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On letterhead of:
Canadian Bancshares, Inc.
May 14, 1996
Dear Shareholder:
We are pleased to invite you to attend the Special Meeting of
Shareholders (the "Special Meeting") of Canadian Bancshares, Inc.
("Canadian") on June 20, 1996. The Special Meeting will be held at
the offices of First State Bank of Canadian, 115 Main Street,
Canadian, Texas 79014, commencing at 1:30 p.m. local time.
At the Special Meeting, Canadian's shareholders will be asked
to approve the merger of Canadian with a subsidiary of Boatmen's
Bancshares, Inc. ("Boatmen's"). The merger terms provide that upon
consummation of the merger each outstanding share of common stock
of Canadian will be converted into 5.9518 shares of common stock of
Boatmen's (subject to certain possible adjustments), and cash in
lieu of fractional shares.
Your Board of Directors submits this proposed merger to you
after careful review and consideration. We believe that this
proposed merger will provide significant value to all shareholders,
enabling holders of Canadian common stock to participate in the
expanded opportunities for growth that association with a larger,
more geographically-diversified super-regional financial
organization makes possible and position Canadian and its
shareholders to take advantage of future opportunities as the
banking industry continues to consolidate and restructure.
Accordingly, the Board has unanimously approved the merger as being
in the best interests of Canadian and its shareholders and
recommends that you vote in favor of the merger at the Special
Meeting.
You are urged to read carefully the accompanying Proxy
Statement/Prospectus, which contains detailed information
concerning the matters to be acted upon at the Special Meeting.
Your participation in the meeting, in person or by proxy, is
important. Therefore, we ask that you please mark, sign and date
the enclosed proxy card and return it as soon as possible in the
enclosed postage-paid envelope. If you attend the Special Meeting,
you may vote in person if you wish, even if you have previously
mailed in your proxy card.
Sincerely,
/s/ Jay T. Godwin
Jay T. Godwin
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CANADIAN BANCSHARES, INC.
A TEXAS CORPORATION
______________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 20, 1996
______________________________
The Special Meeting of Shareholders (the "Special Meeting") of
Canadian Bancshares, Inc. ("Canadian") will be held on June 20,
1996, at 1:30 p.m., local time, at the offices of First State Bank
of Canadian, 115 Main Street, Canadian, Texas 79014, for the purpose
of considering and voting upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated January 30, 1996, attached as
Appendix A to the accompanying Proxy Statement/Prospectus, providing
for the merger of Canadian with and into Boatmen's Texas, Inc., a
Missouri corporation and wholly owned subsidiary of Boatmen's
Bancshares, Inc.
Only the holders of common stock of Canadian of record at the
close of business on May 10, 1996 are entitled to notice of and to
vote at the Special Meeting or at any adjournments or postponements
thereof.
EACH SHAREHOLDER IS URGED TO COMPLETE AND RETURN PROMPTLY THE
ACCOMPANYING PROXY WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE
SPECIAL MEETING. The prompt return of your signed proxy will help
assure a quorum and aid Canadian in reducing the expense of
additional proxy solicitation. The giving of such proxy does not
affect your right to vote in person in the event you attend the
Special Meeting.
By Order of the Board of Directors
/s/ John Baker
John Baker
Secretary
Canadian, Texas
May 14, 1996
CANADIAN SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS
FOR SUBMITTING SUCH CERTIFICATES.
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Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-03171
CANADIAN BANCSHARES, INC.
PROXY STATEMENT
----------------------
BOATMEN'S BANCSHARES, INC.
PROSPECTUS
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus")
is being furnished to the shareholders of Canadian Bancshares,
Inc., a Texas corporation ("Canadian"), in connection with the
solicitation of proxies by the Board of Directors of Canadian for
use at the Special Meeting of Shareholders of Canadian (the "Special
Meeting") to be held at 1:30 p.m., local time, on June 20, 1996, at
the offices of First State Bank of Canadian, 115 Main Street,
Canadian, Texas.
At the Special Meeting, shareholders of Canadian will consider
and vote upon the Agreement and Plan of Merger, dated January 30,
1996 (the "Merger Agreement"), among Canadian, Boatmen's
Bancshares, Inc., a Missouri corporation ("Boatmen's"), and
Boatmen's Texas, Inc., a Missouri corporation and wholly owned
subsidiary of Boatmen's ("Boatmen's-Texas"), which provides for,
among other matters, the merger of Canadian with and into
Boatmen's-Texas (the "Merger"). Upon consummation of the Merger,
each issued and outstanding share of common stock of Canadian
(other than shares held by any shareholder properly exercising
dissenters' rights) will be converted into the right to receive
5.9518 shares, subject to possible adjustment as described herein,
of common stock, par value $1.00 per share, of Boatmen's and any
attached rights ("Boatmen's Common"), plus cash in lieu of any
fractional share interests.
This Proxy Statement/Prospectus also constitutes a prospectus
of Boatmen's with respect to up to 192,883 shares of Boatmen's
Common issuable in the Merger to holders of common stock of
Canadian. The outstanding shares of Boatmen's Common are, and the
shares of Boatmen's Common to be issued in the Merger will be,
included for quotation on the Nasdaq Stock Market's National Market
("Nasdaq"). The last reported sale price of Boatmen's Common on
Nasdaq on May 14, 1996, was $39.75.
This Proxy Statement/Prospectus and the accompanying form of
proxy are first being mailed to shareholders of Canadian on or
about May 14, 1996 (the "Mailing Date").
Any proxy given pursuant to this solicitation may be revoked
by the grantor at any time prior to the voting thereof at the
Special Meeting. Holders of common stock of Canadian will be
entitled to appraisal rights in connection with the Merger as
described herein.
The Proxy Statement/Prospectus does not cover any resales of
the Boatmen's Common offered hereby to be received by the
stockholders deemed to be "affiliates" of Boatmen's or Canadian
upon consummation of the Merger. No person is authorized to make
use of this Proxy Statement/Prospectus in connection with such
resales.
THE SHARES OF BOATMEN'S COMMON ISSUABLE IN THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------------
THE SHARES OF BOATMEN'S COMMON OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
-----------------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MAY 14, 1996.
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . 1
SUMMARY INFORMATION. . . . . . . . . . . . . . . . . . . . . . 3
Introduction . . . . . . . . . . . . . . . . . . . . . . . 3
The Parties. . . . . . . . . . . . . . . . . . . . . . . . 3
Boatmen's . . . . . . . . . . . . . . . . . . . . . . 3
Boatmen's-Texas . . . . . . . . . . . . . . . . . . . 4
Canadian. . . . . . . . . . . . . . . . . . . . . . . 4
The Special Meeting. . . . . . . . . . . . . . . . . . . . 4
Date, Time and Place of the Special Meeting . . . . . 4
Matters to be Considered at the Special Meeting . . . 4
Record Date for the Special Meeting . . . . . . . . . 4
Vote Required to Approve Merger Agreement . . . . . . 4
Certain Holders of Canadian Common. . . . . . . . . . 5
Revocation of Proxies . . . . . . . . . . . . . . . . 5
The Merger . . . . . . . . . . . . . . . . . . . . . . . . 5
Merger Consideration. . . . . . . . . . . . . . . . . 5
Value of the Merger . . . . . . . . . . . . . . . . . 6
Reasons for the Merger and Recommendation
of the Boards of Directors . . . . . . . . . . . 6
Opinion of Financial Advisor. . . . . . . . . . . . . 6
Conduct of Business Pending the Merger; Dividends . . 6
Conditions to the Merger; Regulatory Approvals. . . . 7
Termination of the Merger Agreement . . . . . . . . . 7
Payment Upon Occurrence of Certain Triggering Events. 8
Federal Income Tax Consequences . . . . . . . . . . . 9
Accounting Treatment. . . . . . . . . . . . . . . . . 9
Effective Time of the Merger. . . . . . . . . . . . . 9
Interests of Certain Persons in the Merger. . . . . . 9
Dissenters' Rights. . . . . . . . . . . . . . . . . . 10
Management and Operations After the Merger . . . . . . . . 10
Comparison of Shareholder Rights . . . . . . . . . . . . . 10
Comparative Stock Prices . . . . . . . . . . . . . . . . . 11
SELECTED COMPARATIVE PER SHARE DATA. . . . . . . . . . . . . . 12
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . 13
THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . 16
Date, Time and Place of the Special Meeting. . . . . . . . 16
Matters to be Considered at the Special Meeting. . . . . . 16
Record Date for the Special Meeting. . . . . . . . . . . . 16
Vote Required to Approve the Merger Agreement. . . . . . . 16
Voting and Revocation of Proxies for the Special Meeting . 17
Solicitation of Proxies for the Special Meeting. . . . . . 17
Expenses for Preparation of Proxy Statement/Prospectus . . 17
Mailing Date of Proxy Statement/Prospectus . . . . . . . . 17
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PAGE
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THE PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Boatmen's. . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . 18
Recent Acquisitions . . . . . . . . . . . . . . . . . 18
Fourth Financial Corporation. . . . . . . . . . . 18
Tom Green National Bank . . . . . . . . . . . . . 18
Boatmen's-Texas. . . . . . . . . . . . . . . . . . . . . . 19
Canadian . . . . . . . . . . . . . . . . . . . . . . . . . 19
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 19
General. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Background of the Merger . . . . . . . . . . . . . . . . . 19
Reasons for the Merger . . . . . . . . . . . . . . . . . . 21
Recommendation of the Board of Directors . . . . . . . . . 21
Opinion of Financial Advisor . . . . . . . . . . . . . . . 21
Merger Consideration . . . . . . . . . . . . . . . . . . . 26
Fractional Shares. . . . . . . . . . . . . . . . . . . . . 27
Share Adjustments. . . . . . . . . . . . . . . . . . . . . 27
Form of the Merger . . . . . . . . . . . . . . . . . . . . 27
Conduct of Business Pending the Merger; Dividends. . . . . 27
Effective Time . . . . . . . . . . . . . . . . . . . . . . 27
Regulatory Approvals . . . . . . . . . . . . . . . . . . . 28
Conditions to Consummation of the Merger . . . . . . . . . 28
Termination or Abandonment . . . . . . . . . . . . . . . . 29
Payment Upon Occurrence of Certain Triggering Events . . . 30
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . 31
Exchange of Canadian Stock Certificates;
Fractional Shares . . . . . . . . . . . . . . . . . . 32
Representations and Warranties of Canadian, Boatmen's and
Boatmen's-Texas . . . . . . . . . . . . . . . . . . . 33
Certain Other Agreements . . . . . . . . . . . . . . . . . 34
Business of Canadian in Ordinary Course . . . . . . . 34
Additional Canadian Reserves, Accruals, Charges and
Expenses . . . . . . . . . . . . . . . . . . . . 35
Environmental Inspections . . . . . . . . . . . . . . 35
Other Canadian Agreements . . . . . . . . . . . . . . 36
Boatmen's Agreements. . . . . . . . . . . . . . . . . 36
No Solicitation. . . . . . . . . . . . . . . . . . . . . . 37
Waiver and Amendment . . . . . . . . . . . . . . . . . . . 37
Expenses and Fees. . . . . . . . . . . . . . . . . . . . . 37
Federal Income Tax Consequences. . . . . . . . . . . . . . 37
Resale of Boatmen's Common . . . . . . . . . . . . . . . . 38
Interests of Certain Persons in the Merger . . . . . . . . 38
Insurance; Indemnification. . . . . . . . . . . . . . 39
Employee Benefits . . . . . . . . . . . . . . . . . . 39
Accounting Treatment . . . . . . . . . . . . . . . . . . . 39
Management and Operations After the Merger . . . . . . . . 39
Effect on Employee Benefit Plans . . . . . . . . . . . . . 40
Boatmen's Dividend Reinvestment and Stock Purchase Plan. . 40
PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 40
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PAGE
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DESCRIPTION OF BOATMEN'S CAPITAL STOCK . . . . . . . . . . . . 43
Boatmen's Common . . . . . . . . . . . . . . . . . . . . . 43
Boatmen's Series A Preferred Stock . . . . . . . . . . . . 44
Boatmen's Series B Preferred Stock . . . . . . . . . . . . 45
COMPARISON OF SHAREHOLDER RIGHTS . . . . . . . . . . . . . . . 46
Shareholder Vote Required for Certain Transactions . . . . 46
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . 48
Special Meetings of Shareholders; Shareholder Action by
Written Consent. . . . . . . . . . . . . . . . . . . . . . 49
Notice of Shareholder Nominations of Directors . . . . . . 50
Shareholder Proposal Procedures. . . . . . . . . . . . . . 50
Shareholder Rights Plan. . . . . . . . . . . . . . . . . . 50
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . 53
Takeover Statutes. . . . . . . . . . . . . . . . . . . . . 54
Liability of Directors; Indemnification. . . . . . . . . . 55
Limitation of Liability of Directors . . . . . . . . . . . 56
Consideration of Non-Shareholder Interests . . . . . . . . 57
INFORMATION ABOUT CANADIAN . . . . . . . . . . . . . . . . . . 57
Business of Canadian and First State Bank. . . . . . . . . 57
Management's Discussion and Analysis of Financial
Condition and Results of Operations of
Canadian and First State Bank . . . . . . . . . . . . 58
Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . 74
Family Relationships . . . . . . . . . . . . . . . . . . . 76
LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . 76
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Independent Auditors for Boatmen's . . . . . . . . . . . . 76
Independent Auditors for Canadian. . . . . . . . . . . . . 76
Presence at Special Meeting. . . . . . . . . . . . . . . . 77
SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . 77
FINANCIAL STATEMENTS OF CANADIAN . . . . . . . . . . . . . . .F-1
APPENDICES
Merger Agreement . . . . . . . . . . . . . . . . . . . . .A-1
Fairness Opinion . . . . . . . . . . . . . . . . . . . . .B-1
Excerpts of The Texas Business Corporation Act
(Dissenters' Rights) . . . . . . . . . . .. . . . . .C-1
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND ANY SUCH
INFORMATION OR REPRESENTATION, IF GIVEN OR MADE, MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY BOATMEN'S OR CANADIAN. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE A SOLICITATION OR AN
OFFERING OF ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO
WHICH IT RELATES OR IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT ANY INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Boatmen's is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"S.E.C."). The reports, proxy statements and other information can
be inspected and copied at the public reference facilities of the
S.E.C., Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the S.E.C.
located at Suite 1300, Seven World Trade Center, New York, New York
10048, and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661, and copies of such materials can be
obtained from the public reference section of the S.E.C. at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, reports, proxy statements and other
information concerning Boatmen's may be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735
K Street, N.W., Washington, D.C. 20006.
Boatmen's has filed with the S.E.C. a Registration Statement
on Form S-4 (together with any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of
Boatmen's Common to be issued pursuant to the Merger described
herein. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement and the
exhibits thereto. Such additional information may be obtained from
the S.E.C.'s principal office in Washington, D.C. Statements
contained in this Proxy Statement/Prospectus or in any document
incorporated in this Proxy Statement/Prospectus by reference as to
the contents of any contract or other document referred to herein
or therein are not necessarily complete, and in each instance where
reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other
document, each such statement is qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the S.E.C. by Boatmen's
(File No. 1-3750) pursuant to the Exchange Act are incorporated by
reference in this Proxy Statement/Prospectus:
1. Boatmen's Annual Report on Form 10-K for the year ended
December 31, 1995;
2. The description of the common stock of Boatmen's contained
in Boatmen's Registration Statement on Form 8-A under the
Exchange Act, as amended under cover of Form 8 dated
July 15, 1988, and the description of the preferred share
purchase rights contained in
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Boatmen's Registration Statement on Form 8-A under the
Exchange Act, filed August 14, 1990;
3. Boatmen's Current Reports on Form 8-K dated February 2,
1996, March 29, 1996 and May 3, 1996;
All documents and reports filed by Boatmen's pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after
the date of this Proxy Statement/Prospectus and prior to the date
of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part
hereof from the dates of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS
RELATING TO BOATMEN'S BY REFERENCE WHICH ARE NOT PRESENTED HEREIN
OR DELIVERED HEREWITH. THESE DOCUMENTS (EXCLUDING UNINCORPORATED
EXHIBITS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST TO KEVIN R. STITT, DIRECTOR
OF INVESTOR RELATIONS, BOATMEN'S BANCSHARES, INC., ONE BOATMEN'S
PLAZA, 800 MARKET STREET, ST. LOUIS, MISSOURI 63101 (TELEPHONE
NUMBER (314) 466-7662). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE 13, 1996.
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SUMMARY INFORMATION
The following is a brief summary of certain information
contained elsewhere in this Proxy Statement/Prospectus. Although
the following summary addresses all material information regarding
the Merger, it is not intended to be complete and is qualified in
all respects by the information appearing elsewhere herein or
incorporated by reference into this Proxy Statement/Prospectus, the
Appendices hereto and the documents referred to herein. All
information contained in this Proxy Statement/Prospectus relating
to Boatmen's and its subsidiaries has been supplied by Boatmen's
and all information relating to Canadian and its subsidiary has
been supplied by Canadian. Shareholders are urged to read this
Proxy Statement/Prospectus and the Appendices hereto in their
entirety.
INTRODUCTION
This Proxy Statement/Prospectus relates to an Agreement and
Plan of Merger dated January 30, 1996 (the "Merger Agreement"),
among Canadian Bancshares, Inc., a Texas corporation ("Canadian"),
Boatmen's Bancshares, Inc., a Missouri corporation ("Boatmen's"),
and Boatmen's Texas, Inc., a Missouri corporation and wholly owned
subsidiary of Boatmen's ("Boatmen's-Texas"), which provides for,
among other things, the merger of Canadian with and into Boatmen's-
Texas (the "Merger"). As a result of the Merger, Boatmen's will
retain beneficial ownership of all of the issued and outstanding
stock of Boatmen's-Texas, and the separate corporate existence of
Canadian will cease.
In connection with the Merger, Boatmen's First National Bank
of Amarillo ("Boatmen's-Amarillo"), a national banking association
and wholly owned subsidiary of Boatmen's-Texas, and First State
Bank of Canadian, Canadian, Texas ("First State Bank"), a Texas
state-chartered banking association and wholly owned subsidiary of
Canadian, have entered into an Agreement to Merge, dated April 25,
1996 (the "Subsidiary Merger Agreement"), which provides for the
merger of First State Bank with and into Boatmen's-Amarillo ("the
"Subsidiary Bank Merger"). It is anticipated that the Subsidiary
Bank Merger would be consummated contemporaneously with the Merger.
The summary set forth in this Proxy Statement/Prospectus of
certain provisions of the Merger Agreement is qualified in its
entirety by reference to the full text of the Merger Agreement,
which is incorporated by reference herein and attached as
Appendix A to this Proxy Statement/Prospectus.
THE PARTIES
BOATMEN'S
Boatmen's, a Missouri corporation, is a multi-bank holding
company headquartered in St. Louis, Missouri. At December 31,
1995, Boatmen's had consolidated assets of approximately
$33.7 billion and shareholders' equity of approximately
$2.9 billion, making it the largest bank holding company in
Missouri and among the 30 largest in the United States. On January
31, 1996, Boatmen's completed its acquisition of Fourth Financial
Corporation ("Fourth Financial"), Wichita, Kansas, the largest
banking organization in Kansas and second-largest banking
organization in Oklahoma. See "THE PARTIES -- Boatmen's -- Recent
Acquisitions." Including Fourth Financial, Boatmen's has
consolidated assets of approximately $41 billion and shareholders'
equity of approximately $3.4 billion. Boatmen's 57 subsidiary
banks, including a federal savings bank, operate from over 650
locations in Missouri, Arkansas, Illinois, Iowa, Kansas, New
Mexico, Oklahoma, Tennessee and Texas. Boatmen's also ranks among
the 17 largest providers of trust services in the nation, with
approximately $44.4 billion in assets under management at December
31, 1995. Boatmen's other principal businesses include a mortgage
banking company, a credit life insurance company, a credit
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card company and an insurance agency. The principal executive
offices of Boatmen's are at One Boatmen's Plaza, 800 Market Street,
St. Louis, Missouri 63101 (telephone number (314) 466-6000).
BOATMEN'S-TEXAS
Boatmen's-Texas is a wholly owned subsidiary of Boatmen's
which, in turn, owns all of the capital stock of Boatmen's-
Amarillo. At December 31, 1995, Boatmen's-Texas had consolidated
assets of approximately $1.6 billion and shareholders' equity of
approximately $159 million.
CANADIAN
Canadian is a bank holding company headquartered in Canadian,
Texas, and owns all of the outstanding capital stock of First State
Bank. The business of Canadian consists primarily of the
ownership, supervision and control of First State Bank, a
commercial bank offering complete banking services to the
commercial, agricultural and residential areas that it serves. At
December 31, 1995, Canadian had consolidated assets of
approximately $38.7 million and shareholders' equity of
approximately $5.1 million. The principal executive offices of
Canadian and First State Bank are at 115 Main Street, Canadian,
Texas 79014 (telephone number (806) 323-6435).
THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of shareholders of Canadian (the "Special
Meeting") will be held at the offices of First State Bank, 115 Main
Street, Canadian, Texas 79014, on June 20, 1996, at 1:30 p.m., local
time.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of common stock, par value
$1.00 per share, of Canadian ("Canadian Common") will consider and
vote upon the approval of the Merger Agreement providing for, among
other things, the Merger of Canadian with and into Boatmen's-Texas.
In addition, the holders of Canadian Common may be asked to vote on
a proposal to adjourn or postpone the Special Meeting, which
adjournment or postponement could be used for the purpose, among
others, of allowing time for the solicitation of additional votes
to approve the Merger Agreement.
RECORD DATE FOR THE SPECIAL MEETING
The record date for the Special Meeting is May 10, 1996.
VOTE REQUIRED TO APPROVE MERGER AGREEMENT
The presence, in person or by proxy, of a majority of the
issued and outstanding shares of Canadian entitled to vote on the
record date is necessary to constitute a quorum at the Special
Meeting. Approval of the Merger Agreement will require the
affirmative vote of two-thirds of the outstanding shares of
Canadian Common entitled to vote thereon. Holders of Canadian
Common will be entitled to one vote per share. The failure to
submit a proxy card (or to vote in person) at the Special Meeting,
the abstention from voting at the Special Meeting and, in the case
of shares held in street name, the failure of the beneficial owner
thereof to give specific voting instructions to the broker holding
such shares (broker non-votes) will have the same effect as a vote
against approval of the Merger Agreement.
4
11
CERTAIN HOLDERS OF CANADIAN COMMON
As of the record date, the officers and directors of Canadian
and their affiliates owned beneficially 9,252 shares (approximately
29.14%) of Canadian Common, which are expected by management of
Canadian to be voted in favor of the Merger Agreement. See
"INFORMATION ABOUT CANADIAN -- Security Ownership of Certain
Beneficial Owners and Management."
REVOCATION OF PROXIES
Proxies for use at the Special Meeting accompany this Proxy
Statement/Prospectus. Any proxy given pursuant to this
solicitation may be revoked by the grantor at any time prior to the
voting thereof on the Merger Agreement by filing with the Secretary
of Canadian a written revocation or a duly executed proxy bearing
a later date. A holder of Canadian Common may withdraw his or her
proxy at the Special Meeting at any time before it is exercised by
electing to vote in person; however, attendance at the Special
Meeting will not in and of itself constitute a revocation of the
proxy.
THE MERGER
MERGER CONSIDERATION
At the time the Merger is consummated (the "Effective Time"),
Canadian will merge into Boatmen's-Texas and, as a result thereof,
each share of Canadian Common, other than any shares the holders of
which have duly exercised and perfected their dissenters' rights
under the Texas Business Corporation Act (the "Texas Law"), will be
converted into 5.9518 shares (the "Conversion Ratio"), subject to
possible adjustment as described herein, of common stock, par value
$1.00 per share, of Boatmen's, together with any rights attached
thereto ("Boatmen's Common"), under or by virtue of the Rights
Agreement dated August 14, 1990, between Boatmen's and Boatmen's
Trust Company, as Rights Agent (such number of shares of Boatmen's
Common, together with any cash payment in lieu of fractional
shares, as described herein, is referred to herein as the "Merger
Consideration"). For a description of the Rights Agreement, see
"COMPARISON OF SHAREHOLDER RIGHTS -- Shareholder Rights Plan." No
fractional shares of Boatmen's Common will be issued and, in lieu
thereof, holders of shares of Canadian Common who would otherwise
be entitled to a fractional share interest (after taking into
account all shares of Canadian Common held by such holder) will be
paid an amount in cash equal to the product of such fractional
share interest and the closing price of a share of Boatmen's Common
on the Nasdaq Stock Market's National Market ("Nasdaq") on the
business day immediately preceding the date on which the Effective
Time occurs.
The Merger Agreement provides that the Merger Consideration
will be increased if the Effective Time occurs after the record
date for the payment of the regular quarterly dividend on Boatmen's
Common declared during the second quarter of 1996 or the third
quarter of 1996. In such event, the Merger Consideration will be
increased by adding to the Conversion Ratio the quotient of (i) the
product of (A) the amount of such quarterly dividend or dividends,
as the case may be, multiplied by (B) 5.9518, divided by (ii) the
average closing price of a share of Boatmen's Common on Nasdaq
during the 20 trading days immediately preceding the fifth calendar
day immediately preceding the closing date of the Merger (the
"Boatmen's Average Price").
The Merger Agreement also provides that, if the cost of taking
all remedial and corrective actions and measures required by
applicable law or recommended or suggested by any report of
environmental inspection on the real property owned, leased or
operated by Canadian and First State Bank, or prudent in light of
serious life, health or safety concerns, net of any amounts received
or which will be received from the Texas Natural Resource Conservation
Commission (the "Remediation Cost"), exceeds $50,000 and the
5
12
parties do not terminate the Merger Agreement on the basis on
the amount of such Remediation Cost, the Merger Consideration
would be decreased by subtracting from the Conversion Ratio the
quotient of (i) the quotient of (A) the amount by which the
Remediation Cost exceeds $50,000 (up to a maximum excess amount
equal to $200,000), divided by (B) 31,755, divided by (ii) the
Boatmen's Average Price. See "THE MERGER -- Merger Consideration",
"-- Termination or Abandonment" and "-- Certain Other Agreements --
Environmental Inspections."
The actual amount of such adjustment or adjustments, if any,
cannot be calculated as of the date of this Proxy
Statement/Prospectus and will not be known until a date five
calendar days prior to the closing date of the Merger.
VALUE OF THE MERGER
Based on the Merger Consideration (without adjustment as
provided in the Merger Agreement as described herein) and the
closing sales price of Boatmen's Common as reported on Nasdaq on
May 14, 1996, the Merger had a per share value of $236.58 to holders
of Canadian Common, and the approximate total value of the Merger
Consideration to Canadian shareholders, was $7.5 million. The
market value of the Merger Consideration as stated above may
increase or decrease depending on the closing price of Boatmen's
Common as reported on Nasdaq on the date on which the Effective Time
occurs. No assurance can be given as to the market price of
Boatmen's Common on the date on which the Effective Time occurs.
REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARDS OF
DIRECTORS
The Board of Directors of Canadian has determined that the
Merger and the Merger Agreement, including the Merger
Consideration, are fair to, and in the best interests of, Canadian
and its shareholders. The Board believes that a business
combination with a larger and more geographically diversified
regional bank holding company would, in addition to providing
significant value to all shareholders, enable First State Bank to
compete more effectively in its market area and participate in the
expanded opportunities for growth that the Merger and the
Subsidiary Bank Merger will make possible. Accordingly, the Board
unanimously recommends that shareholders of Canadian vote FOR
approval and adoption of the Merger Agreement.
Certain members of the management and Board of Directors of
Canadian have interests in the Merger that are in addition to the
interests of shareholders of Canadian generally. See "THE
MERGER -- Interests of Certain Persons in the Merger."
The Board of Directors of Boatmen's believes that the
acquisition of Canadian and the merger of its banking subsidiary,
First State Bank, into Boatmen's-Amarillo, would be a natural and
desirable addition to Boatmen's banking franchise in the Panhandle
of North Texas.
OPINION OF FINANCIAL ADVISOR
Canadian's advisor with respect to the financial aspects of
the Merger, The Bank Advisory Group, Inc. has rendered its opinion to
the Board of Directors of Canadian that the terms of the Merger are
fair and equitable, from a financial perspective, to Canadian and
its shareholders. The opinion of The Bank Advisory Group, Inc., attached
as Appendix B to this Proxy Statement/Prospectus, sets forth the
matters considered in rendering such opinion and should be read by
the Canadian shareholders in its entirety.
CONDUCT OF BUSINESS PENDING THE MERGER; DIVIDENDS
Pursuant to the Merger Agreement, Canadian has agreed to 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
6
13
Agreement. The Merger Agreement provides that Canadian may not
declare or pay any dividend or make any other distribution to
shareholders, whether in cash, stock or other property, after the
date of the Merger Agreement.
CONDITIONS TO THE MERGER; REGULATORY APPROVALS
The Merger is subject to various conditions including, among
other things: (i) approval of the Merger Agreement by the
requisite two-thirds vote of the shareholders of Canadian;
(ii) receipt of regulatory approval from the Board of Governors of
the Federal Reserve System (the "Federal Reserve") with respect to
the Merger; (iii) receipt of an opinion of counsel on certain tax
aspects of the Merger; and (iv) the occurrence of no material
adverse changes in the businesses of Boatmen's or Canadian. The
conditions described in items (i) and (ii) above (the receipt of
shareholder and regulatory approvals) may not be waived by either
party. Although the remaining conditions to effect the Merger may
be waived by either party entitled to the benefit thereof, neither
Boatmen's nor Canadian intend to waive any such conditions except
in those circumstances where the Board of Directors of either
Boatmen's or Canadian, as the case may be, deems such waiver to be
in the best interests of Boatmen's or Canadian, as the case may be,
and its respective shareholders. There can be no assurances as to
when and if such conditions will be satisfied (or, where
permissible, waived) or that the Merger will be consummated.
The Merger may not be consummated until the 30th day after the
date of Federal Reserve approval; provided, however, that the
Merger may be consummated after the 15th day following the date of
Federal Reserve approval if the Federal Reserve has not received
any adverse comments from the United States Department of Justice
relating to the competitive aspects of the transaction and the
Department of Justice has consented to such shorter waiting period.
An application for the required regulatory approval of the Merger
from the Federal Reserve has been filed and is pending.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to
the Effective Time: (i) by any party if the Merger is not
consummated on or prior to January 30, 1997; (ii) by mutual written
agreement of the parties; (iii) by any party in the event of a
material breach by the other of any of its representations and
warranties or agreements under the Merger Agreement not cured
within 30 days after notice of such breach is given by the non-
breaching party; (iv) by any party in the event all the conditions
to its obligations are not satisfied or waived (and not cured
within any applicable cure period); (v) by Boatmen's in the event
that Canadian or First State Bank becomes a party or subject to any
new or amended written agreement, memorandum of understanding,
cease and desist order, imposition of civil money penalties or
other regulatory enforcement action or proceeding with any federal
or state agency charged with the supervision or regulation of banks
or bank holding companies after the date of the Merger Agreement,
provided, however, that Boatmen's may not terminate the Merger
Agreement on account of any such regulatory enforcement action or
proceeding which, through the reasonable efforts of Canadian and/or
Boatmen's, could be terminated on or before the date on which the
Merger is consummated (the "Closing Date") without requiring any
capital infusion to be made or other action having a financial
effect materially adverse to the financial benefits of the Merger
to Boatmen's; (vi) by any party if any regulatory application filed
in connection with the Merger or the Subsidiary Bank Merger should
be finally denied or disapproved by the respective regulatory
authority; and (vii) by any party if the Merger is not approved by
the shareholders of Canadian.
The Merger Agreement may also be terminated by Boatmen's if
certain reports of environmental inspection on the real properties
of Canadian and First State Bank to be obtained pursuant to the
Merger Agreement should disclose any contamination or presence of
hazardous wastes, the Remediation Cost of which exceeds $50,000.
If, however, the Remediation Cost does not exceed $250,000,
Boatmen's, at the
7
14
election of Canadian, may not so terminate the Merger Agreement,
provided, however, that in such event the Merger Consideration would
be decreased by subtracting from the Conversion Ratio the quotient of
(i) the quotient of (A) the amount by which the Remediation Cost
exceeds $50,000 (up to a maximum excess amount equal to $200,000),
divided by (B) 31,755, divided by (ii) the Boatmen's Average Price.
Should the Remediation Cost equal or exceed $250,000, Boatmen's has
the exclusive right to either (i) terminate the Merger Agreement, or
(ii) reduce the aggregate value of the Merger Consideration payable
under the Merger Agreement by $200,000 and consummate the Merger.
See "THE MERGER -- Merger Consideration", "-- Termination or
Abandonment" and "-- Certain Other Agreements -- Environmental
Inspections."
PAYMENT UPON OCCURRENCE OF CERTAIN TRIGGERING EVENTS
The Merger Agreement provides that upon the occurrence of one
or more Triggering Events (as described below), Canadian shall pay
to Boatmen's the sum of $300,000.
As used in the Merger Agreement, the term "Triggering Event"
means any of the following events: (i) termination of the Merger
Agreement by Boatmen's upon a breach thereof by Canadian, provided
that within 12 months of the date of such termination, an event
described in clause (iii) or (iv) of this sentence shall have
occurred; (ii) the failure of Canadian's shareholders to approve
the Merger and the Merger Agreement at the Special Meeting;
provided, however, that the failure of Canadian's shareholders to
approve the Merger and the Merger Agreement shall not be deemed a
Triggering Event if (a) the average of the daily closing prices of
a share of Boatmen's Common, as reported on Nasdaq during the
period of 20 trading days ending on the second trading day
immediately preceding the Mailing Date (the "Boatmen's Final
Price"), is less than $30.00, and (b) the number obtained by
dividing the Boatmen's Final Price by the Boatmen's Initial Price
(as defined below), is less than the number obtained by dividing
the Final Index Price (as defined below) by the Initial Index Price
(as defined below) and subtracting .20 from such quotient, or (c)
within 18 months after the date of such meeting an event described
in clause (iii) or (iv) below does not occur; (iii) any person or
group of persons (other than Boatmen's) acquires, or has the right
to acquire, 50% or more of the outstanding shares of Canadian
Common (exclusive of any shares of Canadian Common sold directly or
indirectly to such person or group of persons by Boatmen's); or
(iv) upon the entry by Canadian or First State Bank into an
agreement or other understanding with a person or group of persons
(other than Boatmen's and/or its affiliates) for such person or
group of persons to acquire, merge or consolidate with Canadian or
First State Bank or to purchase or acquire Canadian or all or
substantially all of Canadian's or First State Bank's assets.
As used in the Merger Agreement: (i) "Index Group" means all
of the bank holding companies listed on Exhibit 7.09 to the Merger
Agreement, the common stock of which is publicly traded and as to
which there is no pending publicly announced proposal at any time
during the period of 20 trading days ending at the end of the fifth
trading day immediately preceding the Closing Date for such company
to be acquired or to acquire another company (which would
constitute a "significant subsidiary" of such company, as such term
is defined under applicable S.E.C. regulations) in exchange for its
stock; (ii) "Boatmen's Initial Price" means the closing price of a
share of Boatmen's Common as reported on Nasdaq on January 30,
1996; (iii) "Initial Index Price" means the weighted average
(weighted in accordance with the factors specified on Exhibit 7.09
to the Merger Agreement) of the per share closing prices of the
common stock of the bank holding companies comprising the Index
Group, as reported on the consolidated transactions reporting system
for the market or exchange on which such common stock is principally
traded, on January 30, 1996; (iv) "Final Price" of any company
belonging to the Index Group means the average of the daily closing sale
prices of a share of common stock of such company, as reported in the
consolidated transaction reporting system for the market or exchange
on which such common stock is principally traded, during the period
of 20 trading days ending at the end of the second trading day
immediately preceding the Mailing Date; and (v) "Final Index Price"
means the weighted average (weighted in accordance with the factors
specified on
8
15
Exhibit 7.09 to the Merger Agreement) of the Final Prices for all of
the companies comprising the Index Group.
FEDERAL INCOME TAX CONSEQUENCES
The Merger has been structured to qualify as a tax-free
reorganization so that no gain or loss would be recognized by
Boatmen's or Canadian, and no gain or loss would be recognized by
Canadian shareholders, except in respect of cash received for
fractional shares and except for any cash payments which might be
received by such shareholders properly exercising their dissenters'
rights. Consummation of the Merger is conditioned upon receipt by
Boatmen's of an opinion of Lewis, Rice & Fingersh, L.C., counsel to
Boatmen's, that: (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended; (ii) no gain or loss will be recognized by the
shareholders of Canadian who receive solely shares of Boatmen's
Common; (iii) the basis of shares of Boatmen's Common received by
the shareholders of Canadian will be the same as the basis of
shares of Canadian Common exchanged therefor; and (iv) the holding
period of the shares of Boatmen's Common received by such
shareholders will include the holding period of the shares of
Canadian Common exchanged therefor, provided such shares were held
as capital assets as of the Effective Time.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO CANADIAN
SHAREHOLDERS, WITHOUT REGARD TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND STATUS. EACH
CANADIAN SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING ANY SUCH SPECIFIC TAX SITUATION AND STATUS, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS
AND THE POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for by Boatmen's under the
purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16, "Business Combinations," as
amended. Under this method of accounting, the purchase price will
be allocated to assets acquired and liabilities assumed based on
their estimated fair values at the Effective Time. Income of the
combined company will not include results of operations of Canadian
prior to the Effective Time.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that the Merger will become
effective upon the filing of a Certificate of Merger with the
Secretary of State of the State of Missouri and the Secretary of
State of the State of Texas. It is presently anticipated that the
Merger and the Subsidiary Bank Merger will be consummated
contemporaneously during the second quarter of 1996, but no
assurance can be given that such timetable will be met.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Canadian's management and Board of Directors
have interests in the Merger that are in addition to, and separate
from, the interests of shareholders of Canadian generally. These include,
among others, provisions in the Merger Agreement relating to director
and officer indemnification and employee benefits after the Merger.
For information about the percentage of Canadian Common owned
by the directors and executive officers of Canadian, see
"INFORMATION ABOUT CANADIAN -- Security Ownership of Certain
9
16
Beneficial Owners and Management." None of the directors or
executive officers of Canadian would own, on a pro forma basis
giving effect to the Merger, more than 1% of the issued and
outstanding shares of Boatmen's Common.
DISSENTERS' RIGHTS
The rights of dissenting shareholders of Canadian are governed
by the Texas Law, which provides, in certain situations, that a
shareholder will be entitled to receive the fair value of his or
her shares of Canadian Common held immediately before the Merger is
consummated if such shareholder: (i) files a written objection to
the proposed Merger prior to the Special Meeting; (ii) does not
vote his or her shares in favor of approving the Merger Agreement;
(iii) makes written demand on Canadian for payment of the fair
value of his or her shares within 10 days after Boatmen's mails or
delivers notice of the consummation of the Merger; (iv) submits his
or her certificates to Boatmen's within 20 days of demanding
payment for his or her shares for notation thereon that such demand
has been made; and (v) either gives notice within 60 days of
Boatmen's offer to accept that offer or, within 120 days from the
date of the Merger, files a petition with the appropriate court for
an appraisal. See "THE MERGER -- Dissenters' Rights" and
Appendix C hereto.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
It is anticipated that, as of the Effective Time of the
Merger, the Subsidiary Bank Merger will be consummated. Boatmen's-
Amarillo will be the surviving bank in the Subsidiary Bank Merger.
Following consummation of the Subsidiary Bank Merger, the present
office of First State Bank will operate as a branch office of
Boatmen's-Amarillo. It is not anticipated that the Board of
Directors of Boatmen's, Boatmen's-Texas or Boatmen's-Amarillo will
be affected as a result of the Merger or the Subsidiary Bank
Merger. It is presently anticipated that the executive officers of
First State Bank will continue as officers of the Canadian, Texas
branch of Boatmen's-Amarillo following the Subsidiary Bank Merger.
There are no written employment agreements with respect to such
anticipated continued employment.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the shareholders of Canadian Common and
Boatmen's Common differ in certain respects. The rights of the
shareholders of Canadian who receive shares of Boatmen's Common in
the Merger will be governed by the corporate law of Missouri, the
state in which Boatmen's is incorporated, and by Boatmen's Articles
of Incorporation, Bylaws and other corporate documents. The
governing law and documents of Boatmen's differ from those which
apply to Canadian, which is a Texas corporation, in several
respects, of which the material differences from the perspective of
shareholders, as hereafter described under "COMPARISON OF
SHAREHOLDER RIGHTS," are the shareholder votes required for certain
business combinations; the procedures for shareholders to make
proposals for consideration at meetings of shareholders; the
ability of shareholders to call special meetings, to nominate,
elect and remove directors and to amend the Articles of
Incorporation; certain rights pursuant to Boatmen's shareholder
rights plan; and rights of Boatmen's and its shareholders pursuant
to certain corporate takeover statutes. See "COMPARISON OF
SHAREHOLDER RIGHTS."
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17
COMPARATIVE STOCK PRICES
Shares of Boatmen's Common are traded in the over-the-counter
market and are listed on Nasdaq under the symbol BOAT. There is no
established trading market for Canadian Common. The following
table sets forth the high and low last sale prices of Boatmen's
Common for the periods indicated, as reported on Nasdaq, and the
high and low trading prices of Canadian Common known to management
of Canadian.
Boatmen's Canadian
Common Stock Common Stock
------------------- ------------------
High Low High Low
------ ------ ------ ------
1994 First Quarter . . . . . . . . . . . . . $30.50 $27.00 $ <F*> $ <F*>
Second Quarter. . . . . . . . . . . . . 34.88 29.25 <F*> <F*>
Third Quarter . . . . . . . . . . . . . 34.69 30.25 95.00 95.00
Fourth Quarter. . . . . . . . . . . . . 31.13 26.25 <F*> <F*>
1995 First Quarter . . . . . . . . . . . . . 31.38 27.25 $90.00 $90.00
Second Quarter. . . . . . . . . . . . . 36.00 30.88 <F*> <F*>
Third Quarter . . . . . . . . . . . . . 38.00 34.75 <F*> <F*>
Fourth Quarter. . . . . . . . . . . . . 42.38 36.25 <F*> <F*>
1996 First Quarter . . . . . . . . . . . . . $42.88 $37.63 $ <F*> $ <F*>
Second Quarter. . . . . . . . . . . . . 39.88 37.38 <F*> <F*>
(through May 14)
<FN>
- --------------------------------------------
<F*>Management of Canadian is not aware of any sales of shares
of Canadian Common during the periods indicated. Given the limited
trading activity of Canadian Common, the prices reflected in the
chart may not be indicative of the actual value of Canadian Common,
which value may be more or less than that indicated. The most
recent transaction reported to management of Canadian involving
shares of Canadian Common took place on March 8, 1995, at a price
per share of $90.00.
On January 30, 1996, the last trading day before the
announcement of the proposed Merger, the closing sale price of
Boatmen's Common as reported on Nasdaq was $41.13 per share. On
such date, the equivalent per share price for Canadian Common,
calculated on the basis of the Merger Consideration, was $244.77.
On May 14, 1996, the closing sale prices of Boatmen's Common as
reported on Nasdaq was $39.75 per share and the equivalent per share
price for Canadian Common was $236.58. On such date, there were
approximately 37,276 and 42 holders of record of Boatmen's Common
and Canadian Common, respectively.
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SELECTED COMPARATIVE PER SHARE DATA
(unaudited)
The following summary presents comparative historical, pro
forma and pro forma equivalent unaudited per share data for
Boatmen's and Canadian. Boatmen's historical per share data has
been restated for the period presented to reflect the acquisition
of Fourth Financial, which acquisition was completed on January 31,
1996. The pro forma amounts assume the Merger had been effective
during the period presented and has been accounted for under the
purchase method of accounting. For a description of the purchase
method of accounting with respect to the Merger, see "THE MERGER --
Accounting Treatment." The amounts designated "Pro Forma Combined
Per Boatmen's Share" represent the pro forma results of the Merger,
the amounts designated "Equivalent Pro Forma Per Canadian Share"
are computed by multiplying the Pro Forma Combined Per Boatmen's
Share amounts by a factor of 5.9518 to reflect the Merger
Consideration (which equals 5.9518 shares of Boatmen's Common for
each share of Canadian Common), subject to adjustment as described
herein). See "THE MERGER -- Merger Consideration." The data
presented should be read in conjunction with the historical
financial statements and the related notes thereto included herein
or incorporated by reference herein, and the pro forma financial
statements included elsewhere in this Proxy Statement/Prospectus.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA
FINANCIAL DATA" and "FINANCIAL STATEMENTS OF CANADIAN."
Year Ended
December 31, 1995
-------------------
NET INCOME PER COMMON SHARE:
Historical:
Boatmen's. . . . . . . . . . . . . . . . . . . . . . $ 3.02
Canadian . . . . . . . . . . . . . . . . . . . . . . 19.92
Pro forma combined per Boatmen's share . . . . . . . . . 3.02
Equivalent pro forma per Canadian share. . . . . . . . . 17.97
DIVIDENDS PER COMMON SHARE:
Historical
Boatmen's. . . . . . . . . . . . . . . . . . . . . . $ 1.39
Canadian . . . . . . . . . . . . . . . . . . . . . . ---
Pro forma combined per Boatmen's share<F1> . . . . . . . 1.39
Equivalent pro forma per Canadian share<F2>. . . . . . . 8.27
BOOK VALUE PER COMMON SHARE (PERIOD END):. . . . . . . .
