter of independent public accountants
to CGB;
* receipt of a written fairness opinion dated as of the date of this joint
proxy statement/prospectus from each of Enterbank's and CGB's financial
advisors; and
* other customary conditions.
TERMINATION OF THE MERGER AGREEMENT (PAGES 102-105)
CGB and Enterbank can mutually agree in writing to terminate the merger
agreement at any time before the merger is completed, even if the
shareholders of CGB or Enterbank have approved the merger agreement. In
addition, either CGB or Enterbank can terminate the merger agreement under
the circumstances described in this joint proxy statement/prospectus. See
"The Merger--Termination of the Merger Agreement."
TERMINATION FEES (PAGE 105)
CGB is required to pay Enterbank a $1 million fee, less actual expenses
paid, if any, by CGB to Enterbank as described below, if CGB elects to enter
into an agreement with a third party relating to a takeover proposal where
20% or more of the shares of common stock of CGB or a significant subsidiary
or 20% or more of the consolidated assets of CGB or a significant subsidiary
are transferred or disposed of through tender or exchange offer, sale,
merger, consolidation, business combination or similar transaction.
Enterbank is required to pay CGB a $1 million fee if the merger is
terminated for the following reasons:
* if Enterbank accepts any offer or enters into any agreement with any
third party regarding a takeover proposal where 20% or more of the
shares of common stock of Enterbank or a significant subsidiary or
20% or more of the consolidated assets of Enterbank or a significant
subsidiary are transferred or disposed of through tender or exchange
offer, sale, merger, consolidation, business combination or similar
transaction where CGB is not given the opportunity or elects not to
be included in such transaction; or
* if Enterbank accepts a takeover proposal from a third party in which
the third party conditions its proposal on the termination of the
merger and failing to accept the proposal would constitute a breach
of fiduciary duty by the Enterbank Board of Directors.
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REQUIRED REGULATORY APPROVALS (PAGES 107-108)
The merger must be approved by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") pursuant to the provisions of
the Bank Holding Company Act (the "BHC Act") or be exempt under the BHC Act.
A transaction approved by the Federal Reserve Board may not be consummated
for at least 30 days (in some circumstances a 15-day waiting period is
allowed) after such approval. During such period, the Department of Justice
may commence a legal action challenging the transaction under federal
antitrust laws. If the Department of Justice does not commence a legal
action during such 30-day period (in some circumstances a 15-day waiting
period is allowed), it may not thereafter challenge the transaction except in
an action commenced under the anti-monopoly provisions of Section 2 of the
Sherman Antitrust Act.
Based on current precedents, the respective managements of Enterbank and
CGB believe that the merger and other exemptions, consents and approvals will
be obtained from the Federal Reserve Board and the merger will not be subject
to challenge by the Department of Justice under federal antitrust laws.
However, no assurance can be provided that the Federal Reserve Board or the
Department of Justice will concur in this assessment or that any exemption or
approval granted will not contain conditions or requirements which so
materially and adversely affect the anticipated economic and business
benefits of the merger as further described in the merger agreement. If such
a material and adverse condition or requirement is imposed in connection with
a governmental approval, a condition to Enterbank's obligation to consummate
the merger will be deemed not to have occurred and Enterbank will have the
right to terminate the merger agreement.
The regulatory approval applications to the Federal Reserve Board and the
Department of Justice have been filed concurrently with the filing of the
registration statement filed by Enterbank to register the shares to be issued
to CGB shareholders.
FEES AND EXPENSES OF THE MERGER (PAGES 105-106)
Other than in the situations described in the following paragraphs and in
"--Termination Fees" above, whether or not the merger is completed in
accordance with the merger agreement, all costs and expenses incurred in
connection with the merger agreement and the transactions covered by the
merger agreement will be paid by the party incurring those expenses.
If the merger agreement is terminated due to either party's willful breach
of a representation, warranty or covenant, the breaching party will bear all
costs and expenses incurred by the non-breaching party.
If the merger agreement is terminated because Deloitte & Touche LLP fails
to deliver a poolability letter at or prior to the closing, or a material
adverse change or prospective change has occurred in the business, financial
condition, results of operations or prospects of CGB or its subsidiaries and
such change has not been cured within a specified time, or if Fister &
Associates shall fail to deliver an updated fairness opinion to CGB, CGB
shall pay promptly all costs and expenses incurred by Enterbank not exceeding
$250,000.
If the merger agreement is terminated because KPMG LLP fails to deliver a
poolability letter at or prior to the closing or a material adverse change or
prospective change has occurred in the business, financial condition, results
of operations or prospects of Enterbank or its subsidiaries and such change
has not been cured within a specified time, Enterbank shall pay promptly all
costs and expenses incurred by CGB not exceeding $250,000.
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INCOME TAX CONSEQUENCES OF THE MERGER (PAGES 108-110)
We have structured the merger so that, in general, Enterbank, CGB and the
shareholders of Enterbank and CGB will not recognize gain or loss for federal
income tax purposes in the merger, except for taxes payable because of cash
received by CGB shareholders instead of fractional shares or dissenting
shares. Each party may elect to terminate the merger if it has not received
an opinion from its counsel to the effect, among other matters, that the
merger should qualify as a tax-free reorganization.
Tax matters are very complicated. The tax consequences of the merger to you
will depend on the facts of your own situation. We urge you to consult your
own tax advisors as to the specific tax consequences of the merger, including
the applicable federal, state, local and foreign tax laws.
ACCOUNTING TREATMENT (PAGE 110)
Enterbank expects to account for the merger as a "pooling of interests."
Under the pooling of interests accounting method, Enterbank will carry
forward on its books the assets and liabilities of CGB at their historical
recorded values.
DISSENTERS' RIGHTS OF APPRAISAL (PAGES 112-115)
ENTERBANK. No holder of Enterbank common stock will be entitled to
dissenters' rights.
CGB. No holder of CGB common stock will be entitled to dissenters' rights
unless the holder has perfected his or her dissenter's rights in accordance
with Section 17-6712 of the Kansas General Corporation Code which is included
with this joint proxy statement/prospectus as Annex E.
SHARE OWNERSHIP OF MANAGEMENT (PAGES 29-33)
At the close of business on the record date, directors and executive
officers of Enterbank and their affiliates beneficially owned and were
entitled to vote approximately shares of Enterbank common
stock, which represented approximately % of the shares of Enterbank
common stock outstanding on that date. The approval of the merger agreement
and the issuance of the shares of Enterbank common stock to CGB's
shareholders requires the affirmative vote of a majority of the votes cast
with respect to that proposal at Enterbank's special meeting. An abstention
or a broker non-vote will be included in determining the number of shares
present at the meeting for the purpose of determining the presence of a
quorum. Abstentions and broker non-votes will not, however, be counted in
determining the vote to approve the merger agreement.
At the close of business on the record date, directors and executive
officers of CGB and their affiliates beneficially owned and were entitled to
vote approximately 281,536 shares of CGB common stock, which represented
approximately 33.4 % of the shares of CGB common stock outstanding on that
date. The approval of the merger agreement requires the affirmative vote of
the holders of record of at least a majority of the shares of CGB common
stock outstanding on the record date for CGB's special meeting. An abstention
or a broker non-vote will be included in determining the number of shares
present and voting at a meeting for the purpose of determining the presence
of a quorum. Such abstentions and broker non-votes will have the same effect
as votes against the merger agreement and consummation of the merger.
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COMPARATIVE PER SHARE PRICE INFORMATION (PAGE 116)
Neither the common stock of Enterbank nor CGB is listed or traded on an
exchange or in any established public trading market. Enterbank is aware of
periodic trading activity in its stock which is reported to Nasdaq, though
there may be transactions from time to time at prices that are not known to
Enterbank. Because Enterbank does not expect to list its common stock on any
exchange or seek quotation of its common stock on Nasdaq in the near future,
no established public trading market for the Enterbank common stock is
expected to develop for the foreseeable future.
The following table sets forth the most recent sale prices known to
Enterbank and CGB, respectively, of Enterbank common stock and CGB common
stock on January 4, 2000 (the most recent day before announcement of the
merger) and , 2000 (the most recent day prior to the
date of this joint proxy statement/prospectus. The table also shows the pro
forma equivalent value of CGB common stock on those dates. The equivalent
pro forma market value of CGB common stock was determined by multiplying the
exchange ratio (2.1429) by the Enterbank stock price.
HISTORICAL SALE PRICE
---------------------
CGB Equivalent
Enterbank CGB Pro Forma Market Value
--------- --- ----------------------
January 4, 2000 $18.25 $25.00 $39.11
, 2000 $ $25.00 $
COMPARISON OF SHAREHOLDER RIGHTS (PAGE 119)
Your rights as a shareholder of CGB are currently governed by Kansas law
and the articles of incorporation and bylaws of CGB. If the merger is
completed, your rights as an Enterbank shareholder will be governed by
Delaware law and by Enterbank's certificate of incorporation and bylaws,
which differ in certain respects from CGB's articles of incorporation and
bylaws.
DESCRIPTION OF ENTERBANK CAPITAL STOCK (PAGE 125)
The authorized capital stock of Enterbank consists of 20,000,000 shares of
Enterbank common stock, $.01 par value. As of ,
2000, shares of Enterbank common stock were outstanding and an
additional shares of the authorized Enterbank common stock
were available for future grant and reserved for issuance to holders of
outstanding stock options under Enterbank's stock option plans. Holders of
Enterbank common stock are entitled to one vote for each share held of record
on all matters submitted to a vote of shareholders. Shareholders of
Enterbank are entitled to cumulate their votes with respect to election of
directors. Shareholders are entitled to receive ratably such dividends as
may be legally declared by Enterbank's Board of Directors. In the event of a
liquidation, common shareholders are entitled to share ratably in all assets
remaining after payment of liabilities and liquidation preference for
securities with a priority over the Enterbank common stock. Shareholders of
Enterbank common stock have no preemptive or conversion rights. Enterbank
common stock is not subject to calls or assessments.
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SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA (PAGES 19-21)
We are providing the following information to aid you in your analysis of
the financial effects of the merger. The following tables show financial
results actually achieved by each of Enterbank and CGB (the "historical"
figures). The tables also show results as if the companies had been combined
for the periods presented (the "pro forma combined" figures). Pro forma
combined figures are simply arithmetical combinations of Enterbank's and
CGB's separate financial results; you should not assume that Enterbank and
CGB would have achieved the pro forma combined results if they had actually
been combined during the periods presented. These pro forma presentations
treat our companies as if they had always been combined for accounting and
financial reporting purposes, a method known as pooling of interests
accounting, which is how we plan to account for the merger. When you read
this information, you should also read the information under the heading
"Unaudited Pro Forma Condensed Combined Financial Information". For purposes
of illustration, the pro forma combined earnings per share figures have been
calculated using the exchange ratio of 2.1429.
Annual historical figures are derived from consolidated financial
statements of Enterbank and CGB. The annual historical information presented
below should be read together with the consolidated audited financial
statements of Enterbank, incorporated in this document by reference, and of
CGB, appearing elsewhere in this joint proxy statement/prospectus. To find
this information, see "Where You Can Find More Information" (page 127) and
"Index to Financial Statements" (page F-1).
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
Pro Forma
Enterbank Commercial Combined
Holdings Guaranty Adjustments 12/31/99
----------- ----------- ----------- -----------
Interest income:
Interest and fees on loans $30,018,530 $ 7,685,788 $ -- $37,704,318
Interest on debt securities:
Taxable 978,651 1,115,184 -- 2,093,835
Nontaxable 26,102 19,925 -- 46,027
Interest on federal funds sold 1,112,929 117,792 -- 1,230,721
Interest on interest earning deposits 697 410 -- 1,107
----------- ----------- ---------- -----------
Total interest income 32,136,909 8,939,099 -- 41,076,008
----------- ----------- ---------- -----------
Interest expense:
Interest-bearing transaction accounts 490,791 323,393 -- 814,184
Money market accounts 7,833,783 694,965 -- 8,528,748
Savings 43,942 135,087 -- 179,029
Certificates of deposit:
$100,000 and over 2,160,871 535,929 -- 2,696,800
Other 3,224,838 1,898,570 -- 5,123,408
Federal Home Loan Bank advances 331,042 -- -- 331,042
Federal funds purchased 1,597 220,038 -- 221,635
Guaranteed preferred debenture expense 186,605 -- -- 186,605
Notes payable (other borrowings) 78,650 -- -- 78,650
----------- ----------- ---------- -----------
Total interest expense 14,352,119 3,807,982 -- 18,160,101
----------- ----------- ---------- -----------
Net interest income 17,784,790 5,131,117 -- 22,915,907
Provision for loan losses 1,021,256 975,000 -- 1,996,256
----------- ----------- ---------- -----------
Net interest income after
provision for loan losses 16,763,534 4,156,117 -- 20,919,651
----------- ----------- ---------- -----------
Noninterest income:
Service charges on deposit accounts 621,472 563,892 -- 1,185,364
Gain on sale of ORE 130,050 -- -- 130,050
Financial advisory income 594,810 -- -- 594,810
Realized gain on trading assets 202,454 -- -- 202,454
Other service charges and fee income 212,669 465,887 -- 678,556
Gain on sale of mortgage loans 809,110 -- -- 809,110
Income from minority interest in EMB LLC 2,934 -- -- 2,934
(Gain)loss on investment in Enterprise Fund, L.P. (7,763) -- -- (7,763)
----------- ----------- ---------- -----------
Total noninterest income 2,565,736 1,029,779 -- 3,595,515
----------- ----------- ---------- -----------
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CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
Pro Forma
Enterbank Commercial Combined
Holdings Guaranty Adjustments 12/31/99
----------- ----------- ----------- -----------
Noninterest expense:
Salaries 6,748,905 2,157,090 -- 8,905,995
Payroll taxes and employee benefits 1,386,603 311,605 -- 1,698,208
Occupancy 977,422 333,707 -- 1,311,129
Furniture and equipment 431,005 243,416 -- 674,421
FDIC insurance 30,139 10,843 -- 40,982
Data processing 457,529 215,469 -- 672,998
Amortization of goodwill -- 190,566 -- 190,566
Other 3,354,569 1,246,089 -- 4,600,658
----------- ----------- ---------- -----------
Total noninterest expense 13,386,172 4,708,785 -- 18,094,957
----------- ----------- ---------- -----------
Income before income tax expense 5,943,098 477,111 -- 6,420,209
Income tax expense 2,244,404 260,993 -- 2,505,397
----------- ----------- ---------- -----------
Income before cumulative effect of a change
income accounting principle $ 3,698,694 $ 216,118 $ -- $ 3,914,812
=========== =========== ========== ===========
Per share amounts
Basic earnings per share:
Income before cumulative effect
of change in accounting principle $ 0.52 $ 0.25 $ 0.44
Basic weighted average common shares and
common stock equivalents outstanding 7,135,697 848,479 8,953,903
Diluted earnings per share:
Income before cumulative effect
of change in accounting principle $ 0.48 $ 0.25 $ 0.41
Basic weighted average common shares and
common stock equivalents outstanding 7,704,800 863,443 9,555,072
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HISTORICAL AND PRO FORMA PER SHARE DATA FOR ENTERBANK AND CGB
We have calculated the pro forma combined per share data for net income
using the weighted average number of shares of Enterbank common stock
outstanding for the periods presented, increased by the weighted average
number of shares of CGB common stock outstanding for the periods presented
multiplied by an assumed exchange ratio of 2.1429 shares of Enterbank common
stock for each share of CGB common stock, as if these shares were outstanding
for each period presented. The pro forma combined per share data for
dividends declared represents the historical dividends for Enterbank common
stock. The pro forma combined book value per share has been calculated using
shares of outstanding Enterbank common stock increased by the shares of
outstanding CGB common stock multiplied by an assumed exchange ratio of
2.1429 for each share of CGB common stock as if these shares were outstanding
as of the dates presented.
The pro forma CGB shares information has been calculated by multiplying the
pro forma combined per share information by an assumed exchange ratio of
2.1429.
Enterbank CGB Pro Forma
Common Stock Common Stock Combined
------------ ------------ ---------
Book Value per common share:
December 31, 1999 4.59 17.14 5.30
Tangible Book Value per common share:
December 31, 1999 4.59 14.24 5.02
Dividends declared:
December 31, 1999 0.040 - 0.040
December 31, 1998 0.033 - 0.033
December 31, 1997 0.030 - 0.030
Net income
Basic:
December 31, 1999 0.54 0.25 0.45
December 31, 1998 0.43 (0.09) 0.34
December 31, 1997 0.35 0.06 0.30
Diluted:
December 31, 1999 0.50 0.25 0.42
December 31, 1998 0.40 (0.09) 0.32
December 31, 1997 0.33 0.06 0.29
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RISK FACTORS
In deciding whether to vote in favor of the merger, shareholders of CGB and
Enterbank should consider the following factors, in addition to the other
matters described or incorporated by reference in this document:
MERGER RISK FACTORS
- -------------------
THE FINANCIAL CONDITION OF ENTERBANK AND CGB MAY BE NEGATIVELY IMPACTED BY
WORSENING ECONOMIC CONDITIONS, RISING INTEREST RATES OR ACTS OF NATURE
The loan portfolios of Enterbank and CGB are partially dependent on real
estate. At December 31, 1999, real estate served as the principal source of
collateral with respect to approximately 55% of CGB's loan portfolio, 51% of
Enterbank's loan portfolio and 54% of pro forma combined Enterbank and CGB's
loan portfolio. A worsening of current economic conditions or rising interest
rates could have an adverse effect on the demand for new loans, the ability
of borrowers to repay outstanding loans, the value of real estate and other
collateral securing loans and the value of the available-for-sale investment
portfolio, as well as Enterbank's and CGB's financial condition and results
of operations in general and the market value for Enterbank common stock and
CGB common stock. Acts of nature, including earthquakes and floods, which may
cause uninsured damage and other loss of value to real estate that secures
these loans, may also negatively impact Enterbank's and CGB's financial
condition.
CUSTOMERS AND EMPLOYEES OF FIRST COMMERCIAL BANK, N.A. MAY NOT BE RETAINED
Upon the consummation of the merger, CGB will be a wholly-owned subsidiary
of Enterbank. At that time, it is anticipated that the First Commercial Bank,
N.A. will continue to operate in the markets it has traditionally served.
Management of Enterbank expects that Enterbank will be able to serve
customers of First Commercial Bank, N.A. at its existing branches. Enterbank
also anticipates that, after the effective time of the merger, most of First
Commercial Bank, N.A.'s existing employees and customers will choose to
remain employees and customers of the combined entity.
There are no assurances that First Commercial Bank, N.A. customers will not
move their banking relationships to other financial institutions and that a
greater than anticipated number of First Commercial Bank, N.A. employees will
elect not to remain employed by Enterbank after the merger.
THE PRICE OF ENTERBANK COMMON STOCK MAY DECLINE
The merger consideration the CGB shareholders will receive may be affected
by potential changes in the market price of Enterbank common stock. This
means that at the time of the special meetings, the CGB shareholders will not
know the exact value of the Enterbank common stock that they will receive
when the merger is completed. The market price of Enterbank common stock when
the merger takes place may vary from the price at the date of this document
and at the date of the special meetings. Such variations in the market price
of Enterbank common stock may result from changes in the business, operations
or prospects of Enterbank, CGB or the combined company, market assessments of
the likelihood that the merger will be consummated and the timing thereof,
regulatory considerations, general market and economic conditions and other
factors. We urge you to obtain current market quotations for Enterbank common
stock. See "The Merger--Purchase Price and Potential Adjustments."
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THERE HAS NOT BEEN AN ACTIVE PUBLIC MARKET FOR THE ENTERBANK COMMON STOCK,
AND AN ACTIVE TRADING MARKET MAY NOT DEVELOP
The common stock of Enterbank is not listed or traded on an exchange or in
any established public trading market. Based on periodic trading activity
reported to Nasdaq, Enterbank believes an average of approximately 12,000
shares of Enterbank common stock are traded per month. Because Enterbank
does not expect to list its common stock on any exchange or seek quotation of
its common stock on the Nasdaq Stock Market in the near future, no
established public trading market for the Enterbank common stock is expected
to develop for the foreseeable future.
THE COMBINED COMPANIES WILL BE IMPACTED BY COMPETITION FROM MANY OTHERS
The commercial banking, merchant banking and financial advisory businesses
are all extremely competitive. Many of the competitors of the combined
companies are, or are affiliates of, enterprises that have greater resources
than the combined companies.
Through their various businesses, the combined companies will compete with
many different institutions, including:
* other banks and thrift institutions;
* investment companies, mutual funds and money market funds;
* full service and discount broker dealers;
* insurance companies;
* credit unions; and
* mortgage companies.
Some of the combined companies' competitors are not regulated as
extensively as Enterbank and CGB are and, therefore, may have greater
flexibility in competing for business. Some of these competitors are subject
to similar regulation but have the advantages of established customer bases,
higher lending limits, extensive branch networks, numerous automated teller
machines or other factors. The failure of the combined companies to compete
effectively in the markets they serve could have an adverse effect on their
financial condition.
In addition to traditional competitive forces in the banking industry, the
passage of the Graham-Leach-Bliley Act may accelerate trends toward larger
financial services companies offering a wider range of products and services.
This major banking legislation now permits affiliation among depository
institutions and entities whose activities are considered "financial in
nature." Activities which are expressly considered financial in nature
include securities and insurance underwriting and agency, investment
management and merchant banking. The affiliated entities resulting from this
legislation may have increased resources and market power which may adversely
affect the ability of the combined companies to compete effectively.
ADDITIONAL SHARES OF ENTERBANK COMMON STOCK COULD BE ISSUED WHICH COULD
RESULT IN A DECLINE IN THE MARKET PRICE OF SUCH STOCK
Shares of Enterbank common stock eligible for future sale could have a
dilutive effect on the market
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for Enterbank common stock and could adversely affect the market price.
The certificate of incorporation of Enterbank authorizes the issuance of
20,000,000 shares of common stock, of which shares
were outstanding at , 2000. Pursuant to its stock
option plans, at , 2000, Enterbank had outstanding
options to purchase an aggregate of shares of Enterbank
common stock. As of , 2000, shares of
Enterbank common stock remained available for option grants under Enterbank's
stock option plans. The merger agreement does not restrict Enterbank's
ability to grant additional options under Enterbank's stock option plan or
with respect to a takeover proposal to which Enterbank is a party. See "The
Merger--Purchase Price and Potential Adjustments." Sales of substantial
amounts of Enterbank common stock in the public market following the merger
could adversely affect the market price of Enterbank common stock.
There are no restrictions in the merger agreement preventing Enterbank from
issuing additional shares of Enterbank common stock after the merger. There
can be no assurance given as to the market value of Enterbank common stock
after the merger based on future acquisitions, if any, or other factors,
including but not limited to, general economic conditions or fluctuating
interest rates.
BANKING INDUSTRY RISK FACTORS
- -----------------------------
ANY CHANGES IN INTEREST RATES OR THE COST OF FUNDS MAY ADVERSELY AFFECT THE
COMBINED COMPANIES' EARNINGS AND FINANCIAL CONDITION
Changes in interest rates will affect the operating performance and
financial condition of the combined companies in diverse ways. The
profitability of the combined companies will depend in substantial part on
the "net interest spread," which is the difference between the rates received
on loans and investments and the rates paid for deposits and other sources of
funds. The net interest spread of the combined companies will depend on many
factors that are partly or entirely outside their control, including
competition, federal economic, monetary and fiscal policies, and economic
conditions generally. Historically, net interest spreads for many financial
institutions have widened and narrowed in response to these and other
factors, which are often collectively referred to as "interest rate risk." We
intend to try to minimize the combined companies' exposure to interest rate
risk, but we will be unable to eliminate it.
In addition, the combined companies will fund a portion of their loans
through wholesale deposits, which are considered to be a lower cost, more
stable source than alternative borrowed funds. If we are unable to attract
wholesale deposits, the combined companies' cost of funds may rise, which
could have a material adverse effect on operating results. In their banking
operations, the combined companies will be subject to interest rate risk on
loans held in their portfolios arising from mismatches (i.e., the interest
rate sensitivity gap) between the dollar amount of repricing or maturing
assets and liabilities, which is measured in terms of the ratio of the
interest rate sensitivity gap to total assets. A higher level of assets
repricing or maturing than liabilities over a given time frame is considered
asset-sensitive and is reflected as a positive gap. In contrast, a higher
level of liabilities repricing or maturing than assets over a given time
frame is considered liability-sensitive and is reflected as a negative gap.
An asset-sensitive position (i.e., a positive gap) will generally enhance
earnings in a rising interest rate environment and will negatively impact
earnings in a falling interest rate environment. A liability-sensitive
position (i.e., a negative gap) will generally enhance earnings in a falling
interest rate environment and negatively impact earnings in a rising interest
rate environment. Fluctuations in interest rates are not predictable or
controllable. We can not give any assurance that a sudden or significant
change in prevailing interest rates will not have a material adverse effect
on the combined companies' operating results.
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IF BORROWERS DO NOT REPAY LOANS IT WILL ADVERSELY AFFECT THE COMBINED
COMPANIES
Some borrowers may not repay loans that the combined companies make to
them. This risk is inherent in the commercial banking business. If a
significant amount of loans are not repaid, it would have an adverse effect
on the combined companies' earnings and overall financial condition, and
could cause the insolvency of the combined companies. The combined companies
will maintain an allowance for loan losses to provide for loan defaults and
nonperformance. The allowance for loan losses will be maintained at a level
management believes is adequate to absorb losses inherent in the loan
portfolio, an evaluation that will be primarily based upon a review of the
combined companies' and the banking industry's historical loan loss
experience, known and inherent risks contained in the loan portfolio,
composition, and growth of the loan portfolio, and current and projected
economic factors. However, the combined companies' allowance for loan losses
may not be adequate to cover actual losses, and future provisions for loan
losses may adversely affect the combined companies' earnings. In addition,
various regulatory agencies, as an integral part of the examination process,
will periodically review the combined companies' loan portfolios. No such
agencies may require the combined companies to add to the allowance for loan
losses based on their judgments and interpretations of information available
to them at the time of their examinations.
THE SUCCESS OF THE COMBINED COMPANIES WILL BE DEPENDENT UPON THE FUTURE
SUCCESS OF CERTAIN OF OUR SUBSIDIARIES
The growth and success of certain subsidiaries of the combined companies
will be important to the ability to implement the strategy of the combined
companies. In particular, both Enterprise Merchant Banc and Enterprise
Financial Advisors are unproven and relatively new operating units still in
the formative stages of growth. Their present contributions to the revenues
and net income of Enterbank are minimal. The combined companies will not
control the operations of Enterprise Merchant Banc, LLC, the profitability of
which has a direct impact on Enterprise Merchant Banc. Moreover, the business
and profitability of Enterprise Financial Advisors are dependent, in part, on
the performance of third parties, including Argent Capital Management and
Moneta Group, Inc., over which the combined companies will have no control.
The failure of these subsidiaries to grow and be profitable in the future
could adversely affect the financial condition of the combined companies and
the ability to meet strategic objectives.
IF THERE ARE ADVERSE CONDITIONS IN THE COMBINED COMPANIES' GEOGRAPHIC AREAS
OR WITH A FEW CUSTOMERS, THERE MAY BE A DISPROPORTIONATELY LARGE EFFECT ON
THE COMBINED COMPANIES' FINANCIAL RESULTS
The success of the combined companies will be dependent to a certain extent
upon the general economic conditions in the St. Louis and Kansas City
metropolitan areas and, in particular, the conditions for entrepreneurial
entities and small businesses which are the focus of the combined companies'
customer base. Although we expect that economic conditions will be favorable
in the combined companies' markets, there can be no assurance that favorable
economic conditions will occur or, if they occur, that they will continue.
Adverse changes in economic conditions in the St. Louis or Kansas City
metropolitan areas could impair the ability to collect loans and have a
negative effect on the overall financial condition of the combined companies.
WE WILL BE DEPENDENT ON KEY PERSONNEL
The growth and development to date of Enterbank and CGB have been largely
dependent on certain key employees, the loss of any of whom could have a
material adverse effect on the combined companies. The key employees of
Enterbank are Fred H. Eller, James C. Wagner, David J. Mishler, James E.
Graser, Richard C. Leuck and Paul L. Vogel, none of whom are subject to
employment agreements. Each of these persons are officers of Enterbank or
Enterprise Bank. Enterbank carries
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27
"key person" life insurance on the lives of Mr. Eller and Mr. Vogel. The key
employees of CGB and subsidiaries are Scott Woods, Paul Clendening and Robert
P. Wray, none of whom are subject to employment agreements.
THE BUSINESS OF THE COMBINED COMPANIES WILL BE SUBJECT TO SIGNIFICANT
GOVERNMENT REGULATION
The banking industry is heavily regulated. The success of the combined
companies will depend not only on competitive factors but also on the cost of
complying with state and federal regulations affecting banks and bank holding
companies. The combined companies will be subject to regulation by the
Federal Deposit Insurance Corporation, the Missouri Division of Finance, and
the Board of Governors of the Federal Reserve System. These regulations will
put the combined companies at a competitive disadvantage compared to less
regulated competitors such as finance companies, mortgage banking companies
and leasing companies. Banking industry regulations are primarily intended to
protect depositors, not shareholders, and are subject to continuous change.
The ultimate effect of regulatory change cannot be predicted with certainty.
Additional statutes affecting financial institutions may be proposed and
enacted in the future. There can be no assurance that the cost of complying
with government regulations will not adversely affect the business or
economic performance of the combined companies.
The Gramm-Leach-Bliley Act was signed into law on November 12, 1999. This
major banking legislation now permits affiliation among depository
institutions and entities whose activities are considered "financial in
nature." Activities which are expressly considered financial in nature
include securities and insurance underwriting and agency, investment
management and merchant banking. With certain exceptions, this act similarly
expanded the authorized activities of subsidiaries of national banks and,
indirectly, through the provisions of state law, Missouri and Kansas banks.
In general, these expanded powers are reserved to bank holding companies and
banks where all depository institutions affiliated with them are well
capitalized and well managed based on applicable banking regulation. These
provisions became effective March 11, 2000. The act clarifies the regulation
by states of insurance products sold by depository institutions, imposes
rules on data privacy and repeals some of the exemptions enjoyed by banks
under federal securities laws relating to the offering of securities and the
licensing of broker-dealers and investment advisors. This act will be the
subject of extensive rule making by federal banking regulators and others.
Although the effects of this legislation will only begin to be understood
over the next several years and cannot presently be predicted with any
certainty, it may accelerate trends toward larger financial services
companies offering a wider range of products and services. Firms of this type
may have increased resources and market power which may adversely affect the
ability of the combined companies to compete effectively.
SIGNIFICANT COSTS MAY BE INCURRED IF THE COMBINED COMPANIES FORECLOSE ON
ENVIRONMENTALLY CONTAMINATED REAL ESTATE
If the combined companies foreclose on a defaulted real estate loan to
recover an investment in such real estate loan, there may be significant
environmental liabilities in connection with the underlying real property.
These liabilities could exceed the fair value of the real property. It is
also possible that hazardous substances or wastes, contaminants, pollutants
or their sources (as defined by state and federal laws and regulations) may
be discovered on properties during the combined companies' ownership or after
they are sold to a third party. If they are discovered on a property that the
combined companies have acquired through foreclosure or otherwise, the
combined companies may be required to remove those substances and clean up
the property. The combined companies may have to pay for the entire cost of
any removal and clean-up without the contribution of any other third parties.
These costs may also exceed the fair value of the property. The combined
companies may also
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be liable to tenants and other users of neighboring properties. In addition,
the combined companies may find it difficult or impossible to sell the
property prior to or following any such clean-up.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus contains forward-looking statements
regarding each of CGB and Enterbank and the combined company following the
merger, including statements relating to:
* the financial condition, results of operations and business of
Enterbank following completion of the merger, and
* enhanced revenues and accretion to reported earnings that are
expected to be realized from the merger.
These forward-looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities:
* revenues following the merger are lower than expected or deposit
withdrawals, operating costs or customer loss and business disruption
following the merger may be greater than expected;
* competitive pressures among depository and other financial services
companies increase significantly;
* costs or difficulties related to the integration of the businesses of
Enterbank and CGB are greater than expected;
* changes in the interest rate environment reduce interest margins,
cause an increase in the prepayment rate on mortgages and other loans
or reduce the demand for new loans;
* general economic or business conditions, either internationally,
nationally or in the states in which the combined company will be
doing business, are less favorable than expected, resulting in, among
other things, a deterioration in credit quality or a reduced demand
for credit;
* legislation or regulatory requirements or changes adversely affect
the businesses in which the combined company would be engaged;
* technology-related changes may be harder to make or more expensive
than expected;
* changes in the securities market; and
* timing of completion of the merger may be delayed, due to regulatory
requirements or other factors which may delay, restrict or prohibit
new operations.
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INTRODUCTION
THE SPECIAL MEETINGS: DATES, TIMES AND PLACES
ENTERBANK. The special meeting of Enterbank Holdings, Inc. ("Enterbank")
will be held at , St. Louis,
Missouri, at , local time, on ,
2000.
CGB. The special meeting of Commercial Guaranty Bancshares, Inc. ("CGB")
will be held at , , at
, local time, on , 2000.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
ENTERBANK. At Enterbank's special meeting, holders of Enterbank common
stock are being asked to approve the merger agreement, including the
resulting issuance of Enterbank common stock to CGB's shareholders as
provided under the terms of the agreement. See "The Merger."
CGB. At CGB's special meeting, holders of CGB common stock are being asked
to approve the merger agreement. See "The Merger."
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
ENTERBANK. Only holders of record of Enterbank common stock at the close
of business on , 2000, the record date for
Enterbank's special meeting, are entitled to receive notice of and to vote at
Enterbank's special meeting. On the record date, approximately shares of
Enterbank common stock were issued and outstanding and held by approximately
holders of record. A majority of the shares of Enterbank common stock
issued and outstanding and entitled to vote on the record date must be
represented in person or by proxy at Enterbank's special meeting in order for a
quorum to be present for purposes of transacting business at Enterbank's
special meeting. In the event that a quorum is not present at Enterbank's
special meeting, it is expected that the meeting will be adjourned or postponed
to solicit additional proxies. Holders of record of Enterbank common stock on
the record date are each entitled to one vote per share on each matter to be
considered at Enterbank's special meeting.
CGB. Only holders of record of CGB common stock at the close of business
on , 2000, the record date for CGB's special meeting,
are entitled to receive notice of and to vote at CGB's special meeting. On the
record date, approximately shares of CGB common stock were issued
and outstanding and held by approximately holders of record. A
majority of the shares of CGB common stock issued and outstanding and
entitled to vote on the record date must be represented in person or by proxy
at CGB's special meeting in order for a quorum to be present for purposes of
transacting business at CGB's special meeting. In the event that a quorum is
not present at CGB's special meeting, it is expected that the meeting will be
adjourned or postponed to solicit additional proxies. Holders of record of
CGB common stock on the record date are each entitled to one vote per share
on each matter to be considered at CGB's special meeting.
VOTES REQUIRED
ENTERBANK. The approval of the merger agreement and the issuance of the
shares of Enterbank common stock to CGB's shareholders requires the
affirmative vote of a majority of the votes cast with respect to that
proposal at Enterbank's special meeting. An abstention or a broker non-vote
will be included in determining the number of shares present at the meeting
for the purpose of determining the presence of a quorum. Abstentions and
broker non-votes will not, however, be counted in determining the vote to
approve the merger agreement. See "--Voting of Proxies--Abstentions and
Broker Non-Votes."
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30
CGB. The approval of the merger agreement requires the affirmative vote of
the holders of record of at least a majority of the shares of CGB common
stock outstanding on the record date for CGB's special meeting. An abstention
or a broker non-vote will be included in determining the number of shares
present and voting at a meeting for the purpose of determining the presence
of a quorum. Such abstentions and broker non-votes will have the same effect
as votes against the merger agreement and consummation of the merger. See
"--Voting of Proxies--Abstentions and Broker Non-Votes" and "Dissenters'
Rights of Appraisal--Appraisal Rights of CGB Shareholders."
SHARE OWNERSHIP OF MANAGEMENT
ENTERBANK. At the close of business on the record date, directors and
executive officers of Enterbank and their affiliates beneficially owned and
were entitled to vote approximately shares of Enterbank
common stock, which represented approximately % of the shares of
Enterbank common stock outstanding on that date. Each of those directors and
executive officers has agreed to vote, or cause to be voted, the Enterbank
common stock owned by him or her FOR approval of the merger agreement and the
resulting issuance of Enterbank common stock to CGB's shareholders under the
terms of the merger agreement at Enterbank's special meeting.
As of the record date, the directors and executive officers of Enterbank
beneficially owned shares of Enterbank common stock as described in the
following table. Unless otherwise indicated, each director and executive
officer listed below possesses sole voting power and sole investment power.
All of the shares shown in the following table are owned both of record and
beneficially except as indicated in the notes to the table. The address for
beneficial owners, all of whom are incumbent directors and officers of
Enterbank and Enterprise Bank, is the address of Enterbank, 150 North
Meramec, Clayton, Missouri 63105.
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER POSITION BENEFICIAL OWNERSHIP <F1><F2> PERCENT OF CLASS<F*>
---------------- -------- ----------------------------- --------------------
Fred H. Eller <F3><F4> President and Chief 290,315 4.01%
Executive Officer
Ronald E. Henges <F3><F5> Chairman of the 358,555 4.99%
Board, Director
Kevin C. Eichner <F3><F6> Vice Chairman of 249,579 3.46%
the Board, Director
Randall D. Humphreys <F7> Director 0 N/A
Paul R. Cahn <F7><F8> Director 230,985 3.23%
William B. Moskoff <F7><F9> Director 85,161 1.19%
Birch M. Mullins <F7> Director 53,634 <F*>
Robert E. Saur <F7><F10> Director 117,084 1.64%
Henry D. Warshaw <F3><F11> Director 56,734 <F*>
<F12><F13>
James L. Wilhite <F13><F14> Director 32,534 <F*>
James A. Williams <F13><F15> Director 20,043 <F*>
Ted C. Wetterau <F7><F16> Director 35,904 <F*>
David J. Mishler <F3><F17> President, Enterprise 164,447 2.27%
Bank, Clayton
James E. Graser <F3><F18> President, Enterprise 85,535 1.19%
Bank, Sunset Hills
Richard C. Leuck <F3><F19> President, Enterprise 46,773 <F*>
Bank, St. Peters
Paul L. Vogel <F3><F20> Director 39,905 <F*>
James C. Wagner <F3><F21> Chief Financial Officer 84,470 1.18%
All Directors and Executive
Officers as a Group 1,951,658 26.00%
<FN>
<F*>Less than 1% of the outstanding Enterbank common stock.
- ---------------
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<F1> Pursuant to the rules of the Securities and Exchange Commission, certain
shares of Common Stock which a person has the right to acquire within 60
days pursuant to the exercise of stock options and warrants are deemed
to be outstanding for the purpose of computing beneficial ownership and
the percentages of ownership of that person, but are not deemed
outstanding for the purposes of computing the percentage ownership of
any other person. All directors and officers as a group hold options to
purchase an aggregate of 339,281 shares of Common Stock. As of April
25, 2000, there were 7,165,236 shares outstanding.
<F2> Unless otherwise indicated, the named person has sole voting and
dispositive power for all shares shown.
<F3> Includes options outstanding and exercisable as of April 25, 2000,
outstanding or exercisable as of April 25, 2000 or within 60 days
thereafter, including those beneficially owned by the named person, as
follows: Mr. Eichner, 48,000 shares; Mr. Eller, 72,000 shares; Mr.
Henges, 48,000 shares; Mr. Graser, 27,000 shares; Mr. Mishler, 66,000
shares; Mr. Wagner, 36,000; Mr. Leuck, 27,000; Mr. Vogel, 10,800 shares;
Mr. Warshaw, 4,481 shares; all directors and executive officers as a
group, 339,281 shares.
<F4> Includes 72,180 shares held jointly by Mr. Eller and his spouse; 60
shares held in the name of Mr. Eller to which Mr. Eller has voting
power; 45,540 shares held in trust for the benefit of Mr. Eller's spouse
to which Mr. Eller has voting power; 67,000 shares held in Mr. Eller's
trust to which Mr. Eller has voting power; and 33,535 shares held in the
Eller Family Partnership to which Mr. Eller has voting power.
<F5> Includes 231,285 shares held of record by Henges Equity, L.P., of which
Mr. Henges is the General Partner and has voting power; 66,855 shares
held in an Individual Retirement Account for the benefit of Mr. Henges,
to which Mr. Henges has voting power; 60 shares held in the name of Mr.
Henges in which Mr. Henges has voting power; 9,855 shares held in an
Individual Retirement Account for the benefit of the spouse of Mr.
Henges to which Mr. Henges has voting power; and 2,500 shares held
jointly by Mr. Henges and his spouse.
<F6> Includes 141,579 shares held in the name of Mr. Eichner in which he has
voting power and 60,000 shares held in Mr. Eichner's trust in which he
has voting power.
<F7> Included are the vested portion of 1,200 Stock Appreciation Rights
("SARs") which are granted to directors who are not othrwise compensated
by the Company. Under the SAR Agreement, these could have a dilutive
effect, as it is at the discretion of the Company whether compensation
will be given in the form of cash or Common Stock. As of April 25,
2000, Mr. Cahn, Mr. Moskoff, Mr. Mullins, Mr. Saur and Mr. Wetterau are
vested in what would be approximately 84 shares if the Company should
choose to pay Common Stock as opposed to paying cash. None of Mr.
Humphreys' SARs are vested and are therefore excluded.
<F8> Excludes 71,940 shares held by two adult children of Mr. Cahn, as well
as 30,950 shares held by the son in law of Mr. Cahn. Includes 15,000
shares held in trust for the benefit of Mr. Cahn's spouse, to which Mr.
Cahn has voting power; and 215,901 shares held of record by Cahn Family
Partnership, L.P., to which Mr. Cahn has voting power.
<F9> Includes 85,077 shares held of record by Vasil's L.P., of which Mr.
Moskoff is the General Partner and has voting power.
<F10> Includes 60 shares held in the name of Mr. Saur to which Mr. Saur has
voting power; and 116,940 shares held in a trust for the benefit of Mr.
Saur to which Mr. Saur has voting power.
<F11> Includes 25,740 held in an Individual Retirement Account for the benefit
of Mr. Warshaw, to which Mr. Warshaw has voting power; and 25,980 shares
held in an Individual Retirement Account for the benefit of the spouse
of Mr. Warshaw, to which Mr. Warshaw has voting power; and 60 shares in
the name of Mr. Warshaw to which Mr. Warshaw has voting power. On
January 1, 1999, Mr. Warshaw was granted 22,351 shares for his 1998
performance as a result of Enterbank Holdings' referral relationship
with Moneta Group, Inc. As of April 25, 2000, 4,481 of these options
were vested and have been included. On January 1, 2000, Mr. Warshaw was
granted an additional 1,700 options as a result of the agreement with
Moneta Group. None of these options are vested and have thus been
excluded.
<F12> Mr. Warshaw, in addition to being a director of the Company, is a
principal at Moneta Group, Inc. The Company has a Customer Referral
Agreement with Moneta Group, Inc. whose principals may earn Enterbank
Holdings, Inc. stock options (right to purchase) by referring customers
to the Company.
<F13> Included are the vested portion of 4,800 SARs which are granted to
directors who are not otherwise compensated by the Company. Under the
SAR Agreement, these could have a dilutive effect, as it is at the
discretion of the Company whether
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32
compensation will be given in the form of cash or Common Stock. As of
April 25, 2000, Mr. Warshaw is vested in what would be approximately 473
shares, Mr. Williams is vested in what would be approximately 523 shares
and Mr. Wilhite is vested in what would be approximately 371 shares if
the Company should choose to pay Common Stock as opposed to paying cash.
<F14> Includes 1,950 shares held in a trust for the benefit of the spouse of
Mr. Wilhite of which the spouse of Mr. Wilhite is trustee, and Mr.
Wilhite has voting power; 3 shares in the name of Mr. Wilhite to which
Mr. Wilhite has voting power; 10,500 shares held in Mr. Wilhite's trust
in which he has voting power; 3,000 shares held of record by the Wilhite
Family Partnership, L.P., to which Mr. Wilhite has voting power; and
16,710 shares held in an Individual Retirement Account for Mr. Wilhite
in which Mr. Wilhite has voting power.
<F15> Includes 2,535 shares held by Mr. Williams held in an Individual
Retirement Account for the benefit of Mr. Williams to which Mr. Williams
has voting power; 11,985 shares held in the name of Mr. Williams in
which Mr. Williams has voting power and 5,000 shares held in a joint
trust account with the spouse of Mr. Williams in which Mr. Williams has
voting power.
<F16> Includes 35,820 shares held of record by Wetterau Ventures, L.P. to
which Mr. Wetterau is the General Partner and has voting power.
<F17> Includes 90,551 shares held jointly by Mr. Mishler and his spouse; 7,893
shares held in an Individual Retirement Account for the benefit for the
benefit of Mr. Mishler, to which Mr. Mishler has voting power and 3
shares held in the name of Mr. Mishler to which Mr. Mishler has voting
power.
<F18> Includes 58,532 shares held in Mr. Graser's trust to which Mr. Graser
has voting power and 3 shares in the name of Mr. Graser to which Mr.
Graser has voting power.
<F19> Includes 7,500 shares held in a trust of the spouse of Mr. Leuck for the
benefit of Mr. Leuck to which Mr. Leuck has voting power; 7,500 shares
held in a trust of the spouse of Mr. Leuck, for the benefit of the
spouse of Mr. Leuck, to which Mr. Leuck has shared voting power; 4,770
shares held in an Individual Retirement Account for the benefit of Mr.
Leuck to which Mr. Leuck has voting power; and 3 shares held in the name
of Mr. Leuck to which Mr. Leuck has voting power.
<F20> Includes 456 shares held in an Individual Retirement Account (SEP) for
the benefit of Mr. Vogel to which Mr. Vogel has voting power; 2,325
shares held in another Individual Retirement Account for the benefit of
Mr. Vogel to which Mr. Vogel has voting power; 26,195 shares held in the
name of Mr. Vogel to which Mr. Vogel has voting power; and 129 shares
held in an Individual Retirement Account for the benefit of the spouse
of Mr. Vogel to which Mr. Vogel has voting power.
<F21> Includes 30,000 shares held jointly by Mr. Wagner and his spouse and
18,470 shares held in a trust for the benefit of Mr. Wagner's children
and other relatives. Mr. Wagner is a co-trustee and has voting power
and investment authority for this trust.
CGB. At the close of business on the record date, directors and executive
officers of CGB and their affiliates beneficially owned and were entitled to
vote approximately 281,536 shares of CGB common stock, which represented
approximately 33.4% of the shares of CGB common stock outstanding on that
date. Each of those directors and executive officers has agreed to vote, or
cause to be voted, the CGB common stock owned by him or her FOR approval of
the merger agreement at CGB's special meeting. See "The Merger--Interests of
CGB Officers and Directors in the Merger."
As of the record date, the directors and executive officers of CGB
beneficially owned shares of CGB common stock as described in the following
table. Unless otherwise indicated, each director and executive officer listed
below possesses sole voting power and sole investment power. All of the
shares shown in the following table are owned both of record and beneficially
except as indicated in the notes to the table. The address for beneficial
owners is the address of CGB, 12695 Metcalf Ave., Overland Park, Kansas 66213.
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33
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER POSITION BENEFICIAL OWNERSHIP <F1><F2> PERCENT OF CLASS<F*>
---------------- -------- ----------------------------- --------------------
Robert Ames <F3><F4> Director; Vice 43,936 5.24%
Chairman & Director
(SE Region) of First
Commercial Bank
Duane L. Becker <F3><F5> Director 36,380 4.33%
Abhay K. Bisarya <F3><F6> Director 20,030 2.38%
Gerald E. Boyer <F3><F7> Director 15,530 1.85%
Paul C. Clendening <F3><F8> Executive Vice 20,120 2.35%
President; President
of First Commercial
Bank
Michael J. Decoursey <F3><F9> Director 14,000 1.67%
Phillip A. Harris <F3><F10> Director 16,460 1.96%
Michael F. Herbal <F3><F11> Director 17,280 2.06%
Wynne R. Jennings <F3><F12> Director 1,800 *
Richard D. Masinton <F3><F13> Director 19,630 2.34%
Joe C. Morris <F3><F14> Chairman & Director 12,090 1.43%
Ted A. Murray <F3><F15> Director 10,680 1.27%
Alex S. Rosser <F3><F16> Vice Chairman & 14,930 1.77%
Director
Scott A. Woods <F3><F17> President & Director; 27,150 3.18%
Chairman/CEO &
Director of First
Commercial Bank
Robert P. Wray <F3><F18> President & CEO of 10,320 1.22%
The Capital
Corporation
All Directors and Executive 281,536 33.40%
Officers as a Group
<FN>
<F*>Less than 1%.
- ---------------
<F1> Pursuant to the rules of the Securities and Exchange Commission, certain
shares of Common Stock which a person has the right to acquire within 60
days pursuant to the exercise of stock options and warrants are deemed
to be outstanding for the purpose of computing beneficial ownership and
the percentages of ownership of that person, but are not deemed
outstanding for the purposes of computing the percentage ownership of
any other person. All directors and officers as a group hold options to
purchase an aggregate of 81,600 shares of Common Stock.
<F2> Unless otherwise indicated, the named person has sole voting and
dispositive power for all shares shown.
<F3> Includes options as of March 1, 2000 outstanding and exercisable as of
December 31, 1999 or within 60 days thereafter, including those
beneficially owned by the named person, as follows: Mr. Ames, 1,000
shares; Mr. Becker, 3,000 shares; Mr. Bisarya, 3,000 shares; Mr. Boyer,
3,000 shares; Mr. Clendening, 17,000 shares; Mr. DeCoursey, 1,800
shares; Mr. Harris, 3,000 shares; Mr. Herbel, 3,000 shares; Mr.
Jennings, 1,800 shares; Mr. Masinton, 3,000 shares; Mr. Morris, 8,000
shares; Mr. Murray, 3,000 shares; Mr. Rosser, 4,000 shares; Mr. Woods,
17,000 shares; and Mr. Wray, 10,000 shares; all directors and officers
as a group, 81,600.
<F4> Includes 22,326 shares held by Mr. Ames' spouse.
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34
<F5> Includes 24,680 shares held jointly by Mr. Becker and his spouse; 7,500
shares held in the name of E.S.F. Company, Inc. in which Mr. Becker has
sole voting control and 1,200 shares held as joint tenants with Mr.
Becker's granddaughter in which Mr. Becker has shared voting control.
Excludes 7,500 shares held by Mr. Becker's adult son.
<F6> Includes 17,030 shares held jointly by Mr. Bisarya and his spouse.
Excludes 1,000 shares held by Mr. Bisarya's adult son.
<F7> Includes 7,500 shares held in the name ProSoCo, Inc. Profit Sharing Plan
for the benefit of Mr. Boyer.
<F8> Includes 3,120 shares held in an Individual Retirement Account for the
benefit of Mr. Clendening, for which Mr. Clendening has voting power.
<F9> Includes 12,200 shares held jointly by Mr. DeCoursey and his spouse.
<F10> Includes 13,460 shares held jointly by Mr. Harris and his spouse.
<F11> Includes 1,000 shares held jointly by Mr. Herbel and his spouse.
Excludes 2,200 shares held by Mr. Herbel's adult son.
<F12> Includes 1,200 shares held in Mr. Jennings' trust in which he has voting
power.
<F13> Includes 16,630 shares held in Mr. Masinton's trust in which he has
voting power and 400 shares held in trust for Mr. Masinton's spouse.
<F14> Includes 2,430 shares held in Mr. Morris' trust in which he has voting
power; 1,200 shares held in the name of Morris Corporation in which he
has one-third voting power; 400 shares held in his spouse's trust over
which Mr. Morris has voting power, and 60 in the name of Mr. Morris.
<F15> Includes 600 shares in an Individual Retirement Account for the benefit
of Mr. Murray, 600 shares held in an Individual Retirement Account for
the benefit of Mr. Murray's spouse and 6,480 shares in trust for the
benefit of Mr. Murray's spouse.
<F16> Includes 300 shares held in the name of Mr. Rosser's spouse. Excludes
300 shares held in the name of Mr. Rosser's adult stepchild, and
excludes 300 shares held in name of Mr. Rosser's spouse as custodian for
Mr. Rosser's minor stepson.
<F17> Includes 10,150 shares held in an Individual Retirement Account for the
benefit of Mr. Woods, for which Mr. Woods has voting power. Excludes
174 shares held in the name of Mr. Woods' two adult children.
<F18> Includes 320 shares held jointly by Mr. Wray and his spouse.
VOTING OF PROXIES
SUBMITTING PROXIES. Enterbank and CGB shareholders may vote their shares in
person by attending their respective special meeting or vote their shares by
proxy by completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage-paid envelope. IF A WRITTEN PROXY CARD IS
SIGNED BY A SHAREHOLDER AND RETURNED WITHOUT INSTRUCTIONS, THE SHARES
REPRESENTED BY THE PROXY WILL BE VOTED FOR THE PROPOSALS PRESENTED AT
ENTERBANK'S SPECIAL MEETING OR FOR THE PROPOSALS PRESENTED AT CGB'S SPECIAL
MEETING, AS APPLICABLE. Enterbank and CGB shareholders whose shares are held
in "street name" (i.e., in the name of a broker, bank or other record holder)
must either direct the record holder of their shares as to how to vote their
shares or obtain a proxy from the record holder to vote at their respective
special meeting.
REVOKING PROXIES. Enterbank and CGB shareholders of record may revoke their
proxies at any time before the time their proxies are voted at Enterbank's
special meeting or CGB's special meeting, respectively. Proxies may be
revoked by written notice, including by telegram or telecopy, to the
Corporate Secretary of Enterbank or CGB, as applicable, by a later-dated
proxy signed and returned
33
35
by mail or by attending Enterbank's special meeting or CGB's special meeting,
as applicable, and voting in person. Attendance at Enterbank's special
meeting or CGB's special meeting will not in and of itself constitute a
revocation of a proxy. The shareholder must inform the secretary at the
special meeting, prior to the vote, that he or she wants to revoke his or her
proxy and vote in person. Any written notice of a revocation of a proxy must
be sent so as to be delivered before the taking of the vote at the applicable
special meeting as follows:
FOR ENTERBANK SHAREHOLDERS, TO: FOR CGB SHAREHOLDERS, TO:
Enterbank Holdings, Inc. Commercial Guaranty Bancshares, Inc.
150 North Meramec 12695 Metcalf
Clayton, Missouri 63105 Overland Park, Kansas 66213
Attention: James C. Wagner Attention: Robert P. Wray
ABSTENTIONS AND BROKER NON-VOTES. The presence, in person or by properly
executed proxy, of the holders of a majority of the outstanding shares is
necessary to constitute a quorum at each of Enterbank's special meeting and
CGB's special meeting. Abstentions and broker non-votes (as described below)
will be counted solely for the purpose of determining whether a quorum is
present. Under the applicable rules of the National Association of Securities
Dealers, Inc., brokers or members who hold shares in street name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote those shares with respect to the approval of the
merger agreement in the absence of specific instructions from such customers.
We refer to these as "broker non-votes." Abstentions and broker non-votes
will have the same effect as a vote against the merger agreement at the CGB
special meeting but will not be counted in determining the vote to approve
the merger agreement at the Enterprise special meeting. Abstentions and
broker non-votes will not, however, have the effect of establishing
dissenters' rights of CGB shareholders. See "Dissenters' Rights of
Appraisal--Appraisal Rights of CGB Shareholders."
If any other matters are properly presented for consideration at
Enterbank's special meeting, in the case of the Enterbank shareholders, or at
CGB's special meeting, in the case of the CGB shareholders, the persons named
in the enclosed form of proxy will have discretion to vote or not vote on
those matters in accordance with their best judgment, unless authorization to
use that discretion is withheld. If a proposal to adjourn Enterbank's special
meeting or CGB's special meeting is properly presented, however, the persons
named in the enclosed form of proxy will not have discretion to vote in favor
of the adjournment proposal any shares which have been voted against the
proposal(s) to be presented at the respective special meetings.
Neither Enterbank nor CGB is aware of any matters expected to be presented
at its respective special meeting other than as described in their respective
notice of special meeting. The cost of solicitation of proxies will be paid
by Enterbank and CGB, as applicable. In addition to solicitation by mail, the
directors, officers and employees of Enterbank and CGB may also solicit
proxies from shareholders by telephone, facsimile, telegram or in person.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries to send the proxy materials to beneficial owners;
and Enterbank or CGB, as the case may be, will, upon request, reimburse those
34
36
brokerage houses and custodians for their reasonable expenses in so doing.
Neither Enterbank nor CGB has retained a proxy solicitor.
Shareholders who submit proxy cards should not send in any stock
certificates with their proxy cards. A letter of transmittal with
instructions for the surrender of certificates representing shares of CGB
common stock will be mailed by Enterbank to former CGB shareholders shortly
after the merger is completed. See "The Merger--Exchange of CGB Stock
Certificates; Fractional Interests."
RECOMMENDATION OF THE ENTERBANK BOARD OF DIRECTORS AND CGB BOARD OF
DIRECTORS. Each of the Enterbank Board of Directors and CGB Board of
Directors has unanimously approved the merger described above and unanimously
recommends that their respective shareholders vote FOR the merger at their
respective special meetings.
35
37
ENTERBANK HOLDINGS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
This section presents selected historical financial information of
Enterbank. You should read carefully Enterbank's financial statements
incorporated by reference in this prospectus, including the notes to the
financial statements. The selected information in this section is not
intended to replace the financial statements. The information below also
should be read in conjunction with "Unaudited Pro Forma Condensed Combined
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference in this
prospectus.
Enterbank derived the selected consolidated statement of income information
presented below for each of its 1999, 1998, 1997, 1996 and 1995 years and the
balance sheet data at December 31, 1999, 1998, 1997, 1996 and 1995 from its
audited consolidated financial information.
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
STATEMENT OF INCOME:
Net interest income 17,785 13,545 10,177 6,985 6,027
Provisions for possible loan
or lease losses 1,021 711 775 345 631
Other income 2,565 2,079 476 1,239 836
Other expenses 13,386 10,052 6,339 5,146 4,187
Income before income taxes 5,943 4,861 3,539 2,733 2,045
Income taxes 2,244 1,850 1,317 1,031 741
Income before cumulative effect of a
change in accounting principle 3,699 3,011 2,222 1,702 1,304
Cumulative effect on prior years of a
change in asset classification 121 0 0 0 0
Net income 3,820 3,011 2,222 1,702 1,304
PER SHARE DATA:
Net income per share-basic 0.54 0.43 0.35 0.37 0.30
Net income per share-diluted 0.50 0.40 0.33 0.32 0.26
Cash dividends per share 0.040 0.033 0.030 0.027 0.023
Book value per common share 4.59 4.11 3.78 2.96 2.75
Tangible book value per common share 4.59 4.11 3.77 2.95 2.73
BALANCE SHEET DATA:
Balance sheet totals-end of period:
Assets 488,001 375,304 291,365 184,584 153,706
Loans and leases 385,102 273,818 225,560 134,133 110,464
Allowance for loan losses 4,235 3,200 2,510 1,765 1,400
Deposits 435,798 339,180 264,301 168,961 141,140
Long-term obligations 17,920 6,000 0 300 0
Shareholders' equity 32,764 29,240 26,067 14,758 12,052
Average balance sheet amounts:
Assets 408,268 318,628 227,914 152,706 131,868
Loans and leases 342,565 251,916 177,532 120,849 94,737
Earning assets 384,531 296,896 212,913 141,535 121,417
Interest-bearing liabilities 318,741 243,370 171,519 113,974 98,864
Shareholders' equity 31,029 27,719 22,722 13,373 11,717
SELECTED RATIOS:
Return on average equity 12.31 10.86 9.78 12.73 11.13
Return on average tangible equity 12.31 10.87 9.80 12.78 11.20
Return on average assets 0.94 0.94 0.97 1.12 0.99
36
38
ENTERBANK HOLDINGS, INC
SELECTED CONSOLIDATED FINANCIAL INFORMATION
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Efficiency ratio (non-interest expense
as a percentage of total revenues) 65.78 64.34 59.50 62.57 61.01
Average equity to average assets 7.60 8.70 9.97 8.76 8.89
Leveraged capital ratio 10.74 9.16 11.42 9.62 9.11
Net yield on average earning assets 8.39 8.59 8.84 8.90 9.00
Cost of interest-bearing liabilities 4.49 4.88 5.03 4.89 4.94
Net interest margin 4.66 4.59 4.79 4.96 4.98
Nonperforming loans and leases to total
loans and leases 0.08 0.00 0.02 0.12 0.10
Nonperforming assets to total assets 0.14 0.22 0.29 0.56 0.64
Net chargeoffs (recoveries) to average
loans and leases 0.00 0.01 0.02 (0.02) 0.24
Allowance for loan or lease losses to
total loans and leases 1.10 1.17 1.11 1.32 1.27
37
39
COMMERCIAL GUARANTY BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
This section presents selected historical financial information of CGB.
You should read carefully CGB's financial statements contained in this
prospectus, including the notes to the financial statements. The selected
information in this section is not intended to replace the financial
statements. The information below also should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Commercial Guaranty Bancshares, Inc." appearing elsewhere in this
prospectus.
CGB derived the selected consolidated statement of income information
presented below for each of its 1999, 1998 and 1997 years and the balance
sheet data as of December 31, 1999 and 1998 from audited financial statements
presented herein. Selected consolidated statement of operations information
presented below for each of its 1996 and 1995 years and balance sheet data as
of December 31, 1997, 1996 and 1995 were derived from audited financial
statements that are not included herein.
