EXHIBIT (a) TO SCHEDULE 13E-3
INTRUST FINANCIAL CORPORATION
105 NORTH MAIN STREET
WICHITA, KANSAS 67202
April 11, 2003
Dear Fellow Stockholders:
You are cordially invited to attend the Special Meeting of Stockholders
of INTRUST Financial Corporation on May 6, 2003 at 4:00 p.m. The meeting will
be held at the Executive Dining Room of INTRUST Bank at 105 North Main Street,
Wichita, Kansas 67202.
At this important meeting, you will be asked to vote on a proposed
transaction that, if approved and when combined with the recent redemption of
INTRUST's publicly held 8.24% Cumulative 1998 Trust Preferred Securities, will
result in the termination of the registration of INTRUST's trust preferred
securities under the federal securities laws and thereby eliminate the
significant expense required to comply with the reporting and related
requirements under those laws. Commonly referred to as a "going private"
transaction, the proposed transaction will reduce the number of stockholders of
record to fewer than 300, as required for the elimination of our periodic
reporting obligations under the federal securities laws. The reduction in the
number of stockholders will be accomplished by the merger of a newly-formed
subsidiary of INTRUST with and into INTRUST on the terms set forth in the merger
agreement, a copy of which is attached as ANNEX A to this Proxy Statement.
Under the terms of the merger, each share of INTRUST common stock owned
of record at the effective time of the merger:
- by a stockholder of FEWER than 1,000 shares will be converted into the
right to receive from INTRUST $152.00 in cash per share, and
- by a stockholder of 1,000 or MORE shares will remain as outstanding
shares of INTRUST common stock after the merger.
Because INTRUST has a large number of stockholders who own fewer than
1,000 shares, we expect that the number of stockholders of record will be
reduced from approximately 450 to approximately 200, while the number of
outstanding shares will decrease by only 5.6%--a reduction of approximately
130,000 shares from the 2,309,278 outstanding shares as of March 26, 2003.
The Board of Directors of INTRUST formed a Special Pricing Committee,
consisting of five directors who are not officers or employees of INTRUST, to
provide non-binding advice and recommendations to the Board of Directors with
respect to certain issues arising in connection with the merger, including the
per share price to be paid to stockholders who are being cashed out in the
merger.
After careful consideration, the Board of Directors concluded that the
costs associated with being a "public" company are not justified by the benefits
in view of our stock's limited trading activity. The Board of Directors has
approved the merger agreement and the merger. The Board of Directors believes
that the terms of the merger agreement and the proposed merger are fair from a
financial point of view to, and in the best interests of, INTRUST stockholders,
including both those stockholders who will receive
cash in the merger and those stockholders who will remain stockholders after the
merger. ACCORDINGLY, YOUR BOARD OF DIRECTORS BELIEVES THE MERGER IS IN THE BEST
INTERESTS OF INTRUST AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE PROPOSAL. In addition, several members of senior management,
including myself, as well as the merger subsidiary, join in the recommendation
of the Board of Directors.
In reaching its decision, the members of the Board of Directors
considered, among other things, their understanding of the INTRUST business,
their general business knowledge, the recommendation of the Special Pricing
Committee with respect to the per share price to be paid to stockholders who are
being cashed out in the merger and the written opinion of Keefe, Bruyette &
Woods, Inc., to the Board of Directors, that, based upon and subject to the
factors and assumptions set forth in that opinion, as of December 10, 2002, the
$152.00 per share consideration offered in the merger is fair, from a financial
point of view, to stockholders of INTRUST, including both those stockholders who
will receive cash in the merger and those stockholders who will remain
stockholders after the merger. The opinion of Keefe, Bruyette & Woods, Inc. is
attached to this Proxy Statement as ANNEX B.
Consummation of the transaction is subject to certain conditions,
including the affirmative vote of at least two-thirds of the shares of INTRUST
common stock entitled to vote at the Special Meeting. It is anticipated that the
transaction will become effective during the second quarter of 2003. Details of
the proposed transaction are set forth in the accompanying Proxy Statement,
which we urge you to read carefully in its entirety.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE TAKE THE TIME TO VOTE BY COMPLETING AND MAILING THE ENCLOSED
PROXY. IF YOU DO NOT VOTE, IT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
MERGER.
Sincerely,
Charles Q. Chandler
Chairman of the Board of Directors and Chief
Executive Officer
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INTRUST FINANCIAL CORPORATION
105 NORTH MAIN STREET
WICHITA, KANSAS 67202
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 2003
TO OUR STOCKHOLDERS:
The Special Meeting of Stockholders of INTRUST Financial Corporation, a
Kansas corporation ("INTRUST"), will be held in the Executive Dining Room of
INTRUST Bank at 105 North Main Street, Wichita, Kansas 67202 at 4:00 p.m.,
local time, on May 6, 2003, for the following purposes:
(1) to approve the Agreement and Plan of Merger dated effective as of
December 10, 2002 by and between INTRUST and INTRUST Merger
Corporation, a Kansas corporation ("Merger Corp."), pursuant to
which Merger Corp. will merge with and into INTRUST with INTRUST
being the surviving corporation (the "Merger"), and each of the
transactions contemplated thereby, including, without limitation,
the Merger; and
(2) to transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of INTRUST common stock, par value $5.00 per
share, at the close of business on April 8, 2003 are entitled to notice of the
Special Meeting and to vote at the Special Meeting. As of March 26, 2003, there
were 2,309,278 shares of INTRUST common stock outstanding. The accompanying
Proxy Statement is dated April 11, 2003, and is being first mailed to
stockholders on or about April 11, 2003.
Stockholders are cordially invited to attend the meeting in person.
Whether planning to attend the meeting or not, stockholders are urged to
complete, date and sign the enclosed Proxy and to return it promptly. Any Proxy
given pursuant to this solicitation may be revoked by the person giving it at
any time before it is voted at the Special Meeting. Proxies may be revoked by
delivering to Brian E. Sullivan, Secretary, INTRUST Financial Corporation, 105
North Main Street, Wichita, Kansas 67202, a written notice of revocation bearing
a date later than the date of the Proxy, by duly executing and delivering to the
Secretary a subsequently dated Proxy relating to the same shares or by attending
the Special Meeting and voting in person (attendance at the Special Meeting will
not in and of itself constitute revocation of a Proxy). The enclosed, addressed
envelope requires no postage if mailed in the United States.
By order of the Board of Directors,
Brian E. Sullivan
Secretary
April 11, 2003
YOUR VOTE IS IMPORTANT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, PASSED UPON THE
MERITS OR FAIRNESS OF THIS TRANSACTION, OR PASSED UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
TABLE OF CONTENTS
PAGE
----
SUMMARY TERM SHEET 1
QUESTIONS AND ANSWERS ABOUT THE MEETING 7
SUMMARY FINANCIAL INFORMATION 11
Summary Historical Financial Information of INTRUST 11
Summary Unaudited Pro Forma Financial Information 12
Selected Per Share Financial Information 13
STATEMENT REGARDING FORWARD-LOOKING INFORMATION 13
THE SPECIAL MEETING 14
General 14
Annual and Quarterly Reports 14
Who Can Vote at the Meeting 14
Attending the Meeting 14
Vote Required 15
Proxies 15
Voting and Revocation of Proxies 15
Recommendation Regarding the Approval of the Merger Agreement 16
SPECIAL FACTORS 17
Background Of The Merger Proposal 17
The Effects Of The Merger 21
Effects on Stockholders 23
Redemption of the Publicly Held Trust Preferred Securities 25
U.S. Federal Income Tax Consequences 25
Special Pricing Committee 28
Recommendation of the Board of Directors; Fairness of the Merger Proposal 29
Determination of Fairness of the Merger Proposal by and Recommendation of Merger
Corp. and the Other Filing Persons 32
Conduct of INTRUST's Business After the Merger 32
Opinion of the Financial Advisor 33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 43
Directors and Executive Officers of INTRUST 43
Ownership Table 44
Subsequent Sale of Qualifying Shares 45
PROPOSAL: APPROVAL OF THE MERGER AGREEMENT 46
Overview 46
The Parties 46
Effect on Stockholders 46
Reasons for the Merger 48
Effect of the Merger Proposal on INTRUST Stockholders 50
Effect of the Merger Proposal on INTRUST 50
Exchange and Payment Procedures 51
Dissenters' and Appraisal Rights 51
Interests of Officers and Directors in the Merger 53
Fees and Expenses 53
Anticipated Accounting Treatment 54
Regulatory Requirements 54
The Merger Agreement 54
Dividend Policies 58
FINANCIAL DATA 59
Selected Historical Financial Data 59
Pro Forma Consolidated Financial Statements (Unaudited) 60
Per Share Market Price and Dividend Information 64
Prior Stock Purchases 65
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OTHER MATTERS 66
WHERE YOU CAN FIND MORE INFORMATION 66
ADDITIONAL DOCUMENTS AND OTHER INFORMATION INCORPORATED BY
REFERENCE 66
AGREEMENT AND PLAN OF MERGER ANNEX A
OPINION OF THE FINANCIAL ADVISOR ANNEX B
K.S.A. 17-6712 - RIGHTS OF DISSENTING STOCKHOLDERS ANNEX C
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SUMMARY TERM SHEET
The following summary term sheet, together with the "Questions and
Answers About the Meeting and the Merger" following this summary term sheet,
highlight selected information from this Proxy Statement about our proposed
merger and the Special Meeting. This summary term sheet and the question and
answer sections may not contain all of the information that is important to you.
To better understand, and for a more complete description of, the merger and the
other matters on which you will vote, you should carefully read this entire
document and all of its annexes before you vote. For your convenience, we have
directed your attention in parentheses to the location in this Proxy Statement
where you can find a more complete discussion of each item listed below.
As used in this Proxy Statement, "INTRUST," "we," "our," "ours," "us"
and the "Company" refer to INTRUST Financial Corporation and all of its
subsidiaries. "Merger Corp." refers to INTRUST Merger Corporation, and "merger
agreement" refers to the Agreement and Plan of Merger by and between INTRUST and
Merger Corp. "Common stock" or "shares" refers to the issued and outstanding
shares of INTRUST common stock, par value $5.00 per share. References to
INTRUST's "publicly held trust preferred securities" or "trust preferred
securities" are to the 8.24% Cumulative 1998 Trust Preferred Securities issued
by INTRUST Capital Trust and guaranteed by its parent, INTRUST, which were
redeemed on March 21, 2003.
THE MERGER AGREEMENT (Page 54)
On December 10, 2002, the Board of Directors of INTRUST (the "Board of
Directors") adopted and approved a merger agreement, under which Merger Corp., a
newly-formed Kansas corporation, would merge with INTRUST. Under the terms of
the merger agreement, if the merger is completed:
- INTRUST stockholders holding fewer than 1,000 shares of INTRUST common
stock as of the effective time of the merger will receive a cash
payment of $152.00 per share.
- INTRUST stockholders holding 1,000 or more shares as of the effective
time of the merger will continue to hold their shares.
- the officers and directors of INTRUST at the Effective Time of the
merger will be the officers and directors of INTRUST immediately after
the merger.
THE PARTIES (Page 46)
- INTRUST is a Kansas corporation and registered bank holding company
under the Bank Holding Company Act of 1956, as amended.
- Merger Corp. is a recently-formed Kansas corporation organized for the
sole purpose of the merger.
In addition, INTRUST, Merger Corp. and certain members of INTRUST's
senior management involved in structuring the transaction have filed a Rule
13e-3 Transaction Statement on Schedule 13E-3 with the SEC. These members of
senior management, whom we refer to as the "Other Filing Persons," are Charles
Q. Chandler, Charles Q. Chandler IV, Jay L. Smith and Ronald L. Baldwin. The
business address of INTRUST and Merger Corp. and of each of the Other Filing
Persons is 105 North Main Street, Wichita, Kansas 67202, and the business
telephone number for each such entity or person is (316) 383-1111.
VOTE REQUIRED (Page 15)
Approval of the merger agreement and the merger (the "Merger Proposal")
requires the approval of the holders of at least two-thirds (2/3) of the shares
of INTRUST common stock entitled to vote at the Special Meeting. K.S.A. 17-6701
requires that the merger be approved by a majority of the outstanding common
stock of INTRUST; however, the Restated Articles of Incorporation of INTRUST
requires a greater approval percentage - at least two-thirds (2/3) of the shares
of INTRUST common stock entitled to vote at the Special Meeting, meaning 2/3 of
the shares that are issued and outstanding at the close of business on the
record date. If you do not vote your shares, either in person or by proxy, or if
you abstain from voting on this matter, it has the same effect as if you voted
against the merger. In addition, if you do not instruct your broker on how to
vote on the merger, your broker will not be able to vote for you. This will have
the same effect as a vote against the merger.
EFFECTS OF THE MERGER (Page 21)
As a result of the merger:
- following the merger and the redemption of INTRUST's publicly held
trust preferred securities, INTRUST will cease to be subject to the
reporting requirements of the Securities Exchange Act of 1934 pursuant
to Rule 12h-3 of the Securities Exchange Act and price quotations will
no longer be available on the OTC Bulletin Board. Accordingly, the
merger and the trust preferred redemption are collectively considered a
"going private" transaction;
- cashed-out stockholders will no longer have an interest in or be a
stockholder of INTRUST and, therefore, they will not be able to
participate in INTRUST's future earnings and growth, if any;
- the number of record stockholders will be reduced from approximately
450 to approximately 200, and the number of outstanding shares of
INTRUST common stock will decrease from 2,309,278 to approximately
2,179,000;
- the percentage of ownership of INTRUST common stock beneficially held
by the current officers and directors of INTRUST as a group will
increase from 35.6% to approximately 37.6%;
- aggregate stockholders' equity of INTRUST as of December 31, 2002 will
be reduced from approximately $205,600,000 on a historical basis to
approximately $184,502,000 on a pro forma basis;
- the book value per share of common stock as of December 31, 2002 will
be reduced from approximately $88.45 per share on a historical basis to
approximately $84.08 per share on a pro forma basis;
- INTRUST's regulatory capital will be reduced, including a decrease in
INTRUST's Tier 1 capital as of December 31, 2002, from $254,276,000 on
a historical basis to $233,178,000 on a pro forma basis;
- diluted earnings per share of common stock for the year ended December
31, 2001 will increase from $11.21 on a historical basis to $11.42 on a
pro forma basis; and
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- diluted earnings per share of common stock for the year ended December
31, 2002 will increase from $11.41 on a historical basis to $11.92 on a
pro forma basis.