Historical
Boatmen's. . . . . . . . . . . . . . . . . . . . . . $ 22.21
Canadian . . . . . . . . . . . . . . . . . . . . . . 160.75
Pro forma combined per Boatmen's share . . . . . . . . . 22.21
Equivalent pro forma per Canadian share. . . . . . . . . 132.19
<FN>
- ------------------------------------
<F1> Boatmen's pro forma dividends per share represent historical
dividends per share paid by Boatmen's.
<F2> Represents historical dividends per share paid by Boatmen's
calculated on the basis of the Merger Consideration.
12
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SELECTED FINANCIAL DATA
The following tables present selected consolidated
historical financial data for Boatmen's, selected consolidated
unaudited historical financial data for Canadian and unaudited
pro forma combined amounts reflecting the Merger. The pro forma
amounts assume the Merger had been effective during the periods
presented. The data presented are derived from the consolidated
financial statements of Boatmen's, which have been restated to
reflect the acquisition of Fourth Financial, and of Canadian and
should be read in conjunction with the more detailed information
and financial statements included herein or incorporated by
reference in this Proxy Statement/Prospectus. The data should
also be read in conjunction with the unaudited pro forma
financial statements included elsewhere in this Proxy Statement/
Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "PRO FORMA FINANCIAL DATA" and "FINANCIAL STATEMENTS
OF CANADIAN."
BOATMEN'S BANCSHARES, INC.
SELECTED FINANCIAL DATA
(UNAUDITED)
Year Ended December 31,
-----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(income statement amounts in thousands except per share
data and balance sheet amounts in millions)
Summarized Income Statement:
- ---------------------------
Net Interest Income $1,491,972 $1,468,943 $1,393,693 $1,246,297 $1,059,153
Provision for Loan Losses 59,756 26,176 70,922 160,908 161,943
Noninterest Income 759,630 713,658 680,567 581,907 485,236
Noninterest Expense 1,450,825 1,411,081 1,400,549 1,222,092 1,076,592
Income Tax Expense 261,010 254,418 174,315 116,625 72,757
Net Income 480,011 490,926 428,474 328,579 233,097
Per Common Share Data:
- ---------------------
Net Income $3.02 $3.10 $2.74 $2.26 $1.70
Cash Dividends Paid 1.39 1.27 1.15 1.09 1.07
Stockholders' Equity (period end) 22.21 19.70 19.09 17.00 16.12
Financial Position at Period End:
- --------------------------------
Loans, Net of Unearned Income $24,051 $22,718 $20,388 $17,973 $16,863
Total Assets 41,123 40,692 37,946 35,147 31,935
Deposits 31,978 31,109 29,462 28,306 25,007
Long-Term Debt 615 599 590 467 395
Stockholders' Equity 3,600 3,164 3,068 2,689 2,254
Selected Financial Ratios:
- -------------------------
Return on Average Assets 1.19% 1.26% 1.19% 1.01% 0.77%
Return on Average Common
Equity 14.31 15.98 15.25 13.43 10.90
Return on Average Total Equity 14.10 15.70 14.96 13.20 10.89
Net Interest Margin 4.24 4.35 4.48 4.41 4.08
Nonperforming Assets as % of
Total Loans and Foreclosed
Property<F1> 1.02 1.08 1.76 2.68 3.68
Nonperforming Loans as % of
Total Loans 0.87 0.78 1.16 1.83 2.40
Loan Reserve as % of Net Loans 1.88 1.98 2.18 2.28 2.11
Net Charge-Offs as % of Average
Loans 0.27 0.13 0.28 0.77 0.86
Equity to Assets 8.75 7.78 8.09 7.65 7.06
Tangible Equity to Assets<F2> 7.78 6.85 7.08 6.87 6.28
Tier 1 Risk-Based Capital 11.29 10.92 11.23 10.98 10.16
Total Risk-Based Capital 13.97 13.70 14.28 13.85 12.86
<FN>
- ---------------------------
<F1> Nonperforming assets include nonaccrual loans, restructured loans, loans past due 90 days
or more and foreclosed property.
<F2> Tangible equity to assets is defined as total equity less all intangibles as a percentage
of total tangible assets.
13
20
CANADIAN BANCSHARES, INC.
SELECTED FINANCIAL DATA
(UNAUDITED)
Year Ended December 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(income statement amounts in thousands except per
share data and balance sheet amounts in millions)
Summarized Income Statement:
- ---------------------------
Net Interest Income $2,059 $2,161 $1,828 $1,683 $1,641
Provision for Loan Losses 60 30 -- -- --
Noninterest Income 154 136 150 134 151
Noninterest Expense 1,356 1,361 1,399 1,312 1,399
Income Tax Expense 164 177 103 69 67
Net Income 633 729 476 436 326
Per Common Share Data:
- ---------------------
Net Income $19.92 $22.12 $11.24 $10.49 $7.46
Cash Dividends Paid -- -- -- -- --
Stockholders' Equity (period end) 160.75 141.38 116.80 105.57 95.08
Financial Position at Period End:
- --------------------------------
Loans, Net of Unearned Income $22 $21 $22 $21 $21
Total Assets 39 45 47 48 51
Deposits 33 39 41 42 46
Long-Term Debt -- 2 1 1 1
Stockholders' Equity 5 4 4 4 3
Selected Financial Ratios:
- -------------------------
Return on Average Assets 1.51% 1.58% 1.00% 0.88% 0.90%
Return on Average Equity 13.24 17.10 12.25 12.44 14.41
Net Interest Margin 5.31 5.05 4.14 3.68 3.47
Nonperforming Assets as % of
Total Loans and Foreclosed
Property<F1> 0.47 0.17 2.39 3.72 0.76
Nonperforming Loans as % of
Total Loans 0.37 0.08 0.20 1.09 0.61
Loan Reserve as % of Net Loans 1.51 1.32 1.65 2.35 2.59
Net Charge-Offs as % of
Average Loans 0.02 0.53 0.50 0.28 0.20
Equity to Assets 13.21 9.83 8.64 7.76 6.51
Tangible Equity to Assets<F2> 13.21 9.83 8.64 7.76 6.51
Tier 1 Risk-Based Capital 19.69 14.87 14.73 14.99 12.83
Total Risk-Based Capital 20.94 15.79 16.05 16.93 14.89
<FN>
- ---------------------------
<F1> Nonperforming assets include nonaccrual loans, restructured loans, loans past due 90 days
or more and foreclosed property.
<F2> Tangible equity to assets is defined as total equity less all intangibles as a percentage
of total tangible assets.
14
21
BOATMEN'S BANCSHARES, INC.
AND
CANADIAN BANCSHARES, INC.
PRO FORMA COMBINED SELECTED FINANCIAL DATA
(UNAUDITED)
Year Ended December 31, 1995
--------------------------------
(income statement amounts in
thousands except per share data)
Summarized Income Statement:
- ---------------------------
Net Interest Income . . . . . . . . . . . . . . $1,494,031
Provision for Loan Losses . . . . . . . . . . . 59,816
Noninterest Income. . . . . . . . . . . . . . . 759,784
Noninterest Expense . . . . . . . . . . . . . . 1,452,357
Income Tax Expense. . . . . . . . . . . . . . . 261,108
Net Income<F1> . . . . . . . . . . . . . . . . 480,534
Per Common Share Data:
- ---------------------
Net Income<F1> . . . . . . . . . . . . . . . . $3.02
Cash Dividends Paid . . . . . . . . . . . . . . 1.39
Stockholders' Equity (period end) . . . . . . . 22.21
Financial Position at Period End:
- --------------------------------
Loans, Net of Unearned Income . . . . . . . . . $24,073
Total Assets. . . . . . . . . . . . . . . . . . 41,157
Deposits. . . . . . . . . . . . . . . . . . . . 32,011
Long-Term Debt. . . . . . . . . . . . . . . . . 615
Stockholders' Equity. . . . . . . . . . . . . . 3,600
Selected Financial Ratios:
- -------------------------
Return on Average Assets. . . . . . . . . . . . 1.19%
Return on Average Common Equity . . . . . . . . 14.33
Return on Average Total Equity. . . . . . . . . 14.12
Net Interest Margin . . . . . . . . . . . . . . 4.24
Nonperforming Assets as % of Total Loans and
Foreclosed Property<F2> . . . . . . . . . . 1.02
Nonperforming Loans as % of Total Loans . . . . 0.87
Loan Reserve as % of Net Loans. . . . . . . . . 1.88
Net Charge-Offs as % of Average Loans . . . . . 0.27
Equity to Assets. . . . . . . . . . . . . . . . 8.75
Tangible Equity to Assets<F3> . . . . . . . . . 7.76
Tier 1 Risk-Based Capital . . . . . . . . . . . 11.28
Total Risk-Based Capital. . . . . . . . . . . . 13.96
<FN>
- ---------------------------
<F1> Net income includes amortization of goodwill which would result
from the acquisition of Canadian Bancshares, Inc. as if the
goodwill existed as of the earliest period presented. Goodwill
will approximate $2.6 million to be amortized over 15 years.
<F2> Nonperforming assets include nonaccrual loans, restructured
loans, loans past due 90 days or more and foreclosed property.
<F3> Tangible equity to assets is defined as total equity less all
intangibles as a percentage of total tangible assets.
15
22
THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to shareholders
of Canadian Bancshares, Inc., a Texas corporation ("Canadian"), in
connection with the solicitation of proxies by the Board of Directors of
Canadian for use at the special meeting of shareholders (the "Special
Meeting") to be held at the offices of First State Bank of Canadian
("First State Bank"), 115 Main Street, Canadian, Texas 79014 on June
20, 1996, at 1:30 p.m., local time.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the holders of common stock, par value
$1.00 per share, of Canadian ("Canadian Common") will be asked to
approve the Agreement and Plan of Merger, dated January 30, 1996 (the
"Merger Agreement"), by and among Canadian, Boatmen's Bancshares, Inc.,
a Missouri corporation ("Boatmen's"), and Boatmen's Texas, Inc., a
Missouri corporation and wholly owned subsidiary of Boatmen's
("Boatmen's-Texas"), providing for, among other matters, the merger of
Canadian with and into Boatmen's-Texas. In addition, the holders of
Canadian Common may be asked to vote on a proposal to adjourn or
postpone the Special Meeting which adjournment or postponement could be
used for the purpose, among others, of allowing time for the
solicitation of additional votes to approve the Merger Agreement.
RECORD DATE FOR THE SPECIAL MEETING
The Board of Directors of Canadian has fixed the close of business
on May 10, 1996, as the record date for the determination of holders
of shares of Canadian Common to receive notice of and to vote at the
Special Meeting. On the record date, there were 31,755 shares of
Canadian Common outstanding. Only holders of shares of Canadian Common
of record on the record date are entitled to vote at the Special
Meeting. No shares of Canadian Common can be voted at the Special
Meeting unless the record holder is present in person or represented by
proxy at the Special Meeting.
VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT
The presence in person or by proxy of a majority of the issued and
outstanding shares of Canadian Common entitled to vote on the record
date is necessary to constitute a quorum at the Special Meeting. The
affirmative vote of two-thirds of the outstanding shares of Canadian
Common entitled to vote thereon is required to approve the Merger
Agreement and the transactions contemplated thereby, including the
Merger. Each holder of Canadian Common is entitled to one vote per
share of Canadian Common. As of the record date, the executive officers
and directors of Canadian and their affiliates have the power to vote
9,252 shares (approximately 29.14% of the shares outstanding) of
Canadian Common, all of which are expected by management to be voted in
favor of the Merger Agreement. For information regarding the shares of
Canadian Common beneficially owned, directly or indirectly, by certain
shareholders, by each director and executive officer of Canadian, and by
all directors and officers of Canadian as a group, see "INFORMATION
ABOUT CANADIAN -- Security Ownership of Certain Beneficial Owners and
Management." As of the record date, the subsidiaries of Boatmen's, and
the directors and executive officers of Boatmen's, did not own
beneficially any shares of Canadian Common.
16
23
VOTING AND REVOCATION OF PROXIES FOR THE SPECIAL MEETING
Proxies for use at the Special Meeting accompany this Proxy
Statement/Prospectus. A shareholder may use his or her proxy if he or
she is unable to attend the Special Meeting in person or wishes to have
his or her shares voted by proxy even if he or she does attend the
Special Meeting. Shares of Canadian Common represented by a proxy
properly signed and returned to Canadian at, or prior to, the Special
Meeting, unless subsequently revoked, will be voted at the Special
Meeting in accordance with instructions thereon. If a proxy is properly
signed and returned and the manner of voting is not indicated on the
proxy, any shares of Canadian Common represented by such proxy will be
voted FOR the Merger Agreement and the transactions contemplated
thereby, including the Merger, and FOR any proposal regarding
adjournment or postponement, if such a proposal is made. The failure to
submit a proxy card (or to vote in person) at the Special Meeting, the
abstention from voting at the Special Meeting and, in the case of shares
held in street name, the failure of the beneficial owner thereof to give
specific voting instructions to the broker holding such shares (broker
non-votes), will have the same effect as a vote against approval of the
Merger Agreement.
Any proxy given pursuant to this solicitation may be revoked by the
grantor at any time prior to the voting thereof on the Merger Agreement
by filing with the Secretary of Canadian a written revocation or a duly
executed proxy bearing a later date. A holder of Canadian Common who
previously signed and returned a proxy and who elects to attend the
Special Meeting and vote in person may withdraw his or her proxy at any
time before it is exercised by giving notice of such revocation to the
Secretary of Canadian at the Special Meeting and voting in person by
ballot at the Special Meeting; however, attendance at the Special
Meeting will not in and of itself constitute a revocation of the proxy.
SOLICITATION OF PROXIES FOR THE SPECIAL MEETING
In addition to solicitation of proxies from shareholders of
Canadian Common by use of the mail, proxies also may be solicited by
personal interview, telephone and wire by directors, officers and
employees of Canadian, who will not be specifically compensated for such
services. Except as set forth below, all costs of soliciting proxies,
assembling and mailing the Proxy Statement/Prospectus and all papers
which now accompany or hereafter may supplement the same will be borne
by Canadian.
EXPENSES FOR PREPARATION OF PROXY STATEMENT/PROSPECTUS
Boatmen's and Canadian have agreed to share in the expense of
preparing this Proxy Statement/Prospectus, and Boatmen's will bear the
entire cost of printing this Proxy Statement/Prospectus and all
Securities and Exchange Commission ("S.E.C.") and other regulatory
filing fees incurred in connection therewith.
MAILING DATE OF PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus, the attached notice of Special
Meeting and the enclosed proxy card are first being sent to shareholders
of Canadian on or about May 14, 1996 (the "Mailing Date").
17
24
THE PARTIES
BOATMEN'S
GENERAL
Boatmen's, a Missouri corporation, is a multi-bank holding company
headquartered in St. Louis, Missouri. Its largest subsidiary, The
Boatmen's National Bank of St. Louis, was founded in 1847 and is the
oldest bank west of the Mississippi River. Boatmen's owns substantially
all of the capital stock of 57 subsidiary banks, including a federal
savings bank, which operate from over 650 banking locations in Missouri,
Arkansas, Illinois, Iowa, Kansas, New Mexico, Oklahoma, Tennessee and
Texas. Boatmen's other principal businesses include a trust company, a
mortgage banking company, a credit life insurance company, a credit card
bank and an insurance agency. At December 31, 1995, Boatmen's had
consolidated assets of approximately $33.7 billion and total
shareholders' equity of approximately $2.9 billion, making it one of the
30 largest bank holding companies in the United States. On January 31,
1996, Boatmen's completed it acquisition of Fourth Financial Corporation
("Fourth Financial"), the largest banking organization in Kansas and the
third-largest banking organization in Oklahoma. Including Fourth
Financial, Boatmen's has consolidated assets of approximately $41
billion and shareholders' equity of approximately $3.4 billion.
Boatmen's is among the 17 largest providers of personal trust
services in the nation, providing personal trust services primarily
within its banks' market areas and institutional and pension-related
trust services on a national scale. Operating principally through
Boatmen's Trust Company, its subsidiaries and trust departments of
selected banks, the combined trust operations had assets under
management totaling approximately $44.4 billion at December 31, 1995.
The trust operations, with revenues in 1995 of approximately
$177.2 million, provide Boatmen's with a significant source of
noninterest income.
Additional information regarding Boatmen's and its subsidiaries is
set forth in the Boatmen's documents incorporated by reference herein.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
RECENT ACQUISITIONS
Fourth Financial Corporation. As described above, Boatmen's
----------------------------
completed its acquisition of Fourth Financial on January 31, 1996.
Fourth Financial was a publicly held, multi-bank holding company
headquartered in Wichita, Kansas, operating 143 retail banking offices
throughout the states of Kansas and Oklahoma and four such offices in
Independence, Missouri. At December 31, 1995, Fourth Financial had
consolidated assets of approximately $7.4 billion, deposits of
approximately $6.0 billion and shareholders' equity of approximately
$672 million.
Boatmen's exchanged (and will exchange assuming the exercise of all
outstanding stock options) approximately 28.5 million shares of its common
stock and 248,000 shares of Boatmen's 7% Cumulative Convertible
Preferred Stock, Series A, for all of the shares of Fourth Financial.
The shares of Boatmen's common stock issued in connection with the
acquisition of Fourth Financial constituted approximately 22% of the
total number of such shares outstanding as of the date of the
acquisition. The acquisition of Fourth Financial was accounted for
under the pooling of interests method of accounting for business
combinations.
Tom Green National Bank. On March 1, 1996, Boatmen's acquired, in
-----------------------
exchange for shares of Boatmen's common stock, all of the issued and
outstanding shares of Tom Green National Bank, a national
18
25
banking association located in San Angelo, Texas. Tom Green National
Bank was merged with and into Boatmen's First National Bank of Amarillo,
a second-tier, wholly owned subsidiary of Boatmen's. At December 31,
1995, Tom Green National Bank had assets of approximately $74.4 million
and shareholders' equity of approximately $5.2 million. Boatmen's
exchanged approximately 240,000 shares of its common stock for all of
the stock of Tom Green National Bank, which represents less than 1% of
the total number of shares of Boatmen's Common outstanding as of the
date hereof. The acquisition was accounted for under the purchase
method of accounting for business combinations.
BOATMEN'S-TEXAS
Boatmen's-Texas is a wholly owned subsidiary of Boatmen's which, in
turn, owns all of the capital stock of Boatmen's-Amarillo. At December
31, 1995, Boatmen's-Texas had consolidated assets of approximately
$1.6 billion and shareholders' equity of approximately $159 million.
CANADIAN
Canadian, a Texas corporation, is a bank holding company
headquartered in Canadian, Texas. Canadian owns 100 percent of the
outstanding capital stock of First State Bank, a Texas state-chartered
bank. The business of Canadian consists primarily of the ownership,
supervision and control of First State Bank, a commercial bank offering
complete banking services to the commercial, agricultural and
residential areas which it serves. These services include agricultural
production loans and loans to commercial accounts, small businesses and
consumers. Agricultural and residential mortgages, deposit services,
and many other traditional banking services are also provided. Primary
lending occurs in the agricultural industry, businesses directly and
indirectly related to oil and gas development, and to residential home
buyers. At December 31, 1995, Canadian had consolidated assets of
approximately $38.7 million and shareholders' equity of approximately
$5.1 million. The principal executive offices of Canadian and First
State Bank are at 115 Main Street, Canadian, Texas 79014 (telephone
number (806) 323-6435).
THE MERGER
GENERAL
This section of the Proxy Statement/Prospectus describes certain
aspects of the Merger, including the principal provisions of the Merger
Agreement. The following information relating to the Merger is
qualified in its entirety by reference to the other information
contained elsewhere in this Proxy Statement/Prospectus, including the
Appendices hereto and the documents incorporated herein by reference. A
copy of the Merger Agreement is attached hereto as Appendix A and is
incorporated by reference herein. Reference is made thereto for a
complete description of the terms of the Merger. ALL SHAREHOLDERS OF
CANADIAN ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
BACKGROUND OF THE MERGER
The Board of Directors of Canadian has historically provided
policy-making direction to management with a primary emphasis on
enhancing shareholder value. This emphasis has been influenced by the
impact of its subsidiary, First State Bank, on the economic well being
of Canadian, Texas and the surrounding area. In recent years, the Board
of Directors has recognized the trend by commercial banks to provide not
only
19
26
commercial banking services, but also additional services being sought
by businesses and consumers, and the trend by other financial service
companies to provide services typically associated with commercial
banks. These trends have resulted in increased competition for Canadian
and First State Bank from providers of these services, such as insurance
companies, brokerage firms, credit unions and finance companies.
The Board of Directors of Canadian sought counsel from professional
banking advisors regarding the impact of this new competition and the
increased activity in bank mergers and acquisitions in the State of
Texas. Potential growth for First State Bank appears to be limited,
given the static population base in Canadian, Texas, and the surrounding
area. Options to enhance shareholder value appeared to be limited to
either acquisitions of other banks or a merger with a larger, more
competitive provider of financial services.
A representative of Boatmen's approached Canadian in the spring of
1995 with a proposal to acquire Canadian. This initial offer was not
accepted by the Board of Directors but did provide the basis for further
discussions between the parties. As a result of such offer, Canadian
engaged the services of The Bank Advisory Group, Inc., Austin, Texas, a
nationally-recognized banking consultant with substantial experience in
bank mergers and acquisitions.
Advice provided by The Bank Advisory Group, Inc. guided the
directors through consideration of a number of material factors,
including but not limited to the following:
a. The prospect of growth for First State Bank should it remain
independent.
b. The impact of increasing competition from regional and national
financial institutions.
c. The enhancement of liquidity to the shareholders for their
stock in a national trading market.
d. The additional services available to customers and the
community by association with a larger and more geographically
diversified super-regional bank holding company.
e. The impact of a tax-free reorganization through the exchange of
stock, as compared to a cash purchase.
f. The benefits and costs of privately negotiating a transaction
with one potential acquiror, as opposed to an "auction" of the
institution through competing offers.
Each of these factors were deliberated extensively by the Board of
Directors in consultation with The Bank Advisory Group, Inc. After
careful deliberations, the Board of Directors elected to begin formal
negotiations with Boatmen's. No other offers were received by the Board
of Directors.
After further discussions and negotiations between the parties, a
revised offer was submitted by letter dated October 23, 1995, which was
accepted by the parties, subject to a due diligence review of Canadian
by Boatmen's and negotiation of a definitive agreement acceptable to
both parties. The due diligence review of Canadian was completed during
November 1995 and was the basis for additional negotiations initiated by
Boatmen's. A revised offer was submitted by Boatmen's by letter dated
December 19, 1995, which was accepted in principle by the parties,
subject to negotiation of a definitive agreement acceptable to both
parties. The resulting Merger Agreement was approved unanimously by the
Board of Directors of Canadian and was executed January 30, 1996.
20
27
In connection with the Merger, Boatmen's-Amarillo and First State
Bank have entered into an Agreement to Merge, dated April 25, 1996 (the
"Subsidiary Merger Agreement"), which provides for the merger of First
State Bank with and into Boatmen's-Amarillo (the "Subsidiary Bank
Merger"). It is anticipated that the Subsidiary Bank Merger would be
consummated contemporaneously with the Merger.
REASONS FOR THE MERGER
The Board of Directors of Canadian has determined that the Merger
and the Merger Agreement, including the Merger Consideration (as defined
herein), are fair to, and in the best interests of, Canadian and its
shareholders. The Board of Directors of Canadian believes that a
business combination with a larger financial institution and more
geographically diversified super regional bank holding company would, in
addition to providing significant value to all shareholders, enable
First State Bank to compete more effectively in its market area and
participate in the expanded opportunities for growth that the Merger and
the Subsidiary Bank Merger will make possible. Accordingly, the Board
unanimously recommends that shareholders of Canadian vote for approval
and adoption of the Merger Agreement.
Certain members of the management and Board of Directors of
Canadian have interests in the Merger that are in addition to the
interests of shareholders generally. See "THE MERGER -- Interests of
Certain Persons in the Merger."
The Board of Directors of Boatmen's believes that the acquisition
of Canadian and the merger of its banking subsidiary, First State Bank,
into Boatmen's-Amarillo, would be a natural and desirable addition to
Boatmen's banking franchise in the Panhandle of North Texas.
RECOMMENDATION OF THE BOARD OF DIRECTORS
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF CANADIAN
UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF CANADIAN COMMON VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER.
OPINION OF FINANCIAL ADVISOR
The Bank Advisory Group, Inc. ("Advisory") is a recognized
investment banking firm regularly engaged in the valuation of financial
institutions and their securities in connection with mergers and
acquisitions, and in valuations for estate, corporate and other
purposes. In connection with Canadian's proposed merger with Boatmen's-
Texas, Canadian selected Advisory to act as an independent financial
analyst and advisor to the common shareholders of Canadian, and its
wholly-owned subsidiary, First State Bank, on the basis of Advisory's
reputation and qualifications in evaluating financial institutions.
Advisory was asked to render advice and analysis in connection with the
Merger as to the fairness, from the perspective of the common
shareholders of Canadian, of the financial terms of the Merger.
Advisory has rendered a separate written opinion (the "Opinion") to
the Board of Directors of Canadian to the effect that the terms of the
Merger are fair from a financial point of view to the shareholders of
Canadian as of the date of the Opinion. A copy of the Opinion is
attached as Appendix B to this Proxy Statement/Prospectus and should be
read in its entirety by Canadian's shareholders. Advisory's Opinion
21
28
does not constitute an endorsement of the Merger or a recommendation
to any Canadian shareholder as to how such shareholder should vote
regarding the Merger.
Regarding Canadian, Advisory based its Opinion upon, among other
things, a review of: 1) consolidated financial statements for the years
ended December 31, 1995 (audited), 1994 and 1993 (unaudited); 2) parent
company only financial statements, on form FR Y-9SP, for the years ended
December 31, 1995, 1994 and 1993, as filed with the Federal Reserve
System; 3) reports of condition and income for First State Bank, for the
years ended December 31, 1995, 1994, and 1993, and for the three month
period ending March 31, 1996, as filed with Federal bank regulatory
agencies; 4) the economy in general and, in particular, the local
economies in which First State Bank operates; 5) certain internal
financial analyses and forecasts for First State Bank prepared by the
management of First State Bank, including projections of future
performance; 6) certain other summary materials and analyses with
respect to First State Bank's loan portfolio, securities portfolio,
deposit base, fixed assets, and operations including, but not limited
to: (i) schedules of loans and other assets identified by management as
deserving special attention or monitoring given the characteristics of
the loan/asset and the local economy, (ii) analyses concerning the
adequacy of the loan loss reserve, (iii) schedules of "other real estate
owned," including current carrying values and recent appraisals, and
(iv) schedules of securities, detailing book values, market values and
lengths to maturity, and; 7) such other information -- including
financial studies, analyses, investigations, and economic and market
criteria -- that Advisory deemed relevant to its assignment.
Regarding Boatmen's, Advisory based its Opinion upon, among other
things, a review of: 1) audited consolidated financial statements,
contained in Annual Reports and Form 10-Ks, for the years ended
December 31, 1995, 1994, and 1993; 2) quarterly financial statements for
Boatmen's, in both "press release" and quarterly report format, for the
1995 calendar quarters and the calendar quarter ended March 31, 1996 (to
be provided subsequent to the date of Advisory's Opinion);
3) consolidated financial statements for Boatmen's, on form FR Y-9C, for
the years ended 1995, 1994, and 1993, together with consolidated
financial statements for the three month period ended March 31, 1996 (to
be provided subsequent to the date of Advisory's Opinion), as filed with
the Federal Reserve System; 4) equity research reports regarding
Boatmen's prepared by various stock analysts who cover the financial
institutions sector; 5) the condition of the commercial banking
industry, as indicated in the financial reports filed by all federally-
insured commercial banks with various federal bank regulatory
authorities; 6) the economy in general and, in particular, the major
trade areas in which Boatmen's and its subsidiaries operate, and;
7) such other information -- including financial studies, analyses,
investigations, and economic and market criteria -- that Advisory deemed
relevant to its assignment.
Additionally, Advisory based its Opinion upon, among other things,
a review of: 1) the Agreement, and any amendments thereto, that sets
forth, among other items, the terms, conditions to closing, pending
litigation against both Canadian and Boatmen's, and representations and
warranties of Canadian and Boatmen's with respect to the proposed
Merger; 2) this Proxy Statement/Prospectus, to which the Opinion is
appended, that is being furnished to the shareholders of Canadian in
connection with the proposed Merger; 3) the financial terms and price
levels for commercial banks with assets under $100 million that were
recently acquired in the United States -- and specifically in Texas --
together with the financial performance and condition of such banks;
4) the financial terms and stated price levels of other banking
organizations, the proposed acquisition of which has been publicly
announced by Boatmen's subsequent to January 1, 1995, and prior to the
date of the Opinion; 5) the price-to-equity and price-to-earnings
multiples of the stocks of banking organizations based in the midwestern
United States which have publicly-traded common stocks, together
with the financial performance and conditions of such banking
organizations, and; 6) such other information -- including financial
studies, analyses, investigations, and economic and market criteria --
that Advisory deemed relevant to its assignment.
22
29
Advisory maintains a sizable database of information pertaining
to the prices paid for banks in the United States. The database includes
transactions involving banking organizations in Texas and the Southwest
region of the United States, and provides comparable pricing and financial
performance data for banking organizations acquired in the United States
since 1982. Advisory has the capability of searching this database to
yield transactions involving similar banks. Such similarities might
include banks within a specific assets size range, banks that generate
a return on average assets (ROA) within a specified range, banks that
have an equity-to-assets ratio within a certain range, or banks that
sold for a specific form of consideration (e.g., cash and/or stock).
The ability to produce specific groups of comparable banks facilitates
making a valid comparative purchase price analysis.
As noted, Advisory considered the transaction values for banking
organizations with assets under $100 million acquired in the United
States - and specifically in Texas - during 1995 and thus far in 1996,
irrespective of the form of consideration paid. Advisory compared those
transaction values, and the corresponding financial characteristics for
the relevant banks, in relation to the transaction value computed for
Canadian's merger with Boatmen's-Texas. The comparative analysis revealed
that the merger of Canadian with Boatmen's-Texas yields a transaction
value that results in a price-equity index (purchase price as a percent
of total assets) of 19.92 and a price-earnings index (purchase price as
-----
a percent of average assets) of 18.41, versus averages of 15.18 and 15.52,
-------
respectively, for the comparator banks in the United States; and averages
of 13.94 and 14.19, respectively, for the comparator bank in Texas. This
analysis suggests that the transaction value for Canadian, as measured
by the price indices described above, compares favorably with, and
exceeds, the average price indices paid during 1995 and thus far in
1996 for banks with assets under $100 million in both the United States
and Texas alone, irrespective of the form of consideration paid. The
table set forth below summarizes this comparative analysis, and highlights
the Canadian transaction.
Equity- Total Price Multiples Price Indices
# of Assets to- Price ---------------- -----------------
Banks $(000) Assets ROA ROE $(000) Equity Earnings Equity Earnings
U.S. Transactions 110 $52,311 9.15% 1.05% 11.63% $7,942 1.66x 14.83x 15.18 15.52
Texas Transactions 30 $45,372 8.95% 1.25% 14.22% $6,324 1.56x 11.36x 13.94 14.19
- --------------------------------------------------------------------------------------------------------------------------------
Canadian 1 $38,660 13.20% 1.51% 13.24% $7,700 1.51x 12.16x 19.92 18.41
- --------------------------------------------------------------------------------------------------------------------------------
In the context of the Merger, Advisory specifically considered the
transaction values for Texas banking organizations with assets of less
than $250 million which were acquired for stock during 1994, 1995 and
thus far in 1996 (the "comparable banks"). Advisory compared those
transaction values, and the corresponding financial characteristics
for the comparable banks, in relation to the transaction value computed
for Canadian's merger with Boatmen's-Texas. The comparative analysis
revealed that the merger of Canadian with Boatmen's-Texas yields a
transaction value that results in a price-equity index (purchase price
as a percent of total assets) of 19.92 and a price-earnings index
-----
(purchase price as a percent of average assets) of 18.41, versus
-------
averages of 16.48 and 17.17, respectively, for the comparable banks.
This analysis suggests that the transaction value for Canadian, as
measured by the price indices described above, compares favorably with,
and exceeds, the average price indices paid for the comparable banks.
The table set forth below summarizes this comparative analysis, and
highlights the Canadian transaction.
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Equity- Total Price Multiples Price Indices
# of Assets to- Price ---------------- -----------------
Banks $(000) Assets ROA ROE $(000) Equity Earnings Equity Earnings
Comparable Banks 13 $112,082 10.03% 1.72% 17.46% $18,470 1.64x 9.96x 16.48 17.17
- --------------------------------------------------------------------------------------------------------------------------------
Canadian 1 $38,660 13.20% 1.51% 13.24% $ 7,700 1.51x 12.16x 19.92 18.41
- --------------------------------------------------------------------------------------------------------------------------------
Expanding its analysis further, Advisory broadened the universe of
banks and compared the transaction value for Canadian in relation to the
weighted average price paid during 1995 for all banks with assets of less
than $500 million in the United States, and in Texas alone (irrespective
of the form of consideration paid). This expanded comparative analysis
yielded a conclusion consistent with that noted above: the transaction
value for Canadian, as measured by the price indices, compares favorably
with, and exceeds, the average price indices paid for banks with assets of
less than $500 million in the United States, and in Texas alone. The table
set forth below summarizes this expanded comparative analysis, and
highlights the Canadian transaction.
Price Multiples Price Indices
Assets Equity-to- Return on ---------------- -----------------
Region (# of Banks) $(000) Assets Assets Equity Earnings Equity Earnings
U.S. (177) $112,874 8.84% 0.96% 1.78x 16.91x 15.73 16.15
Texas (37) $ 87,437 9.07% 1.28% 1.60x 11.59x 14.52 14.89
- -----------------------------------------------------------------------------------------------------------------
Canadian $ 38,660 13.20% 1.51% 1.51x 12.16x 19.92 18.41
- -----------------------------------------------------------------------------------------------------------------
As previously noted, Advisory also considered the transaction values
for banking organizations acquired by Boatmen's, the announcements of
which occurred subsequent to January 1, 1995 and prior to the date of
Advisory's Opinion. Advisory also expanded its analysis to include those
transactions announced by Boatmen's during 1994. Advisory compared those
transaction values, and the corresponding financial characteristics for
the relevant banks, in relation to the transaction value computed for
Canadian's merger with Boatmen's-Texas. The comparative analysis
revealed that the merger of Canadian with Boatmen's-Texas yields a
transaction value that results in a price-equity index (purchase price
as a percent of total assets) of 19.92 and a price-earnings index
-----
(purchase price as a percent of average assets) of 18.41, versus averages
-------
of 15.97 and 15.89, respectively, for the transactions announced by
Boatmen's since January 1, 1994 (inclusive of transactions announced
during 1995 and thus far in 1996); and averages of 15.68 and 15.55,
respectively, for the transactions announced by Boatmen's since
January 1, 1995 (inclusive of transactions announced thus far in 1996).
This analysis suggests that the transaction value for Canadian, as
measured by the price indices described above, compares favorably with,
and exceeds, the average price indices paid by Boatmen's for recent
acquisitions.
Since the form of consideration in Canadian's merger with Boatmen's
involves the exchange of Boatmen's Common for shares of Canadian Common,
Advisory evaluated the financial condition and performance of Boatmen's,
as noted above. Advisory conducted its own independent financial analysis
of Boatmen's based on the above-mentioned information provided to or obtained
by Advisory. Advisory also reviewed and considered financial analyses and
earnings forecasts produced by financial analysts affiliated with various
brokerage firms that cover the financial institutions industry, and
Boatmen's in particular. The intent of this financial analysis is to
ascertain the current financial condition and future earnings prospects
of Boatmen's, given that the current shareholders of Canadian will have
an ownership stake in Boatmen's on a post-transaction basis. Advisory is
satisfied with the findings obtained from its financial analyses regarding
the financial condition and future earnings prospects of Boatmen's, and
believes that a sufficient
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foundation exists in this regard to support Advisory's conclusion
regarding the financial fairness of the proposed transaction.
Consideration was also given to the projected levels of earnings per
share, equity per share, and dividends per share appreciation or dilution
percentages between the merger partners over the next three to five years
after consummation of the Merger. Typically, a merger is completed with the
intention of realizing economies of scale and earnings enhancement
opportunities, thereby providing a benefit to shareholders of both merger
partners that might not otherwise be achieved with both parties operating
on a stand-alone basis. To justify the fairness of the transaction from the
perspective of the shareholders of Canadian, it is important to forecast a
positive impact for Canadian shareholders, based upon realistic financial
projections for both parties together with realistic merger savings. Overall,
Advisory forecasts that Canadian shareholders will benefit from the Merger
on a financial basis versus what Canadian could have otherwise achieved for
its shareholders operating on a stand-alone basis. Specifically, after
adjusting Canadian's projected earnings per share on a stand-alone basis to
reflect the Conversion Ratio, Canadian shareholders would be expected to
experience earnings per share appreciation ranging between 23% and 45% for
any given year during the 1997-2001 time period. Furthermore, since
Canadian has not paid dividends in recent years, and there is no assurance
that it will pay dividends in the future, Canadian shareholders would
benefit from the dividends received as a result of holding Boatmen's Common.
Like the enhanced earnings support, the projected dividend stream available
to Canadian shareholders receiving Boatmen's Common in the Merger also
provides a greater underpinning of financial support for their investment.
Finally, because Canadian is highly capitalized (tangible equity-to-assets
ratio of 13.21% at year-end 1995, versus 7.78% for Boatmen's), Canadian
shareholders are forecast to experience equity per share dilution
approximating 18% for any given year during the 1997-2001 time period,
after adjusting Canadian's projected equity per share on a stand-alone
basis to reflect the Conversion Ratio. Although this suggests that Canadian
shareholders will not enjoy the benefit of higher tangible equity as an
underpinning of support for their investment, Advisory has concluded that
the equity per share dilution is outweighed by the sizable earnings per
share appreciation Canadian's shareholders are forecast to experience,
coupled with the receipt of quarterly dividends. Thus, overall, Advisory
has concluded that the shareholders of Canadian will benefit from the
transaction on a financial basis.
Advisory is of the belief that its review of, among other things,
the aforementioned items, provides a reasonable basis for the issuance
of its Opinion, recognizing that Advisory is issuing an informed
professional opinion -- not a certification of value.
No limitations were imposed on the scope of Advisory's investigation
by either Canadian or Boatmen's. Advisory indirectly participated in
the negotiation of the terms of the Merger, and other related agreements
associated with the Merger, through discussions with officials at
Canadian. However, the actual terms of the Merger were negotiated
directly between officials of Canadian and Boatmen's, on an arm's-length
basis.
Advisory, as part of its line of professional services, specializes
in rendering valuation opinions of banks and bank holding companies in
connection with mergers and acquisitions nationwide. Prior to its
retention for this assignment, Advisory had provided financial advisory
services to Canadian and First State Bank; however, the revenues derived
from the delivery of such services are insignificant when compared to
Advisory's total gross revenues. Advisory has not previously provided
any services to Boatmen's.
Advisory has relied upon the information provided by the management
of Canadian and Boatmen's, or otherwise reviewed by Advisory, as being
complete and accurate in all material respects. Advisory has not
verified through independent inspection or examination the specific
assets or liabilities of Canadian,
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Boatmen's or their subsidiary banks. Advisory has assumed that there
has been no material changes in the assets, financial condition,
results of operations, or business prospects of Canadian and
Boatmen's since the date of the last financial statements made
available to Advisory. Advisory met with the management of Canadian
for the purpose of discussing the relevant information that has
been provided to Advisory.
Based on all factors that Advisory deemed relevant and assuming the
accuracy and completeness of the information and data provided, Advisory
concluded that the financial provisions of the proposed Merger, as
outlined herein, are fair, from a financial standpoint, to the common
shareholders of Canadian. For its services as an independent financial
analyst and advisor to Canadian in connection with the Merger, Canadian
has either paid or has agreed to pay Advisory aggregate professional
fees of $25,200. Additionally, Canadian also has agreed to reimburse
Advisory for reasonable out-of-pocket expenses.
MERGER CONSIDERATION
The Merger Agreement provides that each share of Canadian Common,
other than shares held by any shareholder properly exercising
dissenters' rights under the Texas Business Corporation Act (the "Texas
Law"), will be converted, at the effective time of the Merger (the
"Effective Time"), into the right to receive 5.9518 shares (the
"Conversion Ratio") of common stock, $1.00 par value per share, of
Boatmen's, including any attached rights thereto ("Boatmen's Common"),
under or by virtue of the Rights Agreement, dated August 14, 1990,
between Boatmen's and Boatmen's Trust Company, as Rights Agent (see
"COMPARISON OF SHAREHOLDER RIGHTS -- Shareholder Rights Plan"), plus
cash in lieu of fractional shares, as described herein (the "Merger
Consideration"). The Conversion Ratio is subject to possible adjustment
as described herein. The Merger Consideration was determined through
negotiations between Boatmen's and Canadian, taking into account the
relative value of Boatmen's Common and Canadian Common.
The Merger Agreement provides that the Merger Consideration will be
increased if the Effective Time occurs after the record date for the
payment of the regular quarterly dividend on Boatmen's Common
declared during the second quarter of 1996 or the third quarter of 1996.
In such event, the Merger Consideration will be increased by adding to
the Conversion Ratio the quotient of (i) the product of (A) the amount
of such quarterly dividend or dividends, as the case may be, multiplied
by (B) 5.9518, divided by (ii) the average closing price of a share of
Boatmen's Common on the Nasdaq Stock Market's National Market ("Nasdaq")
during the 20 trading days immediately preceding the fifth calendar day
immediately preceding the closing date of the Merger (the "Boatmen's
Average Price").
The Merger Agreement also provides that, if the cost of taking all
remedial and corrective actions and measures required by applicable law
or recommended or suggested by any report of environmental inspection on
the real property owned, leased or operated by Canadian and First State
Bank or prudent in light of serious life, health or safety concerns, net
of any amounts received or which will be received from the Texas Natural
Resource Conservation Commission (the "Remediation Cost"), exceeds
$50,000 and the parties do not terminate the Merger Agreement on the
basis of the amount of such Remediation Cost, the Merger Consideration
would be decreased by subtracting from the Conversion Ratio the quotient
of (i) the quotient of (A) the amount by which the Remediation Cost
exceeds $50,000 (up to a maximum excess amount equal to $200,000),
divided by (B) 31,755, divided by (ii) the Boatmen's Average Price. See
"THE MERGER -- Termination or Abandonment" and "-- Certain Other
Agreements -- Environmental Inspections."
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The actual amount of such adjustment or adjustments, if any, cannot
be calculated as of the date of this Proxy Statement/Prospectus and will
not be known until five calendar days prior to the closing date of the
Merger.
FRACTIONAL SHARES
No fractional shares of Boatmen's Common will be issued and, in
lieu thereof, each holder of Canadian Common who would otherwise be
entitled to a fractional share interest of Boatmen's Common (after
taking into account all shares of Canadian Common held by such holder)
will be paid an amount in cash equal to the product of such fractional
share interest and the closing price of a share of Boatmen's Common on
Nasdaq on the business day immediately preceding the date on which the
Effective Time occurs.
SHARE ADJUSTMENTS
If, prior to the Effective Time, a share of Boatmen's Common would
be changed into a different number of shares of Boatmen's Common or a
different class of shares (a "Share Adjustment"), by reason of
reclassification, recapitalization, splitup, exchange of shares or
readjustment, or if a stock dividend thereon should be declared with a
record date prior to the Effective Time, then the number of shares of
Boatmen's Common into which a share of Canadian Common would be
converted pursuant to the Merger Agreement will be appropriately and
proportionately adjusted so that each shareholder of Canadian will be
entitled to receive such number of shares of Boatmen's Common as such
shareholder would have received pursuant to such Share Adjustment had
the record date thereof been immediately following the Effective Time.
FORM OF THE MERGER
The Merger Agreement provides that, subject to the satisfaction or
waiver (where permissible) of the conditions set forth therein, at the
Effective Time, Canadian will merge into Boatmen's-Texas, which is a
wholly owned subsidiary of Boatmen's, and Boatmen's-Texas will be the
surviving corporation in the Merger. At the Effective Time, the
separate corporate existence of Canadian will terminate.
CONDUCT OF BUSINESS PENDING THE MERGER; DIVIDENDS
Pursuant to the Merger Agreement, Canadian has agreed to 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. The Merger Agreement provides that Canadian may not declare
or pay a dividend on the Canadian Common or make any other distribution
to shareholders, whether in cash, stock or other property, after the
date of the Merger Agreement.
EFFECTIVE TIME
The Merger Agreement provides that the Merger will become effective
upon the filing of a Certificate of Merger with the Secretary of State
of the State of Missouri and the Secretary of State of the State of
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Texas. It is presently anticipated that the Merger and the Subsidiary
Bank Merger will be consummated contemporaneously during the second
quarter of 1996, but no assurance can be given that such timetable will
be met.