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
(dollars in thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
STATEMENT OF INCOME:
Net interest income 5,131 4,255 1,442 554 22
Provisions for possible loan or lease
losses 975 650 100 185 --
Non interest income 1,030 679 162 18 --
Non interest expense 4,709 4,474 1,584 927 191
Income (loss) before income taxes 477 (190) (80) (539) (169)
Income tax expense 261 (125) (114) -- --
Net income 216 (65) 34 (539) (169)
PER SHARE DATA:
Net income per share-basic 0.25 (0.09) 0.06 (1.26) (0.50)
Net income per share-diluted 0.25 (0.09) 0.06 (1.25) (0.50)
Cash dividends per share -- -- -- -- --
Book value per common share 17.14 17.76 16.10 14.96 13.36
Tangible book value per common share 14.24 14.63 11.98 14.96 13.36
BALANCE SHEET DATA:
Balance sheet totals-end of period:
Assets 127,642 112,762 107,474 27,653 5,340
Loans 95,790 81,109 68,323 15,988 --
Allowance for loan losses 2,023 1,230 660 185 --
Deposits 106,531 94,023 92,334 19,276 --
Long-term obligations 4,196 3,205 3,674 -- --
Shareholders' equity 14,610 15,065 10,934 8,279 5,282
Average balance sheet amounts:
Assets 118,987 107,073 37,304 15,365 1,290
Loans 86,843 76,845 25,812 7,578 --
Earning assets 107,757 96,232 33,209 13,574 587
Interest-bearing liabilities 92,965 84,825 26,240 8,797 --
Shareholders' equity 15,232 13,429 8,275 6,171 1,290
38
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COMMERCIAL GUARANTY BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
SELECTED RATIOS:
Return on average equity 1.42 (0.48) 0.41 (8.73) (13.10)
Return on average tangible equity 1.69 (0.60) 0.62 (8.73) (13.10)
Return on average assets 0.18 (0.06) 0.09 (3.51) (13.10)
Efficiency ratio (non-interest expense
as a percentage of total revenues) 76.43 90.68 98.77 161.90 877.80
Average equity to average assets 12.80 12.54 22.18 40.16 100.00
Leveraged capital ratio 10.48 11.54 22.72 53.88 409.44
Net yield on average earning assets 8.31 8.45 8.47 7.75 1.69
Cost of interest-bearing liabilities 4.10 4.52 5.23 5.65 -
Net interest margin 4.76 4.42 4.34 4.08 1.69
Nonperforming loans and leases to total
loans and leases 2.59 0.05 N/A N/A N/A
Nonperforming assets to total assets 1.94 0.04 N/A N/A N/A
Net chargeoffs (recoveries) to average
loans and leases 0.21 0.11 N/A N/A N/A
Allowance for loan or lease losses to
total loans and leases 2.11 1.52 0.97 1.16 N/A
39
41
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Statements of Income
for the years ended December 31, 1999, 1998 and 1997 present the combined
results of operations of Enterbank and CGB as if the merger had been
effective at the beginning of each period. The Unaudited Pro Forma Condensed
Combined Balance Sheets as of December 31, 1999, combines the historical
consolidated balance sheets of Enterbank and CGB as if the merger had been
effective on December 31, 1999. The Unaudited Pro Forma Condensed Combined
Financial Information has been prepared from, and should be read in
conjunction with, the historical consolidated financial statements and notes
thereto of Enterbank and CGB.
The Unaudited Pro Forma Condensed Combined Financial Information and
accompanying notes reflect the application of the pooling of interests method
of accounting for the merger. Under this method of accounting, the recorded
assets, liabilities, shareholders' equity, income and expenses of Enterbank
and CGB are combined and reflected at their historical amounts.
The pro forma combined figures shown in the Unaudited Pro Forma Condensed
Combined Financial Information are simply arithmetical combinations of
Enterbank's and CGB's separate financial result; you should not assume that
Enterbank and CGB would have achieved the pro forma combined results if they
had actually been combined during the periods presented.
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
Pro Forma
Enterbank Commercial Combined
Holdings Guaranty Adjustments 12/31/99
----------- ---------- ----------- -----------
Interest income:
Interest and fees on loans $30,018,530 $7,685,788 $ -- $37,704,318
Interest on debt securities:
Taxable 978,651 1,115,184 -- 2,093,835
Nontaxable 26,102 19,925 -- 46,027
Interest on federal funds sold 1,112,929 117,792 -- 1,230,721
Interest on interest earning deposits 697 410 -- 1,107
----------- ---------- ---------- -----------
Total interest income 32,136,909 8,939,099 -- 41,076,008
----------- ---------- ---------- -----------
Interest expense:
Interest-bearing transaction accounts 490,791 323,393 -- 814,184
Money market accounts 7,833,783 694,965 -- 8,528,748
Savings 43,942 135,087 -- 179,029
Certificates of deposit:
$100,000 and over 2,160,871 535,929 -- 2,696,800
Other 3,224,838 1,898,570 -- 5,123,408
Federal Home Loan Bank advances and other
borrowings 519,244 220,038 -- 739,282
Notes payable (other borrowings) 78,650 -- -- 78,650
----------- ---------- ---------- -----------
Total interest expense 14,352,119 3,807,982 -- 18,160,101
----------- ---------- ---------- -----------
Net interest income 17,784,790 5,131,117 -- 22,915,907
Provision for loan losses 1,021,256 975,000 -- 1,996,256
----------- ---------- ---------- -----------
Net interest income after
provision for loan losses 16,763,534 4,156,117 -- 20,919,651
----------- ---------- ---------- -----------
Noninterest income:
Service charges on deposit accounts 621,472 563,892 -- 1,185,364
Gain on sale of ORE 130,050 -- -- 130,050
Financial advisory income 594,810 -- -- 594,810
Realized gain on trading assets 202,454 -- -- 202,454
Other service charges and fee income 212,669 465,887 -- 678,556
Gain on sale of mortgage loans 809,110 -- -- 809,110
Income from minority interest in EMB LLC 2,934 -- -- 2,934
(Gain)loss on investment in Enterprise Fund, L.P. (7,763) -- -- (7,763)
----------- ---------- ---------- -----------
Total noninterest income 2,565,736 1,029,779 -- 3,595,515
----------- ---------- ---------- -----------
40
42
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
Pro Forma
Enterbank Commercial Combined
Holdings Guaranty Adjustments 12/31/99
----------- ---------- ----------- -----------
Noninterest expense:
Salaries 6,748,905 2,157,090 -- 8,905,995
Payroll taxes and employee benefits 1,386,603 311,605 -- 1,698,208
Occupancy 977,422 333,707 -- 1,311,129
Furniture and equipment 431,005 243,416 -- 674,421
FDIC insurance 30,139 10,843 -- 40,982
Data processing 457,529 215,469 -- 672,998
Amortization of goodwill -- 190,566 -- 190,566
Other 3,354,569 1,246,089 -- 4,600,658
----------- ---------- ---------- -----------
Total noninterest expense 13,386,172 4,708,785 -- 18,094,957
----------- ---------- ---------- -----------
Income before income tax expense 5,943,098 477,111 -- 6,420,209
Income tax expense 2,244,404 260,993 -- 2,505,397
----------- ---------- ---------- -----------
Income before cumulative effect of a change
income accounting principle $ 3,698,694 $ 216,118 $ -- $ 3,914,812
=========== ========== ========== ===========
Per share amounts
Basic earnings per share:
Income before cumulative effect
of change in accounting principle $ 0.52 $ 0.25 $ 0.44
Basic weighted average common shares and
common stock equivalents outstanding 7,135,697 848,479 8,953,903
Diluted earnings per share:
Income before cumulative effect
of change in accounting principle $ 0.48 $ 0.25 $ 0.41
Diluted weighted average common shares and
common stock equivalents outstanding 7,704,800 863,443 9,555,072
41
43
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
Pro Forma
Enterbank Commercial Combined
Holdings Guaranty Adjustments 12/31/99
----------- ---------- ----------- -----------
Interest income:
Interest and fees on loans $23,001,165 $6,868,897 $ -- $29,870,062
Interest on debt securities:
Taxable 878,147 1,011,697 -- 1,889,844
Nontaxable 26,565 78,063 -- 104,628
Interest on federal funds sold 1,468,652 131,499 -- 1,600,151
Interest on interest earning deposits 39,740 714 -- 40,454
----------- ---------- ---------- -----------
Total interest income 25,414,269 8,090,870 -- 33,505,139
----------- ---------- ---------- -----------
Interest expense:
Interest-bearing transaction accounts 492,581 407,789 -- 900,370
Money market accounts 5,361,463 629,598 -- 5,991,061
Savings 36,918 150,453 -- 187,371
Certificates of deposit:
$100,000 and over 2,189,803 561,461 -- 2,751,264
Other 3,722,039 1,831,058 -- 5,553,097
Federal Home Loan Bank advances and other
borrowings -- 255,868 -- 255,868
Notes payable (other borrowings) 66,527 -- -- 66,527
----------- ---------- ---------- -----------
Total interest expense 11,869,331 3,836,227 -- 15,705,558
----------- ---------- ---------- -----------
Net interest income 13,544,938 4,254,643 -- 17,799,581
Provision for loan losses 710,899 650,000 -- 1,360,899
----------- ---------- ---------- -----------
Net interest income after
provision for loan losses 12,834,039 3,604,643 -- 16,438,682
----------- ---------- ---------- -----------
Noninterest income:
Service charges on deposit accounts 252,873 453,593 -- 706,466
Gain on sale of ORE -- -- -- --
Financial advisory income -- -- -- --
Realized gain on trading assets -- -- -- --
Other service charges and fee income 585,169 225,441 -- 810,610
Gain on sale of mortgage loans 1,242,869 -- -- 1,242,869
Income from minority interest in EMB LLC -- -- -- --
(Gain)loss on investment in Enterprise Fund, L.P. (2,199) -- -- (2,199)
----------- ---------- ---------- -----------
Total noninterest income 2,078,712 679,034 -- 2,757,746
----------- ---------- ---------- -----------
Noninterest expense:
Salaries 5,103,863 2,038,662 -- 7,142,525
Payroll taxes and employee benefits 999,579 287,280 -- 1,286,859
Occupancy 879,046 360,915 -- 1,239,961
Furniture and equipment 389,274 268,733 -- 658,007
FDIC insurance 40,638 10,970 -- 51,608
Data processing 306,691 132,838 -- 439,529
Amortization of goodwill -- 190,567 -- 190,567
Other 2,332,611 1,183,747 -- 3,516,358
----------- ---------- ---------- -----------
Total noninterest expense 10,051,702 4,473,712 -- 14,525,414
----------- ---------- ---------- -----------
Income before income tax expense 4,861,049 (190,035) -- 4,671,014
Income tax expense 1,850,275 (124,872) -- 1,725,403
Net income $ 3,010,774 $ (65,163) $ -- $ 2,945,611
=========== ========== ========== ===========
Per share amounts
Basic earnings per share:
Net income $ 0.43 $ (0.09) $ 0.34
Basic weighted average common shares and
common stock equivalents outstanding 7,052,289 741,903 8,642,113
Diluted earnings per share:
Net income $ 0.40 $ (0.09) $ 0.32
Diluted weighted average common shares and
common stock equivalents outstanding 7,544,820 748,542 9,148,871
42
44
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
Pro Forma
Enterbank Commercial Combined
Holdings Guaranty Adjustments 12/31/99
----------- ---------- ----------- -----------
Interest income:
Interest and fees on loans $16,795,887 $2,375,591 $ -- $19,171,478
Interest on debt securities:
Taxable 1,017,897 359,244 -- 1,377,141
Nontaxable 34,630 -- -- 34,630
Interest on federal funds sold 909,326 79,558 -- 988,884
Interest on interest earning deposits 1,289 451 -- 1,740
----------- ---------- ---------- -----------
Total interest income 18,759,029 2,814,844 -- 21,573,873
----------- ---------- ---------- -----------
Interest expense:
Interest-bearing transaction accounts 410,915 21,229 -- 432,144
Money market accounts 3,604,225 449,562 -- 4,053,787
Savings 32,357 3,189 -- 35,546
Certificates of deposit:
$100,000 and over 1,658,554 429,717 -- 2,088,271
Other 2,862,256 464,772 -- 3,327,028
Federal Home Loan Bank advances and other
borrowings 11,035 4,604 -- 15,639
Notes payable (other borrowings) 2,888 -- -- 2,888
----------- ---------- ---------- -----------
Total interest expense 8,582,230 1,373,073 -- 9,955,303
----------- ---------- ---------- -----------
Net interest income 10,176,799 1,441,771 -- 11,618,570
Provision for loan losses 775,064 100,000 -- 875,064
----------- ---------- ---------- -----------
Net interest income after
provision for loan losses 9,401,735 1,341,771 -- 10,743,506
----------- ---------- ---------- -----------
Noninterest income:
Service charges on deposit accounts 173,452 66,871 -- 240,323
Gain on sale of ORE -- -- -- --
Financial advisory income -- -- -- --
Realized gain on trading assets -- -- -- --
Other service charges and fee income 228,479 95,546 -- 324,025
Gain on sale of mortgage loans 78,948 -- -- 78,948
Income from minority interest in EMB LLC -- -- -- --
(Gain)loss on investment in Enterprise Fund, L.P. (4,904) -- -- (4,904)
----------- ---------- ---------- -----------
Total noninterest income 475,975 162,417 -- 638,392
----------- ---------- ---------- -----------
Noninterest expense:
Salaries 3,221,147 739,146 -- 3,960,293
Payroll taxes and employee benefits 620,438 69,359 -- 689,797
Occupancy 552,063 149,767 -- 701,830
Furniture and equipment 227,061 78,337 -- 305,398
FDIC insurance 21,846 2,487 -- 24,333
Data processing 237,248 45,902 -- 283,150
Amortization of goodwill -- -- -- --
Other 1,458,773 499,382 -- 1,958,155
----------- ---------- ---------- -----------
Total noninterest expense 6,338,576 1,584,380 -- 7,922,956
----------- ---------- ---------- -----------
Income before income tax expense 3,539,134 (80,192) -- 3,458,942
Income tax expense 1,316,590 (114,000) -- 1,202,590
----------- ---------- ---------- -----------
Net income $ 2,222,544 $ 33,808 $ -- $ 2,256,352
=========== ========== ========== ===========
Per share amounts
Basic earnings per share:
Net income $ 0.35 $ 0.06 $ 0.30
Basic weighted average common shares and
common stock equivalents outstanding 6,286,077 562,860 7,492,230
Diluted earnings per share:
Net income $ 0.33 $ 0.06 $ 0.29
Diluted weighted average common shares and
common stock equivalents outstanding 6,674,901 567,065 7,890,065
43
45
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
Pro Forma
Enterbank Commercial Combined
Holdings Guaranty Adjustments 12/31/99
------------ ------------ ----------- ------------
Assets:
Cash and due from banks $ 14,798,216 $ 4,556,100 $ -- $ 19,354,316
Federal funds sold 54,825,000 -- -- 54,825,000
Interest-bearing deposits 469 -- -- 469
Investments in debt and equity securities:
Trading, at fair value 910,000 -- -- 910,000
Available for sale, at estimated fair value 22,685,372 19,470,170 -- 42,155,542
Held to maturity, at amortized cost 679,806 -- -- 679,806
Capital Stock of the Federal Reserve Bank
and the Federal Home Loan Bank, at cost 1,122,200 808,150 -- 1,930,350
------------ ------------ ---------- -------------
Total investments in debt and equity
securities 25,397,378 20,278,320 -- 45,675,698
------------ ------------ ---------- -------------
Loans held for sale 1,438,335 -- -- 1,438,335
Loans, less unearned loan fees 385,101,759 95,789,722 -- 480,891,481
Less allowance for loan losses 4,235,000 2,023,222 -- 6,258,222
------------ ------------ --------- ------------
Loans, net 380,866,759 93,766,500 -- 474,633,259
------------ ------------ --------- ------------
Other real estate owned 396,072 -- -- 396,072
Office equipment and leasehold improvements 3,228,256 4,617,706 -- 7,845,962
Accrued interest receivable 2,473,781 1,081,834 -- 3,555,615
Minority interest in Enterprise Merchant Banc LLC 572,009 -- -- 572,009
Investment in Enterprise Fund, L.P. 546,710 -- -- 546,710
Goodwill -- 2,468,671 -- 2,468,671
Prepaid expenses and other assets 3,458,459 872,914 -- 4,331,373
------------ ------------ --------- ------------
Total assets $488,001,444 $127,642,045 $ -- $615,643,489
============ ============ ========= ============
Liabilities and Shareholders' Equity
Deposits:
Demand $ 62,486,092 $ 12,559,611 $ -- $ 75,045,703
Interest-bearing transaction accounts 31,532,705 16,881,503 -- 48,414,208
Money market accounts 197,935,760 20,200,107 -- 218,135,867
Savings 2,736,638 4,895,033 -- 7,631,671
Certificates of deposit:
$100,000 and over 56,321,178 11,902,864 -- 68,224,042
Other 84,785,457 40,091,679 -- 124,877,136
------------ ------------ --------- ------------
Total deposits 435,797,830 106,530,797 -- 542,328,627
------------ ------------ --------- ------------
Guaranteed preferred beneficial interests in
EBH-subordinated debentures 11,000,000 -- -- 11,000,000
Federal Home Loan Bank advances 6,920,386 4,196,444 -- 11,116,830
Federal funds purchased -- 1,300,000 -- 1,300,000
Accrued interest payable 962,205 329,950 -- 1,292,155
Accounts payable and accrued expenses 557,338 674,943 -- 1,232,281
------------ ------------ --------- ------------
Total liabilities 455,237,759 113,032,134 -- 568,269,893
------------ ------------ --------- ------------
Shareholders' equity:
Common stock, $.01 par value (Enterbank),
$1.00 par value (Commercial Guaranty); 71,436 852,454 (834,521) 89,369
Surplus 19,285,957 15,013,642 444,521 34,744,120
Retained earnings (accumulated deficit) 13,476,400 (523,770) -- 12,952,630
Accumulated other comprehensive gain(loss) (70,108) (342,415) -- (412,523)
Treasury Stock -- (390,000) 390,000 --
------------ ------------ --------- ------------
Total shareholders' equity 32,763,685 14,609,911 -- 47,373,596
------------ ------------ --------- ------------
Total liabilities and shareholders' equity $488,001,444 $127,642,045 $ -- $615,643,489
============ ============ ========= ============
44
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Common stock outstanding as of December 31, 1999 is calculated on the basis
of 2.1429 shares of Enterbank common stock to one share of CGB common stock.
Enterbank 7,143,636
CGB 1,793,294
---------
Pro forma combined 8,936,930
This assumes the retirement of 15,600 shares of CGB treasury stock
outstanding at December 31, 1999.
Adjustments between common stock and surplus reflect the issuance of 2.1429
Enterbank common stock for every one share of CGB common stock outstanding
and the conversion of $0.01 par value for Enterbank stock and $1.00 par value
for CGB stock.
45
47
MANAGEMENT'S DISCUSSION OF THE FORMATION AND EXPANSION OF
COMMERCIAL GUARANTY BANCSHARES, INC.
AND THE RELATED ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion of the formation, expansion, financial condition
and results of the operations of Commercial Guaranty Bancshares, Inc. ("CGB")
should be read in conjunction with its consolidated financial statements and
the related notes. All references to CGB in the following discussion
includes CGB and its subsidiaries.
CGB, a Kansas corporation, was formed in March 1995 to operate as a
diversified commercial bank holding company. CGB raised more than $6,000,000
of equity capital through the sale of common stock to 114 investors. All
stock sales were made by the four individual incorporators through a private
placement. Applications for Federal Reserve holding company status, a
national bank charter and Federal Deposit Insurance Corporation ("FDIC")
deposit insurance coverage were approved in the fourth quarter of 1995, and
CGB's commercial bank subsidiary, First Commercial Bank ("FCB"), opened for
business in Overland Park, Kansas in February 1996. The initial
capitalization of FCB was $5,690,000, and its total assets grew to
$27,449,000 by year-end.
The Johnson County, Kansas market in which CGB operates has enjoyed the
strongest economy in the State of Kansas and the Kansas City metropolitan
area for several years. The primary market area of CGB includes the
worldwide headquarters of Sprint Corporation, Yellow Corporation, the parent
company of Yellow Freight System, Inc., and Black & Veatch Corporation, a
major international engineering firm. In addition, Johnson County is the
base for many successful small and medium sized businesses. The consumer
demographics of the market are very attractive with an average household
income within a three mile radius of CGB of approximately $100,000. CGB's
focus on such consumers and the businesses they own and/or manage has been
very effective since its inception.
The original business plan of CGB included growth through acquisition of
other banks, the formation of non-bank financial service subsidiaries,
affiliations with outside financial service providers such as insurance
agencies, and expansion of the Johnson County private/wholesale banking
concept to similar markets outside the State of Kansas. To initiate one or
more of these steps, a second successful private placement raised $3,000,000
in equity capital in the third quarter of 1996, thus increasing the number of
shareholders to 170. In early 1997, $1,000,000 of this new capital was
transferred by CGB to FCB, thereby increasing its capital to more than
$6,000,000.
As part of CGB's long term growth plan, an investment banking firm, The
Capital Corporation was formed in mid-1996. This subsidiary leads clients
through mergers, acquisitions and divestitures with a particular focus on the
community banking industry. In addition, The Capital Corporation provides
strategic planning and general consulting services to financial institution
owners and management teams. Capitalized with $360,000 of equity, The
Capital Corporation began focused marketing efforts in the first quarter of
1997 with a projected three-year time frame to achieve
46
48
profitability. To date, The Capital Corporation has closed three investment
banking transactions which generated total fees of $330,000.
In December 1997, CGB acquired all of the capital stock of Humboldt
National Bank ("Humboldt"), a $60,000,000 community bank with offices in
Humboldt, Chanute and Iola, Kansas. The acquisition price of $7,067,650 was
paid with $2,586,000 in cash, the issuance of 114,324 new shares of CGB
common stock and the assumption of an existing bank stock loan of
approximately $2,100,000. The cash portion of the purchase price came from
funds generated in the 1996 stock offering and borrowings under a $3,200,000
(including the loan assumption noted above) line of credit secured by all
issued and outstanding common stock of CGB. Coincident with the acquisition,
Humboldt was merged into FCB, creating a bank with equity of $14,610,000 and
total assets of $127,642,000 as of December 31, 1999.
In the spring of 1998, CGB initiated another private placement which raised
more than $4,000,000 in new equity capital and increased the number of
shareholders to 275. Stock sales were made by CGB's directors. With the
completion of this successful offering, CGB raised more than $13,000,000 in
cash equity over a three-year period. Proceeds of the 1998 offering were
used to repay the loan used in the Humboldt acquisition with the balance
available for general corporate activities, including future possible
acquisitions. The equity offerings have resulted in a well capitalized
holding company and a bank able to support ongoing deposit and asset growth.
CGB continues to benefit from the significant new business opportunities
available in Johnson County and has built upon the strong foundation laid by
the former Humboldt National Bank in Allen and Neosho Counties, Kansas.
Since the merger, total deposits have grown from $92,334,000 at year-end 1997
to $106,531,000 on December 31, 1999. During the same period, total loans
have grown from $68,323,000 to $95,790,000. While all banking locations have
contributed to that growth, the primary source of loan growth has been
Johnson County.
FISCAL 1999 COMPARED TO FISCAL 1998
- -----------------------------------
FINANCIAL CONDITION
Total assets at December 31, 1999 were $127,642,000, an increase of
$14,880,000 or 13.20%, over total assets of $112,762,000 at December 31,
1998. Total loans were $95,790,000, at December 31, 1999 an increase of
$14,681,000 or 18.10%, over total loans of $81,109,000 at December 31, 1998.
Federal funds sold and investment securities were $19,470,000, at December
31, 1999, a decrease of $345,000 or 1.74%, from total federal funds sold and
investment securities of $19,815,000 at December 31, 1998.
Total deposits at December 31, 1999 were $106,531,000, an increase of
$12,508,000, or 13.30%, over total deposits of $94,023,000 at December 31,
1998. Most of the deposit growth occurred in certificates of deposit which
increased $10,553,000 or 25.46% from $41,442,000 at December 31, 1998 to
$51,995,000 at December 31, 1999. Growth in certificates of deposit is due
to marketing efforts designed to enhance CGB's presence in its market areas.
47
49
Total shareholders' equity at December 31, 1999 was $14,610,000, a $455,000
decrease from equity of $15,065,000 at December 31, 1998. CGB's $216,000
decrease in accumulated deficit during 1999 was offset in large part by a
$342,000 unrealized loss in its investment portfolio, net of income taxes,
and purchases of treasury stock aggregating $390,000 during 1999.
RESULTS OF OPERATIONS
Net income for CGB for the year ended December 31, 1999, was $216,000.
This is a $281,000 increase over the net loss of $65,000 in 1998. The
following sections identify the major components of this increase.
NET INTEREST INCOME
Interest income is the largest component of CGB's revenue. Net interest
income (presented on a tax equivalent basis) was $5,142,000 for the year
ended December 31, 1999. This is a $847,000 or 19.72% increase compared to
net interest income of $4,295,000 in 1998. The net interest margin of 4.77%
in 1999 increased from 4.46% in 1998. The increase in net interest income
was the result of continued growth in FCB's loan portfolio which was funded
by a combination of deposit growth and liquidation of lower yielding
investment securities. At December 31, 1999, average total loans were
$86,843,000, up $9,998,000 from $76,845,000 at December 31, 1998.
In contrast the yield on average earning assets decreased to 8.31% for the
year ended December 31, 1999 from 8.45% in 1998. The decrease in asset yield
was primarily due to a total 75 basis point (0.75%) decrease in the prime
lending rate in the latter half of 1998 which impacted 1999 yields.
The average rate paid on interest bearing liabilities decreased to 4.10%
for the year ended December 31, 1999 from 4.52% in 1998. This change was the
result of management's decision to re-price maturing certificates of deposit
at lower rates and an overall decline in the interest rates paid on interest
bearing transaction accounts. The average balance of interest bearing
liabilities as a percent of total assets of 78.13% for the year ended
December 31, 1999 remained relatively constant compared to the average
balance of 79.22% for the year ended December 31, 1998.
FISCAL 1998 COMPARED TO FISCAL 1997
- -----------------------------------
FINANCIAL CONDITION
Total assets at December 31, 1998 were $112,762,000, an increase of
$5,288,000 or 4.92%, over total assets of $107,474,000 at December 31, 1997.
Total loans were $81,109,000, an increase of $12,786,000 or 18.71%, over
total loans of $68,323,000 at December 31, 1997. The 1998 growth in total
assets and loans was the result of continued marketing and calling efforts.
Federal funds sold and investment securities were $19,815,000, a decrease
of $6,906,000, or 25.84%, from total federal funds sold and investment
securities of $26,721,000 at December 31, 1997. The decrease from December
31, 1997 to December 31, 1998 in total investment securities and
48
50
federal funds sold was due to a conscious effort by management to convert
these lower yielding assets to higher yielding loans. This is further
evidenced by the increase in the net interest margin of 4.46% for the year
ended December 31, 1998 as compared to 4.34% for the same period in 1997.
Total deposits at December 31, 1998 were $94,023,000, an increase of
$1,689,000, or 1.83%, over total deposits of $92,334,000 at December 31,
1997. The growth was in interest bearing transaction accounts, money market
demand accounts and savings accounts. These account balances increased to
$42,027,000 at December 31, 1998. This is a $6,390,000 or 17.93% increase
from $35,637,000 at December 31, 1997. This growth was offset by
certificates of deposit which decreased by $3,041,000 to $41,442,000 at
December 31, 1998 from $44,483,000 at December 31, 1997. Non-interest
bearing demand accounts also decreased by $1,661,000 or 13.60% from
$12,215,000 at December 31, 1997 to $10,554,000 at December 31, 1998.
Total shareholders' equity was $15,065,000 at December 31, 1998 compared to
$10,934,000 at December 31, 1997, a $4,131,000 increase. This increase
resulted primarily from the sale of new capital stock in the amount of
$4,150,000. Other changes in equity from December 31, 1997 to December 31,
1998 included a $65,000 net loss and a $47,000 increase in the unrealized
gain on investment securities available for sale, net of income taxes.
RESULTS OF OPERATIONS
CGB had a net loss of $65,000 for the year ended December 31, 1998. This
was a decrease of $99,000 from net income of $34,000 in 1997. The major
reason for the decrease in earnings was the decision by FCB's management to
increase the provision for loan losses. The provision for loan losses for
the year ended December 31, 1998, was $650,000, a $550,000 increase from the
$100,000 provision in 1997. This increase in the loan loss provision was
offset by an increase in net interest income which is discussed in the next
section.
NET INTEREST INCOME
Net interest income (presented on a tax equivalent basis) was $4,295,000,
in 1998. This produced a net interest margin of 4.46% for the year. Net
interest income and net interest margin in 1997 were $1,442,000 and 4.34%,
respectively. The $2,853,000 increase in net interest income was driven
primarily by a $63,023,000 increase in average earning assets. During 1998,
total earning assets were $96,232,000 compared to $33,209,000 during 1997.
Average loans increased to $76,845,000 in 1998 from $25,812,000 in 1997. For
the same periods, the yield on average loans was 8.94% and 9.20%,
respectively. The $51,033,000 growth in average loans from December 31, 1997
to December 31, 1998, resulted primarily from the acquisition of Humboldt
which included $32,321,000 in loans. The remaining $18,712,000 growth
resulted from calling efforts and continued market growth.
The yield on average earning assets for the year ended December 31, 1998
was 8.45%, down from 8.47% in 1997. This decline is explained by a total 75
basis point (0.75%) decrease in the prime lending rate during the latter half
of 1997 which impacted 1998 yields.
49
51
The increase in the net interest income and net interest margin for 1998
was also due to a decrease in the average rate paid on interest bearing
liabilities for that time period. The average rate paid was 4.52%, down from
5.23% in 1997. This rate decrease occurred in money market, savings and
certificates of deposit categories. The decrease was attributable to
management's decision to lower deposit interest rates in conjunction with the
prime rate decreases of the third and fourth quarters of 1998.
The following table sets forth on a tax-equivalent basis, certain
information relating to CGB's average balance sheet, and reflects the average
yield earned on interest earnings, the average cost of interest bearing
liabilities and the resulting net interest income for each of the three years
ended December 31, 1999, 1998 and 1997.
50
52
Year ended December 31,
--------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------- ------------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
Balance Assets Expense Rate Balance Assets Expense Rate
--------------------------------------------------------------------------------------------
(Dollars in Thousands)
Interest-earning assets:
Loans <F1> $ 86,843 72.99% $7,686 8.85% $ 76,845 71.77% $6,869 8.94%
Taxable investments
in debt securities 18,268 15.35 1,115 6.10 15,681 14.65 1,012 6.45
Non-taxable investments
in debt securities <F2> 313 0.26 30 9.64 1,186 1.11 118 9.97
Federal funds sold 2,320 1.95 118 5.09 2,507 2.34 131 5.23
Interest earning deposits 13 0.01 1 3.85 13 0.01 1 3.73
-------- ------ ------ -------- ------ ------
Total interest-earning
assets 107,757 90.56 8,950 8.31 96,232 89.88 8,131 8.45
Non-interest-earning assets:
Cash and due from banks 3,241 2.72 2,281 2.13
Office equipment &
leasehold improvements 4,745 3.99 4,811 4.49
Other assets 4,547 3.83 4,472 4.17
Allowance for possible
loan losses (1,303) (1.10) (723) (0.67)
-------- ------ -------- ------
Total assets $118,987 100.00% $107,073 100.00%
======== ====== ======== ======
Interest-bearing
transaction accounts 18,047 15.17 $ 323 1.79% 18,243 17.04% $ 408 2.24%
Money market 19,508 16.40 695 3.56 14,872 13.90 630 4.24
Savings 5,146 4.32 135 2.62 5,367 5.01 150 2.79
Certificates of deposit 46,513 39.09 2,435 5.25 42,930 40.08 2,394 5.58
Federal Home Loan Bank
advances & FFP & N/P 3,751 3.15 220 5.87 3,413 3.19 254 7.44
-------- ------ ------ -------- ------ ------
Total interest-bearing
liabilities 92,965 78.13 3,808 4.10 84,825 79.22 3,836 4.52
Non-interest-bearing
liabilities:
Demand deposits 9,476 7.97 8,455 7.90
Other liabilities 1,314 1.10 364 0.34
-------- ------ -------- ------
Total liabilities 103,755 87.20 93,644 87.46
Shareholders' equity 15,232 12.80 13,429 12.54
-------- ------ -------- ------
Total liabilities &
shareholders' equity $118,987 100.00% 107,073 100.00%
======== ====== ======== ======
Net interest income $5,142 $4,295
====== ======
Net interest margin 4.77% 4.46%
==== ====
--------------------------------------------
1997
--------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
--------------------------------------------
Interest-earning assets:
Loans <F1> $ 25,812 69.19% $2,376 9.20%
Taxable investments
in debt securities 5,919 15.87 359 6.07
Non-taxable investments
in debt securities <F2> -- -- -- N/A
Federal funds sold 1,469 3.94 79 5.38
Interest earning deposits 9 0.02 1 3.16
-------- ------ ------
Total interest-earning
assets 33,209 89.02 2,815 8.47
Non-interest-earning assets:
Cash and due from banks 919 2.46
Office equipment &
leasehold improvements 2,849 7.64
Other assets 559 1.50
Allowance for possible
loan losses (232) (0.62)
-------- ------
Total assets $ 37,304 100.00%
======== ======
Interest-bearing
transaction accounts 1,080 2.90 $ 21 1.94%
Money market 9,852 26.41 449 4.56
Savings 104 0.28 3 2.89
Certificates of deposit 15,124 40.54 895 5.92
Federal Home Loan Bank
advances & FFP & N/P 80 0.21 5 5.01
-------- ------ ------
Total interest-bearing
liabilities 26,240 70.34 1,373 5.23
Non-interest-bearing
liabilities:
Demand deposits 2,693 7.22
Other liabilities 96 0.26
-------- ------
Total liabilities 29,029 77.82
Shareholders' equity 8,275 22.18
-------- ------
Total liabilities &
shareholders' equity 37,304 100.00%
======== ======
Net interest income $1,442
======
Net interest margin 4.34%
====
<FN>
<F1> Average balances include non-accrual loans. The income on such loans is
included in interest but is recognized only upon receipt. Loan fees
included in interest income are approximately $167,000, $114,000 and
$76,000 for 1999, 1998 and 1997, respectively.
<F2> Non-taxable investment income is presented on a fully tax-equivalent
basis assuming a tax rate of 34%.
51
53
Interest earned on total earning assets increased by $819,000 for the year
ending December 31, 1999 as compared to the interest earned on total earning
assets during the same time period in 1998. The primary component of the
increase was the result of increased volume of total loans which contributed
$885,000. This was partly offset by a $68,000 decrease in interest income
due to a decline in the rate earned on loans in 1999. The net result was an
increase of $817,000 in total interest earned on loans for the year ended
December 31, 1999. Interest income of investment securities and federal
funds sold for the year ending December 31, 1999 stayed relatively consistent
with the interest earned on these investments during the year ending December
31, 1998.
Concurrently, there was a net decrease of $28,000 in the total interest
expense paid on deposits and other borrowings during 1999. Although there
was a total increase of $382,000 in interest expense on these accounts as a
result of increased volume, the increase was more than offset by a decrease
of $410,000 in interest expense as a result of a decline in the rates paid
for these accounts.
The end result of these factors, was a net increase of $847,000 in net
interest income for the year ending December 31, 1999 as compared to the
prior year ending December 31, 1998.
Comparison of interest earned on interest earning assets during the year
ending December 31, 1998 to the year ending December 31, 1997, reveals an
increase of $5,316,000. Again, the majority of this increase was attributed
to the increase in interest earned on loans of $4,563,000 due to increased
volume in 1998 as compared to 1997. This volume increase resulted primarily
from the purchase of Humboldt on December 31, 1997. The increase in interest
income on loans was somewhat mitigated by a $70,000 decrease due to a slight
decline in the interest rates earned on loans in 1998 as compared to 1997.
Similarly, net interest income on investments and federal funds sold
increased by $823,000 for the year ended December 31, 1998 as compared to the
year ending December 31, 1997. While there was a total increase of $906,000
on these investments in 1998 due to increased volume, it was offset by a net
decline of $83,000 resulting from lower rates earned during the year.
The Humboldt acquisition also resulted in a significant increase in the
average balances CGB's deposit accounts. This is the primary factor for the
net interest expense increase of $2,463,000 for the year ending December 31,
1998 compared to the year ending December 31, 1997. The total increase of
interest expense was $2,496,000 due to increased volume, offset by a $33,000
decrease in interest expense resulting from lower rates paid on certificates
of deposit during 1998 as compared to the rates paid during 1997.
The above components together resulted in a net increase in interest income
of $2,853,000 for the year ended December 31, 1998 over the interest income
earned during 1997.
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54
The following table sets forth, on a tax-equivalent basis for the periods
indicated, a summary of the changes in interest income and interest expense
resulting from changes in yield/rates and volume:
1999 Compared to 1998 1998 Compared to 1997
Increase (Decrease) Due to Increase (Decrease) Due to
---------------------------------- ----------------------------------
Volume<F1> Rate<F2> Net Volume<F1> Rate<F2> Net
---------- -------- ------ ---------- -------- ------
(Dollars in Thousands)
Interest earned on:
Loans $ 885 $ (68) $ 817 $4,563 $ (70) $4,493
Taxable investments in debt and equity
securities 160 (57) 103 719 (66) 653
Nontaxable investments in debt and
equity securities <F3> (82) (6) (88) 118 -- 118
Federal funds sold (13) -- (13) 69 (17) 52
------ ------- ------ ------ ------ ------
Total interest-earning assets $ 950 $ (131) $ 819 $5,469 $(153) $5,316
------ ------- ------ ------ ------ ------
Interest paid on:
Interest-bearing transaction accounts $ (4) $ (81) $ (85) $ 383 $ 4 $ 387
Money market deposits 176 (111) 65 167 14 181
Savings deposits (6) (9) (15) 147 -- 147
Time deposits 193 (152) 41 1,553 (54) 1,499
Federal Home Loan Bank advances and
Federal funds purchased 23 (57) (34) 246 3 249
------ ------- ------ ------ ------ ------
Total 3,821 (410) (128) 2,496 (33) 2,463
------ ------- ------ ------ ------ ------
Net interest income $ 568 $ 279 $ 847 $2,973 $(120) $2,853
====== ======= ====== ====== ====== ======
<FN>
- ---------------
<F1> Change in volume multiplied by yield/rate of prior period.
<F2> Change in yield multiplied by volume of prior period.
<F3> Nontaxable investments in debt securities are presented on a fully
tax-equivalent basis assuming a tax rate of 34%.
Note: The change in interest due to both rates and volume has been allocated
to rate and volume changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
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55
LOAN PORTFOLIO
- --------------
Loans, in the aggregate, are the largest asset and primary source of
interest income for FCB. Diversification among different loan categories
reduces the risks associated with any single type of loan. The following
table describes the composition of FCB's loan portfolio by type of loan at
the indicated dates:
December 31,
-----------------------------------------------------------------------------
1999 1998 1997
---------------------- ----------------------- ----------------------
Percent Percent Percent
of Total of Total of Total
Amount Loans Amount Loans Amount Loans
-------- -------- -------- -------- -------- --------
(Dollars in thousands)
Commercial, industrial and agriculture $35,587 37.15% $35,121 43.30% $26,009 38.07%
Real estate:
Commercial 19,688 20.56 13,109 16.16 10,395 15.22
Construction 3,757 3.92 1,373 1.69 3,022 4.42
Residential/Agriculture 24,956 26.05 20,784 25.63 21,721 31.79
Consumer and other 11,802 12.32 10,722 13.22 7,176 10.50
------- ------ ------- ------ ------- ------
Total Loans $95,790 100.00% $81,109 100.00% $68,323 100.00%
======= ====== ======= ====== ======= ======
CGB offers a broad range of commercial, real estate, agricultural and
personal loans. In the Overland Park, Kansas market (which includes Kansas
City, Missouri and its suburbs), loans are made primarily to established
small to medium sized businesses and their owner/managers. In the southeast
Kansas market, loans are made to a wider range of businesses and consumers,
including farmers. Overall, FCB's loan portfolio is well diversified
although a substantial portion is secured by real estate. At December 31,
1999, FCB's loans totaled $95,790,000, and $48,401,000 or 50.53% of those
loans were secured by real estate. Comparable real estate secured loan
totals at December 31, 1998 and 1997 were $35,266,000 (43.48% of total loans)
and $35,138,000 (51.43% of total loans), respectively. While most of the
growth in FCB's loan portfolio over the past three years has occurred in its
Overland Park market, the portfolio's overall diversity is enhanced by the
greater variety of loan types available in its southeast Kansas market. In
both Overland Park and southeast Kansas, FCB focuses its loan product
offerings on particular market segments which are consistent with its lending
expertise in each market and the ongoing benefits of portfolio
diversification.
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56
The following table sets forth the maturity distribution of the loan
portfolio at December 31, 1999.
----------------------------------------------------------------
Less Than One Year One to Five Years Over Five Years Total
------------------ ----------------- --------------- ------
(Dollars in thousands)
Commercial loan and other $12,879 $13,543 $ 3,331 $29,753
Agriculture 4,542 1,287 5 5,834
Real Estate:
Construction 2,067 1,679 11 3,757
Mortgage 3,861 13,116 7,979 24,956
Commercial and other 4,410 14,340 938 19,688
Consumer loans 4,814 6,935 53 11,802
------- ------- ------- -------
Total $32,573 $50,900 $12,317 $95,790
------- ------- ------- -------
Fixed rate loans 20,104 22,856 1,575 44,535
Floating rate loans 12,469 28,044 10,742 51,255
------- ------- ------- -------
Total $32,573 $50,900 $12,317 $95,790
======= ======= ======= =======
PROVISION FOR LOAN LOSSES
- -------------------------
FCB's loan loss provisions in 1999, 1998 and 1997 were $975,000, $650,000
and $100,000, respectively. To accommodate the substantial growth in its
loan portfolio, and to provide for two specific troubled relationships, it
was management's decision to significantly increase the allowance for
possible loan losses during 1998 and 1999. The increased provisions resulted
in an ending reserve for loan losses of 2.11%, 1.52% and .97% of total loans
at December 31, 1999, 1998 and 1997 respectively.
FCB's net loan charge-offs were $181,000, $81,000 and $0 in 1999, 1998 and
1997, respectively. During the three year period, charge-offs totaled
$342,000, and recoveries totaled $80,000. Net loan losses were 0.21%, 0.11%
and 0% of average total loans in 1999, 1998 and 1997, respectively.
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57
The following table summarizes changes in the allowance for loan losses
arising from loans charged off, recoveries on loans previously charged off
and additions to the allowance charged to expense:
December 31,
-------------------------------------------
1999 1998 1997
------- ------- -------
(Dollars in thousands)
Allowance at beginning of period $ 1,230 $ 660 $ 185
------- ------- -------
Loans charged off:
Commercial and industrial 90 18 --
Real estate:
Commercial 2 20 --
Construction -- -- --
Residential -- -- --
Consumer and other 135 77 --
------- ------- -------
Total loans charged off 227 115 --
------- ------- -------
Recoveries of loans previously charged off:
Commercial and industrial 15 18 --
Real estate:
Commercial 6 -- --
Construction
Residential -- --
Consumer and other 24 16 --
------- ------- -------
Total recoveries of loans previously charged off 45 34 --
Net loans charged off 182 81 --
Provision charged to operations 975 650 100
Reserve acquired with Humboldt 375
------- ------- -------
Allowance at end of period $ 2,023 $ 1,230 $ 660
======= ======= =======
Average loans $86,843 $76,845 $25,812
Total loans 95,790 81,109 68,323
Nonperforming loans 2,265 664 --
Net charge-offs (recoveries) to average loans 0.21% 0.11% 0.00%
Allowance for loan losses to loans 2.11% 1.52% 0.97%
FCB's credit management policies and procedures focus on identifying,
measuring and controlling credit risk. These policies and procedures employ
a lender initiated system of rating loans which is ratified in the loan
approval process and subsequently tested through internal loan review,
external audits and regulatory bank examinations.
Adversely rated credits, including loans which would not necessarily be
criticized by regulators, are listed on a monthly watch loan list reviewed by
senior credit management on a continual basis and by FCB's Board of Directors
at least monthly. Loans may be added to the watch list for reasons which are
temporary and correctable such as non-current financial information or loan
documentation deficiencies. Other loans are added to the watch list whenever
an adverse event or circumstance which might affect the borrower's ability to
repay the loan as agreed is detected. Such events or circumstances include,
but are not limited to, payment
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58
delinquency, deterioration in the borrower's financial condition, collateral
value decrease or an adverse change in the borrower's economic environment.
Downgrades of loan risk ratings may be initiated by the responsible officer at
any time. Upgrades must be approved by senior credit management and FCB's
Management Loan Committee.
In determining the adequacy of the allowance for loan losses, management
reviews the portfolio's risk profile and changes in that profile over time in
a variety of ways. Among these are specific analysis of all loans on the
watch loan list, changes in past due and non-performing loans over time,
analysis of loans aggregated by internal risk ratings, actual historical loss
rates on loans by type and current economic conditions in FCB's markets.
Management presents its loan portfolio risk profile analysis to FCB's board
of directors each month with a recommendation for adjustments to the
allowance. Adjustments approved by FCB's Board are reflected in the
consolidated statements of income (loss).
Management believes the allowance for loan losses is adequate to absorb
losses inherent in the loan portfolio. While management uses available
information to recognize loan losses, future additions to the allowance may
be necessary due to changes in economic conditions. In addition, bank
regulatory agencies periodically review the adequacy of the allowance. Those
agencies may require FCB to increase the allowance based on their assessment
and interpretation of available information at the time of each examination.
At December 31, 1999, FCB had 29 loans in the aggregate amount of
$2,897,000 on its watch loan list compared to 33 loans in the aggregate
amount of $3,478,000 on December 31, 1998. Of the total 29 loans on the list
as of December 31, 1999, eight loans totaling $2,265,000 were considered to
be non-performing.
The following table sets forth information concerning FCB's non-performing
assets as of the dates indicated:
December 31,
--------------------------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
Nonaccrual loans $ 2,191 $ 579 $ --
Loans past due 90 days or more and still accruing interest 74 85 --
Restructured loans -- -- --
-------- -------- --------
Total nonperforming loans 2,265 664
Foreclosed property -- -- --
-------- -------- --------
Total nonperforming assets $ 2,265 $ 664 $ --
======== ======== ========
Total assets $127,642 $112,762 $107,474
Total loans, net of unearned loan fees 97,970 81,109 68,323
Total loans plus foreclosed property 97,970 81,109 68,323
Nonperforming loans to total loans 2.36% 0.82% N/A
Nonperforming assets to total loans plus foreclosed property 2.36% 0.82% N/A
Nonperforming assets to total assets 1.77% 0.59% N/A
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59
FCB's policy is to discontinue the accrual of interest on loans when
principal or interest is due and has remained unpaid for 90 days or more.
The increase in non-accrual loans from December 31, 1998 to December 31, 1999
was chiefly the result of one relationship which totaled $1,900,000. This
represents 86.72% of the $2,191,000 in non-accrual loans at December 31,
1999. A specific reserve of $900,000 was made in December of 1999 as a
result of management's decision to provide for a possible loss as a result of
this relationship.
The increase in non-accrual loans from December 31, 1997 to December 31,
1998 was also chiefly the result of one credit relationship which totaled
$534,000, representing 92% of the $579,000 in non-accrual loans at December
31, 1998. The entire balance regarding this credit was subsequently received
by the company in the first quarter of 1999.
The following table sets forth the allocation of the allowance for loan
losses by loan category as an indication of the estimated risk of loss for
each loan type. The unallocated portion of the allowance is intended to
cover loss exposure related to problem loans for which no specific allowance
has been estimated and for the risks in the remainder of the loan portfolio.
December 31,
-----------------------------------------------------------------------------
1999 1998 1997
------------------------ ------------------------ ----------------------
Percent of Percent of Percent of
Category Category Category
Allowance Total Loans Allowance Total Loans Allowance Total Loans
--------- ----------- --------- ----------- --------- -----------
(Dollars in thousands)
Commercial and industrial $1,380 37.15% $ 777 43.30% $247 38.07%
Real estate:
Commercial 236 20.56 130 16.16 83 15.22
Construction 34 3.92 9 1.69 24 4.42
Residential 150 26.05 98 25.63 172 31.79
Consumer and other 162 12.32 123 13.22 88 10.50
Not allocated 61 -- 93 -- 46 --
------ ------ ------ ------ ---- ------
Total $2,023 100.00% $1,230 100.00% $660 100.00%
====== ====== ====== ====== ==== ======
The above allocation by loan category does not mean that actual loan
charge-offs will be incurred in the categories indicated. The risk factors
considered in determining the above allocation are the same as those used
when determining the overall level of the allowance.
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60
NON-INTEREST INCOME
The following table depicts the annual changes in various non-interest
income categories:
December 31,
----------------------------------------------------------------------------
1999 versus 1998 1998 versus 1997
----------------------------------- -----------------------------------
$ Change 1999 1998 $ Change 1998 1997
-------- ---------- -------- -------- -------- --------
Service charges on deposit accounts $110,299 $ 563,892 $453,593 $386,722 $453,593 $ 66,871
Capital Corporation Investment
banking and consulting fees 270,619 340,872 70,253 3,253 70,253 67,000
Credit life insurance fees (7,350) 52,056 59,406 59,406 59,406 --
Safe deposit box rental income 1,606 25,734 24,128 21,146 24,128 2,982
Other noninterest income (24,429) 47,225 71,654 46,090 71,654 25,564
-------- ---------- -------- -------- -------- --------
Total noninterest income $350,745 $1,029,779 $679,034 $516,617 $679,034 $162,417
======== ========== ======== ======== ======== ========
Total non-interest income was $1,030,000 in 1999 representing a $351,000
increase from 1998. The growth was mainly the result of the increased
investment banking fees and service charges on deposit accounts. As a result
of ongoing marketing efforts at The Capital Corporation, three investment
banking transactions were closed in 1999 providing the $271,000 increase from
1998. The increase in service charge income of $110,000 during 1999 was due
to increased deposit transaction volume. These increases were offset by
decreases in credit life insurance fees and other noninterest income.
In 1998, total non-interest income was $679,000, a $517,000 increase from
1997. The increase was primarily the result of a $387,000 increase in
service charges on deposit accounts. This increase resulted primarily from
an increase in the balance of FCB's deposit accounts due to the Humboldt
acquisition in December 1997 and the restructuring by management of the
charges for these services.
NON-INTEREST EXPENSE
The following table depicts changes in non-interest expense:
December 31,
----------------------------------------------------------------------------
1999 versus 1998 1998 versus 1997
----------------------------------- -----------------------------------
$ Change 1999 1998 $ Change 1998 1997
-------- ---------- ---------- ---------- ---------- ----------
Salaries and benefits $142,753 $2,468,695 $2,325,942 $1,517,437 $2,325,942 $ 808,505
Occupancy (27,208) 333,707 360,915 211,148 360,915 149,767
Goodwill amortization (1) 190,566 190,567 190,567 190,567 --
Data processing 82,631 215,469 132,838 86,936 132,838 45,902
Other 36,898 1,500,348 1,463,450 883,244 1,463,450 580,206
-------- ---------- ---------- ---------- ---------- ----------
Total noninterest expense $235,073 $4,708,785 $4,473,712 $2,889,332 $4,473,712 $1,584,380
======== ========== ========== ========== ========== ==========
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61
Total non-interest expense was $4,709,000 in 1999, a $235,000 increase from
1998. An increase in salaries and benefits, data processing and other
operating expenses attributable to the growth of FCB, resulted in this
increase. This increase was offset in part by a decrease in occupancy
expenses. Several categories were involved in this decrease including
utilities which decreased approximately $14,000, building and equipment
maintenance which decreased approximately $7,000, service contracts which
decreased by approximately $15,000 and property insurance which decreased by
approximately $7,000. The decreases were primarily related to the Humbolt
acquisition. The company was able to combine and/or eliminate maintenance
and service contracts and building insurance policies.
Total non-interest expense was $4,474,000 in 1998, a $2,889,000 increase
from 1997. The 1998 increase was primarily due to the acquisition of
Humboldt and ongoing growth. The increase was consistent with the increase
in 1998 non-interest income.
INCOME TAXES
Income tax expense was $261,000 in 1999 compared to income tax benefits of
$125,000 and $114,000 in 1998 and 1997, respectively. The effective tax rate
was 54.70% for 1999. The excess of the effective rate in 1999 over the
statutory rate of 34% is due to non-deductible goodwill amortization and
non-deductible merger related expenses. The tax benefits in 1998 and 1997
were the result of current and previous losses FCB experienced as a start-up
company for which valuation allowances were previously provided.
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62
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is provided by CGB's earning assets, including short-term
investments in federal funds sold, maturities in the loan portfolio,
maturities in the investment portfolio, amortization of term loans, and by
CGB's deposit inflows, proceeds from borrowings, and stock issuance. The
following table reflects CGB's GAP analysis (rate sensitive assets minus rate
sensitive liabilities) as of December 31, 1999:
--------------------------------------------------------------
Over 3 After 5 Years
Months Over 1 Year Or No
3 Months Through Through Stated
or Less 12 Months 5 Years Maturity Total
--------------------------------------------------------------
(Dollars in thousands)
Assets:
Investments in debt and
equity securities $ 1,001 $ 2,546 $ 9,959 $ 5,964 $ 19,470
Loans, net of unearned loan fee 47,198 14,727 32,279 1,586 95,790
-------- --------- ------- --------- --------
Total interest sensitive assets $ 48,199 $ 17,273 $42,238 $ 7,550 $115,260
======== ========= ======= ========= ========
Liabilities:
Interest-bearing transaction accounts 16,882 -- -- -- 16,882
Money market and savings accounts 25,095 -- -- -- 25,095
Certificate of deposit 9,102 23,693 19,200 -- 51,995
Federal Home Loan Bank advances 1,088 20 3,083 5 4,196
Federal funds purchased 1,300 -- -- -- 1,300
-------- --------- ------- --------- --------
Total interest sensitive liabilities $ 53,467 $ 23,713 $22,283 $ 5 $ 99,468
======== ========= ======= ========= ========
Interest sensitivity GAP
GAP by period $(5,268) $ (6,440) $19,955 $ 7,545 $ 15,792
Cumulative GAP $(5,268) $(11,708) $ 8,247 $ 15,792 $ 15,792
======== ========= ======= ========= ========
Ratio of interest sensitive assets to
interest sensitive liabilities
Periodic 0.90 0.73 1.90 1,510.00 1.16
Cumulative GAP 0.90 0.85 1.03 1.16 1.16
======== ========= ======= ========= ========
CGB made certain assumptions in preparing the table above. These
assumptions included: loans will repay at historic repayment speeds,
interest-bearing demand accounts and savings accounts are interest sensitive
due to immediate repricing of remaining balance for each period presented,
and fixed maturity deposits will not be withdrawn prior to maturity
As indicated in the preceding table, CGB was liability sensitive on a
cumulative basis in the near term (three months or less and over three months
through twelve months) at December 31, 1999 based on contractual repricing
and maturities. In this regard, a decrease in the general level of interest
rates would generally have a positive effect on CGB's net interest income as
the repricing of the larger volume of interest sensitive liabilities would
create a larger reduction in interest expenses as compared to the reduction
in interest income created by the repricing of the smaller volume of interest
sensitive assets. Tools used by management include standard GAP reports and
an asset/liability management model which simulates different rate shock
scenarios.
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QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
FCB's exposure to market risk is reviewed on a regular basis by the
Asset/Liability Committee. Interest rate risk is the potential of economic
losses due to future interest rate changes. These economic losses can be
reflected as a loss of future net interest income and/or a loss of current
fair market values. The objective is to measure the effect on net interest
income and to adjust the balance sheet to minimize the inherent risk while at
the same time maximizing income. Management realizes certain risks are
inherent and that the goal is to identify and minimize those risks. At
December 31, 1999 net interest income for calendar year 2000 may increase by
1.59% or $81,295 should rates immediately rise by 200 basis points, or
decrease 3.76% or $192,355 should rates immediately fall by 200 basis points
from their December 31, 1999 level. FCB has no market risk sensitive
instruments held for trading purposes.
The following tables represent the scheduled repricing of market risk
sensitive instruments at December 31, 1999 (dollars in thousands):
Beyond 5
Years or
No Stated
Year 1 Year 2 Year 3 Year 4 Year 5 Maturity Total
------ ------ ------ ------ ------ -------- -----
Assets:
Investments in debt and
equity securities $ 3,547 $ 4,853 $ 643 $1,162 $3,301 $5,964 $ 19,470
Loans, net of unearned loan
fees 61,925 9,883 16,302 3,202 2,892 1,586 95,790
------- ------- ------- ------ ------ ------ --------
Total $65,472 $14,736 $16,945 $4,364 $6,193 $7,550 $115,260
======= ======= ======= ====== ====== ====== ========
Liabilities:
Interest-bearing transaction,
savings and money market accounts $41,977 $ -- $ -- $ -- $ -- $ -- $ 41,977
Certificates of deposits 32,795 9,729 8,767 171 533 -- 51,995
Federal funds purchased 1,300 -- -- -- -- -- 1,300
Federal Home Loan Bank
advances 1,108 2,039 24 10 1,010 5 4,196
------- ------- ------- ------ ------ ------ --------
Total $77,180 $11,768 $ 8,791 $ 181 $1,543 $ 5 $ 99,468
======= ======= ======= ====== ====== ====== ========
Average Estimated
Total Interest Rate Fair Value
----- ------------- ----------
Assets:
Investments in debt and equity securities $ 19,470 6.11% $ 19,470
Capital Stock of the Federal
Home Loan Bank and
Federal Reserve Bank 808 6.50% 808
Loans, net of unearned loan fees 95,790 8.85% 94,386
-------- ---------
Total $116,068 $ 114,664
======== =========
Liabilities:
Interest-bearing transaction,
savings and money market accounts $ 41,977 2.25% $ 41,977
Certificates of deposits 51,995 5.25% 52,811
Federal Home Loan Bank advances 4,196 3.99% 4,113
Federal funds purchased 1,300 5.91% 1,300
-------- ---------
Total $ 99,468 $ 100,201
======== =========
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BALANCE SHEET TREND
The following table summarizes certain trends in CGB's balance sheet during
the three-year period ended December 31, 1999:
December 31,
---------------------------------------------
1999 1998 1997
--------- --------- ---------
(Dollars in thousands)
Total assets $127,642 $112,762 $107,474
Earning assets 116,068 101,650 95,594
Deposits 106,531 94,023 92,334
Net loans to deposits 89.92% 86.27% 73.99%
Loans to total assets 75.05% 71.93% 63.57%
Investment securities to total assets 15.89% 16.29% 23.33%
Earning assets to total assets 90.93% 90.15% 88.95%
========= ========= =========
Loans $ 95,802 $ 81,115 $ 68,333
Unearned loan fees (12) (6) (10)
--------- --------- ---------
Net loans $ 95,790 $ 81,109 $ 68,323
========= ========= =========
Capital Stock of FHLB and Federal Reserve Bank 808 726 550
Investment securities - AFS $ 19,470 $ 17,640 $ 19,617
Investment securities - HTM -- -- 4,903
--------- --------- ---------
Total investments $ 20,278 $ 18,366 $ 25,070
========= ========= =========
Total investments $ 20,278 $ 18,366 $ 25,070
Federal funds sold -- 2,175 2,200
Total loans 95,790 81,109 68,323
--------- --------- ---------
Total earnings assets $116,068 $101,650 $ 95,594
========= ========= =========
The ratio of earning assets to total assets was 90.93%, 90.15% and 88.95%
as of December 31, 1999, 1998 and 1997, respectively. Earning assets
increased $14,418,000 and $6,056,000 or 14.18% and 6.34%, for the years ended
December 31, 1999 and 1998, respectively, and total assets increased
$14,880,000 and $5,288,000 or 13.20% and 4.92% during the same periods. This
is primarily the result of CGB's focused effort to take advantage of the
growing Johnson County market in addition to the increase in assets from the
Humboldt acquisition.
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65
The following table shows, for the periods indicated, the average annual
amount and the average rate paid by type of deposit:
Year ended December 31,
------------------------------------------------------------------------------------------
1999 1998 1997
----------------------------- ----------------------------- --------------------------
Average Interest Average Average Interest Average Average Interest Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- -------- ------- ------- -------- ------- ------- ------- -------
(Dollars in thousands)
Noninterest-bearing
demand deposits $ 9,476 $ -- -- $ 8,455 $ -- -- $ 2,693 $ -- --
Interest-bearing
transaction accts 18,047 323 1.79% 18,243 408 2.24% 1,080 21 1.94%
Money market 19,508 695 3.56% 14,872 630 4.24% 9,852 449 4.56%
Savings 5,146 135 2.62% 5,367 150 2.79% 104 3 2.89%
Certificates of deposit 46,513 2,435 5.25% 42,930 2,394 5.58% 15,124 895 5.92%
------- ------ ----- ------- ------ ----- ------- ------ -----
$98,690 $3,588 3.64% $89,867 $3,582 3.99% $28,853 $1,368 4.74%
======= ====== ===== ======= ====== ===== ======= ====== =====
Since inception, FCB has experienced rapid loan and deposit growth
primarily due to aggressive direct calling efforts of relationship officers
and continued economic growth in the markets served by FCB. Growth is also
attributed to the acquisition of Humboldt. Management has pursued
closely-held businesses whose management desires a close working relationship
with a locally managed full-service bank. Due to the relationships developed
with these customers, management views large deposits from this as a stable
deposit source.
The following table sets forth the amount and maturity of certificates of
deposit that had balances of more than $100,000 at December 31, 1999:
Remaining maturity Amount
------------------ ------
(Dollars in thousands)
Three months or less $ 1,476
Over three through six months 6,643
Over six through twelve months 3,553
-------
Over twelve months $11,903
=======
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The table below sets forth the carrying value of investment securities held
by CGB at the dates indicated:
December 31,
----------------------------------------------------------------------------
1999 1998 1997
---------------------- ---------------------- ----------------------
Percent Percent Percent
of Total of Total of Total
Amount Securities Amount Securities Amount Securities
------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $16,132 79.55% $12,772 69.54% $17,763 70.90%
Municipal bonds 117 0.58 187 1.02 3,112 12.42
Mortgage-backed securities 3,221 15.88 4,681 25.49 3,628 14.48
Federal Home Loan Bank
and Federal Reserve Bank 808 3.99 726 3.95 550 2.20
------- ------ ------- ------ ------- ------
$20,278 100.00% $18,366 100.00% $25,053 100.00%
======= ====== ======= ====== ======= ======
Securities with an amortized cost of $19,989,000 and $17,566,000 were
classified as available for sale as of December 31, 1999, December 31, 1998,
respectively. The market valuation account was adjusted to $520,000 to
decrease the recorded balance of these securities at December 31, 1999 to
fair value at that time.