REASONS FOR THE MERGER (Page 48)
Our primary reason for the merger is that after the merger and the
redemption of the trust preferred securities, we will terminate the registration
of our trust preferred securities under the Securities Exchange Act, and we will
no longer be required to file periodic reports with the SEC. As a result, we
will no longer incur the costs of maintaining our registration or filing
periodic reports. For more information on our reasons for the merger, please see
page 48 of this Proxy Statement.
REDEMPTION OF PUBLICLY HELD TRUST PREFERRED SECURITIES (Page 25)
In connection with the merger, the INTRUST Board of Directors approved
the redemption of the $57,500,000 outstanding 8.24% Cumulative 1998 Trust
Preferred Securities issued by INTRUST Capital Trust and guaranteed by INTRUST,
which redemption was completed on March 21, 2003. To finance the redemption of
the publicly held trust preferred securities, the Board of Directors authorized
the issuance of up to $75,000,000 in privately-placed trust preferred
securities, which will not be registered under the Securities Exchange Act. As
of the date of this Proxy Statement, we had issued $50,000,000 of such privately
placed trust preferred securities. See "Special Factors--Redemption of Publicly
Held Trust Preferred Securities" for a discussion of the redemption of these
trust preferred securities.
BACKGROUND OF THE MERGER PROPOSAL (Page 17)
Please see "Special Factors--Background of the Merger Proposal" for a
discussion of the events leading up to the signing of the merger agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER (Page 58)
The completion of the merger depends upon the satisfaction of a number
of conditions, unless waived, including:
- approval of the merger agreement and the merger by the holders of at
least two-thirds (2/3) of the shares of INTRUST common stock entitled
to vote at the Special Meeting; and
- no litigation pending by any governmental agency regarding the merger.
U.S. FEDERAL INCOME TAX CONSEQUENCES (Page 25)
The receipt of cash by certain stockholders in the merger will be
taxable for federal income tax purposes.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES TO YOU OF
THE MERGER WILL DEPEND ON YOUR OWN SITUATION. TO REVIEW THE MATERIAL TAX
CONSEQUENCES IN GREATER DETAIL, PLEASE READ THE DISCUSSION UNDER "SPECIAL
FACTORS--U.S. FEDERAL INCOME TAX CONSEQUENCES."
DISSENTERS' AND APPRAISAL RIGHTS (Page 51)
Under Kansas law, you are entitled to dissent from the merger and you
may have appraisal rights in connection with the merger. To exercise your
appraisal rights, you must comply with all procedural requirements of Kansas
law. A description of the relevant section of Kansas law is provided in
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"Proposal--Dissenters' and Appraisal Rights" on page 51, and the full text of
the section is attached as ANNEX C to this document. FAILURE TO TAKE ANY STEPS
REQUIRED BY APPLICABLE KANSAS LAW MAY RESULT IN A TERMINATION OR WAIVER OF YOUR
APPRAISAL RIGHTS.
SOURCES OF FUNDS (Page 21)
We estimate that the total funds required to fund the payment of the
consideration to be paid to cashed-out stockholders and to pay fees and expenses
relating to the merger will be approximately $20,510,000. These amounts will be
paid for through available working capital of INTRUST.
On March 21, 2003, we redeemed our outstanding publicly held trust
preferred securities, which redemption was funded in part through the issuance
of a series of privately placed trust preferred securities and in part through
available working capital. See "Special Factors--Redemption of Publicly Held
Trust Preferred Securities." The privately placed trust preferred securities
will not be registered under the Securities Exchange Act.
SPECIAL PRICING COMMITTEE (Pages 18 and 28)
A committee of our Board of Directors, which we refer to as the
"Special Pricing Committee," was formed to provide non-binding advice and
recommendations to the Board of Directors with respect to certain issues arising
in connection with the merger, including, among other things, the per share
price to be paid to stockholders who are being cashed out in the merger. The
Special Pricing Committee unanimously determined that the merger consideration
of $152.00 in cash per share is fair to both the holders of INTRUST common stock
who will receive cash in the merger and those who will remain stockholders after
the merger.
As noted, the Special Pricing Committee considered the transaction for
both the stockholders who would be cashed out in the transaction and for those
who would remain stockholders. The Special Pricing Committee was comprised of
five members, including three members who would be cashed out in the merger
transaction, if approved. The Special Pricing Committee considered factors
relevant to each group of stockholders as well as the opinion of the financial
advisor, whose opinion addressed the fairness of the transaction for both
groups. However, the Special Pricing Committee was not acting solely on behalf
of those stockholders who would be cashed out in the transaction, and the
relevant factors may be different for this group. As discussed under
"--Potential Conflicts of Interest" below, this represents a conflict of
interest. The Board believed that the Committee would be able to sufficiently
represent and convey the interests of those stockholders. The Board based this
belief on the fact that the Committee was comprised of a majority of
stockholders who would be cashed out in the merger and who were not employed or
otherwise controlled by INTRUST. The Board believed that all of the Committee
members could adequately convey their opinions and concerns to the Committee, as
well as to the entire Board, without the need for establishing a separate
committee solely to represent the stockholders who would be cashed out in the
merger. The Board accordingly believed the Committee would be able to adequately
balance the competing interests to arrive at a recommendation that would be fair
to both groups. See "Special Factors--Special Pricing Committee Recommendation
of the Board of Directors; Fairness of the Merger Proposal" below.
RECOMMENDATION OF THE BOARD OF DIRECTORS, MERGER CORP. AND THE OTHER FILING
PERSONS (Pages 28 and 32)
The Board of Directors, based in part upon the recommendation of the
Special Pricing Committee, has unanimously determined that the merger
consideration is fair to, and the merger is advisable and in the best interests
of, INTRUST and the holders of INTRUST common stock.
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Accordingly, our Board of Directors has approved the merger agreement and
unanimously recommends that you vote "FOR" the proposal to adopt it.
In addition, pursuant to the federal securities laws, Merger Corp. and
the Other Filing Persons are required to join in the filing of a Transaction
Statement on Schedule 13E-3, of which this Proxy Statement is a part. All of
those persons join in the recommendation of the Board of Directors that you vote
"FOR" the proposal to adopt it.
OPINION OF THE FINANCIAL ADVISOR (Page 33)
The Special Pricing Committee retained Keefe, Bruyette & Woods, Inc.,
or "KBW," as its financial advisor in connection with the transaction. On
December 5, 2002, KBW presented its valuation analysis to the Special Pricing
Committee, indicating that the going concern value of INTRUST's common stock
ranged from $145.00 to $155.00. On December 10, 2002, KBW delivered its opinion,
subsequently confirmed in writing, to the Board of Directors that, as of such
date, and based on and subject to the factors and assumptions set forth in that
opinion, the $152.00 per share consideration offered in the merger is fair, from
a financial point of view, to stockholders of INTRUST, including both those
stockholders who will receive cash in the merger and those stockholders who will
remain stockholders after the merger. A copy of KBW's written fairness opinion,
which we refer to as the "KBW Opinion," is attached to this Proxy Statement as
ANNEX B. We urge you to read the KBW Opinion carefully.
The KBW Opinion is directed to the INTRUST Board of Directors,
addresses only the fairness to holders of INTRUST common stock from a financial
point of view of the cash consideration offered in the merger and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote at the Special Meeting.
The KBW Opinion addressed the fairness, from a financial point of view,
of the transaction to both those stockholders who will receive cash in the
merger and those stockholders who will remain stockholders after the merger. The
Committee considered proposals from several investment banking firms, each of
which proposed to evaluate the transaction as to both stockholders who would be
cashed out in the merger and those who would remain stockholders after the
merger. As discussed below under "--Potential Conflicts of Interest," this
represents a conflict of interest. However, in view of the fact that KBW, like
any other firm, would have access to the relevant information to assess the
transaction from differing perspectives, both the Committee and KBW believed
that KBW would be able to adequately balance the competing considerations for
each group of stockholders in evaluating the fairness of the transaction.
Accordingly, the Committee believed that hiring a single firm to consider the
transaction from the perspective of both cashed-out and remaining stockholders
was appropriate under the circumstances. The Committee determined to retain KBW
because of its experience in the Midwestern financial institutions market, its
focus on community banks, and its experience in transactions similar to
INTRUST's proposed transaction. The Committee believed that these reasons
outweighed any advantages from hiring a second financial advisor other than KBW
to consider the transaction solely from the perspective of the stockholders who
would be cashed out in the transaction.
THE SPECIAL MEETING (Page 14)
The Special Meeting of Stockholders of INTRUST will be held in the
Executive Dining Room of INTRUST Bank at 105 North Main Street, Wichita, Kansas
67202 at 4:00 p.m., local time, on May 6, 2003. At the Special Meeting, you
will be asked to consider the following proposal:
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- the approval of the merger agreement, pursuant to which Merger Corp.
will merge with and into INTRUST with INTRUST being the surviving
corporation, and each of the transactions contemplated thereby,
including the merger.
POTENTIAL CONFLICTS OF INTEREST (Page 29)
The executive officers and directors of INTRUST may have interests in
the transaction that are different from your interests as a stockholder, or
relationships that may present conflicts of interest, including the following:
- All but seven of our directors and three of our executive officers hold
of record 1,000 or more shares of INTRUST common stock and will retain
their shares in the merger. Following the merger, each of the seven
directors who holds fewer than 1,000 shares and who is accordingly
cashed-out in the merger will purchase seven shares of our common stock
so that they own at least $1,000 worth of "qualifying" shares in
INTRUST as required for their continued directorship under the National
Bank Act.
- As a result of the merger, the stockholders who own of record as of the
effective time of the merger, 1,000 or more shares, such as our
directors and some of our executive officers, will increase their
percentage ownership interest in INTRUST as a result of the purchase by
INTRUST of the shares owned by the holders of fewer than 1,000 shares.
For example, assuming the merger is approved, the ownership percentage
of the directors and executive officers will increase from
approximately 35.6% to approximately 37.6% as a result of the reduction
of the number of shares of the common stock outstanding by
approximately 130,000 shares.
- Certain members of our senior management, the Other Filing Persons
identified above, were involved in structuring the transaction. As a
group, those persons will increase their percentage ownership interest
in INTRUST from approximately 8.0% to approximately 8.5% as a result of
the merger. These persons will also remain officers following the
merger, and Messrs. C.Q. Chandler, C.Q. Chandler IV and Baldwin will
remain directors of INTRUST.
In addition, as noted above, both the Special Pricing Committee and our
financial advisor, KBW, considered the fairness of this transaction as to both
those stockholders who will receive cash in the merger and those stockholders
who will remain stockholders after the merger. The interests of these two groups
of stockholders, however, are different and are in conflict. The goal of the
stockholders receiving cash in the merger would be to obtain the highest per
share price possible; in contrast, the goal of the stockholders who would remain
stockholders following the merger would be to retain as much cash in INTRUST as
possible. See "--Special Pricing Committee" and "--Opinion of the Financial
Advisor" above, as well as the more detailed discussions cross referenced
thereby, for a discussion of how the Board, the Committee and the financial
advisor addressed this conflict of interest.
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QUESTIONS AND ANSWERS ABOUT THE MEETING AND THE MERGER
Q: WHY DID YOU SEND ME THIS PROXY STATEMENT?
A: We sent you this Proxy Statement and the enclosed proxy because our
Board of Directors is soliciting your votes for use at a Special
Meeting of Stockholders.
This Proxy Statement summarizes information that you need to know in
order to cast an informed vote at the meeting. However, you do not need
to attend the meeting to vote your shares. Instead, you may simply
complete, sign and return the enclosed proxy.
We will begin sending this Proxy Statement, Notice of Special Meeting
and the enclosed proxy on or about April 11, 2003 to all stockholders
entitled to vote. Holders of our common stock on the record date are
entitled to vote at the Special Meeting. The record date for those
entitled to vote is April 8, 2003. On March 26, 2003, there were
2,309,278 shares of our common stock outstanding. Stockholders are
entitled to one vote for each share of common stock held as of the
record date.
Q: WHAT IS THE TIME AND PLACE OF THE SPECIAL MEETING?
A: The Special Meeting will be held in the Executive Dining Room of
INTRUST Bank at 105 North Main Street, Wichita, Kansas 67202 at 4:00
p.m., local time, on Tuesday, May 6, 2003.
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to vote on the approval of the merger agreement
between INTRUST and Merger Corp., pursuant to which Merger Corp. will
merge with and into INTRUST. As a result of the merger, all
stockholders owning fewer than 1,000 shares of INTRUST common stock
will receive $152.00 for each share that they own. After the merger
(and the redemption of the publicly held trust preferred securities
described elsewhere in this Proxy Statement), INTRUST intends to "go
private" and end its reporting obligations with the SEC.
Q: WHO MAY BE PRESENT AT THE SPECIAL MEETING AND WHO MAY VOTE?
A: All holders of our common stock and other interested persons may attend
the Special Meeting in person. However, only holders of our common
stock of record as of April 8, 2003 may cast their votes in person or
by proxy at the Special Meeting.