REGULATORY APPROVALS
The Merger is subject to the prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve") and the
Texas Department of Banking. Acquisitions subject to Federal Reserve
approval under the Bank Holding Company Act of 1956, such as the Merger,
may not be consummated until 30 days after the date of the approval by
the Federal Reserve, during which period the United States Department of
Justice may in its discretion challenge the transaction under the
antitrust laws. If, however, the Federal Reserve has not received any
adverse comments from the United States Department of Justice relating
to the competitive aspects of the transaction and the Department of
Justice has consented to a shorter waiting period, then the Merger may
be consummated after the 15th day following the date of the approval by
the Federal Reserve. An application for the required regulatory
approval from the Federal Reserve has been filed and is pending, and a
copy of such application has been provided to the Texas Department of
Banking.
In addition, an application has been filed with the Office of the
Comptroller of the Currency for approval of the Subsidiary Bank Merger,
which application is pending.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger is subject to various conditions. Specifically, the
obligations of each party to effect the Merger are subject to the
fulfillment or waiver by each of the parties, at or prior to the date on
which the Merger is consummated (the "Closing Date"), of the following
conditions: (i) the representations and warranties of the respective
parties to the Merger Agreement as set forth therein will be true and
correct in all material respects on the date thereof and as of the
Closing Date; (ii) each of the respective parties to the Merger
Agreement will have performed and complied in all material respects
with all of its obligations and agreements required to be performed
prior to the Closing Date; (iii) no party to the Merger Agreement
will be subject to any order, decree or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger; (iv) all necessary regulatory approvals and
consents required to consummate the Merger, including the approval of
the shareholders of Canadian, will have been obtained and all waiting
periods in respect thereof will have expired; (v) each party will have
received all required documents from the other party; (vi) the
Registration Statement relating to the Boatmen's Common to be issued
pursuant to the Merger will have become effective, and no stop order
suspending the effectiveness of the Registration Statement will have
been issued and no proceedings for that purpose will have been initiated
or threatened by the S.E.C. or any securities agency; and (vii)
Boatmen's will have received an opinion of Lewis, Rice & Fingersh, L.C.,
counsel to Boatmen's, to the effect that (a) the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), (b) no gain or loss will
be recognized by the holders of Canadian Common upon receipt of the
Merger Consideration (except for cash received in lieu of fractional
shares), (c) the basis of shares of Boatmen's Common received by the
shareholders of Canadian will be the same as the basis of shares of
Canadian Common exchanged therefor, and (d) the holding period of the
shares of Boatmen's Common received by the shareholders of Canadian will
include the holding period of the shares of Canadian Common exchanged
therefor, provided such shares were held as capital assets as of the
Effective Time.
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The obligations of Boatmen's and Boatmen's-Texas to effect the
Merger are further subject to the condition that, prior to the Closing
Date, Boatmen's has received certain environmental inspection reports
required to be obtained on Canadian's real properties and Boatmen's will
not have elected to exercise its termination rights in connection
therewith. See "THE MERGER -- Termination or Abandonment."
The conditions described in item (iv) above (the receipt of
shareholder and regulatory approvals) may not be waived by any party.
Although the remaining conditions to effect the Merger may be waived by
the party entitled to the benefit thereof, neither Boatmen's, Boatmen's-
Texas nor Canadian intend to waive any such conditions except in those
circumstances where the Board of Directors of either Boatmen's,
Boatmen's-Texas or Canadian, as the case may be, deems such waiver to be
in the best interests of Boatmen's, Boatmen's-Texas or Canadian, as the
case may be, and their respective shareholders.
An application for the required regulatory approval of the Merger
has been filed with the Federal Reserve, which application is pending.
No assurance can be provided as to if or when all of the foregoing
conditions precedent to the Merger will be satisfied or waived (where
permissible) by the party permitted to do so. If the Merger is not
effected on or before January 30, 1997, the Merger Agreement may be
terminated by Boatmen's, Boatmen's-Texas or Canadian. See "THE
MERGER -- Termination or Abandonment."
TERMINATION OR ABANDONMENT
The Merger Agreement may be terminated at any time prior to the
Effective Time: (i) by any party if the Merger is not consummated on or
prior to January 30, 1997; (ii) by mutual written agreement of the
parties; (iii) by any party in the event of a material breach by the
other of any of its representations and warranties or agreements
under the Merger Agreement not cured within 30 days after notice of
such breach is given by the non-breaching party; (iv) by any party
in the event all the conditions to its obligations are not satisfied
or waived (and not cured within any applicable cure period); (v) by
Boatmen's in the event that Canadian or First State Bank becomes a
party or subject to any new or amended written agreement, memorandum
of understanding, cease and desist order, imposition of civil money
penalties or other regulatory enforcement action or proceeding with
any federal or state agency charged with the supervision or
regulation of banks or bank holding companies after the date of the
Merger Agreement, provided, however, that Boatmen's may not terminate
the Merger Agreement on account of any such regulatory enforcement
action or proceeding which, through the reasonable efforts of
Canadian and/or Boatmen's, could be terminated on or before the
Closing Date without requiring any capital infusion to be made or other
action having a financial effect materially adverse to the financial
benefits of the Merger to Boatmen's; (vi) by any party if any regulatory
application filed in connection with the Merger or the Subsidiary Bank
Merger should be finally denied or disapproved by the applicable
regulatory authority; and (vii) by any party should the shareholders of
Canadian not approve the Merger.
The Merger Agreement may also be terminated by Boatmen's if certain
reports of environmental inspection on the real properties of Canadian
and First State Bank to be obtained pursuant to the Merger Agreement
should disclose any contamination or presence of hazardous wastes, the
Remediation Cost of which exceeds $50,000, as reasonably estimated by an
environmental expert retained for such purpose by Boatmen's within 10
business days following receipt of an acceptable environmental report
and reasonably acceptable to Canadian, or if the Remediation Cost cannot
be so reasonably estimated by such expert to be $50,000 or less with any
reasonable degree of certainty; provided, however, that Boatmen's must
exercise such termination right within 10 business days following
receipt of such estimate or indication that the
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Remediation Cost cannot be so reasonably estimated by giving written
notice thereof to Canadian (the "Environmental Termination Notice").
In the event that Boatmen's delivers the Environmental Termination
Notice and the Remediation Cost does not exceed $250,000, then Boatmen's,
at the election of Canadian, may not terminate the Merger Agreement,
provided, however, that in such event the Merger Consideration would be
decreased by subtracting from the Conversion Ratio the quotient of (i) the
quotient of (A) the amount by which the Remediation Cost exceeds $50,000
(up to a maximum excess amount equal to $200,000), divided by (B) 31,755,
divided by (ii) the Boatmen's Average Price. Should the Remediation Cost
equal or exceed $250,000, Boatmen's has the exclusive right to either (i)
terminate the Merger Agreement as described above, or (ii) reduce the
aggregate value of the Merger Consideration payable under the Merger
Agreement by $200,000 and consummate the Merger. See "THE MERGER --
Merger Consideration" and "-- Certain Other Agreements -- Environmental
Inspections."
PAYMENT UPON OCCURRENCE OF CERTAIN TRIGGERING EVENTS
The Merger Agreement provides that upon the occurrence of one or
more Triggering Events (defined below), Canadian shall pay to Boatmen's
the sum of $300,000.
As used in the Merger Agreement, the term "Triggering Event" means
any of the following events: (i) termination of the Merger Agreement by
Boatmen's upon a breach thereof by Canadian, provided that within 12
months of the date of such termination, either an event described in
clause (iii) or (iv) of this sentence shall have occurred; (ii) the
failure of Canadian's shareholders to approve the Merger and the Merger
Agreement at the Special Meeting; provided, however, that the failure of
Canadian shareholders to approve the Merger and the Merger Agreement
shall not be deemed a Triggering Event if (a) the average of the daily
closing prices of a share of Boatmen's Common, as reported on Nasdaq
during the period of 20 trading days ending on the second trading day
immediately preceding the Mailing Date (the "Boatmen's Final Price"), is
less than $30.00, (b) the number obtained by dividing the Boatmen's
Final Price by the Boatmen's Initial Price (as defined below), is less
than the number obtained by dividing the Final Index Price (as defined
below) by the Initial Index Price (as defined below) and subtracting .20
from such quotient, or (c) within 18 months after the date of such meeting
an event described in clause (iii) or (iv) below does not occur; (iii) any
person or group of persons (other than Boatmen's) acquires, or has the
right to acquire, 50% or more of the outstanding shares of Canadian Common
(exclusive of any shares of Canadian Common sold directly or indirectly to
such person or group of persons by Boatmen's); or (iv) upon the entry by
Canadian or First State Bank into an agreement or other understanding with
a person or group of persons (other than Boatmen's and/or its affiliates)
for such person or group of persons to acquire, merge or consolidate with
Canadian or First State Bank or to purchase or acquire Canadian or all or
substantially all of Canadian's or First State Bank's assets.
As used in the Merger Agreement, (i) "Index Group" means all of the
bank holding companies listed on Exhibit 7.09 to the Merger Agreement,
the common stock of which is publicly traded and as to which there is no
pending publicly announced proposal at any time during the period of 20
trading days ending at the end of the fifth trading day immediately
preceding the Closing Date for such company to be acquired or to acquire
another company which would constitute a "significant subsidiary" of
such company (as such term is defined under applicable S.E.C.
regulations) in exchange for its stock; (ii) "Boatmen's Initial Price"
means the closing price of a share of Boatmen's Common as reported on
Nasdaq on January 30, 1996; (iii) "Initial Index Price" means the
weighted average (weighted in accordance with the factors specified on
Exhibit 7.09 to the Merger Agreement) of the per share closing prices of
the common stock of the bank holding companies comprising the Index
Group, as reported on the consolidated transactions reporting system for
the market or exchange on which such common stock is principally traded,
on January 30, 1996;
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(iv) "Final Price" of any company belonging to the Index Group means the
average of the daily closing sale prices of a share of common stock of
such company, as reported in the consolidated transaction reporting system
for the market or exchange on which such common stock is principally
traded, during the period of 20 trading days ending at the end of the
second trading day immediately preceding the Mailing Date; and (v) "Final
Index Price" means the weighted average (weighted in accordance with the
factors specified on Exhibit 7.09 to the Merger Agreement) of the Final
Prices for all of the companies comprising the Index Group.
DISSENTERS' RIGHTS
The following summary of the rights of Canadian shareholders who
choose to dissent and demand payment for their shares of Canadian Common
does not purport to be a complete statement of the Texas Law relating to
their rights, and is qualified by reference to the excerpts of the Texas
Law that have been set forth as Appendix C to this Proxy
Statement/Prospectus. Each shareholder of Canadian who chooses to
dissent from the Merger Agreement should consult with his or her own
legal counsel concerning his or her rights and the specific procedures
and available remedies under the Texas Law.
ANY FAILURE TO FOLLOW THE DETAILED PROCEDURES SET FORTH IN THE
TEXAS LAW MAY RESULT IN A SHAREHOLDER OF CANADIAN LOSING ANY RIGHT HE OR
SHE MAY HAVE TO DISSENT FROM THE MERGER AGREEMENT AND DEMAND AN
APPRAISAL FOR THE VALUE FOR HIS OR HER SHARES OF CANADIAN COMMON.
The rights of Canadian shareholders who choose to dissent from the
Merger are governed by provisions of the Texas Law. An excerpt of the
Texas Law (Sections 5.11-5.13) is attached as Appendix C to the Proxy
Statement/Prospectus. Under the Texas Law, a shareholder of a Texas
corporation who wishes to assert dissenters' rights with respect to a
merger must file with the corporation, prior to the shareholder's
meeting at which the merger is to be voted upon, a written objection
stating that the shareholder's right to dissent will be exercised if the
merger is effected and giving the shareholder's mailing address for
receiving notice of the merger if it becomes effective.
In addition, in order to dissent, the shareholder must not vote in
favor of the merger. It is not necessary that a shareholder vote
against the merger in order to dissent, so long as the shareholder files
a written objection in advance of the proposed action. However, merely
voting against the proposal, either by proxy or at the shareholders'
meeting, will not take the place of filing the required written
objection.
If the merger is effected and the dissenters' rights provisions of
the Texas Law are applicable to such merger, the surviving corporation
of such merger must, within 10 days thereafter, mail or deliver notice
thereof to each shareholder who has filed a written objection and who
has not voted in favor of the merger. Within 10 days after the
surviving corporation mails or delivers notice to shareholders who have
not voted in favor of the merger and who have filed objections, each
such shareholder who elects to dissent must make written demand for the
payment of the fair value of his or her shares within 10 days of the
date the surviving corporation mailed or delivered the notice in
accordance with the provisions of Article 5.12 of the Texas Law, a copy
of which is attached to the Proxy Statement/Prospectus as Appendix C.
Such written demand must state the number and class of the shares owned
by the shareholder and the shareholder's estimate of the fair value of
such shares. Also, within 20 days after demanding payment, the
shareholder must submit the certificates representing his or her shares
to the surviving corporation for notation on the certificate that such
demand has been made in accordance with the provisions of Article 5.13
of the Texas Law, a copy of which is attached to the Proxy Statement/
Prospectus as Appendix C.
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A shareholder who votes for the merger, or does not file a written
objection stating an intent to assert dissenters' rights prior to the
shareholder's meeting at which the merger is voted upon, or does not
demand payment within 10 days after receiving notice of the
effectiveness of the merger, will be deemed to have waived his or her
right to dissent and will be bound by the terms of the merger. A
shareholder who fails to submit his or her certificate for notation of
demand for payment will, at the option of the surviving corporation,
terminate his or her right to dissent unless a court for good and
sufficient cause directs otherwise.
Within 20 days after receiving demand for payment from a dissenting
shareholder, the surviving corporation must (i) notify the shareholder
that it agrees to the amount claimed as the fair value of the shares, or
(ii) set forth the surviving corporation's estimate of the fair value of
the shares. If the surviving corporation and the shareholder agree on a
value within 60 days after the merger, the surviving corporation must
pay that value for the shares within 90 days after the merger. If the
surviving corporation and the dissenting shareholder do not so agree,
either the surviving corporation or such shareholder may file a petition
in a court of competent jurisdiction in the appropriate Texas State
district court within 120 days after the merger asking for a finding and
determination of the fair value of the shares owned by the dissenting
shareholder.
All shareholders who properly dissent from a proposed merger
involving a Texas corporation in accordance with Article 5.12 of the
Texas Law will lose all rights with respect to their shares except the
right to receive payment for the shares and the right to maintain an
appropriate action to obtain relief on the grounds that the merger would
be or was fraudulent. A shareholder may withdraw his or her demand
before payment is made for the shares or before a petition has been
filed asking for a finding and determination of the fair value of such
shares, but no demand may be withdrawn after such payment has been made,
or, unless the surviving corporation consents, after any such petition
has been filed.
If a shareholder withdraws his or her demand, or if neither party
timely files a petition asking for a determination of fair value of the
shares, such shareholder shall be bound by the terms of the merger and
restored to the status of shareholder.
The dissenters' rights provisions of the Texas Law described herein
are applicable to all proposed mergers involving Texas corporations,
except in those instances where (i) the shares of such corporation are
listed on a national securities exchange or (ii) such shares are held of
record by 2,000 holders or more. The shares of Canadian Common are not
listed and traded on a national securities exchange. In addition,
Canadian has substantially fewer than 2,000 record shareholders (42 as
of the record date for the Special Meeting).
THE FOREGOING SUMMARY OF THE RIGHTS OF SHAREHOLDERS TO DISSENT AND
DEMAND PAYMENT FOR THEIR SHARES DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF THE TEXAS LAW RELATING TO THE RIGHTS OF DISSENTING
SHAREHOLDERS OF CANADIAN, AND IS QUALIFIED BY REFERENCE TO THE EXCERPTS
OF THE TEXAS LAW WHICH HAVE BEEN SET FORTH IN FULL AS APPENDIX C TO THIS
PROXY STATEMENT/PROSPECTUS.
EXCHANGE OF CANADIAN STOCK CERTIFICATES; FRACTIONAL SHARES
The conversion of Canadian Common into Boatmen's Common (other than
any shares as to which dissenters' rights are properly exercised) will
occur by operation of law at the Effective Time. After the
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Effective Time, certificates theretofore evidencing shares of Canadian
Common (such certificates, other than certificates held by shareholders
exercising their dissenters' rights, being collectively referred to
herein as the "Canadian Certificates") which may be exchanged for shares
of Boatmen's Common will be deemed, for all corporate purposes other
than the payment of dividends and other distributions on such shares, to
evidence ownership of and entitlement to receive such shares of
Boatmen's Common.
As soon as reasonably practicable after the Effective Time, and in
no event more than 10 business days thereafter, Boatmen's Trust Company
(the "Exchange Agent") will mail a transmittal letter and instructions
to each record holder of a Canadian Certificate whose shares were
converted into the right to receive the Merger Consideration, advising
such holder of the number of shares of Boatmen's Common such holder is
entitled to receive pursuant to the Merger, of the amount of cash such
holder is due in lieu of a fractional share of Boatmen's Common, and of
the procedures for surrendering such Canadian Certificates in exchange
for a Certificate for the number of whole shares of Boatmen's Common,
and a check for the cash amount (if any) such holder is entitled to
receive in lieu of fractional shares. The letter of transmittal will
also specify that delivery will be effected, and risk of loss and title
to the Canadian Certificates will pass, only upon proper delivery of the
Canadian Certificates to the Exchange Agent and will be in such form and
have such other provisions as Boatmen's may reasonably specify.
SHAREHOLDERS OF CANADIAN ARE REQUESTED NOT TO SURRENDER THEIR CANADIAN
CERTIFICATES FOR EXCHANGE UNTIL SUCH LETTER OF TRANSMITTAL AND
INSTRUCTIONS ARE RECEIVED. The shares of Boatmen's Common into which
Canadian Common will be converted in the Merger will be deemed to have
been issued at the Effective Time. Unless and until the Canadian
Certificates are surrendered, along with a duly executed letter of
transmittal, any other required documents and notification of the
holder's federal taxpayer identification number, dividends on the shares
of Boatmen's Common issuable with respect to such Canadian Common, which
would otherwise be payable, will not be paid to the holders of such
Canadian Certificates and, in such case, upon surrender of the Canadian
Certificates and a duly executed Letter of Transmittal, any other
required documents and notification of taxpayer identification number,
there will be paid any dividends on such shares of Boatmen's Common which
became payable between the Effective Time and the time of such surrender
and notification. No interest on any such dividends will accrue or be
paid.
REPRESENTATIONS AND WARRANTIES OF CANADIAN, BOATMEN'S AND BOATMEN'S-TEXAS
The Merger Agreement contains various representations and
warranties of the parties thereto. These include, among other things,
representations and warranties by Canadian, except as otherwise
disclosed to Boatmen's, as to: (i) its organization and good standing;
(ii) its capitalization; (iii) the due authorization and execution of
the Merger Agreement by Canadian; (iv) the identity and ownership of
First State Bank as a wholly owned subsidiary of Canadian; (v) the
accuracy of the financial statements of Canadian and of First State
Bank's filings with the Federal Deposit Insurance Corporation (the
"F.D.I.C."); (vi) the absence of material adverse changes in the
financial condition, results of operations, business or prospects of
Canadian and its subsidiaries; (vii) the absence of certain orders,
agreements or memoranda of understanding between Canadian or First State
Bank and any federal or state agency charged with the supervision or
regulation of banks or bank holding companies; (viii) the filing of tax
returns and payment of taxes; (ix) the absence of pending or threatened
litigation or other such actions; (x) agreements with employees,
including employment agreements; (xi) certain reports required to be
filed with various regulatory agencies; (xii) its loan portfolio;
(xiii) employee matters and ERISA; (xiv) title to its properties, the
absence of liens (except as specified) and insurance matters;
(xv) environmental matters; (xvi) compliance with applicable laws and
regulations; (xvii) the absence of undisclosed liabilities; (xviii) the
absence of brokerage commissions or similar finder's fees in connection
with the Merger; and (xix) the accuracy of information supplied by
Canadian in connection with the Registration Statement, this Proxy
Statement/Prospectus and any other documents to be
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filed with the S.E.C. or any banking or other regulatory authority in
connection with the transactions contemplated by the Merger Agreement.
Boatmen's and Boatmen's-Texas' representations and warranties
include, among other things, those as to (i) their organization and good
standing; (ii) their capitalization; (iii) the due authorization and
execution of the Merger Agreement by each of Boatmen's and Boatmen's-
Texas, and the absence of the need (except as specified) for
governmental or third party consents to the Merger; (iv) subsidiaries of
Boatmen's; (v) the accuracy of Boatmen's financial statements and
filings with the S.E.C.; (vi) the absence of material adverse changes in
the financial condition, results of operations or business of Boatmen's
and its subsidiaries; (vii) the absence of material pending or
threatened litigation or other such actions; (viii) certain reports
required to be filed with various regulatory agencies; (ix) compliance
with applicable laws and regulations; and (x) the accuracy of
information supplied by Boatmen's and Boatmen's-Texas in connection with
the Registration Statement, this Proxy Statement/Prospectus and any
other documents to be filed with the S.E.C. or any banking or other
regulatory authority in connection with the transactions contemplated by
the Merger Agreement.
CERTAIN OTHER AGREEMENTS
Business of Canadian in Ordinary Course. Pursuant to the Merger
---------------------------------------
Agreement, Canadian has agreed, among other things, that it will conduct
its business and the business of First State Bank and engage in
transactions only in the usual, regular and ordinary course as
previously conducted, and that neither it nor First State Bank will,
without the prior written consent of Boatmen's (which shall not be
unreasonably withheld): (i) issue additional Canadian Common or other
capital stock, options, warrants or other rights to subscribe for or
purchase Canadian Common, or any other capital stock or any other
securities convertible into or exchangeable for any capital stock of
Canadian or its subsidiaries; (ii) directly or indirectly redeem,
purchase or otherwise acquire Canadian Common or any other capital stock
of Canadian or its subsidiaries; (iii) effect a reclassification,
recapitalization, splitup, exchange of shares, readjustment or other
similar change in any capital stock or otherwise reorganize or
recapitalize; (iv) change its certificate or articles of incorporation
or association, as the case may be, or bylaws; (v) grant any increase,
other than ordinary and normal increases consistent with past practices,
in the compensation payable or to become payable to officers or salaried
employees, grant any stock options or, except as required by law, adopt
or change any bonus, insurance, pension, or other employee plan, payment
or arrangement made to, for or with any such officers or employees; (vi)
except in the ordinary course of business, borrow or agree to borrow any
amount of funds or directly or indirectly guarantee or agree to
guarantee any obligations of others; (vii) make or commit to make any
new loan or letter of credit or any new or additional discretionary
advance under any existing line of credit, in excess of $600,000, or
that would increase the aggregate credit outstanding to any one borrower
or group of affiliated borrowers to more than $600,000; (viii) purchase
or otherwise acquire any investment security for its own account having
an average remaining life maturity greater than five years or any asset-
backed securities other than those issued or guaranteed by the
Government National Mortgage Association, the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation; (ix) increase
or decrease the rate of interest paid on time deposits or certificates
of deposit except in accordance with past practices; (x) enter into any
agreement, contract or commitment having a term in excess of three
months other than letters of credit, loan agreements, and other lending,
credit and deposit agreements and documents made in the ordinary course
of business; (xi) mortgage, pledge, subject to lien or charge or
otherwise encumber any of its assets or properties except in the
ordinary course of business; (xii) cancel, accelerate or waive any
material indebtedness, claims or rights owing to Canadian or First State
Bank except in the ordinary course of business; (xiii) sell or otherwise
dispose of any real property or any personal property with an aggregate
fair market value in excess of $10,000 other than properties acquired
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in foreclosure or otherwise in the ordinary collection of indebtedness;
(xiv) foreclose or otherwise take title to or possess any real property,
other than single family, non-agricultural residential property of one
acre or less, without first obtaining a phase one environmental report
which indicates that the property is free of hazardous, toxic or
polluting waste materials; (xv) commit any act or fail to do any act
which will result in a material breach of any agreement, contract or
commitment; (xvi) violate any law, statute, rule, governmental
regulation or order which will materially adversely affect the business,
financial condition or earnings of Canadian and First State Bank;
(xvii) purchase any real or personal property or make any capital
expenditure in excess of $100,000; or (xviii) engage in any transaction
or take any action that would render untrue, in any material respect,
any of the representations and warranties made by Canadian in the Merger
Agreement, if such representations or warranties were given as of the
date of such transaction or action.
Additional Canadian Reserves, Accruals, Charges and Expenses. The
------------------------------------------------------------
Merger Agreement acknowledges that while Canadian believes it has
established all reserves and taken all provisions for possible loan
losses required by generally accepted accounting principles and
applicable laws, rules and regulations, Boatmen's has adopted different
loan, accrual and reserve policies (including different loan
classifications and levels of reserves for possible loan losses).
Accordingly, the Merger Agreement provides that Boatmen's and Canadian
will consult and cooperate with each other prior to the Effective Time
(i) to conform Canadian's loan, accrual and reserve policies to those of
Boatmen's; (ii) to determine appropriate accruals, reserves, and charges
for Canadian 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; and (iii) to determine the amount and the timing
for recognizing for financial accounting purposes the expenses of the
Merger and the restructuring charges related to or to be incurred in
connection with the Merger. Canadian has agreed to establish and take
all such reserves, accruals and charges and recognize, for financial
accounting purposes, such expenses and charges, as requested by
Boatmen's and at such times as are mutually agreeable to Boatmen's and
Canadian, provided, however, that Canadian is not required to take any
action which is inconsistent with generally accepted accounting
principles.
Environmental Inspections. In accordance with the terms of the Merger
-------------------------
Agreement, Canadian has provided Boatmen's reports of phase one environmental
investigations on certain real property owned or leased by Canadian or
First State Bank (not including leased space in retail and similar
establishments and space leased for automatic teller machines). Canadian
has also agreed to provide Boatmen's with similar reports of a phase one
environmental investigation within 10 days after the acquisition or lease
of any real property acquired by Canadian or First State Bank (not
including leased space in retail or similar establishments and space leased
for automatic teller machines) after January 30, 1996, the date of the
Merger Agreement. Boatmen's has requested, and Canadian has agreed to
provide Boatmen's with, reports of a phase two investigations on certain
properties requiring such additional study. If the Remediation Cost
exceeds $50,000, as reasonably estimated by an environmental expert
retained for such purpose by Boatmen's and reasonably acceptable to
Canadian, the Boatmen's will have the right for a period of 10 business
days to terminate the Merger Agreement by giving written notice to
Canadian. If, however, the Remediation Cost does not exceed $250,000,
Boatmen's, at the election of Canadian, may not terminate the Merger
Agreement, provided, however, that in such event the Merger Consideration
would be decreased by subtracting from the Conversion Ratio the quotient of
(i) the quotient of (A) the amount by which the Remediation Cost exceeds
$50,000 (up to a maximum excess amount equal to $200,000), divided by
(B) 31,755, divided by (ii) the Boatmen's Average Price. Should the
Remediation Cost equal or exceed $250,000, Boatmen's has the exclusive
right to either (i) terminate the Merger Agreement, or (ii) reduce the
aggregate value of the Merger Consideration payable under the Merger
Agreement by $200,000 and consummate the Merger. See "THE MERGER --
Merger Consideration" and "-- Termination or Abandonment." See "THE
MERGER -- Termination or Abandonment."
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Environmental investigations routinely are conducted by Boatmen's
in connection with transactions involving the acquisition of real
property, whether pursuant to the acquisition of a bank or other
business or in its ongoing business operations. These investigations
are intended to identify and quantify potential environmental risks of
ownership, such as contamination, which could lead to liability for
clean-up costs under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and other applicable
laws. A "phase one" investigation is an initial environmental inquiry
intended to identify areas of concern which might require more in-depth
assessment. The scope of a phase one investigation varies depending on
the environmental consultant utilized and the property assessed, but
will typically include (i) visual inspection of the property;
(ii) review of governmental records to ascertain the presence of such
things as "Superfund" sites, underground storage tanks or landfills,
etc. on or near the site; (iii) review of all relevant site records such
as air or water discharge permits and hazardous waste manifests; and
(iv) research regarding previous owners and uses of the property as well
as those of surrounding properties. In bank or other business
acquisition transactions, Boatmen's policy is to obtain phase one
environmental investigations of real property to ensure that
environmental problems do not exist which could result in unacceptably
high or unquantifiable risk to Boatmen's and its shareholders.
Other Canadian Agreements. In addition, Canadian has agreed to:
-------------------------
(i) give Boatmen's prompt written notice of any occurrence, or impending
or threatened occurrence, of any event or condition which would cause or
constitute a breach of any of Canadian's representations or agreements
in the Merger Agreement or of the occurrence of any matter or event
known to and directly involving Canadian (not including changes in
conditions that affect the banking industry generally) that is
materially adverse to the business, operations, properties, assets or
condition (financial or otherwise) of Canadian and First State Bank;
(ii) use its best efforts to obtain all necessary consents with respect
to any material leases, licenses, contracts, instruments and rights
which require the consent of another person for their transfer or
assumption pursuant to the Merger; (iii) use its best efforts to perform
and fulfill all conditions and obligations to be performed or fulfilled
under the Merger Agreement and to effect the Merger; (iv) permit Boatmen's
reasonable access to Canadian's properties and to disclose and make
available all books, documents, papers and records relating to assets,
stock ownership, properties, operations, obligations and liabilities in
which Boatmen's may have a reasonable and legitimate interest in
furtherance of the transactions contemplated by the Merger Agreement; and
(iv) cause First State Bank to enter into the Subsidiary Merger Agreement
with Boatmen's-Amarillo and take all other actions and cooperate with
Boatmen's in causing the Subsidiary Bank Merger to be effected.
Boatmen's Agreements. Pursuant to the Merger Agreement, Boatmen's
--------------------
has agreed, among other things, to: (i) file all regulatory
applications required in order to consummate the Merger and to provide
Canadian with copies of all such applications; (ii) file the
Registration Statement with the S.E.C. and use its best efforts to cause
the Registration Statement to become effective; (iii) timely file all
documents required to obtain all necessary permits and approvals under
applicable state securities laws; (iv) prepare and file any other
filings required to list on Nasdaq the shares of Boatmen's Common to be
issued in the Merger and any other filing required under the Securities
Exchange Act of 1934, as amended, relating to the Merger and related
transactions; (v) promptly notify Canadian in writing should Boatmen's
have knowledge of any event or condition which would cause or constitute
a breach of any of its representations or agreements contained in the
Merger Agreement; (vi) use its best efforts to perform and fulfill all
conditions and obligations to be performed or fulfilled under the Merger
Agreement and to effect the Merger; and (vii) permit Canadian reasonable
access to all books, documents, papers and records relating to the
assets, stock ownership, properties, operations, obligations and
liabilities of Boatmen's in which Canadian may have a reasonable and
legitimate interest in furtherance of the transactions contemplated in
the Merger Agreement. In addition, the Merger Agreement states that
Boatmen's shall provide certain employee benefit plans and
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programs to the employees of Canadian and First State Bank who continue
their employment after the Effective Time.
NO SOLICITATION
The Merger Agreement provides that, unless and until the Merger
Agreement has been terminated, Canadian will not solicit or encourage
or, subject to the fiduciary duties of its directors as advised by
counsel, hold discussions or negotiations with, or provide information
to, any person in connection with any proposal from any person relating
to the acquisition of all or a substantial portion of the business,
assets or stock of Canadian and First State Bank. Canadian is required
to promptly advise Boatmen's of its receipt of, and the substance of,
any such proposal or inquiry.
WAIVER AND AMENDMENT
Prior to or at the Effective Time, any provision of the Merger
Agreement, including, without limitation, the conditions to consummation
of the Merger, may be (i) waived, to the extent permitted under law, in
writing by the party which is entitled to the benefits thereof; or
(ii) amended at any time by written agreement of the parties, whether
before or after approval of the Merger Agreement by the shareholders of
Canadian at the Special Meeting; provided, however, that after any such
approval, no such amendment or modification shall alter the amount or
change the form of the Merger Consideration or alter or change any of
the terms of the Merger Agreement if such alteration or change would
adversely affect the holders of Canadian Common. It is anticipated that
a condition to the obligations of Canadian and Boatmen's to consummate
the Merger would be waived only in those circumstances where the Board
of Directors of Canadian or Boatmen's, as the case may be, deems such
waiver to be in the best interests of such company and its shareholders.
EXPENSES AND FEES
In the event the Merger Agreement is terminated or the Merger is
abandoned, all costs and expenses incurred in connection with the Merger
Agreement will be paid by the party incurring such costs and expenses,
and no party shall have any liability to the other party for costs,
expenses, damages or otherwise, except that: (i) in the event the
Merger Agreement is terminated on account of a willful breach of any of
the representations or warranties therein or any breach of the
agreements set forth therein, the non-breaching party is entitled to
seek damages against the breaching party; and (ii) in certain events,
Canadian will be required to pay a fee of $300,000 to Boatmen's. See
"THE MERGER -- Payment Upon Occurrence of Certain Triggering Events."
FEDERAL INCOME TAX CONSEQUENCES
The Merger has been structured to qualify as a reorganization under
Section 368(a) of the Code. Except for shareholders perfecting their
dissenters' rights, and cash received in lieu of a fractional share
interest in Boatmen's Common, holders of shares of Canadian Common will
recognize no gain or loss on the receipt of Boatmen's Common in the
Merger. Additionally, their aggregate basis in the shares of Boatmen's
Common received in the Merger will be the same as their aggregate basis
in their shares of Canadian Common converted in the Merger, and,
provided the shares surrendered are held as capital assets,
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the holding period of the shares of Boatmen's Common received by them will
include the holding period of their shares of Canadian Common converted in
the Merger. Cash received in lieu of fractional share interests and cash
received by shareholders exercising their dissenters' rights will be
treated as a distribution in full payment of such fractional share
interests, or shares surrendered in exercise of dissenters' rights,
resulting in capital gain or loss or ordinary income, as the case may
be, depending upon each shareholder's particular situation.
Consummation of the Merger is conditioned upon receipt by Boatmen's
of an opinion of Lewis, Rice & Fingersh, L.C., counsel to Boatmen's, to
the effect that if the Merger is consummated in accordance with the
terms set forth in the Merger Agreement: (i) the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by the holders of shares of
Canadian Common upon receipt of the Merger Consideration (except for
cash received in lieu of fractional shares); (iii) the basis of shares
of Boatmen's Common received by the shareholders of Canadian will be the
same as the basis of shares of Canadian Common exchanged therefor; and
(iv) the holding period of the shares of Boatmen's Common received by
such shareholders will include the holding period of the shares of
Canadian Common exchanged therefor, provided such shares were held as
capital assets as of the Effective Time.
THE FOREGOING IS A GENERAL SUMMARY OF ALL OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO CANADIAN SHAREHOLDERS, WITHOUT
REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S
TAX SITUATION AND STATUS. EACH CANADIAN SHAREHOLDER SHOULD CONSULT HIS
OR HER OWN TAX ADVISOR REGARDING ANY SUCH SPECIFIC TAX SITUATION AND
STATUS, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL
AND FOREIGN LAWS AND THE POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER
TAX LAWS.
RESALE OF BOATMEN'S COMMON
The shares of Boatmen's Common issued pursuant to the Merger will
be freely transferable under the Securities Act of 1933, as amended (the
"Securities Act"), except for shares issued to any Canadian shareholder
who may be deemed to be an "affiliate" of Canadian or Boatmen's for
purposes of Rule 145 under the Securities Act. The Merger Agreement
provides that each such affiliate will enter into an agreement with
Boatmen's providing that such affiliate will not transfer any shares of
Boatmen's Common received in the Merger except in compliance with the
Securities Act. This Proxy Statement/Prospectus does not cover resales
of shares of Boatmen's Common received by any person who may be deemed
to be an affiliate of Canadian. Persons who may be deemed to be
affiliates of Canadian generally include individuals who, or entities
which, control, are controlled by or are under common control with
Canadian and will include directors and certain officers of Canadian and
may include principal shareholders of Canadian.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management and the Board of Directors of
Canadian may be deemed to have interests in the Merger in addition to
their interests as shareholders of Canadian generally. For information
about the percentage of Canadian Common owned by the directors and
executive officers of Canadian, see "INFORMATION ABOUT CANADIAN --
Security Ownership of Certain Beneficial Owners and Management." None
of the directors or executive officers of Canadian would own, on a pro
forma basis giving effect to the Merger, more than 1% of the issued and
outstanding shares of Boatmen's Common.
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Insurance; Indemnification. The Merger Agreement provides that
--------------------------
Boatmen's will provide the directors and officers of Canadian and First
State Bank, after the Merger, with the same directors' and officers'
liability insurance coverage that Boatmen's provides to directors and
officers of its other banking subsidiaries generally and, in addition,
for a period of three years will use its best efforts to continue
Canadian's directors' and officers' liability insurance coverage with
respect to actions occurring prior to the Effective Time to the extent
that such coverage is obtainable for an aggregate premium not to exceed
the annual premium presently being paid by Canadian. If the premium of
such insurance would exceed such maximum amount, Boatmen's will use its
best efforts to procure such level of insurance having the coverage
described herein as can be obtained for a premium equal to such maximum
amount. The Merger Agreement also provides that for a period of six
years after the Effective Time Boatmen's will cause Boatmen's-Texas, as
the surviving corporation in the Merger, or any successor of Boatmen's-
Texas, to indemnify the present and former directors, officers,
employees and agents of Canadian and First State Bank against any
liability arising out of actions occurring prior to the Effective Time,
to the extent that such indemnification is then permitted under the
Texas Law and by Canadian's Articles of Incorporation as in effect on
the date of the Merger Agreement, including provisions relating to
advances of expenses incurred in the defense of any action or suit.
Employee Benefits. The Merger Agreement contains certain
-----------------
provisions regarding employee benefits which are described under "THE
MERGER -- Effect on Employee Benefit Plans."
No member of Boatmen's management or Boatmen's Board of Directors
or any other affiliate of Boatmen's has an interest in the Merger, other
than as a shareholder of Boatmen's generally.
ACCOUNTING TREATMENT
The Merger will be accounted for by Boatmen's under the purchase
method of accounting in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations", as amended. Under this method
of accounting, the purchase price will be allocated to assets acquired
and liabilities assumed based on their estimated fair values at the
Effective Time. Income of the combined company will not include results
of operations of Canadian prior to the Effective Time. See "PRO FORMA
FINANCIAL DATA."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
It is anticipated that, effective as of the Effective Time of the
Merger, First State Bank will merge into Boatmen's-Amarillo. Boatmen's-
Amarillo will be the surviving bank in the Subsidiary Bank Merger.
Following consummation of the Subsidiary Bank Merger, the present office
of First State Bank will be operated as a branch office of Boatmen's-
Amarillo. It is not anticipated that the Board of Directors of
Boatmen's, Boatmen's-Texas or Boatmen's-Amarillo will be affected as a
result of the Merger or the Subsidiary Bank Merger. It is presently
anticipated that the executive officers of First State Bank will
continue as officers of the Canadian, Texas branch of Boatmen's-Amarillo
following the Subsidiary Bank Merger. There are no written employment
agreements with respect to such anticipated continued employment.
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EFFECT ON EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that each employee of Canadian or its
subsidiaries who continues as an employee following the Effective Time
will be entitled, as a new employee of a subsidiary of Boatmen's, to
participate in certain employee benefit and stock plans that may be in
effect for employees of all of Boatmen's subsidiaries, from time to
time, on the same basis as similarly situated employees of other
Boatmen's subsidiaries, subject to the right of Boatmen's to amend,
modify or terminate any such plans or programs in its sole discretion.
Boatmen's will, for purposes of measuring periods of time for vesting
and any age or period of service requirements for commencement of
participation with respect to any employee benefit plans in which former
employees of Canadian and First State Bank may participate, credit each
such employee with his or her term of service with Canadian and First
State Bank.
BOATMEN'S DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Boatmen's has an automatic Dividend Reinvestment and Stock Purchase
Plan (the "Boatmen's DRP") which provides, in substance, for those
shareholders who elect to participate, that dividends on Boatmen's
Common and optional cash payments of not less than $100 per payment, up
to a maximum of $10,000 for each quarter, will be invested in shares of
Boatmen's Common. The purchase price for Boatmen's Common purchased
under the Boatmen's DRP is 100% of the market price. The Boatmen's DRP
provides for the payment by Boatmen's of any brokerage commissions or
service charges with respect to such purchases. After the Effective
Time, shareholders of Canadian who receive Boatmen's Common in the
Merger will have the right to participate in the Boatmen's DRP.
PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined condensed balance sheet
as of December 31, 1995, and the pro forma combined condensed statement
of income for the year ended December 31, 1995, give effect to the
Merger based on the historical consolidated financial statements of
Boatmen's and its subsidiaries, which have been restated to reflect the
acquisition of Fourth Financial, and the historical consolidated
financial statements of Canadian and its subsidiary under the
assumptions and adjustments set forth in the accompanying notes to the
pro forma financial statements.
These pro forma statements assume the Merger was consummated at the
beginning of each period presented. The pro forma statements may not be
indicative of the results that actually would have occurred if the
Merger had been in effect on the dates indicated or which may be
obtained in the future. The pro forma financial statements should be
read in conjunction with the historical consolidated financial
statements and notes thereto of Boatmen's and Canadian either
incorporated by reference herein or contained elsewhere in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." The pro forma financial data give effect to Boatmen's
acquisition of Fourth Financial, a pooling acquisition completed on
January 31, 1996, for all periods presented, but do not give effect to
the recent acquisitions of other financial institutions, which other
acquisitions are not material to Boatmen's individually or in the
aggregate as these acquisitions represent less than 1% of Boatmen's
consolidated assets. See "THE PARTIES -- Boatmen's -- Recent
Acquisitions."
40
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PRO FORMA COMBINED CONDENSED BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1995
(IN THOUSANDS)
BOATMEN'S CANADIAN PRO FORMA
BANCSHARES, INC. BANCSHARES, INC. ADJUSTMENTS COMBINED
---------------- ---------------- ----------- ---------
ASSETS:
Cash and noninterest-bearing balances due from banks $2,611,765 $2,400 ($7,737)<F1> $2,606,428
Short term investments 83,166 83,166
Securities:
Held to Maturity 923,130 6,883 930,013
Available for Sale 10,347,172 10,347,172
Trading 58,361 58,361
Federal funds sold and securities purchased
under resale agreements 1,225,671 6,450 1,232,121
Loans, net of unearned 24,050,903 21,889 24,072,792
Less reserve for loan losses 452,560 330 452,890
------------ -------- ------- ------------
Loans, net 23,598,343 21,559 23,619,902
------------ -------- ------- ------------
Property and equipment 800,502 587 801,089
Intangibles 435,597 2,632 <F2> 438,229
Other assets 1,039,782 781 1,040,563
------------ -------- ------- ------------
Total Assets $41,123,489 $38,660 ($5,105) $41,157,044
============ ======== ======= ============
LIABILITIES AND EQUITY:
Noninterest-bearing deposits $6,894,649 $6,374 $6,901,023
Interest-bearing deposits 25,083,488 26,927 25,110,415
------------ -------- ------- ------------
Total deposits 31,978,137 33,301 32,011,438
------------ -------- ------- ------------
Federal funds purchased and other
short-term borrowings 4,377,964 4,377,964
Long-term debt 615,129 615,129
Capital lease obligations 39,076 39,076
Other liabilities 512,436 254 512,690
------------ -------- ------- ------------
Total liabilities 37,522,742 33,555 0 37,556,297
------------ -------- ------- ------------
Redeemable preferred stock 961 961
Stockholders' equity:
Preferred stock 99,324 99,324
Common stock 158,068 41 (41)<F2> 158,068
Surplus 1,212,838 1,648 (1,648)<F2> 1,212,838
Retained earnings 2,137,176 4,227 (4,227)<F2> 2,137,176
Less: Treasury stock (18,096) (811) (7,737)<F1>
8,548 <F2> (18,096)
Unrealized net appreciation available for sale
securities 10,476 10,476
------------ -------- ------- ------------
Total stockholders' equity 3,599,786 5,105 (5,105) 3,599,786
------------ -------- ------- ------------
Total liabilities and stockholders' equity $41,123,489 $38,660 ($5,105) $41,157,044
============ ======== ======= ============
Stockholders' equity per share $22.21 $22.21
============ ============
<FN>
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
<F1> Reflects purchase of treasury shares to be used in the
acquisition of Canadian Bancshares, Inc.
<F2> Reflects acquisition of Canadian Bancshares, Inc. for a
purchase price of $7.7 million, resulting in the issuance
of shares of Boatmen's Common through treasury (189,000
shares at approximately $41 per share), and recognition of
goodwill.