At December 31, 1998, the market valuation account was adjusted to $74,000
to increase the recorded balance of these securities at December 31, 1998 to
fair value at that time.
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67
The following table summarizes maturity and yield information on the
investment portfolio at December 31, 1999:
Carrying Value Yield <F1>
-------------- ----------
(Dollars in Thousands)
U.S. Treasury securities and obligations
of U.S. government corporations and agencies:
0 to 1 year $ 3,494 5.93%
1 to 5 years 8,152 6.19
5 to 10 years 4,486 4.14
No stated maturity -- --
------- ----
Total $16,132 5.56%
======= ====
Municipal bonds:
0 to 1 year $ 53 5.47%
1 to 5 years 64 4.65
5 to 10 years -- --
No stated maturity -- --
------- ----
Total $ 117 5.02%
======= ====
Mortgage-backed securities:
0 to 1 year $ -- --%
1 to 5 years -- --
5 to 10 years -- --
No stated maturity 3,221 6.27
------- ----
Total $ 3,221 6.27%
======= ====
Federal Home Loan and Federal Reserve Bank stock:
0 to 1 year $ -- --
1 to 5 years -- --
5 to 10 years -- --
No stated maturity 808 6.50
------- ----
Total $808 6.50%
======= ====
Total
0 to 1 year $ 3,547 5.92%
1 to 5 years 8,216 6.18
5 to 10 years 4,486 4.14
FHLB and FRB stock 808 6.50
Mortgage backed securities 3,221 6.27
------- ----
Total $20,278 5.71%
======= ====
<FN>
<F1> Weighted average tax-equivalent yield
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68
SHORT-TERM BORROWINGS
The table below outlines the average balance, the highest balance and the
average yield paid for short-term borrowing for the years ending December 31,
1999, 1998 and 1997.
December 31,
---------------------------------------------
1999 1998 1997
--------- --------- ---------
Average balance 576,384 399,090 79,795
Highest balance 7,100,000 3,100,000 1,225,000
Average rate 5.28% 5.43% 5.75%
CAPITAL ADEQUACY
Risk-based capital guidelines for financial institutions were adopted by
regulatory authorities effective January 1, 1991. These guidelines were
designed to relate regulatory capital requirements to the risk profile of the
specific institution and to provide for uniform requirements among the various
regulators. Currently, the risk-based capital guidelines require CGB to meet
a minimum total capital ratio of 8.0% of which at least 4.0% must consist of
Tier 1 capital. Tier 1 capital generally consists of (a) common shareholders'
equity (excluding the unrealized market value adjustments on the
available-for-sale securities); (b) qualifying perpetual preferred stock and
related surplus subject to certain limitations specified by the FDIC; and (c)
minority interests in the equity accounts of consolidated subsidiaries less
goodwill, mortgage servicing rights within certain limits, and any other
intangible assets and investments in subsidiaries that the FDIC determines
should be deducted from Tier 1 capital. The FDIC also requires a minimum
leverage ratio of 3.0%, defined as the ratio of Tier 1 capital to average
total assets for banking organizations deemed the strongest and most highly
rated by banking regulators. A higher minimum leverage ratio is required of
less highly rated banking organizations. Total capital, a measure of capital
adequacy, includes Tier 1 capital, allowance for possible loan losses, and
debt considered equity for regulatory capital purposes.
The following table summarizes CGB's risk-based capital and leverage ratios
at the dates indicated:
December 31,
-------------------------------------------------
1999 1998 1997
------ ------ ------
Tier 1 capital to risk weighted assets 12.75% 15.01% 10.96%
Total capital to risk weighted assets 13.48 16.27 11.85
Leverage ratio (Tier 1 capital to average assets) 10.20 11.54 22.72
Tangible capital to tangible assets 10.23 12.17 8.41
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69
At December 31, 1999, CGB's Tier 1 capital was $12,141,000 compared to
$12,359,000 and $8,140,000 at December 31, 1998 and 1997, respectively. At
December 31, 1999, CGB's total capital was $12,837,000 compared to
$13,395,000 and $8,800,000 at December 31, 1998 and 1997, respectively.
YEAR 2000
Overview. The Year 2000 ("Y2K") issue refers to the ability of a
date-sensitive computer program to recognize a two-digit date field
designated "00" as the year 2000. Mistaking "00" for 1900 could result in a
system failure or miscalculations causing a disruption of operations and
normal business activities. This is a significant issue for many companies,
including banks, and the implications of the Y2K issue cannot be predicted
with any high degree of certainty.
The Cost of Y2K compliance. The total cost to CGB to assess, correct and
verify Y2K issues was approximately $10,000, consisting of costs allocated to
Y2K projects, and software and hardware expenses required for upgrading and
testing of CGB's systems. This cost estimate does not include the cost
associated with regulatory reporting, legal review of regulatory
requirements, auditing requirements or other costs incurred related only to
the disclosure requirements and not actual software or hardware issues. Such
costs are difficult to determine as these requirements change frequently. If
these non-systems related costs become significant and quantifiable, they
will be disclosed at that time.
What Risks Exist for CGB. The most likely risk CGB faces with respect to
Y2K issues is in the core banking software. This system identifies and
calculates payments due CGB's subsidiary bank for loans made to customers and
amounts due to the bank's customers for deposits. The loss of these records
or inability to accurately perform these calculations could cause the bank to
incur additional expenses such as loan losses, under payments of amounts due
on loans, overpayments of amounts due to depositors or increased personnel
expenses required to track this information manually. Such expenses are not
currently quantifiable, but could be material to the operations and financial
performance of CGB and its subsidiaries. As of March 1, 2000 CGB had
encountered no significant Y2K related problems.
EFFECT OF INFLATION
Persistent high rates of inflation can have a significant effect on the
reported financial condition and results of operations of all industries.
However, the asset and liability structure of commercial banks is
substantially different from that of an industrial company in that virtually
all assets and liabilities of commercial banks are monetary in nature.
Accordingly, changes in interest rates may have a significant impact on a
commercial bank's performance. Interest rates do not necessarily move in the
same direction or in the same magnitude as the prices of goods and services.
Inflation does have an impact on the growth of total assets in the banking
industry, often resulting in a need to increase equity capital at higher than
normal rates to maintain an appropriate equity-to-assets ratio.
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SUPERVISION AND REGULATION
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CGB and FCB are subject to state and federal banking laws and regulations
which impose specific requirements or restrictions on and provide for general
regulatory oversight with respect to virtually all aspects of operations.
These laws and regulations are generally intended to protect depositors, not
shareholders. To the extent that the following summary describes statutory or
regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. Any change in applicable laws
or regulations may have a material effect on the business and prospects of
CGB. The numerous regulations and policies promulgated by the regulatory
authorities creates a difficult and ever-changing atmosphere in which to
operate. CGB and FCB commit substantial resources in order to comply with
these statutes, regulations and policies. CGB is unable to predict the nature
or the extent of the effect on its business and earnings that fiscal or
monetary policies, economic control, or new federal or state legislation may
have in the future.
FEDERAL BANK HOLDING COMPANY REGULATION
CGB is a bank holding company under the definition of the Bank Holding
Company Act of 1956 (the "BHCA"). Under the BHCA, CGB is subject to periodic
examination by the Federal Reserve and is required to file periodic reports of
its operations and such additional information as the Federal Reserve may
require. CGB's and FCB's activities are limited to banking, managing or
controlling banks, furnishing services to or performing services for its
subsidiaries, or engaging in any other activity that the Federal Reserve
determines to be closely related to banking.
Investments, Control and Activities. With certain limited exceptions, the
BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (i) acquiring substantially all the assets of any bank,
(ii) acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5% of the
voting shares of such bank (unless it already owns or controls the majority of
such shares), or (iii) merging or consolidating with another bank holding
company.
In addition, and subject to certain exceptions, the BHCA and the Change in
Bank Control Act, together with regulations thereunder, require Federal
Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as CGB. Control is conclusively presumed to exist if an
individual or company acquires 25% or more of any class of voting securities
of a bank holding company. Under Federal Reserve regulations applicable to
CGB, control will be refutably presumed to exist if a person acquires at least
10% of the outstanding shares of any class of voting securities. The
regulations provide a procedure for challenge of the rebuttable control
presumption.
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Under the BHCA, CGB is generally prohibited from engaging in, or acquiring
direct or indirect control of more than 5% of the voting shares of any company
engaged in, nonbanking activities, unless the Federal Reserve, by order or
regulation, has found those activities to be so closely related to banking or
managing or controlling banks as to be a related activity. Some of the
activities that the Federal Reserve has determined by regulation to be proper
incidents to the business of banking include investment in and management of
Small Business Investment Companies, making or servicing loans and certain
types of leases, engaging in certain insurance and brokerage activities,
performing data processing services, acting in certain circumstances as a
fiduciary or investment or financial advisor, owning savings associations, and
making investments in limited projects designed primarily to promote community
welfare.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
policy, CGB is expected to act as a source of financial strength to FCB and to
commit resources to support FCB in circumstances in which CGB might not
otherwise do so. Under the BHCA, the Federal Reserve may require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary (other than a nonbank subsidiary of a bank) upon the Federal
Reserve's determination that such activity or control constitutes a serious
risk to the financial soundness or stability of any subsidiary depository
institution of a bank holding company. Further, federal bank regulatory
authorities have additional discretion to require a bank holding company to
divest itself of any bank or nonbank subsidiary if the agency determines that
divestiture may aid the depository institution's financial condition.
BANK REGULATION
General. As of December 31, 1999, CGB is the holding company for a single
national bank (FCB). FCB is a member of the Federal Reserve system. The
Office of the Comptroller of the Currency (OCC) is the primary regulator for
FCB. The OCC regulates or monitors all areas of FCB's operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuance of securities,
payment of dividends, interest rates payable on deposits, interest rates or
fees chargeable on loans, establishment of branches, corporate
reorganizations, maintenance of books and records, and adequacy of staff
training to carry on safe lending and deposit gathering practices. FCB must
maintain certain capital ratios and is subject to limitations on aggregate
investments in real estate, bank premises, and furniture and fixtures.
All insured institutions must undergo regular on-site examinations by their
appropriate bank regulatory agencies. The cost of examinations of insured
depository institutions and any affiliates may be assessed by the appropriate
agency against each institution or affiliate as it deems necessary or
appropriate. Insured institutions are required to submit annual and quarterly
reports to their appropriate regulatory agencies.
Transactions With Affiliates and Insiders. FCB is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on
the amount of loans or extensions of credit to, investments in, or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. In
addition, most of these loans and certain other transactions must be secured
in prescribed amounts. FCB is also subject
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to the provisions of Section 23B of the Federal Reserve Act that, among other
things, prohibit an institution from engaging in certain transactions with
certain affiliates unless the transactions are on terms substantially the same,
or at least as favorable to such institution or its subsidiaries, as those
prevailing at the time for comparable transactions with nonaffiliated
companies. FCB is subject to certain restrictions on extensions of credit to
executive officers, directors, certain principal shareholders, and their
related interests. Such extensions of credit (i) must be made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with third parties and (ii) must not
involve more than the normal risk of repayment or present other unfavorable
features.
Community Reinvestment Act. The Community Reinvestment Act ("CRA")
requires that, in connection with examinations of financial institutions
within its jurisdiction, the OCC shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or
facility. FCB has a satisfactory rating under CRA.
Other Regulations. Interest and certain other charges collected or
contracted for by FCB are subject to state usury laws and certain federal laws
concerning interest rates. FCB's loan operations are also subject to certain
federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials
to determine whether a financial institution is fulfilling its obligation to
help meet the housing needs of the community it serves; the Equal Credit
Opportunity Act prohibiting discrimination on the basis of race, creed or
other prohibited factors in extending credit; the Fair Credit Reporting Act of
1978 governing the provision of information to credit reporting agencies; the
Fair Debt Collection Act governing the manner in which consumer debts may be
collected by collection agencies; and the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of FCB also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records, and the Electronic Funds Transfer Act and
Regulation E issued by the Federal Reserve Board to implement that act, which
governs automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
Deposit Insurance. The deposits of FCB are currently insured by the FDIC
to a maximum of $100,000 per depositor, subject to certain aggregation rules.
The FDIC establishes rates for the payment of premiums by federally insured
banks for deposit insurance. An insurance fund is maintained for commercial
banks, with insurance premiums from the industry used to offset losses from
insurance payouts when banks fail. The FDIC has adopted a risk-based deposit
insurance premium system for all insured depository institutions, including
FCB, which requires premiums from a depository institution based upon its
capital levels and risk profile, as determined by its primary federal
regulator on a semiannual basis.
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DIVIDENDS
The principal source of CGB's cash revenues comes from dividends received
from FCB. The amount of dividends that may be paid by FCB to CGB depends on
FCB's earnings and capital position and is limited by federal and state law,
regulations, and policies.
CAPITAL REGULATIONS
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, account for off-balance-sheet
exposure, and minimize disincentives for holding liquid assets. The resulting
capital ratios represent qualifying capital as a percentage of total
risk-weighted assets and off-balance-sheet items. The guidelines are
minimums, and the federal regulators have noted that banks and bank holding
companies contemplating significant expansion programs should not allow
expansion to diminish their capital ratios and should maintain ratios well in
excess of the minimums. The current guidelines require all bank holding
companies and federally regulated banks to maintain a minimum risk-based total
capital ratio, a portion of which must be Tier 1 capital. Tier 1 capital
includes common shareholders' equity, qualifying perpetual preferred stock,
and minority interests in equity accounts of consolidated subsidiaries, but
excludes goodwill and most other intangibles and excludes the allowance for
loan and lease losses. Tier 2 capital includes the excess of any preferred
stock not included in Tier 1 capital, mandatory convertible securities, hybrid
capital instruments, subordinated debt and intermediate term-preferred stock,
and general reserves for loan and lease losses up to 1.25% of risk-weighted
assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50% or 100%. In addition, certain off-balance-sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight will apply. These computations
result in the total risk-weighted assets. Most loans are assigned to the 100%
risk category, except for first mortgage loans fully secured by residential
property and, under certain circumstance, residential construction loans, both
of which carry a 50% rating. Most investment securities are assigned to the
20% category, except for municipal or state revenue bonds, which have a 50%
rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is Tier 1 capital as a percentage of average total assets less
intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base.
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INFORMATION ABOUT ENTERBANK AND ITS AFFILIATES
Enterbank is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Enterbank was incorporated
under the laws of the State of Delaware on December 13, 1994. Its principal
office is located at 150 North Meramec, Clayton, Missouri 63105 and its
telephone number is (314) 725-5500.
Enterbank owns 100% of the issued and outstanding shares of Enterprise
Bank. Enterprise Bank was chartered in 1988 and commenced business in
Clayton, Missouri shortly thereafter. Enterprise offers a broad range of
commercial and personal banking services to its customers. Loans include
commercial, commercial real estate, financial and industrial development, real
estate construction and development, residential real estate and consumer
loans which are made primarily to owners and affiliates of its commercial
customers. Other services include cash management, Automated Clearing House,
safe-deposit box, lock box and online banking services.
Enterbank also owns 100% of the issued and outstanding shares of Enterprise
Merchant Banc, Inc., which was first established in 1995 to provide merchant
banking services to closely-held businesses and their owners. Its current
operations include a minority investment in Enterprise Merchant Banc, LLC,
which focuses on providing equity capital and equity-linked debt investments
to growing companies in need of additional capital to finance internal and
acquisition-related growth. Additionally, Enterprise Merchant Banc, Inc.
receives fee income for its role as a financial advisor in capital raising
transactions as well as mergers and acquisitions. It focuses on "second
stage" and mezzanine financing for established companies rather than "seed
money" for start up operations.
Enterprise Financial Advisors was organized as a division of Enterprise
Bank in late 1997 to provide fee-based personal and corporate financial
consulting and trust services to the bank's target market. Personal financial
consulting includes estate planning, investment management, retirement
planning, trust services and custodial services. Corporate consulting
services are focused in the areas of retirement plans, management compensation
and management succession issues. Some investment management services are
provided through Argent Capital Management, a money management company that
invests principally in large capitalization companies. Enterbank owns
approximately an 8% interest in Argent Capital Management. Enterprise
Financial Advisors also receives assistance in staffing, training, marketing
and regulatory compliance from Moneta Group, Inc., a nationally recognized
firm in the financial planning industry.
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INFORMATION ABOUT CGB AND FIRST COMMERCIAL BANK, N.A.
CGB is a bank holding company registered under the BHC Act. CGB was
incorporated under the laws of the State of Kansas on March 20, 1995. Its
principal office is located at 12695 Metcalf Avenue, Overland Park, Kansas
66213, and its telephone number is (913) 663-5525.
CGB owns 100% of the issued and outstanding shares of CGB Acquisition
Corporation which, in turn, owns 100% of the issued and outstanding shares of
First Commercial Bank, N.A. First Commercial Bank, N.A. was chartered under
the laws of the United States and opened for business in Overland Park, Kansas
on February 20, 1996. In December 1997, CGB Acquisition Corporation acquired
all of the issued and outstanding stock of Humboldt Bancshares, Inc., a bank
holding company which owned Humboldt National Bank in Humboldt, Kansas. First
Commercial Bank, N.A. and Humboldt National were merged on December 30, 1997.
The new bank retained the First Commercial Bank, N.A. name and the Humboldt
National Bank charter which was originally granted in 1896. The bank operates
offices in Overland Park (a suburb of Kansas City, Missouri) and in the
southeast Kansas communities of Humboldt, Iola and Chanute.
First Commercial Bank, N. A. offers a broad range of commercial,
agricultural and personal banking services to its customers. Loans include
commercial (working capital lines of credit, equipment acquisition, real
estate acquisition and expansion), consumer (home equity lines of credit, home
improvement and vehicle purchase) and agricultural (operating lines of credit,
equipment acquisition, livestock purchase and feeding and farm real estate
acquisition). In the Overland Park market, loans are made primarily to
established small and medium sized businesses and their respective owner,
managers. In the southeast Kansas market, loans are made to a broader range
of businesses and consumers. Other services include corporate cash
management, safe deposit boxes, wire transfers and personal computer based
banking services.
CGB also owns 100% of the issued and outstanding shares of The Capital
Corporation, an investment banking firm established in 1996. This subsidiary
leads and assists clients through mergers, acquisitions and divestitures with
a particular focus on the community banking industry. In addition, The
Capital Corporation generates fee income through providing strategic planning
and general consulting services to financial institution owners and management
teams.
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THE MERGER
BACKGROUND OF THE MERGER
The following is a brief description of the events that resulted in the
execution of the Agreement and Plan of Merger dated as of January 5, 2000
between Enterbank and CGB.
Early in 1998, management of Enterbank determined to explore the
possibility of expanding its business into the Kansas City metropolitan
market. In the spring of 1999, the President and Chief Executive Officer of
Enterbank was introduced to CGB and the management group of First Commercial
Bank N.A. Representatives of CGB began discussing with Enterbank
opportunities in the Kansas City metropolitan market and the business
prospects and objectives of Enterbank and CGB.
In May of 1999, representatives of CGB contacted Enterbank to discuss, on a
preliminary basis, the possibility of combining the two organizations as an
alternative to Enterbank seeking a de novo charter, a de novo branch or
investigating other means of expansion to the Kansas City area.
In an introductory meeting in June 1999, the Chief Executive Officer, the
Chief Financial Officer and other Enterbank representatives met with the CGB
Board of Directors to discuss the operating philosophies and strategies of
both companies. This meeting also provided a forum for key representatives
of both companies to become familiar with each other and to further their
knowledge of their respective businesses.
Representatives of Enterbank met with a number of representatives of CGB on
September 28, 1999 in Kansas City to discuss in more detail an arrangement
between Enterbank and CGB. Enterbank proposed that the companies combine in
a transaction in which CGB shareholders would receive Enterbank shares in
exchange for their CGB shares.
On October 21, 1999, the CGB Board of Directors met to discuss the
Enterbank proposal. The CGB Board determined to decline the Enterbank
proposal because they believed the proposal was inadequate.
On November 11, 1999, representatives of Enterbank and CGB again met to
rekindle merger discussions. They discussed various potential exchange
ratios, and tentatively agreed on an exchange ratio of 2.1429 shares of
Enterbank common stock for each outstanding share of CGB common stock. Based
upon a value of $17.50 per Enterbank common share, which was the most recent
price at which Enterbank shares were known to have traded, the proposed
exchange ratio would result in each CGB shareholder receiving for each CGB
share Enterbank shares with a value of $37.50.
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On November 12, 1999, Enterbank sent to the CGB Board a written proposal
outlining the matters discussed at the November 11 meeting. At a meeting on
November 17, 1999, the Enterbank Board was informed of the tentative
agreement reached with CGB and instructed management to proceed with its
discussions with CGB. On November 30, 1999 the CGB Board reconvened and
agreed to accept the Enterbank proposal.
On December 15, 1999, the Enterbank Board met to review, in detail,
financial and other information about CGB and to discuss the terms of the
proposed combination of Enterbank and CGB. Throughout the month of December
1999, representatives of management of CGB and Enterbank negotiated the terms
of the merger agreement.
At separate meetings held on January 5, 2000, the Boards of Directors of
Enterbank and CGB met to consider the proposed merger agreement. At the
Enterbank meeting, the Board of Directors, with 2 directors absent,
authorized execution of the merger agreement. Subsequent to the meeting, the
absent directors approved the action of the Enterbank Board, making the
Enterbank Board's approval unanimous. At the CGB meeting, the Board of
Directors, with one director absent, authorized execution of the merger
agreement. Subsequent to the meeting, the absent director approved the
action of the CGB Board, making the CGB Board's approval unanimous. The
merger agreement was signed by Enterbank and CGB on the evening of January 5,
1999.
Annex A to the joint proxy statement/prospectus contains a copy of the
merger agreement, which is incorporated herein by reference.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
ENTERBANK. The strategy of the Board of Directors of Enterbank for
enhancing long-term value for Enterbank shareholders recognizes that further
consolidation will occur in the banking and financial services industry in
the United States and that Enterbank must be in a position to take advantage
of this change. Pursuant to this strategy, management of Enterbank, at the
direction of the Board of Directors of Enterbank, continually explores and
evaluates expansion opportunities, such as the merger with CGB.
In reaching the conclusion that the merger is fair to and in the best
interests of the shareholders of Enterbank, in addition to the opinion of
Enterbank's financial advisor that the exchange ratio is fair to the
shareholders of Enterbank from a financial point of view, the Board of
Directors of Enterbank considered numerous factors, including the following:
(1) The Board's familiarity with and review of CGB's business, results of
operations, prospects and financial condition and the willingness of
the Board of Directors of CGB to consider a merger with Enterbank.
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(2) Economic conditions and prospects for the markets in which Enterbank
and CGB operate, and competitive pressures in the financial services
industry in general and the banking industry in particular.
(3) The enhancement of Enterbank's competitiveness and its ability to
serve its customers, depositors, creditors, and other constituents
and the communities in which it operates as a result of a business
combination with another bank holding company, such as CGB.
(4) Information concerning the business, results of operations, asset
quality and financial condition of Enterbank and CGB on a stand-alone
and combined basis, and the future growth prospects of Enterbank and
CGB following the merger. The Board considered the results of the
initial review conducted by Enterbank's management with respect to
CGB's business and operations, including, in particular, its asset
quality and certain related conditions in the merger agreement.
Such review included an assessment of the opportunities to achieve
increased market penetration in its existing market and to expand
into CGB's market area.
(5) An assessment that, in the current economic environment, expansion
through acquisition of another financial institution is most
economically advantageous to Enterbank's shareholders when compared
to other alternatives, such as de novo branch openings or branch
acquisitions.
(6) The geographic and business similarities of Enterbank and CGB and
the complementary nature of their respective businesses.
(7) Information with respect to historical trading ranges and multiples
of Enterbank common stock, and possible trading ranges and multiples
for Enterbank's stock on a stand-alone basis and on a combined basis
and the evaluation by the Board of Directors of the financial terms
of the merger and their effect on the shareholders of Enterbank and
the belief of the Board that such terms are fair to Enterbank and its
shareholders.
(8) The expectation that for Federal income tax purposes the merger
will constitute a tax-free reorganization to Enterbank and its
subsidiaries.
(9) The expectation that the merger will be accounted for under the
pooling of interests method of accounting.
(10) The terms and conditions of the merger agreement and the related
agreements.
(11) The likelihood of the merger being approved by the appropriate
regulatory authorities.
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(12) The structure of the merger and the resulting corporate entity.
The Board of Directors of Enterbank did not assign any relative or specific
weights to the factors considered and individual directors may have assigned
different weights to the above factors.
The Board of Directors of Enterbank unanimously recommends that the merger
agreement, the related agreements, the transactions contemplated thereby and
the issuance of Enterbank common stock in connection therewith, be approved
by the Enterbank shareholders.
OPINION OF ENTERBANK'S FINANCIAL ADVISOR
The Enterbank Board of Directors approved the retention of Stifel as
Enterbank's financial advisor in connection with the merger and to render a
fairness opinion with respect thereto. Stifel is an investment banking and
securities firm with membership on all principal U.S. securities exchanges.
As part of its investment banking activities, Stifel is regularly engaged in
the valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. In connection with the
January 5, 2000 meeting of the Board of Directors of Enterbank, Stifel
rendered its oral opinion that, as of such date, the exchange ratio was fair
to the holders of Enterbank common stock from a financial point of view.
Stifel has confirmed its January 5, 2000 oral opinion by delivery of its
written opinion to the Enterbank Board of Directors, dated the date of this
joint proxy statement/prospectus, that, based upon and subject to the various
considerations set forth therein, as of the date hereof the exchange ratio is
fair to the holders of Enterbank common stock from a financial point of view.
Stifel is familiar with Enterbank, having acted as its financial advisor in
connection with, and having participated in the negotiations leading to, the
Agreement and Plan of Merger. The merger consideration and the exchange
ratio were determined separately in negotiations between Enterbank and CGB.
In 1999, Stifel served as underwriter in an offering of trust preferred
securities by EBH Capital Trust I, a wholly-owned subsidiary of Enterbank.
In consideration for its underwriting services, Stifel received underwriting
commissions of $550,000.
The full text of Stifel's opinion as of the date hereof, which sets forth
the assumptions made, matters considered and limitations of the review
undertaken, is attached as Annex D to this joint proxy statement/prospectus
and is incorporated herein by reference, and should be read in its entirety
in connection with this joint proxy statement/prospectus. The summary of the
opinion of Stifel set forth in this joint proxy statement/prospectus is
qualified in its entirety by reference to the full text of such opinion.
Stifel's opinion is directed only to the fairness of the exchange ratio
from a financial point of view and does not constitute a recommendation to
any holders of Enterbank common stock as to
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how such holders of Enterbank common stock should vote at the Special Meeting
or as to any other matter.
In connection with its January 5, 2000 oral opinion and its written opinion
dated the date hereof, Stifel reviewed, among other things: the Agreement;
the financial statements of Enterbank included in their Annual Reports on
form 10-K for the five years ended December 31, 1998 and their Quarterly
Report on form 10-Q for the quarter ended September 30, 1999; the audited
statements of CGB for the three years ended December 31, 1998 and the period
from inception (March 7, 1995) to December 31, 1995 and internal financial
statements for the eleven months ended November 30, 1999; certain internal
financial analyses and forecasts for Enterbank prepared by its management;
certain pro forma financial forecasts for Enterbank and CGB on a combined
basis, giving effect to the merger, prepared by the respective management's
of Enterbank and CGB utilizing Enterbank's and CGB's internal financial
forecasts. Stifel conducted conversations with Enterbank's senior management
and CGB's senior management regarding recent developments and management's
financial forecasts for Enterbank and CGB, respectively. In addition, Stifel
spoke to members of Enterbank's senior management and CGB's senior management
regarding factors which affect each entity's business. Stifel has also
compared certain financial and securities data of Enterbank and CGB with
various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of the common stock
of Enterbank, reviewed the financial terms of certain other business
combinations and conducted such other financial studies, analyses and
investigations as it deemed appropriate for purposes of its opinion. Stifel
also took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well as its
experience in securities valuations and its knowledge of the banking industry
generally.
In rendering its opinion, Stifel relied upon and assumed, without
independent verification, the accuracy and completeness of all of the
financial and other information that was provided to it or that was otherwise
reviewed by it and did not assume any responsibility for independently
verifying any of such information. With respect to the financial forecasts
supplied to Stifel (including without limitation, projected cost savings and
operating synergies resulting from the merger), Stifel assumed with
Enterbank's consent that they were reasonably prepared on the basis
reflecting the best currently available estimates and judgments of Enterbank
and CGB as to the future operating and financial performance of Enterbank and
CGB, that they would be realized in the amounts and time periods estimated
and that they provided a reasonable basis upon which Stifel could form its
opinion. Stifel also assumed that there were no material changes in the
assets, liabilities, financial condition, results of operations, business or
prospects of either Enterbank or CGB since the date of the last financial
statements made available to it. Stifel also assumed, without independent
verification and with Enterbank's consent, that the aggregate allowances for
loan losses set forth in the financial statements of Enterbank and CGB are in
the aggregate adequate to cover all such losses. Stifel did not make or
obtain any independent evaluation, appraisal or physical inspection of
Enterbank's or CGB's assets or liabilities, the collateral securing any of
such assets or liabilities, or the collectibility of any such assets nor did
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it review loan or credit files of Enterbank or CGB. Stifel relied on advice
of Enterbank's counsel and accountants as to all legal and accounting matters
with respect to Enterbank, the Agreement and the transactions and other
matters contained or contemplated therein. Stifel assumed, with Enterbank's
consent, that there are no factors that would delay or subject to any adverse
conditions any necessary regulatory or governmental approval and that all
conditions to the merger will be satisfied and not waived. Stifel was
retained by the Enterbank Board to express an opinion as to the fairness of
the exchange ratio to the holders of Enterbank common stock, from a financial
point of view.
The financial forecasts furnished to Stifel for Enterbank and CGB and
estimates of cost savings and operating synergies resulting from the merger
were prepared by the management's of Enterbank and CGB and constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. As a matter of policy, Enterbank and CGB do
not publicly disclose internal management forecasts, projections or estimates
of the type furnished to Stifel in connection with its analysis of the
financial terms of the merger, and such forecasts and estimates were not
prepared with a view towards public disclosure. These forecasts and
estimates were based on numerous variables and assumptions which are
inherently uncertain and which may not be within the control of the
management of either Enterbank or CGB, including, without limitation, factors
related to the integration of Enterbank and CGB and general economic,
regulatory and competitive conditions. Accordingly, actual results could
vary materially from those set forth in such forecasts and estimates.
In connection with rendering its January 5, 2000 oral opinion, Stifel
performed a variety of financial analyses that are summarized below. Such
summary does not purport to be a complete description of such analyses.
Stifel believes that its analyses and the summary set forth herein must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and processes underlying its
opinions. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. In its analyses, Stifel made numerous
assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of
Enterbank or CGB. Any estimates contained in Stifel's analyses are not
necessarily indicative of actual future values or results, which may be
significantly more or less favorable than suggested by such estimates.
Estimates of values of companies do not purport to be appraisals or
necessarily reflect the actual prices at which companies or their securities
actually may be sold. No company or transaction utilized in Stifel's
analyses was identical to Enterbank or CGB or the merger. Accordingly, such
analyses are not based solely on arithmetic calculations; rather, they
involve complex considerations and judgments concerning differences in
financial and operating characteristics of the relevant companies, the timing
of the relevant transactions, and prospective buyer interest, as well as
other factors that could affect the public trading values of the company or
companies to which they are being compared. None of the analyses performed
by Stifel was assigned a greater significance by Stifel than any other.
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The following is a summary of the financial analyses performed by Stifel in
connection with providing its oral opinion, on January 5, 2000. In connection
with its written opinion dated as of the date of this joint proxy
statement/prospectus, Stifel intends on performing procedures to update
certain of its analyses and review the assumptions on which such analyses
were based and the factors considered in connection therewith. In updating
its opinion, Stifel will not utilize any methods of analysis in addition to
those described.
Pro Forma Effect of the Merger. Stifel reviewed certain estimated future
-------------------------------
operating and financial information developed by Enterbank and CGB and
certain estimated future operating and financial information for the pro
forma combined entity resulting from the merger for the twelve month periods
ended December 31, 2000 and December 31, 2001 prepared by the management of
Enterbank and CGB. Based on this analysis, Stifel compared certain of
Enterbank's estimated future per share results with such estimated figures
for the pro forma combined entity. Stifel compared Enterbank's estimated
future stand-alone earnings per share with such estimated figures for the pro
forma combined entity. On a pro forma basis, the merger is forecast to be
accretive to Enterbank's earnings per share for the twelve month periods
ended December 31, 2000 and December 31, 2001. This analysis did not purport
to be indicative of actual future results. Stifel also reviewed certain
historical financial information in order to determine the effect of the
merger on Enterbank's book value and tangible book value. Based on this
analysis, at September 30, 1999, on a pro forma basis the merger is forecast
to be accretive to Enterbank's book value per share and tangible book value
per share.
Analysis of Bank Merger Transactions. Stifel analyzed certain information
-------------------------------------
relating to recent transactions in the banking industry, consisting of 15
acquisitions announced between January 1, 1999 and December 31, 1999,
involving sellers in the Midwest Region of the United States with transaction
values between $20 million and $100 million ("Group A"), a second group of 57
acquisitions announced between January 1, 1999 and December 31, 1999,
involving sellers in the Midwest Region of the United States with announced
transaction values ("Group B"), and a third group of 217 acquisitions
announced between January 1, 1999 and December 31, 1999, involving sellers in
all regions of the United States with announced transaction values ("Group
C") (the "Selected Transactions"). Stifel calculated the following ratios
with respect to the Merger and the Selected Transactions:
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ENTERBANK/CGB GROUP A SELECTED TRANSACTIONS
------------- -----------------------------
Ratios 5th Percentile Median 95th Percentile
- ------ -------------- ------ ---------------
Deal Price per share/Book Value 222.2% 133.6% 207.6% 347.4%
Deal Price per share/Tangible Book
Value 265.0% 137.7% 274.7% 373.4%
Adjusted Deal Price/6.50% Equity 339.8% 163.0% 241.1% 418.4%
Deal Price per share/Last 12
months earnings per share 46.4x 12.8x 22.2x 34.9x
Deal Price/Assets 28.3% 10.8% 20.5% 29.7%
Premium over Tangible Book
Value/Deposits 20.7% 7.0% 11.7% 25.3%
Deal Price/Deposits 33.2% 12.5% 24.5% 43.2%
====== ====== ====== ======
ENTERBANK/CGB GROUP B SELECTED TRANSACTIONS
------------- -----------------------------
Ratios 5th Percentile Median 95th Percentile
- ------ -------------- ------ ---------------
Deal Price per share/Book Value 222.2% 120.0% 205.1% 335.9%
Deal Price per share/Tangible Book
Value 265.0% 120.0% 212.7% 370.5%
Adjusted Deal Price/6.50% Equity 339.8% 92.1% 237.3% 472.4%
Deal Price per share/Last 12
months earnings per share 46.4x 11.8x 20.4x 40.5x
Deal Price/Assets 28.3% 8.9% 19.9% 32.4%
Premium over Tangible Book
Value/Deposits 20.7% -0.6% 10.2% 31.6%
Deal Price/Deposits 33.2% 10.3% 23.6% 43.8%
====== ====== ====== ======
ENTERBANK/CGB GROUP C SELECTED TRANSACTIONS
------------- -----------------------------
Ratios 5th Percentile Median 95th Percentile
- ------ -------------- ------ ---------------
Deal Price per share/Book Value 222.2% 120.0% 229.6% 401.2%
Deal Price per share/Tangible Book
Value 265.0% 120.1% 244.2% 428.8%
Adjusted Deal Price/6.50% Equity 339.8% 107.5% 275.6% 498.1%
Deal Price per share/Last 12
months earnings per share 46.4x 11.9x 21.1x 42.4x
Deal Price/Assets 28.3% 9.5% 21.1% 34.4%
Premium over Tangible Book
Value/Deposits 20.7% 0.6% 14.2% 32.0%
Deal Price/Deposits 33.2% 10.7% 24.8% 43.2%
====== ====== ====== ======
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Comparison of Selected Companies. Stifel reviewed and compared certain
---------------------------------
multiples and ratios for a peer group of 9 selected banks with assets less
than $1 billion which Stifel deemed to be relevant. The group of selected
banks consisted of Bank of the Ozarks Inc., CNBT Bancshares Inc., Independent
Bankshares Inc., Indiana United Bancorp, Mercantile Bank Corporation, S.Y.
Bancorp Inc., Southside Bancshares Corporation, Southside Bancshares Inc.,
and Summit Bancshares Inc. In order to calculate a range of imputed values
for a share of CGB common stock, Stifel applied a 30.2% control premium to
the trading prices of the selected group of comparable companies and compared
the resulting theoretical offer price to each of book value, tangible book
value, adjusted 6.5% equity, latest 12 month earnings, estimated 2000
earnings as provided by Institutional Brokers Estimate System ("IBES"),
assets, tangible book value to deposits and deposits. Stifel then applied
the resulting range of multiples and ratios for the peer group specified
above to the appropriate financial results of CGB. This analysis resulted in
a range of imputed values for CGB common stock of between $13.73 and $39.54
based on the median multiples and ratios for the peer group. The control
premium selected by Stifel was based on a 5 year analysis of market premiums
paid in bank and thrift merger transactions. This analysis did not purport
to reflect the prices at which shares of CGB common stock may trade in the
public markets. The value of one share of CGB common stock under the terms of
the Agreement was calculated to be $39.11 as of January 5, 2000.
Additionally, Stifel calculated the following ratios with respect to the 9
selected comparable companies after application of the 30.2% control premium:
ENTERBANK/CGB 9 SELECTED COMPARABLE COMPANIES
------------- -------------------------------
Ratios Minimum Median Maximum
- ------ ------- ------ -------
Deal Price per share/Book Value 222.2% 148.7% 224.7% 383.3%
Deal Price per share/Tangible Book
Value 265.0% 149.0% 259.3% 390.2%
Adjusted Deal Price/6.50% Equity 339.8% 161.9% 196.4% 433.6%
Deal Price per share/Last 12
months earnings per share 46.4x 13.0x 16.3x 24.4x
Deal Price per share/Estimated
2000 earnings per share 29.1x 11.5x 14.5x 18.5x
Deal Price/Assets 28.3% 11.6% 15.8% 29.6%
Premium over Tangible Book
Value/Deposits 20.7% 5.1% 10.3% 25.4%
Deal Price/Deposits 33.2% 16.5% 20.0% 34.5%
====== ====== ====== ======
Present Value Analysis. Applying discounted cash flow analysis to the
-----------------------
theoretical future earnings and dividends of Enterbank and CGB, Stifel
compared the calculated value of an Enterbank share to the calculated value
of the combined entity. The analysis was based upon management's projected
earnings growth, a range of assumed price/earnings ratios, and a 15.0%, 17.5%
and 20.0% discount rate. Stifel selected the range of terminal
price/earnings ratios on the basis of past and current trading multiples for
Enterbank and other publicly traded comparable
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commercial banks. The stand-alone present value of Enterbank common stock
calculated on this basis ranged from $8.87 to $27.97 per share. The present
value of one share of common stock in the combined entity under the terms of
the Agreement calculated on this basis ranged from $9.47 to $29.91 per share.
Discounted Cash Flow Analysis. Using a discounted cash flow ("DCF")
------------------------------
analysis, Stifel estimated the net present value of the future streams of
after-tax cash flow that CGB could produce to benefit Enterbank
("Dividendable Net Income"). In this analysis, Stifel assumed that CGB would
perform in accordance with management's estimates and calculated assumed
after- tax distributions to Enterbank such that its tangible common equity
ratio would be maintained at 6.5 percent of assets. Stifel calculated the
sum of (1) the estimated terminal values per share of CGB common stock based
on assumed multiples to CGB's projected 2005 earnings ranging from 16.1x to
21.2x, plus (2) the assumed 2000 - 2004 Dividendable Net Income streams per
share, in each case discounted to present values at assumed discount rates
ranging from 12.0% to 16.0%. This DCF analysis indicated an implied equity
value reference range of $42.72 to $69.62 per share of CGB common stock.
This analysis did not purport to be indicative of actual future results and
did not purport to reflect the prices at which shares of CGB common stock may
trade in the public markets. A DCF analysis was included because it is a
widely used valuation methodology, but the results of such methodology are
highly dependent upon the numerous assumptions that must be made, including
estimated revenue enhancements, earnings growth rates, dividend payout rates,
terminal values and discount rates.
Contribution Analysis. Stifel reviewed certain financial information for
----------------------
Enterbank and CGB for the nine month period ended September 30, 1999
including net revenues before and after provision for loan losses, net income
before preferred dividends and extraordinary items, total assets, loans,
total deposits and total equity and compared the percentage contribution of
CGB to the pro forma combined figures for Enterbank and CGB and to the
percentage of total outstanding Enterbank common stock that would be owned by
the CGB stockholders as a result of the merger. The contribution analysis
showed that CGB would contribute 18% of pro forma combined net revenues
before provision for loan losses, 17% of pro forma combined net revenues
after provision for loan losses, 14% of pro forma combined net income before
preferred dividends and extraordinary items and restructuring charges, 22% of
pro forma combined total assets, 19% of pro forma combined loans, 21% of pro
forma combined total deposits, and 33% of pro forma combined total equity.
Under the terms of the Agreement, CGB shareholders would own 20% of the total
outstanding Enterbank common shares. Ownership figures are based on an
exchange ratio of 2.1429.
No company or transaction used in the above analyses as a comparison is
identical to Enterbank, CGB, or the merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and
operating characteristics of the companies and other facts that could affect
the public trading value of the companies to which they are being compared.
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As described above, Stifel's oral opinion was among the many factors taken
into consideration by the Enterbank Board in making its determination to
approve the merger.
Pursuant to the terms of Stifel's engagement, Enterbank has paid Stifel a
nonrefundable cash fee of $30,000 and, subject to and conditioned upon
consummation of the merger, an additional cash fee of $20,000. Enterbank has
also agreed to reimburse Stifel for certain out-of-pocket expenses and has
agreed to indemnify Stifel, its affiliates and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities, including liabilities under the federal
securities laws.
CGB. The Board of Directors of CGB believes that the merger is fair to and
in the best interests of the shareholders of CGB. In reaching their conclusion
to approve the merger, in addition to the opinion of CGB's financial advisor
that the merger is fair to the shareholders of CGB from a financial point of
view, the Board of Directors of CGB considered numerous factors, including the
following:
(1) The Board's familiarity with and review of Enterbank's business,
results of operations, prospects and financial condition and the
willingness of the Board of Directors of Enterbank to consider
a merger with CGB.
(2) The enhancement of CGB's competitiveness and its ability to serve
its customers, depositors, creditors and other constituents and the
communities in which it operates as a result of a business
combination with another bank holding company such as Enterbank.
(3) The similarity of CGB's Overland Park, Kansas market with those of
Enterbank and the similar focus of both companies on small to medium
sized businesses and affluent individuals in those markets.
(4) The Board's assessment that CGB will achieve its long range strategic
goals, including those of optimizing shareholder value and providing
liquidity for CGB's stock more quickly through affiliation with
Enterbank than on a stand-alone basis. In making this assessment,
the Board of Directors considered the time, staff and capital
commitments and profitability level required to make CGB a public
company through acquisition of and/or merger with other bank holding
companies of similar or smaller size.
(5) Economic conditions and prospects for the markets in which CGB and
Enterbank operate and competitive pressures in the financial services
industry in general and the banking industry in particular.
(6) Information concerning the business, profitability, asset quality,
financial condition and general reputation of CGB and Enterbank on
a stand-alone and
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combined basis and the future growth prospects of CGB and Enterbank
following the merger. The Board considered the results of the review
conducted by management and specific Board members with respect to
Enterbank. The review included an assessment of the opportunities to
achieve corporate and shareholder goals more quickly and effectively
as part of a larger multi-state bank holding company.
(7) Recognition by the Board of Directors of the similarity of the
strategic focus of both CGB and Enterbank on the creation of a
diversified financial services company with significant non-bank
components and the fact that both Enterbank and CGB have already
established relationships with and/or made investments in such
non-bank entities.
(8) The expectation that, for Federal income tax purposes, the
merger will constitute a tax-free reorganization to CGB and
its subsidiaries.
(9) The expectation that the merger will be accounted for under the
pooling of interests method of accounting.
(10) The terms and conditions of the merger agreement and the related
agreements.
(11) The likelihood of the merger being approved by the appropriate
regulatory authorities.
(12) The structure of the merger and the resulting corporate entity.
The Board of Directors of CGB did not assign relative weights to the factors
above or determine that any factor was of particular importance. Rather, the
CGB Board made recommendations based on the totality of the information
presented to and considered by them.
The Board of Directors of CGB unanimously recommends that the merger
agreement and related agreements and the transactions contemplated by those
agreements, including the merger of Enterbank Acquisition Corp. I into CGB,
resulting in CGB becoming a wholly-owned subsidiary of Enterbank, be approved
by the CGB shareholders.
OPINION OF CGB'S FINANCIAL ADVISOR
The CGB Board of Directors approved the retention of Fister & Associates,
Inc. as CGB's financial advisor in connection with the merger and to render a
fairness opinion with respect thereto. Fister is an investment banking firm
which is regularly engaged in the valuation of businesses and their
securities in connection with merger transactions and other types of
acquisitions, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
In connection with the January 5, 2000
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meeting of the Board of Directors of CGB, Fister rendered an opinion that, as
of that date, the exchange ratio of CGB shares into shares of Enterbank was
fair to the holders of CGB common stock from a financial point of view.
Fister has updated its January 5, 2000 opinion by delivery of a subsequent
written opinion to the CGB Board of directors dated the date of this joint
proxy statement/prospectus, that, based upon and subject to the various
considerations set forth therein, as of the date hereof the exchange ratio is
fair to the holders of CGB common stock from a financial point of view.
The full text of Fister's opinion as of the date hereof, which sets forth
the assumptions made, matters considered and limitations of the review
undertaken, is attached as Annex C to this joint proxy statement/prospectus
and is incorporated herein by reference, and should be read in its entirety
in connection with this joint proxy statement/prospectus. The summary of the
opinion of Fister set forth in this joint proxy statement/prospectus is
qualified in its entirety by reference to the full text of such opinion.
Fister's opinion is directed only to the fairness of the exchange ratio
from a financial point of view and does not constitute a recommendation to
any holders of CGB common stock as to how such holders of CGB common stock
should vote at the Special Meeting or as to any other matter.
In connection with its January 5, 2000 opinion and the subsequent written
opinion dated the date hereof, Fister reviewed, among other things: the
merger agreement; the Financial Statements of Enterbank included in its
Annual Reports on Forms 10-K for the five years ended December 31, 1998 and
their Quarterly Report on form 10-Q for the quarter ended September 30, 1999;
the audited statements of CGB for three years ended December 31, 1998 and for
the period from inception (March 7, 1995) to December 31, 1995 and internal
financial statements for the eleven months ended November 30, 1999; certain
internal financial analyses and forecasts for CGB prepared by its management;
certain pro forma financial forecasts for Enterbank and CGB on a combined
basis, giving effect to the merger, prepared by the respective management's
of CGB and Enterbank utilizing CGB's and Enterbank's internal financial
forecasts. Fister conducted conversations with Enterbank's senior management
and CGB's senior management regarding recent developments and management's
financial forecasts for CGB and Enterbank, respectively. In addition, Fister
spoke with members of Enterbank's senior management and CGB's senior
management regarding factors which affect each entity's business. Fister has
also compared certain financial and securities data of CGB and Enterbank with
various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of the common stock
of Enterbank, reviewed the financial terms of certain other business
combinations and conducted such other financial studies, analyses and
investigations as it deemed appropriate for purpose of its opinion. Fister
also took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well as its
experience in securities valuations and its knowledge of the banking industry
generally.
In rendering its opinion, Fister relied upon and assumed, without
independent verification, the accuracy and completeness of all of the
financial and other information that was
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provided to it or that was otherwise reviewed by it and did not assume any
responsibility for independently verifying any of such information. With
respect to the financial forecasts supplied to Fister, Fister assumed with
CGB's consent that it was reasonably prepared on the basis reflecting the
best currently available estimates and judgments of Enterbank and CGB as to
the future operation and financial performance of Enterbank and CGB, that
they would be realized in amounts and time period estimated and that they
provided a reasonable basis upon which Fister could form its opinion. Fister
also assumed that there were no material changes in the assets, liabilities,
financial condition, results of operations, business or prospects of either
Enterbank or CGB since the date of the last financial statements made
available to it. Fister also assumed, without independent verification and
with CGB's consent, that the aggregate allowances for loan losses set forth
in the financial statements of Enterbank and CGB are in the aggregate
adequate to cover all such losses. Fister did not make or obtain any
independent evaluation, appraisal or physical inspection of Enterbank's or
CGB's assets or liabilities, the collateral securing any of such assets or
liabilities, or the collectibility of any such assets nor did it review loan
or credit files of Enterbank or CGB. Fister relied on advice of CGB's
counsel and accountants as to all legal and accounting matters with respect
to CGB, the merger agreement and the transactions and other matters contained
or contemplated therein. Fister assumed, with CGB's consent, that there are
no factors that would delay or subject to any adverse conditions any
necessary regulatory or governmental approval and that all conditions to the
merger will be satisfied and not waived. Fister was retained by the CGB
board of directors to express an opinion as to the fairness of the exchange
ratio to the holders of CGB common stock, from a financial point of view.
The financial forecasts furnished to Fister for Enterbank and CGB were
prepared by the managements of Enterbank and CGB and constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. As a matter of policy, Enterbank and CGB do
not publicly disclose internal management forecasts, projections or estimates
of the type furnished to Fister in connection with its analysis of the
financial terms of the merger, and such forecasts and estimates were not
prepared with a view towards public disclosure. These forecasts and
estimates were based on numerous variables and assumptions which are
inherently uncertain and which may not be within the control of the
management of either Enterbank or CGB, including, without limitation, factors
related to the integration of Enterbank and CGB and general economic,
regulatory and competitive conditions. Accordingly, actual results could
vary materially from those set forth in such forecasts and estimates.
In connection with rendering its January 5, 2000 opinion, Fister performed
a variety of financial analyses that are summarized below. Such summary does
not purport to be a complete description of such analyses. Fister believes
that its analyses and the summary set forth herein must be considered as a
whole and that selecting portions of such analyses and the factors considered
therein, without considering all factors and analyses, could create an
incomplete view of the analyses and processes underlying its opinions. The
preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. In its analyses, Fister made numerous assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which are beyond the control of Enterbank or CGB. Any estimates
contained in Fister's analyses are not necessarily indicative of actual
future values or results, which may be significantly more or less
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favorable than suggested by such estimates. Estimates of values of companies
do not purport to be appraisals or necessarily reflect the actual prices at
which companies or their securities actually may be sold. No company or
transaction utilized in Fister's analyses was identical to Enterbank or CGB
or the merger. Accordingly, such analyses are not based solely on arithmetic
calculations; rather, they involve complex considerations and judgments
concerning differences in financial and operating characteristics of the
relevant companies, the timing of the relevant transactions, and prospective
buyer interest, as well as other factors that could affect the public trading
values of the company or companies to which they are being compared.
The following is a summary of the financial analysis performed by Fister in
connection in providing its opinion on January 5, 2000. In connection with
its written opinion dated as of the date of this joint proxy
statement/prospectus, Fister performed procedures to update certain of its
analyses and reviewed the assumptions on which such analyses were based and
the factors considered in connection therewith. In updating its opinion,
Fister did not utilize any methods of analysis in addition to those
described.
Analysis of Bank Merger Transactions. Fister analyzed certain recent
-------------------------------------
mergers in the banking industry, developed relevant multiples from those
merger transactions and applied them to CGB's subsidiary bank (FCB). Fister
analyzed several groups of deals, the first being transactions that occurred
in the Midwest region occurring from October 1, 1998, to September 30, 1999,
where the selling bank was between $75 million to $150 million in total
assets. A thorough financial analysis of these selling organizations was
performed and deals were ultimately chosen from this group that had
characteristics similar to FCB. Certain ratios were developed including
price-to-book, price-to-tangible book, price-to-earnings and franchise
premium-to-core deposits.
The price-to-book multiples from this group range from a low of 1.55% to a
high of 2.89% with an average price-to-book multiple of 2.27 and a median of
2.04. The price-to-tangible book multiples ranged from a low of 1.55% to a
high of 2.89% with an average price-to-tangible book multiple of 2.27 and a
median of 2.04. The price-to-earnings multiples ranged from a low of 13.01
to a high of 22.57 with an average price-to-earnings multiple of 18.55 and a
median of 19.10. The franchise premium-to-core deposits percentage ranged
from a low of 4.82% to a high of 29.18% with an average figure of 16.54% and
a median figure of 14.55.
Fister applied the average price-to-book multiple and price-to-earnings
multiple to FCB and to values ranging between $19.4 million end $25.0 million
with an average fair market value of $24,838,000. Fister then looked at the
tangible book premium-to-core deposits method and came to a value of
$26,971,000 with this method and adding that into the other methods and
weighting the price-to-book method at 5%, price-to-earnings method at 5% and
tangible book premium to deposits at 90%, Fister then came to a value of
$29,083,000. Fister then replaced the investment in FCB, on CGB's balance
sheet with each of these fair market value numbers for FCB to come to range
of values between $26,648,987 and made $30,893,987 for a per-share value
range between $31.42 and $36.42. Fister analyzed FCB and CGB in the above
manner, however, using deals that occurred in the entire U.S.
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Fister analyzed price-to-book, price-to-tangible book, price-to-earnings
and franchise premium-to-core deposit multiples. Of the deals that were
chosen from the entire U.S., price-to-book multiples ranged from a low of
1.29% to a high of 4.48% with an average multiple of 2.58% and a median of
2.51%. Price-to-tangible book multiples ranged from a low of 1.46% to a high
of 4.76% with an average price-to-tangible book multiple of 2.61% and a
median multiple of 2.51%. Price-to-earnings ratios ranged from a low of 11
.61x to a high of 42.3x with an average price-to-earnings multiple of 19.83x
and a median multiple of 17.57x. Franchise premium-to-core deposits
percentage ranged from a low of 4.82% to a high of 36.21% with an average of
20.08% and a median of 20.37%. Fister applied these multiples in the same
manner resulting in a range of fair market value per share for CGB from a low
of $32.44 per share to a high of $40.12 per share.
Fister then analyzed Enterbank using transactions that occurred in the
marketplace consistent with the analysis performed with CGB. Fister used
deals that occurred in the entire U.S. where the seller's asset range was
between $300 million and $500 million. Fister calculated price-to-book,
price-to-tangible book, price-to-earnings and franchise premium-to-core
deposit multiples for the transactions that occurred within the parameters of
their search that were comparable to Enterbank.
From the comparable deals that occurred in the marketplace, price-to-book
multiples ranged from a low of .98 to a high of 3.8 with an average multiple
of 2.65 and a median multiple of 2.86. Price-to-tangible book multiples
ranged from a low of .999 to a high of 4.51 with an average multiple of 2.9
and a median multiple of 3.02. Price-to-earnings multiples ranged from a low
of 16.78 to a high of 58.77 with an average of 26.14 and a median of 21.92.
Franchise premium-to-core deposits ranged from a low of zero to a high of
37.22 with an average of 18.6 and a median of 20.9. Fister applied the
price-to-book multiple and price-to-earnings multiple and came to a value of
$77.8 million for Enterbank.
In addition to the comparable transactions methodology, Fister looked at
comparable publicly traded banks and applied price-to-earnings and
price-to-book multiples to Enterbank. Fister looked at publicly traded banks
located in the Midwest that had assets under $600 million. Price-to-earnings
multiples ranged from a low of 5.33 to a high of 39.89 with an average of
17.59 and a median of 16.38. Price-to-book multiples ranged from a low of
.75 to a high of 2.75 with an average of 1.48 and a median of 1.34 for the
27 publicly traded banks. Fister applied the price-to-book and
price-to-earnings multiples to Enterbank to come to a value of $46 million.
Fister then looked at publicly traded banks located in the Midwest between
$200 million and $700 million in assets and calculated price-to-earnings and
price-to-book multiples. Price-to-earnings multiples ranged from a low of
9.52 to a high of 27.42 with an average of 16.86 and a median of 16.11.
Price-to-book multiples ranged from a low of .75 to a high of 3.65 with an
average of 1.81 and a median of 1.71. Using these multiples, Fister came to
a value of $51.2 million.
Fister then looked at holding company multiples for major bank holding
companies located in the Midwest between $1 billion and $4 billion, as these
may be acquirers of Enterbank.
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Of the 29 publicly traded companies in this group, price-to-earnings
multiples ranged from a low of 9.1 to a high of 47.1 with an average of 17.52
and a median of 14.88. Price-to-book multiples ranged from a low of .21 to a
high of 3.96 with an average of 1.92 and a median of 1.86. A value of $51.7
million was put on Enterbank using this method. Per share values for
Enterbank ranged from a low of $5.98 per share to a high of $7.38 per share.
Fister then analyzed trading activity in Enterbank's stock and conducted
interviews with Enterbank's management and Enterbank's market maker. Fister
analyzed the trades of stocks that have occurred in the marketplace since
1998. Fister analyzed the volume and the prices that these trades occurred
at and concluded that there was significant trading activity between willing
buyers and willing sellers in Enterbank's stock to warrant the prevailing
price of $18 per share.
Fister then analyzed the combination of CGB and Enterbank as related to the
possible effects on Enterbank's stock price after such a transaction.
Management of Enterbank and J.A. Glynn & Co., a broker-dealer that frequently
effects trades in Enterbank stock, have both expressed their belief that a
significant amount of shares could be placed in a short period of time if
CGB's stockholders determine to sell Enterbank stock once the merger
transaction is effected. Fister analyzed possible block trades of Enterbank
stock to be held by CGB stockholders and determined that the prevailing price
of $18 per share for Enterbank stock is valid and would be valid after the
transaction given current market conditions.
No company or transaction used in the above analysis as a comparison is
identical to Enterbank, CGB, or the merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and
operation characteristics of the companies and other facts that could affect
the public trading value of the companies to which they are being compared.
As described above, Fister's opinion was among the many factors taken into
consideration by the CGB Board in making its determination to approve the
merger.
Pursuant to the terms of Fister's engagement, CGB has paid Fister a
nonrefundable cash fee of $20,000 and, as of the date of this joint proxy
statement/prospectus, CGB will pay Fister an additional cash fee of $15,000.
CGB has also agreed to reimburse Fister for certain out-of-pocket expenses
and has agreed to indemnify Fister, its affiliates and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities under federal securities laws.
EFFECTIVE DATE AND TIME OF THE MERGER
The merger agreement provides that the merger will be effective upon the
date of the filing with the Kansas Secretary of State of a duly executed
agreement of merger pursuant to Section 17-6003 of the Kansas General
Corporation Code, or at such time thereafter as is provided by mutual
agreement in the merger agreement. The date and time on which the merger is
effective as specified in the merger agreement is referred to in this
document as the effective date and effective time, respectively. Although the
parties have not adopted any formal timetable,
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it is presently anticipated that the merger will be consummated during May
2000, assuming all of the conditions set forth in the merger agreement are
theretofore satisfied or waived.
PURCHASE PRICE AND POTENTIAL ADJUSTMENTS
Each share of CGB common stock issued and outstanding prior to the
effective time (other than shares as to which dissenters' rights have been
perfected) shall be converted into the right to receive 2.1429 shares of
Enterbank common stock, plus cash in lieu of fractional shares. The exchange
ratio is subject to adjustment under the following circumstances:
* If Enterbank changes (or establishes a record date for changing) the
number of shares of Enterbank common stock outstanding prior to the
effective time as a result of an issuance of shares, recapitalization,
merger, stock split, stock dividend or similar transaction, the exchange
ratio will be proportionately adjusted to eliminate the effect of such
event;
* If, prior to the effective time, Enterbank issues, sells or distributes
a warrant, option (other than options issued pursuant to Enterbank's
Incentive Stock Option Plans, its Non-Qualified Incentive Stock Option
Plan or options granted to employees of Moneta Group Investment
Advisors, Inc.) or other instrument convertible into or exchangeable for
any shares of Enterbank common stock (collectively, "Enterbank
Instruments"), then (1) the exchange ratio will be proportionately
adjusted to eliminate the effect of such event or (2) in the sole
discretion of Enterbank, Enterbank will provide to holders of CGB common
stock proportionately equivalent Enterbank Instruments upon consummation
of the merger; and
* By mutual agreement of Enterbank and CGB if the average closing price of
Enterbank common stock for the 20 trading days ending two business days
before the closing of the merger is less than $15.50 or greater than
$23.00.
No such adjustments to the exchange ratio will take place (1) in connection
with the grant of options under Enterbank's Incentive Stock Option Plans, its
Non-Qualified Incentive Stock Option Plan or options granted to employees of
Moneta Group Investment Advisors, Inc. or with respect to Enterbank's grants
in accordance with past practice of stock appreciation rights ("SARs") to
members or advisory members of the Board of Directors of Enterbank or its
subsidiaries who have not received grants of SARs prior to January 5, 2000,
or for shares of Enterbank common stock issued to members of the Board of
Directors of Enterbank or its subsidiaries upon vesting of SARs granted prior
to January 5, 2000.
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CONVERSION OF SHARES OF CGB COMMON STOCK
At the effective time, by virtue of the merger and without any action on
the part of the holders of CGB common stock, each issued and outstanding
share of CGB common stock (other than dissenting and fractional shares) will
be converted into the right to receive the per share consideration of
Enterbank common stock as discussed above. See "--Purchase Price and
Potential Adjustments." All such shares of CGB common stock shall no longer
be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously representing any such shares
shall thereafter represent the shares of Enterbank common stock into which
such shares of CGB common stock have been converted. Certificates previously
representing shares of CGB common stock shall be exchanged for certificates
representing whole shares of Enterbank common stock issued in consideration
therefor upon the surrender of such certificates. Cash will be paid in lieu
of any fractional share of Enterbank common stock. See "--Exchange of CGB
Stock Certificates; Fractional Interests." From and after the effective date,
the holders of certificates formerly representing shares of CGB common stock
shall cease to have any rights with respect such shares.