Q: WHAT IS THE VOTE REQUIRED?
A: The proposal to approve the merger agreement and the merger must
receive the affirmative vote of the holders of at least two-thirds
(2/3) of the shares of INTRUST common stock entitled to vote at the
Special Meeting. If you do not vote your shares, either in person or by
proxy, or if you abstain from voting on this matter, it has the same
effect as if you voted against the merger. In addition, if you do not
instruct your broker on how to vote on the merger, your broker will not
be able to vote for you. This will have the same effect as a vote
against the merger.
Q: WHO IS SOLICITING MY PROXY?
A: The Board of Directors.
7
Q: WHAT IS THE RECOMMENDATION OF OUR BOARD OF DIRECTORS REGARDING THE
MERGER PROPOSAL?
A: Our Board of Directors has determined that the merger is advisable and
in the best interests of INTRUST and its stockholders. Our Board of
Directors has, therefore, unanimously approved the merger agreement and
recommends that you vote "FOR" approval of this matter at the Special
Meeting. In addition, several members of senior management, as well as
Merger Corp., join in the recommendation of the Board of Directors.
Q: WHAT DO I NEED TO DO NOW?
A: Please sign, date and complete your proxy and promptly return it in the
enclosed, self addressed, prepaid stamped envelope so that your shares
can be represented at the Special Meeting. If you do not vote your
shares, either in person or by proxy, or if you abstain from voting on
this matter, it has the same effect as if you voted against the merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: If you do not instruct your broker on how to vote on the merger, your
broker will not be able to vote for you. This will have the same effect
as a vote against the merger. Your broker will vote your shares for you
ONLY if you instruct your broker how to vote for you. Your broker
should mail information to you that will explain how to give these
instructions.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. Just send by mail a written revocation or a completed and signed
proxy dated after the date of the first proxy before the Special
Meeting or simply attend the Special Meeting and vote in person. You
may not change your vote by facsimile or telephone.
Q: WHAT HAPPENS IF I SELL MY INTRUST SHARES BEFORE THE SPECIAL MEETING?
A: The record date for the Special Meeting is earlier than the expected
effective time of the merger. If you own shares of INTRUST common stock
on the record date and transfer your shares after the record date but
before the merger, you will retain your right to vote at the Special
Meeting based on the number of shares you owned on the record date. If
you sell a sufficient number of shares so that you own fewer than 1,000
shares at the effective time of the merger, you will receive $152.00
cash for each share you own as of the effective time of the merger. The
effective time of the merger will be as of 4:00 p.m. Central time on
the date of the filing of the Articles of Merger with the Secretary of
State of Kansas.
Q: WHAT HAPPENS IF THE SPECIAL MEETING IS POSTPONED OR ADJOURNED?
A: Your proxy will be good and may be voted at the postponed or adjourned
meeting. You will still be able to change or revoke your proxy until it
is voted.
Q: WHAT IF I DO NOT SEND BACK A PROXY OR VOTE MY SHARES IN PERSON AT THE
SPECIAL MEETING?
A: If you do not vote your shares, either in person or by proxy, or if you
abstain from voting on this matter, it has the same effect as if you
voted against the merger.
8
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send instructions on how to
return your stock certificates and receive any cash payments you may be
entitled to receive.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If you own fewer than 1,000 shares of INTRUST common stock as of the
effective time of the merger, you will receive $152.00 in cash for each
share you own. If you own 1,000 or more shares of INTRUST common stock
as of the effective time of the merger (and you do not exercise your
dissenters' rights as discussed on page 51), you will not receive
anything in the merger and will continue to hold your shares of INTRUST
common stock. The merger agreement has specific provisions regarding
the treatment of shares held in street name. Please read the discussion
under "Proposal--The Merger Agreement--Conversion of Shares in the
Merger" for a description of these provisions as well as the terms of
the merger agreement generally.
Q: WHAT IF I HOLD SHARES IN STREET NAME?
A: Any shares you hold in street name will be added to the number of any
shares you may hold directly in record name in determining the number
of shares you hold. You will be entitled to receive the cash amount
payable in the merger only if you certify to INTRUST that the total
number of shares you hold (whether of record or in street name) is
fewer than 1,000. The merger agreement has detailed provisions
regarding the treatment of shares held in street name. Please read the
discussion under "Proposal--The Merger Agreement--Conversion of Shares
in the Merger" for a description of these provisions as well as the
terms of the merger agreement generally.
Q: HOW WILL INTRUST BE OPERATED AFTER THE MERGER?
A: After the merger (and the redemption of the publicly held trust
preferred securities), INTRUST will be a privately held company.
INTRUST expects its business and operations to continue as they are
currently being conducted and, except as disclosed in this Proxy
Statement, the merger is not anticipated to have any effect upon the
conduct of such business. The Board of Directors believes the
going-private transaction is consistent with INTRUST's vision of
maintaining an independent banking strategy. As a result of the merger,
stockholders of INTRUST who receive cash for their shares in the merger
will no longer have a continuing interest as stockholders of INTRUST
and will not share in any future earnings and growth of INTRUST.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible and
we expect the merger to be completed shortly after the Special Meeting.
The effective time of the merger will be as of 4:00 p.m. Central time
on the date of the filing of the Articles of Merger with the Secretary
of State of Kansas.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A: The receipt of cash in the merger will be taxable for federal income
tax purposes. Stockholders who do not receive cash in the merger should
not be subject to taxation as a result of the merger. To review the
material tax consequences in greater detail, please read the discussion
under "Special Factors--U.S. Federal Income Tax Consequences."
9
Q: MAY I BUY ADDITIONAL SHARES IN ORDER TO REMAIN A STOCKHOLDER OF
INTRUST?
A: Yes. The key date is the effective time of the merger. So long as you
are able to acquire a sufficient number of shares so that you own 1,000
or more shares at 4:00 p.m. on the effective date of the merger, which
we expect to occur shortly after the Special Meeting upon the filing of
the Certificate of Merger with the Secretary of State of Kansas, your
shares of INTRUST common stock will not be cashed-out in the merger.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions concerning the merger or the Special Meeting,
or if you would like additional copies of this disclosure document or
proxy, please contact: Jay L. Smith, INTRUST Financial Corporation, 105
North Main Street, Wichita, Kansas 67202. His telephone number is (316)
383-1596.
10
SUMMARY FINANCIAL INFORMATION
SUMMARY HISTORICAL FINANCIAL INFORMATION OF INTRUST
The following summary historical consolidated financial data for
INTRUST for the fiscal years ended December 31, 2002, 2001 and 2000, was derived
from the audited consolidated financial statements of INTRUST. This financial
information is only a summary and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of INTRUST and the notes
thereto included in our 2002 Annual Report on Form 10-K, and the "Selected
Historical Financial Data" included elsewhere in this Proxy Statement. See
"Additional Documents and Other Information Incorporated by Reference."
YEAR ENDED DECEMBER 31,
-----------------------
2002 2001 2000
---- ---- ----
CONSOLIDATED STATEMENT OF INCOME DATA:
Interest income $ 133,375 $ 168,210 $ 183,147
Interest expense 43,694 74,192 88,225
Net interest income 89,681 94,018 94,922
Income before provision for income taxes 40,815 42,361 41,675
Provision for income taxes 13,924 15,842 16,540
Net income 26,891 26,519 25,135
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DATA:
Total assets $ 2,524,548 $ 2,555,497 $ 2,418,457
Stockholders' equity 205,600 188,746 169,466
Tier 1 capital 254,276 222,664 201,647
Average stockholders' equity 197,099 180,323 159,255
PER SHARE DATA:
Earnings, basic $ 11.52 $ 11.31 $ 10.60
Earnings, diluted 11.41 11.21 10.50
Cash dividends declared 3.20 3.20 3.00
11
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following summary unaudited pro forma consolidated income statement
data of INTRUST for the years ended December 31, 2002 and December 31, 2001
gives effect to the merger as if it had occurred on January 1, 2002, and January
1, 2001, respectively. The unaudited consolidated balance sheet data of INTRUST
at December 31, 2002 and December 31, 2001 gives effect to the merger as if it
had occurred on those dates. In addition, we have assumed that (1) INTRUST's
8.24% publicly held trust preferred securities are redeemed as of December 31,
2002 and December 31, 2001 for purposes of the balance sheets as of December 31,
2002 and December 31, 2001, respectively, and as of January 1, 2001 with respect
to the consolidated income statement data for the year ended December 31, 2001,
and as of January 1, 2002 for the year ended December 31, 2002 and (2) that
INTRUST has issued $60,000,000 in privately placed trust preferred securities as
of December 31, 2002 and December 31, 2001 for purposes of the balance sheets as
of December 31, 2002 and December 31, 2001, respectively, and as of January 1,
2001 with respect to the consolidated income statement data for the year ended
December 31, 2001 and as of January 1, 2002 for the year ended December 31,
2002. The issuance carries an assumed interest rate of 4.66%. You should read
the summary unaudited pro forma financial information in conjunction with the
unaudited Pro Forma Consolidated Financial Statements and the related
assumptions and notes included elsewhere in this Proxy Statement. As described
in such assumptions, the pro forma financial data assumes that 130,000 shares of
INTRUST common stock are cashed out in connection with the merger. The pro forma
information set forth below is not necessarily indicative of what INTRUST's
actual financial position or results of operations would have been had the
merger been consummated as of the above referenced dates or of the financial
position or results of operations that may be reported by INTRUST in the future.
Year Ended Year Ended
December 31, 2002 December 31, 2001
----------------- -----------------
(Dollars in thousands, except per share data)
--------------------------------------------------
CONSOLIDATED INCOME STATEMENT DATA:
Total interest income $ 133,052 $ 167,662
Total interest expense 43,810 74,469
Net interest income 89,242 93,193
Provision for loan losses 11,300 13,105
Net interest income after provision for loan losses 77,942 80,088
Income before provision for income taxes 40,276 40,786
Provision for income taxes 13,745 15,252
Net income 26,531 25,534
BALANCE SHEET DATA:
Total assets $2,480,180 $2,535,458
Stockholders' equity 184,502 167,222
Tier 1 capital 233,178 202,140
12
SELECTED PER SHARE FINANCIAL INFORMATION
The following table sets forth selected historical per share financial
information for INTRUST and unaudited pro forma per share financial information
for INTRUST giving effect to the merger, the redemption of INTRUST's 8.24%
publicly held trust preferred securities, and the issuance of $60,000,000
privately-placed trust preferred securities as if each of these issues had been
consummated as of December 31, 2002, in the case of book value information, and
as of the beginning of the respective reporting periods, in the case of income
statement information. The information presented below is derived from (1) the
consolidated historical financial statements of INTRUST, including the related
notes thereto, and (2) the unaudited Pro Forma Consolidated Financial
Statements, including the assumptions and notes thereto, contained elsewhere in
this Proxy Statement. You should read this table together with the unaudited Pro
Forma Consolidated Financial Statements and the related assumptions and notes
and the "Selected Historical Financial Data" included elsewhere in this Proxy
Statement and the consolidated financial statements of INTRUST and the notes
thereto included in our 2002 Annual Report on Form 10-K. As described in the
assumptions to the unaudited Pro Forma Consolidated Financial Statements, the
pro forma per share information assumes that 130,000 shares of INTRUST common
stock are cashed out in connection with the merger. The pro forma information
set forth below is not necessarily indicative of what INTRUST's actual financial
position or results of operations would have been had the merger been
consummated as of the above referenced dates or of the financial position or
results of operations that may be reported by INTRUST in the future.
AS OF AND FOR THE AS OF AND FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
HISTORICAL:
Earnings (loss) per common share from continuing operations:
Basic $ 11.52 $ 11.31
Diluted 11.41 11.21
Book value per common share 88.45 80.55
Dividends per common share 3.20 3.20
PRO FORMA:
Earnings (loss) per common share from continuing operations:
Basic $ 12.03 $ 11.53
Diluted 11.92 11.42
Book value per common share 84.08 75.55
Dividends per common share 3.20 3.20
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
"Forward looking statements" are those statements that describe
management's beliefs and expectations about the future. We have identified
forward looking statements by using words such as "anticipate," "believe,"
"could," "estimate," "may," "expect," and "intend." Although we believe these
expectations are reasonable, our operations involve a number of risks and
uncertainties, including those described in this Proxy Statement and other
documents filed with the Securities and Exchange Commission. Therefore, these
types of statements may prove to be incorrect. Further, the safe harbor
provisions of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act do not apply to the merger.
13
THE SPECIAL MEETING
GENERAL
The accompanying Proxy is solicited by and on behalf of the Board of
Directors for use at the Special Meeting of Stockholders to be held on May 6,
2003, at the time and place and for the purposes set forth in the accompanying
Notice and at any recess or adjournments thereof. The original solicitation will
be made by mail. The total expense of such solicitation will be borne by INTRUST
and will include reimbursement paid to brokerage firms and other custodians,
nominees and fiduciaries for their reasonable expenses incurred in forwarding
solicitation material regarding the meeting to beneficial owners. Further
solicitation of Proxies may be made personally, electronically or by telephone
following the original solicitation. All further solicitation will be by regular
employees of INTRUST, who will not be additionally compensated therefor.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted at the Special Meeting. Proxies
may be revoked by delivering to the Secretary of INTRUST, Brian E. Sullivan, 105
North Main Street, Wichita, Kansas 67202, a written notice of revocation bearing
a date later than the date of the Proxy, by duly executing and delivering to the
Secretary a subsequently dated Proxy relating to the same shares or by attending
the Special Meeting and voting in person (although attendance at the Special
Meeting will not in and of itself constitute revocation of a Proxy).