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PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
BOATMEN'S CANADIAN PRO FORMA
BANCSHARES, INC. BANCSHARES, INC. COMBINED
---------------- ---------------- ---------
Interest Income $2,873,290 $3,372 $2,876,662
Interest Expense 1,381,318 1,313 1,382,631
----------- ------- -----------
Net Interest Income 1,491,972 2,059 1,494,031
Provision for loan losses 59,756 60 59,816
----------- ------- -----------
Net Interest Income after
provision for loan losses 1,432,216 1,999 1,434,215
Noninterest income 759,630 154 759,784
Noninterest expense 1,450,825 1,532 1,452,357
----------- ------- -----------
Income before income taxes 741,021 621 741,642
Income tax expense 261,010 98 261,108
----------- ------- -----------
Net income $480,011 $523 $480,534
=========== ======= ===========
Net income available to
common shareholders $472,868 $523 $473,391
=========== ======= ===========
Net income per common share $3.02 $3.02
=========== ===========
Average shares outstanding 156,664 156,664
=========== ===========
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
1. Net income includes amortization of goodwill which would result from the
acquisition of Canadian Bancshares, Inc. as if the goodwill existed as
of the earliest period presented. Goodwill will approximate $2.6 million
to be amortized over 15 years.
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DESCRIPTION OF BOATMEN'S CAPITAL STOCK
The Restated Articles of Incorporation of Boatmen's
currently authorize the issuance of 200,000,000 shares of common
stock, par value $1.00 per share (previously defined herein as
the "Boatmen's Common"), and 10,300,000 preferred shares, no par
value per share, of which 250,000 shares are designated "7%
Cumulative Convertible Preferred Stock, Series A," stated value
$100.00 per share, liquidation preference $400.00 per share (the
"Boatmen's Series A Preferred Stock"), 35,045 shares are
designated "7% Cumulative Redeemable Preferred Stock, Series B,"
$100.00 stated value per share (the "Boatmen's Series B Preferred
Stock") and 2,000,000 shares are designated "Junior Participating
Preferred Stock, Series C," $1.00 stated par value per share (the
"Boatmen's Series C Preferred Stock").
As of April 30, 1996, 157,203,256 shares of Boatmen's Common were
issued and outstanding, 247,729 shares of Boatmen's Series A Preferred
Stock were issued and outstanding, 9,570 shares of Boatmen's Series B
Preferred Stock were issued and outstanding, and 2,000,000 shares of
Boatmen's Series C Preferred Stock were reserved for issuance with no
shares outstanding.
With respect to the remaining authorized but unissued
preferred shares, Boatmen's Restated Articles of Incorporation
provide that its Board of Directors may, by resolution, cause
such preferred shares to be issued from time to time, in series,
and fix the powers, designations, preferences and relative,
participating, optional and other rights and qualifications,
limitations and restrictions of such shares.
The following is a brief description of the terms of
Boatmen's Common, Boatmen's Series A Preferred Stock and
Boatmen's Series B Preferred Stock. For a discussion of the
terms of Boatmen's Series C Preferred Stock, see "COMPARISON OF
SHAREHOLDER RIGHTS -- Shareholder Rights Plan."
BOATMEN'S COMMON
Dividend Rights. The holders of Boatmen's Common are
---------------
entitled to share ratably in dividends when, as and if declared
by the Board of Directors of Boatmen's from funds legally
available therefor, after full cumulative dividends have been
paid, or declared and funds sufficient for the payment thereof
set apart, on all shares of Boatmen's Series A Preferred Stock
and Boatmen's Series B Preferred Stock, and any other class or
series of preferred stock ranking superior as to dividends to
Boatmen's Common. The ability of the subsidiary banks of
Boatmen's to pay cash dividends, which are expected to be
Boatmen's principal source of income, is restricted by applicable
banking laws.
Voting Rights. Each holder of Boatmen's Common has one vote
-------------
for each share held on matters presented for consideration by the
shareholders, except that, in the election of directors, such
shareholders have cumulative voting rights, which entitle each
such shareholder to the number of votes that equals the number of
shares held by the shareholder multiplied by the number of
directors to be elected. All such cumulative votes may be cast
for one candidate for election as a director or may be
distributed among two or more candidates.
Classification of Board of Directors. The Board of
------------------------------------
Directors of Boatmen's is divided into three classes, and the
directors are elected by classes to three-year terms, so that
approximately one-third of the directors of Boatmen's will be
elected at each annual meeting of the shareholders. Although it
promotes stability and continuity of the Board of Directors,
classification of the Board of Directors may have the effect of
decreasing the number of directors that could otherwise be
elected by anyone who obtains a controlling interest in Boatmen's
Common and thereby could impede a change in control of Boatmen's.
Because fewer
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directors will be elected at each annual meeting, such classification
also will reduce the effectiveness of cumulative voting as a means of
establishing or increasing minority representation on the Board of
Directors.
Preemptive Rights. The holders of Boatmen's Common have no
-----------------
preemptive right to acquire any additional unissued shares or
treasury shares of Boatmen's Common.
Liquidation Rights. In the event of liquidation,
------------------
dissolution or winding up of Boatmen's, whether voluntary or
involuntary, the holders of Boatmen's Common will be entitled to
share ratably in any of its assets or funds that are available
for distribution to its shareholders after the satisfaction of
its liabilities (or after adequate provision is made therefor)
and after preferences on any outstanding preferred stock.
Assessment and Redemption. Shares of Boatmen's Common will
-------------------------
be, when issued, fully paid and non-assessable. Except with
respect to the attached preferred share purchase rights, such
shares of Boatmen's Common do not have any redemption provisions.
See "COMPARISON OF SHAREHOLDER RIGHTS -- Shareholder Rights
Plan."
BOATMEN'S SERIES A PREFERRED STOCK
In connection with Boatmen's acquisition of Fourth
Financial, Boatmen's held a special meeting of its shareholders
on December 12, 1995, at which meeting the shareholders of
Boatmen's approved a proposal to, among other things, issue
Boatmen's Series A Preferred Stock to holders of the Class A 7%
Cumulative Convertible Preferred Stock of Fourth Financial
pursuant to the terms of the Fourth Financial Agreement. See
"THE PARTIES -- Boatmen's -- Recent Acquisitions." The shares of
Boatmen's Series A Preferred Stock issued upon consummation of
the acquisition of Fourth Financial rank prior to the Boatmen's
Series B Preferred as to dividends and upon liquidation. Such
shares of Series A Preferred Stock are represented by depositary
shares. Each depositary share represents a 1/16th interest in a
share of Boatmen's Series A Preferred Stock.
Dividend Rights. Holders of shares of Boatmen's Series A
---------------
Preferred Stock will be entitled to receive, when and as declared
by the Board of Directors of Boatmen's, out of funds legally
available for such purpose, cumulative cash dividends at an
annual dividend rate per share of 7% of the liquidation
preference, payable quarterly. Dividends on Boatmen's Series A
Preferred Stock are cumulative and no cash dividends can be
declared or paid on any shares of Boatmen's Common or preferred
stock ranking junior to Boatmen's Series A Preferred Stock unless
full cumulative dividends on Boatmen's Series A Preferred Stock
(and any preferred stock on parity with the Boatmen's Series A
Preferred Stock) have been paid, or declared and funds sufficient
for the payment thereof set apart.
Conversion Rights. Shares of Boatmen's Series A Preferred
-----------------
Stock will be convertible at any time at the option of the holder
into shares of Boatmen's Common at a conversion price of $29 per
share of Boatmen's Common, with Boatmen's Series A Preferred
Stock being valued at its liquidation preference, subject to
adjustment upon certain events, including a Share Adjustment and
the issuance to holders of Boatmen's Common generally of rights
or warrants to subscribe for Boatmen's Common at less than the
then current market price.
Liquidation Rights. In the event of the dissolution,
------------------
liquidation or winding up of Boatmen's, the holders of Boatmen's
Series A Preferred Stock will be entitled to receive, before any
distribution on shares of Boatmen's Common or any other class of
stock ranking junior to Boatmen's Series A Preferred Stock,
liquidating dividends of $400.00 per share plus accumulated
dividends. If, upon such dissolution, liquidation
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or winding up of Boatmen's, the amounts payable with respect to the
Boatmen's Series A Preferred Stock and any other shares of stock of
Boatmen's ranking as to any such distribution on a parity with
Boatmen's Series A Preferred Stock are not paid in full, the
holders of the Boatmen's Series A Preferred Stock and of such
other shares will share ratably in any such distribution of
assets of Boatmen's.
Redemption. Shares of Boatmen's Series A Preferred Stock
----------
will not be redeemable prior to March 1, 1997. Thereafter,
Boatmen's Series A Preferred Stock will be redeemable at the
option of Boatmen's, in whole or in part, at the redemption price
of $400.00 per share plus accumulated dividends. If any
dividends on the Boatmen's Series A Preferred Stock are in
arrears, no shares of Boatmen's Series A Preferred Stock may be
redeemed unless all such outstanding shares are simultaneously
redeemed.
Voting Rights. Unless required by applicable law or by
-------------
Boatmen's Restated Articles of Incorporation, holders of
Boatmen's Series A Preferred Stock will not be entitled to vote
on any matter and will not be entitled to notice of any meeting
of the shareholders of Boatmen's. If, however, Boatmen's falls
in arrears in the payment of dividends on the Boatmen's Series A
Preferred Stock in an aggregate amount at least equal to full
accrued dividends for six quarterly dividend periods, the number
of directors of Boatmen's will be increased by two and the
holders of the Boatmen's Series A Preferred Stock (and all
classes of preferred stock ranking on parity thereto), voting
separately as a class, will have the exclusive right to elect two
directors to fill the positions so created. Such voting right
will continue annually until all dividends in arrears have been
paid in full or declared or set aside for payment. Thereafter,
the terms of the directors so elected will terminate.
BOATMEN'S SERIES B PREFERRED STOCK
Dividend Rights. Holders of shares of Boatmen's Series B
---------------
Preferred Stock will be entitled to receive, when and as declared
by the Board of Directors, out of any funds legally available for
such purpose, cumulative cash dividends at an annual dividend
rate per share of 7% of the stated value thereof, payable
quarterly. Dividends on Boatmen's Series B Preferred Stock are
cumulative and no cash dividends can be declared or paid on any
shares of Boatmen's Common unless full cumulative dividends on
Boatmen's Series B Preferred Stock have been paid, or declared
and funds sufficient for the payment thereof set apart.
Liquidation Rights. In the event of the dissolution,
------------------
liquidation or winding up of Boatmen's, the holders of Boatmen's
Series B Preferred Stock will be entitled to receive, after
payment of the full liquidation preference on shares of any class
or series of preferred stock ranking superior to Boatmen's Series
B Preferred Stock (if any such shares are then outstanding) but
before any distribution on shares of Boatmen's Common,
liquidating dividends of $100.00 per share plus accumulated
dividends.
Redemption. Shares of Boatmen's Series B Preferred Stock
----------
are redeemable, in whole or in part, at the option of the holders
thereof, at the redemption price of $100.00 per share plus
accumulated dividends, provided, that (i) full cumulative
dividends have been paid, or declared and funds sufficient for
payment set apart, upon any class or series of preferred stock
ranking superior to Boatmen's Series B Preferred Stock; and
(ii) Boatmen's is not then in default or arrears with respect to
any sinking or analogous fund or call for tenders obligation or
agreement for the purchase or any class or series of preferred
stock ranking superior to Boatmen's Series B Preferred Stock.
Voting Rights. Each share of Boatmen's Series B Preferred
-------------
Stock has equal voting rights, share for share, with each share
of Boatmen's Common.
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Superior Stock. Boatmen's may, without the consent of
--------------
holders of Boatmen's Series B Preferred Stock, issue preferred
stock with superior or equal rights or preferences.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of Boatmen's Common are
governed by the General and Business Corporation Law of Missouri
(the "Missouri Law"), the state of Boatmen's incorporation, and
by Boatmen's Restated Articles of Incorporation, Bylaws and other
corporate documents. The rights of holders of shares of Canadian
Common are governed by the Texas Law and by Canadian's Articles
of Incorporation, Bylaws and other corporate documents. The
rights of holders of shares of Canadian Common differ in certain
respects from the rights which they would have as shareholders of
Boatmen's. A summary of the material differences between the
respective rights of holders of Canadian Common and Boatmen's
Common is set forth herein.
SHAREHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
Business Combinations. The Missouri Corporate Law provides
---------------------
that unless a corporation's articles of incorporation or bylaws
provide otherwise, certain business combinations including
mergers require the approval of the holders of at least two-
thirds of the outstanding shares entitled to vote on the subject
transaction.
The Restated Articles of Incorporation of Boatmen's provide
that, in addition to any affirmative vote required by law, any
"Business Combination" (as defined herein) will require the
affirmative vote of the holders of not less than 80% of Boatmen's
Common. Notwithstanding the foregoing, however, Boatmen's
Restated Articles of Incorporation also provide that any such
Business Combination may be approved by the affirmative vote of
shareholders as required by law if it has been approved by 75% of
the entire Board of Directors of Boatmen's. The term "Business
Combination" means: (i) any merger or consolidation of Boatmen's
or any subsidiary of Boatmen's with (a) any individual or entity
who, together with certain affiliates or associates, owns greater
than 5% of Boatmen's Common (a "Substantial Shareholder") or
(b) any other corporation that, after such merger or
consolidation, would be a Substantial Shareholder, regardless of
which entity survives; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one transaction or a
series of transactions) to or with any Substantial Shareholder of
all or substantially all of the assets of Boatmen's or any of its
subsidiaries; (iii) the adoption of any plan or proposal for the
liquidation of Boatmen's by or on behalf of a Substantial
Shareholder; or (iv) any transaction involving Boatmen's or any
of its subsidiaries, if the transaction would have the effect,
directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class of equity or convertible
securities of Boatmen's of which a Substantial Shareholder is the
beneficial owner.
The Texas Law provides that any merger or consolidation must
be approved by the affirmative vote of holders of at least two-
thirds of the outstanding shares of each corporation entitled to
vote thereon, unless the board of directors requires a greater
vote or vote by class or by series. Notwithstanding the
foregoing, Texas Law permits the articles of incorporation or
bylaws to specifically provide that the act of the shareholders
on matters with respect to which an affirmative vote of holders
of a specified portion of the shares entitled to vote is required
shall be the affirmative vote of holders of a specified portion,
but not less than a majority of the shares entitled to vote on
that matter. Canadian's Articles of Incorporation and Bylaws do
not contain any specific provision relating to the vote necessary
to effect a business combination or merger.
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53
Because of the differences between the Missouri Corporate
Law and the Texas Law, it may be more difficult for Boatmen's
shareholders to cast sufficient votes to approve certain business
combinations than it is for shareholders of Canadian.
Removal of Directors. The Missouri Corporate Law provides
--------------------
that, unless otherwise provided in a corporation's articles of
incorporation or bylaws, one or more directors or the entire
board of directors may be removed, with or without cause, by a
vote of the holders of a majority of the shares then entitled to
vote in an election of the directors. Directors may be removed
only at a meeting called expressly for that purpose. If a
corporation's articles of incorporation or bylaws provide for
cumulative voting in the election of directors and if less than
the entire board is to be removed, no one of the directors may be
removed if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the
entire board of directors or, if there are classes of directors,
at an election of the class of directors of which he or she is a
part. Whenever the holders of the shares of any class are
entitled to elect one or more directors by the provisions of the
articles of incorporation, any references to a vote of the
holders of outstanding shares are to outstanding shares of that
class and not to the vote of the outstanding shares as a whole.
Any director of a corporation may be removed for cause by an
action of a majority of the entire board of directors if the
director fails to meet the qualifications stated in the
corporation's articles of incorporation or bylaws for election as
a director or is in breach of any agreement between such director
and the corporation relating to such director's services as a
director or employee of the corporation. Notice of the proposed
removal by the directors must be given to all directors of a
corporation prior to action thereon.
The Restated Articles of Incorporation of Boatmen's provide
that, at a meeting called expressly for that purpose, a director
or the entire Board of Directors may be removed without cause
only upon the affirmative vote of the holders of not less than
80% of the shares entitled to vote generally in an election of
directors. Notwithstanding the foregoing, however, if less than
the entire Board of Directors is to be removed without cause, no
one of the directors may be removed if the votes cast against his
removal would be sufficient to elect him or her if then
cumulatively voted at an election of the class of directors of
which he or she is a part. At a meeting called expressly for
that purpose, a director may be removed by the shareholders for
cause by the affirmative vote of the holders of a majority of the
shares entitled to vote upon his or her election.
The Texas Law permits the removal of directors only by
specific provision in the articles of incorporation or bylaws at
a meeting specifically called for that purpose, which such
removal is approved by not less than a majority of shareholders
then entitled to vote at any election of directors. Canadian's
Bylaws contain a provision permitting the removal of any director
with or without cause at a special meeting called for that
purpose by the affirmative vote of a majority of the shares
represented in person or by proxy then entitled to vote at any
election of directors. However, unless the entire Board is
removed, no individual director shall be removed without cause if
the votes of less than two-thirds of the shares are cast for his
removal.
Because of the differences between Boatmen's Restated
Articles of Incorporation and Canadian's Bylaws, it may be more
difficult for a shareholder of Boatmen's to remove a director
without cause than it is for a shareholder of Canadian.
Amendments to Articles of Incorporation. Under the Missouri
---------------------------------------
Corporate Law, a corporation may amend its articles of incorporation
upon receiving the affirmative vote of the holders of a majority of
its voting shares and the affirmative vote of the holders of a
majority of the outstanding shares of each class entitled to vote
thereon as a class; provided, however, that if the corporation's
articles of incorporation or
47
54
bylaws provide for cumulative voting in the election of directors, the
number of directors of the corporation may not be decreased to less
than three by amendment to the corporation's articles of incorporation
when the number of shares voting against the proposal for decrease
would be sufficient to elect a director if the shares were voted
cumulatively at an election of three directors; and provided, further,
that a proposed amendment which provides that Section 351.407 of the
Missouri Corporate Law does not apply to "control share acquisitions"
of shares of a corporation requires the affirmative vote of the
holders of two-thirds of such corporation's voting shares. See
"COMPARISON OF SHAREHOLDER RIGHTS -- Takeover Statutes."
Article XII of the Restated Articles of Incorporation of
Boatmen's provides that Boatmen's may amend, alter, change or
repeal provisions of its Restated Articles of Incorporation in
the manner provided by law, with the exception, however, of
amendments to those provisions of the Restated Articles of
Incorporation relating to the classification and number of
directors, the approval of Business Combinations (which provision
is described above under "COMPARISON OF SHAREHOLDER RIGHTS
- -- Shareholder Vote Required for Certain Transactions -- Business
Combinations"), and the aforementioned exceptions set forth in
Article XII, which require the affirmative vote of the holders of
80% of Boatmen's Common then entitled to vote at a meeting of
shareholders called for that purpose.
Under the Texas Law, an amendment to the articles of
incorporation of a Texas corporation is adopted upon receiving
the affirmative vote of the holders of at least two-thirds of the
outstanding shares entitled to vote thereon, unless any class or
series of shares is entitled to vote thereon as a class, in which
event, the proposed amendment shall be adopted upon receiving the
affirmative vote of the holders of at least two-thirds of the
shares within each class or series of outstanding shares entitled
to vote thereon as a class and of at least two-thirds of the
total outstanding shares entitled to vote thereon. In addition,
Texas Law provides that the holders of outstanding shares of a
class or series, whether or not entitled to vote as a class or
series thereon by provision of the articles of incorporation, may
do so if the amendment directly affects their class or series of
stock.
The Articles of Incorporation of Canadian do not include any
provision relating to amendments of the articles of
incorporation.
Except for amendments relating generally to the
classification and number of directors and the approval of
Business Combinations, the Missouri Corporate Law and provisions
of Boatmen's Restated Articles of Incorporation make it easier
for the shareholders of Boatmen's to amend the Restated Articles
of Incorporation than it is for the shareholders of Canadian to
amend its Articles of Incorporation.
VOTING RIGHTS
Under the Missouri Corporate Law, unless otherwise provided
in the articles of incorporation, each outstanding share is
entitled to one vote on each matter submitted to a vote at a
meeting of the shareholders. However, the Missouri Corporate Law
provides that, unless the articles of incorporation or bylaws
provide otherwise, each shareholder is entitled to cumulative
voting when electing directors, which means that each shareholder
has the right to cast as many votes in the aggregate equal to the
number of votes held by such person multiplied by the number of
directors to be elected at the election, and the person may cast
the whole number of votes for one candidate or distribute them in
any manner he or she desires.
Boatmen's Bylaws provide that at all meetings of the
shareholders, unless otherwise provided in the Bylaws or Articles
of Incorporation, each share is entitled to one vote on each
matter submitted to a vote,
48
55
but no shares belonging to or hypothecated to Boatmen's shall be
voted. Additionally, Boatmen's Bylaws provide for cumulative voting
with regard to the election of directors.
Under the Texas Law, each outstanding share, regardless of
class, is entitled to one vote on each matter submitted to a vote
at a meeting of shareholders, except to the extent provided by
the articles of incorporation or as otherwise provided in the
Texas Law. The Texas Law does provide, however, for cumulative
voting for the election of directors unless expressly prohibited
by the articles of incorporation. Canadian's Articles of
Incorporation specifically prohibit cumulative voting.
Cumulative voting, like that provided by Boatmen's Articles
of Incorporation, makes it easier for minority shareholders to
elect one or more directors than under conventional voting, like
that provided by Canadian's Articles of Incorporation.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN
CONSENT
The Missouri Corporate Law provides that special meetings of
the shareholders may be called by the board of directors of the
corporation or by any other persons authorized by the articles of
incorporation or bylaws of the corporation. The Bylaws of
Boatmen's provide that a special meeting of shareholders may be
called by the Chairman of the Board or the President or by
resolution of Boatmen's Board of Directors whenever deemed
necessary. The business transacted at any such special meeting
will be confined to the purpose or purposes specified in the
notice therefor and the matters germane thereto.
The Missouri Corporate Law provides that any action required
or permitted to be taken at a meeting of shareholders may be
taken without a meeting if a consent, in writing, setting forth
the action taken is signed by the holders of all of the shares
entitled to vote on the subject matter.
The Texas Law provides that a special meeting of shareholders
may be called by the president, the board of directors or by persons
authorized in the articles of incorporation or the bylaws or by the
holders of at least 10% of all of the shares entitled to vote at the
proposed special meeting, unless the articles of incorporation provide
for a number of shares greater than or less than 10%, but in no event
shall the articles of incorporation provide for a number of shares
greater than 50%. Only business within the purpose or purposes
described in the notice of meeting may be conducted at a special
meeting of the shareholders. Canadian's Bylaws provide that a special
meeting of shareholders for any purpose may be called by the
President, the Board of Directors or shareholders owning not less than
10% of all shares entitled to vote at the meeting.
The Texas Law also provides that, unless otherwise provided
for in the articles of incorporation, any action required or
permitted to be taken at a meeting of shareholders may be taken
without a meeting if a consent, in writing, setting forth the
action taken is signed by the holders of all shares entitled to
vote on the subject matter. Under the Texas Law, the articles of
incorporation may also specifically allow for such actions to be
taken by written consent of the shareholders having not less than
the minimum number of votes necessary to authorize such action at
a meeting at which all shares entitled to vote thereon are
present. Canadian's Articles of Incorporation do not so provide
for such action to be taken by written consent. Canadian's
Bylaws also require that any action taken by written consent be
signed by all of the shareholders entitled to vote with respect
to the subject matter of the consent.
Unlike shareholders of Canadian, shareholders of Boatmen's
may not call a special meeting. The rights of shareholders of
Boatmen's and Canadian to act by written consent are not
materially different.
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NOTICE OF SHAREHOLDER NOMINATIONS OF DIRECTORS
Neither the Missouri Corporate Law nor the Texas Law contain
any specific provisions regarding notice of shareholders'
nominations of directors.
The Bylaws of Boatmen's provide that a shareholder may
nominate a person for director only if he or she delivers notice
of such nomination to the Secretary of Boatmen's, accompanied or
promptly followed by such supporting information as the Secretary
shall reasonably request, not less than 75 days prior to the date
of any annual meeting or more than seven days after the mailing
of notice of any special meeting. Canadian's Bylaws contain no
provision with respect to the nomination of directors.
The notice provisions contained within Boatmen's Bylaws make
it more difficult for the shareholders of Boatmen's than for
those of Canadian to nominate a person for director.
SHAREHOLDER PROPOSAL PROCEDURES
Neither the Missouri Corporate Law nor the Texas Law contain
any specific provisions regarding notice of shareholders'
proposals.
Boatmen's Bylaws provide that in order for any business to
be transacted at any meeting of the shareholders, other than
business proposed by or at the direction of the Board of
Directors, notice thereof must be received from the proposing
shareholder by the Secretary of Boatmen's, accompanied or
promptly followed by such supporting information as the Secretary
of Boatmen's shall reasonably request, not less than 75 days
prior to the date of any annual meeting or more than seven days
after the mailing of notice of any special meeting.
Neither the Texas Law nor Canadian's Articles of
Incorporation or Bylaws specifically address the ability of a
shareholder to propose business at any meeting.
The provisions of the Bylaws of Boatmen's make it more
difficult for the shareholders of Boatmen's than for those of
Canadian to present proposals for business to be transacted at
their meetings.
SHAREHOLDER RIGHTS PLAN
Boatmen's has adopted a shareholder rights plan pursuant to
which holders of a share of Boatmen's Common also hold one
preferred share purchase right which may be exercised upon the
occurrence of certain "triggering events" specified in the
Boatmen's Rights Agreement (defined herein). Shareholder rights
plans such as Boatmen's plan are intended to encourage potential
hostile acquirors of a "target" corporation to negotiate with the
board of directors of the target corporation in order to avoid
occurrence of the "triggering events" specified in such plans.
Shareholder rights plans are intended to give the directors of a
target corporation the opportunity to assess the fairness and
appropriateness of a proposed transaction in order to determine
whether or not it is in the best interests of the corporation and
its shareholders. Notwithstanding these purposes and intentions
of shareholder rights plans, such plans, including that of
Boatmen's, could have the effect of discouraging a business
combination which shareholders believe to be in their best
interests.
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On August 14, 1990, the Board of Directors of Boatmen's
declared a dividend, payable on August 31, 1990 (the "Boatmen's
Record Date"), of one Preferred Share Purchase Right (a
"Boatmen's Right") for each outstanding share of Boatmen's
Common. Each Boatmen's Right entitles the registered holder to
purchase from Boatmen's one one-hundredth share of Boatmen's
Series C Preferred Stock at a price of $110.00 (the "Boatmen's
Purchase Price"), subject to adjustment. The description and
terms of the Boatmen's Rights are set forth in a Rights Agreement
(the "Boatmen's Rights Agreement") between Boatmen's and
Boatmen's Trust Company as Rights Agent (the "Rights Agent"), and
the following description is qualified in its entirety by the
Boatmen's Rights Agreement.
Until the earlier to occur of (i) ten days following a
public announcement that a person or group of affiliated or
associated persons (a "Boatmen's Acquiring Person") has acquired
beneficial ownership of 20% or more of the outstanding shares of
Boatmen's Common; or (ii) ten business days (or such later date
as may be determined by action of the Board of Directors prior to
such time as any person becomes a Boatmen's Acquiring Person)
following the commencement of, or announcement of an intention to
make, a tender or exchange offer the consummation of which would
result in the beneficial ownership by a person or group of 20% or
more of such outstanding shares of Boatmen's Common (the earlier
of such dates being called the "Boatmen's Distribution Date"),
the Boatmen's Rights will be evidenced, with respect to any of
the Boatmen's Common share certificates outstanding as of the
Boatmen's Record Date, by such Boatmen's Common share
certificates, with a copy of a Summary of Rights attached
thereto.
The Boatmen's Rights Agreement provides that until the
Boatmen's Distribution Date (or earlier redemption or expiration
of the Boatmen's Rights), the Boatmen's Rights will be
transferred only with shares of Boatmen's Common. New Boatmen's
Common share certificates issued after the Boatmen's Record Date,
upon transfer or new issuance of Boatmen's Common, including
issuance of shares pursuant to the Merger, will contain a
notation incorporating the Boatmen's Rights Agreement by
reference, and the surrender for transfer of any certificates for
Boatmen's Common outstanding as of the Boatmen's Record Date,
even without such notation or a copy of the Summary of Rights
being attached thereto, will also constitute the transfer of the
Boatmen's Rights associated with the Boatmen's Common shares
represented by such certificate. As soon as practicable
following the Boatmen's Distribution Date, separate certificates
evidencing the Boatmen's Rights (the "Boatmen's Right
Certificates") will be mailed to holders of record of Boatmen's
Common as of the close of business on the Boatmen's Distribution
Date and such separate Boatmen's Right Certificates alone will
evidence the Boatmen's Rights.
The Boatmen's Rights are not exercisable until the Boatmen's
Distribution Date. The Boatmen's Rights will expire on
August 14, 2000 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Boatmen's Rights are
earlier redeemed by Boatmen's, in each case as described herein.
The Boatmen's Purchase Price payable, and the number of
shares of Boatmen's Series C Preferred Stock or other securities
or property issuable, upon exercise of the Boatmen's Rights are
subject to adjustment from time to time upon the occurrence of
certain events in order to prevent dilution. In addition, the
number of outstanding Boatmen's Rights and the number of one one-
hundredths of a share of Boatmen's Series C Preferred Stock
issuable upon exercise of each Boatmen's Right are also subject
to adjustment in the event of a stock split of Boatmen's Common
or a stock dividend on Boatmen's Common payable in shares of
Boatmen's Common or subdivisions, consolidations or combinations
of shares of Boatmen's Common occurring, in any such case, prior
to the Boatmen's Distribution Date.
Boatmen's Series C Preferred Stock purchasable upon exercise
of the Boatmen's Rights will not be redeemable. Each share of
Boatmen's Series C Preferred Stock will be entitled to a minimum
preferential
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quarterly dividend payment of $1.00 per share and will be entitled
to an aggregate dividend of 100 times the dividend declared on each
share of Boatmen's Common. In the event of liquidation, the holders
of the Boatmen's Series C Preferred Stock will be entitled to a
minimum preferential liquidation payment of $100 per share and will
be entitled to an aggregate payment of 100 times the payment made on
each share of Boatmen's Common. Each share of Boatmen's Series C
Preferred Stock will have 100 votes, voting together with the
Boatmen's Common shares. Finally, in the event of any merger,
consolidation or other transaction in which shares of Boatmen's
Common are exchanged, each share of Boatmen's Series C Preferred
Stock will be entitled to receive 100 times the amount received
on each share of Boatmen's Common. The Boatmen's Rights are
protected by customary anti-dilution provisions.
Because of the nature of the Boatmen's Series C Preferred
Stock's dividend, liquidation and voting rights, the value of the
one one-hundredth interest in a share of Boatmen's Series C
Preferred Stock purchasable upon exercise of each Boatmen's Right
should approximate the value of one Boatmen's Common share.
In the event that Boatmen's is acquired in a merger or other
business combination transaction or 50% or more of its consolidated
assets or earning power are sold, proper provision will be made so
that each holder of a Boatmen's Right will thereafter have the right
to receive, upon the exercise thereof at the then current exercise
price of the Boatmen's Right, that number of shares of common stock
of the acquiring company which at the time of such transaction will
have a market value of two times the exercise price of the Boatmen's
Right. In the event that (i) any person or group of affiliated or
associated persons becomes the beneficial owner of 20% or more of
the outstanding shares of Boatmen's Common (unless such person first
acquires 20% or more of the outstanding shares of Boatmen's Common
by a purchase pursuant to a tender offer for all of the Boatmen's
Common for cash, which purchase increases such person's beneficial
ownership to 80% or more of the outstanding Boatmen's Common); or
(ii) during such time as there is a Boatmen's Acquiring Person,
there shall be a reclassification of securities or a
recapitalization or reorganization of Boatmen's or other transaction
or series of transactions involving Boatmen's which has the effect
of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity securities of Boatmen's or
any of its subsidiaries beneficially owned by the Boatmen's
Acquiring Person, proper provision will be made so that each holder
of a Boatmen's Right, other than Boatmen's Rights beneficially owned
by the Boatmen's Acquiring Person (which will thereafter be void),
will thereafter have the right to receive upon exercise that number
of shares of Boatmen's Common having a market value of two times the
exercise price of the Boatmen's Right.
At any time after the acquisition by a Boatmen's Acquiring
Person of beneficial ownership of 20% or more of the outstanding
shares of Boatmen's Common, and prior to the acquisition by such
Boatmen's Acquiring Person of 50% or more of the outstanding
shares of Boatmen's Common, the Board of Directors of Boatmen's
may exchange the Boatmen's Rights (other than Boatmen's Rights
owned by such person or group which have become void), in whole
or in part, at an exchange ratio of one share of Boatmen's Common
per Boatmen's Right (subject to adjustment).
With certain exceptions, no adjustment in the Boatmen's
Purchase Price will be required until cumulative adjustments
require an adjustment of at least 1% of the Boatmen's Purchase
Price. No fractional shares of Boatmen's Series C Preferred
Stock will be issued (other than fractions that are integral
multiples of one one-hundredth of a share of Boatmen's Series C
Preferred Stock and that may, at the election of Boatmen's, be
evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the
shares of Boatmen's Common on the last trading day prior to the
date of exercise.
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At any time prior to the acquisition by a Boatmen's
Acquiring Person of beneficial ownership of 20% or more of the
outstanding shares of Boatmen's Common, the Board of Directors of
Boatmen's may redeem the Boatmen's Rights in whole, but not in
part, at a price of $0.01 per Boatmen's Right (the "Boatmen's
Redemption Price"). The redemption of the rights may be made
effective at such time, on such basis, and with such conditions
as the Board of Directors of Boatmen's in its sole discretion may
establish.
In addition, if a bidder who does not beneficially own more
than 1% of the shares of Boatmen's Common and all other voting
shares of Boatmen's (together the "Voting Shares") (and who has
not within the past year owned in excess of 1% of the Voting
Shares and, at a time he held a greater than 1% stake, disclosed,
or caused the disclosure of, an intention which relates to or
would result in the acquisition or influence of control of
Boatmen's) proposes to acquire all of the Voting Shares for cash
at a price which a nationally recognized investment banker
selected by such bidder states in writing is fair, and such
bidder has obtained written financing commitments (or otherwise
has financing) and complies with certain procedural requirements,
then Boatmen's, upon the request of the bidder, will hold a
special shareholders meeting to vote on a resolution requesting
the Board of Directors of Boatmen's to accept the bidder's
proposal. If a majority of the outstanding shares entitled to
vote on the proposal vote in favor of such resolution, then for a
period of 60 days after such meeting the Boatmen's Rights will be
automatically redeemed at the Boatmen's Redemption Price
immediately prior to the consummation of any tender offer for all
of such shares at a price per share in cash equal to or greater
than the price offered by such bidder; provided, however, that no
redemption will be permitted or required after the acquisition by
any person or group of affiliated or associated persons of
beneficial ownership of 20% or more of the outstanding shares of
Boatmen's Common. Immediately upon any redemption of the
Boatmen's Rights, the right to exercise the Boatmen's Rights will
terminate and the only right of the holders of Boatmen's Rights
will be to receive the Boatmen's Redemption Price.
The terms of the Boatmen's Rights may be amended by the
Board of Directors of Boatmen's without the consent of the
holders of the Boatmen's Rights, including an amendment to lower
certain thresholds described herein to not less than the greater
of (i) any percentage greater than the largest percentage of the
outstanding shares of Boatmen's Common then known to Boatmen's to
be beneficially owned by any person or group of affiliated or
associated persons; or (ii) 10%, except that from and after such
time as any person becomes a Boatmen's Acquiring Person no such
amendment may adversely affect the interests of the holders of
the Boatmen's Rights.
Until a Boatmen's Right is exercised, the holder thereof, as
such, will have no rights as a shareholder of Boatmen's,
including, without limitation, the right to vote or to receive
dividends.
Canadian does not have a shareholder rights plan. The
existence of the Boatmen's Rights Agreement makes it more
difficult in Boatmen's case than in the case of Canadian for a
potential acquiror to effect a business combination that has not
been negotiated with the Board of Directors of Boatmen's.
DISSENTERS' RIGHTS
Under the Missouri Law, a shareholder of a corporation is
entitled to receive payment for the fair value of his or her
shares if such shareholder dissents from a sale or exchange of
substantially all of the property and assets of the corporation
or a merger or consolidation to which such corporation is a
party. A shareholder is also entitled to receive payment for the
fair value of his or her shares if such shareholder dissents from
according voting rights to "control shares" in a control share
acquisition, as further described
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herein. Because Boatmen's is not merging directly with Canadian,
Boatmen's shareholders will not be entitled to assert such rights in
connection with the Merger.
Under the Texas Law, a shareholder of a Texas corporation is
entitled to receive payment for the fair value of his or her
shares under certain circumstances. However, unlike the Missouri
Law, not all Texas corporations are governed by the Texas Law
with respect to dissenters' rights. See "THE MERGER --
Dissenters' Rights."
The rights of shareholders of Boatmen's and those of
Canadian are not materially different in these respects.
TAKEOVER STATUTES
The Missouri Corporate Law contains provisions regulating a
broad range of business combinations, such as a merger or
consolidation, between a Missouri corporation which is a
"resident domestic corporation", as defined in the statute, with
shares of its stock registered under the federal securities laws
or that makes an election by appropriate provisions in its
articles of incorporation to be subject to the provisions of this
statute, and an "interested shareholder" (which is defined as any
owner of 20% or more of the corporation's stock) for five years
after the date on which such shareholder became an interested
shareholder, unless, among other things, the stock acquisition
which caused the person to become an interested shareholder was
approved in advance by the corporation's board of directors.
This so-called "five year freeze" provision is effective even if
all the parties should subsequently decide that they wish to
engage in a business combination. The Missouri Corporate Law
also contains a "control share acquisition" provision which
effectively denies voting rights to shares of a Missouri
corporation acquired in control share acquisitions unless a
resolution granting such voting rights is approved at a meeting
of shareholders by affirmative majority vote of (i) all
outstanding shares entitled to vote at such meeting voting by
class if required by the terms of such shares; and (ii) all
outstanding shares entitled to vote at such meeting voting by
class if required by the terms of such shares, excluding all
interested shares. A control share acquisition is one by which a
purchasing shareholder acquires more than one-fifth, one-third,
or a majority, under various circumstances, of the voting power
of the stock of an "issuing public corporation." An "issuing
public corporation" is a Missouri corporation with: (i) one
hundred or more shareholders; (ii) its principal place of
business, principal office or substantial assets in Missouri; and
(iii) either (a) more than 10% of its shareholders resident in
Missouri, (b) more than 10% of its shares owned by Missouri
residents, or (c) 10,000 shareholders resident in Missouri.
Boatmen's meets the statutory definition of an "issuing public
corporation." Finally, if a control share acquisition should be
made of a majority or more of the corporation's voting stock, and
those shares are granted full voting rights, shareholders are
granted dissenters' rights.
The Texas Law does not contain a takeover statute or a
"control share acquisition" provision.
Because of the differences between the Missouri Corporate
Law and the Texas Law, it is more difficult to effect an
unsolicited business combination with Boatmen's than it is to
effect an unsolicited business combination with Canadian.
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LIABILITY OF DIRECTORS; INDEMNIFICATION
Pursuant to the Missouri Law and the Texas Law, each
corporation may indemnify persons, including certain officers and
directors, in connection with liabilities arising from legal
proceedings resulting from such persons' service to the
corporation in certain circumstances. The Articles of
Incorporation and Bylaws of Boatmen's obligate it to indemnify
directors and certain officers. Each of Boatmen's and Canadian
may also voluntarily undertake to indemnify certain persons
acting on the corporation's behalf in certain circumstances.
Section 351.355(1) and (2) of the Missouri Corporate Law
provides that a corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the
fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful,
except that, in the case of an action or suit by or in the right
of the corporation, the corporation may not indemnify such
persons against judgments and fines and no person shall be
indemnified as to any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court in which
the action or suit was brought determines upon application that
such person is fairly and reasonably entitled to indemnity for
proper expenses. Section 351.355 of the Missouri Corporate Law
further provides that, to the extent that a director, officer,
employee or agent of the corporation has been successful in the
defense of any such action, suit or proceeding or any claim,
issue or matter therein, he or she shall be indemnified against
expenses, including attorney's fees, actually and reasonably
incurred in connection with such action, suit or proceeding.
Section 351.355 also provides that a Missouri corporation may
provide additional indemnification to any person indemnifiable
under subsection (1) or (2) thereof, provided such additional
indemnification is authorized by the corporation's articles of
incorporation or an amendment thereto or by a shareholder-
approved by-law or agreement, and provided further that no person
shall thereby be indemnified against conduct which was finally
adjudged to have been knowingly fraudulent, deliberately
dishonest or willful misconduct. The Restated Articles of
Incorporation of Boatmen's provide that it shall indemnify its
directors and certain of its executive officers to the full
extent specified in Section 351.355 and, in addition, shall
indemnify each of them against all expenses incurred in
connection with any claim by reason of service for or at the
request of Boatmen's in any of the capacities referred to in
Section 351.355 or arising out of his or her status in any such
capacity, provided that he or she may not be indemnified against
conduct finally adjudged to have been knowingly fraudulent,
deliberately dishonest or wilful misconduct, and that it may
extend to other officers, employees and agents such
indemnification and additional indemnification.
A Missouri corporation also has the power to purchase and
maintain insurance on behalf of any person against any liability
asserted against such a person and incurred by such person in any
such capacity, or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify
such person against such liability under the provisions of the
Missouri Corporate Law.
The Texas Law authorizes corporations to indemnify any party
or threatened party to any threatened, pending or completed
action, suit or proceeding who is or was a director, officer,
employee or agent of the corporation and any person who is or was
serving at the request of the corporation as director, officer,
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partner, venturer, proprietor, trustee, employee or agent of
another corporation or other enterprise if such individual acted
in good faith and reasonably believed that his or her conduct was
in the corporation's best interests. In the case of any criminal
proceeding, the individual must have no reasonable cause to
believe that his or her conduct was unlawful in order for the
corporation to indemnify him or her. The Texas Law provides that
no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged liable
where the defendant's conduct was judged to be willful or
intentional misconduct in the performance of his or her duty to
the corporation, and will be limited to reasonable expense
actually incurred in connection with the proceeding where the
defendant is found liable to the corporation or liable for
receipt of improper personal benefits. Whether such director,
officer, employee or agent acted properly is determined by a
majority of a quorum of non-party directors, independent legal
counsel opinion or by non-party shareholders. A corporation may
pay expenses incurred by a director or officer before final
disposition of an action or proceeding, but the director or
officer must repay such expenses if it is determined that he or
she was not entitled to indemnification. The board of directors
may determine appropriate terms and conduct to pay an employee or
agent. The corporation may purchase insurance on a director,
officer, employee or agent for liability asserted against him or
her whether or not the corporation could indemnify that party.
Canadian's Articles of Incorporation and Bylaws do not
mention indemnification of its directors.
While the indemnification laws and provisions applicable to
Boatmen's and Canadian are different from the perspective of
officers and directors of the respective organizations, such laws
and provisions are not materially different from the perspective
of the shareholders thereof.
LIMITATION OF LIABILITY OF DIRECTORS
The Missouri Corporate Law provides that a Missouri
corporation may include any provision in its articles of
incorporation that is not inconsistent with the law, but does not
specifically prohibit or allow a provision limiting the liability
of directors in the articles of incorporation of a Missouri
corporation. Other than in regard to the indemnification of
directors, Boatmen's Articles of Incorporation do not contain a
provision regarding the liability of directors.
The Texas Law provides that a Texas corporation may include
any provision in its articles of incorporation which is not
inconsistent with the Texas Law, including any provision which
under the Texas Law is required or permitted to be set forth in
the bylaws which the incorporators elect to set forth in the
articles of incorporation for the regulation of the internal
affairs of the corporation. The Texas Miscellaneous Corporation
Laws Act provides that a corporation may limit the liability of
its directors by provision in its articles of incorporation;
provided, however, such provision may not limit the liability of
a director to the extent the director is found liable for (i)
breach of his or her duty of loyalty to the company or its
shareholders, (ii) an act or omission not in good faith or which
involves intentional misconduct or a knowing violation of the
law, (iii) a transaction from which the director received an
improper benefit, or (iv) an act or omission for which liability
is expressly provided for by statute. Canadian's Articles of
Incorporation contains such a provision limiting the liability of
directors.
These differences do not materially affect the rights of
shareholders of either organization.
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CONSIDERATION OF NON-SHAREHOLDER INTERESTS
The Missouri Corporate Law provides that in exercising
business judgment in consideration of acquisition proposals, a
Missouri corporation's board of directors may consider the
following factors, among others: (i) the consideration being
offered; (ii) the existing political, economic, and other factors
bearing on securities prices generally, or the corporation's
securities in particular; (iii) whether the acquisition proposal
may violate any applicable laws; (iv) social, legal and economic
effects on employees, suppliers, customers and others having
similar relationships with the corporation, and the communities
in which the corporation conducts its businesses; (v) the
financial condition and earning prospects of the person making
the acquisition proposal; and (vi) the competence, experience and
integrity of the person making the acquisition proposal.
The Texas Law does not contain provisions comparable to
those described above.
These differences do not materially affect the rights of
shareholders of either organization.
INFORMATION ABOUT CANADIAN
BUSINESS OF CANADIAN AND FIRST STATE BANK
Canadian was incorporated under the laws of the State of
Texas on June 10, 1982, to become a bank holding company for
First State Bank. First State Bank was chartered in April 1953
as a Texas banking association.
First State Bank offers complete banking services to the
commercial, agricultural and residential areas which it serves.