EXCHANGE OF CGB STOCK CERTIFICATES; FRACTIONAL INTERESTS
Prior to the effective date, Enterbank has agreed to appoint Enterprise
Bank or its successor, or any other bank or trust company having capital of
at least $10 million which is mutually acceptable to Enterbank and CGB, as
exchange agent (the "Exchange Agent") for the purpose of exchanging
certificates representing shares of Enterbank common stock, and at and after
the effective date, Enterbank will issue and deliver to the Exchange Agent
certificates representing the shares of Enterbank common stock to be
delivered to holders of shares of CGB common stock. As soon as practicable
after the effective date, each holder of shares of CGB common stock, upon
surrender to the exchange agent of one or more certificates for such shares
of CGB common stock for cancellation, will be entitled to receive a
certificate representing the number of shares of Enterbank common stock into
which such number of shares of CGB common stock will have been converted and
a payment in cash with respect to fractional shares, if any.
No dividends or other distributions of any kind which are declared payable
to shareholders of record of the shares of Enterbank common stock after the
effective date will be paid to persons entitled to receive such certificates
for shares of Enterbank common stock until such persons surrender their
certificates representing shares of CGB common stock. Upon surrender of
certificates representing shares of CGB common stock, the holder thereof will
be paid, without interest, any dividends or other distributions with respect
to the shares of Enterbank common stock as to which the record date and
payment date occurred on or after the effective date and on or before the
date of surrender.
If any certificate for shares of Enterbank common stock is to be issued in
a name other than that in which the certificate for shares of CGB common
stock surrendered in exchange therefor is registered, it will be a condition
of such exchange that the person requesting such exchange will pay to the
Exchange Agent any transfer costs, taxes or other expenses required by
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reason of the issuance of certificates for such shares of Enterbank common
stock in a name other than the registered holder of the certificate
surrendered, or such persons will establish to the satisfaction of Enterbank
and the Exchange Agent that such costs, taxes or other expenses have been
paid or are not applicable.
All dividends or distributions, and any cash to be paid in lieu of
fractional shares, if held by the Exchange Agent for payment or delivery to
the holders of unsurrendered certificates representing shares of CGB common
stock and unclaimed at the end of one year from the effective date, will
(together with any interest earned thereon) at such time be paid or
redelivered by the Exchange Agent to Enterbank, and after such time any
holder of a certificate representing shares of CGB common stock who has not
surrendered such certificate to the Exchange Agent will, subject to
applicable law, look as a general creditor only to Enterbank for payment or
delivery of such shares of Enterbank common stock and dividends or
distributions or cash, as the case may be.
No fractional shares of Enterbank common stock will be issued to holders of
shares of CGB common stock. In lieu thereof, each such holder entitled to a
fraction of a share of Enterbank common stock will receive, at the time of
surrender of the certificate or certificates representing such holder's
shares of CGB common stock, an amount in cash equal to the average price of
Enterbank common stock multiplied by the fraction of a share of Enterbank
common stock to which such holder otherwise would be entitled. The average
price of Enterbank common stock is calculated using the closing price of the
Enterbank common stock for the 20 trading days ending two business days
before the closing. No such holder will be entitled to dividends, voting
rights, interest on the value of, or any other rights in respect of, a
fractional share.
TREATMENT OF STOCK OPTIONS
At the effective time, the obligations under the CGB stock option plan will
be assumed by Enterbank. At the effective time, options to purchase shares of
CGB common stock issued pursuant to CGB's stock option plan that are
outstanding and unexercised will be converted, without any action on the part
of the holders thereof, into options to acquire the number of shares of
Enterbank common stock the option holder would have received pursuant to the
merger if he or she had exercised all of his or her options immediately prior
to the effective date. The option exercise price will be adjusted to equal
the exercise price per share for the options immediately prior to the merger
divided by the exchange ratio of 2.1429, as the exchange ratio may be
adjusted. Except as noted above, each CGB stock option will otherwise
continue on terms and conditions that are consistent with those that were
applicable on the effective date.
CONDUCT OF BUSINESS PENDING THE MERGER
Under the merger agreement, Enterbank and CGB have each agreed that, during
the period from the date of the merger agreement to the effective time of the
merger, it and each of its respective subsidiaries will, except as otherwise
permitted by the merger agreement or consented to in writing by the other
party:
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* carry on its business in the usual, regular and ordinary course in
substantially the same manner as conducted prior to the execution of
the merger agreement and use all reasonable efforts to preserve intact
its present business organizations,
* maintain the rights and franchises of its business, and preserve the
relationships with its customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing businesses
will not be impaired in any material respect at the effective time of
the merger,
* not declare or pay any dividends on or make other distributions in
respect of any of its capital stock, except (1) (A) in the case of CGB,
cash dividends in an amount per share not greater than, and consistent
with the manner and frequency of, dividends paid by CGB, in the
12 months prior to the date of the merger agreement, and (B) in the case
of Enterbank, cash dividends in an amount not to exceed $.0125 per
share, and (2) for dividends paid to Enterbank or CGB from a
wholly-owned subsidiary,
* not split, combine or reclassify any of its capital stock or issue any
other securities instead of shares of its capital stock,
* not repurchase, redeem or otherwise acquire, or permit any of its
subsidiaries to purchase or otherwise acquire, any shares of its capital
stock or the capital stock of any other of its subsidiaries or any
securities convertible into or exercisable for any shares of its capital
stock, and
* subject to certain exceptions, not change its or any of its subsidiaries
methods of accounting.
In addition, CGB has agreed that it will not, without the prior written
consent of Enterbank:
* amend the articles of incorporation or bylaws or other organizational
documents of CGB or any of its subsidiaries except as otherwise required
to perform its obligations under the merger agreement,
* issue or sell any shares of its capital stock, or any rights, warrants
or options to acquire its capital stock, other than issuances of common
stock in connection with the exercise of options,
* enter into any new material line of business or materially change its
lending, investment, liability management and other material banking
policies, except as required by law or by policies imposed by a banking
regulatory authority,
* subject to certain exceptions, incur or commit to any capital
expenditures or any obligations or liabilities in connection with
capital expenditures other than in the
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ordinary course of business consistent with past practice, but in no
event for more than $25,000 as to any one such item or $75,000 as to all
such items in the aggregate,
* make any acquisition of or enter into any merger or consolidation with
any other business organization, except as permitted by certain limited
exceptions,
* sell, lease, encumber or otherwise dispose of, any material assets,
other than in the ordinary course of business consistent with past
practice,
* incur or guarantee any long-term indebtedness or issue, sell or
guarantee any long-term debt securities other than (1) indebtedness of
a subsidiary to CGB, (2) deposits taken in the ordinary course of
business consistent with past practice, or (3) renewals or extensions of
existing long-term indebtedness without any change in the material terms
thereof,
* intentionally take or fail to take any action that would, or reasonably
might be expected to, result in any of the representations and
warranties set forth in the merger agreement being or becoming untrue in
any material respect, or in any of the conditions to the closing set
forth in the merger agreement not being satisfied or, unless such action
is required by applicable law or sound banking practice, which would
adversely affect the ability of Enterbank or CGB to obtain any of the
requisite regulatory approvals,
* subject to certain exceptions, enter into or amend any employee benefit
plans or agreements or increase the compensation or fringe benefits of
any director, officer or employee,
* subject to certain exceptions, commit to or renew any real estate
secured or construction loan with a principal amount exceeding
$1,500,000 or any commercial loan which is referred to the loan
committee of the First Commercial Bank, N.A. Board of Directors with
a principal amount exceeding $650,000,
* issue or agree to issue any letters of credit or otherwise guarantee
the obligations of any other persons except in the ordinary course of
business consistent with past practice,
* engage or participate in any material transaction or incur or sustain
any material obligation not in the ordinary course of business
consistent with past practice,
* settle any claim involving the payment of money damages in excess of
$50,000 as to any such matter, or settle any other matter not involving
money damages which is material to CGB,
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* except as required by GAAP or applicable law or regulation, change
or make any tax elections or settle or compromise any material tax
liability,
* subject to certain exceptions, relocate or close any branch or loan
production office,
* except as permitted by the merger agreement, enter into any
securitization or similar transactions with respect to any loans,
leases or other assets, or
* agree to, or make any commitment to, take any of the prohibited actions
described above.
Additionally, Enterbank has agreed that it and its subsidiaries will not,
without the prior written consent of CGB:
* amend its certificate of incorporation or its bylaws in a manner that
would materially and adversely affect (1) its ability to perform it
obligations under the merger agreement or complete the merger, or (2)
the rights, powers and privileges of the shares of Enterbank common
stock to be issued in the merger,
* intentionally take or fail to take any action that would, or reasonably
might be expected to, result in (1) any of its representations and
warranties set forth in the merger agreement being or becoming untrue in
any material respect, or (2) any of the conditions to the closing set
forth in the merger agreement not being satisfied, or, unless such
action is required by applicable law or sound banking practice, that
would adversely affect the ability of Enterbank or CGB to obtain any of
the requisite regulatory approvals without imposition of a burdensome
condition, or
* agree to, or make any commitment to, take any of the prohibited actions
described above.
Under the merger agreement, Enterbank further agreed:
* to use all commercially reasonable efforts to publish as soon as
practicable after the quarter in which there are at least 30 days of
post-merger combined operations, combined sales and net income figures,
and
* until the effective time of the merger, not to accept a takeover
proposal from a third party unless such proposal is expressly
conditioned upon the performance by Enterbank of its obligations under
the merger agreement; provided, however, that Enterbank may, under
certain circumstances, accept such third party takeover proposal by
paying or causing to be paid to CGB the termination fee specified in the
merger agreement. See "-- Fees and Expenses."
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ADDITIONAL AGREEMENTS
SPECIAL SHAREHOLDERS' MEETINGS. In the merger agreement, each of Enterbank
and CGB has agreed to call a meeting of its shareholders to be held as
promptly as practicable for the purpose of voting on the merger. Each of
Enterbank and CGB is required through its Board of Directors to recommend to
its shareholders approval of the merger agreement unless its Board of
Directors determines in good faith, based upon the written advice of outside
counsel, that making such recommendation, or failing to withdraw, modify or
amend any previously made recommendation, would constitute a breach of
fiduciary duty by its Board of Directors under applicable law.
NO SOLICITATIONS. From January 5, 2000, until the earlier of the effective
time of the merger or the termination of the merger agreement, CGB has agreed
that neither it nor any of its subsidiaries, nor any of their affiliates or
agents, will enter into discussions or negotiations with or provide
information to any person or group of persons (other than Enterbank and its
subsidiaries) concerning any inquiry, proposal or offer to acquire in any
manner 20% or more of any class of equity securities of, or a merger,
consolidation, business combination, sale, recapitalization, liquidation,
dissolution or other disposition or similar transaction involving 20% or more
of the assets of, CGB or any significant subsidiary of CGB. However, the
Board of Directors of CGB, to the extent required by its fiduciary duty, as
determined in good faith based upon the advice of independent counsel, may
recommend or enter into an agreement with respect to a bona fide takeover
proposal by a third party on terms determined in good faith by the Board of
Directors of CGB to be reasonably capable of being completed, taking into
account all legal, financial, regulatory and other aspects of the proposal
and the person making the proposal and, based on the advice of a financial
advisor of nationally recognized reputation, if consummated, to be more
favorable to the shareholders of CGB from a financial point of view than the
merger with Enterbank. If the Board of Directors exercises the right
discussed in the preceding sentence, CGB is required to pay to Enterbank a
termination fee. See "-- Fees and Expenses."
FILINGS AND OTHER ACTIONS. In the merger agreement, Enterbank and CGB have
each agreed to use all reasonable efforts:
* to take all actions necessary to comply promptly with all legal
requirements which may be imposed on such party or its subsidiaries with
respect to the transactions contemplated by the merger agreement, and
* to obtain (and to cooperate with the other party to obtain) any
governmental or private consent, authorization, order, exemption or
approval which is required to be obtained or made by such party or any
of its subsidiaries in connection with the merger and the other
transactions contemplated by the merger agreement. In addition, each of
CGB and Enterbank has agreed to use all reasonable best efforts to take
all actions, and to do all things, necessary and proper or advisable to
complete, as soon as practicable, the transactions contemplated by the
merger agreement, including using all reasonable best efforts to:
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(1) lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to complete the merger
according to the merger agreement,
(2) defend any litigation seeking to enjoin, prevent or delay the
completion of the merger according to the merger agreement or seeking
material damages, and
(3) provide to counsel to the other party representations and
certifications as to such matters as such counsel may reasonably
request in order to render the respective tax opinions described
under "--Conditions to the Completion of the Merger" and to obtain
the letters of their independent accountants regarding pooling of
interests accounting treatment.
EMPLOYEE BENEFIT PLANS. Under the merger agreement, Enterbank has agreed
to honor, and to cause its subsidiaries to honor, all of CGB's employee
benefits plans, provided that after the effective time of the merger
Enterbank or its subsidiaries may amend, modify or terminate such plans in
accordance with their terms and with applicable law. Additionally, CGB has
agreed that its 401(k) Plan and Flexible Benefits Plan shall be merged with
the Enterprise Bank Incentive Savings Plan and Enterprise Bank Section 125
Premium Conversion Plan, respectively.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Under the merger
agreement, from and after the effective time of the merger, Enterbank will
indemnify and hold harmless each present or former officer or director of CGB
and its subsidiaries (determined as of the effective time) against (1) all
damages in connection with any action arising out of actions or omissions
prior to the effective time of the merger (collectively, "Indemnified
Liabilities") and (2) all Indemnified Liabilities arising out of the merger
agreement or the transactions contemplated by the merger agreement, in each
case to the full extent that CGB would have been permitted under applicable
law and its articles of incorporation and bylaws.
Additionally, Enterbank will maintain CGB's directors' and officers'
liability insurance policy for a period of not less than three years
following the effective time of the merger, provided that Enterbank may
substitute policies providing at least equivalent coverage which is no less
advantageous to CGB's current officers and directors. See "Comparison of
Shareholder Rights--Indemnification of Directors and Executive Officers."
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary mutual representations by each of
Enterbank and CGB relating to, among other things, (1) corporate organization
and existence, (2) capitalization, (3) ownership by CGB of Enterbank's common
stock and each party's ownership of capital stock held in a trust account or
in respect of a debt previously contracted, (4) corporate power and authority
to enter into, and due authorization, execution, delivery, performance and
enforceability of, the merger agreement, (5) required governmental and third
party consents and approvals and that neither the merger agreement nor the
transactions contemplated thereby
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violate either party's organizational documents, applicable law and certain
material agreements, (6) financial statements, (7) Securities and Exchange
Commission documents (in the case of Enterbank), (8) the accuracy of the
information provided by each of Enterbank and CGB for inclusion in this joint
proxy statement/prospectus, (9) compliance with applicable laws, (10) the
absence of material litigation, (11) filing of tax returns, payment of taxes
and related matters, (12) certain material contracts, (13) employee benefit
plans and agreements, (14) subsidiaries, (15) certain bank regulatory
matters, (16) the absence of certain material changes or events since
September 30, 1999, (17) the absence of undisclosed liabilities, (18) timely
filing of all material regulatory reports, (19) the absence of material
environmental liability, (20) title to properties, (21) transactions with
affiliates, (22) brokers' and finders' fees, (23) intellectual property, (24)
confirmation that the merger will qualify for pooling of interests treatment
for accounting purposes, (25) compliance with the Community Reinvestment Act,
(26) Year 2000 readiness, (27) insurance, (28) validity and enforceability of
all loans, leases, other extensions of credit, commitments or other
interest-bearing assets and investments of CGB, (29) absence of high risk,
highly interest rate sensitive derivative contracts (except as disclosed),
and (30) absence of collective bargaining agreements.
In the merger agreement, CGB also makes representations and warranties to
Enterbank concerning (1) receipt of a fairness opinion from its financial
advisor, (2) absence of restrictions on investments, and (3) absence of
brokered deposits (except as disclosed).
The representations and warranties of Enterbank and CGB terminate as of the
effective time of the merger.
CONDITIONS TO THE COMPLETION OF THE MERGER
Each party's obligation to complete the merger is subject to various
conditions which include, in addition to the other customary closing
conditions, the following:
* both Enterbank and CGB shareholders shall have approved the merger
agreement;
* all necessary governmental approvals for the merger shall have been
obtained and any waiting periods required by any governmental entity
with respect to the merger shall have expired;
* there shall not be any injunction or restraining order preventing the
completion of the merger or the transactions contemplated by the merger
agreement, nor shall the merger or the transactions contemplated by the
merger agreement, be illegal under any applicable law;
* no stop orders suspending the effectiveness of the filed by Enterbank
to register the shares to be issued to CGB registration statement
shareholders shall have been issued or proceedings for that purpose
initiated or threatened by the Securities and Exchange Commission;
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* receipt of a reasonably satisfactory poolability letter from KPMG LLP
to Enterbank to the effect that the merger should qualify for pooling
of interests accounting treatment;
* receipt of a reasonably satisfactory poolability letter from Deloitte &
Touche LLP to CGB;
* in approving the merger agreement, no governmental authority shall have
imposed a burdensome condition or restriction upon Enterbank, CGB or
their subsidiaries or any affiliate which would reasonably be expected
to (1) have a material adverse effect after the effective time of the
merger on the present or prospective consolidated financial condition,
business, operating results or prospects of Enterbank or the surviving
corporation, including, without limitation, any requirement to dispose
of any material assets or businesses or restrict in any significant way
any material operations or activities, (2) prevent Enterbank or its
subsidiaries from realizing all or a substantial portion of the
economic benefits of the transactions contemplated by the merger
agreement, or (3) materially impair Enterbank's ability to exercise and
enforce its rights under the merger agreement, stock option agreement
and agreement of merger;
* the number of shares held by holders of CGB shareholders electing to
exercise their dissenters' rights of appraisal shall not exceed 9.9% of
the number of outstanding shares of CGB common stock when combined with
tainted treasury shares held by CGB and fractional shares for which
cash will be distributed;
* the average closing price of Enterbank's common stock for the twenty
trading days preceding the second business day prior to the closing
date shall be no less than $15.50 and no greater than $23.00, unless
Enterbank and CGB mutually agree to revise the exchange ratio is the
average closing price of Enterbank's common stock is less than $15.50
or greater than $23.00 or otherwise choose not to exercise their merger
agreement termination rights.
* the representations and warranties of the other party set forth in the
merger agreement shall be true and correct in all material respects as
of the date of the merger agreement (except to the extent such
representations and warranties speak as of an earlier date) and as
of the closing date;
* the other party shall have performed in all material respects all of
its obligations under the merger agreement;
* such party shall have received a copy of the resolution or resolutions
duly approved by the board of directors (or a duly authorized committee
thereof) of the other party and of the holders of the common stock of
the other party, authorizing the execution, delivery and performance by
such party of the merger agreement;
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* such party shall have received an opinion of its counsel or independent
public accountants, dated the closing date, that the merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and each party
will be a party to that reorganization within the meaning of Section
368(b) of the Internal Revenue Code;
* no material adverse effect upon either party shall have occurred since
September 30, 1999 and neither party shall be a party to or, so far as
such party is aware, threatened with, and to such party's knowledge
there is no reasonable basis for, any legal action or other proceeding
before any court, any arbitrator of any kind or any government agency,
which, in the reasonable judgment of the other party, could have a
material adverse effect upon such party, and the other party shall have
received a certificate from such party to such effect; and
* each party shall have received from the other party such certificates
and other closing documents as counsel for such party shall reasonably
request,
In addition, Enterbank's obligation to complete the merger is subject to
the following additional condition, which may be waived by Enterbank:
* Enterbank shall have received a written "bring-down" opinion of Stifel
Nicolaus, dated as of the date of this joint proxy statement/prospectus
to the effect that the merger is fair to Enterbank's stockholders from
a financial point of view.
In addition, CGB's obligation to complete the merger is subject to the
following additional conditions, any of which may be waived by CGB:
* Enterbank shall have amended its bylaws or taken any other action
necessary to increase the number of authorized directors on its Board
of Directors to permit the appointment of the four CGB designees at
least five business days prior to the closing date; and
* CGB shall have received a written "bring-down" opinion of
Fister & Associates, dated as of the date of this joint proxy
statement/prospectus to the effect that the merger is fair to CGB's
stockholders from a financial point of view.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time before the effective
time of the merger. If the merger agreement is terminated, the merger will
not occur. The merger agreement may be terminated by action taken or
authorized by the Board of Directors of the terminating party or parties
whether before or after the approval of the merger agreement by the
shareholders of Enterbank or CGB:
* by mutual consent of Enterbank and CGB in a written instrument,
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* by either party (1) upon written notice to the other party if any bank
regulator shall have issued an order denying approval of the merger and
the other material aspects of the transactions contemplated by the
merger agreement or if any governmental entity with authority to do so
shall have issued a final permanent order enjoining or otherwise
prohibiting the completion of the merger in accordance with the merger
agreement, and the time for appeal or petition for reconsideration of
any such order shall have expired without such appeal or petition being
granted, or (2) if any governmental entity with authority to do so
shall have issued an order in connection with the transactions under
the merger agreement imposing a burdensome condition on Enterbank or
the surviving corporation, and the time for appeal or petition for
reconsideration of any such order shall have expired without such
appeal or petition being granted,
* by either party, if the merger is not completed on or before July 31,
2000, except that such termination date may be extended by up to
60 days (1) at the election of the non-breaching party, if the merger
shall not have been consummated due to the volitional breach of any
material representation, warranty or covenant in the merger agreement
by Enterbank or CGB, or (2) at the election of the party who has
requested a required regulatory approval, in the event that the merger
shall not have been consummated because such required regulatory
approval has not been received,
* by Enterbank, in the event of a breach by CGB of any representation,
warranty or covenant contained in the merger agreement, which breach
(1) either is not cured within 45 days after the giving of written
notice to CGB, or is of a nature which cannot be cured prior to the
closing, and (2) would entitle the non-breaching party to elect not to
complete the merger in accordance with the merger agreement under the
provisions described under "--Conditions to the Completion of the
Merger;" provided, however, that Enterbank may immediately terminate
the merger agreement upon notice to CGB in the event that CGB shall
breach the covenant described under "--Additional Agreements--No
Solicitations,"
* by CGB, in the event of a breach by Enterbank of any representation,
warranty or covenant contained in the merger agreement, which breach
(1) either is not cured within 45 days after the giving of written
notice to CGB, or is of a nature which cannot be cured prior to the
closing, and (2) would entitle the non-breaching party to elect not to
complete the merger in accordance with the merger agreement under the
provisions described under "-- Conditions to the Completion of the
Merger;" provided that CGB can terminate the merger agreement within
ten business days after notice to Enterbank in the event Enterbank
breaches its covenant regarding a third party takeover proposal and
such breach is not cured within the ten business day period, and upon
such termination Enterbank shall pay to CGB the termination fee
described under "--Fees and Expenses,"
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* by Enterbank (1) if a third party makes a written offer to Enterbank
regarding a takeover proposal of Enterbank in which such third party
indicates that they would not be willing to consummate the takeover
proposal unless the merger agreement is terminated, and (2) the
Enterbank Board of Directors determines in good faith, based upon the
written advice of outside counsel, that failing to accept such takeover
proposal would constitute a breach of fiduciary duty by Enterbank's
Board of Directors, provided that upon such termination Enterbank shall
pay to CGB the termination fee described under "--Fees and Expenses,"
* by CGB if Enterbank accepts any offer or enters into any agreement with
any third party regarding a takeover proposal where 20% or more of the
shares of common stock of Enterbank or a significant subsidiary or 20%
or more of the consolidated assets of Enterbank or a significant
subsidiary are transferred or disposed of through tender or exchange
offer, sale, merger, consolidation, business combination or similar
transaction where CGB is not given the opportunity or elects not to be
included in such transaction,
* by Enterbank or CGB, if the Board of Directors of the other party
(1) fails to recommend approval of the merger agreement by its
shareholders, (2) amends or modifies such recommendation in a manner
materially adverse to the other party, or (3) withdraws such
recommendation to its shareholders,
* by either party (1) if the approval of the merger agreement by the
shareholders of the other party is not obtained, (2) the poolability
letters are not delivered by the parties' respective accountants
regarding the availability of pooling accounting treatment to the
merger or (3) the aggregate number of shares held by shareholders of
CGB exercising dissenters' rights of appraisal exceeds 9.9% of the
outstanding shares of CGB common stock when combined with tainted
treasury shares held by CGB and fractional shares for which cash will
be distributed,
* by Enterbank if the required updated fairness opinion is not delivered
by Stifel Nicolaus,
* by CGB if the required updated fairness opinion is not delivered by
Fister & Associates,
* by CGB, by providing written notice to Enterbank within the two
business day period following the fifth business day after the
"determination date," if the average Enterbank closing price
(calculated over the 20 consecutive trading days preceding the
second business day prior to the closing date) is less than $15.50 and
provided the parties have not mutually agreed to adjust the exchange
ratio during the five business days following the determination date.
The determination date is the second business day prior to the closing
date,
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* by Enterbank, by providing written notice to CGB within the two
business day period following the fifth business day after the
determination date, if the average Enterbank closing price (calculated
over the 20 consecutive trading days preceding the second business day
prior to the closing date) is greater than $23.00 and provided the
parties have not mutually agreed to adjust the exchange ratio during
the five business days following the determination date, and
* by either party, if (1) there has been a change, or any event involving
a prospective change, in the business, financial condition, results of
operations or prospects of the other party or its subsidiaries that has
had, or would be reasonably likely to have, a material adverse effect
on the other party, and (2) if such change or event is not capable of
being cured or such change or event has not been cured within 45 days
of giving written notice to the other party.
FEES AND EXPENSES
TERMINATION FEES. CGB is required to pay Enterbank a $1 million fee (minus
actual expenses paid, if any, by CGB to Enterbank as described below) if CGB
elects to enter into an agreement with a third party relating to a takeover
proposal where 20% or more of the shares of common stock of CGB or a
significant subsidiary or 20% or more of the consolidated assets of CGB or a
significant subsidiary are transferred or disposed of through tender or
exchange offer, sale, merger, consolidation, business combination or similar
transaction.
Enterbank is required to pay CGB a $1 million fee if the merger is
terminated for the following reasons:
* if Enterbank accepts any offer or enters into any agreement with any
third party regarding a takeover proposal where 20% or more of the
shares of common stock of Enterbank or a significant subsidiary or
20% or more of the consolidated assets of Enterbank or a significant
subsidiary are transferred or disposed of through tender or exchange
offer, sale, merger, consolidation, business combination or similar
transaction where CGB is not given the opportunity or elects not to be
included in such transaction; or
* if Enterbank accepts a takeover proposal from a third party in which
the third party conditions its proposal on the termination of the
merger and failing to accept the proposal would constitute a breach of
fiduciary duty by the Enterbank Board of Directors.
GENERAL EXPENSES. Other than in the situations described above and in the
following paragraphs, whether or not the merger is completed in accordance
with the merger agreement, all costs and expenses incurred in connection with
the merger agreement and the transactions covered by the merger agreement
will be paid by the party incurring those expenses.
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If the merger agreement is terminated due to either party's willful breach
of a representation, warranty or covenant, the breaching party will bear all
costs and expenses incurred by the non-breaching party.
REIMBURSEMENT EXPENSES. If the merger agreement is terminated because
Deloitte & Touche LLP fails to deliver a poolability letter at or prior to
the closing, or a material adverse change or prospective change has occurred
in the business, financial condition, results of operations or prospects of
CGB or its subsidiaries and such change has not been cured within a specified
time, or if Fister & Associates shall fail to deliver an updated fairness
opinion to CGB, CGB shall pay promptly all costs and expenses incurred by
Enterbank not exceeding $250,000.
If the merger agreement is terminated because KPMG LLP fails to deliver a
poolability letter at or prior to the closing or a material adverse change or
prospective change has occurred in the business, financial condition, results
of operations or prospects of Enterbank or its subsidiaries and such change
has not been cured within a specified time, Enterbank shall pay promptly all
costs and expenses incurred by CGB not exceeding $250,000.
AMENDMENT
The merger agreement may be amended by the parties at any time before or
after approval of the merger agreement by the shareholders of Enterbank and
CGB. However, after the approval by the shareholders of Enterbank and CGB, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. The merger agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties. On March 14, 2000, the merger agreement was amended by the parties
to clarify certain of the understandings reached during the merger
negotiations. A copy of the amendment is included in Annex A attached
hereto.
EXTENSION; WAIVER
At any time prior to the closing of the merger, the parties, by action
taken or authorized by their respective boards of directors, may, to the
extent legally allowed, (1) extend the time for the performance of any of the
obligations or other acts of the other parties, (2) waive any inaccuracies in
the representations and warranties contained in the merger agreement or in
any document delivered pursuant to it, and (3) waive compliance with any of
the agreements or conditions contained in the merger agreement. To "waive"
means to give up rights.
Any agreement on the part of a party to the merger agreement to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
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MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Upon the consummation of the merger, Enterbank Acquisition Corp. I will
merge into CGB, and CGB will become a wholly-owned subsidiary of Enterbank.
The articles of incorporation and bylaws of CGB in effect immediately prior
to the effective date shall be and continue to be the articles of
incorporation and bylaws of CGB following the merger. The directors and
executive officers of CGB prior to the effective date will be the directors
and executive officers of CGB following the merger. The directors and
executive officers of Enterbank prior to the effective date will be the
directors and executive officers of Enterbank following the merger, except
that four CGB directors will be added to the Board of Directors of Enterbank.
REQUIRED REGULATORY APPROVALS
The merger must be approved by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") pursuant to the provisions of
the Bank Holding Company Act or be exempt under the BHC Act. In conducting a
review of any application for a merger, the Federal Reserve Board is required
to consider the financial and managerial resources and future prospects of
the companies and the banks concerned and the convenience and needs of the
communities to be served. The Federal Reserve Board has the authority to deny
an application if it concludes, among other things, that the requirements of
the Community Reinvestment Act of 1977, as amended, are not satisfied.
A transaction approved by the Federal Reserve Board may not be consummated
for at least 30 days (in some circumstances a 15-day waiting period is
allowed) after such approval. During such period, the Department of Justice
may commence a legal action challenging the transaction under federal
antitrust laws. If the Department of Justice does not commence a legal action
during such 30-day period (in some circumstances a 15-day waiting period is
allowed), it may not thereafter challenge the transaction except in an action
commenced under the anti-monopoly provisions of Section 2 of the Sherman
Antitrust Act.
The BHC Act provides for the publication of notice and the opportunity for
administrative hearings relating to an application for approval under the BHC
Act and authorizes the Federal Reserve Board to permit interested parties to
intervene in the proceedings. If an interested party is permitted to
intervene, such intervention could substantially delay the regulatory
approval required for consummation of the merger.
CGB and Enterbank believe that the merger will not raise substantial
antitrust or other significant regulatory concerns and that they will be able
to obtain all requisite regulatory approvals on a timely basis without the
imposition of any condition that would have a material adverse effect.
Under the merger agreement, prior to the merger, all governmental approvals
required for the merger shall be in effect, and all conditions or
requirements prescribed by law or any governmental approval shall be
satisfied. However, no governmental approval shall be deemed to have been
received if it imposes any condition or requirement or disapproves any aspect
of any applications which, in the reasonable opinion of the Board of
Directors of Enterbank or CGB
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materially and adversely affects the anticipated economic and business
benefits to Enterbank or CGB of the transactions contemplated by the merger
agreement as to render consummation of such transaction inadvisable.
Based on current precedents, the respective managements of Enterbank and
CGB believe that the merger and other exemptions, consents and approvals will
be obtained from the Federal Reserve Board and the merger will not be subject
to challenge by the Department of Justice under federal antitrust laws.
However, no assurance can be provided that the Federal Reserve Board or the
Department of Justice will concur in this assessment or that, in connection
with the grant of any exemption or approval by the Federal Reserve Board, any
exemption or action taken, or statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the merger or transactions
contemplated thereby, will not contain conditions or requirements which so
materially and adversely affect the anticipated economic and business
benefits of the merger as further described in the merger agreement. If such
a material and adverse condition or requirement is imposed in connection with
a governmental approval, a condition to Enterbank's obligation to consummate
the merger will be deemed not to have occurred and Enterbank will have the
right to terminate the merger agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax consequences of the merger. The discussion does not address all
aspects of United States federal taxation that may be relevant to you, and it
may not be applicable to CGB shareholders who, for United States federal
income tax purposes, are nonresident alien individuals, foreign corporations,
foreign partnerships, foreign trusts or foreign estates, or who acquired
their CGB common stock pursuant to the exercise of CGB stock options or
otherwise as compensation. You should consult your own tax advisor as to the
particular tax consequences of the merger to you.
This discussion is based on the Internal Revenue Code of 1986, as amended,
regulations thereunder, current administrative rulings and practice, and
judicial precedent, all of which are subject to change. Any such change,
which may or may not be retroactive, could alter the tax consequences to you
as discussed in this joint proxy statement/prospectus. This discussion
assumes that you hold your CGB common stock as a capital asset within the
meaning of section 1221 of the Internal Revenue Code.
Enterbank is not required to complete the merger unless Enterbank receives
an opinion of Armstrong Teasdale LLP, counsel to Enterbank, based upon
certain customary assumptions and representations made by Enterbank and CGB,
and to the effect that under currently applicable law for United States
federal income tax purposes:
* The merger will constitute a reorganization within the meaning of
section 368(a) of the Internal Revenue Code; and
* Enterbank and CGB will each be a party to that reorganization within the
meaning of section 368(b) of the Internal Revenue Code.
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CGB's obligation to complete the merger is conditioned upon CGB receiving
an opinion of Stinson, Mag & Fizzell, P.C., independent counsel to CGB, or
other law or accounting firm reasonably acceptable to Enterbank, based upon
certain customary assumptions and representations made by Enterbank and CGB,
and to the effect that under currently applicable law for United States
federal income tax purposes:
* The merger should constitute a reorganization within the meaning of
section 368(a) of the Internal Revenue Code;
* Enterbank and CGB should each be a party to that reorganization within
the meaning of section 368(b) of the Internal Revenue Code;
* except for any cash received in lieu of any fractional share, no gain or
loss should be recognized by the holders of CGB common stock who receive
Enterbank common stock in exchange for the CGB common stock which they
hold;
* the holding period of the Enterbank common stock exchanged for CGB
common stock should include the holding period of the CGB common stock
for which it is exchanged, assuming the shares of CGB common stock are
capital assets in the hands of the holder thereof at the effective time;
and
* the basis of the Enterbank common stock received in the exchange should
be the same as the basis of the CGB common stock for which it was
exchanged, less any basis attributable to fractional shares for which
cash is received.
In the event CGB fails to receive the foregoing opinion from Stinson, Mag &
Fizzell, P.C. or other law or accounting firm and reasonably acceptable to
Enterbank, such condition shall be deemed satisfied to the extent CGB shall
have received an opinion from Armstrong Teasdale LLP or other law or
accounting firm reasonably acceptable to CGB, to the effect that, under
currently applicable law for United States federal income tax purposes, the
merger should constitute a reorganization within the meaning of section
368(a) of the Internal Revenue Code and Enterbank and CGB should each be a
party to that reorganization within the meaning of section 368(b) of the
Internal Revenue Code.
Each of Armstrong Teasdale LLP and Stinson, Mag & Fizzell, P.C. has
indicated that it expects to be able to deliver its tax opinion. No ruling
has been or will be obtained from the Internal Revenue Service in connection
with the merger. Opinions of counsel are not binding on the Internal Revenue
Service or the courts.
Although not explicitly addressed in either the Armstrong Teasdale LLP or
Stinson, Mag & Fizzell, P.C. opinion, the following federal income tax
consequences will occur as a result of the merger being classified as a
reorganization within the meaning of section 368(a) of the Internal Revenue
Code. Neither Enterbank nor CGB will recognize gain or loss solely as a
result of the merger. In addition, if you receive cash in the merger instead
of a fractional share of Enterbank
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common stock, then you will be treated as if you received the fractional share
in the merger and then Enterbank redeemed the fractional share in exchange for
the cash. You will generally be required to recognize gain or loss equal to the
difference between the amount of cash received and the portion of your adjusted
tax basis in the shares of Enterbank common stock allocable to the fractional
share.
You will recognize no gain or loss if you receive solely Enterbank common
stock in exchange for shares of CGB common stock you hold, except with
respect to cash received instead of fractional shares of Enterbank common
stock.
* The holding period of the shares of Enterbank common stock you receive
in the merger (including any fractional share of Enterbank common stock
deemed to be received by you, as described below), will include the
holding period of the shares of CGB common stock you exchange for the
shares of Enterbank common stock; and
* The aggregate adjusted tax basis of the shares of Enterbank common stock
you receive in the merger (including any fractional share of Enterbank
common stock deemed to be received by you, as described below), will be
equal to the aggregate adjusted tax basis of the shares of CGB common
stock surrendered by you for the shares of Enterbank common stock.
The foregoing is a general discussion of the material United States federal
income tax consequences of the merger and is included for general information
only. The foregoing discussion does not take into account the particular
facts and circumstances of your status and attributes. As a result, the
United States federal income tax consequences addressed in the foregoing
discussion may not apply to you. In view of the individual nature of income
tax consequences, you are urged to consult your own tax advisor to determine
the specific tax consequences of the merger to you, including the application
and effect of United States federal, state, local and other tax laws and the
possible effects of changes in United States federal and other tax laws.
ACCOUNTING TREATMENT
For accounting and financial reporting purposes, the merger is intended to
be treated as a pooling of interests of CGB by Enterbank under generally
accepted accounting principles. Under the pooling of interests accounting
method, Enterbank will carry forward on its books the assets and liabilities
of CGB at their historical recorded values. The unaudited pro forma combined
financial information contained in this joint proxy statement/prospectus have
been prepared using the pooling of interests method of accounting to account
for the merger. See "Summary--Selected Historical and Pro Forma Financial
Data" and "Unaudited Pro Forma Condensed Combined Financial Information."
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TRADING MARKETS FOR STOCK
Neither the common stock of Enterbank nor CGB is listed or traded on an
exchange or in any established public trading market. Enterbank is aware of
periodic trading activity in its stock which is reported to the Nasdaq,
though there may be transactions from time to time at prices that are not
known to Enterbank. Because Enterbank does not expect to list its common
stock on any exchange or seek quotation of its common stock on the Nasdaq in
the near future, no established public trading market for the Enterbank
common stock is expected to develop for the foreseeable future.
RESALES OF ENTERBANK COMMON STOCK
The Enterbank common stock issued pursuant to the merger will be freely
transferable under the Securities Act, except for shares issued to any CGB
shareholder who may be deemed to be an "affiliate" of Enterbank or CGB for
purposes of Rule 145 under the Securities Act. Each director and executive
officer of CGB is deemed to be such an affiliate.
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DISSENTERS' RIGHTS OF APPRAISAL
APPRAISAL RIGHTS OF ENTERBANK SHAREHOLDERS
Pursuant to the Delaware General Corporation Law, dissenters' rights will
not be available to the shareholders of Enterbank
APPRAISAL RIGHTS OF CGB SHAREHOLDERS
Under Kansas law, CGB shareholders that do not wish to accept the merger
consideration provided for in the merger agreement have the right to dissent
from the merger and to receive payment in cash for the fair value of the CGB
common stock. CGB SHAREHOLDERS ELECTING TO EXERCISE DISSENTERS' RIGHTS MUST
COMPLY WITH THE PROVISIONS OF KAN. STAT. ANN. SEC. 17-6712 (THE "APPRAISAL
STATUTE") IN ORDER TO PERFECT THEIR RIGHTS. CGB WILL REQUIRE STRICT
COMPLIANCE WITH THE STATUTORY PROCEDURES. A copy of the Appraisal Statute is
attached as Appendix E of this joint proxy statement/prospectus.
The following is intended as a brief summary of the material provisions of
the Appraisal Statute procedures required to be followed by a shareholder in
order to dissent from the merger and perfect the shareholder's dissenters'
rights. This summary, however, is not a complete statement of all applicable
requirements and is qualified in its entirety by reference to the Appraisal
Statute, the full text of which appears in Appendix E of this joint proxy
statement/prospectus.
The Appraisal Statute provides that each CGB shareholder may, within 20
days after the mailing of this joint proxy statement/prospectus, demand in
writing from Enterbank payment of the value of such shareholder's CGB common
stock as of the effective date of the merger. If Enterbank and such
shareholder agree upon such value, Enterbank must pay such value to the
shareholder within 50 days after the mailing of this joint proxy
statement/prospectus. If you wish to consider exercising your dissenters'
rights you should carefully review the text of the Appraisal Statute
contained in Appendix E because failure to timely and properly comply with
the requirements of the Appraisal Statute will result in the loss of your
dissenters' rights under Kansas law.
If you elect to demand appraisal of your shares, you must satisfy each of
the following conditions:
1. You must deliver to CGB a written demand for payment of the value of
your shares. This written demand is in addition to and separate from
any proxy or vote abstaining from or against the merger. Voting against
or failing to vote for the merger by itself does not constitute a demand
within the meaning of the Appraisal Statute. This demand must be made
within 20 days after the mailing of this joint proxy
statement/prospectus.
2. You must not vote in favor of the merger. An abstention or failure to
vote will satisfy this requirement, but a vote in favor of the merger,
by proxy or in person,
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will constitute a waiver of your dissenters' rights in respect of the
shares so voted and will nullify any previously filed written demands
for appraisal.
If you fail to comply with either of these conditions and the merger is
completed, you will be entitled to receive the merger consideration for your
shares of CGB common stock as provided for in the merger agreement, but you
will have no dissenters' rights with respect to your shares of CGB common
stock.
All demands for the value of your shares pursuant to the Appraisal Statute
should be addressed to the Corporate Secretary, Commercial Guaranty
Bankshares, 12695 Metcalf Ave., Overland Park, Kansas 66213, before the vote
on the merger is taken at the special meeting and should be executed by, or
on behalf of, the record holder of the shares of CGB common stock. The
demand must reasonably inform CGB of the identity of the shareholder and the
intention of the shareholder to demand appraisal of his or her shares.
TO BE EFFECTIVE, A DEMAND FOR APPRAISAL BY A HOLDER OF CGB COMMON
STOCK MUST BE MADE BY OR IN THE NAME OF SUCH REGISTERED SHAREHOLDER,
FULLY AND CORRECTLY, AS THE SHAREHOLDER'S NAME APPEARS ON HIS OR HER STOCK
CERTIFICATE(S) AND CANNOT BE MADE BY THE BENEFICIAL OWNER IF HE OR SHE DOES
NOT ALSO HOLD THE SHARES OF RECORD. THE BENEFICIAL HOLDER MUST, IN SUCH
CASES, HAVE THE REGISTERED OWNER SUBMIT THE REQUIRED DEMAND IN RESPECT OF
SUCH SHARES.
If shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of a demand for appraisal should be
made in such capacity; and if the shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent, including one for
two or more joint owners, may execute the demand for appraisal for a
shareholder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, he or
she is acting as agent for the record owner. A record owner, such as a
broker, who holds shares as a nominee for others, may exercise his or her
right of appraisal with respect to the shares held for one or more beneficial
owners, while not exercising this right for other beneficial owners. In such
case, the written demand should state the number of shares as to which
appraisal is sought. Where no number of shares is expressly mentioned, the
demand will be presumed to cover all shares held in the name of such record
owner.
If you hold your shares of CGB common stock in a brokerage account or in
other nominee form and you wish to exercise appraisal rights, you should
consult with your broker or such other nominee to determine the appropriate
procedures for the making of a demand for appraisal by such nominee.
Within 10 days after the effective date of the merger, Enterbank must give
written notice that the merger has become effective to each CGB shareholder
who has properly filed a written demand for appraisal and who did not vote in
favor of the merger. If within 50 days following the date hereof, CGB and
the shareholders who have demanded appraisal rights have not agreed upon a
value of the CGB common stock, then for four months thereafter, either
Enterbank or any
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shareholder who has complied with the requirements of the Appraisal Statute
may file a petition in the Kansas District Court demanding a determination of
the fair value of the shares held by all shareholders entitled to appraisal.
Enterbank does not presently intend to file such a petition in the event
there are dissenting shareholders and has no obligation to do so.
Accordingly, the failure of a shareholder to file such a petition within the
period specified could nullify such shareholder's previously written demand
for appraisal.
At any time within 60 days after the effective date of the merger, any
shareholder who has demanded an appraisal has the right to withdraw the
demand and to accept the merger consideration specified by the merger
agreement for his or her shares of CGB common stock. If a petition for
appraisal is duly filed by a shareholder and a copy of the petition is
delivered to Enterbank, Enterbank will then be obligated within 20 days after
receiving service of a copy of the petition to provide the District Court
with a duly verified list containing the names and addresses of all
shareholders who have demanded an appraisal of their shares. After notice to
dissenting shareholders, the District Court will conduct a hearing and shall
appoint one or more appraisers who will determine the value of the CGB common
stock. The appraiser or appraisers will be required to submit their
determination of the value of the CGB common stock to the District Court and
the District Court will make a final determination of such value. The
District Court may require the shareholders who have demanded payment for
their shares to submit their stock certificates to the clerk of the court for
notation thereon of the pendency of the appraisal proceedings; and if any
shareholder fails to comply with such direction, the District Court may
dismiss the proceedings as to such shareholder. After value is determined,
the District Court will direct the payment of such value, with interest
thereon accrued during the pendency of the proceeding if the District Court
so determines, to the shareholders entitled to receive the same, upon
surrender by such holders of the certificates representing such shares.
Costs of the appraisal proceeding may be imposed upon Enterbank and the
shareholders participating in the appraisal proceeding by the District Court
as the District Court deems equitable in the circumstances. Upon the
application of a shareholder, the District Court may order all or a portion
of the expenses incurred by any shareholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares entitled to appraisal. Any shareholder who had demanded appraisal
rights will not, after the effective date, be entitled to vote shares subject
to such demand for any purpose or to receive payments of dividends or any
other distribution with respect to such shares (other than with respect to
payment as of a record date prior to the effective date); however, if no
petition for appraisal is filed within the above referenced four month
period, or if such shareholder delivers a written withdrawal of his or her
demand for appraisal and an acceptance of the merger within such four month
period, then the right of such shareholder to appraisal will cease and such
shareholder will be entitled to receive the merger consideration for shares
of his or her CGB common stock pursuant to the merger agreement. Any
withdrawal of a demand for appraisal made more than 60 days after the
effective date of the merger may only be made with the written approval of
the surviving corporation and must, to be effective, be made within 120 days
after the effective date.
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Any shareholder that has made a demand for value pursuant to the Appraisal
Statute is not thereafter entitled to vote such stock for any purpose or
entitled to the payment of dividends or other distributions on the
shareholder's CGB common stock, except for dividends or distributions payable
to shareholders of record at a date which is prior to the effective date of
the merger unless the appointment of the appraiser or appraisers shall not be
applied for within the time limits discussed above, or the proceeding has
been dismissed as to such shareholder, or unless such shareholder, with the
written approval of Enterbank, has delivered to Enterbank a written
withdrawal of the shareholder's objections to and acceptance of the merger,
in any of such cases the right of such shareholder to payment of the
appraised value for the shareholder's stock will cease.
In view of the complexity of the Appraisal Statute, CGB shareholders who
may wish to dissent from the merger and pursue appraisal rights should
consult their legal advisors.
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MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICE DATA
As of , 2000, there were approximately
holders of record of Enterbank common stock and approximately
holders of record of CGB common stock.
Neither the common stock of Enterbank or CGB is listed or traded on an
exchange or in any established public trading market. Enterbank is aware of
periodic trading activity in its stock which is reported to Nasdaq. The
following table describes historical per share high and low sale prices for
Enterbank common stock based solely upon information made available from
Nasdaq and for CGB common stock based solely on information made available to
Enterbank and CGB from a limited number of buyers and sellers. There may
have been other transactions at other prices not known to Enterbank or CGB.
The table also sets forth per share cash dividends declared for the quarters
indicated.
Enterbank Holdings Commercial Guaranty
Dividends Dividends
Market Price <F1> Declared Market Price <F2> Declared
------------------ --------- ----------------- ---------
1999 High Low High Low
- -------------- ------ ------ ------ ------
First Quarter $12.50 10.33 $0.01 $25.00 $25.00 $ --
Second Quarter 14.00 12.50 0.01 25.00 25.00 --
Third Quarter 15.17 14.00 0.01 25.00 25.00 --
Fourth Quarter $18.25 15.17 $0.01 $25.00 $25.00 $ --
1998
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First Quarter $ 8.58 7.00 $0.0083 $20.83 $20.83 $ --
Second Quarter 10.00 8.58 0.0083 25.00 20.83 --
Third Quarter 10.67 9.33 0.0083 25.00 25.00 --
Fourth Quarter $10.33 9.83 $0.0083 $25.00 $25.00 $ --
1997
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First Quarter $5.17 4.58 $0.0075 $20.83 $20.83 $ --
Second Quarter 5.17 5.17 0.0075 20.83 20.83 --
Third Quarter 6.75 5.17 0.0075 20.83 20.83 --
Fourth Quarter $6.75 6.75 $0.0075 $20.83 $20.83 $ --
<FN>
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<F1> Adjusted to give retroactive effect to a 3 for 1 stock split effective
September 29, 1999.
<F2> There is no market for CGB common stock. All prices are based upon
stock offerings. Adjusted to give retroactive effect to a 3 for 1 stock
split effective March 18, 1998.
At the close of business on January 5, 2000, immediately prior to the first
public announcement of the merger, the most recent sale price known to
management for Enterbank common stock was $18.25.
At the close of business on January 5, 2000, immediately prior to the first
public announcement of the merger, the most recent sale price known to
management for CGB common stock was [$25].
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DIVIDENDS AND DIVIDEND POLICY
ENTERBANK. Enterbank's Board of Directors considers the advisability and
amount of proposed dividends each year. Future dividends will be determined
after consideration of Enterbank's earnings, financial condition, future
capital funds, regulatory requirements and such other factors as the Board of
Directors may deem relevant. Enterbank's primary source of funds for payment
of dividends to its shareholders will be receipt of dividends from Enterprise
Bank and First Commercial Bank, N.A. The payment of dividends by a bank is
subject to various legal and regulatory restrictions.
Enterbank has paid quarterly cash dividends on its outstanding shares of
common stock totaling $0.03 per share in 1997, $0.033 per share in 1998 and
$0.04 per share in 1999. It is the intention of Enterbank to continue to pay
cash dividends, subject to the restrictions on the payment of cash dividends
as described above, depending upon the level of earnings, management's
assessment of future capital needs and other factors considered by the Board
of Directors.
Holders of Enterbank common stock are entitled to receive dividends as and
when declared by the Board of Directors of Enterbank out of funds legally
available therefor under the laws of the State of Delaware. The Delaware
General Corporation Law provides that a corporation may make a distribution
to its shareholders out of its surplus (the excess of the corporation's net
assets over its capital), or if there is no surplus, out of its net profits
for the year in which the dividend is declared and/or its preceding fiscal
year.
The Federal Reserve Board generally prohibits a bank holding company from
declaring or paying a cash dividend which would impose undue pressure on the
capital of subsidiary banks or would be funded only through borrowing or
other arrangements that might adversely affect a bank holding companys
financial position. The Federal Reserve Board's policy is that a bank holding
company should not continue its existing rate of cash dividends on its common
stock unless its net income is sufficient to fully fund each dividend and its
prospective rate of earnings retention appears consistent with its capital
needs, asset quality and overall financial condition.
Under the merger agreement, Enterbank is prohibited from declaring or
paying any dividends on or making other distributions in respect of any of
its capital stock, except (1) cash dividends in an amount substantially
equivalent to dividends paid in the 12 months prior to the date of the merger
agreement and (2) dividends paid to Enterbank from a wholly-owned subsidiary.
The merger agreement also requires each party to coordinate with the other
party the declaration of, and record and payment dates for, any dividend in
respect of its common stock.
CGB. Holders of CGB common stock are entitled to receive dividends as and
when declared by the CGB Board of Directors out of funds legally available
therefor under the laws of the State of Kansas. The Kansas General
Corporation Code provides that a corporation may make a distribution to its
shareholders out of its surplus (the excess of the corporation's net assets
over its capital), or if there is no surplus, out of its net profits for the
year in which the dividend is declared and/or its preceding fiscal year.
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The Federal Reserve Board generally prohibits a bank holding company from
declaring or paying a cash dividend which would impose undue pressure on the
capital of subsidiary banks or would be funded only through borrowing or
other arrangements that might adversely affect a bank holding company's
financial position. The Federal Reserve Board's policy is that a bank
holding company should not continue its existing rate of cash dividends on
its common stock unless its net income is sufficient to fully fund each
dividend and its prospective rate of earnings retention appears consistent
with its capital needs, asset quality and overall financial condition.
Historically, CGB has not paid dividends to its stockholders. Under the
merger agreement, CGB is prohibited from declaring or paying any dividends on
or making other distributions in respect of any of its capital stock, except
(1) cash dividends in an amount substantially equivalent to dividends paid in
the 12 months prior to the date of the merger agreement and (2) dividends
paid to CGB from a wholly-owned subsidiary. The merger agreement also
requires each party to coordinate with the other party the declaration of,
and record and payment dates for, any dividend in respect of its common
stock.
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COMPARISON OF SHAREHOLDER RIGHTS
GENERAL
Enterbank is incorporated under and subject to the provisions of the
Delaware General Corporation Law. CGB is incorporated under and subject to
the provisions of the Kansas General Corporation Code.
Upon consummation of the merger, except for those persons, if any, who
perfect appraisal rights under the Kansas General Corporation Code (see
"Dissenters' Rights of Appraisal"), the shareholders of CGB will become
shareholders of Enterbank.
Enterbank is a Delaware corporation and, accordingly, is governed by the
Delaware General Corporation Law and by its Certificate of Incorporation (the
"Enterbank Certificate") and Bylaws (the "Enterbank Bylaws"). CGB is a
Kansas corporation and, accordingly, is governed by the Kansas General
Corporation Code, its Articles of Incorporation (the "CGB Articles") and
Bylaws (the "CGB Bylaws").
The following is a general comparison of certain similarities and material
differences between the rights of Enterbank and CGB shareholders under their
respective governing Certificate or Articles of Incorporation and Bylaws.
This discussion is only a summary of certain provisions and does not purport
to be a complete description of such similarities and differences, and is
qualified in its entirety by reference to the Delaware General Corporation
Law and the common law thereunder, the Kansas General Corporation Code and
the common law thereunder, and the full text of the Enterbank Certificate of
Incorporation, Enterbank Bylaws, CGB Articles and CGB Bylaws.
CERTAIN ANTI-TAKEOVER MEASURES
Some of the provisions in the Enterbank Certificate of Incorporation and
the Enterbank Bylaws discussed below may deter efforts to obtain control of
Enterbank on a basis which some shareholders might deem favorable. Such
provisions are designed to encourage any person attempting a change in
control of Enterbank to enter into negotiations with the Board of Directors
of Enterbank. The anti-takeover measures may decrease the likelihood that a
person or group would obtain control of Enterbank or may perpetuate incumbent
management.
CGB has no anti-takeover provisions in its Articles or Bylaws; however CGB
stock is subject to a Stockholders Agreement which requires CGB stockholders
which desire to sell or transfer all or any portion of their CGB stock to
first offer such stock to CGB on the same terms and conditions. If CGB shall
fail to exercise it right of first refusal on the CGB stock, the transferring
stockholder must then offer such stock on the same terms and conditions to
the remaining CGB stockholders on a pro-rata basis.
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The CGB Stockholders Agreement also contains a "take along provision" which
states if, at any time, an offer is (or offers are) made by a current
stockholder or prospective purchaser (either hereinafter referred to as the
"prospective purchaser") to acquire an amount of CGB stock which would give
the prospective purchaser 66 2/3 percent or more of the CGB stock outstanding
the prospective purchaser must, within 15 days of the offer(s) to purchase,
offer to purchase all of the CGB stock held by all of the CGB stockholders
pursuant to the same terms and conditions. No CGB stockholder, however, will
be compelled to accept such offer. The CGB stockholders will have, unless
the offer provides for a longer time period, 30 days to accept or reject the
offer. Unless the directives as provided herein are followed, any sale made
will be void and no CGB stockholder may sell to the prospective purchaser.
QUORUM REQUIREMENTS
Both the Enterbank Bylaws and the CGB Bylaws provide that the presence in
person or by proxy of the holders of a majority of the shares entitled to
vote at any meeting of the shareholders shall constitute a quorum for the
transaction of business.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Under Sections 102(b)(7) and 145 of the Delaware General Corporate Law
("DGCL"), Enterbank has broad power to indemnify and insure its directors and
officers against liabilities they may incur in their capacities as such.
Section 102(b)(7) of the DGCL permits a corporation to adopt a provision in
its certificate of incorporation eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, except that such
provision shall not limit the liability of a director for: (i) any breach of
the director's duty of loyalty to the corporation or its shareholders; (ii)
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) liability under Section 174 of the DGCL
for unlawful payment of dividends or stock purchases or redemptions; or (iv)
any transaction from which the director derived an improper personal benefit.
Enterbank's certificate of incorporation limits the personal liability of
Enterbank's directors for monetary damages to the fullest extent permissible
under applicable law. Under Section 145 of the DGCL, a corporation may
indemnify any person made a party or threatened to be made a party to any
type of proceeding (other than an action by or in the right of the
corporation) because he is or was an officer, director, employee or agent of
the corporation, or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or entity,
against expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred in connection with such proceeding: (i) if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation; or (ii) in the case of a criminal
proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation may indemnify any person made a party or threatened
to be made a party to any threatened, pending or completed action or suit
brought by or in the right of the corporation because he was an officer,
director, 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 or other entity, against expenses actually and reasonably
incurred in connection with such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of
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the corporation, except that there may be no such indemnification if the
person is found liable to the corporation unless, in such a case, the court
determines the person is entitled thereto. A corporation must indemnify a
director, officer, employee or agent against expenses actually and reasonably
incurred by him who successfully defends himself in a proceeding to which he
was a party because he was a director, officer, employee or agent of the
corporation. Expenses incurred by an officer or director (or other employees
or agents as deemed appropriate by the Board of Directors) in defending a
civil or criminal proceeding may be paid by Enterbank in advance of the final
disposition of such proceeding upon delivery of a written affirmation by the
director of his good faith belief that the standard of conduct necessary for
indemnification has been met and upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation. The Delaware law indemnification and expense advancement
provisions are not exclusive of any other rights which may be granted by the
bylaws, a vote of shareholders or disinterested directors, agreement or
otherwise. Enterbank's Bylaws provide for the indemnification of (but not
advancement of defense costs to the) directors and officers (but not
employees and agents) of Enterbank to the fullest extent not prohibited by
Delaware law. Enterbank has also obtained directors and officers liability
insurance covering, subject to certain exceptions, actions taken by
Enterbank's directors and officers in their capacities as such. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling Enterbank pursuant to
the foregoing provisions, Enterbank 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.
ENTERBANK. The Enterbank Bylaws obligate Enterbank to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (collectively, "Claims"), by reason of the
fact that such person is or was a director or officer of Enterbank against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with such action, suit or proceeding (collectively,
"Losses"), to the fullest extent permissible under the Delaware General
Corporation Law. The Enterbank Bylaws also grant to Enterbank the power to
indemnify its employees or agents, or persons serving, at the request of
Enterbank, as directors, officers, agents or employees of other corporations
for Losses arising from Claims.
Enterbank is entitled to maintain liability insurance policies that
indemnify its directors, officers, employees or agents against certain losses
in connection with Claims made against them in connection with their
respective capacities. Enterbank has obtained directors and officers
liability insurance covering, subject to certain exceptions, actions taken by
Enterbank's directors and officers in their capacities as such.
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OVERVIEW OF KANSAS LAW.
CGB. The CGB Articles and Bylaws obligate CGB to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (collectively, "Claims"), by reason of the
fact that such person is or was a director or officer of CGB against expenses
(including attorney's fee), judgments, fines and amounts paid in settlement
in connection with such action, suit or proceeding (collectively, "Losses"),
to the fullest extent permissible under the Kansas General Corporation Code.
The CGB Bylaws also grant to CGB the power to indemnify its employees or
agents, or persons serving, at the request of CGB, as directors, officers,
agents or employees of other corporations for Losses arising from Claims.
CGB maintains liability insurance policies that indemnify its directors,
officers, employees or agents against certain losses in connection with
claims made against them in connection with their respective capacities.
Under the merger agreement, from and after the effective time of the merger
Enterbank will indemnify and hold harmless each present or former officer or
director of CGB and its subsidiaries (determined as of the effective time)
against (1) all damages in connection with any action arising out of actions
or omissions prior to the effective time of the merger (collectively,
"Indemnified Liabilities") and (2) all Indemnified Liabilities arising out of
the merger agreement or the transactions contemplated by the merger
agreement, in each case to the full extent that CGB would have been permitted
under applicable law and its articles of incorporation and bylaws.
Additionally, Enterbank will maintain CGB's directors' and officers'
liability insurance policy for a period of not less than three years
following the effective time of the merger, provided that Enterbank may
substitute policies providing at least equivalent coverage which is no less
advantageous to CGB's current officers and directors.
OVERVIEW OF FEDERAL LAW. Federal law authorizes the FDIC to limit, by
regulation or order, the payment of indemnification by insured banks or bank
holding companies to their directors and officers. Pursuant to this
authority, the FDIC has enacted a regulation that permits the payment of
indemnification by banks and bank holding companies to institution-affiliated
directors, officers and other parties only if certain requirements are
satisfied. This regulation permits an institution to make an indemnification
payment to, or for the benefit of, a director, officer or other party only if
the institution's Board of Directors, in good faith, certifies in writing
that the individual has a substantial likelihood of prevailing on the merits
and that the payment of indemnification will not adversely affect the
institution's safety and soundness. An institution's Board of Directors is
obligated to cease making or authorizing indemnification payments in the
event that it believes, or reasonably should believe, that the conditions
discussed in the preceding sentence are no longer being met. Further, an
institution's Board of Directors must provide the FDIC and any other
appropriate bank regulatory agency with prior written notice of any
authorization of indemnification. In addition, indemnification payments
related to an administrative proceeding or civil action instituted by an
appropriate federal bank regulatory agency are limited to the payment or
reimbursement of reasonable legal or other professional expenses. Finally,
the director, officer or
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other party must agree in writing to reimburse the institution for any
indemnification payments received should the proceeding result in a final
order being instituted against the individual assessing a civil money
penalty, removing the individual from office, or requiring the individual to
cease and desist from certain institutional activities.