All shares entitled to vote represented by a properly executed and
unrevoked Proxy received in time for the meeting will be voted at the meeting in
accordance with the instructions given, but in the absence of instructions to
the contrary, such shares will be voted FOR the proposal to approve the merger
agreement. Persons empowered as Proxies will also be empowered to vote in their
discretion upon such other matters as may properly come before the meeting or
any adjournment thereof, except that discretionary authority on the part of the
Proxies will be limited to matters of which we did not have notice a reasonable
time before our mailing of this Proxy Statement and the Proxy. The Proxy
Statement and Proxy are being mailed to stockholders on or about April 11,
2003.
ANNUAL REPORT
INTRUST's Annual Report to Stockholders for the fiscal year ended
December 31, 2002 is available upon request from INTRUST.
WHO CAN VOTE AT THE MEETING
You are entitled to vote your INTRUST common stock if our records show
that you held your shares as of the record date, which is April 8, 2003. On
March 26, 2003, there were 2,309,278 shares of INTRUST common stock outstanding,
held by approximately 450 holders of record. Each such share of INTRUST common
stock is entitled to one vote on each matter submitted at the Special Meeting.
ATTENDING THE MEETING
If you are a beneficial owner of INTRUST common stock held by a broker,
bank or other nominee (i.e., in "street name"), you will need proof of ownership
to be admitted to the meeting. A recent brokerage statement or letter from a
bank or broker are examples of proof of ownership. If you want to vote your
shares of INTRUST common stock held in street name in person at the meeting, you
will have to get a written proxy in your name from the broker, bank or other
nominee who holds your shares.
14
VOTE REQUIRED
Approval of the merger agreement requires the affirmative vote of the
holders of at least two-thirds (2/3) of the outstanding shares of INTRUST common
stock entitled to vote. The transaction has not been structured to require the
approval of a majority of unaffiliated stockholders. If you do not vote your
shares, it will have the same effect as a vote "against" the merger agreement
and the merger. The proposal to adopt the merger agreement and approve the
merger (the "Merger Proposal") is a "non-discretionary" item, meaning that
brokerage firms cannot vote shares in their discretion on behalf of a client if
the client has not given voting instructions. Accordingly, shares held in street
name that have been designated by brokers on proxies as not voted with respect
to that proposal ("broker non-vote shares") will not be counted as votes cast on
it. Shares with respect to which proxies have been marked as abstentions also
will not be counted as votes cast on that proposal. Action on other matters, if
any, that are properly presented at the meeting for consideration of the
stockholders will be approved if a quorum is present and the votes cast favoring
the action exceed the votes cast opposing the action. A quorum will be present
if a majority of the outstanding shares of INTRUST common stock entitled to vote
is represented at the meeting in person or by proxy. Shares with respect to
which proxies have been marked as abstentions and broker non-vote shares will be
treated as shares present for purposes of determining whether a quorum is
present.
The Board of Directors is not aware of any other business to be
presented at the meeting other than matters incidental to the conduct of the
meeting. Because approval of the merger agreement requires the affirmative vote
of the holders of two-thirds (2/3) of the outstanding shares of INTRUST common
stock entitled to vote, abstentions and broker non-vote shares will have the
same effect as votes against the merger. Accordingly, the Board of Directors
urges you to complete, date and sign the accompanying proxy and return it
promptly in the enclosed postage-prepaid envelope.
As of the record date, the directors and executive officers of INTRUST
beneficially owned a total of approximately 35.6% of the outstanding shares of
INTRUST common stock entitled to vote at the Special Meeting.
PROXIES
Stockholders may vote at any meeting of the stockholders by proxies
duly authorized in writing. Proxies with rubber stamped facsimile signatures may
be used and unexecuted proxies may be counted upon receipt of a photographic,
photo-static, facsimile or similar reproduction of an executed proxy from the
stockholder. Proxies meeting these requirements submitted at any time prior to
the votes being taken during the Special Meeting will be accepted.
VOTING AND REVOCATION OF PROXIES
The shares of INTRUST stock represented by properly completed proxies
received at or before the time for the meeting (or any adjournment) will be
voted as directed by the respective stockholders unless the proxies are revoked
as described below. If no instructions are given, executed proxies will be voted
"FOR" approval of the merger agreement. Proxies marked "FOR" approval of the
merger agreement and executed but unmarked proxies will be voted in the
discretion of the proxy holders named in the proxies as to any proposed
adjournment of the meeting. Proxies that are voted "AGAINST" approval of the
merger agreement will not be voted in favor of any motion to adjourn the meeting
to solicit more votes in favor of the merger. The proxies will be voted in the
discretion of the proxy holders on other matters, if any, that are properly
presented at the meeting and voted upon. You may revoke your proxy at any time
before the vote is taken at the meeting. To revoke your proxy, you must either:
15
- notify the Secretary of INTRUST in writing at INTRUST's principal
executive offices;
- submit a later dated proxy to the Secretary of INTRUST; or
- attend the meeting and vote your shares in person.
Your attendance at the meeting will not automatically revoke your
proxy. If you hold your shares in street name, please see the voting form
provided by your broker for additional information regarding the voting of your
shares. Your broker may allow you to deliver your voting instructions via the
telephone or the internet. Please see the voting instruction form from your
broker. If your shares are not registered in your name, you will need additional
documentation from your record holder to vote the shares in person.
RECOMMENDATION REGARDING THE APPROVAL OF THE MERGER AGREEMENT
A special committee of our Board of Directors, the Special Pricing
Committee, consisting of five non-management directors of INTRUST, was formed to
provide non-binding advice and recommendations to the Board of Directors with
respect to certain issues arising in connection with the merger, including,
among other things, the per share price to be paid to stockholders who are being
cashed out in the merger. The Special Pricing Committee unanimously determined
that the merger consideration of $152.00 in cash per share is fair to both the
holders of INTRUST common stock who will receive cash in the merger and those
who will remain stockholders after the merger. The Board of Directors, based in
part upon the recommendation of the Special Pricing Committee, has unanimously
determined that the merger consideration is fair to, and the merger is advisable
and in the best interests of, INTRUST and the holders of INTRUST common stock.
Accordingly, our Board of Directors has approved the merger agreement and the
merger and believes that the proposed transaction is fair to and in the best
interests of INTRUST and its stockholders. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT INTRUST'S STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER.
In addition, pursuant to the federal securities laws, several members
of senior management who were involved in structuring the transaction, as well
as Merger Corp., have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3
with the SEC, of which this Proxy Statement is a part. Those members of senior
management, whom we refer to as the "Other Filing Persons," are Charles Q.
Chandler, Charles Q. Chandler IV, Jay L. Smith and Ronald L. Baldwin. MERGER
CORP. AND EACH OF THE OTHER FILING PERSONS JOIN IN THE RECOMMENDATION OF THE
BOARD OF DIRECTORS THAT YOU VOTE "FOR" THE PROPOSAL TO ADOPT IT.
16
SPECIAL FACTORS
BACKGROUND OF THE MERGER PROPOSAL
OVERVIEW. Of INTRUST's approximately 450 current record stockholders,
approximately 250, or 55.6%, hold fewer than 1,000 shares. Collectively, those
holders own an aggregate of approximately 130,000 shares, representing
approximately 5.6% of INTRUST's outstanding shares. The Board of Directors and
INTRUST's management are of the view that the recurring expense and burden of
maintaining so many small stockholder accounts coupled with the costs associated
with maintaining registration of the publicly held trust preferred securities
under Section 12 of the Securities Exchange Act and continuing to file periodic
reports with the SEC are not cost efficient for INTRUST. We estimate that the
costs associated with these reports and other filing obligations is
approximately $100,000 per year. See "Proposal: Approval of the Merger
Agreement--Reasons for the Merger" for a breakdown of these estimated costs.
These costs include professional fees for our auditors and corporate counsel,
printing and mailing costs, internal compliance costs, and transfer agent costs.
These SEC registration and reporting related costs have been increasing over the
years, and we believe that they will continue to increase, particularly as a
result of the additional reporting and disclosure obligations imposed on public
companies by the recently enacted Sarbanes-Oxley Act of 2002. Going private will
allow us to avoid these additional costs.
There are many advantages to being a public company, including stock
value, stock liquidity, and use of company stock to raise capital or make
acquisitions. However, because there is a limited market for our stock, we have
not effectively taken advantage of these benefits, at least to the extent of
justifying the continuing direct and indirect costs of being a public company.
For example, in recent years, INTRUST believes, the public marketplace has had
less interest in public companies with a small market capitalization and a
limited amount of securities available for trading in the public marketplace. We
believe it is highly speculative whether our common stock would ever achieve
significant market value with an active and liquid market. In addition, as a
result of our limited trading market, we are not in a position to use our public
company status to raise capital through sales of our common stock in a public
offering in the future or to acquire other business entities using our stock as
consideration. Moreover, our limited trading market makes it difficult for our
stockholders to liquidate their holdings. The cash-out merger will also allow
our small stockholders to do so without typical transaction costs. Please refer
to "Proposal: Approval of the Merger Agreement--Reasons for the Merger" for a
further discussion of the reasons supporting the Merger Proposal.
The Merger Proposal is being made at this time because the sooner the
proposal can be implemented, the sooner INTRUST will cease to incur the expenses
and burdens associated with being a public company and the sooner stockholders
who are to receive cash in the merger will receive and be able to reinvest or
otherwise make use of such cash payments.
ALTERNATIVES CONSIDERED. As a result, INTRUST's management began to
explore the possibility of reducing the number of stockholders of record to
below 300 and redeeming the publicly held trust preferred securities in order to
terminate the registration of the trust preferred securities and INTRUST's
reporting requirements. See "--Redemption of Publicly Held Trust Preferred
Securities." In making the determination with respect to the reduction in common
stockholders, the Board of Directors considered other means of achieving the
same result but rejected these alternatives because the Board of Directors
believed that the Merger Proposal would be simpler and less costly. These
alternatives were:
A purchase of shares in the open market. The Board of Directors
concluded this was a less efficient use of capital and was uncertain as to
whether this alternative would result in INTRUST obtaining the entire stock
holdings from a sufficient number of record stockholders to accomplish the
17
going private objective. The Board of Directors found it unlikely that a
sufficient number of holders of small numbers of shares would make the effort to
sell their shares.
A tender offer at a similar price per share. The Board of Directors
concluded this was a less efficient use of capital and again was uncertain as to
whether this alternative would result in shares being tendered by a sufficient
number of record stockholders so as to accomplish the going private objective.
The Board of Directors found it unlikely that a sufficient number of holders of
small numbers of shares would make the effort to tender their shares. The Board
considered as well an odd-lot tender for holders of fewer than 100 shares;
however, even if all odd-lot holders tendered, the transaction would not achieve
its stated goal of reducing the number of stockholders of record to below 300.
A reverse stock split. This alternative would accomplish the objective
of reducing the number of record stockholders, assuming approval of the reverse
stock split by INTRUST's stockholders. In a reverse stock split, INTRUST would
acquire the interests of a number of stockholders pursuant to an amendment to
INTRUST's Restated Articles of Incorporation to reduce the number of issued and
outstanding shares of common stock such that the cashed-out stockholders would
own less than one full share of INTRUST common stock. INTRUST would then
distribute cash for the resulting fractional share interests. Since the reverse
stock split and the merger would both achieve the same objective of reducing the
number of record stockholders, the Board of Directors chose the merger as the
superior method as it would ensure that the cashed-out stockholders would
receive dissenters' rights under Kansas law. Dissenters' rights would generally
not be available under Kansas law to the cashed-out stockholders in a reverse
stock split. In addition, because stockholders who would remain stockholders
following the reverse stock split would nevertheless receive cash for fractional
shares otherwise issuable to them in a reverse stock split, the Board of
Directors determined the total cash consideration payable in connection with a
reverse stock split would be significantly higher than for a cash-out merger.
In addition, the Board of Directors considered remaining a public
company and not engaging in a going private transaction at all. The Board
determined that the only significant positive to this approach was that there
would remain some limited liquidity in INTRUST's stock. The negatives to
remaining a public company were that the stockholders would still have a
relatively illiquid market and that INTRUST would remain responsible for
increasing securities compliance costs, especially in light of recent
legislation and expected regulation, which would reduce the cash flow of
INTRUST.
After consideration of the various alternatives described above, the
Board of Directors determined that the Merger Proposal was the best choice for
the stockholders and INTRUST. Significantly, INTRUST estimates that following
the proposed merger approximately 216 stockholders of record will remain,
comfortably below the maximum of 300 stockholders of record necessary to
de-register from the Securities Exchange Act.
BOARD OF DIRECTORS; SPECIAL PRICING COMMITTEE. During August 2002
INTRUST executive management initiated an examination of strategic alternatives
to, and the consequences of, INTRUST remaining a public company. Factors
considered by management included the limited trading volume of INTRUST's common
stock, an anticipated increase in the time and expense required to meet the
filing requirements of a public company, and the overall capital generation of
INTRUST and the most effective use of that capital. In late August and September
2002, INTRUST discussed these conceptual issues with three investment banking
firms. After further deliberations, executive management selected, in October
2002, the firm of Keefe, Bruyette & Woods, Inc., or "KBW," a nationally
recognized investment banking firm to assist it with the presentation of
strategic alternatives to the Board of Directors.
At a special meeting of the Board of Directors held on November 12,
2002, management presented a report on the business rationale for pursuing a
going private transaction. Management noted
18
that INTRUST's current capital ratios were well in excess of regulatory
requirements and that the current interest rate environment created an
opportunity to favorably reprice its publicly held trust preferred securities.