These services include agricultural production loans and loans to
commercial accounts, small businesses and consumers.
Agricultural and residential mortgages, deposit services, and
many other traditional banking services are also provided.
Primary lending occurs in the agricultural industry, businesses
directly and indirectly related to oil and gas development, and
to residential home buyers.
First State Bank is subject to vigorous competition from
other banks and financial institutions in its principal service
area, which includes Hemphill County, Texas, and surrounding
areas. In making loans, First State Bank encounters substantial
competition from banks and other lending institutions, such as
savings and loan associations, insurance companies, finance
companies and credit unions. In addition, First State Bank
competes for savings accounts with institutions offering various
forms of fixed income investments, particularly other banks,
savings and loan associations, credit unions and money market
funds and securities brokers.
First State Bank is subject to supervision, regulation and
examination by the Texas Department of Banking and the F.D.I.C.
and its deposits are insured by the Bank Insurance Fund of the
F.D.I.C. As a bank holding company, Canadian is regulated by the
Federal Reserve.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF CANADIAN AND FIRST STATE BANK
This section presents an analysis of the financial condition
and results of operations of Canadian for the years ended
December 31, 1995, 1994 and 1993. This review should be read in
conjunction with the consolidated financial statements, notes to
consolidated financial statements, and financial data presented
elsewhere in this Proxy Statement/Prospectus.
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
RESULTS OF OPERATIONS
Net income for the years ending December 31, 1995, 1994, and
1993 was $633,000, $695,000, and $393,000, respectively. Net
income per share for such periods was $19.92, $22.12, and $11.24,
respectively. The increase in net income from 1993 to 1994 was
due primarily to an increase in net interest margin. The
decrease in net income from 1994 to 1995 was due primarily to a
decrease in interest earning assets. Net income of each of the
three years as a percent of average assets and average equity
was:
Return on Average Assets Return on Average Equity
---------------------------------- -----------------------------------
December 31, December 31,
1995 1994 1993 1995 1994 1993
----------- -------- -------- ----------- -------- ----------
Net Income 1.51% 1.58% 1.00% 13.24% 17.10% 12.25%
No dividends were declared by Canadian during the years
ended December 31, 1995, 1994 or 1993.
The following is an analysis of the primary components of
net income for the years ended December 31, 1995, 1994, and 1993.
NET INTEREST INCOME
The major source of revenue of Canadian is net interest
income. Net interest income is the difference between gross
interest and fees earned on earning assets, primarily loans and
investment securities and interest paid on deposits and borrowed
funds. Net interest income is affected by the interest rate
earned and paid and by volume changes, principally in loans,
investment securities, deposits and borrowed funds. The charts
below set forth a summary of average earnings assets and
interest-bearing liabilities for the years ended December 31,
1995, 1994 and 1993, together with the interest earned and paid
on each major type of asset and liability account during such
period. The average yield on the earnings assets and the average
cost of the interest-bearing liabilities during such period also
are summarized. Nonaccruing loans are included in interest-
earning assets; interest income on such loans is recorded when
received. Interest earning assets include tax-exempt
investments, and the related income is presented on actual income
received and not on a tax equivalent basis.
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DECEMBER 31, 1995
------------------------------------------------------------------
INTEREST AVERAGE
AVERAGE PERCENT OF INCOME/ YIELD/
BALANCE TOTAL ASSETS EXPENSE RATE
----------- ---------------- ------------ -----------
(Dollars in Thousands)
Interest-earning assets:
Loans $21,339 50.10% $2,428 11.38%
Taxable securities 4,324 10.15 266 6.15%
Nontaxable securities 4,708 11.05 280 5.95%
Federal funds sold 8,038 18.87 381 4.74%
Other 400 .94 17 4.25%
--------- -------- --------
Total interest earning assets 38,809 91.11% 3,374 8.69%
--------- -------- --------
Non-interest bearing assets:
Cash and due from banks 2,514 5.90%
Premises and equipment 766 1.80
Other assets 807 1.89
Reserve for loan losses (302) (0.7)
--------- --------
Total assets $42,594 100.00%
========= ========
Interest-bearing liabilities:
NOW accounts $ 6,870 16.13% 198 2.88%
Savings accounts 1,866 4.38 59 3.16%
Money market accounts 571 1.34 21 3.68%
Time deposits 20,414 47.93 946 4.63%
Borrowings 777 1.82 89 11.45%
--------- -------- --------
Total interest-bearing liabilities 30,498 71.60% 1,313 4.31%
--------- -------- --------
Non-interest bearing liabilities:
Demand deposits 6,665 15.65%
Other liabilities 658 1.54
--------- --------
Total liabilities 37,821 88.79%
Stockholders' equity 4,773 11.21
--------- --------
Total liabilities and
stockholders' equity $42,594 100.00%
========= ========
Net interest income $2,061
========
Interest rate spread 4.38%
Net interest margin 5.31%
59
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DECEMBER 31, 1994
------------------------------------------------------------------
INTEREST AVERAGE
AVERAGE PERCENT OF INCOME/ YIELD/
BALANCE TOTAL ASSETS EXPENSE RATE
----------- ---------------- ------------ -----------
(Dollars in Thousands)
Interest-earning assets:
Loans $21,539 46.00% $2,342 10.87%
Taxable securities 6,616 14.13 390 5.89%
Nontaxable securities 5,060 10.81 300 5.93%
Federal funds sold 9,125 19.49 249 2.73%
Other 500 1.07 17 3.40%
--------- -------- --------
Total interest earning assets 42,840 91.50% 3,298 7.70%
--------- -------- --------
Non-interest bearing assets:
Cash and due from banks 2,787 5.95%
Premises and equipment 748 1.60
Other assets 765 1.63
Reserve for loan losses (319) (0.68)
--------- --------
Total assets $46,821 100.00%
========= ========
Interest-bearing liabilities:
NOW accounts $ 7,680 16.40% 226 2.94%
Savings accounts 2,111 4.51 63 2.98%
Money market accounts 850 1.82 30 3.53%
Time deposits 22,598 48.26 728 3.22%
Borrowings 1,249 2.67 89 7.13%
--------- -------- --------
Total interest-bearing liabilities 34,488 73.66% 1,136 3.29%
--------- -------- --------
Non-interest bearing liabilities:
Demand deposits 7,101 15.17%
Other liabilities 970 2.07
--------- --------
Total liabilities 42,559 90.90%
Stockholders' equity 4,262 9.10
--------- --------
Total liabilities and
stockholders' equity $46,821 100.00%
========= ========
Net interest income $2,162
========
Interest rate spread 4.41%
Net interest margin 5.05%
60
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DECEMBER 31, 1993
------------------------------------------------------------------
INTEREST AVERAGE
AVERAGE PERCENT OF INCOME/ YIELD/
BALANCE TOTAL ASSETS EXPENSE RATE
----------- ---------------- ------------ -----------
(Dollars in Thousands)
Interest-earning assets:
Loans $21,438 44.84% $1,915 8.93%
Taxable securities 8,306 17.37 545 6.56%
Nontaxable securities 5,092 10.65 296 5.81%
Federal funds sold 8,750 18.30 197 2.25%
Other 600 1.25 18 3.00%
--------- -------- --------
Total interest earning assets 44,186 92.41% 2,971 6.73%
--------- -------- --------
Non-interest bearing assets:
Cash and due from banks 2,627 5.49%
Premises and equipment 676 1.41
Other assets 745 1.58
Reserve for loan losses (425) (0.89)
--------- --------
Total assets $47,809 100.00%
========= ========
Interest-bearing liabilities:
NOW accounts 7,703 16.11% 226 2.93%
Savings accounts 2,044 4.28 58 2.84%
Money market accounts 699 1.46 27 3.86%
Time deposits 23,671 49.51 774 3.27%
Borrowings 945 1.98 58 6.14%
--------- -------- --------
Total interest-bearing liabilities 35,062 73.34% 1,143 3.26%
--------- -------- --------
Non-interest bearing liabilities:
Demand deposits 7,788 16.29%
Other liabilities 1,073 2.24
--------- --------
Total liabilities 43,923 91.87%
Stockholders' equity 3,886 8.13
--------- --------
Total liabilities and
stockholders' equity $47,809 100.00%
========= ========
Net interest income $1,828
========
Interest rate spread 3.47%
Net interest margin 4.14%
61
68
The increase in net interest income from 1993 to 1995 was attributable
to higher interest margins. Interest expense on deposits decreased $6,000
from 1993 to 1994 and cost of funds increased 0.04%. Interest expense on
deposits increased from 1994 to 1995 by $176,000, and the cost of funds
increased 1.01% due primarily to rising interest rates. Interest income on
earnings assets also increased $329,000 from 1993 to 1994, representing an
increase in the average yield of 0.98%. Interest income on earnings assets
also increased from 1994 to 1995 by $63,000, representing an increase in the
average yield of 0.98%. The net interest margin increased by 0.91% from 1993
to 1994, due primarily to a relatively large increase in yield as compared to
the relatively smaller increase in cost of funds. The net interest margin
increased by 0.26% from 1994 to 1995 as investment yield continued to
increase and cost of funds began to rise. Average interest bearing
liabilities decreased from $35,062,000 at December 31, 1993 to $34,488,000 at
December 31, 1994. These declines resulted in decreases in interest expense.
Average earning assets again decreased from 1994 to 1995. They totaled
$42,840,000 at December 31, 1994 and declined to $38,809,000 at December 31,
1995. During the same period, average interest bearing liabilities also
decreased, going from $34,488,000 at December 31, 1994 to $30,498,000 at
December 31, 1995.
Net interest income is affected by the volume and rate of both
interest-earning assets and interest-bearing liabilities. The following
table depicts the dollar effect and rate change for the different categories
of interest-earning assets and interest-bearing liabilities and the resultant
change in interest income and interest expense. Non performing loans are
included with loans in such table.
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69
1995 COMPARED TO 1994 COMPARED TO
1994 INCREASE 1993 INCREASE
(DECREASE) DUE TO (DECREASE) DUE TO
------------------- ---------------------
(DOLLAR IN THOUSANDS)
VOLUME RATE<F1> NET VOLUME RATE<F1> NET
-------- --------- ------- -------- --------- -------
Interest earned on:
- ------------------
Loans $ 21 $ 64 $ 85 $ 8 $420 $428
Taxable securities (138) 14 (124) (112) (42) (154)
Nontaxable securities (20) -- (20) (2) 6 4
Federal funds sold (30) 162 132 8 44 52
Other (4) 4 -- (3) 2 (1)
-------- --------- ------- -------- --------- -------
Total interest-earning
assets (171) 244 73 (101) 430 329
-------- --------- ------- -------- --------- -------
Interest paid on:
- ----------------
NOW accounts (24) (4) (28) -- -- --
Savings and individual
retirement accounts (7) 3 (4) 2 3 5
Money market accounts (10) 1 (9) 6 (3) 3
Certificates of deposit (30) 247 217 (35) (10) (45)
Notes Payable -- -- -- 19 12 31
-------- --------- ------- -------- --------- -------
Total interest bearing
liabilities (71) 247 176 (8) 2 (6)
-------- --------- ------- -------- --------- -------
Net interest income $(100) $ (3) $(103) $(93) $428 $335
======== ========= ======= ======== ========= =======
<FN>
<F1> Changes in interest income and interest expense due to both
rate and volume are included in rate variances.
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70
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses provides a reserve (the
allowance for loan losses) against which loan losses are charged as those
losses become evident. Management determines the appropriate level of the
allowance for loan losses on a quarterly basis. These quarterly analyses
take into consideration the results of an ongoing loan review and grading
process, the purpose of which is to determine the level of credit risk within
the portfolio at any given time.
Utilizing the results of the loan review and grading process, a
specific portion of the reserve is allocated to those loans which appear to
represent a more than normal exposure to risk. In addition, estimates are
made for potential losses within the acceptably graded loan portfolios of
consumer loans, residential mortgage loans, commercial real estate loans, and
commercial loans not otherwise specifically reviewed, based on historical
loss experience and other factors and trends. A provision for loan loss
expense was last made in 1995 when $60,000 was provided to the allowance for
loan losses. Provisions in 1994 and 1993 were $30,000 and $0 respectively.
Following is a table setting forth the activity for loan losses and the
allocation of the allowance for possible loan losses, along with certain
ratios for non-performing loans and total loans in 1995, 1994, and 1993:
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1995 1994 1993
---- ---- ----
(Dollars in Thousands)
Balance at beginning of period $274 $365 $484
Loans charged off:
Commercial loans (24) (65) (72)
Real estate loans -- (18) --
Installment loans (7) (77) (52)
---------- ------------ ---------
Total charge offs (31) (160) (124)
---------- ------------ ---------
Recoveries:
Commercial loans 10 10 --
Real estate loans -- 12 --
Installment loans 17 17 5
---------- ------------ ---------
Total recoveries 27 39 5
---------- ------------ ---------
Net loans charged off (4) (121) (119)
Provision for possible loan losses
charged against income 60 30 0
---------- ------------ ---------
Balance at end of period $330 $274 $365
========== ============ =========
Net charge offs/average loans 0.02% 0.53% 0.50%
Loan reserve/total loans 1.51% 1.32% 1.65%
Loan reserve/non-performing loans 388.24% 1,611.76% 74.19%
The allowance for possible loan losses is not allocated to specific
categories of loans. However, based on First State Bank's loan review
process, historical loan loss experience, and economic conditions, management
believes the allowance for possible loan losses at December 31, 1995 is
adequate to cover potential losses in the loan portfolio.
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RISK ELEMENTS IN A LOAN PORTFOLIO; INTEREST RECOGNITION
Risk elements in a loan portfolio include loans accounted for on a
nonaccrual basis, accruing loans that are contractually past due 90 days or
more as to interest or principal payments, troubled debt restructuring, loans
where there are serious doubts as to the ability of the borrower to comply
with the present loan repayment terms, other real estate and significant
industry concentrations (such as real estate, energy or agricultural loans).
Nonperforming assets are defined as loans delinquent 90 or more days,
nonaccrual loans, restructured loans and foreclosed assets. Such assets do
not necessarily represent future losses to Canadian since underlying
collateral can be sold and the financial condition of the borrower may
improve. The following table sets forth the detail of nonperforming assets.
Canadian had no restructured loans at any of the dates listed herein.
The following table sets forth the detail of non-performing assets:
DECEMBER 31,
----------------------------------------------------------
1995 1994 1993
---------- ---------- ----------
(Dollars in Thousands)
Non-accrual loans $62 $ -- $449
Loans past due 90 days or more 23 17 43
---------- ---------- ----------
Total non-performing loans 85 17 492
Foreclosed assets 17 17 32
---------- ---------- ----------
Total non-performing assets $102 $34 $524
========== ========== ==========
Non-performing loans to total loans 0.37% 0.08% 2.19%
Non-performing assets to loans plus foreclosed assets 0.47% 0.16% 0.14%
Non-performing assets to total assets 0.20% 0.04% 1.01%
The following table compares the allowance for loan losses and the
total nonperforming loans at December 31, 1995, 1994, and 1993:
DECEMBER 31,
----------------------------------------------------------
1995 1994 1993
---------- ---------- ----------
(Dollars in Thousands)
Allowance for loan losses $330 $274 $365
Non-performing loans 85 17 492
Allowance as a percentage of non-performing loans 388.24% 1,611.76% 74.19%
At December 31, 1995, 1994 and 1993, there were no significant
commitments to lend additional funds to borrowers whose loans were considered
nonperforming.
At December 31, 1995, $73,000 in loans not included in any of the
aforementioned risk categories have been identified by management as
potential problem loans due to financial difficulties or technical
deficiencies of the borrowers of those loans. These loans are subject to
close scrutiny by management and their status is reviewed on a quarterly
basis by the Board of Directors of Canadian. At December 31, 1995, total
loans past due over 30 days represented 1.79% of total loans, as compared to
1.14% of total loans at December 31, 1994.
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72
Canadian's policy is to discontinue accruing interest on loans when
principal or interest is due and unpaid for 90 days or more, unless the loan
is well secured and in the process of collection. Canadian would have
recognized additional interest income of approximately $4,000, $0 and $40,000
for 1995, 1994 and 1993, respectively, if contractual interest on these loans
had been recognized. No interest has actually been collected or included in
income related to these loans.
NON-INTEREST INCOME
Income other than from interest-earning assets is derived primarily
from services provided to customers for which fees are charged. These
services are chiefly deposit services such as account service charges,
overdraft and non-sufficient funds privileges, account analysis, issuance of
cashiers' checks and letters of credit, credit life commission income, income
for other real estate transactions and income from securities transactions.
The following schedule lists the accounts from which non-interest income is
derived, gives the totals for those accounts for each of the three years
ended December 31, 1995, 1994 and 1993 and reflects the change from the
initial period shown to the next comparable period.
Year Ended Change
December 31, Percentage Percentage
-------------------------------- -------------- --------------
1995 1994 1993 1995/1994 1994/1993
(Dollars in Thousands)
Service charges on
deposit accounts $128 $120 $126 6.25% (4.76)%
Other fee income 14 13 18 7.69% (16.67)%
Other non-interest income 12 3 6 300.00% (50.00)%
-------- -------- -------- ----------- ------------
Total non-interest income $154 $136 $150 12.69% (9.46)%
======== ======== ======== =========== ============
The decrease in non-interest income from 1993 to 1994 is due
primarily to a decrease in service charges. The increase in non-interest
income from 1994 to 1995 is primarily due to a corresponding increase in
service charges during such period.
OTHER EXPENSES
Expenses other than those incurred in connection with interest-bearing
liabilities include, among other things, those associated with personnel,
facilities, equipment and supplies, advertising and professional services.
Noninterest expense, which Canadian incurs in the course of day-to-day
operations, includes salaries and other types of expenses such as occupancy,
professional fees, ad valorem taxes and supplies. The schedule below lists
the general accounts that make up non-interest expense, gives the totals for
those accounts for the years ended December 31, 1995, 1994 and 1993, and
reflects the changes from the initial period shown to the next comparable
period.
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73
Year Ended Change
December 31, Percentage Percentage
-------------------------------- -------------- --------------
1995 1994 1993 1995/1994 1994/1993
(Dollars in Thousands)
Compensation &
employee benefits $812 $768 $736 5.73% 4.35%
Occupancy & equipment
expense 163 165 166 (1.21)% (0.60)%
All other operating expenses 381 428 497 (10.98)% (13.88)%
Total non-interest
expense $1,356 $1,361 $1,399 (0.36)% (3.00)%
======== ======== ======== =========== ==========
The increase in compensation and employee benefits was due primarily to
increased salary levels. The increase in occupancy and equipment expense was
primarily due to additional bank equipment placed in service. All other
operating expenses decreased, primarily as a result of decreases in F.D.I.C.
assessments.
INCOME TAXES
Canadian files a consolidated Federal income tax return with First
State Bank. First State Bank pays Federal income tax expense to Canadian
based on the taxable income of First State Bank on a stand-alone basis. A
reconciliation of expected income tax expense for Canadian, computed by
applying the Federal statutory rate of 34% to income before the provision for
income taxes, is as follows:
December 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
Federal income tax at statutory rate 34.00% 34.00% 34.00%
Less effect of tax-exempt income (15.42) (10.45) (11.15)
Amortization of intangibles (2.41) (0.89) --
Life insurance expense 0.37 0.12 0.07
Provision for credit losses 3.31 (3.09) (5.41)
Other 0.71 (0.22) 0.29
---------- ---------- ----------
Total provision for income taxes 20.56% 19.47% 17.80%
========== ========== ==========
First State Bank adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," during 1994. The effect was to increase
reported results of operations by $10,000.
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FINANCIAL CONDITION
LOANS
The loan portfolio constitutes the major earning asset of most banks
and typically offers the best alternative for obtaining the maximum interest
spread above the cost of funds. The overall economic strength of any bank
generally parallels the quality and yield of its loan portfolio. Total loans
(net of allowance for loan losses and unearned discount) amounted to
approximately $21,559,000 (55.06% of total assets) at December 31, 1995,
$20,514,000 (44.71% of total assets) at December 31, 1994 and $21,925,000
(45.98% of total assets) at December 31, 1993. The following table presents
loans outstanding, net of unearned discount, at December 31, 1995, 1994 and
1993:
1995 1994 1993
--------------------- --------------------- ----------------------
Percent Percent
Amount of Total Amount Total Amount of Total
-------- ---------- -------- ------- -------- ----------
(Dollars in Thousands)
Commercial loans $ 6,226 28.44% $ 3,267 15.72% $ 2,734 12.27%
Real estate loans 2,105 9.61 2,199 10.58 2,658 11.92
Agricultural loans 11,646 53.21 12,769 61.42 13,509 60.61
Installment loans 1,893 8.65 2,544 12.24 3,372 15.12
Other 20 0.09 9 0.04 17 0.08
------- ------ ------- ------ ------- ------
Total $21,889 100.00% $20,788 100.00% $22,290 100.00%
======= ====== ======= ====== ======= ======
Due to the agricultural industry's major influence on the area, the Bank's
loans are concentrated in this area. Management of the Bank is not aware of any
risks in the loan portfolio that would result in risk of loss in excess of risks
in the prior periods shown.
Canadian does not have any significant lease financing transactions. The loan
portfolio does not include any loans to foreign countries, credit card loans or
highly leveraged transaction loans. Canadian primarily originates or
participates in loans to individuals and businesses in its local lending area of
Hemphill County, Texas, and surrounding areas. Lending within the commercial
and real estate markets is diversified among many industries and activities.
Due to the strength and long history of the oil and gas industry in this area,
many local businesses and activities are dependent upon oil and gas industry
support. Canadian has written policies requiring security for loans including
liens on residential mortgage loans. In addition, policies and procedures are
in place to assess the creditworthiness of borrowers for all loans and
commitments. Borrowers' ability to honor their loan contracts are largely
dependent upon the economic conditions within their market and on the national
level.
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75
MATURITY OF LOANS
The following table sets forth the maturity composition of total loans, gross
of unearned discount, at December 31, 1995:
December 31, 1995
------------------------------------
Loans Percent of Total
------- ------------------
(Dollars in Thousands)
In one year or less $16,092 72.85%
After one year through five years 3,222 14.59
After five years 2,775 12.56
------- ------
Total $22,089 100.00%
======= ======
INTEREST SENSITIVITY
December 31, 1995
--------------------------------------
Fixed Rates Variable Rate
------------- ---------------
(Dollars in Thousands)
In one year or less $ 4,650 $11,442
After one year through five years 3,222 --
After five years 2,775 --
------- -------
Total $10,647 $11,442
======= =======
INVESTMENTS
Canadian's holdings of short-term investments and scheduled maturities
of investment securities serve as a source of liquidity to meet depositor and
borrower fund requirements, in addition to being a significant element of
total interest income. Short-term investments consisting primarily of
Federal Funds sold had outstanding balances at December 31, 1995 of
$6,450,000, as compared to $9,625,000 at year end 1994 and $6,250,000 in
1993.
On January 1, 1995, Canadian adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). Under SFAS 115, each security is classified as
either trading, available for sale or held to maturity. Investments held to
maturity are recorded at amortized cost. Securities available for sale are
recorded at their fair value. The after-tax difference between amortized cost
and fair value of securities available for sale is recorded as an unrealized
gain or loss on securities and either increases (in the case of an unrealized
gain) or decreases (in the case of an unrealized loss) total stockholders'
equity. The tax impact of such adjustment is recorded as an adjustment to
the amount of the deferred tax liability. As of December 31, 1994 and
December 31, 1995, Canadian's entire investment portfolio was classified as
held to maturity.
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76
The following table presents the composition of investments and the
change in each category for the periods presented:
1995 1994 1993
----------------------- ------------------------ ------------------------
PERCENT PERCENT PERCENT
BOOK OF TOTAL BOOK OF TOTAL BOOK OF TOTAL
VALUE SECURITIES VALUE SECURITIES VALUE SECURITIES
-----------------------------------------------------------------------------
(Dollars in Thousands)
U.S. Government
agencies and corporations $988 14.35% $5,001 45.23% 5,003 41.11%
Municipals and other
tax-exempt 4,634 67.33 4,783 43.25 5,337 43.85
Mortgage-backed securities 1,161 16.87 1,174 10.62 1,730 14.22
Corporate bonds and other 100 1.45 100 0.90 100 0.82
-----------------------------------------------------------------------------
Total securities $6,883 100.00% $11,058 100.00% $12,170 100.00%
=============================================================================
The market value of total investment securities was $7,109,000,
$11,099,000 and $12,704,000 at December 31, 1995, 1994, and 1993,
respectively.
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77
The following table shows the maturities and yields for the various
forms of investment securities:
DECEMBER 31, 1995
MATURING
-----------------------------------------------------------------------------------------------------
AFTER ONE THROUGH AFTER FIVE THROUGH
IN ONE YEAR OR LESS FIVE YEARS TEN YEARS AFTER TEN YEARS
------------------- -------------------- -------------------- --------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ------- -------- ------- -------- ------- -------- -------
(Dollars in Thousands)
U.S. Government
agencies &
corporations $-- --% $988 5.46% $ -- --% $ -- --%
Municipals and
other tax exempt<F1> 436 8.22 3,329 8.87 769 8.79 100 15.61
Mortgage-backed
securities -- -- 330 6.69 727 8.60 104 9.03
Corporate bonds and
other 100 7.28 -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------
Total securities $536 8.04% $4,647 7.99% $1,496 6.93% $204 12.26%
=====================================================================================================
<FN>
<F1> Yield presented on a tax-equivalent basis assuming a tax rate of 34%.
By maturity, 7.8% of the portfolio will mature within one year and 75%
will mature within five years.
DEPOSITS
Deposits represent First State Bank's primary and most vital source of
funds. The fundamental use of funds available to First State Bank is to
build earning assets, principally in the form of loans and investment
securities. The following table reflects the deposit mix of First State Bank
for the periods indicated.
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78
DEPOSIT PORTFOLIO
DECEMBER 31,
-------------------------------------------------------------------------------------------------------------
1995 1994 1993
---------- ---------- ----------
COST OF COST OF COST OF
AMOUNT FUNDS PERCENT AMOUNT FUNDS PERCENT AMOUNT FUNDS PERCENT
-------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Noninterest bearing $6,373 -- 19.14% $6,010 -- 15.60% $7,650 -- 18.38%
NOW accounts 5,889 2.88% 17.68 7,852 2.94% 20.38 7,509 2.93% 18.04
Savings accounts 1,766 3.16% 5.30 1,965 2.98% 5.10 2,257 2.84% 5.43
Money market
deposit accounts 367 3.68% 1.10 776 3.53% 2.01 925 3.86% 2.22
Time deposits:
less than $100,000 10,689 4.60% 32.10 11,663 3.94% 30.28 12,892 3.23% 30.98
$100,000 or more 8,217 4.66% 24.68 10,258 2.62% 26.63 10,381 3.30% 24.95
------------- ------------------------- ------------------------- -------------
Total deposits $33,301 100.00% $38,524 100.00% $41,614 100.00%
============= ========================= ========================= =============
No material trends have been noted in the deposit mix and no foreign
deposits are maintained at First State Bank. No significant out-of-area
deposits are maintained.
There is no single person or group of persons that represents such a
material portion of First State Bank's total deposits that the loss of such
deposits would have a material adverse effect on the business of First State
Bank. The agricultural industry is a large factor in the local economy. To
the extent this industry fluctuates, First State Bank's business could
follow.
At December 31, 1995, demand deposits (including NOW and money market
deposits), as a percentage of savings and time deposits, was 63.05%. Public
funds deposits at December 31, 1995 were approximately $3,815,000.
Certificates of deposits issued in amounts of $100,000 or more
represent the type of deposit most likely to affect First State Bank's future
earnings because of interest rate sensitivity. Certificates of deposits of
$100,000 or more represented 24.38%, 26.26% and 24.95% of total deposits as
of December 31, 1995, 1994 and 1993, respectively. The following table sets
forth the amount and maturities of time deposits of $100,000 or more at
December 31, 1995:
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79
DECEMBER 31, 1995 PERCENT OF TOTAL
----------------- ----------------
(Dollars in Thousands)
Three months or less $6,698 81.51%
Over three through twelve months 1,519 18.49
Over twelve months -- --
----------------- ----------------
Total $8,217 100.00%
================= ================
The effective cost of these funds is generally higher than other time
deposits because the funds are usually obtained at premium rates of interest.
Time deposits of $100,000 or more can be a very volatile source of funds.
Management believes, however, that First State Bank's time deposits of
$100,000 or more exhibit core deposit characteristics and these do not
include any brokered deposits. First State Bank follows prevailing market
rates in determining interest rates payable on certificates of deposits.
Interest expense on time certificates of $100,000 or more was approximately
$425,000, $322,000 and $338,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
LIQUIDITY AND RATE SENSITIVITY
Liquidity is the measure of Canadian's ability to meet its customers'
present and future deposit withdrawals or increased loan demand without
penalizing earnings. Interest rate sensitivity involves the relationships
between rate sensitive assets and liabilities and is an indication of the
probable effects of interest rate fluctuations on Canadian's net interest
income.
Liquidity is provided for Canadian by projecting credit demand and
other financial needs and then maintaining sufficient cash and assets readily
convertible into cash to meet these projected requirements. Canadian
provides for its liquidity needs through core deposits, maturing loans,
scheduled maturities of investment securities and federal funds sold. Cash
and federal funds sold were $8,850,000 at December 31, 1995, $12,163,000 and
$12,136,000 at December 31, 1994 and 1993. These levels represent a decline
of 27.24% from December 31, 1994 to December 31, 1995; however, these levels
are considered to be adequate in view of projected liquidity needs.
Interest rate-sensitive assets and liabilities are those with yields or
rates subject to change within a future time period due to maturity or
changes in market rates. An ongoing objective of the use of Canadian's
asset/liability models is to monitor gaps between rate-adjustable assets and
liabilities and to make sure these gaps fall within the board approved ranges
given the current interest rate market. The models are also used to project
future net interest income under a set of possible interest rate movements.
The Board of Directors of Canadian reviews this information to determine if
the projected future net interest income levels would be acceptable.
Canadian attempts to stay within acceptable gap levels and net interest
income levels by matching as closely as possible rate-adjustable assets and
liabilities with similar maturity horizons. Management realizes, however,
that there are limits to these efforts because of relatively low loan volume
compared to the level of deposits and the need to invest in securities that
will maximize yield rather than match shorter-term interest-sensitive
liabilities.
Capital Resources
-----------------
Management views capital as a critical element in Canadian's ability
to expand its asset base and, ultimately, maintain a high level of earnings
per share over a sustained period of time. In addition, a strong
73
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capital position is essential in order to maintain the confidence of investors,
customers and regulators, to afford protection to depositors, to ensure
access to capital markets under favorable terms, to provide a strong
foundation for future growth and to provide an additional cushion against the
risk of shrinkage in asset value and unforeseen losses. Presently, Canadian
has no outstanding long-term indebtedness.
Total stockholders equity was approximately $5,105,000 at December 31,
1995, an increase of $663,000, or 14.93% from $4,442,000 at December 31,
1994, which was an increase of $360,000, or 8.82% from $4,082,000 at December
31, 1993. As a percentage of total assets, total stockholders equity was
13.21% at December 31, 1995, 9.83% at December 31, 1994 and 8.64% at December
31, 1993. The Bank is subject to the issuance of capital adequacy guidelines
by its regulators, all of which have issued similar guidelines for the
measurement of capital adequacy. One measure is the leverage ratio, which
equals the ratio of ending total capital less intangible assets to average
total assets less intangible assets. The guidelines include a definition of
capital and provide a framework for calculating weighted risk assets by
assigning assets and off-balance-sheet instruments to broad risk categories.
The risk-based capital standards are a minimum ratio of total capital to
risk-weighted assets with a minimum of 4% when using Tier 1 capital and a
minimum of 8% when using total capital. Tier 1 capital is the sum of the
core capital elements (common stockholders equity less intangible assets).
Total capital includes the allowance for loan losses limited to a maximum of
1.25% of risk-weighted assets.
As the following table indicates, Bank exceeded the minimum risk-based
and leverage ratios at December 31, 1995, 1994, and 1993:
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- ----------------- -----------------
(Dollars In Thousands)
Tier 1 capital $ 5,105 $ 4,442 $ 4,082
Total capital $ 5,430 $ 4,716 $ 4,449
Risk-weighted assets $25,928 $29,869 $27,721
Capital ratios:
Leverage 13.20% 9.83% 8.64%
Tier 1 capital
to risk-weighted assets 19.69% 14.87% 14.73%
Total capital
to risk-weighted assets 20.94% 15.79% 16.05%
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1995, the names and
addresses of each beneficial owner of more than 5% of Canadian Common known
to the Board of Directors of Canadian, showing the amount and nature of such
beneficial ownership and the names of each director and officer of Canadian,
the number of shares of Canadian Common owned beneficially by each director
and officer and the number of shares of Canadian Common owned beneficially by
all directors and officers as a group. None of the shareholders listed
herein would own, on a pro forma basis giving effect to the Merger, more than
1% of the issued and outstanding shares of Boatmen's Common.
74
81
SHARES OF CANADIAN COMMON
NAMES AND ADDRESS<F1> BENEFICIALLY OWNED PERCENT OF CLASS
--------------------- ------------------------- ----------------
Malouf Abraham, Jr.<F2> 805 2.54%
John W. Baker<F3> 0 <F*>
Donald J. Campbell 1,875 5.90%
923 West Harvester
Pampa, Texas 79065
Robert D. Campbell 1,896 5.97%
923 West Harvester
Pampa, Texas 79065
Jay Godwin<F4> 3,500 11.02%
P.O. Box 468
Canadian, Texas 79014
William J. Jackson<F5> 150 <F*>
Thomas E. Link<F6> 2,758 8.69%
720 Brazos, Suite 105
Austin, Texas 78701
The Estate of Georgia W. Locke 1,775 5.59%
c/o Rocky Hambric
Cornerstone Advisory, Suite 940
2515 McKinney Avenue, LB 10
Dallas, Texas 75201
Jim B. Waterfield<F7> 1,707 5.38%
P.O. Box 447
Canadian, Texas 79014
Richard A. Waterfield<F8> 332 1.05%
Grace H. Wright 5,370 16.91%
P.O. Box 277
Canadian, Texas 79014
Directors and Officers of
Canadian as a Group (7 persons) 9,252 29.14%
<FN>
- ----------------------------------
<F*> Represents less than one percent (1%) of the issued and
outstanding shares of Canadian Common.
<F1> Addresses are provided only with respect to each beneficial owner
of more than five percent (5%) of Canadian Common known to the
Board of Directors of Canadian.
<F2> Dr. Abraham serves as a director of Canadian. Includes shares
held in the name of the First Family Limited Partnership, of
which Dr. Abraham serves as general partner.
<F3> Mr. Baker serves as Secretary/Treasurer of Canadian.
75
82
<F4> Mr. Godwin serves as the President, Chief Executive Officer and a
director of Canadian.
<F5> Mr. Jackson serves as a director of Canadian.
<F6> Mr. Link serves as a director of Canadian. Includes 1,158 shares
held by Link-Can Corporation, of which Mr. Link serves as President.
<F7> Mr. Jim Waterfield serves as Vice President and a director of
Canadian.
<F8> Mr. Richard Waterfield serves as a director of Canadian.
FAMILY RELATIONSHIPS
Jim B. Waterfield, who serves as Vice President and a director of
Canadian, and Richard A. Waterfield, who serves as a director of Canadian,
are brothers.
LEGAL OPINION
The legality of the securities offered hereby will be passed upon by
Lewis, Rice & Fingersh, L.C. Members of Lewis, Rice & Fingersh, L.C. and
attorneys employed by them owned, directly or indirectly, as of May 1, 1996,
85,381 shares of Boatmen's Common.
EXPERTS
INDEPENDENT AUDITORS FOR BOATMEN'S
The consolidated financial statements of Boatmen's incorporated by
reference in Boatmen's Annual Report (Form 10-K) for the year ended December
31, 1995 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The supplemental consolidated financial statements of Boatmen's
incorporated by reference in Boatmen's Current Report (Form 8-K) dated
May 3, 1996, at December 31, 1995 and 1994, and for each of the three years
in the period ended December 31, 1995, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. The supplemental consolidated financial
statements referred to above are incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
INDEPENDENT AUDITORS FOR CANADIAN
The consolidated financial statements of Canadian at December 31, 1995
and for the year then ended appearing in this Proxy Statement/Prospectus and
Registration Statement have been audited by Boatright Kelly & Co.,
independent certified public accountants, as set forth in their report
thereon appearing
76
83
elsewhere herein, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
PRESENCE AT SPECIAL MEETING
Representatives of Boatright Kelly & Co. are expected to be present at
the Special Meeting with the opportunity to make a statement if they desire
to do so and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
The annual meeting of Boatmen's was held on April 23, 1996.
Shareholder proposals for the annual meeting of Boatmen's shareholders to be
held in April 1997 must meet the requirements established by the S.E.C. for
shareholder proposals and must be received by Boatmen's not later than
November 13, 1996 in order to be considered for inclusion in the 1997 proxy
statement. Shareholder proposals must also satisfy the requirements set
forth in the Bylaws of Boatmen's described under "COMPARISON OF SHAREHOLDER
RIGHTS -- Shareholder Proposal Procedures."
Upon receipt of any such proposal, Boatmen's will determine whether or
not to include such proposal in the proxy statement and proxy in accordance
with the S.E.C.'s regulations governing the solicitation of proxies.
---------------
77
84
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
WITH ACCOUNTANTS' REPORT THEREON
F-1
85
BOATRIGHT 2700 WESTERN, SUITE 1000
& KELLY P.O. BOX 9875
CO. AMARILLO, TEXAS 79109
CERTIFIED PUBLIC ACCOUNTANTS (806) 355-9766
A Professional Corporation FAX (806) 359-5058
Independent Auditors' Report
----------------------------
To the Board of Directors
Canadian Bancshares, inc. and Subsidiary
Canadian, Texas
We have audited the accompanying consolidated balance sheet of Canadian
Bancshares, Inc. and Subsidiary as of December 31, 1995 and the related
consolidated statements of operations, stockholders' equity and cash flows
for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in conformity with generally accepted accounting principles,
the consolidated financial position of Canadian Bancshares, Inc. and
Subsidiary at December 31, 1995, and the consolidated results of operations
and cash flows for the year then ended.
The 1994 consolidated balance sheet and 1994 and 1993 consolidated
statements of income, stockholders' equity and cash flows were compiled by
us as of March 23, 1996. We did not audit or review those financial
statements and, accordingly, express no opinion or other form of assurance
on them.
As discussed in the note on accounting changes, Note 2, in 1995 the Bank
changed its method of accounting for impairment of loans and disclosures
about fair value of financial instruments, in 1994 the Bank changed its
method of accounting for investment securities and in 1993 the Bank changed
its method of accounting for income taxes.
/s/ Boatright Kelly & Co.
March 20, 1996
---------------------------------------------------------
Member American Institute of Certified Public Accountants
F-2
86
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
1994
1995 UNAUDITED
----------- -----------
ASSETS:
Cash and due from banks $ 2,400,181 $ 2,538,048
Federal funds sold 6,450,000 9,625,000
Investment securities
Taxable 2,249,320 6,275,086
Exempt from Federal income tax 4,633,798 4,783,289
----------- -----------
6,883,118 11,058,375
----------- -----------
Loans 21,889,385 20,788,376
Less allowance for credit losses (329,832) (274,444)
----------- -----------
Net loans 21,559,553 20,513,932
----------- -----------
Properties and equipment, net 587,403 610,526
Accrued income and other assets 779,635 829,264
----------- -----------
Total assets $38,659,890 $45,175,145
=========== ===========
LIABILITIES:
Demand deposits 6,373,770 6,009,102
Savings and NOW accounts 8,021,711 9,817,808
Time deposits over $100,000 8,217,047 10,711,842
Other time deposits 10,688,818 11,985,235
----------- -----------
33,301,346 38,523,987
----------- -----------
Borrowed funds -- 1,553,274
Accrued expenses 209,605 183,390
Other liabilities 44,323 472,841
----------- -----------
Total liabilities 33,555,274 40,733,492
----------- -----------
Stockholders' equity:
Preferred stock, $1 par value
500,000 shares authorized,
none outstanding -- --
Common stock, $1 par value,
1,000,00 shares authorized,
40,732 shares issued 40,732 40,732
Additional paid-in capital 1,648,270 1,648,270
Retained earnings 4,227,340 3,594,797
----------- -----------
5,916,342 5,283,799
Treasury stock, 8,977 and 9,315 shares respectively, at cost (811,726) (842,146)
----------- -----------
Total stockholders' equity 5,104,616 4,441,653
----------- -----------
Total liabilities and stockholder's equity $38,659,890 $45,175,145
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
87
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1994 1993
1995 UNAUDITED UNAUDITED
---------- ---------- ----------
Interest income:
Interest and fees on loans $2,428,002 $2,342,257 $1,914,516
Interest on investment securities:
Taxable 265,817 389,891 544,739
Exempt from federal income tax 279,842 299,689 295,565
Interest on deposits with banks 16,577 16,548 18,280
Interest on federal funds sold 381,484 249,236 197,292
---------- ---------- ----------
Total interest income 3,371,722 3,297,621 2,970,392
---------- ---------- ----------
Interest expense:
Deposits 1,224,014 1,047,498 1,085,061
Borrowed funds 88,982 88,760 57,727
---------- ---------- ----------
Total interest expense 1,312,996 1,136,258 1,142,788
---------- ---------- ----------
Net interest income 2,058,726 2,161,363 1,827,604
Provision for credit losses 60,000 30,000 --
---------- ---------- ----------
Net interest income after provision
for credit losses 1,998,726 2,131,363 1,827,604
---------- ---------- ----------
Other income:
Service charge 137,317 121,449 130,085
Safe deposit box rent 4,665 4,446 4,656
Exchange fees 1,974 3,336 4,341
Other income 10,212 7,663 10,697
---------- ---------- ----------
Total other income 154,168 136,894 149,779
---------- ---------- ----------
Other expenses:
Salaries and employee benefits 811,574 767,873 736,152
Occupancy expense 162,837 165,951 165,954
Other operating expenses 382,211 427,666 496,576
---------- ---------- ----------
Total other expenses 1,356,622 1,361,490 1,398,682
---------- ---------- ----------
Income before income taxes, change in
accounting principle and minority interest 796,272 906,767 578,701
Income tax expense 163,729 176,508 103,023
---------- ---------- ----------
Income before change in accounting
principle and minority interest 632,543 730,259 475,678
Cumulative effect of change in
accounting principle -- -- 9,910
---------- ---------- ----------
Income before minority interest 632,543 730,259 465,768
Minority interest -- 35,170 73,076
---------- ---------- ----------
Net income $ 632,543 $ 695,089 $ 392,692
========== ========== ==========
The accompanying note are an integral part of these financial statements.
F-4
88
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1994 1993
1995 UNAUDITED UNAUDITED
----------- ----------- -----------
Cash flows from operating activities
Net income $ 632,543 $ 695,089 $ 392,692
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 31,773 60,913 91,025
Minority interest -- 35,170 66,147
Gain on sale of other real estate -- -- (1,447)
Deferred income taxes 10,270 (5,679) --
Provision for credit losses 60,000 30,000 --
Amortization and accretion, net 31,815 35,389 --
(Increase) decrease in accrued income 58,899 (61,994) 14,731
Increase (decrease) in other liabilities (55,029) 17,715 (41,059)
Increase (decrease) in accrued expenses 5,675 40,799 (55,889)
----------- ----------- -----------
Total adjustments 143,403 152,313 73,508
----------- ----------- -----------
Net cash provided (used) by operating activities 775,946 847,402 466,200
----------- ----------- -----------
Cash flow from investing activities:
Net (increase) decrease in federal funds sold 3,175,000 (1,000,000) 250,000
Purchases of investment securities (1,332,950) (1,000,000) (1,958,222)
Proceeds from maturities of securities 5,477,392 2,076,985 4,290,000
Net (increase) decrease in loans (1,105,621) 1,379,138 (1,821,081)
Cash payments for purchase of property (8,648) (197,286) (128,918)
Cash payments for purchase of minority interest (373,490) (258,030) --
Cash payments for organization cost -- (5,000) --
Cash payments for purchase of treasury stock -- (335,350) --
Proceeds from sale of treasury stock 30,420 -- --
Proceeds from sale of property -- -- 4,126
Proceeds from sale of other real estate -- -- 22,443
----------- ----------- -----------
Net cash provided by investing activities 5,862,103 660,457 658,348
----------- ----------- -----------
Cash flows from financing activities:
Increase (decrease) in demand deposits 364,668 (1,220,077) (345,216)
Increase (decrease) in savings and NOW (1,796,097) 51,940 (15,691)
Increase (decrease) in other time deposits (3,791,213) (1,501,257) (291,902)
Proceeds from borrowed funds -- 637,864 11,000
Repayments of borrowed funds (1,553,274) (29,398) (11,000)
----------- ----------- -----------
Net cash provided (used) by financing activities (6,775,916) (2,060,928) (652,809)
----------- ----------- -----------
Net increase (decrease) in cash and equivalents (137,867) (553,069) 471,739
Cash and cash equivalents, beginning of year 2,538,048 3,091,117 2,619,378
----------- ----------- -----------
Cash and cash equivalents, end of year $2,400,181 $2,538,048 $3,091,117
=========== =========== ===========
The accompanying note are an integral part of these financial statements.