SHAREHOLDER MEETINGS AND ACTION BY WRITTEN CONSENT
The Enterbank Bylaws authorize shareholder action by written consent upon
the approval of the holders of outstanding Enterbank common stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon
were present and voted. The CGB Bylaws provide that any action required to be
taken at a meeting of the shareholders or any action which may be taken at a
meeting of the shareholders may be taken without a meeting if consents in
writing setting forth the action so taken shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
Such consents shall have the same force and effect as a unanimous vote of the
shareholders a meeting duly held.
CUMULATIVE VOTING
Cumulative voting allows a shareholder to cast a number of votes equal to
the number of directors to be elected multiplied by the number of shares held
in the shareholder's name on the record date. Both Enterbank and CGB
shareholders are entitled to cumulative voting in the election of directors.
AMENDMENT OF BYLAWS; NUMBER OF DIRECTORS
ENTERBANK. The Enterbank Bylaws may be amended or repealed by the
affirmative vote of a majority of the Enterbank Board of Directors. The
Enterbank Bylaws establish the initial number of directors of Enterbank at
four and thereafter the number and classes of directors is at the discretion
of the Enterbank board of directors. Currently, the Enterbank board of
directors consists of thirteen members. Under the terms of the merger
agreement, Enterbank has agreed to increase the number of authorized
Enterbank directors to permit the appointment of four persons designated by
CGB as of the effective date of the merger.
CGB. The CGB Articles of Incorporation provide that the board of directors
of CGB shall be vested with the power to make, alter, amend or repeal the
Bylaws of the Corporation.
The CGB Articles of Incorporation establish the initial number of directors
at four. The number of directors may be fixed by or in any manner provided
in the CGB Bylaws. The CGB Bylaws provide that the number of directors of
the Corporation shall be set by the board of directors and shall be not less
than three nor more than twenty. Each CGB director shall hold office for a
term of one year, or until his successor shall have been elected and
qualified. CGB directors need not be shareholders.
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At a meeting held in April, 1999, the shareholders of CGB approved an
amendment to the CGB Articles of Incorporation, the result of which would be
to divide the CGB board of directors into three classes. The amendment has
not been filed with the Kansas Secretary of State and, accordingly, the
directors of CGB have not been assigned to classes.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
ENTERBANK. The Enterbank Bylaws provide that vacancies occurring on the
Enterbank Board of Directors may be filled by a vote of a majority of the
remaining directors, though less than a quorum, or by a sole remaining
director, or at a special meeting of Enterbank shareholders by a plurality of
the votes cast by the Enterbank shareholders entitled to vote.
CGB. The CGB Bylaws provide that in the case of death or resignation of
one or more of the CGB Board of directors, a majority of the surviving or
remaining directors may fill the vacancy or vacancies until the successor or
successors are elected at a shareholders meeting.
In addition, the Delaware General Corporation Law provides that if, at the
time of filling any vacancy or any newly created directorship, the directors
then in office who have been elected by shareholders constitute less than a
majority of the whole board, the Delaware Court of Chancery may, upon
application of any shareholder or shareholders holding at least 10% of the
total number of shares outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies
or newly created directorships, or to replace the directors chosen by the
directors then in office.
CALL OF ANNUAL OR SPECIAL MEETING OF SHAREHOLDERS AND ACTION BY SHAREHOLDERS
WITHOUT A MEETING
ENTERBANK. The Enterbank Bylaws provide that a special meeting of the
shareholders may be called at any time by the Enterbank President, the
majority of the Enterbank Board of Directors or upon written request of the
holders of at least 50% of all of the issued and outstanding shares entitled
to vote. Under the Delaware General Corporation Law, unless otherwise
provided in the certificate of incorporation (which, in the case of the
Enterbank Certificate, is not provided), any action which may be taken at any
annual or special meeting may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action
so taken, is signed by the holders of outstanding shares having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
CGB. The CGB Bylaws provide that a special meeting of shareholders may be
called at anytime by the President, Board of directors, or by holders of not
less than one-fifth of all the outstanding shares of CGB entitled to vote at
such meeting.
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CLASSIFIED BOARD PROVISIONS
ENTERBANK. The Enterbank Bylaws provide that the classes of directors may
be changed from time to time by the Board of Directors. As of April 25, 2000,
the Enterbank Board of Directors consisted of thirteen members, all of whose
terms run concurrently for one year periods.
CGB. The CGB Bylaws provide for a single class of directors to hold office
for a term of one year. At a meeting held in April, 1999, the shareholders
of CGB approved an amendment to the CGB Articles of Incorporation, the result
of which would be to divide the CGB board of directors into three classes.
The amendment has not been filed with the Kansas Secretary of State and,
accordingly, the directors of CGB have not been assigned to classes.
DESCRIPTION OF ENTERBANK CAPITAL STOCK
The authorized capital stock of Enterbank consists of 20,000,000 shares of
Enterbank common stock, $.01 par value. As of , 2000,
shares of Enterbank common stock were outstanding and an additional
shares of the authorized Enterbank common stock were available for
future grant and reserved for issuance to holders of outstanding stock options
under Enterbank's stock option plans.
COMMON STOCK
Holders of Enterbank common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders.
Shareholders of Enterbank are entitled to cumulate their votes with respect
to election of directors. Shareholders are entitled to receive ratably such
dividends as may be legally declared by Enterbank's Board of Directors.
There are legal and regulatory restrictions on the ability of Enterbank to
declare and pay dividends. See "Market Price and Dividend
Information--Dividends and Dividend Policy." In the event of a liquidation,
common shareholders are entitled to share ratably in all assets remaining
after payment of liabilities and liquidation preference for securities with a
priority over the Enterbank common stock. Shareholders of Enterbank common
stock have no preemptive or conversion rights. Enterbank common stock is not
subject to calls or assessments. The transfer agent and registrar for
Enterbank common stock is United Missouri Bank, N.A.
DESCRIPTION OF CGB CAPITAL STOCK
The authorized capital stock of CGB consists of 2,000,000 shares of $1.00
par value common stock. As of December 31, 1999, [836,854] shares of CGB
common stock were outstanding.
Common Stock
- ------------
Each share of common stock is entitled to one vote on all matters submitted
to shareholders, except that in the election of directors, cumulative voting
is permitted, which means that each
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holder has the right to cast as many votes in the aggregate as equal the total
number of shares held by him multiplied by number of directors to be elected,
and may cast the whole number of votes to which the shareholder is entitled for
any one or more candidates at his discretion. The common stock is the only
class of CGB's securities entitled to vote. In the event of a liquidation,
dissolution or winding up of CGB, the holders of the common stock are entitled
to receive a pro-rata share of the assets of CGB which are legally available
for distribution to such stockholders.
Preferred Stock
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CGB has authorized 50,000 shares of non-cumulative preferred stock with a
par value of $100.00 per share. No shares of preferred stock are issued or
outstanding. The preferred stock may be issued with such other terms and
conditions that the board of directors shall set from time to time without
further shareholder approval.
EXPERTS
The Consolidated Financial Statements of Enterbank incorporated in this
joint proxy statement/prospectus by reference from Enterbank's annual report
on Form 10-K for the year ended December 31, 1999 have been audited by KPMG
LLP, independent auditors, as stated in their report which is included
herein. Such statements have been included herein in reliance upon the report
of such firm given upon their authority as experts in accounting and
auditing.
The Consolidated Financial Statements of CGB contained in this joint proxy
statement/prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein, and are included in
reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Enterbank common stock offered hereby and
certain legal matters in connection with the merger will be passed upon for
Enterbank by Armstrong Teasdale LLP, St. Louis, Missouri.
SOLICITATION OF PROXIES
Each of Enterbank and CGB will bear the cost of the solicitation of proxies
from their respective shareholders. In addition to solicitation by mail, the
directors, officers and employees of Enterbank or CGB may solicit proxies
from their respective shareholders by telephone or telegram or in person.
Such persons will not be additionally compensated, but will be reimbursed for
reasonable out-of-pocket expenses incurred in connection with such
solicitation. Arrangements will also be made with brokerage firms, nominees,
fiduciaries and other custodians, for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons,
and Enterbank or CGB, as applicable, will reimburse such persons for their
reasonable out-of-pocket expenses in connection therewith.
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WHERE YOU CAN FIND MORE INFORMATION
Enterbank files annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information that Enterbank files at
the Commission's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. You may also obtain copies of this information by
mail from the Public Reference Section of the SEC, 450 5th Street, NW, Room
1024, Washington, D.C. 20549 at prescribed rates. Please call the Commission
at (800) SEC-0330 for further information on the public reference rooms. The
Commission also maintains an Internet World Wide Web site at
"http://www.sec.gov" at which reports, proxy and information statements and
other information regarding Enterbank are available.
Enterbank has filed with the Securities and Exchange Commission a
registration statement on Form S-4 under the Securities Act relating to the
shares of Enterbank common stock to be issued in connection with the merger.
This joint proxy statement/prospectus also constitutes the prospectus of
Enterbank filed as part of the registration statement and does not contain
all the information set forth in the registration statement and exhibits
thereto. You may copy and read the registration statement and its exhibits at
the public reference facilities maintained by the Commission at the public
reference rooms specified above.
The Commission allows Enterbank to "incorporate by reference" information
into this joint proxy statement/prospectus, which means that Enterbank can
disclose important information to you by referring you to another document
filed separately with the Commission. The information incorporated by
reference is deemed to be a part of this joint proxy statement/prospectus,
except for any information superseded by information contained directly in
this joint proxy statement/prospectus. This joint proxy statement/prospectus
incorporates by reference the documents set forth below that Enterbank has
previously filed with the Commission. These documents contain important
information about Enterbank and its financial condition.
ENTERBANK COMMISSION FILINGS
(File No. 000-24131) PERIOD
Annual Reports on Form 10-K Year ended December 31, 1999
Proxy Statement on Schedule 14A Filed March 9, 2000
Enterbank incorporates by reference any additional documents that it may
file with the Commission between the date of this joint proxy
statement/prospectus and the date of the Enterbank special meeting. These
include periodic reports, such as annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, as well as proxy
statements.
Enterbank has supplied all information contained or incorporated by
reference in the joint proxy statement/prospectus relating to Enterbank.
This joint proxy statement/prospectus incorporates by reference documents
relating to Enterbank which are not presented in this joint proxy
statement/prospectus or delivered herewith.
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Those documents relating to Enterbank are available from Enterbank without
charge, excluding all exhibits unless specifically incorporated by reference in
this joint proxy statement/prospectus, by requesting them in writing or by
telephone from Enterbank Holdings, Inc., 150 North Meramec, Clayton, Missouri
63105, Attention: James C. Wagner, (314) 725-5500. If you would like to
request documents from either Enterbank, please do so by ,
2000 in order to receive them before the special meeting.
In deciding how to vote on the merger, you should rely only on the
information contained or incorporated by reference in this joint proxy
statement/prospectus. Neither Enterbank nor CGB has authorized any person to
provide you with any information that is different from what is contained in
this joint proxy statement/ prospectus. This joint proxy statement/prospectus
is dated , 2000. You should not assume that the information
contained in this joint proxy statement/prospectus is accurate as of any date
other than such date, and neither the mailing to you of this joint proxy
statement/prospectus nor the issuance to you of shares of Enterbank common
stock will create any implication to the contrary. This joint proxy
statement/prospectus does not constitute an offer to sell or a solicitation
of any offer to buy any securities, or the solicitation of a proxy in any
jurisdiction in which, or to any person to whom, it is unlawful.
128
130
INDEX TO FINANCIAL STATEMENTS
PAGE
----
ENTERBANK HOLDINGS, INC.
- ------------------------
See the Enterbank Holdings, Inc. Annual Report on Form 10-K for the year ended
December 31, 1999 attached to this joint proxy statement/prospectus N/A
COMMERCIAL GUARANTY BANCSHARES, INC.
- ------------------------------------
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Income (Loss) for the years ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-9
F-1
131
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Commercial Guaranty Bancshares, Inc.
Overland Park, Kansas
We have audited the accompanying consolidated balance sheets of Commercial
Guaranty Bancshares, Inc. (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of income (loss), shareholders'
equity, cash flows and comprehensive income (loss) for each of the three
years in the period ended December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, on January
5, 2000, the Company entered into a definitive agreement and Plan of Merger
with another financial institution. The accompanying consolidated financial
statements do not include any adjustments giving effect to the agreement.
/s/ DELOITTE & TOUCHE LLP
March 23, 2000
Kansas City, Missouri
F-2
132
COMMERCIAL GUARANTY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------
1999 1998
ASSETS
Cash and due from banks $ 4,556,100 $ 3,502,029
Federal funds sold 2,175,000
Investment securities, available for sale, at estimated fair value
(amortized cost of $19,988,981 and $17,565,626, respectively) 19,470,170 17,639,818
Capital Stock of the Federal Reserve Bank and the Federal Home Loan Bank, at cost 808,150 725,800
Loans, net of unearned loan fees 95,789,722 81,109,264
Less allowance for loan losses (2,023,222) (1,229,545)
------------ ------------
Loans, net 93,766,500 79,879,719
Premises and equipment, net 4,617,706 4,832,546
Accrued interest receivable 1,081,834 872,814
Goodwill 2,468,671 2,659,237
Prepaid expenses and other assets 311,379 338,971
Deferred income taxes 561,535 135,612
------------ ------------
Total assets $127,642,045 $112,761,546
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $ 12,559,611 $ 10,554,273
Interest-bearing transaction accounts 16,881,503 18,546,779
Money market accounts 20,200,107 18,558,487
Savings 4,895,033 4,921,825
Certificates of deposit:
$100,000 and over 11,902,864 9,664,797
Other 40,091,679 31,776,739
------------ ------------
Total deposits 106,530,797 94,022,900
Federal Home Loan Bank advances 4,196,444 3,205,012
Federal funds purchased 1,300,000
Accrued interest payable 329,950 306,509
Accounts payable and accrued expenses 209,161 159,730
Income taxes payable 465,782 1,946
------------ ------------
Total liabilities 113,032,134 97,696,097
Shareholders' equity:
Common stock, $1 par value; 2,000,000 shares authorized; 852,454 shares and
848,154 shares issued as of December 31, 1999 and 1998, respectively 852,454 848,154
Additional paid-in capital 15,013,642 14,910,442
Accumulated deficit (523,770) (739,888)
Accumulated other comprehensive income (loss) (342,415) 46,741
Treasury stock, 15,600 shares as of December 31, 1999, at cost (390,000)
------------ ------------
Total shareholders' equity 14,609,911 15,065,449
------------ ------------
Total liabilities and shareholders' equity $127,642,045 $112,761,546
============ ============
See accompanying notes to consolidated financial statements.
F-3
133
COMMERCIAL GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
Interest income:
Interest and fees on loans $7,685,788 $6,868,897 $2,375,591
Interest on investment securities, available for sale:
Taxable 1,115,184 1,011,697 359,244
Nontaxable 19,925 78,063 0
Interest on federal funds sold 117,792 131,499 79,558
Interest on interest bearing deposits 410 714 451
---------- ---------- ----------
Total interest income 8,939,099 8,090,870 2,814,844
Interest expense:
Interest-bearing transaction accounts 323,393 407,789 21,229
Money market accounts 694,965 629,598 449,562
Savings 135,087 150,453 3,189
Certificates of deposit:
$100,000 and over 535,929 561,461 429,717
Other 1,898,570 1,831,058 464,772
Federal funds purchased and other borrowings 220,038 255,868 4,604
---------- ---------- ----------
Total interest expense 3,807,982 3,836,227 1,373,073
---------- ---------- ----------
Net interest income 5,131,117 4,254,643 1,441,771
Provision for loan losses 975,000 650,000 100,000
---------- ---------- ----------
Net interest income after provision for loan losses 4,156,117 3,604,643 1,341,771
---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts 563,892 453,593 66,871
Other service charges and fee income 465,887 225,441 95,546
---------- ---------- ----------
Total noninterest income 1,029,779 679,034 162,417
---------- ---------- ----------
Noninterest expense:
Salaries 2,157,090 2,038,662 739,146
Payroll taxes and employee benefits 311,605 287,280 69,359
Amortization of goodwill 190,566 190,567
Occupancy 333,707 360,915 149,767
Equipment 243,416 268,733 78,337
FDIC insurance 10,843 10,970 2,487
Data processing 215,469 132,838 45,902
Other 1,246,089 1,183,747 499,382
---------- ---------- ----------
Total noninterest expense 4,708,785 4,473,712 1,584,380
---------- ---------- ----------
Income (loss) before income tax expense (benefit) 477,111 (190,035) (80,192)
Income tax expense (benefit) 260,993 (124,872) (114,000)
---------- ---------- ----------
Net income (loss) $ 216,118 $ (65,163) $ 33,808
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-4
134
COMMERCIAL GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- -----------------------------------------------------------------------------------------------------------------------
ACCUMULATED
OTHER TOTAL
COMMON STOCK ADDITIONAL COMPREHENSIVE SHARE-
------------------ PAID-IN ACCUMULATED INCOME TREASURY HOLDERS'
SHARES AMOUNT CAPITAL DEFICIT (LOSS) STOCK EQUITY
Balance, January 1, 1997 553,410 $553,410 $ 8,434,367 $(708,533) $ 8,279,244
Net income 33,808 33,808
Issuances of common stock 11,460 11,460 227,290 238,750
Stock issued pursuant to
bank acquisition 114,324 114,324 2,267,426 2,381,750
------- -------- ----------- --------- -----------
Balance, December 31, 1997 679,194 679,194 10,929,083 (674,725) 10,933,552
Net loss (65,163) (65,163)
Issuances of common stock 168,960 168,960 3,981,359 4,150,319
Other comprehensive income,
net of income taxes $ 46,741 46,741
------- -------- ----------- --------- --------- -----------
Balance, December 31, 1998 848,154 848,154 14,910,442 (739,888) 46,741 15,065,449
Net income 216,118 216,118
Issuances of common stock 4,300 4,300 103,200 107,500
Purchases of treasury stock $(390,000) (390,000)
Other comprehensive income,
net of income taxes (389,156) (389,156)
------- -------- ----------- --------- --------- --------- -----------
Balance, December 31, 1999 852,454 $852,454 $15,013,642 $(523,770) $(342,415) $(390,000) $14,609,911
======= ======== =========== ========= ========= ========= ===========
See accompanying notes to consolidated financial statements.
F-5
135
COMMERCIAL GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
Net income (loss) $ 216,118 $(65,163) $33,808
Other comprehensive income (loss), before income taxes
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period (593,003) 52,278
Unrealized gain on transfer of securities from held to
maturity to available for sale 21,914
--------- -------- -------
Other comprehensive income (loss), before income taxes (593,003) 74,192 33,808
Income tax benefit (expense) related to items of other
comprehensive income (loss) 203,847 (27,451)
--------- -------- -------
Other comprehensive income (loss), net of income tax
benefit (expense) (389,156) 46,741
--------- -------- -------
Comprehensive income (loss) $(173,038) $(18,422) $33,808
========= ======== =======
See accompanying notes to consolidated financial statements.
F-6
136
COMMERCIAL GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
Cash flows from operating activities:
Net income (loss) $ 216,118 $ (65,163) $ 33,808
Adjustments to reconcile net income to net cash
provided by operating acitivites:
Depreciation 327,567 349,423 131,424
Federal Home Loan Bank stock dividends (28,800) (27,000)
Amortization of goodwill 190,566 190,567
Provision for loan losses 975,000 650,000 100,000
Gain on sale of investment securities, available
for sale (20,256)
Loss on disposition of premises and equipment 3,330 2,963
Provision for deferred income taxes (222,076) (144,858) (114,000)
Net amortization of premiums and discounts on
investment securities, available for sale 54,516 55,960 (15,256)
Changes in:
Accrued interest receivable (209,020) 150,376 (98,864)
Prepaid expenses and other assets 27,592 67,510 362,484
Accrued interest payable 23,441 (54,178) 102,496
Accounts payable and accrued expenses 49,431 (12,526) 74,166
Income taxes payable 463,836 1,946 --
------------ ------------ ------------
Net cash provided by operating activities 1,871,501 1,144,764 576,258
Cash flows from investing activities:
Purchases of investment securities, available
for sale (9,238,563) (7,054,356) (2,159,869)
Proceeds from maturities and principal paydowns
of investment securities, available for sale 6,760,692 10,622,133 2,100,000
Proceeds from sales of investment securities,
available for sale 3,351,573
Net increase in loans (14,861,781) (12,867,193) (19,638,101)
Purchase of capital stock of the Federal Reserve
Bank and the Federal Home Loan Bank (173,400) (148,750)
Purchases of premises and equipment (144,579) (886,306) (860,770)
Proceeds from dispositions of premises and equipment 28,522
Cash of acquired bank, net of cash consideration paid 1,930,153
Redemptions of capital stock of the Federal
Home Loan Bank 119,850
------------ ------------ ------------
Net cash used in investing activities (17,509,259) (6,982,899) (18,628,587)
(Continued)
F-7
137
COMMERCIAL GUARANTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
Cash flows from fincancing activities:
Net increase in demand and savings accounts 1,954,890 4,729,974 7,250,090
Net increase (decrease) in certificates of deposit 10,553,007 (3,041,295) 11,249,732
Proceeds from other borrowings 1,050,000 3,000,000 1,150,000
Proceeds from the issuance of common stock 107,500 4,150,319 238,750
Purchases of treasury stock (390,000)
Payments on other borrowings (58,568) (3,468,568)
Federal funds purchased 1,300,000
------------ ------------ ------------
Net cash provided by financing activities 14,516,829 5,370,430 19,888,572
------------ ------------ ------------
Net increase (decrease) in cash and due from
banks (1,120,929) (467,705) 1,836,243
Cash and cash equivalents, beginning of year 5,677,029 6,144,734 4,308,491
------------ ------------ ------------
Cash and cash equivalents, end of year $ 4,556,100 $ 5,677,029 $ 6,144,734
============ ============ ============
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 3,784,541 $ 3,890,405 $ 1,274,239
============ ============ ============
Income taxes $ 6,189
============
Noncash transactions:
Transfers to other real estate owned in settlement
of loans $ 42,000
============
Stock issued in conjunction with acquisition $ 2,381,750
============
Assumption of borrowings due to acquisition $ 2,100,000
============
See accompanying notes to consolidated financial statements.
(Concluded)
F-8
138
COMMERCIAL GUARANTY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Commercial Guaranty Bancshares, Inc. (the "Company") is
a Kansas Corporation formed in March 1995. The Company used the proceeds
of its initial offering of securities to acquire all of the common stock
issued by First Commercial Bank, N.A. ("First Commercial") which
commenced operations in February 1996. On December 30, 1997, the
Company's wholly owned subsidiary, CGB Acquisition Corporation, acquired
all of the common stock of Humboldt Bancshares, Inc., a bank holding
company which owned 100% of Humboldt National Bank ("Humboldt"), a
community bank located in Humboldt, Kansas. Effective December 31, 1997,
First Commercial and Humboldt were merged. The new bank (the "Bank"),
retained the First Commercial Bank name and the Humboldt charter and is
wholly owned by CGB Acquisition Corporation. In 1996, the Company formed
The Capital Corporation (formerly CGB Capital Corporation) to provide
investment banking services to corporations, non-affiliated financial
institutions and high net worth individuals.
The Bank offers commercial, residential and consumer loans, deposit
products and other banking services principally in the southern portion
of Johnson County, Kansas and throughout Allen, Neosho, Anderson and
Woodson counties in Kansas.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries,
First Commercial Bank, N.A., The Capital Corporation and CGB Acquisition
Corporation. All significant intercompany balances have been eliminated.
ESTIMATES - The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Specifically, management has made assumptions in estimating the
fair value of financial instruments and estimates regarding loan losses.
Actual results could differ from estimates made based on management's
assumptions.
CASH AND CASH EQUIVALENTS - For purposes of the Statement of Cash Flows,
cash and cash equivalents include cash and due from banks and federal
funds sold.
INVESTMENT SECURITIES, AVAILABLE FOR SALE - The Company classifies
investments in debt securities as held-to-maturity, available-for-sale
or trading categories at acquisition. Securities classified as
held-to-maturity are carried at amortized cost, available-for-sale
securities are carried at market with unrealized gains (losses) included
in other comprehensive income (loss) and trading securities, if any, are
carried at market with unrealized gains (losses) included in operations.
Securities which are classified as held-to-maturity are done so based on
management's intent and the ability of the Company to hold the securities
to maturity.
Premiums and discounts are amortized and accreted over the estimated
lives of the underlying securities using the level-yield method.
F-9
139
Realized gains or losses on sales are recognized using the specific
identification method.
To the extent management determines a decline in value in an investment
security to be other than temporary, the Company will reduce the
carrying value and include such expense in the consolidated statements
of income (loss).
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. On
July 1, 1998, the Company adopted SFAS No. 133, and, as permitted by the
Statement, reclassified its portfolio of held-to-maturity securities to
available-for-sale. Securities with an aggregate amortized cost of
$2,376,799 and market value of $2,398,713 were transferred. The net
unrealized gain on such securities at the time of the transfer was
recorded as other comprehensive income and is presented, net of deferred
income taxes, in the consolidated statements of comprehensive income
(loss) for the year ended December 31, 1998. The Company does not hold
derivative instruments.
CAPITAL STOCK OF THE FEDERAL HOME LOAN BANK AND THE FEDERAL RESERVE BANK
- Capital stock of the Federal Home Loan Bank and the Federal Reserve
Bank is not readily marketable and is carried at cost. Dividends
received on such stock are included in interest income.
As a member of the Federal Home Loan Bank system administered by the
Federal Housing Finance Board, the Bank is required to maintain an
investment in the capital stock of the Federal Home Loan Bank of Topeka
("FHLB") in an amount equal to the greater of 1% of the aggregate
outstanding balance of loans secured by dwelling units at the beginning
of each year, .3% of its total assets or 5% of total credit obligations
divided by the qualified assets ratio, as defined in the requirement.
LOANS - Loans that management has the positive intent and ability to
hold for the foreseeable future are stated at the amount of unpaid
principal less a provision for loan losses, undisbursed loan funds and
loan fees, net of certain direct loan origination costs. Interest on
loans is credited to income as earned and accrued only if deemed
collectible. Loans are placed on nonaccrual status when, in the opinion
of management, the full timely collection of principal or interest is in
doubt. When a loan is placed on nonaccrual status, previously accrued
but unpaid interest is reversed against current income. Subsequent
collections of cash may be applied as reductions to the principal
balance, interest in arrears or recorded as income, depending on
management's assessment of the ultimate collectibility of the loan.
Nonaccrual loans may be restored to accrual status when principal and
interest become current and full payment of principal and interest is
expected.
Net loan origination and commitment fees are deferred and amortized as a
yield adjustment to interest income using the level-yield method over
the lives of the related loans.
The Company considers a loan to be impaired when management believes it
is probable that it will be unable to collect all principal and interest
due according to the contractual terms of the loan. If a loan is
impaired, the Company records a loss valuation allowance equal to the
excess of the recorded balance over the present value of the estimated
future cash flows discounted at the loan's effective rate, based on the
loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. One-to-four family residential loans
and consumer loans are collectively evaluated for impairment. Commercial
loans are evaluated for impairment on a loan by loan basis. Management's
periodic evaluation of the adequacy of the allowance is based on the
Bank's past loan loss experience, known and
F-10
140
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. These estimates are
susceptible to changes that could result in a material adjustment to
operations. Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. Recovery of the carrying
value of such loans is dependent to a great extent upon economic,
operating and other conditions that may be beyond the Company's control.
Assessing the adequacy of the allowance for loan losses is inherently
subjective as it requires making material estimates, including the
amount and timing of future cash flows expected to be received on
impaired loans, that may be susceptible to significant change. In the
opinion of management, the allowance when taken as a whole, is adequate
to absorb estimated loan losses inherent in the Bank's loan portfolio.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed over the estimated
useful lives of the related assets utilizing the straight-line or
accelerated methods. The estimated useful lives of the assets are as
follows:
Buildings and improvements 20-40 years
Furniture, fixtures and equipment 5-7 years
GOODWILL - Banks acquired and recorded under the purchase method are
recorded at the fair value of the net assets acquired at the acquisition
date, and results of operations are included from that date. Excess of
purchase price over the fair value of net assets acquired is recorded as
goodwill and is being amortized on a straight-line basis over 15 years.
IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets, including goodwill
and premises and equipment, are reviewed for impairment whenever events
or changes in circumstances indicate the carrying amount of an asset or
group of assets may not be recoverable. The impairment review includes a
comparison of future cash flows expected to be generated by the asset or
group of assets with their associated carrying value. If the carrying
value of the asset or group of assets exceeds expected cash flows
(undiscounted and without interest charges), an impairment loss is
recognized to the extent the carrying amount exceeds fair value.
INCOME TAXES - The Company and its subsidiaries file a consolidated
Federal income tax return. State income tax returns are individually
filed for each of the entities.
The Company computes deferred income taxes based on the difference
between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences
are expected to reverse. A valuation allowance is provided when it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred income taxes result primarily from
differences in accounting for financial statement and income tax
purposes related to depreciation methods, mark to market adjustments on
securities available-for-sale, differences between the financial
statement loan loss provision and the tax bad debt deduction and net
operating loss carryforwards.
REVENUE RECOGNITION - Interest income, loan fees, checking account
transaction fees and other ancillary income related to the Bank's
deposits and lending activities are accrued as earned.
F-11
141
STOCK-BASED COMPENSATION - Stock-based compensation is recognized using
the intrinsic value method. For disclosure purposes, pro-forma net
income is provided as if the fair value method had been applied.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1998
and 1997 consolidated financial statements in order to conform with the
1999 presentation.
2. ACQUISITION
On December 30, 1997, the Company acquired Humboldt Bancshares, Inc. for
a total purchase price comprised of $2,585,900 in cash and 114,324
shares of the Company's common stock. The stock issued in conjunction
with the acquisition was valued at $20.83, consistent with the price of
the then recent stock issuances for cash. The Company also assumed
$2,100,000 of debt of Humboldt Bancshares, Inc. in the acquisition.
Prior to the acquisition, Humboldt Bancshares, Inc., owned 100% of the
common stock of Humboldt. The cash required for the acquisition was
provided from the proceeds of a private placement of 48,000 shares of
common stock for $3,000,000 in October of 1996 and through a new bank
credit agreement. The acquisition has been accounted for as a purchase
and the results of Humboldt's operations have been included in the
accompanying consolidated financial statements since December 30, 1997.
The allocation of the purchase price resulted in goodwill of $2,793,966
which is being amortized on a straight line method over 15 years.
F-12
142
3. INVESTMENT SECURITIES, AVAILABLE FOR SALE
1999
--------------------------------------------------------
ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
United States Treasury and other
securities of the United States
government and its agencies $16,497,668 $ 1,621 $(367,582) $16,131,707
Mortgage backed securities 3,373,836 (152,850) 3,220,986
State and local obligations 117,477 117,477
----------- ------- --------- -----------
$19,988,981 $ 1,621 $(520,432) $19,470,170
=========== ======== ========= ===========
1998
--------------------------------------------------------
ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
United States Treasury and other
securities of the United States
government and its agencies $12,693,249 $ 87,728 $ (8,994) $12,771,983
Mortgage-backed securities 4,692,191 6,579 (17,701) 4,681,069
State and local obligations 180,186 6,580 186,766
----------- -------- --------- -----------
$17,565,626 $100,887 $ (26,695) $17,639,818
=========== ======== ========= ===========
As of December 31, 1999 and 1998, respectively, investment securities
with an aggregate amortized cost of $13,110,459 and $9,504,864 and an
estimated fair value of $12,848,166 and $9,584,198 are pledged as
collateral for public funds on deposit.
The amortized cost and estimated fair value of debt and equity
securities classified as available for sale at December 31, 1999 and
1998, by contractual maturity, are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment
penalties.
1999
---------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
Due in one year or less $ 3,551,082 $ 3,547,300
Due after one year through five years 8,312,966 8,215,673
Due after five years but within ten years 4,751,098 4,486,211
Mortgage-backed securities 3,373,835 3,220,986
----------- -----------
$19,988,981 $19,470,170
=========== ===========
F-13
143
The Bank purchases both adjustable and fixed interest rate
mortgage-backed securities. As of December 31, 1999 and 1998, the
composition of these securities at estimated fair value was as follows:
1999 1998
Fixed rate $2,561,523 $3,848,191
Adjustable rate 659,463 832,878
---------- ----------
$3,220,986 $4,681,069
========== ==========
The adjustable rate securities have interest rate adjustment limitations
and are generally indexed to the one year U.S. Treasury rate or a cost
of funds index.
4. LOANS
1999 1998
Commercial and industrial $35,591,291 $35,889,084
Loans secured by real estate 48,408,382 35,199,937
Other 11,802,357 10,026,363
----------- -----------
95,802,030 81,115,384
Less unearned loan fees 12,308 6,120
----------- -----------
$95,789,722 $81,109,264
=========== ===========
The breakdown of loans secured by real estate at December 31, 1999 and
1998 is as follows:
1999 1998
Business and personal loans $16,650,097 $ 9,540,579
Income-producing properties 10,927,519 10,541,120
Owner-occupied properties 17,074,142 13,745,147
Real estate development properties 3,756,624 1,373,091
----------- -----------
$48,408,382 $35,199,937
=========== ===========
The Company's subsidiary bank grants commercial, residential, and
consumer loans throughout its service area. The Company has a
diversified loan portfolio, with no particular concentration of credit
in any one economic sector; however, a substantial portion of the
portfolio is concentrated in and secured by real estate. The ability of
the Company's borrowers to honor their contractual obligations is
dependent upon the local economy and its effect on the real estate
market.
The Company's subsidiary bank has sold participating interests in loans
aggregating $16,944,296 and $17,344,665 as of December 31, 1999 and
1998. Those loans are serviced by the Bank. Included in loans are
participating interests in loans purchased aggregating $3,162,349 as of
December 31, 1999 which are serviced by other institutions.
F-14
144
Following is a summary of activity for the year ended December 31, 1999
of loans to executive officers and directors or to entities in which
such individuals had beneficial interests as a shareholder, officer, or
director. Such loans were made in the normal course of business on
substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other
customers and did not involve more than the normal risk of
collectibility.
Balance, January 1, 1997 $ 2,392,337
New loans 3,687,225
Payments and other reductions (2,280,014)
-----------
Balance, December 31, 1997 3,799,548
New loans 2,603,929
Payments and other reductions (1,403,225)
-----------
Balance, December 31, 1998 5,000,252
New loans 1,623,270
Payments and other reductions (1,847,673)
-----------
Balance, December 31, 1999 $ 4,775,849
===========
A summary of activity in the allowance for loan losses for the years
ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997
Balance at beginning of year $1,229,545 $ 660,315 $185,000
Provisions for loan losses 975,000 650,000 100,000
Allowance for loan losses on acquired bank 375,315
Loans charged off (226,814) (114,845)
Recoveries of loans previously charged off 45,491 34,075
---------- ---------- --------
Balance at end of year $2,023,222 $1,229,545 $660,315
========== ========== ========
A summary of impaired loans, which include nonaccrual loans, at December
31, 1999 and 1998 is as follows:
1999 1998
Nonaccrual loans $ 2,190,975 $ 578,608
Impaired loans continuing to accrue interest 73,645 85,199
----------- ---------
Total impaired loans $ 2,264,620 $ 663,807
=========== =========
Allowance for losses on specific impaired loans $ 926,943 $ 425,700
=========== =========
Impaired loans with no related specific allowance
for loan losses $ 2,820 $ 1,668
=========== =========
Average balance of impaired loans during the year $ 1,454,213 $ 289,304
=========== =========
F-15
145
If interest on nonaccrual loans had been accrued, such income would have
been $171,567 and $13,219 for the years ended December 31, 1999 and
1998, respectively. The amount recognized as interest income on
nonaccrual loans was $4,834 and $255 for the years ended December 31,
1999 and 1998, respectively. There were no impaired loans during the
year ended December 31, 1997.
Loans aggregating $1,900,000 were restructured during 1999 and are
included in impaired loans.
5. PREMISES AND EQUIPMENT
1999 1998
Land $ 842,953 $ 842,953
Buildings and improvements 3,284,862 3,258,028
Furniture, fixtures and equipment 1,276,919 1,202,798
---------- ----------
5,404,734 5,303,779
Less accumulated depreciation (787,028) (471,233)
---------- ----------
Premises and equipment, net $4,617,706 $4,832,546
========== ==========
Depreciation of premises and equipment included in occupancy expense
amounted to $327,567 in 1999, $349,423 in 1998 and $131,424 in 1997.
6. OTHER BORROWINGS
As of December 31, 1999 and 1998, the Company has advances of $4,196,444
and $3,205,012, respectively, from the Federal Home Loan Bank of Topeka.
As of December 31, 1999, these advances bear a weighted average interest
rate of 5.96% and are collateralized by a blanket pledge agreement,
including all of the Company's capital stock of the Federal Home Loan
Bank and qualifying first mortgage loans. Federal Home Loan Bank
advances mature as follows:
2000 $1,108,568
2001 2,038,580
2002 24,296
2003 10,000
2004 1,010,000
2005 5,000
----------
$4,196,444
==========
As of December 31, 1999, the Company had $950,000 available on a
$2,000,000 maturity line-of-credit with the Federal Home Loan Bank of
Topeka that expires February 17, 2000.
Federal funds purchased represent overnight advances bearing interest at
5.83% as of December 31, 1999.
F-16
146
7. MATURITY OF CERTIFICATES OF DEPOSIT
Following is a summary of certificates of deposit maturities at December
31, 1999:
1999
-------------------------------------------------------------------------------------------------------
$100,000
MATURITY PERIOD AND OVER OTHER TOTAL
Less than 1 year $ 8,118,612 $24,676,061 $32,794,673
Greater than 1 year and less than 2 years 2,270,341 7,458,352 9,728,693
Greater than 2 years and less than 3 years 1,513,911 7,252,786 8,766,697
Greater than 3 years and less than 4 years 171,259 171,259
Greater than 4 years and less than 5 years 533,221 533,221
Over 5 years ----------- ----------- -----------
$11,902,864 $40,091,679 $51,994,543
=========== =========== ===========
8. INCOME TAXES
The components of income tax expense (benefit) for the years ended
December 31, 1999, 1998 and 1997 are as follows:
1999 1998 1997
Current $ 483,069 $ 19,986
Deferred (222,076) (144,858) $(114,000)
--------- --------- ---------
$ 260,993 $(124,872) $(114,000)
========= ========= =========
A reconciliation of expected income tax expense, computed by applying
the statutory federal income tax rate of 34% in 1999, 1998 and 1997, to
income before income taxes and the amounts reflected in the
consolidated statements of income (loss) is as follows:
1999 1998 1997
Income tax expense at statutory rate $162,218 $ (64,612) $ (27,265)
Increase (reduction) in income taxes resulting from:
Tax-exempt income (2,736) (6,625)
Goodwill amortization 64,793 64,793
Merger related expenses 37,502
Decrease in valuation allowances on deferred tax
assets (138,476) (99,000)
Other, net (784) 20,048 12,265
-------- --------- ---------
Total income tax expense $260,993 $(124,872) $(114,000)
======== ========= =========
F-17
147
The tax effect of temporary differences that gave rise to deferred tax
assets and deferred tax liabilities at December 31, 1999 and 1998 is as
follows:
1999 1998
Deferred tax assets:
Accrued professional fees $ 10,200
Allowance for loan losses 619,732 $ 336,114
Unrealized losses on securities available for sale 176,396
Net operating loss carryforward 32,464
Other 20,784 34,362
--------- ---------
Total deferred tax assets 827,112 402,940
Deferred tax liabilities:
Federal Home Loan Bank dividends (22,484) (15,344)
Accumulated depreciation (230,135) (203,189)
Unrealized gains on securities available for sale (27,451)
Other (12,958) (21,344)
--------- ---------
Total deferred tax liabilities (265,577) (267,328)
--------- ---------
Net deferred tax asset $ 561,535 $ 135,612
========= =========
9. STOCK OPTION PLANS
In 1996, the Company approved stock option plans which provide incentive
and non-qualified options to certain officers and directors for up to
127,500 common shares of the Company. The options vest immediately and
the incentive options and non-qualified options are exercisable for 10
years and five years, respectively, provided the optionee has remained
in the employment of the Company or its subsidiaries.
F-18
148
Activity in the option plans is summarized in the following table:
WEIGHTED
NUMBER OPTION PRICE AVERAGE PRICE
STOCK OPTIONS UNDER THE PLAN OF SHARES PER SHARE PER SHARE
Outstanding, January 1, 1997 51,000 $16.67 - $20.83 $17.65
Granted 21,600 $20.83 $20.83
-------
Outstanding, December 31, 1997 72,600 $16.67 - $20.83 $18.59
Granted 53,250 $20.83 - $25.00 $23.41
Cancelled (34,000) $16.67 - $25.00 $19.85
-------
Outstanding, December 31, 1998 91,850 $16.67 - $25.00 $20.92
Granted 33,000 $25.00 $25.00
Cancelled (6,000) $25.00 $25.00
-------
Outstanding, December 31, 1999 118,850 $16.67 - $25.00 $21.85
-------
Exercisable, December 31, 1999 118,850 $16.67 - $25.00 $21.85
=======
Summary information about the Company's stock options outstanding and
exercisable at December 31, 1999:
OUTSTANDING WEIGHTED AVERAGE
AND CONTRACTUAL PERIOD
EXERCISE PRICE EXERCISABLE IN YEARS
$16.67 21,000 6.1
$20.83 47,850 3.2
$25.00 50,000 8.0
-------
$16.67-$25.00 118,850 6.7
=======
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations
in accounting for the Plan. Accordingly, no compensation cost has been
recognized for the Plan. Had compensation costs for the Plan been
determined based upon the fair value at the grant date for awards under
the Plan consistent with the methodology prescribed in Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company's net income (loss) would have been,
$469,980, $(223,258) and $(36,612), net of related income tax effects,
in 1999, 1998 and 1997, respectively. The fair value of options at the
date of grant was estimated using the Black-Scholes model.
For options granted during the years ended December 31, 1999, 1998 and
1997, the fair value of options granted were determined based on a
weighted average risk-free interest rate of 4.61%, 5.45% and 7.0%,
respectively, expected option lives of four years, expected volatility
of 0% and an expected dividend yield of 0%.
F-19
149
STOCK SPLITS - On February 26, 1998, the Company authorized a 3-for-1
stock split for all shares and options issued and outstanding as of
March 18, 1998. All periods presented have been restated to reflect the
effect of the stock splits.
10. REGULATORY REQUIREMENTS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures that have been established by regulation to
ensure capital adequacy require the Bank to maintain minimum capital
amounts and ratios (set forth in the table below) of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as
defined) and of Tier 1 capital (as defined) to average assets (as
defined). Management believes, as of December 31, 1999, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1999, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as set forth in the following table. There are no conditions or events
since that notification that management believes have changed the
Bank's category.
TO BE WELL
CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
-------------------- ------------------- -----------------
(DOLLARS IN THOUSANDS) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ------ ------ ----- ------ ------
AS OF DECEMBER 31, 1999:
Total Capital
(to Risk Weighted Assets) $12,763 13.46% $7,647 > 8% $9,559 > 10%
Tier 1 Capital - -
(to Risk Weighted Assets) 11,568 12.20% 3,824 > 4% 5,735 > 6%
Tier 1 Capital - -
(to Average Assets) 11,568 9.25% 5,004 > 4% 6,255 > 5%
- -
AS OF DECEMBER 31, 1998:
Total Capital
(to Risk Weighted Assets) $11,759 14.19% $6,629 > 8% $8,286 > 10%
Tier 1 Capital - -
(to Risk Weighted Assets) 10,723 12.94% 3,314 > 4% 4,972 > 6%
Tier 1 Capital - -
(to Average Assets) 10,723 9.99% 4,295 > 4% 5,368 > 5%
- -
F-20
150
The Company's ability to pay dividends is dependent, in part upon its
ability to obtain dividends from its subsidiary bank. Such payment,
however, will be subject to the regulatory restrictions set forth by
the Office of the Comptroller of the Currency. In addition, the Federal
Deposit Insurance Corporation Improvement Act ("FDICIA") provides that,
as a general rule, a financial institution may not make a capital
distribution if it would be undercapitalized after making the capital
distribution.
11. LITIGATION
Various legal claims have arisen during the normal course of business
which, in the opinion of management, after discussion with legal
counsel, will not result in any material liability.
12. SUBSEQUENT EVENTS
On January 5, 2000, the Company entered into a definitive Agreement and
Plan of Merger with Enterbank Holdings, Inc. ("Enterbank"), the parent
company of Enterprise Bank. The agreement provides for the Company's
shareholders to exchange each share of the Company's stock for 2.1429
shares of Enterbank Holdings, Inc. stock at the effective time of the
merger, subject to statutory dissenter's rights. Pursuant to the merger,
the Company will cease to exist and each of the Company's shareholders
will become shareholders of Enterbank Holdings, Inc. At the effective
date of the merger, options to purchase Company stock issued pursuant to
the stock plans described in Note 9 will be converted into options to
acquire shares of Enterbank stock. The Agreement and Plan of Merger
which is subject to regulatory approval, shareholder approval and the
satisfaction of other conditions, is expected to close in the second
quarter of 2000. The accompanying consolidated financial statements do
not include any adjustments giving effect to the Agreement.
13. DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The Bank issues financial instruments with off-balance-sheet risk in the
normal course of the business of meeting the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. These instruments may involve, to
varying degrees, elements of credit and interest-rate risk in excess of
the amounts recognized in the consolidated balance sheets.
The Company's extent of involvement and potential exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit and standby letters of
credit is represented by the contractual amount of these instruments.
The Bank uses the same credit policies in making commitments and
conditional obligations as it does for financial instruments included on
its balance sheets.
The contractual amount of off-balance-sheet financial instruments as of
December 31, 1999 and 1998 is as follows:
1999 1998
Commitments to extend credit $20,957,000 $12,082,000
Standby letters of credit 368,000 294,000
----------- -----------
$21,325,000 $12,376,000
=========== ===========
F-21
151
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Of the total
commitments to extend credit as of December 31, 1999, $2,722,000
represent fixed rate loan commitments. As certain of the commitments
may expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Bank evaluates
each customer's credit worthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Bank upon extension
of credit, is based on management's credit evaluation of the borrower.
Collateral held varies but may include accounts receivable, inventory,
premises and equipment, and real estate.
Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. These
standby letters of credit are primarily issued to support contractual
obligations of Bank customers. The credit risk involved in issuing
letters of credit is essentially the same as the risk involved in
extending loans to customers.
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments",
extends existing fair value disclosure for some financial instruments
by requiring disclosure of the fair value of such financial
instruments, both assets and liabilities recognized in the consolidated
balance sheets.
The following is a summary of the carrying amounts and fair values of
the Company's financial instruments on the consolidated balance sheets
at December 31, 1999 and 1998:
1999 1998
---------------------------------- --------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
Assets:
Cash and due from banks $ 4,556,100 $ 4,556,100 $ 3,502,029 $ 3,502,029
Federal funds sold 2,175,000 2,175,000
Investments securities,
available for sale 19,470,170 19,470,170 17,639,818 17,639,818
Capital stock of the Federal
Reserve Bank and Federal
Home Loan Bank 808,150 808,150 725,800 725,800
Loans, net 93,766,500 92,363,345 79,879,719 80,760,712
Accrued interest receivable 1,081,834 1,081,834 872,814 872,814
Liabilities:
Deposits $106,530,797 $107,348,052 $94,022,900 $94,218,001
Federal Home Loan Bank
advances 4,196,444 4,113,316 3,205,012 3,136,967
Federal Funds purchased 1,300,000 1,300,000
Accrued interest payable 329,950 329,950 306,509 306,509
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practical
to estimate such fair value.
F-22
152
CASH AND OTHER SHORT-TERM INSTRUMENTS - For cash and due from banks,
federal funds sold, accrued interest receivable (payable) and federal
funds purchased, the carrying amount is a reasonable estimate of fair
value, as such instruments reprice in a short time period.
INVESTMENTS SECURITIES, AVAILABLE FOR SALE - Fair values are based on
quoted market prices or dealer quotes.
CAPITAL STOCK OF THE FEDERAL RESERVE BANK AND THE FEDERAL HOME LOAN
BANK - The carrying values of capital stock of the Federal Reserve Bank
and capital stock of the Federal Home Loan Bank approximate fair value.
LOANS, NET - The fair value of adjustable-rate loans approximates
carrying value. The fair value of fixed-rate loans is estimated by
discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities.
DEPOSITS - The fair value of demand deposits, interest-bearing
transaction accounts, money market accounts and savings deposits is the
amount payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities.
FEDERAL HOME LOAN BANK ADVANCES - The fair value of Federal Home Loan
Bank advances is based on the discounted value of contractual cash
flows. The discount rate is estimated using rates on borrowed money
with similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT - The fair
value of commitments to extend credit and standby letters of credit are
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements,
the likelihood of the counterparties drawing on such financial
instruments, and the present creditworthiness of such counterparties.
The Company believes such commitments have been made on terms which are
competitive in the markets in which it operates; however, no premium or
discount is offered thereon and accordingly, the Company has not
assigned a value to such instruments for purposes of this disclosure.
LIMITATIONS - Fair value estimates are made at a specific point in
time, based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the
Company's entire holdings of a particular financial instrument. Because
no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment, and therefore, cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have
not been considered in many of the estimates.
F-23
153
14. LINE OF BUSINESS RESULTS
Management of the Company reviews the financial performance of its
operating segments on an after-tax basis. The Company's three major
operating segments in 1999, 1998 and 1997 include Commercial Guaranty
Bancshares, Inc. and CGB Acquisition Corporation, First Commercial
Bank, N.A. and The Capital Corporation. Commercial Guaranty Bancshares,
Inc. and CGB Acquisition Corporation operations include general
corporate expenses not allocated to the operating segments. CGB
Acquisition Corporation is a shell entity formed to facilitate the
acquisition of Humboldt Bancshares, Inc. First Commercial Bank, N.A.
provides a full range of commercial banking services. The Capital
Corporation provides investment banking services to corporations, non
affiliated financial institutions and high net worth individuals.
Following are the financial results for the Company's operating
segments.
F-24
154
COMMERCIAL
GUARANTY
BANCSHARES,
INC. AND CGB FIRST THE
ACQUISITION COMMERCIAL CAPITAL
CORPORATION <F*> BANK, N.A. CORPORATION ELIMINATIONS CONSOLIDATED
For the year ended December 31, 1999
Interest income $ 48,056 $ 8,939,099 $ 331 $ (48,387) $ 8,939,099
Interest expense 3,856,369 (48,387) 3,807,982
Provision for loan losses 975,000 975,000
Noninterest income 688,907 340,872 1,029,779
Noninterest expense 523,564 3,812,555 372,666 4,708,785
Income (loss) before income
tax expense (benefit) (475,508) 984,082 (31,463) 477,111
Income tax expense (benefit) (60,611) 330,455 (8,851) 260,993
----------- ------------ --------- ------------ ------------
Net income (loss) $ (414,897) $ 653,627 $ (22,612) $ $ 216,118
=========== ============ ========= ============ ============
Total assets $15,689,690 $127,534,077 $ 217,327 $(15,799,049) $127,642,045
=========== ============ ========= ============ ============
For the year ended December 31, 1998
Interest income $ 41,654 $ 8,082,543 $ 3,609 $ (36,936) $ 8,090,870
Interest expense 150,639 3,722,524 (36,936) 3,836,227
Provision for loan losses 650,000 650,000
Noninterest income 237 608,544 70,253 679,034
Noninterest expense 507,900 3,598,379 367,433 4,473,712
Income (loss) before income
tax expense (benefit) (616,648) 720,184 (293,571) (190,035)
Income tax expense (benefit) (246,257) 260,307 (138,922) (124,872)
----------- ------------ --------- ------------ ------------
Net income (loss) $ (370,391) $ 459,877 $(154,649) $ $ 65,163
=========== ============ ========= ============ ============
Total assets $15,262,453 $112,618,672 $ 221,315 $(15,340,894) $112,761,546
=========== ============ ========= ============ ============
For the year ended December 31, 1997
Interest income $ 122,697 $ 2,748,298 $ 13,657 $ (69,808) $ 2,814,844
Interest expense 1,442,881 (69,808) 1,373,073
Provision for loan losses 100,000 100,000
Noninterest income 95,417 67,000 162,417
Noninterest expense 242,927 1,151,132 190,321 1,584,380
Income (loss) before income tax
expense (benefit) (120,230) 149,702 (109,664) (80,192)
Income tax expense (benefit) (114,000) (114,000)
----------- ------------ --------- ------------ ------------
Net income (loss) $ (120,230) $ 263,702 $(109,664) $ $ 33,808
=========== ============ ========= ============ ============
Total assets $14,269,789 $107,425,471 $ 244,464 $(14,465,428) $107,474,296
=========== ============ ========= ============ ============
<FN>
<F*> Operations exclude equity in income (loss) of First Commercial Bank,
N.A. and The Capital Corporation.
F-25
155
15. PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS
1999 1998
ASSETS
Cash $ 470,530 $ 1,190,468
Investment in CGB Acquisition Corporation 13,694,412 13,429,941
Investment in The Capital Corporation 67,203 89,815
Intercompany receivable 1,077,654 467,533
Other assets 49,891 84,696
----------- -----------
Total assets $15,359,690 $15,262,453
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 134,138 $ 56,000
Intercompany payable 149,859 139,058
Income taxes payable 465,782 1,946
Shareholders' equity 14,609,911 15,065,449
----------- -----------
Total liabilities and shareholders' equity $15,359,690 $15,262,453
=========== ===========
1999 1998 1997
Income:
Interest $ 48,056 $ 41,654 $ 122,697
Noninterest income 237
---------- ----------- -----------
48,056 41,891 122,697
Expenses:
Interest 150,639
Noninterest expense 523,564 507,737 242,905
---------- ----------- -----------
523,564 658,376 242,905
---------- ----------- -----------
Loss before income tax benefit and equity in undisbursed
income (loss) of subsidiaries (475,508) (616,485) (120,208)
Income tax benefit 60,611 246,257
---------- ----------- -----------
Loss before equity in undistributed income (loss) of
subsidiaries (414,897) (370,228) (120,208)
---------- ----------- -----------
Undistributed income of subsidiaries 631,015 305,065 154,016
---------- ----------- -----------
Net income (loss) $ 216,118 $ (65,163) $ 33,808
========== =========== ===========
F-26
156
1999 1998 1997
Cash flows from operating activities:
Net income (loss) $ 216,118 $ (65,163) $ 33,808
Adjustments to reconcile net income (loss) to net cash
used in activities:
Undistributed income of subsidiaries (631,015) (305,065) (154,016)
Change in income taxes payable 463,836 1,946
Change in net intercompany balances (599,320) (328,475)
Other, net 107,449 (63,122) 46,925
---------- ----------- -----------
Net cash used in operating activities (442,932) (759,879) (73,283)
Cash flows from investing activities:
Proceeds from sales of fixed assets 10,733
Investments in subsidiaries (6,036,401)
Purchases of fixed assets (5,239) (30,482) (22,608)
Return of capital from subsidiary 580,000
---------- ----------- -----------
Net cash provided by (used in) investing activities 5,494 549,518 (6,059,009)
Cash flows from financing activities:
Treasury stock purchases (390,000)
Proceeds from issuance of common stock 107,500 4,150,319 238,750
Repayments on borrowings (3,250,000)
Proceeds from borrowings 3,250,000
Payment of Stock subscriptions receivable 202,669
---------- ----------- -----------
Net cash provided by (used in) financing activities (282,500) 900,319 3,691,419
---------- ----------- -----------
Net increase (decrease) in cash (719,938) 689,958 (2,440,873)
Cash, beginning of year 1,190,468 500,510 2,941,383
---------- ----------- -----------
Cash, end of year $ 470,530 $ 1,190,468 $ 500,510
========== =========== ===========
F-27
157
ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
ENTERBANK HOLDINGS, INC.
AND
COMMERCIAL GUARANTY BANCSHARES, INC.