Management further noted the increased cost of regulatory compliance in light of
the recent passage of the Sarbanes-Oxley Act, and that a going private
transaction would increase INTRUST's ability to control its independence. At
that meeting, representatives of KBW presented a report on a going private
transaction, including structuring and process considerations. KBW discussed the
objectives of the going private transaction, including the company's desire to
enhance its operational flexibility by permitting it to focus on long term
business strategies. KBW discussed the implications of a going private
transaction from the perspective of both INTRUST and the stockholders who would
be cashed out in the merger. From the perspective of INTRUST, KBW indicated the
transaction would, among other things, increase INTRUST's ability to control its
independence, enable it to respond more quickly when corporate and stockholder
approval was necessary, position INTRUST for advantageous tax management
opportunities and future tax law changes, and lower INTRUST's costs by
eliminating the costs associated with being a public company. From the
perspective of the stockholders being cashed out, KBW indicated the transaction
would, among other things, offer liquidity to "small" stockholders and alleviate
certain risks associated with share ownership of INTRUST, including the
relatively small market capitalization and public float, low trading volume, and
the lack of research coverage and market making support. KBW noted that INTRUST
had no near term plans to issue additional shares to the public. KBW analyzed
the four alternative structures described above. KBW provided additional support
for management's decision that the cash-out merger was the best choice for
INTRUST in that the transaction structure would ensure that the stockholder base
would be reduced below 300 record holders and that stockholders would be
afforded dissenters' rights under Kansas law. In addition, KBW discussed the
structure of the cash-out merger, the disclosure obligations, key steps in the
valuation process and a transaction timetable. The Board determined to pursue a
going private transaction, among other reasons, in order to:
- reduce the number of stockholders of record of INTRUST to fewer than
300 persons in order to deregister its common stock under the
Securities Exchange Act, thereby relieving INTRUST of the
administrative burden and cost associated with filing reports and
otherwise complying with the requirements of registration under the
Securities Exchange Act;
- decrease the administrative expense and burden of dealing with
INTRUST's high number of stockholders holding small positions in
INTRUST's stock; and
- permit cashed-out stockholders to receive cash for their shares without
having to pay brokerage commissions.
In addition, the Board believed that the going private transaction
represented an opportunity to decrease excess capital and take advantage of the
interest rate environment in connection with redeeming its outstanding trust
preferred securities. A representative from Bryan Cave LLP, corporate counsel to
INTRUST, attended and reviewed the Board's fiduciary duties in connection with
the transaction and discussed the possibility of forming a special committee to
provide advice to the Board with respect to various matters regarding the
proposed cash-out merger. The Board of Directors appointed John T. Stewart
(chairman), Charlie Dieker, Bill Moore and Paul Seymour to a Special Pricing
Committee. See "--Special Pricing Committee" below for a discussion of the
composition of the Committee.
On November 21, 2002, the Special Pricing Committee held a meeting at
INTRUST's offices. The Committee discussed and reviewed its charge to provide a
non-binding recommendation to the INTRUST Board of Directors with respect to the
price at which the shares of common stock would to be redeemed pursuant to the
merger. The Committee discussed the desire to add to the Committee another
director who was a "smaller" stockholder and who was therefore likely to be
cashed out, so that the
19
Committee would have three such members. The Committee unanimously determined
that it would ask Jeff Turner to join the Committee. Mr. Turner subsequently
agreed to join the Committee. The Committee discussed the selection of a
financial advisor and legal counsel. The Committee noted management's
recommendation that it retain KBW and reviewed a draft engagement letter from
KBW, as well as presentation materials from other financial advisors interviewed
by management. The Committee then determined it would have the KBW engagement
letter reviewed by counsel and by management. The Committee discussed retaining
Bryan Cave as counsel. No action was taken at the meeting to retain a financial
advisor or legal counsel. Representatives of KBW then joined the meeting and
reviewed and discussed with the Committee their presentation materials from the
November 12, 2002 Board of Directors meeting.
On December 5 and 6, 2002, the Special Pricing Committee held meetings
at INTRUST's offices. On December 5, 2002, after discussion, the committee
unanimously approved the retention of KBW as its financial advisor and Bryan
Cave as its legal counsel. In addition to the engagement of KBW by the full
Board of Directors, KBW is acting as placement agent under a separate engagement
for INTRUST's private placement of trust preferred securities in 2002 and 2003.
Under the engagement, KBW could potentially earn additional placement agent fees
for future private placements of trust preferred securities of INTRUST. See
"--Opinion of Financial Advisor" below. Bryan Cave LLP has been retained from
time to time in the past by INTRUST to render corporate and banking advice.
Representatives of KBW then joined the meeting and discussed the role
of the Committee and financial and other procedural aspects of the process. In
addition, at that meeting, KBW presented its valuation analysis to the Special
Pricing Committee, taking into account applicable Kansas law. The meeting was
adjourned until December 6, 2002. On December 6, 2002, KBW discussed how record
holders of shares would be counted for purposes of the proposed merger agreement
and reviewed its valuation analyses, which indicated that the going concern
value of INTRUST's common stock ranged from $145.00 to $155.00 per share. During
the course of this review, KBW discussed its valuation methodology and the
financial analyses supporting the range of values. After discussion, the
Committee went into executive session and discussed the valuation information
provided by KBW, in particular as it related to fairness of the transaction to
unaffiliated stockholders who would be cashed out in the merger. The Committee
also discussed the financial impact of the transaction to remaining
stockholders, including a discussion of the amount of cash that was required to
implement the cash-out merger transaction. The Committee decided it needed
further time to consider the information provided before determining a price and
scheduled a meeting for December 9, 2002.
The Special Pricing Committee met at INTRUST's offices on December 9,
2002. Representatives from KBW participated at various times during the meeting
by teleconference. The Committee further discussed the information provided by
KBW. In the context of the Committee's broader advisory role in connection with
the cash-out merger, it discussed the shareholding level under which a
stockholder would be cashed out. Based on the current information available and
after discussion, the Committee unanimously approved recommending to the Board
of Directors a price of $152.00 per share at which shares would be cashed out in
the transaction.
The Special Pricing Committee met at INTRUST's offices the morning of
December 10, 2002, and reviewed updated information provided by KBW that
indicated that INTRUST would only have to cash-out stockholders with fewer than
1,000 shares to achieve the goal of going below 300 stockholders of record. The
Committee determined no further action was necessary.
On December 10, 2002, a special meeting of the Board of Directors was
held at INTRUST's offices. The Board first ratified the addition of Mr. Turner
to the Special Pricing Committee. The chairman of the Special Pricing Committee
then discussed the process undertaken by the Committee and
20
advised the Board on its recommendation of a price of $152.00 per share at which
shares would be redeemed pursuant to the proposed cash-out merger transaction.
Representatives of KBW attended the meeting and reviewed for the full Board of
Directors the steps and procedures performed by their firm in its role as
financial advisors to the Special Pricing Committee and their determination of a
going concern valuation range of $145.00 to $155.00 per share for the
stockholders that would be cashed-out in the proposed transaction. KBW orally
delivered its opinion to the Board to the effect that, based upon and subject to
the factors and assumptions set forth in its opinion, as of December 10, 2002,
the $152.00 consideration offered in the merger is fair, from a financial point
of view, to the stockholders of INTRUST, including both those stockholders who
will receive cash in the merger and those stockholders who will remain
stockholders after the merger. After considerable discussion, the Board of
Directors unanimously agreed that $152.00 per share was fair to both
stockholders that would be cashed-out in the proposed transaction and
stockholders that would remain after the transaction.
The Board then selected 1,000 shares as the ownership minimum because
it represented a logical breakpoint among stockholders in order to insure that,
after completion of the merger, the number of record stockholders would be less
than the 300 stockholder limit necessary to terminate registration with the SEC,
while at the same time involving a relatively small number of shares (estimated
at approximately 130,000, or 5.6% of INTRUST's outstanding shares) that would be
cashed-out in the proposed merger. The Board did not consider a possible sale of
INTRUST. No offers were presented to the Board, and no offers were solicited in
keeping with the Board of Directors' strategic determination to maintain
INTRUST's independence.
INTRUST publicly announced the proposed merger on December 11, 2002.
The members of the Special Pricing Committee were paid $200 per meeting
for each Committee meeting. The Special Pricing Committee held a total of five
meetings.
THE EFFECTS OF THE MERGER
The merger will have various effects on INTRUST, as described below.
REDUCTION IN THE NUMBER OF STOCKHOLDERS AND THE NUMBER OF OUTSTANDING
SHARES. INTRUST believes that the merger will reduce the number of record
stockholders from approximately 450 to approximately 200. Accordingly, as of
March 26, 2003, the number of outstanding shares of common stock will decrease
from 2,309,278 to approximately 2,179,000.
TRANSFER OF BOOK VALUE. Because (1) the price to be paid to holders of
fewer than 1,000 shares of common stock will be $152.00 per share, (2) the
number of shares of common stock expected to be cashed out as a result of the
merger is estimated to be approximately 130,000, (3) the total cost to INTRUST
(including expenses) of effecting the merger is expected to be approximately
$20,510,000, and (4) at December 31, 2002, aggregate stockholders' equity in
INTRUST was approximately $205,600,000, or $88.45 per share, INTRUST expects
that, as a result of the merger:
- aggregate stockholders' equity of INTRUST as of December 31, 2002, will
be reduced from approximately $205,600,000 on a historical basis to
approximately $184,502,000 on a pro forma basis;
- the book value per share of common stock as of December 31, 2002, will
be reduced from approximately $88.45 per share on a historical basis to
approximately $84.08 per share on a pro forma basis;
21
- diluted earnings per share of common stock for the year ended December
31, 2001 will increase from $11.21 on a historical basis to $11.42 on a
pro forma basis; and
- diluted earnings per share of common stock for the year ended December
31, 2002 will increase from $11.41 on a historical basis to $11.92 on a
pro forma basis.
Decrease in capital. As a result of the merger, INTRUST's capital will
be reduced, although INTRUST anticipates that it will remain "well capitalized"
for bank regulatory purposes. For instance, INTRUST's Tier 1 capital as of
December 31, 2002, will decrease from $254,276,000 on a historical basis to
$233,178,000 on a pro forma basis.
TERMINATION OF SECURITIES EXCHANGE ACT REGISTRATION AND REPORTING
REQUIREMENTS. INTRUST's 8.24% Cumulative 1998 Trust Preferred Securities are
currently registered under Section 12(b) of the Securities Exchange Act. On
March 21, 2003, INTRUST redeemed these trust preferred securities and shortly
after the effective date of the merger, INTRUST plans to terminate the
registration of these trust preferred securities. See "--Redemption of Publicly
Held Trust Preferred Securities" below. Upon the termination of the registration
of the publicly held trust preferred securities and the effectiveness of the
merger, if the INTRUST common stock is no longer held by 300 or more
stockholders of record, INTRUST's obligation to continue to file periodic
reports with the SEC shall terminate pursuant to Rule 12h-3 of the Securities
Exchange Act. Termination of this filing requirement under the Securities
Exchange Act will substantially reduce the information required to be furnished
by INTRUST to its stockholders and to the SEC. Accordingly, INTRUST estimates it
will eliminate costs and expenses associated with the continuation of the
registration of the trust preferred securities and the filing of periodic
reports with the SEC, which INTRUST estimates to be approximately $100,000 on an
annual basis. INTRUST intends to apply for such termination as soon as
practicable following completion of the merger and the redemption of the trust
preferred securities.
With respect to the executive officers and directors of INTRUST, in the
event of the termination of the registration of the trust preferred securities
and our obligation to file reports under the Securities Exchange Act:
- executive officers, directors and other affiliates will no longer be
subject to many of the reporting requirements and restrictions of the
Securities Exchange Act; and
- executive officers and directors of INTRUST may be deprived of the
ability to dispose of shares of INTRUST common stock pursuant to Rule
144 under the Securities Act of 1933.
EFFECT ON MARKET FOR SHARES. The INTRUST common stock is traded in the
local over-the-counter market on a limited basis. As discussed below, there
likely will be a decrease in the market for INTRUST shares as a result of the
decrease in the number of outstanding shares and the decrease in the number of
stockholders and this may affect the price at which remaining stockholders may
be able to sell their shares.
Once we stop filing reports with the SEC, our common stock will be
ineligible for quotation on the OTCBB, which may reduce the liquidity of our
common stock. While price quotations for our common stock may continue to be
reported after deregistration in less formal reporting systems such as the Pink
Sheets Electronic Quotation Service, we cannot assure you this will happen or,
even if it does happen, that an active market will exist for you to sell your
shares if you are a remaining stockholder. However, because the current amount
of trading activity in our common stock is so limited, there may be no practical
difference for most stockholders who are remaining stockholders following the
merger. In
22
addition, regardless of whether we become a private company as a result of the
merger and the redemption of our publicly held trust preferred securities, it is
currently proposed that the OTCBB will be phased out by 2003, and price
quotations for our common stock may not be reported on the BBX (which is
expected to replace the OTCBB in 2003). Therefore, our common stock may be
quoted only in the Pink Sheets Electronic Quotations Service regardless of
whether we go private.
FINANCIAL EFFECTS OF THE MERGER; FINANCING OF THE MERGER. INTRUST
expects that the merger and the use of approximately $20,510,000 cash to
complete the merger, which includes approximately $750,000 in professional fees
and other expenses payable by INTRUST related to the transaction, will not have
any material adverse effect on INTRUST's capital adequacy, liquidity, results of
operations or cash flow. Because INTRUST does not currently know the actual
number of shares which will be cashed out in the merger, INTRUST does not know
the total amount of cash to be paid to stockholders by INTRUST in the merger,
but INTRUST estimates it to be approximately $19,760,000. You should read the
discussion under "Proposal--Fees and Expenses" for a description of the fees and
expenses INTRUST expects to incur in connection with the exploration of
INTRUST's alternatives to effect a going private transaction, including the
merger.