F-5
89
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------- ---------- ---------- --------- -------------
Balance, December 31, 1992 $40,732 $1,648,270 $2,507,016 $(506,796) $3,689,222
Net income -- -- 392,692 -- 392,692
------- ---------- ---------- --------- ----------
Balance, December 31, 1993 40,732 1,648,270 2,899,708 (506,796) 4,081,914
Purchase of 3,530 shares
of treasury stock -- -- -- (335,350) (335,350)
Net income -- -- 695,089 -- 695,089
------- ---------- ---------- --------- ----------
Balance, December 31, 1994 40,732 1,648,270 3,594,797 (842,146) 4,441,653
Sale of 338 shares
of treasury stock -- -- -- 30,420 30,420
Net income -- -- 632,543 -- 632,543
------- ---------- ---------- --------- ----------
Balance, December 31, 1995 $40,732 $1,648,270 $4,227,340 $(811,726) $5,104,616
======= ========== ========== ========= ==========
The accompanying note are an integral part of these financial statements.
F-6
90
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) Summary of Significant Accounting Policies
------------------------------------------
General
-------
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, The First State
Bank of Canadian (the Bank). Intercompany transactions and
balances have been eliminated in consolidation. The accounting and
reporting policies of the Bank conform to generally accepted
accounting principles and to general practice within the banking
industry.
During 1994 and 1995, the Company acquired all minority interest in The
First State Bank of Canadian for $631,520. The book value of the
minority interest was $850,671. This resulted in assets acquired
over cost of $219,151. As a result, non current assets of the bank
have been adjusted to reflect this transaction.
Investment securities
---------------------
The Bank's investments in securities are classified in one of three
categories and accounted for as follows:
Trading - Securities held principally for resale in the near term.
Unrealized gains and losses on trading securities are included in
other income.
Held-to-maturity - Securities for which the Bank has the positive
intent and ability to hold to maturity are reported at cost,
adjusted for amortization of premiums and accretion of discounts
which are recognized in interest income.
Available-for-sale - Securities not classified as trading or held-to-
maturity. Unrealized holding gains and losses, net of tax, on
securities available-for-sale are reported as a net amount in a
separate component of stockholders' equity until realized.
Gains and losses on the sale of securities are determined using the
specific identification method.
F-7 Continued
91
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Loans and allowance for credit losses
-------------------------------------
Loans are stated at the amount of unpaid principal, reduced by unearned
discount and an allowance for credit losses. Unearned discount on
installment loans is recognized as income over the terms of the
loans by the rule of 78ths method. Interest on other loans is
calculated by using the simple interest method on daily balances of
the principal amount outstanding. The allowance for credit losses
is established through a provision for credit losses charged to
expenses. Loans are charged against the allowance for credit losses
when management believes that collectibility is unlikely. The
allowance is an amount that management believes will be adequate to
absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans
and prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the
borrowers' ability to pay. Accrual of interest is discontinued on a
loan when management believes, after considering economic and
business conditions and collection efforts, that the borrowers'
financial condition is such that collection of interest is doubtful.
Property and equipment
----------------------
Equipment and building are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line and declining-balance
methods over the estimated useful lives of the assets. Gains and
losses on dispositions are credited or charged to income.
Maintenance and repairs are charged to expense as incurred. Bank
premises and equipment are being depreciated over the following
estimated useful lives (in years)
Building premises 10 - 26
Furniture, fixtures
and equipment 3 - 20
Off-balance sheet financial instruments
---------------------------------------
In the ordinary course of business, the Bank has entered into off-
balance sheet financial instruments consisting of commitments to
extend credit, commercial letters of credit and standby letters of
credit. Such financial instruments are recorded in the financial
statements when they become payable.
Income taxes
------------
Deferred income taxes are reported for timing differences between
items of income or expense reported in the financial statements and
those reported for income tax purposes. The Bank files a
consolidated Federal income tax return with the Company.
F-8 Continued
92
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
Cash and cash equivalents - The carrying amounts of cash and
short-term instruments approximate their fair value.
Trading securities - Fair values for trading account securities which
also are the amounts recognized in the balance sheet, are based on
quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of
comparable instruments except in the case of certain options and
swaps where pricing models are used.
Securities held-to-maturity and available-for-sale - Fair values for
investment securities, excluding restricted equity securities, are
based on quoted market prices. The carrying values of restricted
equity securities approximate fair values.
Loans - For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values of fixed rate loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using
discounted cash flow analyses or underlying collateral values, where
applicable.
Deposit liabilities - The fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the
reporting date. The carrying amount of variable rate, fixed term
money market accounts and certificates of deposits approximate their
fair values at the reporting date. Fair values for fixed rate
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities
on time deposits.
Short-term borrowings - The carrying amounts of federal funds
purchased, borrowings under repurchase agreements, and other
short-term borrowings maturing within 90 days approximate their fair
values. Fair values of other short-term borrowings are estimated
using discounted cash flow analyses based on the Bank's current
incremental borrowing rates for similar types of borrowing
arrangements.
F-9 Continued
93
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Fair Values of Financial Instruments, Continued
-----------------------------------------------
Long-term debt - The fair values of the Bank's long-term debt are
estimated using discounted cash flow analyses based on the Bank's
current incremental borrowing rates for similar types of borrowing
arrangements.
Accrued interest - The carrying amounts of accrued interest
approximate their fair values.
Off-balance-sheet instruments - Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter
into similar agreements, taking into account the remaining term of
the agreements and the counterparties' credit standing.
Cash flows
----------
For purposes of reporting cash flows, cash and cash equivalents
included cash on hand and amounts due from banks. The Company uses
the indirect method to present cash flows from operating activities.
(2) Accounting Changes
------------------
In 1995, the Company implemented Statement of Financial Accounting
Standards (SFAS) 114, "Accounting by Creditors for Impairment of a
Loan" and SFAS 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures." These statements require
that certain impaired loans be measured based on either the present
value of expected future cash flows discounted at the loan's
effective rate, the market price of the loan, or fair value of the
underlying collateral if the loan is collateral dependent. Adoption
of SFAS 114 and 118 had no effect on 1995 earnings.
In 1995, the Company implemented SFAS 107, "Disclosures about Fair
Value of Financial Instruments". SFAS 107 requires that the Company
disclose estimated fair values for its financial instruments.
Adoption of SFAS 107 had no effect on 1995 earnings.
In 1994, the Company implemented Statement of Financial Accounting
Standards (SFAS) 115, "Accounting for Certain Investments in Debt or
Equity Securities" . Under SFAS 115, the Company classified debt and
equity securities as either held-to-maturity, available-for-sale or
trading securities. Held-to-maturity securities are recorded at
amortized cost, whereas available-for-sale and trading securities
are carried at market value. Unrealized gains and losses on
available-for-sale securities are reported, net of tax, as a
separate component of stockholders' equity. Adoption of SFAS 115
had no effect on current year earnings.
In 1993, the Company implemented SFAS 109. Under SFAS 109, the
Company recognizes deferred tax assets if it is more likely than
not that a benefit will be realized. The cumulative effect of this
accounting change was a charge to earnings of $9,910 in 1993.
F-10 Continued
94
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) Supplemental Cash Flow Disclosure
---------------------------------
Supplemental disclosures of cash flow information:
1995 1994 1993
---------- ---------- ----------
Cash paid during the year for:
Interest $1,280,937 $1,116,206 $1,180,194
========== ========== ==========
Income taxes $163,419 $117,209 $69,497
========== ========== ==========
(4) Investment Securities
---------------------
At December 31, 1995, the investment securities portfolio was
comprised of securities classified as held-to-maturity in
conjunction with the adoption of SFAS 115, resulting in investment
securities held-to-maturity being carried at amortized cost.
The amortized cost and estimated market values of investment
securities held-to-maturity at December 31, 1995 were:
GROSS GROSS ESTIMATED
COST GAINS LOSSES VALUES
---------- -------- ------- ----------
U.S. Agency
securities $ 987,544 $3,706 $5,157 $986,093
Obligations of state
and political
subdivisions 4,633,798 185,000 1,646 4,817,152
Mortgage-backed
securities 1,161,791 43,395 -- 1,205,186
Other securities 99,985 1,484 -- 101,469
---------- -------- ------- ----------
$6,883,118 $233,585 $ 6,803 $7,109,900
========== ======== ======= ==========
At December 31, 1994, the investment securities portfolio was
comprised of securities classified as held-to-maturity, in
conjunction with the adoption of SFAS 115, resulting in investment
securities held-to-maturity being carried at cost, adjusted for
amortization of premiums and accretion of discounts.
F-11 Continued
95
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) Investment Securities, Continued
--------------------------------
The amortized cost and estimated market values of investment securities
held-to-maturity at December 31, 1994 were:
GROSS GROSS ESTIMATED
COST GAINS LOSSES VALUES
---------- -------- ------- ----------
U.S. Agency
securities $5,001,156 $ -- $88,189 $4,912,967
Obligations of state
and political
subdivisions 4,783,289 136,157 13,677 4,905,769
Mortgage-backed
securities 1,173,965 7,622 1,444 1,180,143
Other securities 99,965 -- 245 99,720
----------- -------- -------- -----------
$11,058,375 $143,779 $103,555 $11,098,599
=========== ======== ======== ===========
The amortized cost and estimated market value of investment securities
held-to-maturity at December 31, 1995, by expected maturity are shown below.
Expected maturities will differ from contractual maturity because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Securities
Held-to-Maturity
ESTIMATED
AMORTIZED MARKET
COST VALUE
-------------- --------------
Due in one year or less $1,035,087 $1,032,287
Due after one year but
less than five years 3,816,840 3,982,640
Due after five years but
less than ten years 769,400 784,395
Due after ten years 100,000 105,392
-------------- --------------
5,721,327 5,904,714
Mortgage-backed
securities 1,161,791 1,205,186
-------------- --------------
$6,883,118 $7,109,900
============== ==============
Investment securities with a carrying value of approximately
$4,003,000 and 4,808,000 at December 31, 1995 and 1994,
respectively, were pledged to secure public deposits and for other
purposes required and permitted by law.
F-12 Continued
96
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(5) Loans and Allowance for Credit Losses
-------------------------------------
Major classifications of loans at December 31, 1995 and 1994 are as follows:
1995 1994
------------ ------------
Agricultural $11,646,430 $12,768,807
Commercial and industrial 5,167,206 3,267,207
Real estate 2,104,296 2,199,316
Individuals 1,058,362 693,665
Installment 2,093,095 2,036,351
Other 20,047 8,885
------------ ------------
22,089,436 20,974,231
Unearned discount (200,051) (185,855)
------------ ------------
21,889,385 20,788,376
Allowance for loan losses (329,832) (274,444)
------------ ------------
$21,559,553 $20,513,932
============ ============
Loans on which the accrual of interest has been discontinued or
reduced amounted to approximately $42,000 and $0 at December 31, 1995 and
1994. There has been no interest income on those loans, which would be
recorded only when received, since being placed on non-accrual status.
Changes in the allowance for loan losses were as follows:
1995 1994
------------ ------------
Balance, beginning of year $274,444 $366,929
Provision charged to operations 60,000 30,000
Recoveries 26,231 36,959
------------ ------------
360,675 433,888
Loans charged off (30,843) (159,444)
------------ ------------
Balance, end of year $329,832 $274,444
============ ============
(6) Bank Buildings, Equipment and Improvements
------------------------------------------
Major classifications of these assets are summarized as follows:
1995 1994
------------ ------------
Land $274,035 $247,035
Buildings and components 407,068 353,557
Furniture, fixtures and equipment 664,220 655,572
------------ ------------
1,318,323 1,256,164
Accumulated depreciation (730,920) (645,638)
------------ ------------
$587,403 $610,526
============ ============
Depreciation expense amounted to $31,773, $60,913 and $91,025 in 1995,
1994 and 1993.
F-13 Continued
97
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) Borrowed Funds
--------------
Borrowed funds at December 31, 1994 consisted of notes to a bank,
renewable annually, payable in various amounts. The notes are
secured by stock in the subsidiary and bear interest at a rate
variable with prime.
(8) Income Taxes
------------
The total income taxes in the consolidated statements of income are as
follows:
1995 1994 1993
------------ ------------ ------------
Current $153,459 $182,187 $68,292
Deferred 10,270 (5,679) 34,731
------------ ------------ ------------
$163,729 $176,508 $103,023
============ ============ ============
Deferred income taxes are primarily comprised of temporary
differences between the amount of assets and liabilities recognized for
financial accounting purposes and federal income tax purposes. The
primary items making up deferred tax expense are the allowance for
credit losses, depreciation and other real estate.
The components of deferred income taxes included on the balance sheet
at December 31, 1995 were:
Depreciation $38,423
-----------
Gross deferred tax liabilities $38,423
===========
Allowance for credit losses $18,618
Other real estate 7,000
-----------
Gross deferred tax assets $25,618
===========
(9) Financial Instruments with Off-Balance Sheet Risk
-------------------------------------------------
The Company is party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. Those involve, to
varying degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the consolidated balance sheet. The
contract or nominal amounts of those instruments reflect the extent of
the involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instruments for commitments to
extend credit and standby letters of credit is represented by the
contractual or nominal amount of those instruments. The company uses
the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
F-14 Continued
98
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) Financial Instruments with Off-Balance Sheet Risk, Continued
------------------------------------------------------------
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. Since a portion
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 such
evaluations. Collateral held varies but may include accounts
receivable, inventory, or property. Commitments to extend credit
(including amounts to be sold to participating banks) amounted to
approximately $12,400,000 and $12,600,000 at December 31, 1995 and
1994, respectively.
Standby letters of credit are written conditional commitments issued
by the Bank to guarantee the performance of a customer to a third
party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Bank evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of a letter of credit, is
based on management's credit evaluation of the customer. Collateral
held varies but may include certificates of deposit, accounts
receivable and inventory. Standby letters of credit amounted to
approximately $29,000 and $191,000, at December 31, 1995 and 1994,
respectively.
The estimated fair values of the Bank's financial instruments were as
follows as of December 31, 1995.
CARRYING FAIR
AMOUNTS VALUES
---------------- ----------------
Financial assets:
Cash and due from banks interest-bearing
deposits with banks and federal funds sold $ 8,850,181 $ 8,850,181
Investment securities 6,883,118 7,109,900
Loans 21,889,385 21,945,686
Accrued income and other assets 779,635 779,635
Financial liabilities:
Deposit liabilities 33,301,346 33,383,883
Accrued expense and other liabilities 253,928 253,928
Off-balance-sheet instruments:
Commitment to extend credit -- --
Standby letters of credit -- --
F-15 Continued
99
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) Lease Agreements
----------------
The subsidiary Bank leases certain equipment. Minimum future rental
payments under non-cancelable operating leases having remaining terms
in excess of one year as of December 31, 1995 for each of the next
three years and in the aggregate are:
1996 $ 8,376
1997 7,104
1998 6,512
-----------
Total minimum future rental payments $21,992
===========
Total rental expense was $15,200, $10,322 and $10,322 in 1995, 1994
and 1993, respectively.
(11) Related-Party Transactions
--------------------------
The Bank has entered into transactions with its directors, significant
shareholders and their affiliates (related parties). Such
transactions were made in the ordinary course of business on
substantially the same terms and conditions, including interest rates
and collateral, as those prevailing at the same time for comparable
transactions with other customers, and did not, in the opinion of
management, involve more than normal credit risk or present other
unfavorable features. The aggregate amount of loans to such related
parties as of December 31, 1995 and 1994 were $2,708,034 and
$2,170,619, respectively.
(12) Profit Sharing Plan
-------------------
The Bank has a noncontributory profit sharing plan covering
substantially all employees. The total profit sharing expense was
$80,752, $71,306 and $74,859 for the years ended December 31, 1995,
1994 and 1993.
F-16 Continued
100
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) Supplemental Disclosures
------------------------
The following tables summarize the financial information of Canadian
Bancshares, Inc. on a parent company only basis as of December 31,
1995, 1994 and 1993 and for the years then ended.
Balance Sheet
1995 1994 1993
------------ ------------ ------------
ASSETS
------
Cash in subsidiary bank $ 38,218 $ 19,680 $ 696
Receivable from interim bank 5,000 5,000 --
Income tax receivable due
from subsidiary 37,081 34,359 15,406
Investment in subsidiary 5,160,640 6,498,948 5,020,306
Organization cost, net 3,750 4,750 --
------------ ------------ ------------
$5,244,689 $6,562,737 $5,036,408
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Due to directors -- -- 8,000
Accrued interest payable -- 736 1,685
Excess acquired assets over cost 140,073 193,584 --
Accounts payable for stock purchase -- 373,490 --
Borrowed funds -- 1,533,274 944,088
------------ ------------ ------------
Total liabilities 140,073 2,121,084 954,493
------------ ------------ ------------
Stockholder's equity:
Preferred stock, $1 par value
500,000 shares authorized,
none outstanding -- -- --
Common stock, $1 par value
1,000,000 shares authorized
40,732 shares issued 40,732 40,732 40,732
Additional paid-in capital 1,648,270 1,648,270 1,648,270
Retained earnings 4,227,340 3,594,797 2,899,709
------------ ------------ ------------
5,916,342 5,283,799 4,588,711
Treasury stock, 8,977, 9,315 and 5,785 shares
respectively at cost (811,726) (842,146) (506,796)
------------ ------------ ------------
Total stockholders' equity 5,104,616 4,441,653 4,081,915
------------ ------------ ------------
Total liabilities and stockholders' equity $5,244,689 $6,562,737 $5,036,408
============ ============ ============
Income Statement
1995 1994 1993
------------ ------------ ------------
Income:
Dividends from subsidiary $2,000,000 $100,000 $43,072
Dividends in excess of earnings (1,338,306) -- --
------------ ------------ ------------
661,694 100,000 43,072
Accretion of excess of acquired assets over cost 43,830 25,568 --
------------ ------------ ------------
705,524 125,568 43,072
------------ ------------ ------------
Expenses:
Interest expense 88,982 88,760 57,727
Other expenses 21,080 12,047 19,302
------------ ------------ ------------
110,062 100,807 77,029
------------ ------------ ------------
Income before Federal income tax and equity in
undistributed earnings of subsidiary 595,462 24,761 (33,957)
Federal income tax (expense) benefit 37,081 34,359 15,406
Equity in undistributed earnings of subsidiary -- 635,969 411,243
------------ ------------ ------------
$632,543 $695,089 $392,692
============ ============ ============
F-17 Continued
101
CANADIAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) Supplemental Disclosures, Continued
-----------------------------------
Statements of Cash Flows
1995 1994 1993
------------ ------------ ------------
Cash flows from operating activities:
Net income (loss) $632,543 $695,089 $392,692
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization and accretion, net (52,509) (25,318) --
Equity in undistributed earnings -- (635,969) (411,244)
Dividend in excess of earnings 1,338,306 -- --
(Increase) decrease in tax benefit receivable (2,722) (18,953) 3,578
Increase in receivable interim Bank -- (5,000) --
Increase (decrease) - interest payable (736) (951) (13,166)
------------ ------------ ------------
Total adjustments 1,282,339 (686,191) (420,832)
------------ ------------ ------------
Net cash provided (used) by operating activities 1,914,882 8,898 (28,140)
------------ ------------ ------------
Cash flows from investing activities:
Cash payment for purchase of subsidiary stock (373,490) (258,030) --
Cash payment of organizational cost -- (5,000) --
Cash payment for purchase of treasury stock -- (335,350) --
Proceeds from sale of treasury stock 30,420 -- --
------------ ------------ ------------
Net cash provided (used) by investing activities (343,070) (598,380) --
------------ ------------ ------------
Cash flow from financing activities:
Proceeds from borrowed funds -- 637,864 11,000
Repayment of borrowed funds (1,553,274) (29,398) (11,000)
------------ ------------ ------------
Net cash used by financing activities (1,553,274) 608,466 --
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 18,528 18,984 (28,140)
Cash and cash equivalents at beginning of year 19,680 696 28,836
------------ ------------ ------------
Cash and cash equivalents at end of year $38,218 $19,680 $ 696
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense $88,246 $89,711 $70,893
============ ============ ============
(14) Subsequent Event
----------------
Subsequent to December 31, 1995, Canadian Bancshares, Inc. entered
into an agreement with Boatmen's Bancshares, Inc. and Boatmen's Texas, Inc.
which provides for, among other things, the merger of Canadian Bancshares,
Inc. with and into Boatmen's Texas, Inc. Upon consummation of the merger,
each issued and outstanding share of common stock of Canadian Bancshares,
Inc. will be converted into the right to receive 5.9518 shares, subject to
adjustment, of common stock, par value $1.00 per share, of Boatmen's
Bancshares, Inc. and any attached rights, plus cash in lieu of any
fractional shares interest.
F-18
102
APPENDIX A
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
CANADIAN BANCSHARES, INC.,
a Texas corporation,
and
BOATMEN'S BANCSHARES, INC.,
a Missouri corporation,
and
BOATMEN'S TEXAS, INC.,
a Missouri corporation
Dated January 30, 1996
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
103
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE ONE - TERMS OF THE MERGER & CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Section 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Section 1.02. Merging Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Section 1.03. Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Section 1.04. Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Section 1.05. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Section 1.06. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
Section 1.07. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
Section 1.08. Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
Section 1.09. Exchange Procedures; Surrender of Certificates . . . . . . . . . . . . . . . A-4
ARTICLE TWO - REPRESENTATIONS OF CANADIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
Section 2.01. Organization and Capital Stock . . . . . . . . . . . . . . . . . . . . . . . A-5
Section 2.02. Authorization; No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Section 2.03. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Section 2.04. Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Section 2.05. Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Section 2.06. Regulatory Enforcement Matters . . . . . . . . . . . . . . . . . . . . . . . A-7
Section 2.07. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Section 2.08. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Section 2.09. Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Section 2.10. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
Section 2.11. Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
Section 2.12. Employee Matters and ERISA . . . . . . . . . . . . . . . . . . . . . . . . . A-8
Section 2.13. Title to Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . . A-9
Section 2.14. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
Section 2.15. Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
Section 2.16. Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
Section 2.17. Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
Section 2.18. Statements True and Correct. . . . . . . . . . . . . . . . . . . . . . . . . A-10
ARTICLE THREE - REPRESENTATIONS OF BOATMEN'S AND BOATMEN'S-TEXAS . . . . . . . . . . . . . . . . A-11
Section 3.01. Organization and Capital Stock . . . . . . . . . . . . . . . . . . . . . . . A-11
Section 3.02. Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
Section 3.03. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
Section 3.04. Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
Section 3.05. Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
Section 3.06. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
Section 3.07. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
A-i
104
Section 3.08. Compliance With Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
Section 3.09. Statements True and Correct. . . . . . . . . . . . . . . . . . . . . . . . . A-13
ARTICLE FOUR - AGREEMENTS OF CANADIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
Section 4.01. Business in Ordinary Course. . . . . . . . . . . . . . . . . . . . . . . . . A-14
Section 4.02. Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
Section 4.03. Submission to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . A-16
Section 4.04. Consents to Contracts and Leases . . . . . . . . . . . . . . . . . . . . . . A-16
Section 4.05. Merger Expenses and Related Matters. . . . . . . . . . . . . . . . . . . . . A-16
Section 4.06. Consummation of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . A-17
Section 4.07. Environmental Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
Section 4.08. Restriction on Resales . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
Section 4.09. Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
Section 4.10. Subsidiary Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
ARTICLE FIVE - AGREEMENTS OF BOATMEN'S AND BOATMEN'S-TEXAS . . . . . . . . . . . . . . . . . . . A-19
Section 5.01. Regulatory Approvals and Registration Statement. . . . . . . . . . . . . . . A-19
Section 5.02. Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Section 5.03. Consummation of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Section 5.04. Directors and Officers' Liability Insurance and Indemnification. . . . . . . A-20
Section 5.05. Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Section 5.06. Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
ARTICLE SIX - CONDITIONS PRECEDENT TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . A-21
Section 6.01. Conditions to Boatmen's and Boatmen's-Texas' Obligations . . . . . . . . . . A-21
Section 6.02. Conditions to Canadian's Obligations . . . . . . . . . . . . . . . . . . . . A-22
ARTICLE SEVEN - TERMINATION OR ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
Section 7.01. Mutual Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
Section 7.02. Breach of Representations or Agreements. . . . . . . . . . . . . . . . . . . A-23
Section 7.03. Environmental Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
Section 7.04. Failure of Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
Section 7.05. Approval Denial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Section 7.06. Shareholder Approval Denial. . . . . . . . . . . . . . . . . . . . . . . . . A-24
Section 7.07. Regulatory Enforcement Matters . . . . . . . . . . . . . . . . . . . . . . . A-24
Section 7.08. Automatic Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Section 7.09. Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
ARTICLE EIGHT - GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
Section 8.01. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
Section 8.02. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
Section 8.03. Return of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
A-ii
105
Section 8.04. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
Section 8.05. Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
Section 8.06. Nonsurvival of Representations, Warranties and Agreements. . . . . . . . . . A-28
Section 8.07. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Section 8.08. Headings and Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Section 8.09. Waiver, Amendment or Modification. . . . . . . . . . . . . . . . . . . . . . A-28
Section 8.10. Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Section 8.11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Section 8.12. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Section 8.13. Governing Law; Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . A-28
EXHIBIT 1.08(a) - Canadian's Legal Opinion Matters
EXHIBIT 1.08(b) - Boatmen's Legal Opinion Matters
EXHIBIT 4.09 - Affiliates Agreements
EXHIBIT 7.09 - Index Group
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AGREEMENT AND PLAN OF MERGER
----------------------------
This is an AGREEMENT AND PLAN OF MERGER (this "Agreement") made
January 30, 1996, by and among CANADIAN BANCSHARES, INC., a Texas
corporation ("Canadian"), BOATMEN'S BANCSHARES, INC., a Missouri cor-
poration ("Boatmen's"), and BOATMEN'S TEXAS, INC., a Missouri
corporation and wholly-owned subsidiary of Boatmen's ("Boatmen's-
Texas").
In consideration of the premises and the mutual terms and
provisions set forth in this Agreement, the parties agree as follows.
ARTICLE ONE
-----------
TERMS OF THE MERGER & CLOSING
-----------------------------
SECTION 1.01. THE MERGER. Pursuant to the terms and provisions
------------ ----------
of this Agreement and the General and Business Corporation Law of
Missouri (the "Missouri Corporate Law") and the Texas Business
Corporation Act (the "Texas Corporate Law"), Canadian shall merge
with and into Boatmen's-Texas (the "Merger").
SECTION 1.02. MERGING CORPORATION. Canadian shall be the
------------ -------------------
merging corporation under the Merger and the corporate identity and
existence of Canadian, separate and apart from Boatmen's-Texas, shall
cease on consummation of the Merger.
SECTION 1.03. SURVIVING CORPORATION. Boatmen's-Texas shall be
------------ ---------------------
the surviving corporation in the Merger. No changes in the articles
of incorporation of Boatmen's-Texas shall be effected by the Merger.
SECTION 1.04. EFFECT OF THE MERGER. The Merger shall have all
------------ --------------------
of the effects provided by this Agreement, the Missouri Corporate Law
and the Texas Corporate Law.
SECTION 1.05. CONVERSION OF SHARES.
------------ --------------------
(a) At the Effective Time (as defined in Section 1.07), each
share of common stock, par value $1.00, of Canadian (the "Canadian
Common") issued and outstanding immediately prior to the Effective
Time, other than any shares the holders of which have duly exercised
and perfected their dissenters' rights under the Texas Corporate Law,
shall be converted into the right to receive 5.9518 (the "Conversion
Ratio") shares of voting common stock, par value $1.00 per share, of
Boatmen's (the "Boatmen's Common") (together with any cash payment
in lieu of fractional shares, as provided below, the "Merger
Consideration"). No fractional shares of Boatmen's Common shall be
issued and, in lieu thereof, holders of shares of Canadian Common who
would otherwise be entitled to a fractional share interest in
Boatmen's Common (after taking into account all shares of Canadian
Common held by such holder) shall be paid an amount in cash equal to
the product of such fractional share interest and the closing price
of a share of Boatmen's Common on the Nasdaq Stock Market's National
Market ("Nasdaq") on the business day immediately preceding the date
on which the Effective Time occurs. If the Effective Time does not
occur on or before the record date for the payment of the regular
quarterly dividend on Boatmen's Common declared during the second
quarter of 1996, then, notwithstanding the foregoing, the number of
shares of
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Boatmen's Common included in the Merger Consideration shall be
increased by adding to the Conversion Ratio the quotient of (i) the
product of (A) the amount of such quarterly dividend, multiplied
by (B) 5.9518, divided by (ii) the average closing price of a share
of Boatmen's Common on Nasdaq during the twenty (20) trading days
immediately preceding the fifth calendar day immediately preceding
the Closing Date. In addition, if the Effective Time does not occur
on or before the record date for the payment of the regular quarterly
dividend on Boatmen's Common declared during the third quarter of
1996, then, notwithstanding the foregoing, the number of shares of
Boatmen's Common included in the Merger Consideration shall be
further increased by adding to the Conversion Ratio the quotient of
(i) the product of (A) the amount of such quarterly dividend,
multiplied by (B) 5.9518, divided by (ii) the average closing price
of a share of Boatmen's Common on Nasdaq during the twenty (20)
trading days immediately preceding the fifth calendar day immediately
preceding the Closing Date.
(b) In the event that Canadian shall make the Canadian Election
pursuant to Section 4.07 hereof, then the number of shares of
Boatmen's Common included in the Merger Consideration shall be
reduced by subtracting from the Conversion Ratio the quotient of (i)
the quotient of (A) the amount by which the Remediation Cost (as
defined in Section 4.07 hereof) exceeds Fifty Thousand Dollars
($50,000) (but in no event shall such amount be more than Two Hundred
Thousand Dollars ($200,000)), divided by (B) 31,755, divided by (ii)
the average closing price of a share of Boatmen's Common on Nasdaq
during the twenty (20) trading days immediately preceding the fifth
calendar day immediately preceding the Closing Date. In the event
that the Remediation Cost should equal or exceed Two Hundred Fifty
Thousand Dollars ($250,000) and Boatmen's does not deliver the
Environmental Termination Notice (as defined in Section 4.07 hereof),
then the number of shares of Boatmen's Common included in the Merger
Consideration shall be reduced by subtracting from the Conversion
Ratio the quotient of (i) the quotient of (A) Two Hundred Thousand
Dollars ($200,000), divided by (B) 31,755, divided by (ii) the
average closing price of a share of Boatmen's Common on Nasdaq during
the twenty (20) trading days immediately preceding the fifth calendar
day immediately preceding the Closing Date.
(c) At the Effective Time, all of the shares of Canadian Common,
by virtue of the Merger and without any action on the part of the
holders thereof, shall no longer be outstanding and shall be canceled
and retired and shall cease to exist, and each holder of any
certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Canadian Common (the
"Certificates") shall thereafter cease to have any rights with
respect to such shares, except the right of such holders to receive,
without interest, the Merger Consideration upon the surrender of such
Certificate or Certificates in accordance with Section 1.09.
(d) At the Effective Time, each share of Canadian Common, if
any, held in the treasury of Canadian or by any direct or indirect
subsidiary of Canadian (other than shares held in trust accounts for
the benefit of others or in other fiduciary, nominee or similar
capacities) immediately prior to the Effective Time shall be
canceled.
(e) Each share of common stock of Boatmen's-Texas outstanding
immediately prior to the Effective Time shall remain outstanding
unaffected by the Merger.
(f) If between the date hereof and the Effective Time a share
of Boatmen's Common shall be changed into a different number of
shares of Boatmen's Common or a different class of shares by reason
of reclassification, recapitalization, splitup, exchange of shares
or readjustment, or if a stock dividend thereon shall be declared
with a record date within such period, then the number of shares of
Boatmen's
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Common into which a share of Canadian Common will be converted
pursuant to subsections (a) and (b) above will be appropriately and
proportionately adjusted so that each shareholder of Canadian shall be
entitled to receive such fraction of a share or such number of shares
of Boatmen's Common as such shareholder would have received pursuant
to such reclassification, recapitalization, splitup, exchange of
shares or readjustment or as a result of such stock dividend had the
record date therefor been immediately following the Effective Time of
the Merger.
(g) If holders of Canadian Common dissent from this Agreement
and Merger under the Texas Corporate Law, any issued and outstanding
shares of Canadian Common held by a dissenting holder shall not be
converted as described in this Section 1.05 but from and after the
Effective Time shall represent only the right to receive such
consideration as may be determined to be due to such dissenting
holder pursuant to the Texas Corporate Law; provided, however, that
each share of Canadian Common outstanding immediately prior to the
Effective Time and held by a dissenting holder who shall, after the
Effective Time, withdraw his demand for appraisal or lose his right
to dissent shall have only such rights as are provided under the
Texas Corporate Law.
SECTION 1.06. THE CLOSING. The closing of the Merger (the
------------ -----------
"Closing") shall take place at the main offices of Boatmen's First
National Bank of Amarillo ("Boatmen's-Amarillo"), or at such other
location as the parties may agree, at 10:00 A.M. Central Time on the
Closing Date described in Section 1.07 of this Agreement.
SECTION 1.07. CLOSING DATE. At Boatmen's election, the Closing
------------ ------------
shall take place on (i) the last business day of, or (ii) the first
business day of the month following, or (iii) the last business day
of the earliest month which is the second month of a calendar quarter
following, in each case, the month during which each of the
conditions in Sections 6.01(d) and 6.02(d) is satisfied or waived by
the appropriate party or on such other date after such satisfaction
or waiver as Canadian and Boatmen's may agree (the "Closing Date").
The Merger shall be effective upon the filing of Articles of Merger
with the Secretary of State of the State of Missouri and the
Secretary of State of the State of Texas (the "Effective Time"),
which the parties shall use their best efforts to cause to occur on
the Closing Date.
SECTION 1.08. CLOSING DELIVERIES.
------------ ------------------
(a) At the Closing, Canadian shall deliver to Boatmen's and
Boatmen's-Texas:
(i) a certified copy of the Articles of Incorporation of
Canadian and each of its subsidiaries;
(ii) a Certificate or Certificates signed by an appropriate
officer of Canadian stating that (A) each of the representations
and warranties contained in Article Two is true and correct in
all material respects at the time of the Closing with the same
force and effect as if such representations and warranties had
been made at Closing, and (B) all of the conditions set forth in
Section 6.01(b) have been satisfied or waived as provided
therein;
(iii) a certified copy of the resolutions of Canadian's
Board of Directors and shareholders, as required for valid
approval of the execution of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby;
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(iv) a certified list of the shareholders of Canadian dated
as of the Closing Date;
(v) Certificate of the Texas Secretary of State, dated a
recent date, stating that Canadian is in good standing; and
(vi) a legal opinion of counsel for Canadian, in form
reasonably acceptable to Boatmen's counsel, opining with respect
to the matters listed on Exhibit 1.08(a) hereto.
(b) At the Closing, Boatmen's or Boatmen's-Texas, as the case
may be, shall deliver to Canadian:
(i) a Certificate or Certificates signed by an appropriate
officer of Boatmen's and Boatmen's-Texas stating that (A) each
of the representations and warranties contained in Article Three
is true and correct in all material respects at the time of the
Closing with the same force and effect as if such
representations and warranties had been made at Closing, and
(B) all of the conditions set forth in Section 6.02(b) and
6.02(d) (but only with respect to approvals other than by
Canadian's shareholders) have been satisfied;
(ii) a certified copy of the resolutions of the Board of
Directors of Boatmen's authorizing the execution of this
Agreement and the consummation of the transactions contemplated
hereby;
(iii) a certified copy of the resolutions of Boatmen's-
Texas' Board of Directors and sole shareholder, as required for
valid approval of the execution of this Agreement and the
consummation of the transactions contemplated hereby; and
(iv) a legal opinion of counsel for Boatmen's, in form
reasonably acceptable to Canadian's counsel, opining with
respect to the matters listed on Exhibit 1.08(b) hereto.
SECTION 1.09. EXCHANGE PROCEDURES; SURRENDER OF CERTIFICATES.
------------ ----------------------------------------------
(a) Boatmen's Trust Company, St. Louis, Missouri, shall act as
Exchange Agent in the Merger (the "Exchange Agent").
(b) As soon as reasonably practicable, and in no event more than
ten (10) business days after the Effective Time, the Exchange Agent
shall mail to each record holder of any Certificate or Certificates
whose shares were converted into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Boatmen's may reasonably specify) (each such
letter, the "Merger Letter of Transmittal") and instructions for use
in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender to the Exchange Agent of a
Certificate, together with a Merger Letter of Transmittal duly
executed and any other required documents, the holder of such
Certificate shall be entitled to receive in exchange therefor solely
the Merger Consideration. No interest on the Merger Consideration
issuable upon the surrender of the Certificates shall be paid or
accrued for the benefit of holders of Certificates. If the Merger
Consideration is to be issued to a person other than a person in
whose name a surrendered Certificate is registered, it shall be a
condition of issuance that the surrendered Certificate shall be
properly endorsed or otherwise in proper form for transfer and that
the person requesting such issuance shall pay to
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the Exchange Agent any required transfer or other taxes or establish
to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable.
(c) At any time following six months after the Effective Time,
Boatmen's shall be entitled to terminate the Exchange Agent
relationship, and thereafter holders of Certificates shall be
entitled to look only to Boatmen's (subject to abandoned property,
escheat or other similar laws) with respect to the Merger
Consideration issuable upon surrender of their Certificates.
(d) No dividends that are otherwise payable on shares of
Boatmen's Common constituting the Merger Consideration shall be paid
to persons entitled to receive such shares of Boatmen's Common until
such persons surrender their Certificates. Upon such surrender,
there shall be paid to the person in whose name the shares of
Boatmen's Common shall be issued any dividends which shall have
become payable with respect to such shares of Boatmen's Common
(without interest and less the amount of taxes, if any, which may
have been imposed thereon), between the Effective Time and the time
of such surrender.
ARTICLE TWO
-----------
REPRESENTATIONS OF CANADIAN
---------------------------
Canadian hereby makes the following representations and
warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
------------ ------------------------------
(a) Canadian is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and has the
corporate power to own all of its property and assets, to incur all
of its liabilities and to carry on its business as now being
conducted. Canadian is a bank holding company registered with the
Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") under the Bank Holding Company Act of 1956.
(b) The authorized capital stock of Canadian consists of (i)
1,000,000 shares of Canadian Common, of which, as of the date hereof,
31,755 shares are issued and outstanding and 8,977 shares are held
as treasury stock, and (ii) 500,000 shares of preferred stock, par
value $1.00 per share, of which, as of the date hereof, no shares
have been issued. All of the issued and outstanding shares of
Canadian Common are duly and validly issued and outstanding and are
fully paid and non-assessable. None of the outstanding shares of
Canadian Common has been issued in violation of any preemptive rights
of the current or past shareholders of Canadian. Except as disclosed
in Section 2.01(b) of that certain confidential writing delivered by
Canadian to Boatmen's and Boatmen's-Texas and executed by each of
Canadian, Boatmen's and Boatmen's-Texas concurrently with the
delivery and execution of this Agreement (the "Disclosure Schedule"),
each Certificate representing shares of Canadian Common issued by
Canadian in replacement of any Certificate theretofore issued by it
which was claimed by the record holder thereof to have been lost,
stolen or destroyed was issued by Canadian only upon receipt of an
affidavit of lost stock certificate and indemnity agreement of such
shareholder indemnifying Canadian against any claim that may be made
against it on account of the alleged loss, theft or destruction of
any such Certificate or the issuance of such replacement Certificate.
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(c) Except as set forth in subsection 2.01(b), there are no
shares of capital stock or other equity securities of Canadian issued
or outstanding and, except as set forth in Section 2.01(c) of the
Disclosure Schedule, there are no outstanding options, warrants,
rights to subscribe for, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of Canadian or
contracts, commitments, understandings or arrangements by which
Canadian is or may be obligated to issue additional shares of its
capital stock or options, warrants or rights to purchase or acquire
any additional shares of its capital stock.
SECTION 2.02. AUTHORIZATION; NO DEFAULTS. Canadian's Board of
------------ --------------------------
Directors has, by all appropriate action, approved this Agreement and
the Merger and authorized the execution hereof on its behalf by its
duly authorized officers and the performance by Canadian of its
obligations hereunder. Nothing in the articles of incorporation or
bylaws of Canadian, as amended, or any other agreement, instrument,
decree, proceeding, law or regulation (except as specifically
referred to in or contemplated by this Agreement) by or to which it
or any of its subsidiaries are bound or subject would prohibit or
inhibit Canadian from consummating this Agreement and the Merger on
the terms and conditions herein contained. This Agreement has been
duly and validly executed and delivered by Canadian and constitutes
a legal, valid and binding obligation of Canadian, enforceable
against Canadian in accordance with its terms. Canadian and its
subsidiaries are neither in default under nor in violation of any
provision of their articles of incorporation, bylaws, or any
promissory note, indenture or any evidence of indebtedness or
security therefor, lease, contract, purchase or other commitment or
any other agreement which is material to Canadian and its
subsidiaries taken as a whole.
SECTION 2.03. SUBSIDIARIES. Canadian's wholly-owned banking
------------ ------------
subsidiary, First State Bank of Canadian, a Texas state bank (the
"Bank"), and each of Canadian's other direct or indirect subsidiaries
(collectively, the "subsidiaries") the name and jurisdiction of
incorporation of which is disclosed in Section 2.03 of the Disclosure
Schedule, is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the
corporate power to own its respective properties and assets, to incur
its respective liabilities and to carry on its respective business
as now being conducted. The number of issued and outstanding shares
of capital stock of each such subsidiary is set forth in Section 2.03
of the Disclosure Schedule, all of which shares (except as may be
otherwise there expressed disclosed) are owned by Canadian or
Canadian's subsidiaries, as the case may be and as there disclosed,
free and clear of all liens, encumbrances, rights of first refusal,
options or other restrictions of any nature whatsoever, except as may
be disclosed in Section 2.03 of the Disclosure Schedule. There are
no options, warrants or rights outstanding to acquire any capital
stock of any of Canadian's subsidiaries and no person or entity has
any other right to purchase or acquire any unissued shares of stock
of any of Canadian's subsidiaries, nor does any such subsidiary have
any obligation of any nature with respect to its unissued shares of
stock. Except as may be disclosed in Section 2.03 of the Disclosure
Schedule, neither Canadian nor any of Canadian's subsidiaries is a
party to any partnership or joint venture or owns an equity interest
in any other business or enterprise.
SECTION 2.04. FINANCIAL INFORMATION. The unaudited parent
------------ ---------------------
company only balance sheets of Canadian as of December 31, 1994 and
1993 and the related unaudited income statements and statements of
changes in shareholders' equity and of cash flows for the two years
ended December 31, 1994, together with the notes thereto, and the
unaudited balance sheets of the Bank as of December 31, 1994 and 1993
and related unaudited income statements and statements of changes in
shareholders' equity and cash flows for the two years ended December
31, 1994, and the year-end and quarterly Reports of Condition and
Report of Income of the Bank for 1994 and September 30, 1995,
respectively, as currently on file with the Federal
A-6
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Deposit Insurance Corporation (the "F.D.I.C.") (together, the
"Canadian Financial Statements"), have been prepared, on a consistent
basis throughout the periods presented, on an accounting basis which
is acceptable for, and actually utilized by Canadian and the Bank on
their respective, federal and state income tax returns and there are
no differences between, or adjustments necessary to reconcile,
Canadian's and the Bank's books of account and such tax returns, and
fairly present in all material respects the financial position and
the results of operations, changes in shareholders' equity and cash
flows of Canadian and the Bank as of the dates and for the periods
indicated (subject, in the case of interim financial statements, to
normal recurring year-end adjustments, none of which will be
material).
SECTION 2.05. ABSENCE OF CHANGES. Since September 30, 1995,
------------ ------------------
there has not been any material adverse change in the financial
condition, the results of operations or the business or prospects of
Canadian and its subsidiaries taken as a whole, nor have there been
any events or transactions having such a material adverse effect
which should be disclosed in order to make the Canadian Financial
Statements not misleading. Since the date of the most recent
F.D.I.C. examination report regarding the Bank, there has been no
material adverse change in the financial condition, the results of
operations or the business or prospects of the Bank. Notwithstanding
the foregoing, any actions taken or changes made by Canadian or its
subsidiaries, including the Bank, pursuant to Section 4.05 hereof
shall not, individually or in the aggregate, be deemed to be a
material adverse change in the financial condition, the results of
operations or the business or prospects of Canadian and its
subsidiaries taken as a whole.
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Except as may be
------------ ------------------------------
disclosed in Section 2.06 of the Disclosure Schedule, neither
Canadian nor any of its subsidiaries is subject to, and has not
received any notice or advice that it may become subject to, any
order, agreement, memorandum of understanding or other regulatory
enforcement action or proceeding with or by any federal or state
agency charged with the supervision or regulation of banks or bank
holding companies or engaged in the insurance of bank deposits or any
other governmental agency having supervisory or regulatory authority
with respect to Canadian or any of its subsidiaries.