DATED JANUARY 5, 2000
158
TABLE OF CONTENTS
Page
ARTICLE I - THE MERGER............................................................................................1
1.1 Effective Time of the Merger....................................................................1
1.2 Closing.........................................................................................1
1.3 Effects of the Merger...........................................................................2
1.4 Alternative Structure...........................................................................2
1.5 Absence of Control..............................................................................3
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES...................................................................3
2.1 Effect on Capital Stock of the Constituent Corporations.........................................3
(a) Conversion of CGB Common Stock.........................................................3
(b) Enterbank Capital Stock................................................................3
2.2 No Further Ownership Rights in CGB Common Stock.................................................4
2.3 Fractional Shares...............................................................................4
2.4 Surrender of Shares of CGB Common Stock.........................................................4
2.5 Adjustments.....................................................................................5
2.6 Options.........................................................................................6
2.7 Dissenters' Rights..............................................................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES......................................................................7
3.1 Representations and Warranties of CGB...........................................................7
(a) Organization, Standing and Power.......................................................7
(b) Capital Structure; Ownership of CGB Common Stock.......................................9
(c) Authority; No Violation...............................................................10
(d) Financial Statements..................................................................11
(e) CGB Information Supplied..............................................................12
(f) Compliance with Applicable Laws.......................................................12
(g) Litigation............................................................................13
(h) Taxes.................................................................................13
(i) Certain Agreements....................................................................14
(j) Benefit Plans.........................................................................15
(k) Subsidiaries..........................................................................17
(l) Agreements with Bank or Other Regulators..............................................17
(m) Absence of Certain Changes or Events..................................................18
(n) Undisclosed Liabilities...............................................................18
(o) Governmental Reports..................................................................18
(p) Environmental Liability...............................................................19
(q) Properties............................................................................21
(r) Transactions with Affiliates..........................................................21
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(s) Brokers or Finders....................................................................22
(t) Intellectual Property.................................................................22
(u) Pooling of Interests..................................................................22
(v) Opinion of Financial Advisor..........................................................22
(w) Community Reinvestment Act Compliance.................................................22
(x) Year 2000 Readiness...................................................................22
(y) Insurance.............................................................................23
(z) Loans and Other Assets................................................................23
(aa) Restrictions on Investments...........................................................24
(bb) No Brokered Deposits..................................................................24
(cc) Derivatives Contracts; Structured Notes; Etc..........................................24
(dd) Labor Matters.........................................................................25
3.2 Representations and Warranties of Enterbank....................................................25
(a) Organization, Standing and Power......................................................25
(b) Capital Structure; Ownership of Enterbank Common Stock................................26
(c) Authority; No Violation...............................................................27
(d) Financial Statements..................................................................28
(e) Enterbank SEC Documents...............................................................28
(f) Enterbank Information Supplied........................................................29
(g) Compliance with Applicable Laws.......................................................29
(h) Litigation............................................................................30
(i) Taxes.................................................................................30
(j) Certain Agreements....................................................................31
(k) Benefit Plans.........................................................................32
(l) Subsidiaries..........................................................................34
(m) Agreements with Bank or Other Regulators..............................................34
(n) Absence of Certain Changes or Events..................................................34
(o) Undisclosed Liabilities...............................................................34
(p) Governmental Reports..................................................................35
(q) Environmental Liability...............................................................35
(r) Properties............................................................................37
(s) Transactions with Affiliates..........................................................37
(t) No Broker or Finder...................................................................38
(u) Intellectual Property.................................................................38
(v) Pooling of Interests..................................................................38
(w) Community Reinvestment Act Compliance.................................................38
(x) Year 2000 Readiness...................................................................38
(y) Insurance.............................................................................38
(z) Loans and Other Assets................................................................39
(aa) Derivatives Contracts; Structured Notes; Etc..........................................40
(bb) Labor Matters.........................................................................40
(cc) Status of Enterbank Common Stock to be Issued.........................................41
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ARTICLE IV - COVENANTS RELATING TO CONDUCT OF BUSINESS...........................................................41
4.1 Covenants of CGB...............................................................................41
4.2 Covenants of Enterbank.........................................................................44
ARTICLE V - ADDITIONAL AGREEMENTS................................................................................46
5.1 Regulatory Matters.............................................................................46
5.2 Access to Information..........................................................................47
5.3 Shareholders' Meetings.........................................................................48
5.4 No Solicitations...............................................................................49
5.5 Legal Conditions...............................................................................50
5.6 Employee Benefit Plans.........................................................................51
5.7 Additional Agreements..........................................................................52
5.8 Fees and Expenses..............................................................................52
5.9 Cooperation....................................................................................53
5.10 Affiliates.....................................................................................53
5.11 Advice of Changes..............................................................................53
5.12 Subsequent Interim and Annual Financial Statements; Certain Reports............................53
5.13 Dissenters' Rights.............................................................................54
5.14 Retention of FCB Officers and Directors........................................................54
5.15 Indemnification; Directors' and Officers' Insurance............................................54
5.16 Conforming Entries.............................................................................55
ARTICLE VI - CONDITIONS PRECEDENT................................................................................56
6.1 Conditions to Each Party's Obligation..........................................................56
(a) Shareholder Approvals.................................................................56
(b) Other Approvals.......................................................................56
(c) No Injunctions or Restraints..........................................................56
(d) S-4...................................................................................56
(e) Pooling...............................................................................56
(f) Burdensome Condition..................................................................57
(g) Dissenters' Rights....................................................................57
(h) Average Enterbank Closing Price.......................................................57
6.2 Conditions to Obligations of Enterbank.........................................................58
(a) Representations and Warranties........................................................58
(b) Performance of Obligations............................................................58
(c) Corporate Action......................................................................58
(d) Tax Opinion...........................................................................58
(e) Material Adverse Effect...............................................................58
(f) Closing Documents.....................................................................59
(g) Fairness Opinion......................................................................59
6.3 Conditions to Obligations of CGB...............................................................59
(a) Representations and Warranties........................................................59
(b) Performance of Obligations............................................................59
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(c) Corporate Action......................................................................59
(d) Tax Opinion...........................................................................59
(e) Material Adverse Effect...............................................................60
(f) Closing Documents.....................................................................60
(g) Additions to Enterbank Board of Directors.............................................60
(h) Fairness Opinion......................................................................60
ARTICLE VII - TERMINATION AND AMENDMENT..........................................................................60
7.1 Termination....................................................................................60
7.2 Effect of Termination..........................................................................63
7.3 Amendment......................................................................................63
7.4 Extension; Waiver..............................................................................63
ARTICLE VIII - GENERAL PROVISIONS................................................................................63
8.1 Survival of Representations, Warranties and Covenants..........................................63
8.2 Notices........................................................................................64
8.3 Interpretation.................................................................................65
8.4 Counterparts...................................................................................65
8.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership............................65
8.6 Governing Law..................................................................................65
8.7 Severability...................................................................................66
8.8 Assignment.....................................................................................66
8.9 Publicity......................................................................................66
8.10 Attorneys' Fees................................................................................66
EXHIBITS
Exhibit A................................................................................................1
Exhibit B-1.............................................................................................53
Exhibit B-2.............................................................................................53
SCHEDULES
CGB Disclosure Schedule......................................................................................9
Section 3.1(b)(iii)......................................................................................9
Section 3.1(c)(ii)......................................................................................10
Section 3.1(d)..........................................................................................12
Section 3.1(g)..........................................................................................13
Section 3.1(h)..........................................................................................13
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Section 3.1(i)................................................14
Section 3.1(j)................................................43
Section 3.1(j)(i).............................................15
Section 3.1(j)(ii)............................................16
Section 3.1(j)(iii)...........................................16
Section 3.1(j)(iv)............................................17
Section 3.1(j)(v).............................................17
Section 3.1(k)................................................11
Section 3.1(l)................................................17
Section 3.1(m)................................................18
Section 3.1(n)................................................18
Section 3.1(o)................................................18
Section 3.1(p)................................................19
Section 3.1(p)(vii)...........................................20
Section 3.1(q)................................................21
Section 3.1(r)................................................21
Section 3.1(t)................................................22
Section 3.1(u)................................................22
Section 3.1(aa)...............................................24
Section 3.1(aa)(ii)...........................................24
Section 3.1(bb)...............................................24
Section 3.1(cc)...............................................24
Section 4.1(d)................................................42
Section 4.1(q)................................................44
Section 4.1(r)................................................44
Enterbank Disclosure Schedule.....................................26
Section 3.2(b)(ii)............................................26
Section 3.2(b)(iii)...........................................26
Schedule 3.2(b)(iv)...........................................26
Section 3.2(c)(ii)............................................27
Section 3.2(h)................................................30
Section 3.2(i)................................................30
Section 3.2(j)................................................31
Section 3.2(k)................................................32
Section 3.2(k)(ii)............................................32
Section 3.2(k)(iv)............................................33
Section 3.2(k)(v).............................................33
Section 3.2(l)................................................34
Section 3.2(m)................................................34
Section 3.2(n)................................................34
Section 3.2(o)................................................34
Section 3.2(p)................................................35
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Section 3.2(q)................................................35
Section 3.2(q)(vii)...........................................37
Section 3.2(r)................................................37
Section 3.2(s)................................................37
Section 3.2(u)................................................38
Section 3.2(v)................................................38
Section 3.2(z)(ii)............................................40
Section 3.2(aa)...............................................40
Schedule 5.6(d)........................................................52
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DEFINITIONS
Page
Acquisition Sub..........................................................2
Action..................................................................66
Actual Expenses.........................................................52
Affiliate .......................................................9
Agreement................................................................1
Agreement of Merger......................................................1
Average Enterbank Closing Price.........................................56
Bank Regulators.........................................................13
Benefit Plans...........................................................16
BHC Act..................................................................7
BIF......................................................................7
Burdensome Condition....................................................57
Business................................................................20
Business Day.............................................................1
CGB......................................................................1
CGB Benefit Plans.......................................................16
CGB Certificates.........................................................4
CGB Consolidated Financial Statements...................................11
CGB Designees............................................................2
CGB Disclosure Schedule..................................................9
CGB Dissenting Shares....................................................6
CGB Intellectual Property...............................................22
CGB Interim Financial Statements........................................12
CGB Option...............................................................6
CGB Permits.............................................................12
CGB Preferred Stock......................................................9
CGB Shareholder Approval................................................10
CGB Shareholders' Meeting...............................................12
CGB Stock Option Plans...................................................6
CGB Termination Fee.....................................................50
Closing..................................................................1
Closing Date.............................................................1
Code.....................................................................1
Confidentiality Agreement...............................................48
Consents................................................................56
Constituent Corporations.................................................2
CRA.....................................................................22
date hereof..............................................................1
DGCL.....................................................................1
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Derivatives Contract...............................................24
Determination Date.................................................57
DPC Shares.........................................................10
Effective Time......................................................1
Enterbank...........................................................1
Enterbank Benefit Plans............................................32
Enterbank Common Stock..............................................3
Enterbank Consolidated Financial Statements........................28
Enterbank Disclosure Schedule......................................26
Enterbank Dissenting Shares.........................................7
Enterbank Interim Financial Statements.............................28
Enterbank Intellectual Property....................................38
Enterbank Instrument................................................5
Enterbank Permits..................................................29
Enterbank SEC Reports..............................................28
Enterbank Shareholder Approval.....................................27
Enterbank Shareholders' Meeting....................................29
Enterbank Termination Fee..........................................50
Enterprise..........................................................4
Environmental Law..................................................20
ERISA..............................................................15
Exchange Act.......................................................28
Exchange Agent......................................................4
Exchange Ratio......................................................3
FCB.................................................................7
FDIC................................................................7
Federal Reserve....................................................11
GAAP...............................................................12
Governmental Entity................................................11
Hazardous Substances...............................................20
Indemnified Party..................................................54
Injunction.........................................................56
KGCC................................................................3
knowledge...........................................................9
Litigation.........................................................13
material............................................................8
material adverse effect.............................................8
Merger..............................................................1
Moneta..............................................................6
OCC................................................................11
OREO...............................................................23
PBGC...............................................................16
person..............................................................9
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Proxy Statement.......................................................11
Real Property.........................................................21
Reportable Quantity...................................................21
Representatives.......................................................49
Requisite Regulatory Approvals........................................56
S-4...................................................................12
SARs...................................................................6
SEC...................................................................11
SEC Fees..............................................................52
Securities Act........................................................22
SFAS No. 5.............................................................8
Significant Subsidiary................................................49
Subsidiary..........................................................3, 8
Superior Proposal.....................................................50
Surviving Corporation...............................................2, 3
Takeover Proposal.....................................................49
Tax return............................................................14
taxable...............................................................14
taxes.............................................................13, 14
to the best knowledge of...............................................9
Transaction Agreements.................................................8
Trust Account Shares..................................................10
Violation.............................................................11
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of January 5, 2000 (the "date hereof"), between ENTERBANK
HOLDINGS, INC., a Delaware corporation ("Enterbank") and COMMERCIAL GUARANTY
BANCSHARES, INC., a Kansas corporation ("CGB").
WHEREAS, the Board of Directors of Enterbank has approved this
Agreement, declared it advisable and deems it advisable and in the best
interests of the shareholders of Enterbank to consummate the transactions
provided for herein in which, inter alia, CGB would merge with and into
Enterbank pursuant to an Agreement of Merger substantially in the form attached
hereto as Exhibit A (the "Merger");
WHEREAS, the Board of Directors of CGB has approved this Agreement and
declared it advisable and deems it advisable and in the best interests of the
shareholders of CGB to consummate the Merger;
WHEREAS, it is the intention of the parties that the Merger qualify as
a tax-free reorganization pursuant to section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that the Merger shall be accounted
for as a "pooling of interests"; and
WHEREAS, the Boards of Directors of Enterbank and CGB have each
determined that the Merger and the other transactions contemplated by this
Agreement are consistent with, and will contribute to the furtherance of, their
respective business strategies and goals.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the terms and conditions
of this Agreement, the Merger shall become effective upon the occurrence of the
filing of an agreement of merger in substantially the form of Exhibit A hereto
(the "Agreement of Merger") and officers' certificates prescribed by Section 252
of the Delaware General Corporation Law ("DGCL") with the Secretary of State of
the State of Delaware, or at such time thereafter as is provided by mutual
agreement in the Agreement of Merger (the "Effective Time").
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
at 10:00 a.m., St. Louis time, on the first Friday which is at least ten
Business Days after receipt of all Requisite Regulatory Approvals and the
expiration of all requisite waiting periods (subject to the satisfaction of the
condition set forth in Section 6.1(a)), but in no event shall such date be later
than July 31, 2000, unless otherwise agreed in writing by the parties hereto or
as provided in Section 7.1(c) (the "Closing Date"). The Closing shall be held at
the offices of Armstrong Teasdale LLP, One Metropolitan Square, St. Louis,
Missouri 63102 or at such other location as is agreed to in writing by the
parties hereto. As used in this Agreement, "Business Day" shall mean any day
that is not a
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Saturday, Sunday or other day on which banks are required or authorized by law
to be closed in Missouri.
1.3 EFFECTS OF THE MERGER.
(a) At the Effective Time (i) CGB shall be merged with and
into Enterbank and the separate corporate existence of CGB shall cease, (ii) the
Certificate of Incorporation of Enterbank as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, (iii) the By-laws of Enterbank as in effect immediately prior to
the Effective Time shall be the By-laws of the Surviving Corporation, (iv) the
directors of Enterbank at the Effective Time shall be the directors of the
Surviving Corporation (except that the Board of Directors of Enterbank shall
take all necessary action to appoint four other representatives of CGB
(collectively, the "CGB Designees"), who shall be existing directors of CGB, to
serve on the Surviving Corporation's board of directors as of and after the
Effective Time, such CGB Designees to serve as directors until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be; provided that the Board of Directors
of Enterbank or the nomination committee thereof shall nominate and recommend
the election of each of the CGB Designees for reelection as directors of
Enterbank at the conclusion of their respective terms as necessary in order that
each such CGB Designee shall serve as an Enterbank director for at least three
years after the Effective Time; provided further, however, that in the event any
such CGB Designee resigns, is removed (other than by a vote of the shareholders
of Enterbank) or otherwise terminates service, the remaining CGB Designees may
select a person as his or her replacement and Enterbank shall nominate for
election such replacement so selected to serve as a director of Enterbank for at
least the remainder of the term of the CGB Designee being replaced (as such term
may be required to be extended as provided in the second proviso above)), and
(v) the officers of Enterbank immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(b) As used in this Agreement, "Constituent Corporations"
shall mean each of Enterbank and CGB, and "Surviving Corporation" shall mean
Enterbank, at and after the Effective Time, as the surviving corporation in the
Merger.
(c) At and after the Effective Time, the Merger will have the
effects set forth in the DGCL.
1.4 ALTERNATIVE STRUCTURE. Notwithstanding anything contained in this
Agreement to the contrary, upon receipt of CGB's prior written consent (which
consent shall not be unreasonably withheld), Enterbank may specify, for any
reasonable business, tax or regulatory purpose, that, before the Merger,
Enterbank and CGB shall enter into transactions other than those described
herein in order to effect the purposes of this Agreement, or may form an
acquisition subsidiary (an "Acquisition Sub") to be merged with CGB, and the
parties hereto shall take all action necessary and appropriate to effect, or
cause to be effected, such transactions; provided, however, that no such
2
169
specification may (a) materially and adversely affect the timing of the
consummation of the transactions contemplated herein, or (b) adversely affect
the economic benefits, the form of consideration or the tax effect of the Merger
to the holders of CGB Common Stock. If Enterprise forms an Acquisition Sub, the
Acquisition Sub will be a "Subsidiary" of Enterbank for all purposes under this
Agreement (including Section 3.2), will be a "Constituent Corporation" and,
depending on the structure of the Merger, either Acquisition Sub or CGB will be
the "Surviving Corporation."
1.5 ABSENCE OF CONTROL. Subject to any specific provisions of this
Agreement, it is the intent of the parties hereto that neither Enterbank nor CGB
by reason of this Agreement shall be deemed (until consummation of the
transactions contemplated hereby) 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 II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of CGB or Enterbank capital stock:
(a) CONVERSION OF CGB COMMON STOCK. Subject to Sections 2.3,
2.5 and 7.1(h), each of the shares of CGB Common Stock issued and outstanding
immediately prior to the Effective Time (other than CGB Dissenting Shares
perfected in accordance with K.S.A. 17-6712 of the Kansas General Corporation
Code (the "KGCC")) shall be converted into the right to receive 2.1429 shares
(the "Exchange Ratio") of fully paid and nonassessable shares of Common Stock,
$.01 par value per share (the "Enterbank Common Stock"), of Enterbank. All such
shares of CGB Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously representing any such shares shall thereafter represent
the right to receive (i) a certificate representing the number of whole shares
of Enterbank Common Stock into which such CGB Common Stock has been converted
and, if applicable, (ii) cash in lieu of fractional shares as provided in
Section 2.3 hereof. Certificates previously representing shares of CGB Common
Stock shall be exchanged for certificates representing whole shares of Enterbank
Common Stock issued in consideration therefor (and, if applicable, cash in lieu
of fractional shares as provided in Section 2.3 hereof) upon the surrender of
such certificates.
(b) ENTERBANK CAPITAL STOCK. At and after the Effective Time,
each share of Enterbank Common Stock issued and outstanding immediately prior to
the Effective Time shall remain an issued and outstanding share of capital stock
of Enterbank and shall not be affected by the Merger.
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2.2 NO FURTHER OWNERSHIP RIGHTS IN CGB COMMON STOCK. All shares of
Enterbank Common Stock issued upon conversion of shares of CGB Common Stock in
accordance with the terms hereof shall be deemed to represent all rights
pertaining to such shares of CGB Common Stock, and, after the Effective Time,
there shall be no further registration of transfers on the stock transfer books
of CGB of the shares of CGB Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates formerly
representing shares of CGB Common Stock are presented to Enterbank for any
reason, they shall be canceled and, if applicable, exchanged as provided in this
Article II.
2.3 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of Enterbank Common Stock shall be issued to holders of shares
of CGB Common Stock. In lieu thereof, each such holder entitled to a fraction of
a share of Enterbank Common Stock (after taking into account all shares of CGB
Common Stock held at the Effective Time by such holder) shall receive, at the
time of surrender of the certificates representing such holder's CGB Common
Stock, an amount in cash equal to the Average Enterbank Closing Price (as
hereinafter defined), multiplied by the fraction of a share of Enterbank Common
Stock to which such holder would otherwise be entitled. No such holder shall be
entitled to dividends, voting rights, interest on the value of, or any other
rights in respect of a fractional share.
2.4 SURRENDER OF SHARES OF CGB COMMON STOCK.
(a) Prior to the Effective Time, Enterbank shall appoint
Enterprise Bank ("Enterprise") or its successor, or any other bank or trust
company (having capital of at least $10 million) mutually acceptable to CGB and
Enterbank, as exchange agent (the "Exchange Agent") for the purpose of
exchanging certificates representing the Enterbank Common Stock which are to be
issued pursuant to Section 2.1, and at and after the Effective Time, Enterbank
shall issue and deliver to the Exchange Agent certificates representing the
shares of Enterbank Common Stock, as shall be required to be delivered to
holders of shares of CGB Common Stock pursuant to Section 2.1 hereof. As soon as
practicable after the Effective Time, each holder of shares of CGB Common Stock
converted pursuant to Section 2.1, upon surrender to the Exchange Agent of one
or more CGB share certificates (the "CGB Certificates") for cancellation, will
be entitled to receive a certificate representing the number of shares of
Enterbank Common Stock determined in accordance with Section 2.1 and a payment
in cash with respect to fractional shares, if any, determined in accordance with
Section 2.3.
(b) No dividends or other distributions of any kind which are
declared payable to shareholders of record of the shares of Enterbank Common
Stock after the Effective Time will be paid to persons entitled to receive such
certificates for shares of Enterbank Common Stock until such persons surrender
their CGB Certificates. Upon surrender of such CGB Certificate, the holder
thereof shall be paid, without interest, any dividends or other distributions
with respect to the shares of Enterbank Common Stock as to which the record date
and payment date occurred on or after the Effective Time and on or before the
date of surrender.
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(c) If any certificate for shares of Enterbank Common Stock is
to be issued in a name other than that in which the CGB Certificate surrendered
in exchange therefor is registered, it shall be a condition of such exchange
that the person requesting such exchange shall pay to the Exchange Agent any
transfer costs, taxes or other expenses required by reason of the issuance of
certificates for such shares of Enterbank Common Stock in a name other than the
registered holder of the CGB Certificate surrendered, or such persons shall
establish to the satisfaction of Enterbank and the Exchange Agent that such
costs, taxes or other expenses have been paid or are not applicable.
(d) All dividends or distributions, and any cash to be paid in
lieu of fractional shares pursuant to Section 2.3, if held by the Exchange Agent
for payment or delivery to the holders of unsurrendered CGB Certificates
representing shares of CGB Common Stock and unclaimed at the end of one year
from the Effective Time, shall (together with any interest earned thereon) at
such time be paid or redelivered by the Exchange Agent to Enterbank, and after
such time any holder of a CGB Certificate who has not surrendered such CGB
Certificate to the Exchange Agent shall, subject to applicable law, look as a
general creditor only to Enterbank for payment or delivery of such dividends or
distributions or cash, as the case may be.
(e) Neither Enterbank nor the Surviving Corporation shall be
liable to any holder of CGB Common Stock for such shares (or dividends or
distributions thereon) or cash payable in lieu of fractional shares pursuant to
Section 2.3 delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
2.5 ADJUSTMENTS. In the event Enterbank changes (or establishes a
record date for changing) the number of shares of Enterbank Common Stock issued
and outstanding prior to the Effective Time as a result of an issuance of shares
of Enterbank Common Stock, or a recapitalization, reclassification, split-up,
combination, exchange, readjustment, reorganization, merger, consolidation,
distribution, stock split, stock or other dividend, or similar transaction with
respect to the outstanding Enterbank Common Stock and the record date therefor,
if applicable, shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted with the result that the holders of CGB Common Stock
shall receive the same economic benefit set forth in Section 2.1. Further, in
the event Enterbank, prior to the Effective Time, grants, issues, delivers,
sells or otherwise distributes any warrant, option, security, right or other
instrument convertible into or exchangeable for any shares of Enterbank Common
Stock (collectively, an "Enterbank Instrument"), then (i) the Exchange Ratio
shall be proportionately adjusted in the manner prescribed above as if the
shares of Enterbank Common Stock issuable pursuant to such Enterbank Instrument
were outstanding prior to the Effective Time or, (ii) in the sole discretion of
Enterbank, Enterbank shall provide, at or prior to the Effective Time, for the
holders of the CGB Common Stock whose shares are to be converted into shares of
Enterbank Common Stock pursuant to the Merger proportionately equivalent
Enterbank Instruments upon consummation of the Merger; provided, however, that
no adjustment hereunder shall be made for the grant or exercise of options
under: (x) the Enterbank Incentive Stock Option Plan I, II, III or IV; (y) the
Enterbank Holdings, Inc. Non-Qualified Incentive Stock Option Plan; or (z)
options granted to employees of Moneta Group Investment Advisors, Inc.
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172
("Moneta") pursuant to the Agreement among Enterbank, Enterprise Bank and Moneta
made by the Board of Directors of Enterbank in its sole discretion; and no
adjustments shall be made hereunder for the grant in accordance with past
practice of stock appreciation rights ("SARs") to members or advisory members of
the Board of Directors of Enterbank or of any of its Subsidiaries who have not
heretofore received grants of SARs or for shares of Enterbank Common Stock
issued to members of the Boards of Directors of Enterbank or any its
subsidiaries upon vesting of SARs granted prior to the date hereof.
2.6 OPTIONS. At the Effective Time, each option granted by CGB to
purchase shares of CGB Common Stock (each, an "CGB Option") which is outstanding
and unexercised immediately prior thereto shall cease to represent a right to
acquire shares of CGB Common Stock and shall be converted automatically into an
option to purchase shares of Enterbank Common Stock in an amount and at an
exercise price determined as provided below (and otherwise subject to the terms
of the stock option plans of CGB (the "CGB Stock Option Plans") and the
agreements evidencing grants thereunder: (a) the number of shares of Enterbank
Common Stock to be subject to the new option shall be equal to the product of
the number of shares of CGB Common Stock subject to the original option and the
Exchange Ratio, provided that any fractional shares of Enterbank Common Stock
resulting from such multiplication shall be rounded down to the nearest share;
and (b) the exercise price per share of Enterbank Common Stock under the new
option shall be equal to the exercise price per share of CGB Common Stock under
the original option divided by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent. In the case of any options which
are "incentive stock options" (as defined in section 422 of the Code), the
exercise price, the number of shares purchasable pursuant to such options and
the terms and conditions of exercise of such options shall be determined in
order to comply with section 424(a) of the Code. The duration and other terms of
the new option shall be the same as the original option except that all
references to CGB shall be deemed to be references to Enterbank.
2.7 DISSENTERS' RIGHTS.
(a) Notwithstanding anything in this Agreement to the
contrary, shares of CGB Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders that
have not voted such shares in favor of the Merger and have delivered a written
demand for the valuation of such shares in the manner provided in the laws of
the State of Kansas (such shares, the "CGB Dissenting Shares") shall not be
converted into or represent the right to receive Enterbank Common Stock as
provided in Section 2.1 and the holders thereof shall only be entitled to such
rights as are granted by K.S.A. 17-6712 of the KGCC. Each holder of CGB
Dissenting Shares that becomes entitled to payment for such shares pursuant to
K.S.A. 17-6712 of the KGCC shall receive payment therefor from the Surviving
Corporation in accordance with the KGCC; provided, however, that (i) if any such
holder of CGB Dissenting Shares shall have failed to establish that such holder
is entitled to dissenters' rights as provided in K.S.A. 17-6712 of the KGCC, or
(ii) if any such holder of CGB Dissenting Shares shall have effectively
withdrawn the demand for valuation of such shares or lost the right to valuation
and payment of such shares under K.S.A. 17-6712 of the KGCC, or (iii) if neither
the Surviving Corporation nor such holder of CGB
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Dissenting Shares shall have filed a petition demanding a determination of the
value of all CGB Dissenting Shares within the time provided in K.S.A. 17-6712 of
the KGCC, such holder's or holders' (as the case may be) shares of CGB Common
Stock shall thereupon be deemed to have been converted, as of the Effective
Time, into and represent the right to receive from the Surviving Corporation the
shares of Enterbank Common Stock as provided in Section 2.1 hereof.
(b) Notwithstanding anything in this Agreement to the
contrary, if Enterbank is the Surviving Corporation, holders of shares of
Enterbank Common Stock which are issued and outstanding immediately prior to the
Effective Time that have not voted such shares in favor of the Merger and have
delivered a written demand for the valuation of such shares in the manner
provided in the laws of the State of Delaware (such shares, the "Enterbank
Dissenting Shares") shall be entitled to such rights as are granted by Section
262 of the DGCL. In such event, each holder of Enterbank Dissenting Shares that
becomes entitled to payment for such shares pursuant to Section 262 of the DGCL
shall receive payment therefor from the Surviving Corporation in accordance with
Section 262 of the DGCL; provided, however, that (i) if any such holder of
Enterbank Dissenting Shares shall have failed to establish that such holder is
entitled to dissenters' rights as provided in Section 262 of the DGCL, or (ii)
if any such holder of Enterbank Dissenting Shares shall have effectively
withdrawn the demand for valuation of such shares or lost the right to valuation
and payment of such shares under Section 262 of the DGCL, or (iii) if neither
the Surviving Corporation nor such holder of Enterbank Dissenting Shares shall
have filed a petition demanding a determination of the value of all Enterbank
Dissenting Shares within the time provided in Section 262 of the DGCL, each
share of Enterbank Common Stock held by such holder or holders (as the case may
be) immediately prior to the Effective Time shall remain an issued and
outstanding share of capital stock of Enterbank held by such holder or holders
(as the case may be) and shall not be affected by the Merger. If the Constituent
Corporations in the Merger are CGB and an Acquisition Sub, holders of Enterbank
Common Stock will not be entitled to the rights provided by Section 260 of the
DGCL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF CGB. CGB hereby represents and
warrants to Enterbank as follows:
(a) ORGANIZATION, STANDING AND POWER. CGB is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). First Commercial Bank, N.A. ("FCB") is a wholly owned Subsidiary of
CGB and is a national banking association organized under the laws of the United
States. The deposit accounts of FCB are insured by the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation ("FDIC") to the fullest
extent permitted by law, and all premiums and assessments required in connection
therewith have been paid when due. CGB and each of its Subsidiaries is a bank or
corporation duly organized,
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validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not, either individually or
in the aggregate, have a material adverse effect on CGB. The Articles of
Incorporation or Association and By-laws of each of CGB, and each Subsidiary of
CGB, copies of which were previously made available to Enterbank, are true,
complete and correct. The minute books of CGB and its Subsidiaries which have
been made available to Enterbank contain a complete (except for certain portions
thereof relating to the Merger and the transactions contemplated hereby) and
accurate record of all meetings of the respective Boards of Directors (and
committees thereof) and shareholders.
As used in this Agreement,
(i) the term "Subsidiary" when used with respect to
any party means any corporation or other organization, whether incorporated or
unincorporated, (x) of which such party or any other Subsidiary of such party is
a general partner (excluding partnerships, the general partnership interests of
which held by such party or any Subsidiary of such party do not have a majority
of the voting interests in such partnership), or (y) at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries,
(ii) any reference to any event, change or effect
being "material" with respect to any entity means an event, change or effect
which is material in relation to the condition (financial or otherwise),
properties, assets, liabilities, businesses, results of operations or prospects
of such entity and its Subsidiaries taken as a whole,
(iii) the term "material adverse effect" means, with
respect to any entity, a material adverse effect (whether or not required to be
accrued or disclosed under Statement of Financial Accounting Standards No. 5
("SFAS No. 5")) (A) on the condition (financial or otherwise), properties,
assets, liabilities, businesses, results of operations or prospects of such
entity and its Subsidiaries taken as a whole (but does not include any such
effect resulting from or attributable to any action or omission by CGB or
Enterbank or any Subsidiary of either of them taken with the prior written
consent of the other parties hereto, in contemplation of the transactions
contemplated hereby), or (B) on the ability of such entity to perform its
obligations under the Transaction Agreements (as defined below) on a timely
basis,
(iv) the term "Transaction Agreements" shall mean
this Agreement and the Agreement of Merger,
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(v) the term "knowledge" or "to the best knowledge of" a
party hereto means the actual knowledge of a director or executive officer of a
party after reasonable inquiry under all the circumstances,
(vi) the term "Affiliate" means, as to any person, a person
which controls, is controlled by or is under common control with such person,
and
(vii) the term "person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(b) CAPITAL STRUCTURE; OWNERSHIP OF CGB COMMON STOCK.
(i) The authorized capital stock of CGB consists of
2,000,000 shares of CGB Common Stock, par value $1.00 per share and 50,000
shares of preferred stock, par value $100 per share (the "CGB Preferred Stock"),
of which (A) as of December 27, 1999, 836,854 shares of CGB Common Stock were
outstanding (none having been issued thereafter except from the exercise of CGB
Options) and (B) as of December 27, 1999, no shares of CGB Preferred Stock were
outstanding and none have been issued thereafter. All outstanding shares of CGB
Common Stock have been duly authorized and validly issued and are fully paid and
non-assessable and not subject to preemptive rights.
(ii) The authorized capital stock of FCB consists of
1,000,000 shares of FCB Common Stock, $60 par value per share, of which 66,900
shares are outstanding. All outstanding shares of FCB Common Stock have been
duly authorized and validly issued and are fully paid and non-assessable (except
to the extent provided in the National Bank Act) and not subject to preemptive
rights.
(iii) Except for this Agreement and except as set forth in
Section 3.1(b)(iii) of the disclosure schedule of CGB delivered to Enterbank on
the date hereof (the "CGB Disclosure Schedule"), (A) there are no options,
warrants, calls, rights, commitments or agreements of any character to which CGB
or any of its Subsidiaries or Affiliates (as defined herein) is a party or by
which any of the foregoing are bound obligating CGB or any of its Subsidiaries,
including FCB, or Affiliates to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of CGB or any of its
Subsidiaries or obligating CGB or any of its Subsidiaries or Affiliates to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement, (B) there are no outstanding contractual obligations of CGB or any of
its Subsidiaries or Affiliates to repurchase, redeem or otherwise acquire any
shares of capital stock of CGB or any of its Subsidiaries and (C) there are no
outstanding securities of any kind convertible into or exchangeable for the
capital stock of CGB or any of its Subsidiaries (or any interest therein).
Except as set forth in Section 3.1(b)(iii) of the CGB Disclosure Schedule, there
is no agreement of any kind to which CGB or FCB is a party and, to the knowledge
of CGB (without inquiry), no other agreement of any kind, in each case that
gives any person any right to participate in the equity, value or income of, or
to vote
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(x) in the election of directors or officers of, or (y) otherwise with respect
to the affairs of, CGB or any of its Subsidiaries.
(iv) Neither CGB nor any of its Subsidiaries or, to the best
knowledge of CGB, its Affiliates, beneficially owns, directly or indirectly, any
shares of capital stock of Enterbank, securities of Enterbank convertible into,
or exchangeable for, such shares, or options, warrants or other rights to
acquire such shares (regardless of whether such securities, options, warrants or
other rights are then exercisable or convertible), nor is CGB or any of such
Subsidiaries or Affiliates a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
shares of capital stock of Enterbank or any such other securities, options,
warrants or other rights.
(v) No shares of CGB Common Stock are held directly or
indirectly by CGB or its Subsidiaries in trust accounts, managed accounts and
the like or otherwise held in a fiduciary or nominee capacity (any such shares,
and shares of Enterbank Common Stock which are similarly held, whether held
directly or indirectly by CGB or Enterbank or any of their respective
Subsidiaries, as the case may be, being referred to herein as "Trust Account
Shares") and no shares of CGB Common Stock are held by CGB or its Subsidiaries
in respect of a debt previously contracted (any such shares and shares of
Enterbank Common Stock which are similarly held, whether held directly or
indirectly by CGB or Enterbank or any of their respective Subsidiaries, as the
case may be, being referred to herein as "DPC Shares").
(c) AUTHORITY; NO VIOLATION.
(i) CGB has all requisite corporate power and authority to
enter into this Agreement and the other Transaction Agreements and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of CGB, other than the approval of this
Agreement and the Agreement of Merger by the holders of a majority of the
outstanding shares of CGB Common Stock (the "CGB Shareholder Approval"). The CGB
Shareholder Approval is the only vote of any class or series of CGB capital
stock necessary to approve this Agreement and the other Transaction Agreements
and the consummation of the transactions contemplated hereby and thereby. This
Agreement and the other Transaction Agreements have been duly executed and
delivered by CGB, and (assuming due authorization, execution and delivery by
Enterbank) constitute the valid and binding obligations of CGB, enforceable
against CGB in accordance with their terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(ii) Except as set forth in Section 3.1(c)(ii) of the CGB
Disclosure Schedule, the execution and delivery by CGB of this Agreement and the
other Transaction Agreements does not or will not when delivered, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or constitute
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a default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on any assets (any such conflict,
violation, default, right of termination, cancellation or acceleration, loss or
creation, a "Violation") pursuant to, (x) any provision of the Articles of
Incorporation or Association or By-laws or comparable organizational documents
of CGB or any Subsidiary of CGB, or (y) subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit agreement,
note, mortgage, indenture, lease, CGB Benefit Plan (as defined in Section
3.1(k)) or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to CGB or any Subsidiary of CGB or its properties or
assets, which Violation, in the case of clause (y), individually or in the
aggregate, would have a material adverse effect on CGB.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity"), is required by or with respect to CGB or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement or the other Transaction Agreements or the consummation by CGB of the
transactions contemplated hereby or thereby, which, if not made or obtained,
would have a material adverse effect on CGB or on the ability of CGB to perform
its obligations hereunder or thereunder on a timely basis, or on Enterbank's
ability to own, possess or exercise the rights of an owner with respect to the
business and assets of CGB and its Subsidiaries, except for (A) the filing of
applications and notices with the Board of Governors of the Federal Reserve
System (the "Federal Reserve") under the BHC Act and approval of same, (B) the
filing by Enterbank with the Securities and Exchange Commission (the "SEC") of a
joint proxy statement (the "Proxy Statement") in definitive form relating to the
meetings of the shareholders of CGB and Enterbank to be held to approve and
adopt this Agreement and the transactions contemplated hereby, (C) such
applications, filings, authorizations, orders and approvals as may be required
by the Office of the Comptroller of the Currency ("OCC") and the Kansas
Department of Banking and (D) the filing with the Secretaries of States of
Delaware and Kansas of the Agreement of Merger.
(d) FINANCIAL STATEMENTS. CGB has previously delivered to
Enterbank copies of (a) the consolidated statements of financial condition of
CGB and its Subsidiaries, as of December 31, for the fiscal years 1997 and 1998,
and the related consolidated statements of operations, comprehensive income
(loss), shareholders' equity and cash flows for the fiscal years 1996 through
1998, inclusive, in each case accompanied by the report of Deloitte & Touche LLP
(of KPMG LLP with respect to 1996), independent auditors with respect to CGB
(the consolidated financial statements of CGB and its Subsidiaries referred to
in this clause being hereinafter sometimes referred to as the "CGB Consolidated
Financial Statements") and (b) the unaudited condensed consolidated statement of
financial position of CGB and its Subsidiaries as of September 30, 1999 and the
unaudited condensed consolidated statements of operations of CGB and its
Subsidiaries for the nine-month periods ended September 30, 1998 and 1999 (the
unaudited
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condensed consolidated financial statements of CGB and its Subsidiaries referred
to in this clause being sometimes hereinafter referred to as the "CGB Interim
Financial Statements"). Each of the financial statements referred to in this
Section 3.1(d) (including the related notes, where applicable) fairly present,
and the financial statements referred to in Section 5.12 hereof will fairly
present (subject, in the cases of the CGB Interim Financial Statements, to
normal recurring and year-end audit adjustments, none of which are expected to
be material in nature or amount and the fact that the CGB Interim Financial
Statements do not contain footnotes), the results of the consolidated operations
and changes in shareholders' equity and consolidated financial condition of CGB
and its Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth. Each of such statements (including the related notes,
where applicable) complies, and the financial statements referred to in Section
5.12 hereof will comply, in all material respects, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 5.12
will be, prepared, in all material respects, in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except in each case as indicated in such statements or in
the notes thereto or, in the case of the CGB Interim Financial Statements
(subject to normal recurring and year-end audit adjustments), as permitted by
Form 10-Q. The books and records of CGB and its Subsidiaries have been, and are
being, maintained where required in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements and, where such
books and records purport to reflect any transactions, the transactions so
reflected are actual transactions.
(e) CGB INFORMATION SUPPLIED. None of the information supplied
or to be supplied by CGB for inclusion or incorporation by reference in the
Proxy Statement relating to the meeting of the shareholders of CGB (the "CGB
Shareholders' Meeting") at which the CGB Shareholder Approval will be sought or
for inclusion in a registration statement on Form S-4 (the "S-4") will, at the
date of mailing to shareholders of CGB and at the time of the CGB Shareholders'
Meeting, (i) contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading or (ii) at the time and in the light of the circumstances
under which it is made, 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 false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of a proxy for the
CGB Shareholders' Meeting which has become false or misleading.
(f) COMPLIANCE WITH APPLICABLE LAWS. CGB and its Subsidiaries
hold, and at all relevant times have held, all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities which are material
to the operation of the businesses of CGB and its Subsidiaries, taken as a whole
(the "CGB Permits"). CGB and its Subsidiaries are in compliance and have
complied with the terms of the CGB Permits, except where the failure so to
comply, individually or in the aggregate, would not have a material adverse
effect on CGB. The businesses of CGB and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation
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of any Governmental Entity, except for possible violations which, individually
or in the aggregate, do not, and, insofar as reasonably can be foreseen, in the
future will not, have a material adverse effect on CGB. Except for routine
examinations by Federal or state Governmental Entities charged with the
supervision or regulation of banks or bank holding companies or engaged in the
insurance of bank deposits ("Bank Regulators"), no investigation by any
Governmental Entity with respect to CGB or any of its Subsidiaries is pending or
threatened, and no proceedings by any Bank Regulator are pending or threatened
which seek to revoke or materially limit any of the CGB Permits. CGB and its
Subsidiaries do not offer or sell insurance and/or securities products,
including but not limited to annuity products, for their own account or the
account of others.
(g) LITIGATION. Except as set forth in Section 3.1(g) of the
CGB Disclosure Schedule, to the best knowledge of CGB, there is no suit, action,
proceeding, arbitration or investigation ("Litigation") pending to which CGB or
any Subsidiary of CGB is a party or by which any of such persons or their
respective assets may be bound or, to the best knowledge of CGB, threatened
against or affecting CGB or any Subsidiary of CGB, or challenging the validity
or propriety of the transactions contemplated hereby which, if adversely
determined, would, individually or in the aggregate, have or reasonably be
expected to have a material adverse effect on CGB or on the ability of CGB to
perform its obligations under this Agreement in a timely manner, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against CGB or any Subsidiary of CGB.
(h) TAXES. CGB and each of its Subsidiaries have timely filed
all tax returns required to be filed by any of them and all such tax returns
were, when filed, correct and complete in all material respects. CGB and each of
its Subsidiaries have timely paid (or CGB has paid on their behalf), or have set
up an adequate reserve for the payment of, all taxes required to be paid
(whether or not shown as due on such returns), and the most recent financial
statements that have been delivered to Enterbank reflect an adequate reserve
(other than reserves for deferred taxes established to reflect differences
between tax and book basis of assets and liabilities) for all taxes accrued but
not yet due and owing, by CGB and its Subsidiaries accrued through the date of
such financial statements. CGB and its Subsidiaries file tax returns in all
jurisdictions where required to file tax returns. No material deficiencies for
any taxes have been asserted or assessed against CGB or any of its Subsidiaries
that are not adequately reserved for (other than reserves for deferred taxes
established to reflect differences between tax and book basis of assets and
liabilities). Except as set forth in Section 3.1(h) of the CGB Disclosure
Schedule: (i) there are no liens with respect to taxes upon any of the assets or
properties of CGB and its Subsidiaries, other than with respect to taxes not yet
due and payable, (ii) no material issue relating to taxes of CGB and its
Subsidiaries has been raised in writing by any taxing authority in any audit or
examination which can result in a proposed adjustment or assessment by a
governmental authority in a taxable period (or portion thereof) ending on or
before the Closing Date nor, to the best knowledge of CGB, does any basis exist
for the raising of any such issue, (iii) CGB and its Subsidiaries have duly and
timely withheld from all payments (including employee salaries, wages and other
compensation) and paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over for all periods for which the statute
of limitations has not expired under all applicable laws and regulations, (iv)
as of the Closing Date,
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none of CGB nor any of its Subsidiaries shall be a party to, be bound by or have
any obligation under, any tax sharing agreement or similar contract or
arrangement or any agreement that obligates any of them to make any payment
computed by reference to the taxes, taxable income or taxable losses of any
other person, (v) except as set forth on Section 3.1(h) of the CGB Disclosure
Schedule, there is no contract or agreement, plan or arrangement by CGB or any
of its Subsidiaries covering any person that, individually or collectively,
could give rise to the payment of any amount that would not be deductible by CGB
or any of its Subsidiaries by reason of section 280G of the Code, (vi) CGB and
its Subsidiaries have collected all material sales and use taxes required to be
collected, and have remitted, or will remit on a timely basis, such amounts to
the appropriate governmental authorities, or have been furnished properly
completed exemption certificates and have maintained all such records and
supporting documents in all material respects in the manner required by all
applicable sales and use tax statutes and regulations for all periods for which
the statute of limitations has not expired, (vii) neither CGB nor any of its
Subsidiaries has been a United States real property holding corporation within
the meaning of section 897(c)(2) of the Code during the applicable period
specified in section 897(c)(1)(A)(ii) of the Code, and (viii) none of CGB nor
any of its Subsidiaries (A) has been a member of an affiliated group (other than
the group to which they are currently members) filing a consolidated federal
income tax return or (B) has any liability for the taxes of any person (other
than the members of such current group) under Treasury Regulation section
1.1502-6(a) (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise. For the purpose of this
Agreement, the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include, except where the context otherwise
requires, all Federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, withholding, excise,
occupancy, custom, duty, capital stock, ad valorem, value added, estimated,
stamp, alternative, environmental, any taxes imposed under Subchapter H of
Chapter I of Subtitle A of the Code, and other taxes, duties or assessments of
any nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts. As used in this Agreement, the term "Tax
return" shall mean any return, declaration, report, claim for refund or
information return or statement relating to taxes, including any schedule or
attachment thereto, and including any amendment thereof. None of CGB nor any of
its Subsidiaries has filed a consent to the application of section 341(f) of the
Code.
(i) CERTAIN AGREEMENTS. Section 3.1(i) of the CGB Disclosure
Schedule sets forth a listing of all of the following contracts and other
agreements, oral or written (which are currently in force or which may in the
future be operative in any respect) to which CGB or any of its Subsidiaries is a
party or by or to which CGB or any of its Subsidiaries or any of their
respective assets or properties are bound or subject: (i) consulting agreements
not terminable on six months or less notice involving the payment of more than
$25,000 per annum, or union, guild or collective bargaining agreements covering
any employees in the United States, (ii) agreements with any officer or other
key employee of CGB or any of its Subsidiaries (x) providing any term of
employment or (y) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving CGB of
the nature contemplated by this Agreement, (iii) any agreement or plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this
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Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement, (iv) contracts
and other agreements for the sale or lease (other than where CGB or any of its
Subsidiaries is a lessor) of any assets or properties (other than in the
ordinary course of business) or for the grant to any person (other than to CGB
or any of its Subsidiaries) of any preferential rights to purchase any assets or
properties, (v) contracts and other agreements relating to the acquisition by
CGB or any of its Subsidiaries of any operating business or entity or any
interest therein, (vi) contracts or other agreements under which CGB or any of
its Subsidiaries agrees to indemnify any party, other than in the ordinary
course of business, consistent with past practice, or to share a tax liability
of any party, (vii) contracts and other agreements containing covenants
restricting CGB or any of its Subsidiaries from competing in any line of
business or with any person in any geographical area or requiring CGB or any of
its Subsidiaries to engage in any line of business, (viii) contracts or other
agreements (other than contracts in the ordinary course of their banking
business) relating to the borrowing of money by CGB or any of its Subsidiaries,
or the direct or indirect guaranty by CGB or any of its Subsidiaries of any
obligation for, or an agreement by CGB or any of its Subsidiaries to service,
the repayment of borrowed money, or any other contingent obligations of CGB or
any of its Subsidiaries in respect of indebtedness of any other person, and (ix)
any other material contract or other agreement whether or not made in the
ordinary course of business, including any contract which would be required to
be filed pursuant to Item 601(b)(10) of Regulation S-K of the SEC. There have
been delivered or made available to Enterbank true and complete copies of all of
the contracts and other agreements set forth in Section 3.1(i) of the CGB
Disclosure Schedule and in any other Section of the CGB Disclosure Schedule.
Except as set forth in Section 3.1(i) of the CGB Disclosure Schedule, each such
contract and other agreement is in full force and effect and constitutes a
legal, valid and binding obligation of CGB or its Subsidiaries, as the case may
be, and to the best knowledge of CGB, each other party thereto, enforceable in
accordance with its terms subject, as to enforceability, to bankruptcy,
insolvency, and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Neither CGB nor any
Subsidiary of CGB has received any notice, whether written or oral, of
termination or intention to terminate from any other party to such contract or
agreement. None of CGB or any of its Subsidiaries or (to the best knowledge of
CGB) any other party to any such contract or agreement is in violation or breach
of or default under any such contract or agreement (or with or without notice or
lapse of time or both, would be in violation or breach of or default under any
such contract or agreement), which violation, breach or default has had or would
have, individually or in the aggregate, a material adverse effect on CGB.
(j) BENEFIT PLANS.
(i) Section 3.1(j)(i) of the CGB Disclosure Schedule
contains a true and complete list of each "employee benefit plan" (within the
meaning of section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), including, without limitation, multiemployer plans
(within the meaning of ERISA section 3(37)), and all stock purchase, stock
option, severance, employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation, employee stock ownership,
retirement, profit sharing and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not
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subject to ERISA, and whether formal or informal, oral or written (all the
foregoing being herein called "Benefit Plans"), that are sponsored or are being
maintained or contributed to, or required to be contributed to, by CGB or any of
its Subsidiaries (the "CGB Benefit Plans"). No CGB Benefit Plan is a
multiemployer plan or is subject to a collective bargaining agreement.
(ii) With respect to each CGB Benefit Plan, CGB has
delivered to Enterbank a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement or other funding instrument; (B) the
most recent determination letter; (C) any summary plan description and other
written communications (or a description of any oral communications) by CGB or
any of its Subsidiaries to any of their respective employees concerning the
extent of the benefits provided under any CGB Benefit Plan; and (D) except as
described in Section 3.1(j)(ii) of the CGB Disclosure Schedule, for the two most
recent years (I) the Form 5500 and attached schedules; (II) audited financial
statements; and (III) actuarial valuation reports.
(iii) Except as set forth in Section 3.1(j)(iii) of the
CGB Disclosure Schedule, (A) each CGB Benefit Plan has been established and
administered in accordance with its terms, and in compliance in all material
respects with the applicable provisions of ERISA, the Code and other applicable
laws, rules and regulations; (B) each CGB Benefit Plan which is intended to be
qualified within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification and nothing
has occurred, whether by action or failure to act, which would cause the loss of
such qualification; (C) with respect to any CGB Benefit Plan, no audits,
actions, suits or claims (other than routine claims for benefits in the ordinary
course) are pending or threatened, and no facts or circumstances exist which
could give rise to any such audits, actions, suits or claims; (D) neither CGB
nor any other party has engaged in a prohibited transaction which could subject
CGB or any of its Subsidiaries, or the Surviving Corporation, to any taxes,
penalties or other liabilities under Code section 4975 or ERISA sections 409 or
502(i); (E) no event has occurred and no condition exists that could subject CGB
or any of its Subsidiaries, or the Surviving Corporation, either directly or by
reason of any such entity's affiliation with any member of any such entity's
Controlled Group (defined as any organization which is a member of a controlled
group of organizations within the meaning of Code sections 414(b), (c), (m) or
(o)), to any tax, fine, liability or penalty imposed by ERISA, the Code or other
applicable laws, rules and regulations; (F) all insurance and Pension Benefit
Guaranty Corporation ("PBGC") premiums required to be paid with respect to CGB
Benefit Plans through the Closing Date have been or will be paid prior thereto
and adequate reserves will have been provided for on CGB's consolidated
statement of financial condition as of the month end immediately prior to the
Closing Date for any premiums (or portions thereof) attributable to service on
or prior to the Closing Date; (G) all contributions required to be made prior to
the Closing Date under the terms of each CGB Benefit Plan, the Code, ERISA or
other applicable laws, rules and regulations have been or will be timely made
and adequate reserves will have been provided for on CGB's consolidated
statement of financial condition as of the month end immediately prior to the
Closing Date for all benefits attributable to service on or prior to the Closing
Date; (H) no CGB Benefit Plan has incurred any "accumulated funding deficiency"
as such term is defined in ERISA section 302 and (including, but not limited to
the voting of any securities
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held pursuant to an CGB Benefit Plan) Code section 412 (whether or not waived);
(I) the consummation of this Agreement will not result in a nonexempt prohibited
transaction or a breach of fiduciary duty under ERISA; and (J) no CGB Benefit
Plan provides health coverage beyond the termination of employment except as
provided under Code section 4980B.
(iv) Except as set forth in Section 3.1(j)(iv) of the CGB
Disclosure Schedule, with respect to each of the CGB Benefit Plans which is
subject to Title IV of ERISA, as of the Closing Date, the assets of each such
Plan shall be at least equal in value to the present value of the accrued
benefits (vested and unvested) of the participants in such Plan on a termination
and projected basis, based on the actuarial methods and assumptions indicated in
the most recent actuarial valuation reports.
(v) Except as set forth on Section 3.1(j)(v) of the CGB
Disclosure Schedule, no CGB Benefit Plan exists which provides for an increase
in benefits on or after the Closing Date or could result in the payment to any
employee of CGB or any of its Subsidiaries of any money or other property or
rights or accelerate or provide any other rights or benefits to any such
employee as a result of the transactions contemplated by this Agreement. The
aggregate amount of payments due from CGB under all such contracts and the
amount due under each such contract, at the Effective Time, are as set forth in
the schedule included in Section 3.1(j)(v) of the CGB Disclosure Schedule.
Except as set forth in Section 3.1(j)(v) of the CGB Disclosure Schedule, none of
such payments will constitute an "excess parachute" payment within the meaning
of Code section 280G.
(k) SUBSIDIARIES. Section 3.1(k) of the CGB Disclosure
Schedule lists all the Subsidiaries of CGB. CGB owns, directly or indirectly,
beneficially and of record 100% of the issued and outstanding voting securities
of each such Subsidiary. All of the shares of capital stock of each of the
Subsidiaries held by CGB or by another of its Subsidiaries are fully paid and
nonassessable and are owned by CGB or one of its Subsidiaries free and clear of
any lien, claim or other encumbrance. Neither CGB nor any of its Subsidiaries
owns any shares of capital stock or other equity securities of any person (other
than, in the case of CGB, the capital stock of its Subsidiaries and, in the case
of such Subsidiaries, shares or equity securities acquired in satisfaction of
debts previously contracted in good faith in the ordinary course of their
banking business).
(l) AGREEMENTS WITH BANK OR OTHER REGULATORS. Except as set
forth in Section 3.1(l) of the CGB Disclosure Schedule, neither CGB nor any
Subsidiary of CGB is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board resolutions at
the request of, any Bank Regulator which restricts materially the conduct by CGB
or its Subsidiaries of their businesses, or in any manner relates to their
capital adequacy, credit policies, community reinvestment, loan underwriting or
documentation or management, nor has CGB or any such Subsidiary been advised by
any Bank Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of
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understanding, extraordinary supervisory letter, commitment letter or similar
submission, or any such board resolutions.
(m) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 3.1(m) of the CGB Disclosure Schedule, since September 30, 1999, (i)
there has not been any change, or any event involving a prospective change, in
the business, financial condition or results of operations or prospects of CGB
or any of its Subsidiaries which has had, or would be reasonably likely to have,
a material adverse effect on CGB, and (ii) CGB and each of its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices and neither CGB nor any of its Subsidiaries has taken any
action or entered into any transaction, and no event has occurred, that would
have required Enterbank's consent pursuant to Section 4.1 of this Agreement if
such action had been taken, transaction entered into or event had occurred, in
each case, after the date of this Agreement, nor has CGB or any of its
Subsidiaries entered into any agreement, plan or arrangement to do any of the
foregoing.
(n) UNDISCLOSED LIABILITIES. Except as set forth in Section
3.1(n) of the CGB Disclosure Schedule, and except (i) for those liabilities or
obligations that are fully reflected or reserved against in the condensed
consolidated statement of financial condition at September 30, 1999 of CGB
referred to in Section 3.1(d) or (ii) for liabilities or obligations incurred in
the ordinary course of business consistent with past practice since September
30, 1999 and which are not material to CGB and its Subsidiaries taken as a
whole, none of CGB or any of its Subsidiaries has incurred any liability or
obligation of any nature whatsoever (whether absolute, accrued or contingent or
otherwise and whether due or to become due) that, either alone or when combined
with all similar liabilities or obligations, has had, or would have, a material
adverse effect on CGB. No agreement pursuant to which any loans or other assets
have been or will be sold by CGB or any Subsidiary entitle the buyer of such
loans or other assets, unless there is material breach of a representation or
covenant by CGB or its Subsidiaries not relating to the payment or other
performance by an obligor of such loan or other asset of its obligations
thereunder, to cause CGB or its Subsidiaries to repurchase such loan or other
asset or the buyer to pursue any other form of recourse against CGB or its
Subsidiaries.
(o) GOVERNMENTAL REPORTS. CGB and each of its Subsidiaries
have timely filed all material reports, registrations and statements, together
with any amendments required to be made with respect thereto, that they were
required to file since January 1, 1995 with any Governmental Entity and have
paid all fees and assessments due and payable in connection therewith. Except as
set forth in Section 3.1(o) of the CGB Disclosure Schedule and except for normal
examinations conducted by a Governmental Entity in the regular course of
business of CGB and its Subsidiaries, no Governmental Entity has initiated any
proceeding or, to the best knowledge of CGB, investigation into the business or
operations of CGB or any of its Subsidiaries since January 1, 1995. Except as
set forth in Section 3.1(o) of the CGB Disclosure Schedule, there is no material
unresolved violation, criticism or exception by any Governmental Entity with
respect to any report or statement relating to any examinations of CGB or any of
its Subsidiaries.
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(p) ENVIRONMENTAL LIABILITY.
(i) Except as set forth in Section 3.1(p) of the CGB
Disclosure Schedule, to the best knowledge of CGB, there are no pending or
threatened claims, actions or proceedings against CGB or FCB relating to:
(A) any asserted liability of CGB or any of its
Affiliates or any current or prior owner, operator, occupier or user of any Real
Property (as defined herein) under any Environmental Law (as defined herein),
including without limitation, the terms and conditions of any permit, license,
authority, settlement or other obligation arising under any Environmental Law;
(B) any handling, storage, use or disposal of
Hazardous Substances (as defined herein) on, under or within any Real Property
or any transportation or removal of Hazardous Substances to or from any Real
Property;
(C) any actual or threatened discharge, release or
emission of Hazardous Substances from, on, under or within any Real Property
into the air, water, surface water, groundwater, land surface or subsurface
strata; or
(D) any actual or asserted claims for personal
injuries, illness or damage to real or personal property related to or arising
out of exposure to Hazardous Substances discharged, released or emitted from,
on, under, within or into, or transported from or to, any Real Property.
(ii) Except as set forth in Section 3.1(p) of the CGB
Disclosure Schedule, to the best knowledge of CGB, no Hazardous Substances are
present on, under or within any Real Property (except those Hazardous Substances
used in the normal course of operating or maintaining the business of CGB or any
Subsidiary of CGB) and, except as set forth in Section 3.1(p) of the CGB
Disclosure Schedule, the presence of these Hazardous Substances does not violate
any Environmental Law. Except as set forth in Section 3.1(p) of the CGB
Disclosure Schedule, to the best knowledge of CGB, there are no storage tanks
underground or otherwise present on any Real Property and all such tanks set
forth in Section 3.1(p) of the CGB Disclosure Schedule comply in all material
respects with applicable law, all permits in respect thereof are in full force
and effect and there have been no releases or discharges of Hazardous Substances
from such tanks to the environment.
(iii) To the best knowledge of CGB, except as set forth in
Section 3.1(p) of the CGB Disclosure Schedule, no Hazardous Substances have
been, or have been threatened to be, discharged, released or emitted in a
Reportable Quantity (as defined herein) into the air, water, surface water,
groundwater, land surface or subsurface strata or transported to or from the
Real Property except in accordance with Environmental Laws (in particular, but
without limitation, in accordance with any permits issued pursuant thereto). To
the best knowledge of CGB, all notifications, remediation, removal or other
response actions of any kind whatsoever, in respect of
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such discharges, releases and emissions which are required by Environmental
Laws, and by applicable agreements with third parties, have been made within the
time limits prescribed by such Environmental Laws and such third party
agreements. Copies of all such notifications or documents relating to any
remediation, removal or response action have previously been provided to
Enterbank.
(iv) To the best knowledge of CGB, except as set forth in
Section 3.1(p) of the CGB Disclosure Schedule, CGB and its Affiliates are in
compliance, in all material respects, with all Environmental Laws related to the
ownership, operation, use and occupation of the Real Property.
(v) To the best knowledge of CGB, except as set forth in
Section 3.1(p) of the CGB Disclosure Schedule, no part of any Real Property is
listed on CERCLIS or the National Priorities List created pursuant to the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, as a site containing Hazardous Substances.
(vi) CGB has provided Enterbank with copies of all material
notices posted by it under any Environmental Law with respect to the Real
Property at which the business of CGB or its Subsidiaries is conducted.
(vii) All properties held by CGB or its Subsidiaries under
leases are held by them under valid, binding and enforceable leases, with such
exceptions as are not material and do not interfere with the conduct of the
business of CGB, and CGB enjoys quiet and peaceful possession of such leased
property. CGB and its Subsidiaries are not in default in any material respect
under any material lease, agreement or obligation regarding their properties to
which they are a party or by which they are bound.
(viii) Except as set forth in Section 3.1(p) of the CGB
Disclosure Schedule, all of CGB's and its Subsidiaries' rights and obligations
under the leases referred to in Section 3.1(p)(vii) above do not require the
consent of any other party to the transactions contemplated by this Agreement.
(ix) For purposes of this Section 3.1(p) and Section 3.2(p)
only, the following terms shall have the indicated meaning:
"Business" means the business conducted at any Real Property (as
defined below).
"Environmental Law" means any and all applicable federal, state and
local laws (whether under common law, statute, rule, regulation or otherwise),
requirements under permits issued with respect thereto, and other orders,
decrees, judgments, directives or other requirements of any governmental
authority relating to the environment, or to any Hazardous Substances.
"Hazardous Substances" means any chemical, compound, material, mixture,
living organism or substance that is now defined or listed in, or otherwise
classified or regulated in any way pursuant
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to, any Environmental Laws as a "hazardous waste," "hazardous substance,"
"hazardous material," "extremely hazardous waste," "infectious waste," "toxic
substance," or "toxic pollutants," such materials, including without limitation,
oil, waste oil, petroleum, waste petroleum, polychlorinated biphenyls ("PCBs"),
asbestos, radon, natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel (or mixtures of natural gas and such synthetic
gas).
"Real Property" means all interests in real property of CGB or its
Subsidiaries (with respect to Section 3.1) or Enterbank or its Subsidiaries
(with respect to Section 3.2), including without limitation, interests in fee,
leasehold, interest as mortgagee or secured party, or option or contract to
purchase or acquire.
"Reportable Quantity" means the quantity set forth in 40 C.F.R. Part
302 as it is in effect on the effective date of this Agreement for the
particular Hazardous Substances set forth therein. With respect to Hazardous
Substances not listed in that part, if any, "reportable quantity" means that
quantity which, if released, would be required to be reported to a Governmental
Entity pursuant to applicable Environmental Law. "Reportable Quantity" shall be
determined based on a single release or series of related releases or threatened
releases.
(q) PROPERTIES. Except as set forth in Section 3.1(q) of the
CGB Disclosure Schedule, CGB or its Subsidiaries (i) has good and marketable
title to all Real Property owned in fee, and good title to all other properties
and assets reflected in the CGB Consolidated Financial Statements as being owned
by CGB or its Subsidiaries or acquired after the date thereof which are material
to the business of CGB on a consolidated basis (except properties sold or
otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all claims, liens, charges, security interests or
encumbrances of any nature whatsoever except (A) statutory liens securing
payments not yet delinquent, (B) liens on assets of FCB securing deposits
incurred in the ordinary course of its banking business and (C) such
imperfections or irregularities of title, claims, liens, charges, security
interests or encumbrances as do not materially affect the use of the properties
or assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties and (ii) is the lessee of all leasehold
estates reflected in the CGB Consolidated Financial Statements or acquired after
the date thereof which are material to its business on a consolidated basis
(except for leases that have expired by their terms since the date thereof) and
is in possession of the properties purported to be leased thereunder, and each
such lease is valid without material default thereunder by the lessee or, to the
best knowledge of CGB, the lessor. Except as set forth in Section 3.1(q) of the
CGB Disclosure Schedule, all real properties owned by CGB or its Subsidiaries
are owned in accordance in all material respects with all requirements of
applicable rules, regulations and policies of the Bank Regulators.
(r) TRANSACTIONS WITH AFFILIATES. Except as set forth in
Section 3.1(r) of the CGB Disclosure Schedule and except for those arrangements,
contracts, agreements or transactions which were entered into in the ordinary
course of business, since December 31, 1998, neither CGB nor FCB has extended
credit, committed to extend credit or transferred any asset to or assumed or
guaranteed any liability of or entered into any other transactions with the
employees or directors of
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CGB or FCB, or any spouse or child of any of them, or to any of their
"affiliates" or "associates" as such terms are defined in Rule 405 under the
Securities Act of 1933 (the "Securities Act"). Any such transactions, including
those in the ordinary course of business, have been on terms no less favorable
than those which would prevail in an arm's-length transaction with an
independent third party.
(s) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement.
(t) INTELLECTUAL PROPERTY. Except as set forth in Section
3.1(t) of the CGB Disclosure Schedule, CGB and its Subsidiaries own or have a
valid license to use all trademarks, service marks and trade names (including
any registrations or applications for registration of any of the foregoing)
(collectively, the "CGB Intellectual Property") necessary to carry on their
business substantially as currently conducted, except for such CGB Intellectual
Property the failure of which to own or validly license, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect on
CGB. Neither CGB nor any such Subsidiary has received any notice of infringement
of or conflict with, and, to the best knowledge of CGB, there are no
infringements of or conflicts with, the rights of others with respect to the use
of any CGB Intellectual Property that, individually or in the aggregate, in
either such case, would reasonably be expected to have a material adverse effect
on CGB.
(u) POOLING OF INTERESTS. Except as set forth in Section
3.1(u) of the CGB Disclosure Schedule, as of the date of this Agreement, CGB has
no reason (in respect to matters pertaining to CGB existing as of the date
hereof or expected to exist as of the Closing Date) to believe that CGB will not
qualify for pooling of interests treatment for accounting purposes under GAAP as
presently in effect.
(v) OPINION OF FINANCIAL ADVISOR. CGB has received the written
opinion of Fister & Associates, Inc. dated the date hereof, to the effect that,
as of such date, subject to the limitations and conditions contained therein,
the consideration to be received by the holders of CGB Common Stock pursuant to
the Merger is fair to such holders from a financial point of view.