INTRUST expects to be able to finance the cash amount to be paid to
stockholders in the merger out of the working capital of INTRUST. The redemption
of the publicly held trust preferred securities was financed in part by a series
of private placements of other trust preferred securities, described under
"--Redemption of Publicly Held Trust Preferred Securities" below, as well as out
of the working capital of INTRUST.
EFFECTS ON AFFILIATES. As a result of the merger, Merger Corp. will
cease to exist. As described below, the merger will have various effects on the
officers and directors of INTRUST, each of whom may, as a result of his or her
position with INTRUST, be deemed to be an affiliate of INTRUST. As used in this
Proxy Statement, the term "affiliated stockholder" means any stockholder who is
a director or executive officer of INTRUST or the beneficial owner of 10% or
more of INTRUST's outstanding shares, and the term "unaffiliated stockholder"
means any stockholder other than an affiliated stockholder.
EFFECTS ON STOCKHOLDERS
The merger will have various effects on affiliated and unaffiliated
stockholders of INTRUST, as described below. The effects of the merger to a
stockholder will vary based on whether or not all or any portion of the
stockholder's shares will be cashed out in the merger. The determination of
whether or not any particular shares of INTRUST common stock will be cashed out
in the merger will be based on whether the holder of those shares holds either
fewer than 1,000 shares or 1,000 or more shares. Since an affiliated stockholder
may beneficially own shares held by more than one holder of shares, an affiliate
may beneficially own both shares that will be cashed out in the merger and
shares that will remain outstanding in the merger. As described under "Security
Ownership of Certain Beneficial Owners and Management," INTRUST expects current
officers and directors to beneficially own a total of approximately 847,400
shares immediately after the merger compared to 848,202 as of February 14, 2003.
CASHED-OUT STOCKHOLDERS. The merger will have both positive and
negative effects on stockholders owning fewer than 1,000 shares immediately
prior to the Effective Time, including those described below. The Special
Pricing Committee and the Board considered each of the following effects in
making its recommendation.
Positive effects:
23
As a result of the merger, the cashed-out stockholders will:
- receive $152.00 per share in cash, which price represents a premium of
17.3% and 16.6% over the average 30 and 60 trading day closing price
before the public announcement of the proposed merger; and
- be able to liquidate their holdings without incurring brokerage costs.
The Special Pricing Committee and the Board concluded the ability to
liquidate was particularly important given the relatively illiquid
market for shares of INTRUST's common stock.
Negative effects:
As a result of the merger, the cashed-out stockholders will:
- no longer have any equity interest in INTRUST and, therefore, will not
participate in its future potential earnings or growth, if any, except
for seven of our directors who will purchase seven shares of our stock
immediately following the merger for bank regulatory purposes;
- other than upon the exercise of stock options that have previously been
or may in the future be granted by INTRUST to affiliated stockholders,
not be able to re-acquire an equity interest in INTRUST unless they
purchase shares from the remaining stockholders, although INTRUST does
not anticipate that the remaining stockholders will transfer their
shares to third parties; and
- be required to pay federal and, if applicable, state and local income
taxes on the cash amount received in the merger.
REMAINING STOCKHOLDERS. The merger will have both positive and negative
effects on stockholders who remain as stockholders if the merger is effected,
including those described below. The Special Pricing Committee and the Board
considered each of the following effects in making its recommendation.
Positive effects:
- Effect on earnings per share. Diluted earnings per share of common
stock for the year ended December 31, 2002 will increase from $11.41 on
a historical basis to $11.92 on a pro forma basis. Diluted earnings per
share of common stock for the year ended December 31, 2001, will
increase from $11.21 on a historical basis to $11.42 on a pro forma
basis.
- Dividends. INTRUST currently intends to continue to declare and pay
cash dividends on its common stock in the foreseeable future. You
should read the discussion under "Proposal--Dividend Policies" for more
information regarding INTRUST's dividend policies and the effects of
the merger on INTRUST's payment of dividends.
- Continuing interest in the ongoing business of INTRUST. The remaining
stockholders will retain their equity interest in INTRUST and,
therefore, will participate in its future potential earnings or growth.
Negative effects:
24
- Decreased access to information. If the merger is effected, INTRUST
intends to terminate the registration of its trust preferred securities
under the Securities Exchange Act and to cease filing periodic reports
with the SEC. Similarly, executive officers, directors and other
affiliates will no longer be subject to many of the reporting
requirements and restrictions of the Securities Exchange Act.
- Decreased liquidity. The liquidity of the shares of common stock held
by stockholders may be further reduced by the merger. Price quotations
for common stock are currently reported on the OTC Bulletin Board.
Following the going private transactions, any trading in our common
stock will continue only to occur in the "pink sheets" and in privately
negotiated transactions.
- Reduced capital. INTRUST's capital will be reduced, including a
decrease in INTRUST's Tier 1 capital as of December 31, 2002, from
$254,276,000 on a historical basis to $233,178,000 on a pro forma
basis. INTRUST's capital ratios substantially exceed regulatory
requirements, and INTRUST does not expect that the reduction in capital
will have a material effect on its business or operations.
- Reduced book value per share. The book value per share of common stock
as of December 31, 2002, will be reduced from approximately $88.45 per
share on a historical basis to approximately $84.08 per share on a pro
forma basis.
INCREASED SHARE OWNERSHIP OF OFFICERS AND DIRECTORS. As a result of the
merger, it is expected that (a) the percentage of ownership of INTRUST common
stock held by current officers and directors of INTRUST as a group will increase
from approximately 35.6% to approximately 37.6%, and (b) the collective book
value as of December 31, 2002, of the shares of INTRUST common stock held by
INTRUST's current officers and directors, as a group, will decrease from
$75,023,000 on a historical basis to approximately $71,250,000 on a pro forma
basis. For a description of the assumptions INTRUST used in determining the
numbers of shares and related percentages that INTRUST expects to be held by
current officers and directors immediately after the merger, please see footnote
(2) under "Security Ownership of Certain Beneficial Owners and Management."
REDEMPTION OF PUBLICLY HELD TRUST PREFERRED SECURITIES
In January 1998, INTRUST Capital Trust, a special purpose subsidiary of
INTRUST, issued $57,500,000 in cumulative trust preferred securities, which we
refer to in this document as our "publicly held preferred securities." Pursuant
to their terms, we redeemed these securities on March 21, 2003. To finance the
redemption, the Board of Directors authorized the issuance of up to $75,000,000
in privately placed trust preferred securities, which will not be registered
under the Securities Exchange Act. We currently anticipate that we will issue
$60,000,000 of such privately placed securities in a series of private
placements. As of the date of this Proxy Statement we have issued $50,000,000 of
such privately placed securities.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences to INTRUST and the stockholders of the merger. This discussion is
based on currently existing provisions of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), existing and proposed Treasury
regulations thereunder, published administrative rulings and court decisions,
all of which are subject to change or a change in interpretation. Any such
change, which may or may not be retroactive, could alter the tax consequences as
described herein. It is assumed that the shares of INTRUST stock are
25
held as capital assets by United States persons (i.e., a citizen or resident of
the United States or a domestic corporation). This discussion does not address
all aspects of United States federal income taxation that may be relevant to a
particular INTRUST stockholder in light of such stockholder's personal
circumstances or those INTRUST stockholders subject to special treatment under
United States federal income tax laws (for example, financial institutions; real
estate investment trusts; regulated investment companies; insurance companies;
broker-dealers; persons who are not citizens or residents of the United States
or who are foreign corporations, partnerships, estates or trusts; tax exempt
entities or traders in securities that elect to mark-to-market), or investors
who hold their INTRUST stock as a position in a straddle, as part of a hedge or
synthetic security, as part of a conversion transaction or other integrated
transaction or investors whose functional currency is not the U.S. dollar. This
discussion does not address the tax consequences of the alternative minimum tax
or the tax consequences to stockholders who acquired their stock through the
exercise of an employee stock option or other compensation arrangements. This
discussion does not address any aspect of state, local or foreign taxation.
No opinion of counsel has been sought or obtained with respect to any
tax consequences described herein. No rulings or determinations of the Internal
Revenue Service or any other tax authorities have been or will be sought or
obtained with respect to any tax consequences described herein. The discussion
below is not binding upon the Internal Revenue Service or such other
authorities. No assurance can be given that the Service would not assert, or
that a court would not sustain, a different position from any discussed herein.
You are urged to consult your tax advisor regarding the federal, state, local
and foreign tax consequences of the merger.
THIS SECTION DOES NOT DISCUSS ALL ASPECTS OF THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT TO INTRUST STOCKHOLDERS REQUIRED TO
PURCHASE "QUALIFYING" SHARES IN INTRUST UNDER THE NATIONAL BANK ACT.
FEDERAL INCOME TAX CONSEQUENCES IF YOU ARE NOT CASHED OUT IN THE
MERGER. If you (1) continue to hold INTRUST common stock immediately after the
merger, and (2) receive no cash as a result of the merger, you will not
recognize any gain or loss in the merger, and you will have the same adjusted
tax basis and holding period in your INTRUST common stock as you had in such
stock immediately prior to the merger.
FEDERAL INCOME TAX CONSEQUENCES IF YOU ARE CASHED OUT BY THE MERGER. If
you receive cash as a result of the merger, your tax consequences will depend on
whether, in addition to receiving cash, you or a person or entity related to you
continues to hold INTRUST common stock immediately after the merger, as
explained below. Whether a person or entity is considered to be related to you
for this purpose is determined under section 318 of the Internal Revenue Code.
In general, your spouse, children, grandchildren, parents and grantor trusts are
considered to be related to you for this purpose. You will also be considered as
owning all or part of the stock owned by partnerships and trusts in which you
are a partner or a beneficiary, and corporations in which you own 50% or more of
the stock (determined by value as opposed number of shares). In addition, if you
hold an option to acquire stock, you will be treated as owning that stock. If
you are a partnership, trust, or corporation, stock held by a partner,
beneficiary, or stockholder may be attributed to you. There are other situations
in which you will be treated as related to another INTRUST stockholder. If you
are related to a person or entity who continues to hold INTRUST common stock
immediately after the merger, it may be possible to obtain a waiver of such
attribution by filing an election under the Internal Revenue Code. You should
consult with your tax advisor if there is any other INTRUST stockholder to whom
you may be related.
If you (1) receive cash in exchange for INTRUST common stock as a
result of the merger, (2) do not continue to hold INTRUST common stock
immediately after the merger, and (3) are not related to any person or entity
that holds INTRUST common stock immediately after the merger, you will recognize
26
capital gain or loss. The amount of capital gain or loss you recognize will
equal the difference between the cash you receive for your INTRUST common stock
and your aggregate adjusted tax basis in such stock. The gain or loss will be
long-term capital gain or loss if you will have owned your INTRUST common stock
for more than one year at the time of the merger.
If you received cash in exchange for INTRUST common stock as a result
of the merger and either you or a person or entity related to you continues to
hold INTRUST common stock immediately after the merger, you will recognize gain
or loss in the same manner as set forth in the previous paragraph, provided that
your receipt of cash either (1) is "not essentially equivalent to a dividend" or
(2) is a "substantially disproportionate redemption of stock," as described
below.
Whether your receipt of cash is "not essentially equivalent to a
dividend," or is a "substantially disproportionate redemption of stock" will be
determined as follows:
- "Not Essentially Equivalent to a Dividend." You will satisfy the "not
essentially equivalent to a dividend" test if the reduction in your
proportionate interest in INTRUST common stock resulting from the
merger is considered a "meaningful reduction" given your particular
facts and circumstances. The Internal Revenue Service has ruled that
even a small reduction by a minority stockholder whose relative stock
interest is minimal and who exercises no control over the affairs of
the corporation will meet this test.
- "Substantially Disproportionate Redemption of Stock." Your receipt of
cash in the merger will result in a "substantially disproportionate
redemption of stock" if the percentage of all outstanding shares in
INTRUST common stock owned by you immediately after the merger is less
than 80% of the percentage of all outstanding shares of INTRUST common
stock owned by you immediately before the merger.
In applying these tests, you will be treated as owning all shares
actually or constructively owned by certain individuals and entities related to
you. If the taxable amount is not treated as capital gain under any of the
tests, it will be treated as a distribution. For federal income tax purposes, a
distribution is taxed first as ordinary dividend income to the extent of your
ratable share of INTRUST's current and accumulated earnings and profits, then as
a tax-free return of capital to the extent of your aggregate adjusted tax basis
in your shares, and any remaining gain will be treated as capital gain.
FEDERAL INCOME TAX CONSEQUENCES TO INTRUST. Neither INTRUST nor Merger
Corp. will recognize gain or loss for federal income tax purposes as a result of
the merger.
BACKUP WITHHOLDING. Certain of the INTRUST stockholders may be subject
to backup withholding at a 30% rate on the cash payments received for their
shares of INTRUST common stock. Backup withholding will not apply, however, if
you:
- Furnish to INTRUST a correct taxpayer identification number and certify
that you are not subject to backup withholding on the substitute Form
W-9 included in the letter of transmittal to be delivered to you
following the date of the merger;
- Provide a certificate of foreign status on Form W-8; or
- Establish that you are exempt from withholding.
27
Backup withholding is not an additional tax but is credited against the
federal income tax liability of the taxpayer subject to the withholding. If
backup withholding results in an overpayment of a taxpayer's federal income
taxes, that taxpayer may obtain a refund from the Internal Revenue Service.
THIS SECTION DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF YOUR PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS
TO DETERMINE THE UNITED STATES FEDERAL, STATE AND LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE MERGER TO YOU IN VIEW OF YOUR OWN PARTICULAR CIRCUMSTANCES.