SECTION 2.07. TAX MATTERS. Canadian and its subsidiaries have
------------ -----------
filed all federal, state and material local tax returns due in
respect of any of their businesses or properties in a timely fashion
and have paid or made provision for all amounts due shown on such
returns. All such returns fairly reflect the information required
to be presented therein. All provisions for accrued but unpaid taxes
contained in the Canadian Financial Statements in the aggregate do
not materially fail to provide for potential tax liabilities.
SECTION 2.08. LITIGATION. Except as may be disclosed in
------------ ----------
Section 2.08 of the Disclosure Schedule, there is no litigation,
claim or other proceeding pending or, to the knowledge of Canadian,
threatened, against Canadian or any of its subsidiaries, or of which
the property of Canadian or any of its subsidiaries is or would be
subject.
SECTION 2.09. EMPLOYMENT AGREEMENTS. Except as may be
------------ ---------------------
disclosed in Section 2.09 of the Disclosure Schedule, neither
Canadian nor any of its subsidiaries is a party to or bound by any
contract for the employment, retention or engagement, or with respect
to the severance, of any officer, employee, agent, consultant or
other person or entity which, by its terms, is not terminable by
Canadian or such subsidiary on thirty (30) days written notice or
less without the payment of any amount by reason of such termination.
A true, accurate and complete copy of each such written agreement
disclosed in Section 2.09 of the Disclosure Schedule and any and all
amendments or supplements thereto is included as an exhibit thereto.
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SECTION 2.10. REPORTS. Except as may be disclosed in
------------ -------
Section 2.10 of the Disclosure Schedule, Canadian and each of its
subsidiaries has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was
required to file with (i) the Federal Reserve Board, (ii) the
F.D.I.C., (iii) the Finance Commission of the State of Texas, and
(iv) any other governmental authority with jurisdiction over Canadian
or any of its subsidiaries. As of their respective dates, each of
such reports and documents, including any financial statements,
exhibits and schedules thereto, complied in all material respects
with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed,
and did not 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.
SECTION 2.11. LOAN PORTFOLIO. Except as may be disclosed in
------------ --------------
Section 2.11 of the Disclosure Schedule, (i) all loans and discounts
shown on the Canadian Financial Statements at September 30, 1995 or
which were entered into after September 30, 1995, but before the
Closing Date, were and will be made in all material respects for
good, valuable and adequate consideration in the ordinary course of
the business of Canadian and its subsidiaries, in accordance in all
material respects with sound banking practices, and are not subject
to any material known defenses, setoffs or counterclaims, including
without limitation any such as are afforded by usury or truth in
lending laws, except as may be provided by bankruptcy, insolvency or
similar laws or by general principles of equity; (ii) the notes or
other evidences of indebtedness evidencing such loans and all forms
of pledges, mortgages and other collateral documents and security
agreements are and will be, in all material respects, enforceable,
valid, true and genuine and what they purport to be; and
(iii) Canadian and its subsidiaries have complied and will prior to
the Closing Date comply in all material respects with all laws and
regulations relating to such loans or, to the extent there has not
been such compliance, such failure to comply will not materially
interfere with the collection of any such loan.
SECTION 2.12. EMPLOYEE MATTERS AND ERISA.
------------ --------------------------
(a) Except as may be disclosed in Section 2.12(a) of the
Disclosure Schedule, neither Canadian nor any of its subsidiaries has
entered into any collective bargaining agreement with any labor
organization with respect to any group of employees of Canadian or
any of its subsidiaries and to the knowledge of Canadian there is no
present effort nor existing proposal to attempt to unionize any group
of employees of Canadian or any of its subsidiaries.
(b) Except as may be disclosed in Section 2.12(b) of the
Disclosure Schedule, (i) Canadian and its subsidiaries are and have
been in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination and occupational
safety and health requirements, and neither Canadian nor any of its
subsidiaries is engaged in any unfair labor practice; (ii) there is
no material unfair labor practice complaint against Canadian or any
subsidiary pending or, to the knowledge of Canadian, threatened
before the National Labor Relations Board; (iii) there is no labor
dispute, strike, slowdown or stoppage actually pending or, to the
knowledge of Canadian, threatened against or directly affecting
Canadian or any subsidiary; and (iv) neither Canadian nor any
subsidiary has experienced any material work stoppage or other
material labor difficulty during the past five years.
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(c) Except as may be disclosed in Section 2.12(c) of the
Disclosure Schedule, neither Canadian nor any subsidiary maintains,
contributes to or participates in or has any liability under any
employee benefit plans, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
nonqualified employee benefit plans or deferred compensation, bonus,
stock or incentive plans, or other employee benefit or fringe benefit
programs for the benefit of former or current employees of Canadian
or any subsidiary (the "Employee Plans"). To the knowledge of
Canadian, no present or former employee of Canadian or any subsidiary
has been charged with breaching and has not breached a fiduciary duty
under any of the Employee Plans. Neither Canadian nor any of its
subsidiaries participates in, nor has it in the past five years
participated in, nor has it any present or future obligation or
liability under, any multiemployer plan (as defined at Section 3(37)
of ERISA). Except as may be separately disclosed in Section 2.12(c)
of the Disclosure Schedule, neither Canadian nor any subsidiary
maintains, contributes to, or participates in, any plan that provides
health, major medical, disability or life insurance benefits to
former employees of Canadian or any subsidiary.
(d) Neither Canadian nor any of its subsidiaries maintain, nor
have any of them maintained for the past ten years, any Employee
Plans subject to Title IV of ERISA or Section 412 of the Code. No
reportable event (as defined in Section 4043 of ERISA) has occurred
with respect to any Employee Plans as to which a notice would be
required to be filed with the Pension Benefit Guaranty Corporation.
No claim is pending, and Canadian has not received notice of any
threatened or imminent claim with respect to any Employee Plan (other
than a routine claim for benefits for which plan administrative
review procedures have not been exhausted) for which Canadian or any
of its subsidiaries would be liable after December 31, 1994, except
as are reflected on the Canadian Financial Statements. After
December 31, 1994, Canadian and its subsidiaries have no liability
for excise taxes under Sections 4971, 4975, 4976, 4977, 4979 or 4980B
of the Internal Revenue Code of 1986, as amended (the "Code") or for
a fine under Section 502 of ERISA with respect to any Employee Plan.
All Employee Plans have in all material respects been operated,
administered and maintained in accordance with the terms thereof and
in compliance with the requirements of all applicable laws,
including, without limitation, ERISA and the Code.
SECTION 2.13. TITLE TO PROPERTIES; INSURANCE. Except as may be
------------ ------------------------------
disclosed in Section 2.13 of the Disclosure Schedule, (i) Canadian
and its subsidiaries have good and indefeasible title, insurable at
standard rates, free and clear of all liens, charges and encumbrances
(except taxes which are a lien but not yet payable and liens, charges
or encumbrances reflected in the Canadian Financial Statements and
easements, rights-of-way, and other restrictions which are not
material and further excepting in the case of Other Real Estate Owned
("O.R.E.O."), as such real estate is internally classified on the
books of Canadian or its subsidiaries, rights of redemption under
applicable law) to all of their real properties; (ii) all leasehold
interests for real property and any material personal property used
by Canadian and its subsidiaries in their businesses are held
pursuant to lease agreements which are valid and enforceable in
accordance with their terms; (iii) all such properties comply in all
material respects with all applicable private agreements, zoning
requirements and other governmental laws and regulations relating
thereto and there are no condemnation proceedings pending or, to the
knowledge of Canadian, threatened with respect to such properties;
(iv) Canadian and its subsidiaries have valid title or other
ownership rights under licenses to all material intangible personal
or intellectual property used by Canadian or its subsidiaries in
their business, free and clear of any claim, defense or right of any
other person or entity which is material to such property, subject
only to rights of the licensors pursuant to applicable license
agreements, which rights do not materially adversely interfere with
the use of such property; and (v) all material insurable properties
owned or held by Canadian and its subsidiaries are insured by
financially sound and reputable insurers in such amounts and against
fire and
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other risks insured against by extended coverage and public liability
insurance, as is customary with financial institutions of similar
size.
SECTION 2.14. ENVIRONMENTAL MATTERS. As used in this
------------ ---------------------
Agreement, "Environmental Laws" means all local, state and federal
environmental, health and safety laws and regulations in all
jurisdictions in which Canadian and its subsidiaries have done
business or owned, leased or operated property, including, without
limitation, the Federal Resource Conservation and Recovery Act, the
Federal Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Clean Water Act, the Federal Clean Air
Act, and the Federal Occupational Safety and Health Act.
Except as may be disclosed in Section 2.14 of the Disclosure
Schedule, neither the conduct nor operation of Canadian or its
subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them violates or
violated Environmental Laws in any respect material to the business
of Canadian and its subsidiaries and no condition has existed or
event has occurred with respect to any of them or any such property
that, with notice or the passage of time, or both, would constitute
a violation material to the business of Canadian and its subsidiaries
of Environmental Laws or obligate (or potentially obligate) Canadian
or its subsidiaries to remedy, stabilize, neutralize or otherwise
alter the environmental condition of any such property where the
aggregate cost of such actions would be material to Canadian and its
subsidiaries. Except as may be disclosed in Section 2.14 of the
Disclosure Schedule, neither Canadian nor any of its subsidiaries has
received any notice from any person or entity that Canadian or its
subsidiaries or the operation or condition of any property ever
owned, leased or operated by any of them are or were in violation of
any Environmental Laws or that any of them are responsible (or
potentially responsible) for remedying, or the cleanup of, any
pollutants, contaminants, or hazardous or toxic wastes, substances
or materials at, on or beneath any such property.
SECTION 2.15. COMPLIANCE WITH LAW. Canadian and its sub-
------------ -------------------
sidiaries have all licenses, franchises, permits and other gov-
ernmental authorizations that are legally required to enable them to
conduct their respective businesses in all material respects and are
in compliance in all material respects with all applicable laws and
regulations.
SECTION 2.16. UNDISCLOSED LIABILITIES. Canadian and its
------------ -----------------------
subsidiaries do not have any material liability, whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due (and there is no past
or present fact, situation, circumstance, condition or other basis
for any present or future action, suit or proceeding, hearing,
charge, complaint, claim or demand against Canadian or its
subsidiaries giving rise to any such liability), except (i) for
liabilities set forth in the Canadian Financial Statements, and (ii)
as may be disclosed in Section 2.16 of the Disclosure Schedule.
SECTION 2.17. BROKERAGE. Except as may be disclosed in Section
------------ ---------
2.17 of the Disclosure Statement, there are no existing claims or
agreements for brokerage commissions, finders' fees, or similar
compensation in connection with the transactions contemplated by this
Agreement payable by Canadian or its subsidiaries.
SECTION 2.18. STATEMENTS TRUE AND CORRECT. None of the
------------ ---------------------------
information supplied or to be supplied by Canadian or its
subsidiaries for inclusion in (i) the Registration Statement (as
defined in Section 4.06), (ii) the Proxy Statement/Prospectus (as
defined in Section 4.03) and (iii) any other documents to be filed
with the Securities and Exchange Commission (the "S.E.C.") or any
banking or other regulatory authority in connection with the
transactions contemplated hereby, will, at the respective times such
documents are
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filed, and, in the case of the Registration Statement, when it becomes
effective, and, with respect to the Proxy Statement/Prospectus, when
first mailed to the stockholders of Canadian, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading, or,
in the case of the Proxy Statement/Prospectus or any amendment thereof
or supplement thereto, at the time of the Stockholders' Meeting (as
defined in Section 4.03), be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the
solicitation of any proxy for the Stockholders' Meeting. All
documents that Canadian is responsible for filing with the S.E.C. or
any other regulatory authority in connection with the transactions
contemplated hereby will comply as to form in all material respects
with the provisions of applicable law and the applicable rules and
regulations thereunder.
ARTICLE THREE
-------------
REPRESENTATIONS OF BOATMEN'S AND BOATMEN'S-TEXAS
------------------------------------------------
Boatmen's and Boatmen's-Texas hereby make the following
representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
------------ ------------------------------
(a) Boatmen's is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of
Missouri with full corporate power and authority to carry on its
business as it is now being conducted. Boatmen's is a bank holding
company registered with the Federal Reserve Board under the Bank
Holding Company Act of 1956. Boatmen's-Texas is a corporation duly
incorporated, validly existing, and in good standing under the laws
of the State of Missouri with full corporate power and authority to
carry on its business as it is now being conducted.
(b) The authorized capital stock of Boatmen's consists of
(i) 200,000,000 shares of Boatmen's Common, of which, as of December
31, 1995, 129,447,988 shares were issued and outstanding, and
(ii) 10,300,000 Cumulative Preferred Shares, no par value per share,
of which 250,000 shares will be designated "7% Cumulative Convertible
Preferred Stock, Series A," stated value $100.00 per share,
liquidation preference $400.00 per share (the "Boatmen's Series A
Preferred Stock"), 35,045 shares are designated "7% Cumulative
Redeemable Preferred Stock, Series B", $100.00 stated value per share
(the "Boatmen's Series B Preferred Stock"), and 2,000,000 shares are
designated "Junior Participating Preferred Stock, Series C", no par
value per share (the "Boatmen's Series C Preferred Stock"). No
shares of the Boatmen's Series A Preferred Stock or Boatmen's
Series C Preferred Stock are issued and outstanding, and 9,609 shares
of the Boatmen's Series B Preferred Stock were issued and outstanding
as of December 31, 1995. All of the issued and outstanding shares
of Boatmen's Common and Boatmen's Series B Preferred Stock are duly
and validly issued and outstanding and are fully paid and
non-assessable. None of the outstanding shares of Boatmen's Common
has been issued in violation of any preemptive rights of the current
or past stockholders of Boatmen's. As of December 31, 1995,
Boatmen's had outstanding options and other rights to acquire not
more than 4,685,697 shares of Boatmen's Common and no shares of the
Boatmen's Series A Preferred Stock, Boatmen's Series B Preferred
Stock or the Boatmen's Series C Preferred Stock.
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(c) Boatmen's-Texas has authorized capital of one hundred
thousand (100,000) shares of common stock, par value $1.00 per share
(the "Boatmen's-Texas Common"). As of the date hereof, 2,000 shares
of Boatmen's-Texas Common are issued and outstanding, fully paid and
non-assessable and owned by Boatmen's.
(d) The shares of Boatmen's Common that are to be issued to the
shareholders of Canadian pursuant to the Merger have been duly
authorized and, when so issued in accordance with the terms of this
Agreement, will be validly issued and outstanding, fully paid and
nonassessable, with no personal liability attaching to the ownership
thereof.
SECTION 3.02. AUTHORIZATION. The Board of Directors of each of
------------ -------------
Boatmen's and Boatmen's-Texas have, by all appropriate action,
approved this Agreement and the Merger and authorized the execution
hereof on their behalf by their respective duly authorized officers
and the performance by such respective entity of their obligations
hereunder. Nothing in the articles of incorporation or bylaws of
Boatmen's or Boatmen's-Texas, as amended, or any other agreement,
instrument, decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this Agreement) by or
to which either of them or any of their subsidiaries are bound or
subject would prohibit or inhibit Boatmen's or Boatmen's-Texas from
entering into and consummating this Agreement and the Merger on the
terms and conditions herein contained. This Agreement has been duly
and validly executed and delivered by Boatmen's and Boatmen's-Texas
and constitutes a legal, valid and binding obligation of Boatmen's
and Boatmen's-Texas, enforceable against Boatmen's and Boatmen's-
Texas in accordance with its terms and no other corporate acts or
proceedings are required to be taken by Boatmen's or Boatmen's-Texas
to authorize the execution, delivery and performance of this
Agreement. Except for the requisite approval of the Federal Reserve
Board and the Finance Commission of the State of Texas, no notice to,
filing with, authorization by, or consent or approval of, any federal
or state regulatory authority is necessary for the execution and
delivery of this Agreement or consummation of the Merger by Boatmen's
or Boatmen's-Texas.
SECTION 3.03. SUBSIDIARIES. Each of Boatmen's significant
------------ ------------
subsidiaries (as such term is defined under S.E.C. regulations) and
Boatmen's-Texas is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and
has the corporate power to own its respective properties and assets,
to incur its respective liabilities and to carry on its respective
business as now being conducted.
SECTION 3.04. FINANCIAL INFORMATION. The consolidated balance
------------ ---------------------
sheets of Boatmen's and its subsidiaries as of December 31, 1994 and
1993 and related consolidated statements of income, changes in
stockholders' equity and cash flows for the three years ended
December 31, 1994, together with the notes thereto, included in
Boatmen's Annual Report on Form 10-K for the year ended December 31,
1994, and the unaudited consolidated balance sheet of Boatmen's and
its subsidiaries as of September 30, 1995 and the related unaudited
consolidated income statement for the nine months then ended included
in Boatmen's Quarterly Report on Form 10-Q for the quarter then
ended, as currently on file with the S.E.C. (together, the "Boatmen's
Financial Statements"), have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as disclosed therein) and fairly present the
consolidated financial position and the consolidated results of
operations, changes in stockholders' equity and cash flows of
Boatmen's and its consolidated subsidiaries as of the dates and for
the periods indicated (subject, in the case of interim financial
statements, to normal recurring year-end adjustments, none of which
will be material).
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SECTION 3.05. ABSENCE OF CHANGES. Since December 31, 1994,
------------ ------------------
there has not been any material adverse change in the financial
condition, the results of operations or the business of Boatmen's and
its subsidiaries taken as a whole, nor have there been any events or
transactions having such a material adverse effect which should be
disclosed in order to make the Boatmen's Financial Statements not
misleading.
SECTION 3.06. LITIGATION. There is no litigation, claim or
------------ ----------
other proceeding pending or, to the knowledge of Boatmen's,
threatened, against Boatmen's or any of its subsidiaries, or of which
the property of Boatmen's or any of its subsidiaries is or would be
subject which if adversely determined would have a material adverse
effect on the business of Boatmen's and its subsidiaries taken as a
whole.
SECTION 3.07. REPORTS. Each of Boatmen's and its significant
------------ -------
subsidiaries has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was
required to file with (i) the S.E.C., (ii) the Federal Reserve Board,
(iii) the Office of the Comptroller of the Currency, (iv) the
F.D.I.C., (v) any state securities or banking authorities having
jurisdiction, (vi) Nasdaq and (vii) any other governmental authority
with jurisdiction over Boatmen's or any of its significant
subsidiaries. As of their respective dates, each of such reports and
documents, as amended, including the financial statements, exhibits
and schedules thereto, complied in all material respects with the
relevant statutes, rules and regulations enforced or promulgated by
the regulatory authority with which they were filed, and did not
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.
SECTION 3.08. COMPLIANCE WITH LAW. Boatmen's and its
------------ -------------------
significant subsidiaries have all licenses, franchises, permits and
other governmental authorizations that are legally required to enable
them to conduct their respective businesses in all material respects
and are in compliance in all material respects with all applicable
laws and regulations.
SECTION 3.09. STATEMENTS TRUE AND CORRECT. None of the
------------ ---------------------------
information supplied or to be supplied by Boatmen's or Boatmen's-
Texas for inclusion in (i) the Registration Statement (as defined in
Section 4.06), (ii) the Proxy Statement/Prospectus (as defined in
Section 4.03) and (iii) any other documents to be filed with the
S.E.C., or any banking or other regulatory authority in connection
with the transactions contemplated hereby, will, at the respective
times such documents are filed, and, in the case of the Registration
Statement, when it becomes effective, and, with respect to the Proxy
Statement/Prospectus, when first mailed to the stockholders of
Canadian, be false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the
statements therein not misleading, or, in the case of the Proxy
Statement/Prospectus or any amendment thereof or supplement thereto,
at the time of the Stockholders' Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the Stockholders'
Meeting. All documents that Boatmen's is responsible for filing with
the S.E.C. or any other regulatory authority in connection with the
transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable law and any rules
and regulations thereunder.
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ARTICLE FOUR
------------
AGREEMENTS OF CANADIAN
----------------------
SECTION 4.01. BUSINESS IN ORDINARY COURSE.
------------ ---------------------------
(a) Canadian shall not declare or pay any dividend or make any
other distribution to shareholders, whether in cash, stock or other
property, after the date of this Agreement.
(b) Canadian shall, and shall cause each of its subsidiaries to,
continue to carry on after the date hereof its respective business
and the discharge or incurrence of obligations and liabilities, only
in the usual, regular and ordinary course of business, as heretofore
conducted, and by way of amplification and not limitation, Canadian
and each of its subsidiaries will not, after the date of this
Agreement, without the prior written consent of Boatmen's (which
shall not be unreasonably withheld):
(i) issue any Canadian Common or other capital stock or
any options, warrants, or other rights to subscribe for or
purchase Canadian Common or any other capital stock or any
securities convertible into or exchangeable for any capital
stock of Canadian or any of its subsidiaries; or
(ii) directly or indirectly redeem, purchase or otherwise
acquire any Canadian Common or any other capital stock of
Canadian or its subsidiaries; or
(iii) effect a reclassification, recapitalization, splitup,
exchange of shares, readjustment or other similar change in or
to any capital stock or otherwise reorganize or recapitalize; or
(iv) change its certificate or articles of incorporation or
association, as the case may be, or bylaws; or
(v) grant any increase (other than ordinary and normal
increases consistent with past practices) in the compensation
payable or to become payable to officers or salaried employees,
grant any stock options or, except as required by law, adopt or
make any change in any bonus, insurance, pension, or other
Employee Plan, agreement, payment or arrangement made to, for or
with any of such officers or employees; or
(vi) except in the ordinary course of business, (A) borrow
or agree to borrow any amount of funds, or (B) directly or
indirectly guarantee or agree to guarantee any obligations of
others; or
(vii) make or commit to make any new loan or letter of
credit or any new or additional discretionary advance under any
existing line of credit, in principal amounts in excess of
$600,000 or that would increase the aggregate credit outstanding
to any one borrower (or group of affiliated borrowers) to more
than $600,000 (excluding for this purpose any accrued interest
or overdrafts), without the prior written consent of Boatmen's,
acting through its Executive Vice President-Loan Administration
or such other designee as Boatmen's may give notice of to
Canadian; or
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(viii) purchase or otherwise acquire any investment security
for its own account having an average remaining life to maturity
greater than five years or any asset-backed securities other
than those issued or guaranteed by the Government National
Mortgage Association, the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation; or
(ix) increase or decrease the rate of interest paid on time
deposits, or on certificates of deposit, except in a manner and
pursuant to policies consistent with Canadian's past practices;
or
(x) enter into any agreement, contract or commitment out
of the ordinary course of business or having a term in excess of
three (3) months other than letters of credit, loan agreements,
deposit agreements, and other lending, credit and deposit
agreements and documents made in the ordinary course of
business; or
(xi) except in the ordinary course of business, place on
any of its assets or properties any mortgage, pledge, lien,
charge, or other encumbrance; or
(xii) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to Canadian or its
subsidiaries or any claims which Canadian or its subsidiaries
may possess or waive any material rights with respect thereto;
or
(xiii) sell or otherwise dispose of any real property or any
tangible or intangible personal property with an aggregate fair
market value in excess of $10,000 other than properties acquired
in foreclosure or otherwise in the ordinary collection of
indebtedness to Canadian and its subsidiaries; or
(xiv) foreclose upon or otherwise take title to or
possession or control of any real property without first
obtaining a phase one environmental report thereon which
indicates that the property is free of pollutants, contaminants
or hazardous or toxic waste materials; provided, however, that
Canadian and its subsidiaries shall not be required to obtain
such a report with respect to single family, non-agricultural
residential property of one acre or less to be foreclosed upon
unless it has reason to believe that such property might contain
any such waste materials or otherwise might be contaminated; or
(xv) commit any act or fail to do any act which will cause
a breach of any agreement, contract or commitment and which will
have a material adverse effect on Canadian's and its
subsidiaries' business, financial condition, or earnings; or
(xvi) violate any law, statute, rule, governmental
regulation, or order, which violation might have a material
adverse effect on Canadian's and its subsidiaries' business,
financial condition, or earnings; or
(xvii) purchase any real or personal property or make any
other capital expenditure where the amount paid or committed
therefor is in excess of $100,000.
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(c) Canadian and its subsidiaries shall not, without the prior
written consent of Boatmen's, engage in any transaction or take any
action that would render untrue in any material respect any of the
representations and warranties of Canadian contained in Article Two
hereof, if such representations and warranties were given as of the
date of such transaction or action.
(d) Canadian shall promptly notify Boatmen's in writing of the
occurrence of any matter or event known to and directly involving
Canadian, which would not include any changes in conditions that
affect the banking industry generally, that is materially adverse to
the business, operations, properties, assets, or condition (financial
or otherwise) of Canadian and its subsidiaries taken as a whole.
(e) Canadian shall not, on or before the earlier of the Closing
Date or the date of termination of this Agreement, solicit or
encourage, or, subject to the fiduciary duties of its directors as
advised by counsel, hold discussions or negotiations with or provide
any information to, any person in connection with, any proposal from
any person for the acquisition of all or any substantial portion of
the business, assets, shares of Canadian Common or other securities
of Canadian and its subsidiaries. Canadian shall promptly advise
Boatmen's of its receipt of any such proposal or inquiry concerning
any possible such proposal, and the substance of such proposal or
inquiry.
SECTION 4.02. BREACHES. Canadian shall, in the event it has
------------ --------
knowledge of the occurrence, or impending or threatened occurrence,
of any event or condition which would cause or constitute a breach
(or would have caused or constituted a breach had such event occurred
or been known prior to the date hereof) of any of its representations
or agreements contained or referred to herein, give prompt written
notice thereof to Boatmen's and use its best efforts to prevent or
promptly remedy the same.
SECTION 4.03. SUBMISSION TO SHAREHOLDERS. Canadian shall cause
------------ --------------------------
to be duly called and held, on a date mutually selected by Boatmen's
and Canadian, a special meeting of the shareholders of Canadian (the
"Stockholders' Meeting") for submission of this Agreement and the
Merger for approval of such shareholders as required by the law. In
connection with the Stockholders' Meeting, (i) Canadian shall
cooperate and assist Boatmen's in preparing and filing a Proxy
Statement/Prospectus (the "Proxy Statement/Prospectus") with the
S.E.C. and Canadian shall mail it to its shareholders, (ii) Canadian
shall furnish Boatmen's all information concerning itself that
Boatmen's may reasonably request in connection with such Proxy
Statement/Prospectus, and (iii) the Board of Directors of Canadian
shall (subject to compliance with its fiduciary duties as advised by
counsel) recommend to its shareholders the approval of this Agreement
and the Merger and use its best efforts to obtain such shareholder
approval.
SECTION 4.04. CONSENTS TO CONTRACTS AND LEASES. Canadian shall
------------ --------------------------------
use its best efforts to obtain all necessary consents with respect
to all interests of Canadian and its subsidiaries in any material
leases, licenses, contracts, instruments and rights which require the
consent of another person for their transfer or assumption pursuant
to the Merger, if any.
SECTION 4.05. MERGER EXPENSES AND RELATED MATTERS.
------------ -----------------------------------
(a) Notwithstanding that Canadian believes that it and its
subsidiaries have established all reserves and taken all provisions
for possible loan losses required by GAAP and applicable laws, rules
and regulations, Canadian recognizes that Boatmen's 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 to the Effective Time,
Canadian and Boatmen's shall consult and cooperate with each
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other with respect to conforming, as specified in a written notice
from Boatmen's to Canadian, based upon such consultation and as
hereinafter provided, the loan, accrual and reserve policies of
Canadian and its subsidiaries to those policies of Boatmen's.
(b) In addition, from and after the date of this Agreement to
the Effective Time, Canadian and Boatmen's shall consult and
cooperate with each other with respect to determining, as specified
in a written notice from Boatmen's to Canadian, based upon such
consultation and as hereinafter provided, 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.
(c) Canadian and Boatmen's shall consult and cooperate with each
other with respect to determining, as specified in a written notice
from Boatmen's to Canadian, based upon such consultation and as
hereinafter provided, the amount and the timing for recognizing for
financial accounting purposes the expenses of the Merger and the
restructuring charges related to or to be incurred in connection with
the Merger.
(d) At the request of Boatmen's, Canadian shall establish and
take such reserves and accruals as Boatmen's shall request to conform
Canadian's loan, accrual and reserve policies to Boatmen's policies,
shall establish and take such accruals, reserves and charges in order
to implement such policies in respect of excess facilities and
equipment capacity, severance costs, litigation matters, write-off
or write-down of various assets and other appropriate accounting
adjustments, and to recognize for financial accounting purposes such
expenses of the Merger and restructuring charges related to or to be
incurred in connection with the Merger, in each case at such times
as are mutually agreeable to Boatmen's and Canadian; provided,
however, that Canadian shall not be required to take any such action
that is not consistent with GAAP.
(e) No accrual or other adjustment made by Canadian pursuant to
the provisions of this Section 4.05 shall constitute an
acknowledgment by Canadian or create any implication, for any
purpose, that such accrual or adjustment was necessary for any
purpose other than to comply with the provisions of this Section
4.05.
SECTION 4.06. CONSUMMATION OF AGREEMENT. Canadian shall use
------------ -------------------------
its best efforts to perform and fulfill all conditions and obli-
gations on its part to be performed or fulfilled under this Agreement
and to effect the Merger in accordance with the terms and provisions
hereof. Canadian shall furnish to Boatmen's in a timely manner all
information, data and documents in the possession of Canadian
requested by Boatmen's as may be required to obtain any necessary
regulatory or other approvals of the Merger or to file with the
S.E.C. a registration statement on Form S-4 (the "Registration
Statement") relating to the shares of Boatmen's Common that may be
issued to the shareholders of Canadian pursuant to the Merger and
this Agreement and shall otherwise cooperate fully with Boatmen's to
carry out the purpose and intent of this Agreement.
SECTION 4.07. ENVIRONMENTAL REPORTS. Canadian shall provide to
------------ ---------------------
Boatmen's, as soon as reasonably practical, but not later than forty-
five (45) days after the date hereof, a report ("Phase I Report") of
a phase one environmental investigation ("Phase I Investigation") on
all real property owned, leased or operated by Canadian or its
subsidiaries as of the date hereof (other than space
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in retail and similar establishments leased or operated by Canadian
for automatic teller machines) and within ten (10) days after the
acquisition or lease of any real property acquired or leased by
Canadian or its subsidiaries after the date hereof (other than space
in retail and similar establishments leased or operated by Canadian
for automatic teller machines), except as otherwise provided in
Section 4.01(b)(xiv). If required by the Phase I Investigation in
Boatmen's reasonable opinion, Boatmen's shall so notify Canadian
within fifteen (15) business days of Boatmen's receipt of such Phase
I Reports, and Canadian thereafter shall provide to Boatmen's as soon
as reasonably practicable a report ("Phase II Report") of a phase two
investigation on properties requiring such additional study.
Boatmen's shall have fifteen (15) business days from the receipt of
any Phase II Report to notify Canadian of any objection to the
contents of such report. Should the cost to Canadian and the Bank,
net of any amounts received or which will be received from the Texas
Natural Resource Conservation Commission, (the "Remediation Cost")
of taking all remedial and corrective actions and measures
(i) required by applicable law, or (ii) recommended or suggested by
any such Phase I Report or Phase II Report or prudent in light of
serious life, health or safety concerns, in the aggregate, exceed the
sum of Fifty Thousand Dollars ($50,000) as reasonably estimated by
an environmental expert retained for such purpose by Boatmen's within
ten (10) business days following receipt of an acceptable Phase II
Report and reasonably acceptable to Canadian, or if the Remediation
Cost cannot be so reasonably estimated by such expert to be $50,000
or less, with any reasonable degree of certainty, then Boatmen's
shall have the right pursuant to Section 7.03 hereof, for a period
of ten (10) business days following receipt of such estimate or
indication that the Remediation Cost cannot be so reasonably
estimated, to terminate this Agreement by giving written notice
thereof to Canadian (the "Environmental Termination Notice").
In the event that (i) Boatmen's delivers the Environmental
Termination Notice, and (ii) the Remediation Cost does not exceed Two
Hundred Fifty Thousand Dollars ($250,000), then, notwithstanding the
foregoing, Boatmen's, at the sole election of Canadian (which
election shall be communicated to Boatmen's within three (3) business
days following delivery of the Environmental Termination Notice) (the
"Canadian Election"), may not exercise its right to terminate this
Agreement pursuant to this Section 4.07 and Section 7.03 hereof;
provided, however, that in such event the number of shares of
Boatmen's Common included in the Merger Consideration shall be
reduced in accordance with the first sentence of Section 1.05(b)
hereof. In the event that the Remediation Cost equals or exceeds Two
Hundred Fifty Thousand Dollars ($250,000) and Boatmen's does not
deliver the Environmental Termination Notice, then the number of
shares of Boatmen's Common included in the Merger Consideration shall
be reduced in accordance with the second sentence of Section 1.05(b)
hereof.
SECTION 4.08. RESTRICTION ON RESALES. Canadian shall obtain
------------ ----------------------
and deliver to Boatmen's, at least 31 days prior to the Closing Date,
the signed agreement, in the form of Exhibit 4.08 hereto, of each
person who may reasonably be deemed an "affiliate" of Canadian within
the meaning of such term as used in Rule 145 under the Securities Act
of 1933, as amended (the "Securities Act"), regarding (i) compliance
with the provisions of such Rule 145, and (ii) compliance with the
requirements of Accounting Principles Board Opinion No. 16 regarding
the disposition of shares of Canadian Common or Boatmen's Common (or
reduction of risk with respect thereto) until such time as financial
results covering at least 30 days of post-Merger combined operations
have been published.
SECTION 4.09. ACCESS TO INFORMATION. Canadian shall permit
------------ ---------------------
Boatmen's reasonable access in a manner which will avoid undue
disruption or interference with Canadian's normal operations to its
properties and shall disclose and make available to Boatmen's all
books, documents, papers and records relating to its assets, stock,
ownership, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the
general ledger), tax records, minute books of directors' and
shareholders' meetings, organizational documents, material contracts
and agreements, loan files, filings with any regulatory authority,
accountants' workpapers (if available and subject to the respective
independent accountants'
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consent), litigation files, plans affecting employees, and any other
business activities or prospects in which Boatmen's may have a
reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. Canadian shall deliver to Boatmen's
within ten (10) business days after the date hereof a true, accurate
and complete copy of each written plan or program disclosed in Section
2.12(c) of the Disclosure Schedule and, with respect to each such plan
or program, all (i) amendments or supplements thereto, (ii) summary
plan descriptions, (iii) lists of all current participants and all
participants with benefit entitlements, (iv) contracts relating to
plan documents, (v) actuarial valuations for any defined benefit
plan, (vi) valuations for any plan as of the most recent date,
(vii) determination letters from the Internal Revenue Service,
(viii) the most recent annual report filed with the Internal Revenue
Service, and (ix) trust agreements. Boatmen's will hold any such
information which is nonpublic in confidence in accordance with the
provisions of Section 8.01 hereof.
SECTION 4.10. SUBSIDIARY BANK MERGER. Upon the request of
------------ ----------------------
Boatmen's, Canadian shall cause the Bank to enter into a merger
agreement with Boatmen's-Amarillo, a wholly-owned subsidiary of
Boatmen's-Texas, and take all other actions and cooperate with
Boatmen's in causing such merger (the "Subsidiary Bank Merger") to
be effected. Such subsidiary bank merger agreement shall provide,
in addition to customary terms for mergers of subsidiary banks in
transactions such as this: (i) for consummation of such Subsidiary
Bank Merger on a date on or after the Closing Date, as may be
selected by Boatmen's; and (ii) that the obligations of the Bank
thereunder are conditioned on the prior or simultaneous consummation
of the Merger pursuant to this Agreement.
ARTICLE FIVE
------------
AGREEMENTS OF BOATMEN'S AND BOATMEN'S-TEXAS
-------------------------------------------
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT.
------------ -----------------------------------------------
Boatmen's shall file all regulatory applications required in order
to consummate the Merger, including but not limited to the necessary
applications for the prior approval of the Federal Reserve Board and
the Finance Commission of the State of Texas. Boatmen's shall
provide to Canadian a copy of such applications and correspondence
pertaining thereto contemporaneously with the filing or receipt of
same. Boatmen's shall file with the S.E.C. the Registration
Statement relating to the shares of Boatmen's Common to be issued to
the shareholders of Canadian pursuant to this Agreement, and shall
use its best efforts to cause the Registration Statement to become
effective. At the time the Registration Statement becomes effective,
the Registration Statement shall comply in all material respects with
the provisions of the Securities Act and the published rules and
regulations thereunder, and shall 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 not false
or misleading, and at the time of mailing thereof to the shareholders
of Canadian, at the time of the Stockholders' Meeting and at the
Effective Time the Proxy Statement/Prospectus included as part of the
Registration Statement, as amended or supplemented by any amendment
or supplement, shall not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not false or misleading. Boatmen's shall timely
file all documents required to obtain all necessary permits and
approvals from state securities agencies or authorities, if any,
required to carry out the transactions contemplated by this
Agreement, shall pay all expenses incident thereto and shall use its
best efforts to obtain such permits and approvals on a timely basis.
Boatmen's shall promptly and properly prepare and file any other
filings required under the Securities Exchange Act of 1934 (the
"Exchange Act") relating to the Merger and the transactions
contemplated herein.
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SECTION 5.02. BREACHES. Boatmen's shall, in the event it has
------------ --------
knowledge of the occurrence, or impending or threatened occurrence,
of any event or condition which would cause or constitute a breach
(or would have caused or constituted a breach had such event occurred
or been known prior to the date hereof) of any of its representations
or agreements contained or referred to herein, give prompt written
notice thereof to Canadian and use its best efforts to prevent or
promptly remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. Boatmen's and
------------ -------------------------
Boatmen's-Texas shall use their respective best efforts to perform
and fulfill all conditions and obligations on their part to be
performed or fulfilled under this Agreement and to effect the Merger
in accordance with the terms and conditions of this Agreement.
SECTION 5.04. DIRECTORS AND OFFICERS' LIABILITY INSURANCE AND
------------ -----------------------------------------------
INDEMNIFICATION.
- ---------------
(a) Following the Effective Time, Boatmen's will provide the
directors and officers of Canadian and its subsidiaries with the same
directors' and officers' liability insurance coverage that Boatmen's
provides to directors and officers of its other banking subsidiaries
generally, and, in addition, for a period of three (3) years will use
its best efforts to continue Canadian's directors' and officers'
liability insurance coverage with respect to actions occurring prior
to the Effective Time to the extent that such coverage is obtainable
for an aggregate premium not to exceed the annual premium presently
being paid by Canadian. If the premium of such insurance would
exceed such maximum amount, Boatmen's shall use its best efforts to
procure such level of insurance as can be obtained for a premium
equal to such maximum amount.
(b) For six (6) years after the Effective Time, Boatmen's shall
cause Boatmen's-Texas (the survivor of the Merger of Canadian and
Boatmen's-Texas following the Effective Time) to indemnify, defend
and hold harmless the officers, directors, employees and agents of
Canadian and its subsidiaries (each, an "Indemnified Party") at the
Effective Time, regardless of whether or not such persons are
employed thereafter, against all losses, expenses, claims, damages
or liabilities arising out of actions or omissions occurring on or
prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement) to the full extent then
permitted under the Texas Corporate Law and by Canadian's articles
of incorporation or bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense
of any action or suit.
(c) If after the Effective Time Boatmen's-Texas or any of its
successors or assigns (i) shall consolidate with or merge into any
other corporation or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in
each such case, proper provision shall be made so that the successors
and assigns of Boatmen's-Texas shall assume any remaining obligations
set forth in this Section 5.04. If the Surviving Corporation shall
liquidate, dissolve or otherwise wind up its business, then Boatmen's
shall indemnify, defend and hold harmless each Indemnified Party to
the same extent and on the same terms that Boatmen's-Texas was so
obligated pursuant to this Section 5.04.
SECTION 5.05. EMPLOYEE BENEFITS. Boatmen's shall, with respect
------------ -----------------
to each person who remains an employee of Canadian or its
subsidiaries following the Closing Date (each a "Continued
Employee"), provide the benefits described in this Section 5.05.
Subject to the right of subsequent amendment, modification or
termination in Boatmen's sole discretion, each Continued Employee
shall be entitled, as a new employee of a subsidiary of Boatmen's,
to participate in such employee benefit plans, as defined in Section
3(3) of ERISA, or any non-qualified employee benefit plans or
deferred compensation, stock option,
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bonus or incentive plans, or other employee benefit or fringe benefit
programs that may be in effect generally for employees of all of
Boatmen's subsidiaries (the "Boatmen's Plans"), if and as a Continued
Employee shall be eligible and, if required, selected for
participation therein under the terms thereof and otherwise shall not
be participating in a similar plan which is maintained by Canadian
after the Effective Time. Canadian employees shall participate
therein on the same basis as similarly situated employees of other
Boatmen's subsidiaries. All such participation shall be subject to
the terms of such plans as may be in effect from time to time and this
Section 5.05 is not intended to give Continued Employees any rights or
privileges superior to those of other employees of Boatmen's
subsidiaries. Boatmen's may terminate or modify all Employee Plans
and Boatmen's obligation under this Section 5.05 shall not be deemed
or construed so as to provide duplication of similar benefits but,
subject to that qualification, Boatmen's shall, for purposes of
vesting and any age or period of service requirements for commencement
of participation with respect to any Boatmen's Plans in which
Continued Employees may participate, credit each Continued Employee
with his or her term of service with Canadian and its subsidiaries.
SECTION 5.06. ACCESS TO INFORMATION. Boatmen's shall permit
------------ ---------------------
Canadian reasonable access in a manner which will avoid undue
disruption or interference with Boatmen's normal operations to its
properties and shall disclose and make available to Canadian all
books, documents, papers and records relating to its assets, stock
ownership, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the
general ledger), tax records, minute books of directors' and
stockholders' meetings, organizational documents, material contracts
and agreements, loan files, filings with any regulatory authority,
accountants' workpapers (if available and subject to the respective
independent accountants' consent), litigation files, plans affecting
employees, and any other business activities or prospects in which
Canadian may have a reasonable and legitimate interest in furtherance
of the transactions contemplated by this Agreement. Canadian will
hold any such information which is nonpublic in confidence in
accordance with the provisions of Section 8.01 hereof.
ARTICLE SIX
-----------
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
SECTION 6.01. CONDITIONS TO BOATMEN'S AND BOATMEN'S-TEXAS'
------------ --------------------------------------------
OBLIGATIONS. Boatmen's and Boatmen's-Texas' obligations to effect
- -----------
the Merger shall be subject to the satisfaction (or waiver by
Boatmen's) prior to or on the Closing Date of the following
conditions:
(a) The representations and warranties made by Canadian in this
Agreement shall be true in all material respects on and as of the
Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date;
(b) Canadian shall have performed and complied in all material
respects with all of its obligations and agreements required to be
performed prior to the Closing Date under this Agreement;
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any
proceeding by any bank regulatory authority or other person seeking
any of the foregoing be pending. There shall not be any action
taken, or any statute, rule,
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regulation or order enacted, entered, enforced or deemed applicable to
the Merger which makes the consummation of the Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations
and other approvals required by law for consummation of the Merger
shall have been obtained and all waiting periods required by law
shall have expired;
(e) Boatmen's shall have received the environmental reports
required by Section 4.07 hereof, and shall not have elected, pursuant
to Section 7.03 hereof, to terminate and cancel this Agreement;
(f) Boatmen's shall have received all documents required to be
received from Canadian on or prior to the Closing Date, all in form
and substance reasonably satisfactory to Boatmen's;
(g) Boatmen's shall have received an opinion letter, dated as
of the Closing Date, from Ernst & Young LLP, its independent public
accountants, to the effect that the Merger will qualify for pooling
of interests accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with this
Agreement;
(h) The Registration Statement shall be effective under the
Securities Act and no stop orders suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for such
purpose pending before or threatened by the S.E.C.; and
(i) Boatmen's shall have received an opinion of its counsel to
the effect that if the Merger is consummated in accordance with the
terms set forth in this Agreement, (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by the holders of shares of
Canadian Common upon receipt of the Merger Consideration (except for
cash received in lieu of fractional shares); (iii) the basis of
shares of Boatmen's Common received by the shareholders of Canadian
will be the same as the basis of shares of Canadian Common exchanged
therefor; and (iv) the holding period of the shares of Boatmen's
Common received by such shareholders will include the holding period
of the shares of Canadian Common exchanged therefor, provided such
shares were held as capital assets as of the Effective Time.
SECTION 6.02. CONDITIONS TO CANADIAN'S OBLIGATIONS. Canadian's
------------ ------------------------------------
obligation to effect the Merger shall be subject to the satisfaction
(or waiver by Canadian) prior to or on the Closing Date of the
following conditions:
(a) The representations and warranties made by Boatmen's and
Boatmen's-Texas in this Agreement shall be true in all material
respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on the
Closing Date;
(b) Boatmen's and Boatmen's-Texas shall have performed and
complied in all material respects with all of their obligations and
agreements hereunder required to be performed prior to the Closing
Date under this Agreement;
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any
proceeding by any bank regulatory authority or other
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governmental agency seeking any of the foregoing be pending. There
shall not be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Merger
which makes the consummation of the Merger illegal;
(d) All necessary regulatory approvals, consents, authorizations
and other approvals, including the requisite approval of this
Agreement and the Merger by the shareholders of Canadian, required
by law for consummation of the Merger shall have been obtained and
all waiting periods required by law shall have expired;
(e) Canadian shall have received all documents required to be
received from Boatmen's on or prior to the Closing Date, all in form
and substance reasonably satisfactory to Canadian;
(f) The Registration Statement shall be effective under the
Securities Act and no stop orders suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for such
purpose pending before or threatened by the S.E.C.; and
(g) Canadian shall have received a copy of the opinion of
Boatmen's counsel contemplated by Section 6.01(i) of this Agreement.