(w) COMMUNITY REINVESTMENT ACT COMPLIANCE. FCB is in
substantial compliance with the applicable provisions of the Community
Reinvestment Act of 1977 and the regulations promulgated thereunder
(collectively, the "CRA") and has received a CRA rating of "satisfactory" from
the OCC in its most recent examination, and neither CGB nor FCB has any
knowledge of the existence of any fact or circumstance or set of facts or
circumstances which could be reasonably expected to result in FCB failing to be
in substantial compliance with such provisions or having its current rating
lowered.
(x) YEAR 2000 READINESS. There have been no material adverse
effects on either CGB or its Subsidiaries as a result of the date change for any
date on or after January 1, 2000, including leap year calculations, and that, to
the extent applicable to normal operating specifications,
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CGB's and its Subsidiaries' computer systems and equipment have in all material
respects accurately accepted, stored, retrieved, calculated, compared and
otherwise processed dates of January 1, 2000 and later.
(y) INSURANCE. CGB has previously delivered to Enterbank a
list identifying all insurance policies maintained on behalf of CGB and its
Subsidiaries (other than mortgage, title and other similar policies for the
benefit of CGB or its Subsidiaries as mortgagees under residential mortgage
loans). All of the material insurance policies and bonds maintained by or for
the benefit of CGB and its Subsidiaries are in full force and effect, to the
best knowledge of CGB, CGB and its Subsidiaries are not in default thereunder,
and all material claims thereunder have been filed in due and timely fashion,
and neither CGB nor any of its Subsidiaries has received notice that any of such
material claims have been or will be denied. The insurance policies and bonds
maintained by CGB and its Subsidiaries are written by reputable insurers and are
in such amounts, cover such risks and have such other terms as is customary for
banks and bank holding companies comparable in size and operations to CGB and
its Subsidiaries. Since December 31, 1998, there has not been any damage to,
destruction of, or loss of any assets of CGB and its Subsidiaries (whether or
not covered by insurance) that could have a material adverse effect on CGB.
Neither CGB nor any of its Subsidiaries has received any notice of a premium
increase or cancellation with respect to any of its insurance policies or bonds,
and within the last three years, neither CGB nor any of its Subsidiaries has
been refused any insurance coverage sought or applied for, and CGB has no reason
to believe that existing insurance coverage cannot be renewed as and when the
same shall expire, upon terms and conditions as favorable as those presently in
effect, other than possible increases in premiums or unavailability in coverage
that have not resulted from an extraordinary loss experience of CGB or any CGB
Subsidiary.
(z) LOANS AND OTHER ASSETS.
(i) CGB has disclosed to Enterbank prior to the date
hereof the amounts of all loans, leases, other extensions of credit, commitments
or other interest-bearing assets presently owned by CGB or any of its
Subsidiaries that have been classified by any Bank Regulator, CGB's independent
auditors, or the management of CGB or any Subsidiary of CGB as "Other Loans
Especially Mentioned," "Substandard," "Doubtful," or "Loss", or classified using
categories with similar import, and will have disclosed promptly to Enterbank
prior to the Closing Date all such items which will be so classified hereafter
and prior to the Closing Date. All such assets or portions thereof classified
"Loss", or which are subsequently so classified, have been (or will be) charged
off on a timely basis in full, collected or otherwise placed in a bankable
condition. CGB regularly reviews and appropriately classifies its and its
Subsidiaries' loans and other assets in accordance in all material respects with
all applicable legal and regulatory requirements and GAAP. CGB has disclosed to
Enterbank the amounts and identities of all other real estate owned ("OREO")
that has been classified as such as of the date hereof by CGB's independent
auditors, management of CGB or any Bank Regulator and will have promptly
disclosed to Enterbank prior to the Closing Date all such assets which will be
so classified hereafter and prior to the Closing Date. As of the date hereof and
the Closing Date, the recorded values of all OREO on the books of CGB and its
Subsidiaries
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accurately reflect and will reflect the net realizable values of each OREO
parcel thereof in compliance with GAAP. CGB and its Subsidiaries have recorded
on a timely basis all expenses associated with or incidental to its OREO,
including but not limited to taxes, maintenance and repairs as required by GAAP.
(ii) All loans, leases, other extensions of credit,
commitments or other interest-bearing assets and investments of CGB and its
Subsidiaries are legal, valid and binding obligations enforceable in accordance
with their respective terms and are not subject to any setoffs, counterclaims or
disputes known to CGB (subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general applicability), except as previously disclosed
to Enterbank in Section 3.1(aa)(ii) of the CGB Disclosure Schedule or reserved
for in the consolidated statement of financial condition of CGB as of December
31, 1998 referred to in Section 3.1(d) in accordance with GAAP, and were duly
authorized under and made in compliance with applicable federal and state laws
and regulations. CGB and its Subsidiaries do not have any extensions or letters
of credit, investments, guarantees, indemnification agreements or commitments
for the same (including without limitation commitments to issue letters of
credit, to create acceptances, or to repurchase securities, federal funds or
other assets) other than those documented on the books and records of CGB and
its Subsidiaries.
(aa) RESTRICTIONS ON INVESTMENTS. Except for pledges to secure
public and trust deposits and repurchase agreements in the ordinary course of
business and except as described in Section 3.1(aa) of the CGB Disclosure
Schedule, none of the investments reflected in the condensed consolidated
statement of financial condition of CGB as of September 30, 1999 referred to in
Section 3.1(d), and none of the investments made by CGB and its Subsidiaries
since September 30, 1999, is subject to any restriction, whether contractual or
statutory, which materially impairs the ability of CGB or its Subsidiaries
freely to dispose of such investment at any time.
(bb) NO BROKERED DEPOSITS. Except as described in Section
3.1(bb) of the CGB Disclosure Schedule, as of the date hereof, neither CGB nor
any of its Subsidiaries now has any "brokered deposits" as such deposits are
defined by applicable regulations of the OCC as of the date hereof.
(cc) DERIVATIVES CONTRACTS; STRUCTURED NOTES; ETC. Except as
set forth in Section 3.1(cc) of the CGB Disclosure Schedule, neither CGB nor any
Subsidiary is a party to or has agreed to enter into an exchange traded or
over-the-counter equity, interest rate, foreign exchange or other swap, forward,
future, option, cap, floor or collar or any other contract that is not included
on the balance sheet and is a derivatives contract (including various
combinations thereof) (each, a "Derivatives Contract") or owns securities that
(1) are referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate mortgage
derivatives" or (2) are likely to have changes in value as a result of interest
or exchange rate changes that significantly exceed normal changes in value
attributable to interest or exchange rate changes, except for those Derivatives
Contracts and other instruments legally purchased or entered into in the
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ordinary course of their banking business, consistent with safe and sound
banking practices and regulatory guidance, and with counterparties reasonably
believed by CGB to be financially responsible. All of such Derivatives Contracts
or other instruments are legal, valid and binding obligations of CGB or one of
its Subsidiaries and, to the best knowledge of CGB, each of the other
counterparties thereto, enforceable in accordance with their terms (except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally), and are in full force and
effect. CGB and each of its Subsidiaries and, to the best knowledge of CGB, each
of the other counterparties thereto, have duly performed in all material
respects all of their material obligations thereunder to the extent that such
obligations to perform have accrued; and there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder which
would have or would reasonably be expected to have a material adverse effect on
CGB.
(dd) LABOR MATTERS. Neither CGB nor any of its Subsidiaries is
a party to, or is bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor
is it or any of its Subsidiaries the subject of a proceeding asserting that it
or any such Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it or such
Subsidiary to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to the best of its knowledge, threatened, nor is
it aware of any activity involving it or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
3.2 REPRESENTATIONS AND WARRANTIES OF ENTERBANK. Enterbank
represents and warrants to CGB as follows:
(a) ORGANIZATION, STANDING AND POWER. Enterbank is a bank
holding company registered under the BHC Act. The deposit accounts of
Enterbank's bank Subsidiaries are insured by the BIF of the FDIC to the fullest
extent permitted by law, and all premiums and assessments required in connection
therewith have been paid when due. Enterbank and each of its Subsidiaries is a
bank or corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify would not, either
individually or in the aggregate, have a material adverse effect on Enterbank.
The Certificate or Articles of Incorporation or Association and By-laws of each
of Enterbank, and each Subsidiary of Enterbank, copies of which were previously
made available to CGB, are true, complete and correct. The minute books of
Enterbank and its Subsidiaries which have been made available to CGB contain a
complete (except for certain portions thereof relating to the Merger and the
transactions contemplated hereby) and accurate record of all meetings of the
respective Boards of Directors (and committees thereof) and shareholders.
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(b) CAPITAL STRUCTURE; OWNERSHIP OF ENTERBANK COMMON STOCK.
(i) The authorized capital stock of Enterbank consists
of 20,000,000 shares of Enterbank Common Stock, par value $.01 per share, of
which as of December 27, 1999, 7,143,636 shares of Enterbank Common Stock were
outstanding (none having been issued thereafter except from the exercise of
Enterbank Options). All outstanding shares of Enterbank Common Stock have been
duly authorized and validly issued and are fully paid and non-assessable and not
subject to preemptive rights. At the Effective Time, the Enterbank Common Stock
to be issued hereunder will be, when issued in accordance with the terms hereof,
duly authorized, validly issued, fully paid and non-assessable and not subject
to preemptive rights.
(ii) Except for this Agreement and except as set forth in
Section 3.2(b)(ii) of the disclosure schedule of Enterbank delivered to CGB on
the date hereof (the "Enterbank Disclosure Schedule"), (A) there are no options,
warrants, calls, rights, commitments or agreements of any character to which
Enterbank or any of its Subsidiaries or Affiliates is a party or by which any of
the foregoing are bound obligating Enterbank or any of its Subsidiaries or
Affiliates to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Enterbank or any of its Subsidiaries or
obligating Enterbank or any of its Subsidiaries or Affiliates to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement,
(B) there are no outstanding contractual obligations of Enterbank or any of its
Subsidiaries or Affiliates to repurchase, redeem or otherwise acquire any shares
of capital stock of Enterbank or any of its Subsidiaries and (C) there are no
outstanding securities of any kind convertible into or exchangeable for the
capital stock of Enterbank or any of its Subsidiaries (or any interest therein).
Except as set forth in Section 3.2(b)(ii) of the Enterbank Disclosure Schedule,
there is no agreement of any kind to which Enterbank is a party and, to the
knowledge of Enterbank (without inquiry), no other agreement of any kind, in
each case that gives any person any right to participate in the equity, value or
income of, or to vote (x) in the election of directors or officers of, or (y)
otherwise with respect to the affairs of, Enterbank or any of its Subsidiaries.
(iii) Neither Enterbank nor any of its Subsidiaries or, to
the best knowledge of Enterbank, its Affiliates, beneficially owns, directly or
indirectly, any shares of capital stock of CGB, securities of CGB convertible
into, or exchangeable for, such shares, or options, warrants or other rights to
acquire such shares (regardless of whether such securities, options, warrants or
other rights are then exercisable or convertible), nor, except as set forth in
Section 3.2(b)(iii) of the Enterbank Disclosure Schedule, is Enterbank or any of
such Subsidiaries or Affiliates a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
shares of capital stock of CGB or any such other securities, options, warrants
or other rights.
(iv) Except as set forth in Section 3.2(b)(iv) of the
Disclosure Schedule, no shares of Enterbank Common Stock held directly or
indirectly by Enterbank are Trust Account Shares or DPC Shares.
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(c) AUTHORITY; NO VIOLATION.
(i) Enterbank has all requisite corporate power and
authority to enter into this Agreement and the other Transaction Agreements and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the other Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Enterbank, other
than the approval of this Agreement and the Agreement of Merger by the holders
of a majority of the outstanding shares of Enterbank Common Stock (the
"Enterbank Shareholder Approval"). The Enterbank Shareholder Approval is the
only vote of any class or series of Enterbank capital stock necessary to approve
this Agreement and the other Transaction Agreements and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the other
Transaction Agreements have been duly executed and delivered by Enterbank and
(assuming due authorization, execution and delivery by CGB) constitute the valid
and binding obligation of Enterbank enforceable against Enterbank in accordance
with their terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(ii) Except as set forth in Section 3.2(c)(ii) of the
Enterbank Disclosure Schedule, the execution and delivery by Enterbank of this
Agreement and the other Transaction Agreements does not or will not when
delivered, and the consummation of the transactions contemplated hereby and
thereby will not, result in any Violation pursuant to, (x) any provision of the
Certificate or Articles of Incorporation or Association or By-laws or comparable
organizational documents of Enterbank or any Subsidiary of Enterbank, or (y)
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
any loan or credit agreement, note, mortgage, indenture, lease, Enterbank
Benefit Plan (as defined in Section 3.2(k)(i)) or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Enterbank or any
Subsidiary of Enterbank or its properties or assets, which Violation, in the
case of clause (y), individually or in the aggregate, would have a material
adverse effect on Enterbank.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to Enterbank or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the other
Transaction Agreements or the consummation by Enterbank of the transactions
contemplated hereby or thereby, which, if not made or obtained, would have a
material adverse effect on Enterbank or on the ability of Enterbank to perform
its obligations hereunder or thereunder on a timely basis, or on Enterbank's
ability to own, possess or exercise the rights of an owner with respect to the
business and assets of CGB and its Subsidiaries, except for (A) the filing of
applications and notices with the Federal Reserve under the BHC Act and approval
of same, (B) the filing by Enterbank with the SEC of the Proxy Statement in
definitive form relating to the meetings of the shareholders of CGB and
Enterbank to be held to approve and adopt this Agreement and the transactions
contemplated hereby, (C) the filing by Enterbank with the SEC of the S-4 with
respect to the Enterbank Common Stock
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issuable pursuant hereto, (D) compliance with applicable state blue sky laws,
and (E) the filing with the Secretaries of State of the States of Delaware and
Kansas of the Agreement of Merger.
(d) FINANCIAL STATEMENTS. Enterbank has previously delivered
to CGB copies of (a) the consolidated statements of financial condition of
Enterbank and its Subsidiaries, as of December 31, for the fiscal years 1996,
1997 and 1998, and the related consolidated statements of income, comprehensive
income, shareholders' equity and cash flows for the fiscal years 1996 through
1998, inclusive, as reported in Enterbank's Annual Reports on Form 10-K for the
relevant fiscal years filed with the SEC under the Securities Exchange Act of
1934 (the "Exchange Act"), in each case accompanied by the report of KPMG LLP,
independent auditors with respect to Enterbank (the consolidated financial
statements of Enterbank and its Subsidiaries referred to in this sentence being
hereinafter sometimes referred to as the "Enterbank Consolidated Financial
Statements") and (b) the condensed consolidated balance sheet of Enterbank and
its Subsidiaries as of September 30, 1999 and the condensed consolidated
statements of income, comprehensive income and cash flows for the nine months
ended September 30, 1998 and 1999, inclusive, as reported in Enterbank's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 filed
with the SEC under the Exchange Act (the condensed consolidated financial
statements of Enterbank and its Subsidiaries referred to in this clause being
sometimes hereinafter referred to as the "Enterbank Interim Financial
Statements"). Each of the financial statements referred to in this Section
(including the related notes, where applicable) fairly present, and the
consolidated financial statements referred to in Section 5.12 hereof will fairly
present (subject in the cases of the unaudited statements, to normal recurring
and year-end audit adjustments, none of which are expected to be material in
nature or amount), the results of the consolidated operations and changes in
shareholders' equity and consolidated financial condition of Enterbank and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth. Each of such statements (including the related notes, where
applicable) complies, and the financial statements referred to in Section 5.12
hereof will comply, in all material respects, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 5.12
will be, prepared, in all material respects, in accordance with GAAP
consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto or, in the case of the
unaudited statements (subject to normal recurring and year-end audit
adjustments), as permitted by Form 10-Q. The books and records of Enterbank and
its Subsidiaries have been, and are being, maintained where required in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and, where such books and records purport to reflect any
transactions, the transactions so reflected are actual transactions.
(e) ENTERBANK SEC DOCUMENTS. Enterbank has made available to
CGB a true and complete copy of each report, schedule, registration statement
and definitive proxy statement filed by Enterbank with the SEC pursuant to the
Securities Act or the Exchange Act (other than reports filed pursuant to section
13(g) of the Exchange Act), since October 24, 1996 (as such documents have since
the time of their filing been amended, the "Enterbank SEC Reports"), which are
all the documents (other than preliminary material and reports required pursuant
to section 13(g)
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of the Exchange Act) that Enterbank was required to file with the SEC since such
date. As of their respective dates of filing with the SEC, the Enterbank SEC
Reports complied as to form in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Enterbank SEC Reports, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Enterbank included in the Enterbank SEC
Reports (including any related notes and schedules thereto) complied as to form,
as of their respective dates of filing with the SEC, in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared, in all material
respects, in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements (subject to normal recurring and year-end audit
adjustments), as permitted by Form 10-Q of the SEC) and fairly present in all
material respects the consolidated financial position of Enterbank and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of operations, changes in shareholders' equity and cash flows of such companies
for the periods then ended.
(f) ENTERBANK INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Enterbank for inclusion or incorporation by
reference in the Proxy Statement relating to the meeting of shareholders of
Enterbank (the "Enterbank Shareholders' Meeting") at which the Enterbank
Shareholder Approval will be sought or for inclusion in the S-4 will, at the
date of mailing to shareholders of Enterbank and of CGB and at the time of the
Enterbank Shareholders' Meeting, (i) contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading or (ii) at the time and in the light
of the circumstances under which it is made, 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 false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of a
proxy for the Enterbank Shareholders' Meeting which has become false or
misleading.
(g) COMPLIANCE WITH APPLICABLE LAWS. Enterbank and its
Subsidiaries hold, and at all relevant times have held, all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operation of the businesses of Enterbank and its
Subsidiaries, taken as a whole (the "Enterbank Permits"). Enterbank and its
Subsidiaries are in compliance and have complied with the terms of the Enterbank
Permits, except where the failure so to comply, individually or in the
aggregate, would not have a material adverse effect on Enterbank. The businesses
of Enterbank and its Subsidiaries are not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity, except for possible
violations which, individually or in the aggregate, do not, and, insofar as
reasonably can be foreseen, in the future will not, have a material adverse
effect on Enterbank. Except for routine examinations by Bank Regulators, no
investigation by any Governmental Entity with respect to Enterbank or any of its
Subsidiaries is pending or threatened, and no proceedings by any Bank Regulator
are pending or
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threatened which seek to revoke or materially limit any of the Enterbank
Permits. Enterbank and its Subsidiaries do not offer or sell insurance and/or
securities products, including but not limited to annuity products, for their
own account or the account of others.
(h) LITIGATION. Except as set forth in Section 3.2(h) of the
Enterbank Disclosure Schedule, to the best knowledge of Enterbank, there is no
Litigation pending to which Enterbank or any Subsidiary of Enterbank is a party
or by which any of such persons or their respective assets may be bound or, to
the best knowledge of Enterbank, threatened against or affecting Enterbank or
any Subsidiary of Enterbank, or challenging the validity or propriety of the
transactions contemplated hereby which, if adversely determined, would,
individually or in the aggregate, have or reasonably be expected to have a
material adverse effect on Enterbank or on the ability of Enterbank to perform
its obligations under this Agreement in a timely manner, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Enterbank or any Subsidiary of Enterbank.
(i) TAXES. Enterbank and each of its Subsidiaries have timely
filed all tax returns required to be filed by any of them and all such tax
returns were, when filed, correct and complete in all material respects.
Enterbank and each of its Subsidiaries have timely paid (or Enterbank has paid
on their behalf), or have set up an adequate reserve for the payment of, all
taxes required to be paid (whether or not shown as due on such returns), and the
most recent financial statements that have been delivered to CGB reflect an
adequate reserve (other than reserves for deferred taxes established to reflect
differences between tax and book basis of assets and liabilities) for all taxes
accrued but not yet due and owing, by Enterbank and its Subsidiaries accrued
through the date of such financial statements. Enterbank and its Subsidiaries
file tax returns in all jurisdictions where required to file tax returns. No
material deficiencies for any taxes have been asserted or assessed against
Enterbank or any of its Subsidiaries that are not adequately reserved for (other
than reserves for deferred taxes established to reflect differences between tax
and book basis of assets and liabilities). Except as set forth in Section 3.2(i)
of the Enterbank Disclosure Schedule: (i) there are no liens with respect to
taxes upon any of the assets or properties of Enterbank and its Subsidiaries,
other than with respect to taxes not yet due and payable, (ii) no material issue
relating to taxes of Enterbank and its Subsidiaries has been raised in writing
by any taxing authority in any audit or examination which can result in a
proposed adjustment or assessment by a governmental authority in a taxable
period (or portion thereof) ending on or before the Closing Date nor, to the
best knowledge of Enterbank, does any basis exist for the raising of any such
issue, (iii) Enterbank and its Subsidiaries have duly and timely withheld from
all payments (including employee salaries, wages and other compensation) and
paid over to the appropriate taxing authorities all amounts required to be so
withheld and paid over for all periods for which the statute of limitations has
not expired under all applicable laws and regulations, (iv) as of the Closing
Date, none of Enterbank nor any of its Subsidiaries shall be a party to, be
bound by or have any obligation under, any tax sharing agreement or similar
contract or arrangement or any agreement that obligates any of them to make any
payment computed by reference to the taxes, taxable income or taxable losses of
any other person, (v) except as set forth on Section 3.2(i) of the Enterbank
Disclosure Schedule, there is no contract or agreement, plan or arrangement by
Enterbank or any of its Subsidiaries covering any
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person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by Enterbank or any of its Subsidiaries by
reason of section 280G of the Code, (vi) Enterbank and its Subsidiaries have
collected all material sales and use taxes required to be collected, and have
remitted, or will remit on a timely basis, such amounts to the appropriate
governmental authorities, or have been furnished properly completed exemption
certificates and have maintained all such records and supporting documents in
all material respects in the manner required by all applicable sales and use tax
statutes and regulations for all periods for which the statute of limitations
has not expired, (vii) neither Enterbank nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning of section
897(c)(2) of the Code during the applicable period specified in section
897(c)(1)(A)(ii) of the Code, and (viii) none of Enterbank nor any of its
Subsidiaries (A) has been a member of an affiliated group (other than the group
to which they are currently members) filing a consolidated federal income tax
return or (B) has any liability for the taxes of any person (other than the
members of such current group) under Treasury Regulation section 1.1502-6(a) (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise. None of Enterbank nor any of its
Subsidiaries has filed a consent to the application of section 341(f) of the
Code.
(j) CERTAIN AGREEMENTS. Section 3.2(j) of the Enterbank
Disclosure Schedule sets forth a listing of all of the following contracts and
other agreements, oral or written (which are currently in force or which may in
the future be operative in any respect) to which Enterbank or any of its
Subsidiaries is a party or by or to which Enterbank or any of its Subsidiaries
or any of their respective assets or properties are bound or subject: (i)
consulting agreements not terminable on six months or less notice involving the
payment of more than $25,000 per annum, or union, guild or collective bargaining
agreements covering any employees in the United States, (ii) agreements with any
officer or other key employee of Enterbank or any of its Subsidiaries (x)
providing any term of employment or (y) the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving Enterbank of the nature contemplated by this Agreement, (iii) any
agreement or plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (iv) contracts and other agreements for the sale
or lease (other than where Enterbank or any of its Subsidiaries is a lessor) of
any assets or properties (other than in the ordinary course of business) or for
the grant to any person (other than to Enterbank or any of its Subsidiaries) of
any preferential rights to purchase any assets or properties, (v) contracts and
other agreements relating to the acquisition by Enterbank or any of its
Subsidiaries of any operating business or entity or any interest therein, (vi)
contracts or other agreements under which Enterbank or any of its Subsidiaries
agrees to indemnify any party, other than in the ordinary course of business,
consistent with past practice, or to share a tax liability of any party, (vii)
contracts and other agreements containing covenants restricting Enterbank or any
of its Subsidiaries from competing in any line of business or with any person in
any geographical area or requiring Enterbank or any of its Subsidiaries to
engage in any line of business, (viii) contracts or other agreements (other than
contracts in the ordinary course of their banking business) relating to the
borrowing of money by Enterbank or any of its Subsidiaries, or the direct or
indirect
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guaranty by Enterbank or any of its Subsidiaries of any obligation for, or an
agreement by Enterbank or any of its Subsidiaries to service, the repayment of
borrowed money, or any other contingent obligations of Enterbank or any of its
Subsidiaries in respect of indebtedness of any other person, and (ix) any other
material contract or other agreement whether or not made in the ordinary course
of business, including any contract required to be filed by Enterbank pursuant
to Item 601(b)(10) of Regulation S-K of the SEC. There have been delivered or
made available to CGB true and complete copies of all of the contracts and other
agreements set forth in Section 3.2(j) of the Enterbank Disclosure Schedule and
in any other Section of the Enterbank Disclosure Schedule. Except as set forth
in Section 3.2(j) of the Enterbank Disclosure Schedule, each such contract and
other agreement is in full force and effect and constitutes a legal, valid and
binding obligation of Enterbank or its Subsidiaries, as the case may be, and to
the best knowledge of Enterbank, each other party thereto, enforceable in
accordance with its terms subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Neither Enterbank nor any
Subsidiary of Enterbank has received any notice, whether written or oral, of
termination or intention to terminate from any other party to such contract or
agreement. None of Enterbank or any of its Subsidiaries or (to the best
knowledge of Enterbank) any other party to any such contract or agreement is in
violation or breach of or default under any such contract or agreement (or with
or without notice or lapse of time or both, would be in violation or breach of
or default under any such contract or agreement), which violation, breach or
default has had or would have, individually or in the aggregate, a material
adverse effect on Enterbank.
(k) BENEFIT PLANS.
(i) Section 3.2(k) of the Enterbank Disclosure
Schedule contains a true and complete list of each Benefit Plan that is
sponsored or is being maintained or contributed to, or required to be
contributed to, by Enterbank or any of its Subsidiaries (the "Enterbank Benefit
Plans"). No Enterbank Benefit Plan is a multiemployer plan or is subject to a
collective bargaining agreement.
(ii) With respect to each Enterbank Benefit Plan,
Enterbank has delivered to CGB a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement or other funding instrument; (B) the
most recent determination letter; (C) any summary plan description and other
written communications (or a description of any oral communications) by
Enterbank or any of its Subsidiaries to any of their respective employees
concerning the extent of the benefits provided under any Enterbank Benefit Plan;
and (D) except as described in Section 3.2(k)(ii) of the Enterbank Disclosure
Schedule, for the two most recent years (I) the Form 5500 and attached
schedules; (II) audited financial statements; and (III) actuarial valuation
reports.
(iii) Except as set forth in Section 3.2(k) of the
Enterbank Disclosure Schedule, (A) each Enterbank Benefit Plan has been
established and administered in accordance with its terms, and in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations; (B) each Enterbank Benefit Plan
which is
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intended to be qualified within the meaning of Code section 401(a) is so
qualified and has received a favorable determination letter as to its
qualification and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification; (C) with respect to any
Enterbank Benefit Plan, no audits, actions, suits or claims (other than routine
claims for benefits in the ordinary course) are pending or threatened, and no
facts or circumstances exist which could give rise to any such audits, actions,
suits or claims; (D) neither Enterbank nor any other party has engaged in a
prohibited transaction which could subject Enterbank or any of its Subsidiaries,
or the Surviving Corporation, to any taxes, penalties or other liabilities under
Code section 4975 or ERISA sections 409 or 502(i); (E) no event has occurred and
no condition exists that could subject Enterbank or any of its Subsidiaries, or
the Surviving Corporation, either directly or by reason of any such entity's
affiliation with any member of any such entity's Controlled Group (defined as
any organization which is a member of a controlled group of organizations within
the meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine,
liability or penalty imposed by ERISA, the Code or other applicable laws, rules
and regulations; (F) all insurance and PBGC premiums required to be paid with
respect to Enterbank Benefit Plans through the Closing Date have been or will be
paid prior thereto and adequate reserves will have been provided for on
Enterbank's consolidated statement of financial condition as of the month end
immediately prior to the Closing Date for any premiums (or portions thereof)
attributable to service on or prior to the Closing Date; (G) all contributions
required to be made prior to the Closing Date under the terms of each Enterbank
Benefit Plan, the Code, ERISA or other applicable laws, rules and regulations
have been or will be timely made and adequate reserves will have been provided
for on Enterbank's consolidated statement of financial condition as of the month
end immediately prior to the Closing Date for all benefits attributable to
service on or prior to the Closing Date; (H) no Enterbank Benefit Plan has
incurred any "accumulated funding deficiency" as such term is defined in ERISA
section 302 and (including, but not limited to the voting of any securities held
pursuant to an Enterbank Benefit Plan) Code section 412 (whether or not waived);
(I) the consummation of this Agreement will not result in a nonexempt prohibited
transaction or a breach of fiduciary duty under ERISA; and (J) no Enterbank
Benefit Plan provides health coverage beyond the termination of employment
except as provided under Code section 4980B.
(iv) Except as set forth in Section 3.2(k)(iv) of the
Enterbank Disclosure Schedule, with respect to each of the Enterbank Benefit
Plans which is subject to Title IV of ERISA, as of the Closing Date, the assets
of each such Plan shall be at least equal in value to the present value of the
accrued benefits (vested and unvested) of the participants in such Plan on a
termination and projected basis, based on the actuarial methods and assumptions
indicated in the most recent actuarial valuation reports.
(v) Except as set forth on Section 3.2(k)(v) of the
Enterbank Disclosure Schedule, no Enterbank Benefit Plan exists which provides
for an increase in benefits on or after the Closing Date or could result in the
payment to any employee of Enterbank or any of its Subsidiaries of any money or
other property or rights or accelerate or provide any other rights or benefits
to any such employee as a result of the transactions contemplated by this
Agreement. The aggregate amount of payments due from Enterbank under all such
contracts and the amount due under each
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such contract, at the Effective Time, are as set forth in the schedule included
in Section 3.2(k)(v) of the Enterbank Disclosure Schedule. Except as set forth
in Section 3.2(k)(v) of the Enterbank Disclosure Schedule, none of such payments
will constitute an "excess parachute" payment within the meaning of Code section
280G.
(l) SUBSIDIARIES. Section 3.2(l) of the Enterbank Disclosure
Schedule lists all the Subsidiaries of Enterbank. Enterbank owns, directly or
indirectly, beneficially and of record 100% of the issued and outstanding voting
securities of each such Subsidiary. All of the shares of capital stock of each
of the Subsidiaries held by Enterbank or by another of its Subsidiaries are
fully paid and nonassessable and are owned by Enterbank or one of its
Subsidiaries free and clear of any lien, claim or other encumbrance. Neither
Enterbank nor any of its Subsidiaries owns any shares of capital stock or other
equity securities of any person (other than, in the case of Enterbank, the
capital stock of its Subsidiaries and, in the case of such Subsidiaries, shares
or equity securities acquired in satisfaction of debts previously contracted in
good faith in the ordinary course of their banking business).
(m) AGREEMENTS WITH BANK OR OTHER REGULATORS. Except as set
forth in Section 3.2(m) of the Enterbank Disclosure Schedule, neither Enterbank
nor any Subsidiary of Enterbank is a party to any written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of, any Bank Regulator which restricts materially the conduct by
Enterbank or its Subsidiaries of their businesses, or in any manner relates to
their capital adequacy, credit policies, community reinvestment, loan
underwriting or documentation or management, nor has Enterbank or any such
Subsidiary been advised by any Bank Regulator that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, or any such board
resolutions.
(n) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 3.2(n) of the Enterbank Disclosure Schedule, since September 30,
1999, (i) there has not been any change, or any event involving a prospective
change, in the business, financial condition or results of operations or
prospects of Enterbank or any of its Subsidiaries which has had, or would be
reasonably likely to have, a material adverse effect on Enterbank, and (ii)
Enterbank and each of its Subsidiaries have conducted their respective
businesses in the ordinary course consistent with their past practices and
neither Enterbank nor any of its Subsidiaries has taken any action or entered
into any transaction, and no event has occurred, that would have required CGB's
consent pursuant to Section 4.2 of this Agreement if such action had been taken,
transaction entered into or event had occurred, in each case, after the date of
this Agreement, nor has Enterbank or any of its Subsidiaries entered into any
agreement, plan or arrangement to do any of the foregoing.
(o) UNDISCLOSED LIABILITIES. Except as set forth in Section
3.2(o) of the Enterbank Disclosure Schedule, and except (i) for those
liabilities or obligations that are fully
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reflected or reserved against in the consolidated statement of financial
condition at September 30, 1999 of Enterbank referred to in Section 3.2(d) or
(ii) for liabilities or obligations incurred in the ordinary course of business
consistent with past practice since September 30, 1999 and which are not
material to Enterbank and its Subsidiaries taken as a whole, none of Enterbank
or any of its Subsidiaries has incurred any liability or obligation of any
nature whatsoever (whether absolute, accrued or contingent or otherwise and
whether due or to become due) that, either alone or when combined with all
similar liabilities or obligations, has had, or would have, a material adverse
effect on Enterbank. No agreement pursuant to which any loans or other assets
have been or will be sold by Enterbank or any Subsidiary entitle the buyer of
such loans or other assets, unless there is material breach of a representation
or covenant by Enterbank or its Subsidiaries not relating to the payment or
other performance by an obligor of such loan or other asset of its obligations
thereunder, to cause Enterbank or its Subsidiaries to repurchase such loan or
other asset or the buyer to pursue any other form of recourse against Enterbank
or its Subsidiaries.
(p) GOVERNMENTAL REPORTS. Enterbank and each of its
Subsidiaries have timely filed all material reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since January 1, 1995 with any
Governmental Entity and have paid all fees and assessments due and payable in
connection therewith. Except as set forth in Section 3.2(p) of the Enterbank
Disclosure Schedule and except for normal examinations conducted by a
Governmental Entity in the regular course of business of Enterbank and its
Subsidiaries, no Governmental Entity has initiated any proceeding or, to the
best knowledge of Enterbank, investigation into the business or operations of
Enterbank or any of its Subsidiaries since January 1, 1995. Except as set forth
in Section 3.2(p) of the Enterbank Disclosure Schedule, there is no material
unresolved violation, criticism or exception by any Governmental Entity with
respect to any report or statement relating to any examinations of Enterbank or
any of its Subsidiaries.
(q) ENVIRONMENTAL LIABILITY.
(i) Except as set forth in Section 3.2(q) of the
Enterbank Disclosure Schedule, to the best knowledge of Enterbank, there are no
pending or threatened claims, actions or proceedings against Enterbank relating
to:
(A) any asserted liability of Enterbank or
any of its Affiliates or any current or prior owner, operator, occupier or user
of any Real Property under any Environmental Law, including without limitation,
the terms and conditions of any permit, license, authority, settlement or other
obligation arising under any Environmental Law;
(B) any handling, storage, use or disposal
of Hazardous Substances on, under or within any Real Property or any
transportation or removal of Hazardous Substances to or from any Real Property;
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(C) any actual or threatened discharge,
release or emission of Hazardous Substances from, on, under or within any Real
Property into the air, water, surface water, groundwater, land surface or
subsurface strata; or
(D) any actual or asserted claims for
personal injuries, illness or damage to real or personal property related to or
arising out of exposure to Hazardous Substances discharged, released or emitted
from, on, under, within or into, or transported from or to, any Real Property.
(ii) Except as set forth in Section 3.2(q) of the
Enterbank Disclosure Schedule, to the best knowledge of Enterbank, no Hazardous
Substances are present on, under or within any Real Property (except those
Hazardous Substances used in the normal course of operating or maintaining the
business of Enterbank or any Subsidiary of Enterbank) and, except as set forth
in Section 3.2(q) of the Enterbank Disclosure Schedule, the presence of these
Hazardous Substances does not violate any Environmental Law. Except as set forth
in Section 3.2(q) of the Enterbank Disclosure Schedule, to the best knowledge of
Enterbank, there are no storage tanks underground or otherwise present on any
Real Property and all such tanks set forth in Section 3.2(q) of the Enterbank
Disclosure Schedule comply in all material respects with applicable law, all
permits in respect thereof are in full force and effect and there have been no
releases or discharges of Hazardous Substances from such tanks to the
environment.
(iii) To the best knowledge of Enterbank, except as
set forth in Section 3.2(q) of the Enterbank Disclosure Schedule, no Hazardous
Substances have been, or have been threatened to be, discharged, released or
emitted in a Reportable Quantity into the air, water, surface water,
groundwater, land surface or subsurface strata or transported to or from the
Real Property except in accordance with Environmental Laws (in particular, but
without limitation, in accordance with any permits issued pursuant thereto). To
the best knowledge of Enterbank, all notifications, remediation, removal or
other response actions of any kind whatsoever, in respect of such discharges,
releases and emissions which are required by Environmental Laws, and by
applicable agreements with third parties, have been made within the time limits
prescribed by such Environmental Laws and such third party agreements. Copies of
all such notifications or documents relating to any remediation, removal or
response action have previously been provided to Enterbank.
(iv) To the best knowledge of Enterbank, except as
set forth in Section 3.2(q) of the Enterbank Disclosure Schedule, Enterbank and
its Affiliates are in compliance, in all material respects, with all
Environmental Laws related to the ownership, operation, use and occupation of
the Real Property.
(v) To the best knowledge of Enterbank, except as set
forth in Section 3.2(q) of the Enterbank Disclosure Schedule, no part of any
Real Property is listed on CERCLIS or the National Priorities List created
pursuant to the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, as a site containing Hazardous Substances.
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(vi) Enterbank has provided CGB with copies of all
material notices posted by it under any Environmental Law with respect to the
Real Property at which the business of Enterbank or its Subsidiaries is
conducted.
(vii) All properties held by Enterbank or its
Subsidiaries under leases are held by them under valid, binding and enforceable
leases, with such exceptions as are not material and do not interfere with the
conduct of the business of Enterbank, and Enterbank enjoys quiet and peaceful
possession of such leased property. Enterbank and its Subsidiaries are not in
default in any material respect under any material lease, agreement or
obligation regarding their properties to which they are a party or by which they
are bound.
(viii) Except as set forth in Section 3.2(q) of the
Enterbank Disclosure Schedule, all of Enterbank's and its Subsidiaries' rights
and obligations under the leases referred to in Section 3.2(q)(vii) above do not
require the consent of any other party to the transactions contemplated by this
Agreement.
(r) PROPERTIES. Except as set forth in Section 3.2(r) of the
Enterbank Disclosure Schedule, Enterbank or its Subsidiaries (i) has good and
marketable title to all Real Property owned in fee, and good title to all other
properties and assets reflected in the Enterbank Consolidated Financial
Statements as being owned by Enterbank or its Subsidiaries or acquired after the
date thereof which are material to the business of Enterbank on a consolidated
basis (except properties sold or otherwise disposed of since the date thereof in
the ordinary course of business), free and clear of all claims, liens, charges,
security interests or encumbrances of any nature whatsoever except (A) statutory
liens securing payments not yet delinquent, (B) liens on assets of Enterprise
securing deposits incurred in the ordinary course of its banking business and
(C) such imperfections or irregularities of title, claims, liens, charges,
security interests or encumbrances as do not materially affect the use of the
properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties and (ii) is the lessee of all
leasehold estates reflected in the Enterbank Consolidated Financial Statements
or acquired after the date thereof which are material to its business on a
consolidated basis (except for leases that have expired by their terms since the
date thereof) and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without material default thereunder by
the lessee or, to the best knowledge of Enterbank, the lessor. Except as set
forth in Section 3.2(r) of the Enterbank Disclosure Schedule, all real
properties owned by Enterbank or its Subsidiaries are owned in accordance in all
material respects with all requirements of applicable rules, regulations and
policies of the Bank Regulators.
(s) TRANSACTIONS WITH AFFILIATES. Except as set forth in
Section 3.2(s) of the Enterbank Disclosure Schedule and except for those
arrangements, contracts, agreements or transactions which were entered into in
the ordinary course of business, since September 30, 1999, Enterbank has not
extended credit, committed to extend credit or transferred any asset to or
assumed or guaranteed any liability of or entered into any other transactions
with the employees or directors of Enterbank, or any spouse or child of any of
them, or to any of their "affiliates" or "associates" as such terms are defined
in Rule 405 under the Securities Act. Any such transactions, including those
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in the ordinary course of business, have been on terms no less favorable than
those which would prevail in an arm's-length transaction with an independent
third party.
(t) NO BROKER OR FINDER. No agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement
(u) INTELLECTUAL PROPERTY. Except as set forth in Section
3.2(u) of the Enterbank Disclosure Schedule, Enterbank and its Subsidiaries own
or have a valid license to use all trademarks, service marks and trade names
(including any registrations or applications for registration of any of the
foregoing) (collectively, the "Enterbank Intellectual Property") necessary to
carry on their business substantially as currently conducted, except for such
Enterbank Intellectual Property the failure of which to own or validly license,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on Enterbank. Neither Enterbank nor any such Subsidiary
has received any notice of infringement of or conflict with, and, to the best
knowledge of Enterbank, there are no infringements of or conflicts with, the
rights of others with respect to the use of any Enterbank Intellectual Property
that, individually or in the aggregate, in either such case, would reasonably be
expected to have a material adverse effect on Enterbank.
(v) POOLING OF INTERESTS. Except as set forth in Section
3.2(v) of the Enterbank Disclosure Schedule, as of the date of this Agreement,
Enterbank has no reason (in respect to matters pertaining to Enterbank existing
as of the date hereof or expected to exist as of the Closing Date) to believe
that Enterbank will not qualify for pooling of interests treatment for
accounting purposes under GAAP as presently in effect.
(w) COMMUNITY REINVESTMENT ACT COMPLIANCE. Enterprise is in
substantial compliance with the applicable provisions of the CRA and has
received a CRA rating of "satisfactory" from the OCC in its most recent
examination, and Enterbank has no knowledge of the existence of any fact or
circumstance or set of facts or circumstances which could be reasonably expected
to result in Enterprise failing to be in substantial compliance with such
provisions or having its current rating lowered.
(x) YEAR 2000 READINESS. There have been no material adverse
effects on either Enterbank or its Subsidiaries as a result of the date change
for any date on or after January 1, 2000, including leap year calculations, and
that, to the extent applicable to normal operating specifications, Enterbank's
and its Subsidiaries' computer systems and equipment have in all material
respects accurately accepted, stored, retrieved, calculated, compared and
otherwise processed dates of January 1, 2000 and later.
(y) INSURANCE. Enterbank has previously delivered to CGB a
list identifying all insurance policies maintained on behalf of Enterbank and
its Subsidiaries (other than mortgage, title and other similar policies for the
benefit of Enterbank or its Subsidiaries as mortgagees under residential
mortgage loans). All of the material insurance policies and bonds maintained by
or for
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the benefit of Enterbank and its Subsidiaries are in full force and effect, to
the best knowledge of Enterbank, Enterbank and its Subsidiaries are not in
default thereunder, and all material claims thereunder have been filed in due
and timely fashion, and neither Enterbank nor any of its Subsidiaries has
received notice that any of such material claims have been or will be denied.
The insurance policies and bonds maintained by Enterbank and its Subsidiaries
are written by reputable insurers and are in such amounts, cover such risks and
have such other terms as is customary for banks and bank holding companies
comparable in size and operations to Enterbank and its Subsidiaries. Since
September 30, 1999, there has not been any damage to, destruction of, or loss of
any assets of Enterbank and its Subsidiaries (whether or not covered by
insurance) that could have a material adverse effect on Enterbank. Neither
Enterbank nor any of its Subsidiaries has received any notice of a premium
increase or cancellation with respect to any of its insurance policies or bonds,
and within the last three years, neither Enterbank nor any of its Subsidiaries
has been refused any insurance coverage sought or applied for, and Enterbank has
no reason to believe that existing insurance coverage cannot be renewed as and
when the same shall expire, upon terms and conditions as favorable as those
presently in effect, other than possible increases in premiums or unavailability
in coverage that have not resulted from an extraordinary loss experience of
Enterbank or any Enterbank Subsidiary.
(z) LOANS AND OTHER ASSETS.
(i) Enterbank has disclosed to CGB prior to the date
hereof the amounts of all loans, leases, other extensions of credit, commitments
or other interest-bearing assets presently owned by Enterbank or any of its
Subsidiaries that have been classified by any Bank Regulator, Enterbank's
independent auditors, or the management of Enterbank or any Subsidiary of
Enterbank as "Other Loans Especially Mentioned," "Substandard," "Doubtful," or
"Loss", or classified using categories with similar import, and will have
disclosed promptly to CGB prior to the Closing Date all such items which will be
so classified hereafter and prior to the Closing Date. All such assets or
portions thereof classified "Loss," or which are subsequently so classified,
have been (or will be) charged off on a timely basis in full, collected or
otherwise placed in a bankable condition. Enterbank regularly reviews and
appropriately classifies its and its Subsidiaries' loans and other assets in
accordance in all material respects with all applicable legal and regulatory
requirements and GAAP. Enterbank has disclosed to CGB the amounts and identities
of all OREO that has been classified as such as of the date hereof by
Enterbank's independent auditors, management of Enterbank or any Bank Regulator
and will have promptly disclosed to CGB prior to the Closing Date all such
assets which will be so classified hereafter and prior to the Closing Date. As
of the date hereof and the Closing Date, the recorded values of all OREO on the
books of Enterbank and its Subsidiaries accurately reflect and will reflect the
net realizable values of each OREO parcel thereof in compliance with GAAP.
Enterbank and its Subsidiaries have recorded on a timely basis all expenses
associated with or incidental to its OREO, including but not limited to taxes,
maintenance and repairs as required by GAAP.
(ii) All loans, leases, other extensions of credit,
commitments or other interest-bearing assets and investments of Enterbank and
its Subsidiaries are legal, valid and binding
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obligations enforceable in accordance with their respective terms and are not
subject to any setoffs, counterclaims or disputes known to Enterbank (subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of general
applicability), except as previously disclosed to CGB in Section 3.2(z)(ii) of
the Enterbank Disclosure Schedule or reserved for in the consolidated statement
of financial condition of Enterbank as of December 31, 1998 referred to in
Section 3.2(d) in accordance with GAAP, and were duly authorized under and made
in compliance with applicable federal and state laws and regulations. Enterbank
and its Subsidiaries do not have any extensions or letters of credit,
investments, guarantees, indemnification agreements or commitments for the same
(including without limitation commitments to issue letters of credit, to create
acceptances, or to repurchase securities, federal funds or other assets) other
than those documented on the books and records of Enterbank and its
Subsidiaries.
(aa) DERIVATIVES CONTRACTS; STRUCTURED NOTES; ETC. Except as
set forth in Section 3.2(aa) of the Enterbank Disclosure Schedule, neither
Enterbank nor any Subsidiary is a party to or has agreed to enter into a
Derivatives Contract or owns securities that (1) are referred to generically as
"structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (2) are likely to have
changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of their
banking business, consistent with safe and sound banking practices and
regulatory guidance, and with counterparties reasonably believed by Enterbank to
be financially responsible. All of such Derivatives Contracts or other
instruments are legal, valid and binding obligations of Enterbank or one of its
Subsidiaries and, to the best knowledge of Enterbank, each of the other
counterparties thereto, enforceable in accordance with their terms (except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally), and are in full force and
effect. Enterbank and each of its Subsidiaries and, to the best knowledge of
Enterbank, each of the other counterparties thereto, have duly performed in all
material respects all of their material obligations thereunder to the extent
that such obligations to perform have accrued; and there are no breaches,
violations or defaults or allegations or assertions of such by any party
thereunder which would have or would reasonably be expected to have a material
adverse effect on Enterbank.
(bb) LABOR MATTERS. Neither Enterbank nor any of its
Subsidiaries is a party to, or is bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is it or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to compel it
or such Subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or, to the best of its
knowledge, threatened, nor is it aware of any activity involving it or any of
its Subsidiaries'
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employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
(cc) STATUS OF ENTERBANK COMMON STOCK TO BE ISSUED. The shares
of Enterbank Common Stock into which the CGB Common Stock are to be exchanged or
converted pursuant to this Agreement will be, when delivered as specified in
this Agreement, validly authorized and issued, fully paid and nonassessable, and
registered pursuant to an effective registration statement under the Securities
Act.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF CGB. During the period from the date of this Agreement
and continuing until the Effective Time (except as expressly contemplated or
permitted by this Agreement or to the extent that Enterbank shall otherwise
consent in writing, which consent shall not be unreasonably withheld) CGB agrees
that it will and will cause each of its Subsidiaries to carry on the business of
CGB and each of its Subsidiaries in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all reasonable
efforts to preserve intact the present business organizations of CGB and each of
its Subsidiaries, maintain the rights and franchises of, and preserve the
relationships with customers, suppliers and others having business dealings
with, CGB and each of its Subsidiaries to the end that their goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, CGB shall not, and
shall not permit any of its Subsidiaries to, without the prior consent of
Enterbank in writing:
(a) (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except for cash dividends
in an amount per share not greater than, and consistent with the manner and
frequency of, dividends paid by CGB in the past 12 months and dividends by a
wholly owned Subsidiary of CGB to CGB, (ii) set any record or payment dates for
the payment of any dividends or distribution on its capital stock except in the
ordinary course of business consistent with past practice, (iii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock or (iv) repurchase, redeem or otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, any shares
of its capital stock or the capital stock of any other Subsidiary of CGB or any
securities convertible into or exercisable for any shares of such capital stock;
(b) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with respect to
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any of the foregoing, other than issuances of CGB Common Stock pursuant to the
exercise of CGB Options;
(c) except as required to perform its obligations under this
Agreement, amend or propose to amend its Certificate or Articles of
Incorporation or its By-laws or other organizational documents or that of any
Subsidiary;
(d) (i) enter into any new material line of business, (ii)
change its lending, investment, liability management and other material banking
policies in any respect which is material to CGB, except as required by law or
by policies imposed by a Bank Regulator, or (iii) except as set forth in Section
4.1(d) of the CGB Disclosure Schedule, incur or commit to any capital
expenditures or any obligations or liabilities in connection therewith other
than capital expenditures and obligations or liabilities incurred or committed
to in the ordinary course of business consistent with past practice but in no
event for more than $25,000 as to any one such item or $75,000 as to all such
items in the aggregate;
(e) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other means, any business or any corporation,
partnership, association or other business organization or division thereof;
provided, however, that the foregoing shall not prohibit foreclosures and other
debt-previously-contracted acquisitions in the ordinary course of business
consistent with past practice;
(f) sell, lease, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries of CGB), which are material, individually or in
the aggregate, to CGB, other than in the ordinary course of business consistent
with past practice;
(g) incur any long-term indebtedness for borrowed money or
guarantee any such long-term indebtedness or issue or sell any long-term debt
securities or warrants or rights to acquire any long-term debt securities of CGB
or any of its Subsidiaries or guarantee any long-term debt securities of others
other than (i) indebtedness of any Subsidiary of CGB to CGB or to another
Subsidiary of CGB, (ii) deposits taken in the ordinary course of business
consistent with past practice, or (iii) renewals or extensions of existing
long-term indebtedness without any change in the material terms thereof;
(h) intentionally take or fail to take any action that would,
or reasonably might be expected to, result in any of the representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect, or in any of the conditions to the Closing set forth in Article VI
(including without limitation the conditions set forth in Sections 6.1(f) and
6.3(d)) not being satisfied, or (unless such action is required by applicable
law or sound banking practice) which would adversely affect the ability of
Enterbank or CGB to obtain any of the Requisite Regulatory Approvals without
imposition of a condition or restriction of the type referred to in Section
6.1(g);
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(i) change the methods of accounting of CGB or any of its
Subsidiaries, except as required by changes in GAAP as concurred in by such
party's independent auditors;
(j) (i) enter into, adopt, amend (except for technical
amendments and such amendments as may be required by law) or terminate any CGB
Benefit Plan or any other Benefit Plan or any agreement, arrangement, plan or
policy between CGB or any of its Subsidiaries and one or more of its directors
or officers, increase in any manner the compensation or fringe benefits of any
director, officer or employee of CGB or any of its Subsidiaries without
obtaining the prior written consent of Enterbank (which consent shall not be
unreasonably withheld)) or pay or grant any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares or any similar awards) or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing, (ii) enter into or renew any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or employee of
CGB or any of its Subsidiaries of compensation or benefits contingent, or the
terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by this Agreement, or (iii) with respect to any CGB
Benefit Plan which is a defined benefit or defined contribution pension plan,
permit or cause (A) a consolidation or merger of any such CGB Benefit Plan, (B)
a spin-off involving any such CGB Benefit Plan, (C) a transfer of assets and/or
liabilities from or to any such CGB Benefit Plan, or (D) any similar transaction
involving any such CGB Benefit Plan;
(k) enter into any contract that would be required to be
disclosed on Section 3.1(j) of the CGB Disclosure Schedule or renew or terminate
any contract listed in Section 3.1(j) of the CGB Disclosure Schedule through any
volitional conduct, other than renewals of contracts or leases for a term of one
year or less without material adverse changes to the terms thereof;
(l) commit to or renew any real estate secured or
construction loan with a principal amount exceeding $1,500,000, or any
commercial loan which is referred to the Loan Committee of the FCB Board of
Directors for approval or with a principal amount exceeding $650,000; provided,
however, that if any new loan commitment or loan renewal involves a loan to a
borrower (or his associates (as defined in Rule 405 under the Securities Act)
and Affiliates) who has (A) any other classified or criticized asset or (B) a
renewal involving a classified or criticized asset, then the relevant loan
amount subject to this subsection shall be $250,000; provided, further, however,
that any such loan or renewal which is in excess of the applicable amount
specified in this subsection shall not be made or committed to be made unless
CGB shall have given Enterbank at least one Business Day's advance written
notice of the proposal to make such loan commitment or renewal, which written
notice shall provide Enterbank the same information provided to the relevant
loan committee (or loan officer, if no committee approval is required) of CGB or
the applicable CGB Subsidiary, and shall have furnished Enterbank with such
other information as Enterbank may reasonably have requested;
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(m) issue or agree to issue any letters of credit or otherwise
guarantee the obligations of any other persons except in the ordinary course of
business consistent with past practice;
(n) engage or participate in any material transaction or incur
or sustain any material obligation not in the ordinary course of business
consistent with past practice;
(o) settle any claim, action or proceeding involving money
damages involving a payment in excess of $50,000 as to any such matter, or
settle any other matter not involving money damages which is material to CGB;
(p) except as required by GAAP or applicable law or
regulation, change or make any tax elections, change any method of accounting
with respect to taxes, file any amended tax return, or settle or compromise any
federal, state, local or foreign material tax liability;
(q) except as set forth in Section 4.1(q) of the CGB
Disclosure Schedule, relocate or close any branch or loan production office;
(r) except as described in Section 4.1(r) of the CGB
Disclosure Schedule, enter into any securitization or similar transactions with
respect to any loans, leases or other assets of CGB or any of its Subsidiaries;
or
(s) agree to, or make any commitment to, take any of the
actions prohibited by this Section 4.1.
4.2 COVENANTS OF ENTERBANK.
(a) During the period from the date of this Agreement and
continuing until the Effective Time, Enterbank agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or to the extent that CGB shall otherwise consent in writing, which
consent shall not be unreasonably withheld), Enterbank will and will cause each
of its Subsidiaries to carry on its respective businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted and
use all reasonable efforts to preserve intact its present business
organizations, maintain its rights and franchises and preserve its relationships
with customers, suppliers and others having business dealings with them to the
end that their goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, Enterbank shall not, and shall not permit any of its Subsidiaries to,
without the prior consent of CGB in writing:
(i) except as required to perform its obligations
under this Agreement, amend or propose to amend its Articles of Incorporation or
its By-laws in a manner that would materially and adversely affect its ability
to perform its obligations under this Agreement or
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consummate the transactions contemplated hereunder, or otherwise materially and
adversely affect the rights, powers and privileges of the shares of Enterbank
Common Stock to be issued in the Merger;
(ii) (A) declare or pay any dividends on or make
other distributions in respect of any of its capital stock, except for cash
dividends in an amount substantially equivalent to dividends paid in the year
prior to the date hereof and dividends by a wholly owned Subsidiary of Enterbank
to Enterbank, (B) set any record or payment dates for the payment of any
dividends or distribution on its capital stock except in the ordinary course of
business consistent with past practice, (C) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock or (D) repurchase, redeem or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any shares of its capital stock or
the capital stock of any other Subsidiary of Enterbank or any securities
convertible into or exercisable for any shares of such capital stock;
(iii) change the methods of accounting of Enterbank
or any of its Subsidiaries (including any changes in accounting with respect to
taxes), except as required by changes in GAAP as concurred in by such party's
independent auditors;
(iv) intentionally take or fail to take any action
that would, or reasonably might be expected to, result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect, or in any of the conditions to the Closing set
forth in Article VI (including without limitation the conditions set forth in
Sections 6.1(f) and 6.2(d)) not being satisfied, or (unless such action is
required by applicable law or sound banking practice) which would adversely
affect the ability of Enterbank or CGB to obtain any of the Requisite Regulatory
Approvals without imposition of a condition or restriction of the type referred
to in Section 6.1(g); or
(v) agree to, or make any commitment to, take any of
the actions prohibited by this Section 4.2(a).
(b) Enterbank shall use all commercially reasonable efforts to
publish as soon as practicable after the end of the quarter in which there are
at least thirty (30) days of post-Merger combined operations, combined sales and
net income figures as contemplated by and in accordance with the terms of SEC
Accounting Release No. 135.
(c) If during the period from the date of this Agreement and
continuing until the Effective Time (i) Enterbank receives a Takeover Proposal
(as defined in Section 5.4(a), however, references therein to CGB shall be
deemed for purposes of this Section 4.2(c) to refer to Enterbank) and (ii)
Enterbank's Board of Directors determines that it is advisable to pursue
consummation of the Takeover Proposal, Enterbank shall immediately provide
written notice to CGB of the Takeover Proposal, with such notice (x) indicating
that Enterbank's Board of Directors intends to pursue consummation of the
Takeover Proposal, (y) specifying the material terms and conditions of the
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Takeover proposal and (z) identifying the Person making the Takeover Proposal.
CGB shall provide written notice to Enterbank, no later than the tenth Business
Day following CGB's receipt of Enterbank's written notice, signifying that CGB
is (A) in favor of the Takeover Proposal, in which event this Agreement shall
continue in full force and effect, subject to Enterbank's right to terminate
this Agreement pursuant to the penultimate sentence of this Section 4.2(c), or
(B) not in favor of the Takeover Proposal and elects to terminate this
Agreement, in which event this Agreement shall be deemed terminated as of the
date on CGB's notice to Enterbank. If CGB fails to provide written notice to
Enterbank within the time period set out in the immediately preceding sentence,
then CGB shall be deemed to be favorable to the Takeover Proposal as set out in
this Section 4.2(c)(A). If CGB's notice to Enterbank signifies that CGB is
favorable to the Takeover Proposal, Enterbank nevertheless may elect to
terminate this Agreement after the fifth Business Day following CGB's receipt of
a written notice advising CGB that the Board of Directors of Enterbank proposes
to enter into an agreement with respect to the Takeover Proposal pursuant to
Section 7.1(e)(ii). If either Enterbank elects to terminate this Agreement
pursuant to the immediately preceding sentence or CGB elects to terminate this
Agreement under Section 4.2(c)(B), and Enterbank proposes to enter into an
agreement with respect to the Takeover Proposal pursuant to Section 7.1(e)(ii),
Enterbank shall concurrently with entering into such agreement pay, or cause to
be paid, to CGB the Enterbank Termination Fee in accordance with the provisions
of Section 7.1(e)(ii). If the Takeover Proposal is not consummated, CGB
indicated that it was in favor of the Takeover Proposal, and Enterbank has not
terminated this Agreement in accordance with the provisions of this Section 4.2
and Section 7.1(e)(ii), this Agreement shall continue in existence between
Enterbank and CGB, subject to the terms and conditions contained in this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 REGULATORY MATTERS.
(a) CGB and Enterbank shall promptly prepare and file with the
SEC a Proxy Statement, and Enterbank shall promptly prepare and file with the
SEC the S-4, in which the Proxy Statement will be included as a prospectus, and
one or more registration statements or amendments to existing registration
statements under the Securities Act for the purpose of registering the maximum
number of shares of Enterbank Common Stock to which the option holders of CGB
may be entitled pursuant to Section 2.6 at or after the Effective Time. Each of
Enterbank and CGB shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing,
and CGB and Enterbank shall thereafter promptly mail the Proxy Statement to
their respective shareholders.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals
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and authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement and the other Transaction Agreements (including without limitation the
Merger). Enterbank and CGB shall have the right to review in advance and to the
extent practicable each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to CGB or Enterbank, as the case may be, and any of their respective
Subsidiaries which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement (including without limitation the
Merger) and each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
(c) Enterbank and CGB shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Enterbank, CGB
or any of their respective Subsidiaries to any Governmental Entity in connection
with the Merger and the other transactions contemplated by this Agreement.
(d) Enterbank and CGB shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined in Section 6.1(b))
will not be obtained or that the receipt of any such approval will be materially
delayed.
5.2 ACCESS TO INFORMATION. Upon reasonable notice, CGB and Enterbank
shall (and shall cause each of their respective Subsidiaries to) afford to the
other and their representatives and advisors access, during normal business
hours during the period prior to the Closing Date, to all the properties, books,
contracts, commitments and records of CGB (in the case of CGB) and of Enterbank
(in the case of Enterbank) and, during such period, each of CGB and Enterbank
shall (and shall cause each of their respective Subsidiaries to) make available
to the other and their representatives and advisors (a) a copy of each report,
schedule, registration statement and other document filed or received by CGB or
Enterbank, as the case may be, during such period pursuant to the requirements
of Federal securities laws or Federal or state banking laws (other than reports
or documents which such party is not permitted to disclose under applicable law
or reports or documents which are subject to an attorney-client privilege or
which constitute attorney work product) and (b) all other information concerning
the business, properties and personnel of CGB or of Enterbank, as the case may
be, as such other party may reasonably request. Enterbank will hold any such
information with respect to CGB and its Subsidiaries which is nonpublic in
confidence to
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the extent required by, and in accordance with, the provisions of the letter
dated November 12, 1999, between CGB and Enterbank (the "Confidentiality
Agreement"). CGB will hold all such information with respect to Enterbank and
its Subsidiaries which is nonpublic in confidence and will otherwise deal with
such information to the extent required by, and in accordance with, the
provisions of the Confidentiality Agreement, deeming, for purpose of this
sentence, such information to be subject to the provisions of the
Confidentiality Agreement as if such provisions applied by their terms to such
information of Enterbank and its Subsidiaries, as well as to such information of
CGB and its Subsidiaries. No investigation by either Enterbank, on the one hand,
or CGB, on the other hand, shall affect the representations and warranties of
the other.