SPECIAL PRICING COMMITTEE
A special committee of our Board of Directors, the Special Pricing
Committee, consisting of five non-management directors of INTRUST, was formed to
provide non-binding advice and recommendations to the Board of Directors with
respect to certain issues arising in connection with the merger, including the
per share price to be paid to stockholders who are being cashed out in the
merger. The Special Pricing Committee unanimously determined that the merger
consideration of $152.00 in cash per share is fair to both the holders of
INTRUST common stock who will receive cash in the merger and those who will
remain stockholders after the merger.
In considering the approval of a transaction such as the cash-out
merger, a board of directors may form a committee of unaffiliated directors to
guard against bias. However, in considering this transaction, the Special
Pricing Committee was not acting solely on behalf of those stockholders who
would be cashed out as a result of the merger. This represents a conflict of
interest, inasmuch as the goal of the stockholders receiving cash in the merger
would be to obtain the highest per share price possible; in contrast, the goal
of the stockholders who would remain stockholders following the merger would be
to retain as much cash in INTRUST as possible. The Board concluded that there
was sufficient representation in the decision-making process at both the
Committee and Board level to protect the interests of these stockholders. The
Special Pricing Committee was ultimately comprised of five Directors, three of
whom are stockholders who would be cashed out in the merger. In addition, given
that they represented a majority of the Committee, the Board concluded that all
of the Committee members could adequately convey their opinions and concerns to
the Committee, as well as to the entire Board, without the need for establishing
a separate committee solely to represent the stockholders who would be cashed
out in the merger. The Board accordingly believed the Committee would be able to
adequately balance the competing interests to arrive at a recommendation that
would be fair to both groups.
In addition, none of the Committee members are or had been employees
of, or are otherwise controlled by, or under common control with the Company,
and none of the members have had any other business or financial relationships
with INTRUST which would be required to be disclosed under the federal
securities laws. Accordingly, the Board believed the members of the Committee
could exercise independent judgment in making its recommendation to the Board.
RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE MERGER PROPOSAL
The Board of Directors, based in part upon the recommendation of the
Special Pricing Committee described above, has unanimously determined that the
Merger Proposal, taken as a whole, is fair to, and in the best interests of,
INTRUST and its stockholders, including unaffiliated stockholders and both
stockholders who will receive cash in the merger and those who will retain their
shares of common stock after the merger. The Board of Directors also believes
that the process by which the transaction is to be approved is fair. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER PROPOSAL AS DESCRIBED ABOVE. Each member of the Board of Directors
and each executive officer of INTRUST, including each of the Other Filing
Persons, who owns shares of
28
common stock has advised INTRUST that he or she intends to vote his or her
shares in favor of the Merger Proposal. As of February 14, 2003, the directors
and executive officers of INTRUST beneficially owned a total of 848,202 shares
of INTRUST common stock, or approximately 35.6% of the total shares entitled to
vote at the Special Meeting.
The Board of Directors has retained for itself the absolute authority
to reject (and not implement) the Merger Proposal (even after approval thereof
by stockholders) if it determines subsequently that the Merger Proposal is not
then in the best interests of INTRUST and its stockholders. In addition, the
Board of Directors may agree to amend the merger agreement in writing at any
time prior to the filing of the Certificate of Merger with the Secretary of
State of Kansas, except that an amendment made subsequent to the adoption of the
merger agreement by the stockholders of either constituent corporation shall
not: (a) alter or change the amount or kind of shares, securities, cash,
property or rights, or any of the proceedings, in exchange for or on conversion
of all or any of the shares of any class or series thereof of such constituent
corporation, (b) alter or change any term of the Restated Articles of
Incorporation of INTRUST, or (c) alter or change any of the terms and conditions
of the merger agreement if such alteration or change would adversely affect the
holders of any class or series thereof of such constituent corporation. The
Board of Directors unanimously approved the Merger Proposal.
The Board of Directors considered a number of factors in determining to
approve the merger agreement. INTRUST's primary reason for the merger is that
after the merger and the redemption of the trust preferred securities INTRUST
will no longer be required to file periodic reports with the SEC. The Board of
Directors considered the views of management relating to cost savings to be
achieved by redeeming and terminating the registration of the trust preferred
securities under the Securities Exchange Act and reducing the number of
stockholders to below 300 so as to eliminate INTRUST's reporting requirements.
INTRUST's management determined that cost savings of approximately $100,000 per
year could be achieved, including indirect savings resulting from reductions in
the time and effort currently required of management to comply with the
reporting and other requirements associated with continued registration of the
trust preferred securities under the Securities Exchange Act and reporting by
INTRUST. Similarly, the Board of Directors also considered the decrease in the
expense and burden of dealing with INTRUST's high number of stockholders holding
small positions in INTRUST's common stock that would result from the merger. The
Board of Directors also considered the effect that redeeming and terminating the
registration of the trust preferred securities and ceasing to file periodic
reports would have on the market for the common stock and the ability of
stockholders to buy and sell shares. However, the Board of Directors determined
that, even as a publicly-traded corporation, there is a very limited market for
the shares of INTRUST common stock, especially for sales of large blocks of such
shares, and that INTRUST's stockholders derive little benefit from INTRUST's
status as a publicly held corporation. The Board of Directors determined that
the cost savings and reduced burden on management to be achieved by redeeming
and terminating registration of the trust preferred securities under the
Securities Exchange Act and ceasing to file periodic reports with the SEC
outweighed any potential detriment from terminating such registration and
ceasing such filings.
The Board of Directors considered several alternative transactions to
accomplish the proposed going-private transaction but ultimately approved the
Merger Proposal. Please read the discussion under "--Background of the Merger
Proposal" for a description of these alternatives considered by the Board of
Directors.
The Board of Directors considered numerous factors, discussed below, in
reaching its conclusion as to the fairness of the Merger Proposal to the
stockholders, including both affiliated and unaffiliated stockholders. The Board
of Directors formed a Special Pricing Committee to give it non-binding advice
and recommendations to the Board of Directors with respect to certain issues
arising in connection with the merger, including, among other things, the per
share price to be paid to stockholders who are being
29
cashed out in the merger. The Special Pricing Committee of INTRUST retained KBW
as its, and the Board of Directors', financial advisor in connection with the
Merger. The Board of Directors did not assign any specific weights to the
factors listed below. Moreover, in their considerations individual directors may
have given differing weights to different factors.
CURRENT AND HISTORICAL MARKET PRICES OF INTRUST'S COMMON STOCK.
INTRUST's common stock is not traded on any stock exchange and price quotations
are reported on the OTC Bulletin Board. The common stock is thinly traded, and
once we have deregistered with the SEC, price information will no longer by
available on OTC, which will further decrease our trading price and volume.
During the 12 months prior to the public announcement of the proposed merger,
the stock traded infrequently with reported trades occurring on only 59 days
with an average trading volume on those days of approximately 924 shares per
day. The last sale price of INTRUST's common stock on December 9, 2002, the last
trading day before the Board determined to go forward with this transaction, was
$129.50.
The Board also reviewed high and low sales prices for the common stock
from January 1, 2001 to December 3, 2002, which ranged from $120 to $135 per
share. You should read the discussion under "Financial Information--Market
Prices and Dividend Information" for more information about our stock prices.
The Board does not believe it would be realistic to expect that the market would
sustain a price of $152.00 per share if more than a small number of the
cashed-out stockholders sought to sell their shares of INTRUST's common stock,
and that any effort to sell a material portion of INTRUST's shares would
materially depress the then trading price. Accordingly, the Board believes that
$152.00 per share is fair from a pricing point of view.
NET BOOK VALUE. As of September 30, 2002, the book value per share was
$86.70. Although book value was a factor that was considered by the Board among
others in determining the consideration to be paid to cashed-out stockholders in
the merger, the Board determined that it was not directly relevant. However, the
Board noted that the per share cash price of $152.00 payable in the merger
reflected a multiple of 1.75 on INTRUST's September 30, 2002 book value per
share.
GOING CONCERN VALUE. In determining the cash amount to be paid to
cashed-out stockholders in the merger, the Board valued INTRUST's shares on the
basis of a going concern, without giving effect to any anticipated effects of
the merger. Also, the Board did not consider the amount per share that might be
realized in a sale of 100% of the stock of INTRUST, as the Board determined that
consideration of such an amount was inappropriate in the context of a
transaction that would not result in a change of control of INTRUST. In
determining the going concern value of INTRUST's shares, the Board adopted the
analyses and conclusions of its financial advisor, which are described under
"Opinion of the Financial Advisor."
EARNINGS. The Board reviewed the earnings of INTRUST for the previous
three years and for the first three quarters of 2002. For the three years ended
December 31, 2001, 2000 and 1999, INTRUST reported net income of $26,519,000,
$25,135,000 and $22,458,000, respectively. For the nine months ended September
30, 2002, INTRUST reported net income of $19,068,000. The Board noted the
information provided by the financial advisor regarding the multiples in
comparable bank acquisitions stocks nationally as well as in neighboring states
(the "Great Plains States"), including the application by the financial advisor
of a merger premium that was determined to result from the synergistic financial
effect ("Synergy Cost-Savings Adjustment") of the comparable acquisitions.
Although the price paid by INTRUST in the transaction reflected as a multiple of
trailing four quarters earnings and projected earnings is less than the average
national price paid in control transactions as a multiple of earnings, the price
in the transaction is above the comparable average for the Great Plains States,
after adjusting for the Synergy Cost Savings Adjustment. Accordingly, the Board
concluded that $152.00 per share was fair from an earnings standpoint.
30
OPINION OF THE FINANCIAL ADVISOR. The Board considered the opinion of
KBW rendered to the Board orally on December 10, 2002, and subsequently
confirmed in writing, to the effect that, based upon and subject to the factors
and assumptions set forth in their opinion, as of December 10, 2002, the $152.00
consideration offered in the merger is fair, from a financial point of view, to
the stockholders of INTRUST, including both those stockholders who will receive
cash in the merger and those who will remain stockholders after the merger. You
should read the discussion under "Opinion of the Financial Advisor" and a copy
of the KBW Opinion attached as ANNEX B to this Proxy Statement.
OPPORTUNITY TO LIQUIDATE SHARES OF COMMON STOCK. The Board considered
the opportunity the merger presents for stockholders owning fewer than 1,000
shares to liquidate their holdings without incurring brokerage costs,
particularly given the relatively illiquid market for shares of INTRUST's common
stock at a price that represents a premium of 17.3% and 16.6% over the average
30 and 60 trading day closing price before the public announcement of the
proposed merger. In light of the market illiquidity and the premium, the Board
determined that this opportunity supported a determination of fairness.
In connection with its deliberations, the Board of Directors and the
Special Pricing Committee did not consider, and did not request that its
financial advisor evaluate, INTRUST's liquidation value. The Board of Directors
and the Special Pricing Committee did not view INTRUST's liquidation value to be
a relevant measure of valuation, given that the merger consideration
significantly exceeded the book value per share of INTRUST, and it was the Board
of Director's view that INTRUST is far more valuable as a going concern than its
net book value per share of $86.70 as of September 30, 2002. However, book value
per share is a historical accounting number, and an evaluation of liquidation
value could produce a higher valuation than book value per share. Additionally,
INTRUST can give no assurance that the liquidation value would not produce a
higher valuation of INTRUST than its value as a going concern.
No firm offers, other than in conjunction with the merger, of which the
Board of Directors is aware have been made by an unaffiliated person during the
preceding two years for (1) the merger or consolidation of INTRUST into or with
such person, (2) the sale or other transfer of all or any substantial part of
the assets of INTRUST, or (3) the purchase of a number of shares of common stock
that would enable the holder thereof to exercise control of INTRUST.
After consideration of all this information, the Board of Directors
determined that $152.00 per share is fair from a financial point of view to
INTRUST stockholders, including both those stockholders who will receive cash in
the merger and those stockholders who will remain stockholders after the merger.
No unaffiliated representative acting solely on behalf of the
stockholders for the purpose of negotiating the terms of the Merger Proposal was
retained by INTRUST or by a majority of directors who are not employees of
INTRUST. INTRUST has not made any provision in connection with the merger to
grant unaffiliated stockholders access to INTRUST's corporate files or to obtain
counsel or appraisal services at INTRUST's expense, and has not structured the
merger so as to require the approval of a majority of the unaffiliated
stockholders. With respect to unaffiliated stockholders' access to INTRUST's
corporate files, the Board of Directors determined that this Proxy Statement,
together with INTRUST's other filings with the SEC, provide adequate information
for unaffiliated stockholders to make an informed decision with respect to the
Merger Proposal. The Board of Directors also considered the fact that under
Kansas corporate law, and subject to certain conditions set forth under Kansas
law, stockholders have the right to review INTRUST's relevant books and records
of account. As for obtaining counsel or appraisal services solely for
unaffiliated stockholders at INTRUST's expense, the Board of Directors did not
consider these necessary or customary. INTRUST expects the Merger Proposal to
result in the cash out of approximately 130,000 shares of common stock, for a
total purchase price approximating $19,760,000, excluding related
31
costs and expenses estimated at approximately $750,000. After consideration of
the factors described above, the Board of Directors believes that the
transaction is fair notwithstanding the absence of such an unaffiliated
stockholder approval requirement or unaffiliated representative. The Board of
Directors believes that the transaction is procedurally fair because of the role
the Special Pricing Committee played in the process and because, after
consideration of all aspects of the proposed transaction as described above, all
of the directors, including the directors who are not employees of INTRUST and
all the members who were on the Special Pricing Committee, approved the Merger
Proposal.