ARTICLE SEVEN
-------------
TERMINATION OR ABANDONMENT
--------------------------
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be
------------ ----------------
terminated by the mutual written agreement of the parties at any time
prior to the Closing Date, regardless of whether approval of this
Agreement and the Merger by the shareholders of Canadian shall have
been previously obtained.
SECTION 7.02. BREACH OF REPRESENTATIONS OR AGREEMENTS. In the
------------ ---------------------------------------
event that there is a material breach in any of the representations
and warranties or agreements of Boatmen's or Canadian, which breach
is not cured within thirty (30) days after notice to cure such breach
is given to the breaching party by the non-breaching party, then the
non-breaching party, regardless of whether approval of this Agreement
and the Merger by the shareholders of Canadian shall have been
previously obtained, may terminate and cancel this Agreement by
providing written notice of such action to the other party hereto.
SECTION 7.03. ENVIRONMENTAL REPORTS. Boatmen's may terminate
------------ ---------------------
this Agreement to the extent provided by Section 4.07 and this
Section 7.03 by giving written notice thereof to Canadian.
SECTION 7.04. FAILURE OF CONDITIONS. In the event that any of
------------ ---------------------
the conditions to the obligations of either party are not satisfied
or waived on or prior to the Closing Date, and if any applicable cure
period provided in Section 7.02 hereof has lapsed, then such party
may, regardless of whether approval of this Agreement and the Merger
by the shareholders of Canadian shall have been previously obtained,
terminate and cancel this Agreement by delivery of written notice of
such action to the other party on such date.
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SECTION 7.05. APPROVAL DENIAL. If any regulatory application
------------ ---------------
filed pursuant to Section 5.01 hereof should be finally denied or
disapproved by the respective regulatory authority, then this
Agreement thereupon shall be deemed terminated and canceled;
provided, however, that a request for additional information or
undertaking by Boatmen's, as a condition for approval, shall not be
deemed to be a denial or disapproval so long as Boatmen's diligently
provides the requested information or undertaking. In the event an
application is denied pending an appeal, petition for review, or
similar such act on the part of Boatmen's (hereinafter referred to
as the "appeal") then the application will be deemed denied unless
Boatmen's prepares and timely files such appeal and continues the
appellate process for purposes of obtaining the necessary approval.
SECTION 7.06. SHAREHOLDER APPROVAL DENIAL. If this Agreement
------------ ---------------------------
and the Merger is not approved by the requisite vote of the
shareholders of Canadian at the Stockholders' Meeting, then either
party may terminate this Agreement.
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In the event
------------ ------------------------------
that Canadian or any of its subsidiaries shall become a party or
subject to any new or amended written agreement, memorandum of
understanding, cease and desist order, imposition of civil money
penalties or other regulatory enforcement action or proceeding with
any federal or state agency charged with the supervision or
regulation of banks or bank holding companies ("Regulatory
Enforcement Action") after the date of this Agreement, then Boatmen's
may terminate this Agreement; provided, however, that Boatmen's may
not terminate this Agreement pursuant to this Section 7.07 on account
of any Regulatory Enforcement Action which, through reasonable
efforts of Canadian and/or Boatmen's, could be terminated on or
before the Closing Date without requiring any capital infusion to be
made or other action having a financial effect materially adverse to
the financial benefits of the Merger to Boatmen's.
SECTION 7.08. AUTOMATIC TERMINATION. If the Closing Date does
------------ ---------------------
not occur on or prior to the expiration of the first anniversary of
the date of this Agreement, then this Agreement may be terminated by
either party by giving written notice to the other.
SECTION 7.09. TERMINATION FEE.
------------ ---------------
(a) Upon the occurrence of one or more of the following events
(a "Triggering Event"), Canadian shall pay to Boatmen's the sum of
Three Hundred Thousand Dollars ($300,000).
(i) upon termination of this Agreement by Boatmen's upon a
breach thereof by Canadian (including, without limitation, the
entering into of an agreement between Canadian and any third
party which is inconsistent with the transactions contemplated
by this Agreement), provided that within twelve (12) months of
the date of such termination, an event described in clause (iii)
or (iv) below shall have occurred;
(ii) the failure of Canadian's shareholders to approve the
Merger and this Agreement at a meeting called for such purpose;
provided, however, that the failure of the Canadian's
shareholders to approve the Merger and this Agreement at a
meeting called for such purpose shall not be deemed a Triggering
Event if: (A) the average of the daily closing prices of a share
of Boatmen's Common, as reported on Nasdaq during the period of
twenty (20) trading days ending on the second trading day
immediately preceding the date of mailing to the shareholders of
Canadian of notice of a meeting to vote upon this Agreement and
the Merger, together with the Proxy Statement/Prospectus
relating
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thereto (the "Mailing Date") (the "Boatmen's Final Price"), is
less than $30.00; and (B) the number obtained by dividing the
Boatmen's Final Price by the Boatmen's Initial Price (as defined
below), is less than the number obtained by dividing the Final
Index Price (as defined below) by the Initial Index Price (as
defined below) and subtracting .20 from such quotient; or (C)
within eighteen (18) months after the date of such meeting an
event described in clause (iii) or (iv) below does not occur;
(iii) any person or group of persons (other than Boatmen's)
shall acquire, or have the right to acquire, 50% or more of the
outstanding shares of Canadian Common, (exclusive of any shares
of Canadian Common sold directly or indirectly to such person or
group of persons by Boatmen's); or
(iv) upon the entry by Canadian or Bank into an agreement or
other understanding with a person or group of persons (other
than Boatmen's and/or its affiliates) for such person or group
of persons to acquire, merge or consolidate with Canadian or
Bank or to purchase or acquire Canadian or Bank or all or
substantially all of Canadian's or Bank's assets.
(b) As used in this Section 7.09:
(i) "Person" and "group of persons" shall have the meanings
conferred thereon by Section 13(d) of the Exchange Act.
(ii) The "Index Group" shall mean all of those companies
listed on Exhibit 7.09, the common stock of which is publicly
traded and as to which there is no pending publicly announced
proposal at any time during the period of twenty (20) trading
days ending at the end of the fifth trading day immediately
preceding the Closing Date for such company to be acquired or to
acquire another company in exchange for its stock where, in such
later case, such company to be acquired would be a significant
subsidiary of such acquiring company (as such term is defined in
Section 3.03). In the event that any such company or companies
are so removed from the Index Group, the weights attributed to
the remaining companies shall be adjusted accordingly.
(iii) The "Boatmen's Initial Price" shall be the closing
price of a share of Boatmen's Common on the date of this
Agreement. The "Initial Index Price" shall mean the weighted
average (weighted in accordance with the factors listed on
Exhibit 7.09) of the per share closing prices of the common
stock of the companies comprising the Index Group, as reported
on the consolidated transactions reporting system for the market
or exchange on which such common stock is principally traded, on
the date of this Agreement.
(iv) The "Final Price" of any company belonging to the Index
Group shall mean the average of the daily closing sale prices of
a share of common stock of such company, as reported in the
consolidated transaction reporting system for the market or
exchange on which such common stock is principally traded,
during the period of twenty (20) trading days ending on the end
of the second trading day immediately preceding the Mailing
Date.
(v) The "Final Index Price" shall mean the weighted average
(weighted in accordance with the factors listed on Exhibit 7.09)
of the Final Prices for all of the companies comprising the
Index Group.
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If Boatmen's or any company included in the Index Group declares a
stock dividend or effects a reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction
between the date of this Agreement and the end of the fifth trading
day immediately preceding the Closing Date, the closing prices for
the common stock of such company shall be appropriately adjusted for
the purposes of the definitions above so as to be comparable to the
prices on the date of this Agreement.
Canadian shall notify Boatmen's promptly in writing upon its becoming
aware of the occurrence of any Triggering Event.
ARTICLE EIGHT
-------------
GENERAL
-------
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties
------------ ------------------------
acknowledge the confidential and proprietary nature of the
"Information" (as herein described) that has heretofore been
exchanged and that will be received from each other hereunder and
agree to hold and keep, and to instruct their respective agents,
representatives, shareholders, affiliates, employees and consultants
to hold and keep, such information confidential. Such Information
will include any and all financial, technical, commercial, marketing,
customer or other information concerning the business, operations and
affairs of a party that may be provided to the other, irrespective
of the form of the communications, by such party's employees or
agents. Such Information shall not include information that is or
becomes generally available to the public other than as a result of
a disclosure by a party or its representatives in violation of this
Agreement. The parties agree that the Information will be used
solely for the purposes contemplated by this Agreement and that such
Information will not be disclosed to any person other than employees
and agents of a party who are directly involved in evaluating the
transaction. The Information shall not be used in any way
detrimental to a party, including use directly or indirectly in the
conduct of the other party's business or any business or enterprise
in which such party may have an interest, now or in the future, and
whether or not now in competition with such other party.
SECTION 8.02. PUBLICITY. Boatmen's and Canadian shall
------------ ---------
cooperate with each other in the development and distribution of all
news releases and other public disclosures concerning this Agreement
and the Merger and shall not issue any news release or make any other
public disclosure without the prior consent of the other party,
unless such is required by law upon the written advice of counsel or
is in response to published newspaper or other mass media reports
regarding the transaction contemplated hereby, in which such latter
event the parties shall consult with each other regarding such
responsive public disclosure.
SECTION 8.03. RETURN OF DOCUMENTS. Upon termination of this
------------ -------------------
Agreement without the Merger becoming effective, each party (i) shall
deliver to the other originals and all copies of all Information made
available to such party (ii) will not retain any copies, extracts or
other reproductions in whole or in part of such Information, and
(iii) will destroy all memoranda, notes and other writings prepared
by either party based on the Information.
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SECTION 8.04. NOTICES. Any notice or other communication shall
------------ -------
be in writing and shall be deemed to have been given or made on the
date of delivery, in the case of hand delivery, or three (3) business
days after deposit in the United States Registered Mail, postage
prepaid, or upon receipt if transmitted by facsimile telecopy or any
other means, addressed (in any case) as follows:
(a) if to Boatmen's:
Boatmen's Bancshares, Inc.
One Boatmen's Plaza
800 Market Street
St. Louis, Missouri 63102
Attention: Mr. Gregory L. Curl
Facsimile: 314/466-5645
with a copy to:
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Thomas C. Erb, Esq.
Facsimile: 314/241-6056
and
(b) if to Canadian:
Canadian Bancshares, Inc.
115 Main Street
Canadian, Texas 79014-2210
Attention: Mr. Jay T. Godwin
Facsimile: 806/323-9240
with copies to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Attention: Charles E. Greef, Esq.
Facsimile: 214/855-4300
or to such other address as any party may from time to time designate
by notice to the others.
SECTION 8.05. LIABILITIES. In the event that this Agreement is
------------ -----------
terminated pursuant to the provisions of Article Seven hereof, no
party hereto shall have any liability to any other party for costs,
expenses, damages or otherwise; provided, however, that,
notwithstanding the foregoing, in the event that this Agreement is
terminated pursuant to Section 7.02 hereof on account of a willful
breach of any of the
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representations and warranties set forth herein or any breach of any
of the agreements set forth herein, then the non-breaching party shall
be entitled to recover appropriate damages from the breaching party.
SECTION 8.06. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
------------ ----------------------------------------------
AGREEMENTS. Except for, and as provided in, this Section 8.06, no
- ----------
representation, warranty or agreement contained in this Agreement
shall survive the Effective Time or the earlier termination of this
Agreement. The agreements set forth in Sections 1.09, 5.04 and 5.05
shall survive the Effective Time and the agreements set forth in
Sections 7.09, 8.01, 8.02, 8.03 and 8.05 shall survive the Effective
Time or the earlier termination of this Agreement.
SECTION 8.07. ENTIRE AGREEMENT. This Agreement constitutes the
------------ ----------------
entire agreement between the parties and supersedes and cancels any
and all prior discussions, negotiations, undertakings, agreements in
principle and other agreements between the parties relating to the
subject matter hereof.
SECTION 8.08. HEADINGS AND CAPTIONS. The captions of Articles
------------ ---------------------
and Sections hereof are for convenience only and shall not control
or affect the meaning or construction of any of the provisions of
this Agreement.
SECTION 8.09. WAIVER, AMENDMENT OR MODIFICATION. The con-
------------ ---------------------------------
ditions of this Agreement that may be waived may only be waived by
notice to the other party waiving such condition. The failure of any
party at any time or times to require performance of any provision
hereof shall in no manner affect the right at a later time to enforce
the same. This Agreement may be amended or modified by the parties
hereto, at any time before or after approval of the Agreement by the
shareholders of Canadian; provided, however, that after any such
approval no such amendment or modification shall alter the amount or
change the form of the Merger Consideration contemplated by this
Agreement to be received by shareholders of Canadian or alter or
change any of the terms of this Agreement if such alteration or
change would adversely affect the holders of Canadian Common. This
Agreement not be amended or modified except by a written document
duly executed by the parties hereto.
SECTION 8.10. RULES OF CONSTRUCTION. Unless the context
------------ ---------------------
otherwise requires: (a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP; (c) "or" is not exclusive; and
(d) words in the singular may include the plural and in the plural
include the singular.
SECTION 8.11. COUNTERPARTS. This Agreement may be executed in
------------ ------------
two or more counterparts, each of which shall be deemed an original
and all of which shall be deemed one and the same instrument.
SECTION 8.12. SUCCESSORS AND ASSIGNS. This Agreement shall be
------------ ----------------------
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. There shall be no third party
beneficiaries hereof.
SECTION 8.13. GOVERNING LAW; ASSIGNMENT. This Agreement shall
------------ -------------------------
be governed by the laws of the State of Missouri, except to the
extent that the Missouri Corporate Law and the Texas Corporate Law
must govern aspects of the Merger procedures and shareholder rights
related thereto, and applicable federal laws and regulations. This
Agreement may not be assigned by any of the parties hereto.
A-28
134
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CANADIAN BANCSHARES, INC.
By /s/ Jay T. Godwin
-------------------------------------
Jay T. Godwin
President and Chairman
BOATMEN'S BANCSHARES, INC.
By /s/ Gregory L. Curl
-------------------------------------
Gregory L. Curl
Vice Chairman
BOATMEN'S-TEXAS, INC.
By: /s/ Gregory L. Curl
-------------------------------------
Gregory L. Curl
Executive Vice President
A-29
135
EXHIBIT 1.08(a)
---------------
CANADIAN'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of
Canadian under the laws of the State of Texas, its power and
authority to own and operate its properties and to carry on its
business as now conducted, and its power and authority to enter into
the Agreement, to merge with Boatmen's-Texas in accordance with the
terms of the Agreement and to consummate the transactions
contemplated by the Agreement.
2. The due incorporation or organization, valid existence and
good standing of each of the other subsidiaries of Canadian and any
subsidiary of any such subsidiary listed in Section 2.03 of the
Disclosure Schedule, their power and authority to own and operate
their properties, the possession of all licenses, permits and
authorizations necessary to carry on their respective businesses as
now conducted.
3. With respect to Canadian, (i) the number of authorized,
issued and outstanding shares of capital stock of Canadian on the
Closing Date, (ii) the nonexistence of any violation of the
preemptive or subscription rights of any person, (iii) the number of
outstanding Stock Options, warrants, or other rights to acquire, or
securities convertible into, any equity security of Canadian,
(iv) the nonexistence of any obligation, contingent or otherwise, to
reacquire any shares of capital stock of Canadian, and (v) the
nonexistence of any outstanding stock appreciation, phantom stock or
similar rights, except as disclosed in the Agreement.
4. With respect to Canadian's subsidiaries, (i) the number of
authorized, issued and outstanding shares of capital stock on the
Closing Date and the ownership of all issued shares by Canadian,
(ii) the nonexistence of any violation of the preemptive or
subscription rights of any person, (iii) the nonexistence of any
outstanding options, warrants, or other rights to acquire, or
securities convertible into, any equity securities of such
subsidiary, (iv) the nonexistence of any obligation, contingent or
otherwise, to reacquire any shares of capital stock of such
subsidiary, and (v) the nonexistence of any outstanding stock
appreciation, phantom stock or similar rights.
5. The due and proper performance of all corporate acts and
other proceedings necessary or required to be taken by Canadian to
authorize the execution, delivery and performance of the Agreement,
the due execution and delivery of the Agreement by Canadian, and the
Agreement as a valid and binding obligation of Canadian, enforceable
against Canadian in accordance with its terms (subject to the
provisions of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time in
effect, and equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial
discretion).
6. The execution of the Agreement by Canadian, and the
consummation of the Merger and the other transactions contemplated
therein, does not violate or cause a default under Canadian's
articles of incorporation or bylaws, or any statute, regulation or
rule or any judgment, order or decree against or any material
agreement binding upon Canadian or its subsidiaries.
A-Ex. 1.08(a)-1
136
7. The receipt of all required consents, approvals (including
the requisite approval of the shareholders of Canadian), orders or
authorizations of, or registrations, declarations or filings with or
notices to, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, or
any other person or group of persons or entity required to be
obtained or made by Canadian or its subsidiaries in connection with
the respective execution and delivery of the Agreement or the
consummation of the transactions contemplated therein.
8. If requested by Boatmen's pursuant to Section 4.10 of the
Agreement, the due and proper performance of all corporate acts and
other proceedings necessary or required to be taken by the Bank to
authorize the execution, delivery and performance of the Agreement
to Merge with Boatmen's First National Bank of Amarillo, and the
Agreement to Merge as a valid and binding obligation of the Bank,
enforceable against the Bank in accordance with its terms (subject
to the provisions of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time in
effect, and equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial
discretion).
9. The nonexistence of any material actions, suits,
proceedings, orders, investigations or claims pending or threatened
against or affecting Canadian or its subsidiaries which, if adversely
determined, would have a material adverse effect upon their
respective properties or assets or the transactions contemplated by
the Agreement.
A-Ex. 1.08(a)-2
137
EXHIBIT 1.08(b)
---------------
BOATMEN'S LEGAL OPINION MATTERS
1. The due incorporation, valid existence and good standing of
Boatmen's and Boatmen's-Texas under the laws of the State of Missouri
and their respective power and authority to enter into the Agreement
and to consummate the transactions contemplated thereby.
2. The due and proper performance of all corporate acts and
other proceedings required to be taken by each of Boatmen's and
Boatmen's-Texas to authorize the execution, delivery and performance
of the Agreement, the due execution and delivery of the Agreement by
Boatmen's and Boatmen's-Texas, and the Agreement as a valid and
binding obligation of Boatmen's and Boatmen's-Texas, enforceable
against Boatmen's and Boatmen's-Texas in accordance with its terms
(subject to the provisions of bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforceability of creditors'
rights generally from time to time in effect, and equitable
principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion).
3. The due authorization and, when issued to the shareholders
of Canadian in accordance with the terms of the Agreement, the valid
issuance of the shares of Boatmen's Common to be issued pursuant to
the Merger, such shares being fully paid and nonassessable, with no
personal liability attaching to the ownership thereof.
4. The execution and delivery of the Agreement by Boatmen's and
Boatmen's-Texas and the consummation of the transactions contemplated
therein, as neither conflicting with, in breach of or in default
under, resulting in the acceleration of, creating in any party the
right to accelerate, terminate, modify or cancel, or violate, any
provision of Boatmen's and Boatmen's-Texas' articles of incorporation
or bylaws, or any statute, regulation, rule, judgment, order or
decree binding upon Boatmen's and Boatmen's-Texas which would be
materially adverse to the business of Boatmen's and its subsidiaries
taken as a whole.
5. The receipt of all required consents, approvals, orders or
authorizations of, or registrations, declarations or filings with or
without notices to, any court, administrative agency or commission
or other governmental authority or instrumentality, domestic or
foreign, or any other person or entity required to be obtained or
made by or with respect to Boatmen's or Boatmen's-Texas in connection
with the execution and delivery of the Agreement or the consummation
of the transactions contemplated by the Agreement.
A-Ex. 1.08(b)-1
138
EXHIBIT 4.08
------------
-------------------, 1996
Boatmen's Bancshares, Inc.
One Boatmen's Plaza
800 Market Street
St. Louis, Missouri 63101
Re: Agreement and Plan of Merger, dated as of January 30, 1996
(the "Merger Agreement"), by and among Canadian Bancshares,
Inc. ("Canadian"), Boatmen's Bancshares, Inc. ("Boatmen's"),
and Boatmen's Texas, Inc. ("Boatmen's-Texas")
Gentlemen:
I have been advised that I may be deemed to be an affiliate of
Canadian, as that term is defined for purposes of paragraphs (c) and
(d) of Rule 145 ("Rule 145") of the Rules and Regulations of the
Securities and Exchange Commission (the "Commission") promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
Pursuant to the terms and conditions of the Merger Agreement,
each share of common stock of Canadian owned by me as of the
effective time of the merger contemplated by the Merger Agreement
(the "Merger") may be converted into the right to receive shares of
common stock of Boatmen's and cash in lieu of any fractional share.
As used in this letter, the shares of common stock of Canadian owned
by me as of ------------------------- (the date 30 days prior to the
anticipated effective time of the Merger) are referred to as the
"Pre-Merger Shares" and the shares of common stock of Boatmen's that
may be received by me in the Merger in exchange for my Pre-Merger
Shares are referred to as the "Post-Merger Shares." This letter is
delivered to Boatmen's pursuant to Section 4.08 of the Merger
Agreement.
A. I represent and warrant to Boatmen's and agree that:
1. I shall not make any sale, transfer or other
disposition of the Post-Merger Shares I receive pursuant to the
Merger in violation of the Securities Act or the Rules and
Regulations of the Commission promulgated thereunder.
2. I understand that the issuance of the Post-Merger
Shares to me pursuant to the Merger will be registered with the
Commission under the Securities Act. I also understand that
because I may be deemed an "affiliate" of Canadian and because
any distributions by me of the Post-Merger Shares will not be
registered under the Securities Act, such Post-Merger Shares
must be held by me unless (i) the sale, transfer or other
distribution has been registered under the Securities Act,
(ii) the sale, transfer or other distribution of such Post-
Merger Shares is made in accordance with the provisions of
Rule 145, or (iii) in the opinion of counsel acceptable to
Boatmen's some other exemption from registration under the
Securities Act is available with respect to any such proposed
distribution, sale, transfer or other disposition of such Post-
Merger Shares.
A-Ex. 4.08-1
139
Boatmen's Bancshares, Inc.
- --------------------, 1996
Page 2
3. In no event will I sell the Pre-Merger Shares or the
Post-Merger Shares, as the case may be, or otherwise transfer or
reduce my risk relative to the Pre-Merger Shares or Post-Merger
Shares, as the case may be, during the period beginning 30 days
prior to the date on which the Merger is consummated and ending
on the date that Boatmen's has published financial results
covering at least 30 days of the combined operations of
Boatmen's and Canadian.
B. I understand and agree that:
1. Stop transfer instructions will be issued with respect
to the Post-Merger Shares and there will be placed on the
certificates representing such Post-Merger Shares, or any
certificate delivered in substitution therefor, a legend stating
in substance:
"The shares represented by this Certificate were issued in
a transaction to which Rule 145 under the Securities Act of
1933, as amended, applied. The shares represented by this
certificate may be transferred only in accordance with the
terms of a letter agreement dated -----------------, 1996,
by the registered holder in favor of Boatmen's Bancshares,
Inc., a copy of which agreement is on file at the principal
offices of Boatmen's Bancshares, Inc."
2. Unless the transfer by me of Post-Merger Shares is a
sale made in compliance with the provisions of Rule 145(d) or
made pursuant to an effective registration statement under the
Securities Act, Boatmen's reserves the right to place the
following legend on the Certificates issued to my transferee:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, and
were acquired from a person who received such shares in a
transaction to which Rule 145 under the Securities Act of
1933, as amended, applied. The shares have not been
acquired by the holder with a view to, or for resale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended, and may not be
sold or otherwise transferred unless the shares have been
registered under the Securities Act of 1933, as amended, or
an exemption from registration is available."
I understand and agree that the legends set forth in paragraphs
1 and 2 above shall be removed by delivery of substitute Certificates
without any legend if I deliver to Boatmen's a copy of a letter from
the staff of the Commission, or an opinion of counsel in form and
substance satisfactory to Boatmen's, to the effect that no such
legend is required for the purpose of the Securities Act.
I have carefully read this letter and the Merger Agreement and
understand the requirements of each and the limitations imposed upon
the distribution, sale, transfer or other disposition of Pre-Merger
Shares or Post-Merger Shares by me.
Very truly yours,
A-Ex. 4.08-2
140
EXHIBIT 7.09
------------
INDEX GROUP
-----------
NAME WEIGHTING FACTORS
- ---- -----------------
Norwest Corporation 8.28829
First Union Corporation 7.69692
KeyCorp 6.24670
SunTrust Banks, Inc. 6.15258
Wachovia Corporation 5.89445
First Bank System, Inc. 5.28089
Mellon Bank Corporation 5.27149
PNC Bank Corp. 5.05710
Barnett Banks, Inc. 4.69521
CoreStates Financial Corp 4.52202
Fleet Financial Group, Inc. 4.44641
Bank of Boston Corporation 4.21001
National City Corporation 4.03031
Comerica Incorporated 3.53176
Fifth Third Bancorp 3.22588
Huntington Bancshares Incorporated 2.65934
Firstar Corporation 2.44201
U.S. Bancorp 2.31921
First of America Bank Corporation 2.27182
Southern National Corporation 2.20918
Mercantile Bancorporation Inc. 2.02251
Marshall & Ilsley Corporation 2.00114
Meridian Bancorp, Inc. 1.87126
SouthTrust Corporation 1.84150
AmSouth Bancorporation 1.81201
-------
TOTAL: 100.00000%
=========
A-Ex. 7.09-1
141
APPENDIX B
[LOGO]
THE BANK ADVISORY GROUP, INC.
Bank M&A Specialists * Bank Stock Appraisers
May 1, 1996
Board of Directors
Canadian Bancshares, Inc.
Canadian, Texas
Gentlemen:
You have requested that The Bank Advisory Group, Inc. act as an
independent financial analyst and advisor to the common shareholders
of Canadian Bancshares, Inc. ("Canadian") and its wholly-owned
subsidiary, First State Bank of Canadian ("First State Bank").
Specifically, we have been asked to render advice and analysis in
connection with the proposed merger (the "Merger") of Canadian with
and into a wholly-owned subsidiary of Boatmen's Bancshares, Inc.,
St. Louis, Missouri ("Boatmen's"). In our role as an independent
financial analyst, you have requested our opinion with regard to the
fairness -- from the perspective of the common shareholders of
Canadian -- of the financial terms of the proposed merger pursuant
to the provisions of the Agreement and Plan of Merger (the
"Agreement") dated January 30, 1996.
In conjunction with our review of the Agreement, our understanding
is that Boatmen's proposes to consummate the Merger pursuant to the
following financial terms:
* The issuance of 5.9518 shares (the "Conversion Ratio"),
subject to possible adjustment, of Boatmen's common
stock for each common share of Canadian, other than the
shares any holders of which have duly exercised and
perfected their dissenters' rights under the Texas
Business Corporation Act.
* No fractional shares of Boatmen's common stock will be
issued and, in lieu thereof, holders of shares of
Canadian common stock who would otherwise be entitled
to a fractional share interest will be paid an amount
in cash equal to the product of such fractional share
interest and the closing price of a share of Boatmen's
common
ONE CIELO CENTER, SUITE 205 * 1250 CAPITOL OF TEXAS HIGHWAY *
AUSTIN, TEXAS 78746
TELEPHONE (512) 327-8747 * FACSIMILE (512) 327-8775
B-1
142
THE BANK ADVISORY GROUP, INC.
BOARD OF DIRECTORS
CANADIAN BANCSHARES, INC.
MAY 1, 1996
PAGE 2
stock on the Nasdaq Stock Market's National
Market ("Nasdaq"), on the business day immediately
preceding the date of the effective time of the Merger.
* If the Merger is consummated after the record date for
the payment of the regular quarterly dividend on
Boatmen's common stock declared during the second
quarter of 1996 or the third quarter of 1996, the
Conversion Ratio will be increased by an amount equal
---------
to the quotient of (i) the product of (A) the amount of
such quarterly dividends, on a per share basis,
multiplied by (B) 5.9518, divided by (ii) the average
closing price of a share of Boatmen's common stock on
the Nasdaq during the 20 trading days immediately
preceding the fifth calendar day immediately preceding
the closing date of the Merger (the "Boatmen's Average
Price").
* If the cost of taking all remedial and corrective
actions and measures required by applicable law or
recommended or suggested by any report of environmental
inspection on the real property owned, leased or
operated by Canadian and First State Bank, or prudent
in light of serious life, health or safety concerns,
net of any amounts received or which will be received
from the Texas Natural Resource Conservation Commission
(the "Remediation Cost"), exceeds $50,000 and the
parties to the Agreement do not terminate the Agreement
on the basis of the amount of such Remediation Cost,
the Conversion Ratio will be decreased by an amount
---------
equal to the quotient of (i) the quotient of (A) the
amount by which the Remediation Cost exceeds $50,000
(up to a maximum of $200,000), divided by (B) 31,755
divided by (ii) the Boatmen's Average Price.
The Bank Advisory Group, Inc., as part of its line of professional
services, specializes in rendering valuation opinions of banks and
bank holding companies in connection with mergers and acquisitions
nationwide. Prior to our retention for this assignment, The Bank
Advisory Group has provided financial advisory services to Canadian
and First State Bank; however, the revenues derived from the delivery
of such services are insignificant when compared to The Bank Advisory
Group's total gross revenues. The Bank Advisory Group has not
provided any services to Boatmen's.
In connection with this opinion and with respect to Canadian, we have
reviewed, among other things:
1. Consolidated financial statements for Canadian for the
years ended December 31, 1995 (audited), 1994, and 1993
(unaudited);
2. Parent company only financial statements for Canadian,
on form FR Y-9SP, for the years ended December 31,
1995, 1994, and 1993, as filed with the Federal Reserve
System;
B-2
143
THE BANK ADVISORY GROUP, INC.
BOARD OF DIRECTORS
CANADIAN BANCSHARES, INC.
MAY 1, 1996
PAGE 3
3. Reports of Condition and Income for First State Bank
for the years ended December 31, 1995, 1994, and 1993,
and for the three month period ending March 31, 1996,
as filed with Federal bank regulatory agencies;
4. The economy in general and, in particular, the local
economies in which First State Bank operates;
5. Certain internal financial analyses and forecasts for
First State Bank prepared by the management of First
State Bank, including projections of future
performance;
6. Certain other summary materials and analyses with
respect to First State Bank's loan portfolio,
securities portfolio, deposit base, fixed assets, and
operations including, but not limited to:
(i) schedules of loans and other assets identified by
management as deserving special attention or monitoring
given the characteristics of the loan/asset and the
local economy, (ii) analyses concerning the adequacy of
the loan loss reserve, (iii) schedules of "other real
estate owned," including current carrying values and
recent appraisals, and (iv) schedules of securities,
detailing book values, market values, and lengths to
maturity; and
7. Such other information -- including financial studies,
analyses, investigations, and economic and market
criteria -- that we deem relevant to this assignment.
In connection with this opinion and with respect to Boatmen's, we
have reviewed, among other things:
1. Audited consolidated financial statements for
Boatmen's, in Annual Report Form and Form 10-K, for the
years ended December 31, 1995, 1994, and 1993;
2. Quarterly financial statements for Boatmen's, in both
"press release" and quarterly report format, for the
1995 calendar quarters, and the calendar quarter ended
March 31, 1996 (to be provided subsequent to the date
of this opinion);
3. Consolidated financial statements for Boatmen's, on
form FR Y-9C, for the years ended 1995, 1994, and 1993,
together with consolidated statements for the three
month period ended March 31, 1996 (to be provided
subsequent to the date of this opinion) as filed with
the Federal Reserve System;
4. Equity research reports regarding Boatmen's prepared by
various analysts who cover the financial institutions
sector;
B-3
144
THE BANK ADVISORY GROUP, INC.
BOARD OF DIRECTORS
CANADIAN BANCSHARES, INC.
MAY 1, 1996
PAGE 4
5. The condition of the commercial banking industry, as
indicated in financial reports filed with various
Federal bank regulatory authorities by all Federally-
insured commercial banks;
6. The economy in general and, in particular, the major
trade areas in which Boatmen's and its subsidiaries
operate; and
7. Such other information -- including financial studies,
analyses, investigations, and economic and market
criteria -- that we deem relevant to this assignment.
In connection with this opinion and with respect to the proposed
Merger, we have reviewed, among other things:
1. The Agreement, and any amendments thereto, that sets
forth, among other items, the terms, conditions to
closing, pending litigation against both Canadian and
Boatmen's, and representations and warranties of
Canadian and Boatmen's with respect to the proposed
Merger;
2. The Proxy Statement/Prospectus, to which this opinion
is appended, that is being furnished to the
shareholders of Canadian in connection with the
proposed Merger;
3. The financial terms and price levels for commercial
banks with assets under $100 million recently acquired
in the United States -- specifically in the State of
Texas -- together with the financial performance and
condition of such banks;
4. The financial terms and stated price levels of other
banking organizations, the proposed acquisition of
which has been publicly announced by Boatmen's
subsequent to January 1, 1995, and prior to the date of
this opinion;
5. The price-to-equity and price-to-earnings multiples of
banking organizations based in the mid-western United
States which have publicly-traded common stock,
together with the financial performance and condition
of such banking organizations; and
6. Such other information -- including financial studies,
analyses, investigations, and economic and market
criteria -- that we deem relevant to this assignment.
Based on our experience, we believe our review of, among other
things, the aforementioned items provides a reasonable basis for our
opinion, recognizing that we are expressing an informed professional
opinion -- not a certification of value.
B-4
145
THE BANK ADVISORY GROUP, INC.
BOARD OF DIRECTORS
CANADIAN BANCSHARES, INC.
MAY 1, 1996
PAGE 5
We have relied upon the information provided by the management of
Canadian and Boatmen's, or otherwise reviewed by us, as being
complete and accurate in all material respects. Furthermore, we have
not verified through independent inspection or examination the
specific assets or liabilities of Canadian and Boatmen's or their
subsidiary banks. We have also assumed that there has been no
material change in the assets, financial condition, results of
operations, or business prospects of Canadian and Boatmen's since the
date of the last financial statements made available to us. We have
met with the management of Canadian for the purpose of discussing the
relevant information that has been provided to us.
Based on all factors that we deem relevant and assuming the accuracy
and completeness of the information and data provided to us, we
conclude that the terms of the proposed Merger, as outlined herein,
are fair, from a financial standpoint, to the common shareholders of
Canadian.
This opinion is available for disclosure to the shareholders of
Canadian. Accordingly, we hereby consent to the inclusion of our
opinion as an appendix to the Proxy Statement/Prospectus relating to
the proposed Merger, and to the reference of our firm in the Proxy
Statement/Prospectus.
Respectfully submitted,
THE BANK ADVISORY GROUP, INC.
By /s/ Robert L. Walters
-----------------------------------------
B-5
146
APPENDIX C
EXCERPTS OF TEXAS BUSINESS CORPORATION ACT (DISSENTERS' RIGHTS)
5.11 RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF
CERTAIN CORPORATE ACTIONS.--A. Any shareholder of a domestic
corporation shall have the right to dissent from any of the following
corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act
and the shareholder holds shares of a class or series that was
entitled to vote thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not
including any pledge, mortgage, deed of trust or trust indenture
unless otherwise provided in the articles of incorporation) of all,
or substantially all, the property and assets, with or without good
will, of a corporation requiring the special authorization of the
shareholders as provided by this Act;
(3) Any plan of exchange pursuant to Article 5.02 of this Act
in which the shares of the corporation of the class or series held
by the shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article,
a shareholder shall not have the right to dissent from any plan of
merger in which there is a single surviving or new domestic or
foreign corporation, or from any plan of exchange, if (1) the shares
held by the shareholder are part of a class shares of which are
listed on a national securities exchange, or are held of record by
not less than 2,000 holders, on the record date fixed to determine
the shareholders entitled to vote on the plan of merger or the plan
of exchange, and (2) the shareholder is not required by the terms of
the plan of merger or the plan of exchange to accept for his or her
shares any consideration other than (a) shares of a corporation that,
immediately after the effective time of the merger or exchange, will
be part of a class or series of shares of which are (i) listed, or
authorized for listing upon official notice of issuance, on a
national securities exchange, or (ii) held of record by not less than
2,000 holders, and (b) cash in lieu of fractional shares otherwise
entitled to be received. (Last amended by Ch. 901 L. '91, eff.
8-26-91.)
5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID
CORPORATE ACTION.--A. Any shareholder of any domestic corporation who
has the right to dissent from any of the corporate actions referred
to in Article 5.11 of this Act may exercise that right to dissent
only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is
submitted to a vote of shareholders at a meeting, the shareholder
shall file with the corporation, prior to the meeting, a written
objection to the action, setting out that the shareholder's right to
dissent will be exercised if the action is effective and giving the
shareholder's address, to which notice thereof shall be delivered or
mailed in that event. If the action is effected and the shareholder
shall not have voted in favor of the action, the corporation, in the
case of action other than a merger, or the surviving or new
corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days
C-1
147
after the action is effected, deliver or mail to the shareholder written
notice that the action has been effected, and the shareholder may,
within ten (10) days from the delivery or mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, for payment of the
fair value of the shareholder's shares. The fair value of the shares
shall be the value thereof as of the day immediately preceding the
meeting, excluding any appreciation or depreciation in anticipation of
the proposed action. The demand shall state the number and class of the
shares owned by the shareholder and the fair value of the shares as
estimated by the shareholder. Any shareholder failing to make demand
within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation,
in the case of action other than a merger, and the surviving or new
corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days after the date the action is
effected, mail to each shareholder of record as of the effective date
of the action notice of the fact and date of the action and that the
shareholder may exercise the shareholder's right to dissent from the
action. The notice shall be accompanied by a copy of this Article
and any articles or documents filed by the corporation with the
Secretary of State to effect the action. If the shareholder shall
not have consented to the taking of the action, the shareholder may,
within twenty (20) days after the mailing of the notice, make written
demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the
fair value of the shareholder's shares. The fair value of the shares
shall be the value thereof as of the date the written consent
authorizing the action was delivered to the corporation pursuant to
Section A of Article 9. 10 of this Act, excluding any appreciation
or depreciation in anticipation of the action. The demand shall
state the number and class of shares owned by the dissenting
shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the
twenty (20) day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing,
surviving, or new corporation (foreign or domestic) or other entity,
as the case may be, of a demand for payment made by a dissenting
shareholder in accordance with Subsection (1) of this Section, the
corporation (foreign or domestic) or other entity shall deliver or
mail to the shareholder a written notice that shall either set out
that the corporation (foreign or domestic) or other entity accepts
the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected,
and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an
estimate by the corporation (foreign or domestic) or other entity of
the fair value of the shares, together with an offer to pay the
amount of that estimate within ninety (90) days after the date on
which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder
agrees to accept that amount and, in the case of shares represented
by certificates, upon the surrender of the certificates duly
endorsed.
(3) If, within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed upon
between the shareholder and the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may
be, payment for the shares shall be made within ninety (90) days
after the date on which the action was effected and, in the case of
shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the
shareholder shall cease to have any interest in the shares or in the
corporation.
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B. If, within the period of sixty (60) days after the date on
which the corporate action was effected, the shareholder and the
existing, surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, do not so agree, then the
shareholder or the corporation (foreign or domestic) or other entity
may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction
in the county in which the principal office of the domestic
corporation is located, asking for a finding and determination of the
fair value of the shareholder's shares. Upon the filing of any such
petition by the shareholder, service of a copy thereof shall be made
upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the
clerk of the court in which the petition was filed a list containing
the names and addresses of all shareholders of the domestic
corporation 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 (foreign or domestic) or other entity. If the
petition shall be filed by the corporation (foreign or domestic) or
other entity, the petition shall be accompanied by such a list. The
clerk of the court shall give notice of the time and place fixed for
the hearing of the petition by registered mail to the corporation
(foreign or domestic) or other entity and to the shareholders named
on the list at the addresses therein stated. The forms of the
notices by mail shall be approved by the court. All shareholders
thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine
the shareholders who have complied with the provisions of this
Article and have become entitled to the valuation of and payment for
their shares, and shall appoint one or more qualified appraisers to
determine that value. The appraisers shall have power to examine any
of the books and records of the corporation the shares of which they
are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation
as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them
pertinent evidence as to the value of the shares. The appraisers
shall also have such power and authority as may be conferred on
Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares
of the shareholders adjudged by the court to be entitled to payment
for their shares and shall file their report of that value in the
office of the clerk of the court. Notice of the filing of the report
shall be given by the clerk to the parties in interest. The report
shall be subject to exceptions to be heard before the court both upon
the law and the facts. The court shall by its judgment determine the
fair value of the shares of the shareholders entitled to payment for
their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or
other entity, together with interest thereon, beginning 91 days after
the date on which the applicable corporate action from which the
shareholder elected to dissent was effected to the date of such
judgment, to the shareholders entitled to payment. The judgment
shall be payable to the holders of uncertificated shares immediately
but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case
may be, of duly endorsed certificates for those shares. Upon payment
of the judgment, the dissenting shareholders shall cease to have any
interest in those shares or in the corporation. The court shall
allow the appraisers a reasonable fee as court costs, and all court
costs, shall be allotted between the parties in the manner that the
court determines to be fair and equitable.
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E. Shares acquired by the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may
be, pursuant to the payment of the agreed value of the shares or
pursuant to payment of the judgment entered for the value of the
shares, as in this Article provided, shall, in the case of a merger,
be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of
other treasury shares.
F. The provisions of this Article shall not apply to a merger
if, on the date of the filing of the articles of merger, the
surviving corporation is the owner of all the outstanding shares of
the other corporations, domestic or foreign, that are parties to the
merger.
G. In the absence of fraud in the transaction, the remedy
provided by this Article to a shareholder objecting to any corporate
action referred to in Article 5.11 of this Act is the exclusive
remedy for the recovery of the value of his or her shares or money
damages to the shareholder with respect to the action. If the
existing, surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, complies with the requirements of
this Article, any shareholder who fails to comply with the
requirements of this Article shall not be entitled to bring suit for
the recovery of the value of his or her shares or money damages to
the shareholder with respect to the action. (Last amended by Ch. 215,
L. '93, eff. 9-1-93.)
5.13 PROVISIONS AFFECTING REMEDIES OF DISSENTING
SHAREHOLDERS.--A. Any shareholder who has demanded payment for his
or her shares in accordance with either Article 5.12 or 5.16 of this
Act shall not thereafter be entitled to vote or exercise any other
rights of a shareholder except the right to receive payment for his
or her shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the
ground that the corporate action would be or was fraudulent, and the
respective shares for which payment has been demanded shall not
thereafter be considered outstanding for the purposes of any
subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting
shareholder, the corporation shall make an appropriate notation
thereof in its shareholder records. Within twenty (20) days after
demanding payment for his or her shares in accordance with either
Article 5.12 or 5.16 of this act, each holder of certificates
representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand
has been made. The failure of holders of certificated shares to do
so shall, at the option of the corporation, terminate such
shareholder's rights under Articles 5.12 and 5.16 of this Act unless
a court of competent jurisdiction for good and sufficient cause shown
shall otherwise direct. If uncertificated shares for which payment
has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate
issued therefor shall bear similar notation together with the name
of the original dissenting holder of such shares and a transferee of
such shares shall acquire by such transfer no rights in the
corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value
thereof.
C. Any shareholder who has demanded payment for his or her
shares in accordance with either Article 5.12 or 5.16 of this Act may
withdraw such demand at any time before payment for his or her shares
or before any petition has been filed pursuant to Article 5.12 or
5.16 of this Act asking for a finding and determination of the fair
value of such shares, but no such demand may be withdrawn after such
payment has been made or, unless the corporation shall consent
thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant
to Section B of this Article the corporation shall terminate the
shareholder's rights under Article 5.12 or 5.16 of this Act, as the
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case may be, or if no petition asking for a finding and determination
of fair value of such shares by a court shall have been filed within
the time provided in Article 5.12 or 5.16 of this Act, as the case
may be, or if after the hearing of a petition filed pursuant to
Article 5.12 or 5.16, the court shall determine that such shareholder
is not entitled to the relief provided by those articles, then, in
any such case, such shareholder and all persons claiming under him
or her shall be conclusively presumed to have approved and ratified
the corporate action from which he or she dissented and shall be
bound thereby, the right of such shareholder to be paid the fair
value of his or her shares shall cease, and his or her status as a
shareholder shall be restored without prejudice to any corporate
proceedings which may have been taken during the interim, and such
shareholder shall be entitled to receive any dividends or other
distributions made to shareholders in the interim. (Last amended by
Ch. 215, L. '93, eff. 9-1-93.)
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