5.3 SHAREHOLDERS' MEETINGS.
(a) CGB shall call a meeting of its shareholders for the
purpose of voting upon the adoption of this Agreement. CGB will, through its
Board of Directors, recommend to its shareholders adoption of this Agreement
unless the Board of Directors of CGB determines in good faith, based upon the
written advice of outside counsel, that making such recommendation, or failing
to withdraw, modify or amend any previously made recommendation, would
constitute a breach of fiduciary duty by CGB's Board of Directors under
applicable law. In addition, nothing in this Section 5.3 or elsewhere in this
Agreement shall prohibit accurate disclosure by CGB of information that is
required to be disclosed in the Proxy Statement, or any other document required
to be filed with the SEC (including without limitation a
Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be disclosed by applicable law or regulation or the rules of any securities
exchange or automated quotation system on which the securities of CGB may then
be traded.
(b) Enterbank shall call a meeting of its shareholders for the
purpose of voting upon the adoption of this Agreement. Enterbank will, through
its Board of Directors, recommend to its shareholders adoption of this Agreement
unless the Board of Directors of Enterbank determines in good faith, based upon
the written advice of outside counsel, that making such recommendation, or
failing to withdraw, modify or amend any previously made recommendation, would
constitute a breach of fiduciary duty by Enterbank's Board of Directors under
applicable law. In addition, nothing in this Section 5.3 or elsewhere in this
Agreement shall prohibit accurate disclosure by Enterbank of information that is
required to be disclosed in the Proxy Statement, the S-4 or any other document
required to be filed with the SEC (including without limitation a
Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be disclosed by applicable law or regulation or the rules of any securities
exchange or automated quotation system on which the securities of Enterbank may
then be traded.
(c) Each of CGB and Enterbank shall use all commercially
reasonable efforts to cause such meetings of their respective shareholders to
take place as soon as is reasonably practicable after the S-4 is declared
effective by the SEC. CGB and Enterbank shall coordinate and cooperate with
respect to the timing of said meetings and the date on which the CGB
Shareholders' Meeting shall be held.
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5.4 NO SOLICITATIONS.
(a) From the date hereof until the earlier of the Effective
Time or the termination of this Agreement, CGB agrees that neither it, nor any
of its Subsidiaries, Affiliates or agents shall, nor shall it authorize or
permit any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative or agent
(collectively, "Representatives") retained by it or any of its Subsidiaries,
Affiliates or agents to, solicit, initiate or knowingly encourage the submission
of, or enter into discussions or negotiations with or provide information to any
person or group of persons (other than the respective parties to this Agreement)
concerning, any Takeover Proposal (as defined below) or enter into any agreement
with a third party relating to a Takeover Proposal or assist, participate in,
facilitate or encourage any effort or attempt by any other person to do or seek
to do any of the foregoing. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence by
any director, officer or Affiliate of CGB or any of its Subsidiaries or any
investment banker, attorney or other advisor or Representative of CGB or any of
its Subsidiaries or Affiliates, whether or not such Person is purporting to act
on behalf of CGB or any of its Subsidiaries or otherwise, shall be deemed to be
a breach of this Section 5.4(a) by CGB. As used in this Agreement, "Takeover
Proposal" shall mean any inquiry, proposal or offer to acquire in any manner 20%
or more of any class of equity securities of, or a merger, consolidation,
business combination, sale, recapitalization, liquidation, dissolution or other
disposition or similar transaction involving 20% or more of the assets of, CGB
or any Significant Subsidiary of CGB, or any tender offer or exchange offer that
if consummated would result in any person beneficially owning 20% or more of any
class of equity securities of CGB or any Significant Subsidiary of CGB (other
than pursuant to the transactions contemplated by this Agreement). A
"Significant Subsidiary" means any Subsidiary of a person that would constitute
a Significant Subsidiary of such person within the meaning of Rule 1-02 of
Regulation S-X of the SEC.
(b) Except as set forth herein, neither the Board of Directors
of CGB nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Enterbank, the approval or
recommendation by the Board of Directors of CGB or any such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal, or (iii) enter into any agreement with respect
to any Takeover Proposal. Notwithstanding the foregoing, the Board of Directors
of CGB, to the extent required by its fiduciary obligations, as determined in
good faith by the Board of Directors of CGB based on the advice of independent
counsel, may (subject to the following sentences) withdraw or modify its
approval or recommendation of this Agreement or the Merger, approve or recommend
any Superior Proposal (as defined herein), enter into an agreement with respect
to such Superior Proposal or terminate this Agreement, in each case at any time
after the fifth Business Day following Enterbank's receipt of a written notice
advising Enterbank that the Board of Directors of CGB has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the Person making such Superior Proposal (it being understood
that any amendment to a Superior Proposal shall necessitate an additional five
(5) Business Day period). In addition, if CGB proposes to enter into an
agreement with respect to any Takeover Proposal, it shall concurrently with
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entering into such agreement pay, or cause to be paid, to Enterbank the CGB
Termination Fee in accordance with the provisions of Section 5.4(d). For
purposes hereof, "Superior Proposal" shall mean any bona fide written Takeover
Proposal by a third party on terms determined in good faith by the Board of
Directors of CGB to be reasonably capable of being completed, taking into
account all legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal and (based on the advice of a financial advisor
of nationally recognized reputation), if consummated to be more favorable to the
shareholders of CGB from a financial point of view than the Merger.
(c) In addition to the obligation of CGB set forth in
paragraph (b) above, CGB promptly shall advise Enterbank orally and in writing
of any request for information or of any Takeover Proposal, or any inquiry with
respect to or which could lead to any Takeover Proposal, the material terms and
conditions of such request, Takeover Proposal or inquiry and the identity of the
Person making any such request, Takeover Proposal or inquiry. CGB shall keep
Enterbank fully informed of the status and details (including amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry.
(d) If this Agreement is terminated by CGB pursuant to Section
5.4(b), CGB shall pay promptly, but in no event later than two Business Days
after the occurrence of such termination, by wire transfer of immediately
available Federal Funds to such account as Enterbank shall designate, One
Million Dollars $1,000,000.00 (the "CGB Termination Fee") as liquidated damages
to Enterbank for such breach minus any Actual Expenses that have been paid by
CGB pursuant to the penultimate sentence of Section 5.8. If this Agreement is
terminated by Enterbank pursuant to Section 4.2(c) and Section 7.1(e)(ii),
Enterbank shall pay promptly, but in no event later than two Business Days after
the occurrence of such termination, by wire transfer of immediately available
Federal Funds to such account as CGB shall designate, One Million Dollars
$1,000,000.00 (the "Enterbank Termination Fee") as liquidated damages to CGB for
such breach minus any Actual Expenses that have been paid by Enterbank pursuant
to the penultimate sentence of Section 5.8.
5.5 LEGAL CONDITIONS.
(a) Each of CGB and Enterbank shall, and shall cause its
respective Subsidiaries to, use all reasonable efforts (i) to take, or cause to
be taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party or its Subsidiaries with respect to the
transactions contemplated by this Agreement and as promptly as practicable, (ii)
to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and or any other public or private third party which is required to be
obtained or made by such party or any of its Subsidiaries in connection with the
Merger and the other transactions contemplated by this Agreement. Each of CGB
and Enterbank will promptly cooperate with and furnish information to the other
in connection with any such burden suffered by, or requirement imposed upon, any
of them or any of their Subsidiaries in connection with the foregoing.
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(b) Each of CGB and Enterbank agrees to use all reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary and proper or advisable to consummate, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using all reasonable best efforts to (i)
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby, (ii) defend any Litigation seeking to enjoin, prevent or delay the
consummation of the transactions contemplated hereby or seeking material
damages, (iii) provide to counsel to the other party hereto representations and
certifications as to such matters as such counsel may reasonably request in
order to render the opinions referred to in Sections 6.2(d) and 6.3(c), and (iv)
to obtain the letters of the independent accountants referred to in Section
6.1(f).
5.6 EMPLOYEE BENEFIT PLANS.
(a) For purposes of all employee benefit plans of Enterbank or
its Subsidiaries in which the employees of CGB who shall remain in the
employment of Enterbank or its Subsidiaries after the Closing Date shall
participate from and after such date (including all policies and employee fringe
benefit programs, including vacation policies), and under which an employee's
benefit depends, in whole or in part, on length of service, credit will be given
to employees of CGB for vesting and eligibility purposes only for service
previously credited with CGB or its Subsidiaries prior to the Effective Time to
the extent that such crediting of service does not result in duplication of
benefits; provided, however, that Enterbank shall determine each employee's
length of service in a manner consistent with the customary practice with
respect to the employees of the Enterbank Subsidiary by which they shall be
employed. Enterbank shall also cause each employee benefit plan in which
employees of CGB participate from and after the Effective Time to waive (i) any
preexisting condition restriction which was waived under the terms of any
analogous Benefit Plan immediately prior to the Effective Time or (ii) any
waiting period limitation which would otherwise be applicable to an employee of
CGB on or after the Effective Time to the extent such employee of CGB had
satisfied any similar waiting period limitation under an analogous Benefit Plan
prior to the Effective Time.
(b) Notwithstanding the foregoing, except as otherwise
expressly provided in this Agreement, Enterbank shall, and shall cause its
Subsidiaries to, honor in accordance with their terms all Benefit Plans, each as
amended to the date hereof and as otherwise amended prior to the Closing Date,
and other contracts, arrangements, commitments or understandings described in
the CGB Disclosure Schedule; provided, however, that this paragraph (b) shall be
subject to the provisions of paragraph (d) hereof.
(c) Except as otherwise provided herein, nothing in this
Section 5.6 shall be interpreted as preventing Enterbank or its Subsidiaries
after the Effective Time from amending, modifying or terminating any of the
Plans, or other contracts, arrangements, commitments or understandings, in
accordance with their terms and applicable law.
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(d) CGB shall terminate all Benefit Plans that Enterbank
requests CGB to terminate, which will not include the Benefit Plans described in
Schedule 5.6(d), effective as of the Closing Date in accordance with all
applicable requirements of law. Notwithstanding the preceding sentence, the CGB
401(k) Plan and the CGB Flexible Benefits Plan shall be frozen as of the Closing
Date. As soon as practical after the Closing Date, the assets of the CGB 401(k)
Plan and CGB Flexible Benefits Plan shall be merged with the Enterprise Bank
Incentive Savings Plan and Enterprise Bank Section 125 Premium Conversion Plan,
respectively.
5.7 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Subject to the mutual intent of the
parties that the Merger will be accounted for under the pooling of interests
method, CGB shall take any and all actions necessary or appropriate to ensure
that the Merger will be accounted for under the pooling of interests method,
including without limitation, causing Deloitte & Touche LLP to issue the
"poolability" letter required as a condition to close in Section 6.1(f).
5.8 FEES AND EXPENSES. Unless otherwise agreed by the parties in
writing or as otherwise provided herein, each party hereto shall bear and pay
all costs and expenses incurred by it incident to preparing, entering into and
carrying out this Agreement and to consummating the Merger, including fees and
expenses of its own financial advisors, accountants and counsel, all printing,
filing, mailing and other incidental fees, costs and expenses related thereto
associated with the S-4 and the Proxy Statement (collectively, the "SEC Fees").
Notwithstanding the foregoing provisions of this Section 5.8 and notwithstanding
the payment of any Termination Fee pursuant to Section 5.4, if this Agreement is
terminated by either party pursuant to Section 7.1(d) or (e) hereof because of a
willful breach by the other party of any representation, warranty, covenant or
agreement as set forth in Section 7.1(d) or (e), and provided that the
terminating party shall not have been in breach (in any material respect) of any
representation and warranty, covenant or agreement contained herein, then the
breaching party shall bear and pay all the costs and expenses incurred by the
non-breaching party, with respect to the fees and expenses of financial and
other advisors, investment bankers, accountants, counsel, printers and persons
involved in the transactions contemplated by this Agreement, including SEC Fees.
Notwithstanding the foregoing provisions of this Section 5.8, if this Agreement
is terminated pursuant to Sections 7.1(f)(i)(2) or 7.1(f)(i)(3), 7.1(f)(ii)(2)
or 7.1(h)(1), then CGB shall pay promptly by wire transfer of immediately
available funds to such account as Enterbank shall designate the amount of all
costs and expenses incurred by Enterbank incident to preparing, entering into
and carrying out this Agreement and to consummating the Merger, including
without limitation, fees and expenses incurred by Enterbank for its accountants
and counsel and all SEC Fees, and fees and expenses of Stifel, Nicolaus &
Company, Incorporated which amount shall not exceed $250,000 (collectively, the
"Actual Expenses"). Notwithstanding the foregoing provisions of this Section
5.8, if this Agreement is terminated pursuant to Section 7.1(h)(2) or
7.1(g)(iii), then Enterbank shall pay promptly by wire transfer of immediately
available funds to such account as CGB shall designate the amount of all Actual
Expenses incurred by CGB (including any and all fees and expenses of Fister &
Associates, Inc.), which amount of Actual Expenses shall not exceed $250,000.
Final settlement with respect to the payment of such fees and expenses by the
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parties shall be made within thirty days of the termination of this Agreement.
Except as otherwise expressly provided herein, whether or not the transactions
contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense.
5.9 COOPERATION. During the period from the date of this Agreement to
the Effective Time, each of CGB and Enterbank shall, (i) confer on a regular and
frequent basis with the other, report on operational matters, policies and
banking practices and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen, could
have, a material adverse effect on CGB or Enterbank, as the case may be, or
which would cause or constitute a material breach of any of the representations,
warranties or covenants of such party contained herein, (ii) cause each
Subsidiary of CGB and Enterbank that is a bank to file all call reports with the
appropriate Bank Regulators and all other reports, applications and other
documents required to be filed with the applicable Governmental Entities between
the date hereof and the Effective Time and (iii) coordinate with the other the
declaration of any dividends in respect of Enterbank Common Stock and CGB Common
Stock and the record dates and payment dates relating thereto, it being the
intention of the parties hereto that holders of Enterbank Common Stock or CGB
Common Stock shall not receive two dividends, or fail to receive one dividend,
for any single calendar quarter with respect to their shares of Enterbank Common
Stock and/or CGB Common Stock and any shares of Enterbank Common Stock any such
holder receives in exchange therefor in the Merger.
5.10 AFFILIATES. Each of Enterbank and CGB shall use its commercially
reasonable efforts to cause each director, executive officer and other person
who is an "affiliate" (for purposes of Rule 145 under the Securities Act, in the
case of affiliates of CGB, and for purposes of qualifying the Merger for pooling
of interests accounting treatment, in the case of affiliates of either Enterbank
or CGB) of such party to execute and deliver, as soon as practicable after the
date of this Agreement, and in any event on or prior to the date the Proxy
Statements are mailed to the shareholders of CGB and Enterbank, a written
agreement, substantially in the form attached hereto as Exhibit B-1 with respect
to CGB and Exhibit B-2 with respect to Enterbank. CGB shall instruct CGB's
transfer agent regarding stop transfer instructions required in connection with
shares of CGB Common Stock owned by "affiliates" of CGB, as described in Exhibit
B-1 hereto.
5.11 ADVICE OF CHANGES. Enterbank and CGB shall promptly advise the
other party of any change or event which, individually or in the aggregate with
other such changes or events, has a material adverse effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
5.12 SUBSEQUENT INTERIM AND ANNUAL FINANCIAL STATEMENTS; CERTAIN
REPORTS. As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter (other than the fourth quarter of a fiscal
year) or 90 days after December 31, 1999, or the end of each fiscal year ending
after the date of this Agreement, each party will deliver to the other party its
financial statements or any Quarterly Report on Form 10-Q or its Annual Report
on Form 10-K, as the case
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may be, as filed with the SEC under the Exchange Act, and each party will
furnish to the other party copies of their management's monthly interim reports
(which do not comply with the published rules and regulations of the SEC or
GAAP) to their respective Boards of Directors within two days after such reports
are so furnished to the Boards. As soon as reasonably available, but in no event
more than 90 days after December 31, 1999, or the end of each fiscal year ending
after the date of this Agreement, CGB will deliver to Enterbank its financial
statements.
5.13 DISSENTERS' RIGHTS. CGB and (if Enterbank will be the Surviving
Corporation) Enterbank shall include in the notice of shareholder's meeting
required by Section 5.3 hereof a description of appraisal rights as contained in
K.S.A. 17-6712 of the KGCC and, if required, Section 262 of the DGCL.
5.14 RETENTION OF FCB OFFICERS AND DIRECTORS. It is the intention of
the parties hereto that immediately following the Closing Date the current
officers and directors of FCB shall continue to serve FCB in their respective
present capacities and on such terms and conditions as are presently in effect.
5.15 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) The Surviving Corporation shall indemnify, defend, and
hold harmless the present directors, officers, employees, and agents of CGB and
its Subsidiaries (each, an "Indemnified Party") after the Effective Time against
all damages in connection with any action arising out of actions or omissions
occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement) to the full extent permitted under Kansas Law
and by CGB's Certificate of Incorporation and Bylaws as in effect as of the date
hereof, including any provisions relating to advances of expenses incurred in
the defense of any action, suit or proceeding. Enterbank shall cause the
Surviving Corporation and all other relevant Enterbank Subsidiaries to apply
such rights of indemnification in good faith and to the fullest extent permitted
by applicable Law.
(b) With respect to all persons who are currently covered by
CGB's directors' and officers' liability insurance, or will become covered by
such insurance prior to the Effective Time, the Surviving Corporation shall
maintain in effect for a period of not less than three years following the
Effective Time the current directors' and officers' liability insurance
maintained by CGB (provided that the Surviving Corporation may substitute
therefor policies of at least equivalent coverage containing terms and
conditions and coverages which are no less advantageous to the current directors
and officers of the Company) with respect to matters occurring prior to the
Effective Time.
(c) If the Surviving Corporation or any of its successors or
assigns shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or shall transfer all or substantially all of its assets
to any person, corporation or entity, then in each case, proper provision shall
be made
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so that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 5.15.
(d) The provisions of this Section 5.15 are intended to be for
the benefit of and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives, and shall survive the consummation of the Merger and
be binding on all successors and assigns of the Surviving Corporation.
5.16 CONFORMING ENTRIES.
(a) Notwithstanding that CGB believes that CGB and its
Subsidiaries have established all reserves and taken all provisions for possible
loan losses required by GAAP and applicable laws, rules and regulations, CGB
recognizes that Enterbank may have adopted different loan, accrual and reserve
policies (including loan classifications and levels of reserves for possible
loan losses). From and after the date of this Agreement, CGB and Enterbank shall
consult and cooperate with each other with respect to conforming the loan,
accrual and reserve policies of CGB and its Subsidiaries to those policies of
Enterbank, as specified in each case in writing to CGB, based upon such
consultation and as hereinafter provided.
(b) In addition, from and after the date of this Agreement,
CGB and Enterbank shall consult and cooperate with each other with respect to
determining appropriate accruals, reserves and charges to establish and take in
respect of excess equipment write-off or write-down of various assets and other
appropriate charges and accounting adjustments taking into account the parties'
business plans following the Merger, as specified in each case in writing to
CGB, based upon such consultation and as hereinafter provided.
(c) CGB and Enterbank shall consult and cooperate with each
other with respect to determining the amount and timing for recognizing for
financial accounting purposes CGB's expenses of the Merger and the restructuring
charges, if any, related to or to be incurred in connection with the Merger.
(d) With respect to clauses (a) through (c) of this Section
5.16, it is the objective of CGB that such reserves, accruals, charges and
divestitures, if any, to be taken shall be consistent with GAAP.
(e) No action taken by CGB at the request of Enterbank
pursuant to this Section 5.16 to conform the appropriate policies of CGB and its
Subsidiaries to those of Enterbank shall, in and of itself, constitute a breach
of any representation or warranty of CGB contained in Section 3.1(d) or 3.1(z)
hereof or provide a basis on which Enterbank may assert a breach of any
representation or warranty made by CGB in this Agreement.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective obligations
of each party to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) SHAREHOLDER APPROVALS. The CGB Shareholder Approval and
the Enterbank Shareholder Approval shall have been obtained.
(b) OTHER APPROVALS. All authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any Governmental Entity (all the foregoing, "Consents")
which are necessary pursuant to the Merger, other than immaterial Consents
which, if not obtained, would have no material adverse effect on the
consummation of the transactions contemplated by this Agreement and the
Agreement of Merger or on either Enterbank or the Surviving Corporation, shall
have been filed, have occurred or been obtained (all such permits, approvals,
filings and consents and the lapse of all such waiting periods being referred to
as the "Requisite Regulatory Approvals") and all such Requisite Regulatory
Approvals shall be in full force and effect.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the transactions contemplated by this Agreement
or the Transaction Agreements shall be in effect. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement or the
Transaction Agreements, by any Federal, state or foreign Governmental Entity of
competent jurisdiction which makes the consummation of the transactions
contemplated by this Agreement or the Transaction Agreements illegal.
(d) S-4. The S-4 shall become effective under the Securities
Act, no stop orders suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) POOLING. Enterbank shall have received a letter from KPMG
LLP, independent public accountants to Enterbank, dated the Closing Date, in
form and substance reasonably acceptable to Enterbank and CGB, respectively, to
the effect that the Merger will qualify for "pooling of interests" accounting
treatment; provided, however, that Deloitte & Touche LLP shall deliver to the
CGB Board of Directors a "poolability letter" dated the Closing Date in a form
reasonably acceptable to Enterbank and CGB and in accordance with Statement on
Auditing Standards No. 50; provided further, however, that if either party shall
have knowingly taken or omitted to take any action within the control of such
party which shall have prevented such party's
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independent public accountants from rendering such letter, then this condition
shall not be applicable to such party.
(f) BURDENSOME CONDITION. There shall not be any action taken,
or any statute, rule, regulation, order or decree enacted, entered, enforced or
deemed applicable to the Merger or the other Transaction Agreements by any
Federal, state or foreign Governmental Entity which, in connection with the
grant of a Requisite Regulatory Approval or otherwise, imposes any condition or
restriction (a "Burdensome Condition") upon Enterbank or CGB or their respective
Subsidiaries or Affiliates which would reasonably be expected to (i) have a
material adverse effect after the Effective Time on the present or prospective
consolidated financial condition, business, operating results or prospects of
Enterbank or the Surviving Corporation (including, without limitation, any
requirement to dispose of any material assets or businesses or restrict in any
significant way any material operations or activities), (ii) prevent Enterbank
or CGB or their respective Subsidiaries from realizing all or a substantial
portion of the economic benefits of the transactions contemplated by this
Agreement, or (iii) materially impair Enterbank's or CGB's ability to exercise
and enforce its rights under the Transaction Agreements.
(g) DISSENTERS' RIGHTS. The aggregate number of shares of CGB
Common Stock or (if Enterbank is the Surviving Corporation) of Enterbank Common
Stock held by persons who have taken all of the steps required at or prior to
the Enterbank Shareholders' Meeting and the CGB Shareholders' Meeting to perfect
their right (if any) to be paid the value of such shares under Section 262 of
the DGCL and K.S.A. 17-6712 of the KGCC shall not exceed 9.9% of the outstanding
shares of CGB Common Stock when combined with tainted treasury shares held by
CGB and fractional shares for which cash will be distributed.
(h) AVERAGE ENTERBANK CLOSING PRICE. CGB and Enterbank agree
that if the Average Enterbank Closing Price (as hereinafter defined) on the
second Business Day prior to the Closing Date (the "Determination Date") is
either less than $15.50 or greater than $23.00, then Enterbank and CGB shall in
good faith attempt to negotiate a mutually acceptable revised Exchange Ratio;
provided, however, that if a mutually acceptable revised Exchange Ratio is not
negotiated within five (5) Business Days following the Determination Date, then
either CGB (if the Average Enterbank Closing Price is less than $15.50) or
Enterbank (if the Average Enterbank Closing Price is greater than $23.00)may
terminate this Agreement by providing the other party with written notice of
such termination within two (2) Business Days following the fifth Business Day
after the Determination Date. If the applicable party does not elect to
terminate this Agreement pursuant to this Section 6.1(h), then the Closing Date
shall be the seventh Business Day following the Determination Date. For purposes
of this Agreement, "Average Enterbank Closing Price" means the average closing
sale price of the Enterbank Common Stock for the twenty (20) days on which the
New York Stock Exchange is open for trading preceding the second Business Day
prior to the Closing Date as reported by J.A. Glynn & Co. or another firm making
a market in the Enterbank Common Stock. For each of such twenty (20) Business
Days on which there is no reported sale of Enterbank Common Stock, the reported
closing price at which shares of Enterbank Common Stock were sold on the most
recent Business Day prior thereto on which there was a reported sale of
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Enterbank Common Stock shall be deemed to be the closing sale price. For
purposes of this Section 6.1(h), all trades on days on which fewer than an
aggregate of 500 shares are traded shall be disregarded. In the event of any
termination pursuant to this Section 6.1(h), this Agreement shall be of no
further force or effect whatsoever and neither party hereto shall have any
further obligation or liability hereunder.
6.2 CONDITIONS TO OBLIGATIONS OF ENTERBANK. The obligation of Enterbank
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions unless waived by Enterbank:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CGB set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and Enterbank shall
have received a certificate signed on behalf of CGB by its President and Chief
Executive Officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS. CGB shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Enterbank shall have received a
certificate signed on behalf of CGB by its President and Chief Executive Officer
and Chief Financial Officer to such effect.
(c) CORPORATE ACTION. Enterbank shall have received a copy of
the resolution or resolutions duly adopted by the Board of Directors (or a duly
authorized committee thereof) of CGB and of the holders of the CGB Common Stock
authorizing the execution, delivery and performance by CGB of this Agreement and
the other Transaction Agreements, certified by the Secretary or an Assistant
Secretary of CGB.
(d) TAX OPINION. Enterbank shall have received the opinion of
Armstrong Teasdale LLP, counsel to Enterbank, dated the Closing Date, to the
effect that (i) the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of section 368(a) of the Code and (ii)
Enterbank and CGB will each be a party to that reorganization within the meaning
of section 368(b) of the Code. In rendering such opinion, such counsel may
require and rely upon representations and covenants contained in certificates of
officers of Enterbank, CGB and others. If the opinion referred to in this
Section 6.2(d) is not delivered, such condition shall be deemed to be satisfied
if Enterbank shall have received an opinion to the effect of subsections (i) and
(ii) above from Deloitte & Touche LLP or another accounting firm or law firm
selected by CGB and reasonably acceptable to Enterbank. Enterbank will cooperate
in obtaining such opinion.
(e) MATERIAL ADVERSE EFFECT. Except as disclosed to Enterbank
in writing prior to the date hereof, no material adverse effect upon CGB shall
have occurred since September 30, 1999, and CGB shall not be a party to or so
far as CGB is aware, threatened with, and to CGB's knowledge there is no
reasonable basis for, any legal action or other proceeding before any court,
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any arbitrator of any kind or any government agency, which in the reasonable
judgment of Enterbank, could have a material adverse effect upon CGB, and
Enterbank shall have received a certificate signed on behalf of CGB by its
President and Chief Executive Officer to such effect.
(f) CLOSING DOCUMENTS. Enterbank shall have received from CGB
such certificates and other closing documents as counsel for Enterbank shall
reasonably request.
(g) FAIRNESS OPINION. Enterbank shall have received a written
"bring-down" opinion of Stifel, Nicolaus & Company, Incorporated, dated as of
the date of Enterbank's Proxy Statement, to the effect that, as of such date,
the consideration to be received by the holders of the Enterbank Common Stock in
the Merger is fair to the holders of the Enterbank Common Stock from a financial
point of view.
6.3 CONDITIONS TO OBLIGATIONS OF CGB. The obligation of CGB to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions unless waived by CGB:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Enterbank set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and CGB shall have
received a certificate signed on behalf of Enterbank by its President and Chief
Executive Officer and its Chief Financial Officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS. Enterbank shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and CGB shall have received a
certificate signed on behalf of Enterbank by its President and Chief Executive
Officer and its Chief Financial Officer to such effect.
(c) CORPORATE ACTION. CGB shall have received a copy of the
resolution or resolutions duly adopted by the Board of Directors (or a duly
authorized committee thereof) of Enterbank and of the holders of the Enterbank
Common Stock authorizing the execution, delivery and performance by Enterbank of
this Agreement and the other Transaction Agreements, certified by the Secretary
or an Assistant Secretary of Enterbank.
(d) TAX OPINION. CGB shall have received the opinion of
Stinson, Mag & Fizzell, independent counsel to CGB (or other accounting or law
firm reasonably acceptable to Enterbank), dated the Closing Date, to the effect
that (i) the Merger should be treated for Federal income tax purposes as a
reorganization within the meaning of section 368(a) of the Code, (ii) Enterbank
and CGB should each be a party to that reorganization within the meaning of
section 368(b) of the Code and (iii) (1) except for any cash received in lieu of
any fractional share, no gain or loss should be recognized by holders of CGB
Common Stock who receive Enterbank Common Stock in exchange for the CGB Common
Stock which they hold; (2) the holding period of Enterbank
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Common Stock exchanged for CGB Common Stock should include the holding period of
the CGB Common Stock for which it is exchanged, assuming the shares of CGB
Common Stock are capital assets in the hands of the holder thereof at the
Effective Time; and (3) the basis of the Enterbank Common Stock received in the
exchange should be the same as the basis of the CGB Common Stock for which it
was exchanged, less any basis attributable to fractional shares for which cash
is received. In rendering such opinion, such independent accountants ( or law
firm) may require and rely upon representations and covenants contained in
certificates of officers of Enterbank, CGB and others. If the opinion referred
to in this Section 6.3(d) is not delivered, such condition shall be deemed
satisfied if CGB shall have received an opinion to the effect of subsections (i)
and (ii) above from Armstrong Teasdale LLP or another law or accounting firm
selected by Enterbank and reasonably acceptable to CGB. CGB will cooperate in
obtaining such opinion.
(e) MATERIAL ADVERSE EFFECT. Except as disclosed to CGB in
writing prior to the date hereof, no material adverse effect upon Enterbank
shall have occurred since September 30, 1999, and Enterbank shall not be a party
to or so far as Enterbank is aware, threatened with, and to Enterbank's
knowledge there is no reasonable basis for, any legal action or other proceeding
before any court, any arbitrator of any kind or any governmental agency, which
in the reasonable judgment of CGB, could have a material adverse effect upon
Enterbank, and CGB shall have received a certificate signed on behalf of
Enterbank by its President and Chief Executive Officer and its Chief Financial
Officer to such effect.
(f) CLOSING DOCUMENTS. CGB shall have received from Enterbank
such certificates and other closing documents as counsel for CGB shall
reasonably request.
(g) ADDITIONS TO ENTERBANK BOARD OF DIRECTORS. Enterbank shall
have amended its Bylaws or taken any other action necessary to increase the
number of authorized directors on its Board of Directors to permit the
appointment of the four CGB Designees (pursuant to Section 1.3(a)(iv)) at least
five (5) Business Days prior to the Closing Date.
(h) FAIRNESS OPINION. CGB shall have received a written
"bring-down" opinion of Fister & Associates, Inc., dated as of the date of CGB's
Proxy Statement, to the effect that, as of such date, the consideration to be
received by the holders of the CGB Common Stock in the Merger is fair to the
holders of the CGB Common Stock from a financial point of view.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, whether before or after adoption of the
Agreement by the shareholders of CGB or Enterbank:
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(a) by mutual consent of Enterbank and CGB in a written
instrument;
(b) by either Enterbank or CGB (i) upon written notice to the
other party if any Bank Regulator shall have issued an order denying approval of
the Merger and the other material aspects of the transactions contemplated by
this Agreement or if any Governmental Entity of competent jurisdiction shall
have issued a final permanent order enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement or (ii) if any
Governmental Entity of competent jurisdiction shall have issued an order in
connection with the transactions contemplated hereby imposing a Burdensome
Condition on Enterbank or the Surviving Corporation, and in any such case the
time for appeal or petition for reconsideration of any such order referred to in
clauses (i) or (ii) shall have expired without such appeal or petition being
granted;
(c) by either Enterbank or CGB if the Merger shall not have
been consummated on or before July 31, 2000; provided that if the Merger shall
not have been consummated on or before such date, such termination date may be
extended by up to 60 days thereafter (i) at the election of the non-breaching
party, if the Merger shall not have been consummated due to the volitional
breach of any material representation, warranty or covenant in this Agreement by
Enterbank or CGB, or (ii) at the election of the party who has requested any
Requisite Regulatory Approval, in the event that the Merger shall not have been
consummated due to the fact that any such Requisite Regulatory Approvals shall
not yet have been received;
(d) by Enterbank in the event of a breach by CGB of any
representation, warranty or covenant contained in this Agreement, which breach
(i) either is not cured within 45 days after the giving of written notice to
CGB, or is of a nature which cannot be cured prior to the Closing and (ii) would
entitle the non-breaching party to elect not to consummate the transactions
contemplated hereby pursuant to Article VI; provided, however, that Enterbank
may immediately terminate this Agreement upon notice to CGB in the event that
CGB shall breach the covenant provided for in Section 5.4 hereof;
(e) (i) by CGB in the event of a breach by Enterbank of any
representation, warranty or covenant contained in this Agreement, which breach
(1) either is not cured within 45 days after the giving of written notice to
Enterbank or is of a nature which cannot be cured prior to the Closing and (2)
would entitle the non-breaching party to elect not to consummate the
transactions contemplated hereby pursuant to Article VI; provided, however, that
CGB may terminate this Agreement within ten (10) Business Days after notice to
Enterbank in the event that Enterbank shall breach the covenant provided for in
Section 4.2(c) hereof and such breach shall not have been cured within such ten
(10) Business Day period and, upon such termination, Enterbank shall pay to CGB
the Enterbank Termination Fee as liquidated damages to CGB for such breach,
which sum shall be paid by wire transfer of immediately available Federal Funds,
to such account as CGB shall designate;
(ii) by Enterbank, in the event that, notwithstanding its
obligations in Section 4.2(c), a third party makes a written offer regarding a
Takeover Proposal of Enterbank in
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which such third party indicates that they would not be willing to consummate
such a Takeover Proposal unless this Agreement is terminated, and the Board of
Directors of Enterbank determines in good faith, based upon the written advice
of outside counsel, that failing to accept such Takeover Proposal would
constitute a breach of fiduciary duty by Enterbank's Board of Directors under
applicable law; provided, however, that upon such termination, Enterbank shall
pay to CGB the Enterbank Termination Fee as liquidated damages to CGB for such
termination, which sum shall be paid in the manner described in subsection
7.1(e)(i) above;
(f) (i) by Enterbank (1) if, in accordance with Section 5.3,
the Board of Directors of CGB fails to recommend adoption of this Agreement by
the shareholders of CGB, or amends or modifies such recommendation in a manner
materially adverse to Enterbank or withdraws such recommendation to the
shareholders of CGB, (2) if the condition set forth in Section 6.2(q) is not
satisfied, or (3) if Deloitte & Touche LLP fails to deliver the "poolability
letter" required by Section 6.1(e);
(ii) by CGB (1) if, in accordance with Section 5.3, the
Board of Directors of Enterbank fails to recommend adoption of this Agreement by
the shareholders of Enterbank, or amends or modifies such recommendation in a
manner materially adverse to CGB or withdraws such recommendation to the
shareholders of Enterbank, or (2) if the condition set forth in Section 6.3(h)
is not satisfied;
(g) by Enterbank or CGB, if (i) the CGB Shareholder Approval
or the Enterbank Shareholder Approval shall not have been obtained at a duly
held meeting of shareholders of CGB or Enterbank, as appropriate, held for such
purpose or at any adjournment, postponement or continuation thereof, or (ii) the
condition set forth in Section 6.1(h) is not satisfied, or (iii) KPMG LLP fails
to deliver the letter required by Section 6.1(f) (although Deloitte & Touche LLP
has delivered the "poolability letter" required by Section 6.1(f));
(h) (1) by Enterbank in the event there has been a change, or
any event involving a prospective change, in the business, financial condition,
results of operations or prospects of CGB or any of its Subsidiaries which has
had, or would be reasonably likely to have, a material adverse effect on CGB;
provided, however, that termination pursuant to this subsection (1) shall be
effective 45 days after the giving of written notice to CGB if the change or
event described in said notice has not been cured; and provided, further that
termination under this subsection (1) shall be effective immediately after the
giving of written notice if said change or event cannot be cured prior to the
Closing; and (2) by CGB in the event there has been a change, or any event
involving a prospective change, in the business, financial condition, results of
operations or prospects of Enterbank or any of its Subsidiaries which has had,
or would be reasonably likely to have, a material adverse effect on Enterbank;
provided, however, that termination pursuant to this subsection (2) shall be
effective 45 days after the giving of written notice to Enterbank if the change
or event described in said notice has not been cured; and provided, further that
termination under this subsection (2) shall be effective immediately after the
giving of written notice if said change or event cannot be cured prior to
Closing.
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7.2 EFFECT OF TERMINATION. Termination of this Agreement shall not
terminate or affect the obligations of the parties under Section 4.2(c), 5.4,
5.8 or 8.10 or otherwise to pay expenses as provided elsewhere herein, to
maintain the confidentiality of the other party's information pursuant to
Section 5.2 or the provisions of this Section 7.2 or of Section 8.2 or 8.6, and
shall not affect any agreement after such termination. The parties agree that
any termination of this Agreement shall not in any manner release or be
construed as so releasing the nonterminating party or parties or their
respective officers or directors from any liability or damage to the other party
or parties arising out of, in connection with or otherwise relating to, directly
or indirectly, such parties willful breach of its covenants, agreements,
representations or warranties hereunder, except to the extent expressly provided
herein.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto at
any time before or after approval of this Agreement by the shareholders of CGB
and Enterbank, but after any such approval, no amendment shall be made which by
law requires further approval by such shareholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. No
investigation by Enterbank or CGB made before or after the date hereof shall
affect the representations and warranties which are contained in this Agreement;
provided that all representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant hereto or thereto shall expire
on, and be terminated and extinguished at, the Effective Time other than
covenants and agreements that by their terms are to survive or be performed, in
whole or in part, after the Effective Time; provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive Enterbank or CGB (or any director or officer
thereof) of any defense in law or equity which otherwise would be available
against the claims of any person, including, without limitation, any shareholder
or former shareholder of either Enterbank or CGB, the aforesaid representations,
warranties, covenants and agreements being material inducements to the
consummation by Enterbank and CGB of the transactions contemplated herein.
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8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the fifth Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.
(a) if to CGB, to:
Commercial Guaranty Bancshares, Inc.
12695 Metcalf Avenue
Overland Park, Kansas 66213
Attention: Mr. Joe C. Morris
Chairman
Fax: (913) 663-4172
with a copy to:
Stinson, Mag & Fizzell
1201 Walnut, Suite 2800
Kansas City, Missouri 64106-2150
Attention: C. Robert Monroe
Fax: (816) 691-3495
and
(b) if to Enterbank, to:
Enterbank Holdings, Inc.
150 N. Meramec Avenue
St. Louis, Missouri 63105
Attention: Mr. James C. Wagner
Chief Financial Officer
Fax: (314) 727-3239
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with a copy to:
Armstrong Teasdale LLP
One Metropolitan Square, Suite 2600
St. Louis, Missouri 63102
Attention: John L. Gillis, Esq.
Fax: (314) 621-5065
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement (including the documents and the instruments referred
to herein) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, other than the Confidentiality Agreement,
which shall survive the execution and delivery of this Agreement, and (b) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder except as otherwise expressly provided in Section 5.7. The
parties hereby acknowledge that, except as hereinafter agreed to in writing, no
party shall have the right to acquire or shall be deemed to have acquired shares
of common stock of the other party pursuant to the Merger until consummation
thereof. No current or former employee of CGB, Enterbank, or any of their
respective Subsidiaries, shall be construed as a third party beneficiary under
this Agreement, and no provision in this Agreement shall create any right in any
such employee (or his or her beneficiary or dependent) for any reason,
including, without limitation, in respect of employment, continued employment,
or resumed employment with the Surviving Corporation, CGB or Enterbank (or any
of their respective Affiliates) or in respect of any benefits that may be
provided, directly or indirectly, under any Benefit Plan maintained by the
Surviving Corporation, CGB or Enterbank (or any of their respective Affiliates).
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri without giving effect to the
principles of conflicts of law.
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8.7 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability and, unless the
effect of such invalidity or unenforceability would prevent the parties from
realizing the major portion of the economic benefits of the Merger that they
currently anticipate obtaining therefrom, shall not render invalid or
unenforceable the remaining terms and provisions of this Agreement or affect the
validity or enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, and any attempt to make any such assignment without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and permitted assigns.
8.9 PUBLICITY. Enterbank, FCB, and CGB shall consult with each other
before issuing any press release with respect to the Merger or this Agreement
and shall not issue any such press release or make any such public statement
without the prior consent of the other parties, which shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other parties (but after prior consultation, to the extent practicable in the
circumstances) issue such press release or make such public statement as may
upon the advice of outside counsel be required by law. Without limiting the
reach of the preceding sentence, Enterbank and CGB shall cooperate to develop
all public announcement materials and make appropriate management available at
presentations related to the transactions contemplated by this Agreement as
reasonably requested by the other party. In addition, CGB and its Subsidiaries
shall (a) consult with Enterbank regarding communications with customers,
shareholders, prospective investors and employees related to the transactions
contemplated hereby, (b) provide Enterbank with shareholders lists of CGB and
(c) allow and facilitate Enterbank contact with shareholders of CGB and other
prospective investors.
8.10 ATTORNEYS' FEES. In the event of any dispute between the parties
arising out of or relating to this Agreement, the prevailing party in any
litigation (whether at law or in equity), arbitration or other proceeding with
respect to such dispute, including any appeal thereof (collectively, an
"Action"), shall be entitled to recover such party's reasonable attorneys' fees
and all other reasonable costs and expenses incurred in connection with such
Action from the non-prevailing party.
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IN WITNESS WHEREOF, Enterbank and CGB have caused this Agreement to be
executed by their respective officers thereunto duly authorized, all as of date
first above written.
ENTERBANK HOLDINGS, INC.
By: /s/ Fred H. Eller
--------------------------------
Name: Fred H. Eller
Title:
By: /s/ James C. Wagner
--------------------------------
Name: James C. Wagner
Title: Secretary
COMMERCIAL GUARANTY
BANCSHARES, INC.
By: /s/ Joe C. Morris
--------------------------------
Name: Joe C. Morris
Title:
By: /s/ Scott A. Woods
--------------------------------
Name: Scott A. Woods
Title: Secretary
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ANNEX B
235
ANNEX C
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ANNEX D
17-6712. Payment for stock of stockholder objecting to merger or
consolidation; definitions; notice to objecting stockholders; demand for
payment; appraisal and determination of value by district court, when;
taxation of costs; rights of objecting stockholders; status of stock; section
inapplicable to certain shares of stock.
(a) When 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.
(b) The corporation surviving or resulting from any merger or consolidation,
within 10 days after the effective date of the merger or consolidation, shall
notify each stockholder of any corporation of this state so merging or
consolidating who objected thereto in writing and whose shares either were not
entitled to vote or were not voted in favor of the merger or consolidation,
and who filed such written objection with the corporation before the taking of
the vote on the merger or consolidation, that the merger or consolidation has
become effective. If any such stockholder, within 20 days after the date of
mailing of the notice, shall demand in writing, from the corporation surviving
or resulting from the merger or consolidation, payment of the value of the
stockholder's stock, the surviving or resulting corporation shall pay to the
stockholder, within 30 days after the expiration of the period of 20 days, the
value of the stockholder's stock on the effective date of the merger or
consolidation, exclusive of any element of value arising from the expectation
or accomplishment of the merger or consolidation.
(c) If during a period of 30 days following the period of 20 days provided for
in subsection (b), the corporation and any such stockholder fail to agree upon
the value of such stock, any such stockholder, or the corporation surviving or
resulting from the merger or consolidation, may demand a determination of the
value of the stock of all such stockholders by an appraiser or appraisers to
be appointed by the district court, by filing a petition with the court within
four months after the expiration of the thirty-day period.
(d) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the corporation, which shall file with the
clerk of such court, within 10 days after such service, 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 corporation. If the petition shall be
filed by the corporation, the petition shall be accompanied by such duly
verified list. The clerk of the court shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the
corporation and to the stockholders shown upon the list at the addresses
therein stated and notice shall also be given by publishing a notice at least
once, at least one week before the day of the hearing, in a newspaper of
general circulation in the county in which the court is located. The court
may direct such additional publication of notice as it deems advisable. The
forms of the notices by mail and by publication shall be approved by the
court.
(e) After the hearing on such petition the court shall determine the
stockholders who have complied with the provisions of this section and become
entitled to the valuation of and payment for their shares, and shall appoint
an appraiser or appraisers to determine such value. Any such appraiser may
examine any of the books and records of the corporation or corporations the
stock of which such appraiser is charged with the duty of valuing, and such
appraiser shall make a determination of the value of the shares upon such
investigation as seems proper to the appraiser. The appraiser or appraisers
shall also afford a reasonable opportunity to the parties interested to
submit to the appraiser or appraisers pertinent evidence on the value of the
shares. The appraiser or
237
appraisers, also, shall have the powers and authority conferred upon masters
by K.S.A. 60-253 and amendments thereto.
(f) The appraiser or appraisers shall determine the value of the stock of
the stockholders adjudged by the court to be entitled to payment therefor and
shall file a report respecting such value in the office of the clerk of the
court, and notice of the filing of such report shall be given by the clerk of
the court to the parties in interest. Such report shall be subject to
exceptions to be heard before the court both upon the law and facts. The
court by its decree shall determine the value of the stock of the
stockholders entitled to payment therefor and shall direct the payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto by the surviving or resulting corporation. Upon
payment of the judgment by the surviving or resulting corporation, the clerk
of the district court shall surrender to the corporation the certificates of
shares of stock held by the clerk pursuant to subsection (g). The decree may
be enforced as other judgments of the district court may be enforced, whether
such surviving or resulting corporation be a corporation of this state or of
any other state.
(g) At the time of appointing the appraiser or appraisers, the court shall
require the stockholders who hold certificated shares and who demanded payment
for their shares to submit their certificates of stock to the clerk of the
court, to be held by the clerk pending the appraisal proceedings. If any
stockholder fails to comply with such direction, the court shall dismiss
the proceedings as to such stockholder.
(h) The cost of any such appraisal, including a reasonable fee to and the
reasonable expenses of the appraiser, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed
upon the parties to such appraisal or any of them as appears to be equitable,
except that the cost of giving the notice by publication and by registered or
certified mail hereinabove provided for shall be paid by the corporation. The
court, on application of any party in interest, shall determine the amount of
interest, if any, to be paid upon the value of the stock of the stockholders
entitled thereto.
(i) Any stockholder who has demanded payment of the stockholder's stock
as herein provided shall not thereafter be entitled to vote such stock for
any purpose or be entitled to the payment of dividends or other distribution
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, unless the appointment of an appraiser or appraisers shall not
be applied for within the time herein provided, or the proceeding be
dismissed as to such stockholder, or unless such stockholder with the written
approval of the corporation shall deliver to the corporation a written
withdrawal of the stockholder's objections to and an acceptance of the merger
or consolidation, in any of which cases the right of such stockholder to
payment for the stockholder's stock shall cease.
(j) The shares of the surviving or resulting corporation into 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.
(k) This section shall not apply to the shares of any class or series of
a class of stock, which, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the meeting of
stockholders at which the agreement of merger or consolidation is to be acted
on, were either (1) registered 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 (2) held
of record by not less than 2,000 stockholders, unless the articles of
incorporation of the corporation issuing such stock shall otherwise provide;
nor shall this section apply to any of the 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 K.S.A. 17-6701 and amendments thereto. This
subsection shall not be applicable to the holders
238
of a class or series of a class of stock of a constituent corporation if under
the terms of a merger of consolidation pursuant to K.S.A. 17-6701 or 17-6702,
and amendments thereto, such holders are required to accept for such stock
anything except (i) stock or stock and cash in lieu of fractional shares of
the corporation surviving or resulting from such merger or consolidation, or
(ii) stock or stock and cash in lieu of fractional shares of any other
corporation, which at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of stockholders at
which the agreement of merger or consolidation is to be acted on, were either
registered on a national securities exchange or held of record by not less
than 2,000 stockholders, or (iii) a combination of stock or stock and cash in
lieu of fractional shares as set forth in (i) and (ii) of this subsection.
239
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Under Sections 102(b)(7) and 145 of the Delaware General Corporate Law
("DGCL"), Enterbank has broad power to indemnify and insure its directors and
officers against liabilities they may incur in their capacities as such.
Section 102(b)(7) of the DGCL permits a corporation to adopt a provision in
its certificate of incorporation eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, except that such
provision shall not limit the liability of a director for: (i) any breach of
the director's duty of loyalty to the corporation or its shareholders; (ii)
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) liability under Section 174 of the DGCL
for unlawful payment of dividends or stock purchases or redemptions; or (iv)
any transaction from which the director derived an improper personal benefit.
Enterbank's certificate of incorporation limits the personal liability of
Enterbank's directors for monetary damages to the fullest extent permissible
under applicable law. Under Section 145 of the DGCL, a corporation may
indemnify any person made a party or threatened to be made a party to any
type of proceeding (other than an action by or in the right of the
corporation) because he is or was an officer, director, employee or agent of
the corporation, or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or entity,
against expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred in connection with such proceeding: (i) if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation; or (ii) in the case of a criminal
proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation may indemnify any person made a party or threatened
to be made a party to any threatened, pending or completed action or suit
brought by or in the right of the corporation because he was an officer,
director, 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 or other entity, against expenses actually and reasonably
incurred in connection with such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that there may be no such
indemnification if the person is found liable to the corporation unless, in
such a case, the court determines the person is entitled thereto. A
corporation must indemnify a director, officer, employee or agent against
expenses actually and reasonably incurred by him who successfully defends
himself in a proceeding to which he was a party because he was a director,
officer, employee or agent of the corporation. Expenses incurred by an
officer or director (or other employees or agents as deemed appropriate by
the Board of Directors) in defending a civil or criminal proceeding may be
paid by Enterbank in advance of the final disposition of such proceeding upon
delivery of a written affirmation by the director of his good faith belief
that the standard of conduct necessary for indemnification has been met and
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation. The Delaware law
indemnification and expense advancement provisions are not exclusive of any
other rights which may be granted by the bylaws, a vote of shareholders or
disinterested directors, agreement or
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otherwise. Enterbank's Bylaws provide for the indemnification of (but not
advancement of defense costs to the) directors and officers (but not
employees and agents) of Enterbank to the fullest extent not prohibited by
Delaware law. Enterbank has also obtained directors and officers liability
insurance covering, subject to certain exceptions, actions taken by
Enterbank's directors and officers in their capacities as such. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling Enterbank pursuant to
the foregoing provisions, Enterbank 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.
Item 21. Exhibits and Financial Statement Schedules.
(A) Exhibits.
Exhibit
Number Document Description
- ------- --------------------
<F*>2.1 Agreement and Plan of Merger between the Registrant and Commercial
Guaranty Bancshares, Inc., dated as of January 5, 2000 (included as
Annex A to the joint proxy statement/prospectus (without certain
exhibits)).
<F*>2.2 Amendment to Agreement and Plan of Merger between the Registrant
and Commercial Guaranty Bancshares, Inc., dated as of March 14,
2000 (included as Annex A to the joint proxy statement/prospectus).
3.1 Certificate of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibit 3.1 of the
Registrant's Registration Statement on Form S-1 dated December 19,
1996 (File No. 333-14737)).
3.2 Amendment to the Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-8 dated July 1, 1999
(File No. 333-82082)).
3.3 Amendment to the Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 of the
Registrant's Quarterly Report on Form 10-Q for the period ending
September 30, 1999).
3.4 Bylaws of the Registrant, as amended (incorporated herein by
reference to Exhibit 3.4 of the Registrant's Annual Report on Form
10-K for the period ending December 31, 1999).
3.5 Amendment to the Bylaws of the Registrant.(incorporated herein by
reference to Exhibit 3.5 of the Registrant's Annual Report on Form
10-K for the period ending December 31, 1999).
<F*>4.1 Specimen of the Registrant's common stock certificate.
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4.2 Enterprise Bank Incentive Stock Option Plan (incorporated herein by
reference to Exhibit 4.3 of the Registrant's Registration Statement
on Form S-8 dated December 29, 1997 (File No. 333-43365)).
4.3 Enterprise Bank Second Incentive Stock Option Plan (incorporated
herein by reference to Exhibit 4.4 of the Registrant's Registration
Statement on Form S-8 dated December 29, 1997 (File No.
333-43365)).
4.4 Enterbank Holdings, Inc. Third Incentive Stock Option Plan
(incorporated herein by reference to Exhibit 4.5 of the
Registrant's Registration Statement on Form S-8 dated December 29,
1997 (File No. 333-43365)).
4.5 Enterbank Holdings, Inc., Qualified Incentive Stock Option Plan
(incorporated herein by reference to the Registrant's 1998 Proxy
Statement on Form 14-A).
4.6 Enterbank Holdings Stock Appreciation Rights (SAR) Plan and
Agreement (incorporated herein by reference to Exhibit 4.5 of the
Registrant's Quarterly Report on Form 10-Q for the period ended
March 31, 1999).
<F**>5.1 Opinion of Armstrong Teasdale LLP.
<F**>8.1 Tax Opinion of Armstrong Teasdale LLP.
<F**>8.2 Tax Opinion of Stinson, Mag & Fizzell, P.C.
10.1 Customer Referral Agreement by and among Enterbank Holdings, Inc.,
Enterprise Bank and Moneta Group Investment Advisors, Inc.
(incorporated herein by reference to Exhibit 10 of the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30,
1997).
10.2 Revised Customer Referral Agreement by and among Enterbank
Holdings, Inc., Enterprise Bank and Moneta Group Investment
Advisors, Inc. (incorporated herein by reference to Exhibit 10.3
of the Registrant's Annual Report on Form 10-K for the period ended
December 31, 1998).
<F*>11.1 Statement regarding computation of per share earnings.
<F*>21.1 Subsidiaries of the Registrant.
<F*>23.1 Consent of KPMG LLP (Enterbank).
<F*>23.2 Consent of Deloitte & Touche LLP (CGB).
<F**>23.3 Consent of Armstrong Teasdale LLP (included in Exhibit 5.1).
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242
<F*>23.4 Consent of Fister & Associates, Inc.
23.5 Consent of Stifel, Nicolaus & Company, Inc.
<F*>24.1 Power of Attorney (included on signature page hereof).
<F*>27.1 Financial Data Schedule (EDGAR only).
<F*>99.1 Form of proxy to be used in soliciting shareholders of Enterbank
for the Special Meeting.
<F*>99.2 Form of proxy to be used in soliciting shareholders of CGB for the
Special Meeting.
<F**>99.3 Fairness Opinion of Fister & Associates, Inc. (included as Annex B
to the joint proxy statement/prospectus).
<F**>99.4 Fairness Opinion of Stifel, Nicolaus & Company, Inc. (included as
Annex C to the joint proxy statement/prospectus).
<FN>
________________
<F*> Filed herewith.
<F**> To be filed by amendment.
(B) Financial Statement Schedules: Not applicable.
Item 22. Undertakings.
(1) The undersigned Registrant hereby undertakes: (a) To file, during
any period in which offers or sales are being made, a post-effective
amendment to this registration statement: (I) To include any prospectus
required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect
in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in the 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; (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 Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; (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.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be
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deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes as follows: that prior
to any public re-offering 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 re-offering prospectus will the
contain information called for by the applicable registration form with
respect to re-offerings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(4) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(6) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(7) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Clayton, State of Missouri, on the day of
April, 2000.
ENTERBANK HOLDINGS, INC.
By: /s/ Fred H. Eller
--------------------------------------
Fred H. Eller
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Enterbank Holdings, Inc.,
hereby severally constitute and appoint Fred H. Eller and James C. Wagner and
each of them, our true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for each of us in our name, place,
and stead, in any and all capacities, to sign Enterbank Holdings, Inc.'s
Registration Statement on Form S-4, and any other Registration Statement
relating to the same offering, and any and all amendments thereto (including
post-effective amendments), and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grant to such attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and
purposes as each of us might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or his
or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Fred H. Eller
- ---------------------------------- President, Chief Executive Officer
Fred H. Eller and Director , 2000
/s/ James C. Wagner
- ---------------------------------- Principal Financial Officer , 2000
James C. Wagner
/s/ Ronald E. Henges
- ---------------------------------- Chairman of the Board
Ronald E. Henges of Directors , 2000
II-6
245
/s/ Kevin C. Eichner
- ---------------------------------- Vice Chairman of the Board of Directors , 2000
Kevin C. Eichner
/s/ Randall D. Humphreys
- ---------------------------------- Director , 2000
Randall D. Humphreys
/s/ Paul R. Cahn
- ---------------------------------- Director , 2000
Paul R. Cahn
/s/ William B. Moskoff
- ---------------------------------- Director , 2000
William B. Moskoff
/s/ Birch M. Mullins
- ---------------------------------- Director , 2000
Birch M. Mullins
/s/ Robert E. Saur
- ---------------------------------- Director , 2000
Robert E. Saur
/s/ Paul L. Vogel
- ---------------------------------- Director , 2000
Paul L. Vogel
/s/ James A. Williams
- ---------------------------------- Director , 2000
James A. Williams
/s/ Henry D. Warshaw
- ---------------------------------- Director , 2000
Henry D. Warshaw
/s/ James Wilhite
- ---------------------------------- Director , 2000
James L. Wilhite
/s/ Ted C. Wetterau
- ---------------------------------- Director , 2000
Ted C. Wetterau
II-7
246
EXHIBIT INDEX
<F*>2.1 Agreement and Plan of Merger between the Registrant and Commercial
Guaranty Bancshares, Inc., dated as of January 5, 2000 (included as
Annex A to the joint proxy statement/prospectus (without certain
exhibits)).
<F*>2.2 Amendment to Agreement and Plan of Merger between the Registrant
and Commercial Guaranty Bancshares, Inc., dated as of March 14,
2000 (included as Annex A to the joint proxy statement/prospectus).
3.1 Certificate of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibit 3.1 of the
Registrant's Registration Statement on Form S-1 dated December 19,
1996 (File No. 333-14737)).
3.2 Amendment to the Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-8 dated July 1, 1999
(File No. 333-82082)).
3.3 Amendment to the Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 of the
Registrant's Quarterly Report on Form 10-Q for the period ending
September 30, 1999).
3.4 Bylaws of the Registrant, as amended (incorporated herein by
reference to Exhibit 3.4 of the Registrant's Annual Report on Form
10-K for the period ending December 31, 1999).
3.5 Amendment to the Bylaws of the Registrant.(incorporated herein by
reference to Exhibit 3.5 of the Registrant's Annual Report on Form
10-K for the period ending December 31, 1999).
<F*>4.1 Specimen of the Registrant's common stock certificate.
4.2 Enterprise Bank Incentive Stock Option Plan (incorporated herein by
reference to Exhibit 4.3 of the Registrant's Registration Statement
on Form S-8 dated December 29, 1997 (File No. 333-43365)).
4.3 Enterprise Bank Second Incentive Stock Option Plan (incorporated
herein by reference to Exhibit 4.4 of the Registrant's Registration
Statement on Form S-8 dated December 29, 1997 (File No.
333-43365)).
4.4 Enterbank Holdings, Inc. Third Incentive Stock Option Plan
(incorporated herein by reference to Exhibit 4.5 of the
Registrant's Registration Statement on Form S-8 dated December 29,
1997 (File No. 333-43365)).
4.5 Enterbank Holdings, Inc., Qualified Incentive Stock Option Plan
(incorporated herein by reference to the Registrant's 1998 Proxy
Statement on Form 14-A)
247
4.6 Enterbank Holdings Stock Appreciation Rights (SAR) Plan and
Agreement (incorporated herein by reference to Exhibit 4.5 of the
Registrant's Quarterly Report on Form 10-Q for the period ended
March 31, 1999).
<F**>5.1 Opinion of Armstrong Teasdale LLP.
<F**>8.1 Tax Opinion of Armstrong Teasdale LLP.
<F**>8.2 Tax Opinion of Stinson, Mag & Fizzell, P.C.
10.1 Customer Referral Agreement by and among Enterbank Holdings, Inc.,
Enterprise Bank and Moneta Group Investment Advisors, Inc.
(incorporated herein by reference to Exhibit 10 of the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30,
1997).
10.2 Revised Customer Referral Agreement by and among Enterbank
Holdings, Inc., Enterprise Bank and Moneta Group Investment
Advisors, Inc. (incorporated herein by reference to Exhibit 10.3
of the Registrant's Annual Report on Form 10-K for the period ended
December 31, 1998).
<F*>11.1 Statement regarding computation of per share earnings.
<F*>21.1 Subsidiaries of the Registrant.
<F*>23.1 Consent of KPMG LLP (Enterbank).
<F*>23.2 Consent of Deloitte & Touche LLP (CGB).
<F**>23.3 Consent of Armstrong Teasdale LLP (included in Exhibit 5.1).
<F*>23.4 Consent of Fister & Associates, Inc.
<F*>23.5 Consent of Stifel, Nicolaus & Company, Inc.
<F*>24.1 Power of Attorney (included on signature page hereof).
<F*>27.1 Financial Data Schedule (EDGAR only).
<F*>99.1 Form of proxy to be used in soliciting shareholders of Enterbank
for the Special Meeting.
<F*>99.2 Form of proxy to be used in soliciting shareholders of CGB for the
Special Meeting.
<F**>99.3 Fairness Opinion of Fister & Associates, Inc. (included as Annex B
to the joint proxy statement/prospectus).
<F**>99.4 Fairness Opinion of Stifel, Nicolaus & Company, Inc. (included as
Annex C to the joint proxy statement/prospectus).
[FN]
----------------
<F*> Filed herewith.
<F**> To be filed by amendment.