DETERMINATION OF FAIRNESS OF THE MERGER PROPOSAL BY AND RECOMMENDATION OF MERGER
CORP. AND THE OTHER FILING PERSONS
Merger Corp. and its board of directors and each of the Other Filing
Persons believe that the Merger is fair to, and in the best interests of, each
of INTRUST's stockholders, including unaffiliated stockholders and both
stockholders who will receive cash in the merger and those who will retain their
shares of common stock after the merger. In reaching this conclusion, each of
the Other Filing Persons and the Merger Corp. board relied upon the factors
considered by and the analysis and conclusions of the INTRUST Board of Directors
and the Special Pricing Committee as well as the analysis and conclusions of
INTRUST's financial advisor, KBW, and each of the Other Filing Persons and
Merger Corp. adopt such analysis as his and its own, respectively. See "Special
Factors--Special Pricing Committee" and "--Recommendation of the Board of
Directors; Fairness of the Merger Proposal." The merger agreement has been
approved by Merger Corp.'s board of directors. Each of the Other Filing Persons
and Merger Corp. join in the recommendation of the INTRUST Board of Directors
that the stockholders vote "FOR" approval and adoption of the Merger Proposal.
CONDUCT OF INTRUST'S BUSINESS AFTER THE MERGER
INTRUST expects to fund the merger through INTRUST's working capital.
As a result, INTRUST's net stockholder equity will decline by approximately
$20,510,000. The lost earnings that would have otherwise been recognized on the
working capital utilized in the merger (estimated to be approximately $350,000
annually), will have a negative impact on the net income of INTRUST. Otherwise,
INTRUST expects its business and operations to continue as they are currently
being conducted and, except as disclosed below, the merger is not anticipated to
have any effect upon the conduct of such business. The INTRUST Board of
Directors believes the going-private transaction is consistent with INTRUST's
vision of maintaining an independent banking strategy. If the merger is
consummated, persons owning fewer than 1,000 shares at the Effective Time of the
merger will no longer have any equity interest in, and will not be stockholders
of, INTRUST and therefore will not participate in its future potential or
earnings and growth. Instead, each such owner of INTRUST common stock will have
the right to receive $152.00 per share in cash, without interest.
If the Merger Proposal is effected, INTRUST believes that, based on
INTRUST's stockholder records, approximately 200 stockholders of record will
remain. In addition, individuals who are currently members of the Board of
Directors and of management of INTRUST now owning approximately 35.6% of the
common stock will own approximately 37.6% of the common stock after the merger.
See "Security Ownership of Certain Beneficial Owners and Management."
INTRUST plans, as a result of the merger and the redemption of its
publicly held trust preferred securities, to become a privately held company.
INTRUST will redeem and terminate the registration of its trust preferred
securities under the Securities Exchange Act after the merger. Because the trust
preferred securities will no longer be registered under the Securities Exchange
Act and there will be less than 300 stockholder after the merger, INTRUST will
be relieved of the obligation to comply with the periodic reporting requirements
of the SEC, and its officers and directors and stockholders owning more
32
than 10% of the common stock will be relieved of certain obligations under the
Securities Exchange Act. You should read the discussion under "--The Effects of
the Merger" for more discussion regarding the effects of INTRUST terminating the
registration of its trust preferred securities under the Securities Exchange Act
and ceasing to file periodic reports with the SEC. INTRUST estimates that
termination of the registration of the trust preferred securities under the
Securities Exchange Act and of its reporting obligations will save INTRUST
approximately $100,000 per year in legal, accounting and other internal and
external expenses.
Other than as described in this Proxy Statement, neither INTRUST nor
its management has any current plans or proposals to effect any extraordinary
corporate transaction, such as a merger, reorganization or liquidation; to sell
or transfer any material amount of its assets; to change its Board of Directors
or management; to change materially its indebtedness or capitalization; or
otherwise to effect any material change in its corporate structure or business.
As stated throughout this Proxy Statement, INTRUST believes that there are
significant advantages to it in effecting the Merger Proposal and "going
private." INTRUST intends to consider and evaluate any opportunities it may
hereafter have as a private company. Although management does not presently have
an intent to enter into any transaction described above nor is management
currently in negotiations with respect to any such transaction, there is always
a possibility that INTRUST may enter into such an arrangement or transaction in
the future, including, but not limited to, entering into a merger or acquisition
transaction, making any public or private offering for its shares, or entering
into any other arrangement or transaction as it may deem appropriate. In such
event, the remaining stockholders of INTRUST may receive payment for their
shares in any such transaction lower than, equal to or in excess of the amount
paid to cashed-out stockholders in the merger.
OPINION OF THE FINANCIAL ADVISOR
In December 2002, the Special Pricing Committee of INTRUST retained KBW
as its, and the Board of Directors', financial advisor in connection with the
exploration of INTRUST's alternatives to effect a going private transaction,
including the merger. Among other things, KBW was retained to perform a
valuation analysis to determine a going concern valuation range and to render an
opinion as to the fairness from a financial point of view to the stockholders of
INTRUST of the per share consideration offered in connection with the merger.
KBW's valuation was determined on the basis of the going concern value for
INTRUST shares.
KBW was selected to act as INTRUST's financial advisor based upon its
qualifications, expertise and reputation. KBW specializes in providing a range
of investment banking services to financial institutions and regularly engages
in the valuation of banking companies and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
On December 5, 2002, KBW presented a valuation to the Special Pricing
Committee indicating that the going concern value of INTRUST's common stock
ranged from $145.00 to $155.00 per share. On December 10, 2002, KBW rendered its
oral opinion to the Board of Directors to the effect that, based upon and
subject to the factors and assumptions set forth in its opinion, as of December
10, 2002, the $152.00 per share consideration paid in connection with the merger
is fair, from a financial point of view, to the stockholders of INTRUST,
including both those stockholders who will receive cash in the merger and those
stockholders who will remain stockholders after the merger. KBW confirmed its
oral opinion of December 10, 2002 by delivering a written opinion to the Board
of Directors, which we refer to as the "KBW Opinion," to the effect that, based
upon and subject to the factors and assumptions set forth in that opinion, as of
December 10, 2002, the $152.00 per share consideration offered in the merger is
fair, from a financial point of view, to stockholders of INTRUST, including both
those stockholders who will receive cash in the merger and those stockholders
who will remain stockholders after the merger.
33
The full text of the KBW Opinion, which sets forth a description of the
procedures followed, assumptions made, matters considered and limits on the
review undertaken in connection with such opinion, is attached to this document
as ANNEX B and is incorporated herein by reference. Stockholders are urged to
read the KBW Opinion in its entirety. The KBW Opinion is directed to the INTRUST
Board of Directors and relates only to the fairness of the consideration offered
in the merger from a financial point of view, does not address any other aspect
of the merger or any related transaction and does not constitute a
recommendation as to how any stockholder should vote with respect to the merger
or as to any other matter. The summary of the KBW Opinion in this document is
qualified in its entirety by reference to the full text of the KBW Opinion.
In rendering its opinion, KBW reviewed, analyzed and relied upon the
following material relating to the financial and operating condition of INTRUST:
- - annual reports to stockholders and annual reports on Form 10-K of
INTRUST for the three years ended December 31, 2001;
- - recent interim reports to stockholders and quarterly reports on Form
10-Q of INTRUST;
- - other recent communications from INTRUST to its stockholders;
- - other financial information concerning the businesses and operations of
INTRUST furnished to KBW by INTRUST for the purpose of KBW's analysis,
including certain internal financial analyses and forecasts for INTRUST
prepared by senior management of INTRUST;
- - certain publicly available information concerning the trading of, and
the trading market for, the common stock of INTRUST; and
- - certain publicly available information with respect to banking
companies and the nature and terms of certain other transactions that
KBW considered relevant to its inquiry.
Additionally, in connection with the KBW Opinion, KBW reviewed a draft
of the Agreement and Plan of Merger and assumed that it would correspond in all
material respects to the final definitive merger agreement to be executed by
INTRUST. KBW also held discussions with senior management of INTRUST concerning
its past and current business operations, regulatory relations, financial
condition and prospects and such other matters as KBW deemed relevant. KBW also
took into account its assessment of general economic, market and financial
conditions and its experience in similar transactions, as well as its experience
in securities valuation and its knowledge of financial institutions, including
banks, bank holding companies, thrifts and finance companies generally. The KBW
Opinion is based upon conditions as they existed, and could be evaluated, on the
date of the opinion and upon information made available to KBW through the date
thereof.
In conducting its review and arriving at its opinion, KBW relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and KBW did not assume any
responsibility to independently verify the accuracy or completeness of such
information. KBW relied upon the management of INTRUST as to the reasonableness
and achievability of the financial and operating forecasts (the assumptions and
bases therefor) provided to KBW and assumed that such forecasts reflected the
best available estimates and judgments of such management and that such
forecasts will be realized in the amounts and in the time periods estimated by
management. With INTRUST's consent, KBW relied on advice of counsel and
independent accountants to INTRUST as to legal and financial matters concerning
INTRUST and the merger, and assumed that the merger would be conducted in a
manner that complies in all respects with applicable statutes, law, rules and
regulations. Concerning the financial impact to stockholders of INTRUST who will
have an ongoing equity interest in INTRUST after completion of the merger, with
INTRUST's consent KBW considered only the financial
34
impact on INTRUST of the consideration to be offered in the merger and did not
ascribe a material financial impact to the regulatory or legal considerations
associated with the effects of the proposed transaction. KBW is not expert in
the independent verification of the adequacy of loan and lease losses and
assumed, without independent verification, that the aggregate allowances for
loan and lease losses for INTRUST is adequate to cover such losses. KBW did not
make or obtain any evaluations or appraisals of the property of INTRUST, nor did
KBW examine any individual loan credit files.
Valuation Methodologies Overview. In conducting its review and arriving
at its opinion, KBW examined the application of three approaches for valuing an
interest in a business which it believes are generally recognized by appraisal
and valuation experts: (1) a cost approach or asset value method; (2) a market
approach or comparable company method; and (3) an income approach or earnings
(investment) method. KBW did not apply the asset value method because it is
difficult to estimate the market value of a financial institution's assets and
liabilities, particularly loan and deposit portfolios, with an acceptable degree
of accuracy, and because investors in financial institutions generally do not
appear to value such concerns by reference to the individual values of assets
and liabilities.
The market value method is frequently used to determine the price of
average trading blocks of stock when both the quantity and the quality of the
comparable data are deemed sufficient. "Market value" is defined as the price at
which property would change hands between a willing seller and a willing buyer
when both parties have the same information and neither party is acting under
compulsion. This definition of value produces a result that could be achieved if
the property were to be sold in an arm's-length transaction. In KBW's view, the
relative low and infrequent trading volume of INTRUST shares resulted in the
need to review alternative market value methods for comparative pricing
purposes. KBW performed three analyses using the market value method, including
a comparable merger and acquisition analysis, comparable market analysis and
comparable share redemption analysis. These analyses are further described in
detail below.
The income approach quantifies the present value of future economic
benefits of shares by capitalizing or discounting the cash flow of the
enterprise. As such, this approach considers projected levels of asset growth,
required regulatory capital, earnings, dividend paying capacity, and future
residual or terminal value. KBW applied this "discounted cash flow analysis"
because, based on its experience, it believes it is an effective method for
valuing an interest in a business as a going concern.
Valuation Summary. Based on the $152.00 per share consideration to be
offered in the merger and the indicative valuation range of approximately
$145.00 to $155.00 per share derived from KBW's valuation analyses as described
below, KBW calculated the following implied multiples and premiums:
INTRUST CURRENT INTRUST MERGER
PER SHARE DATA MARKET VALUATION (1) VALUATION RANGE CONSIDERATION
-------------- -------------------- ------------------- -------------
$ 129.50 $ 145 $ 155 $ 152
Price to:
Trailing 12 month earnings $ 10.19 12.7x 14.2x 15.2x 14.9x
Trailing 12 month operating earnings $ 10.55 12.3x 13.7x 14.7x 14.4x
Latest quarter annualized earnings $ 10.96 11.8x 13.2x 14.1x 13.9x
2002 projected earnings $ 11.49 11.3x 12.6x 13.5x 13.2x
2002 projected operating earnings $ 10.39 12.5x 13.9x 14.9x 14.6x
2003 projected earnings $ 10.89 11.9x 13.3x 14.2x 14.0x
Premium to:
Book value $ 86.70 149% 167% 179% 175%
Tangible book value $ 75.70 171% 192% 205% 201%
Current market $ 129.50 0% 12% 20% 17%
Historical financial data as of 9/30/02. (1) The most recent trade in INTRUST's
shares, as publicly reported on the OTC Bulletin Board, was $129.50 on November
12, 2002.
35
The indicative valuation range was determined by weighting the implied
values resulting from the selected analyses described below. Specifically, each
of the four analyses resulted in a range of values which were subsequently
weighted based upon the characteristics of INTRUST, as well as upon KBW's
experience and industry expertise, to derive a single value for each analysis.
Detailed descriptions of each analysis and valuation methodology are provided
later in this section. The four resulting weighted values served as the
parameters for the going concern valuation range. The following is a summary of
the implied valuations based on the selected analyses which were performed and
the relative weighting deemed to be appropriate for each:
WEIGHTED
GOING PER SHARE
IMPLIED PER CONCERN PURCHASE
VALUATION METHODOLOGY SHARE VALUE WEIGHTING VALUE PRICE
- --------------------- ----------- --------- ----------- ---------
Select comparable acquisition valuation range
High (National transactions) $170 25%
Low (Great Plains States transactions) $137 75% $145 $152
Comparable public company valuation range
High (National Peers) $173 25%
Low (Great Plains States Peers) $134 75% $144 $152
Comparable share redemption valuation range
High $165 50%
Low $129 50% $147 $152
Discounted cash flow valuation range
High $168 50%
Low $142 50% $155 $152
-------------------------
GOING CONCERN VALUATION RANGE $145 - $155
Financial Impact of the Merger Analysis. KBW analyzed the pro forma
financial impact to INTRUST's book value per share, earnings per share and
capital ratios, assuming the $152.00 per share merger consideration. Based on
this analysis, the following table represents, on a pro forma basis and at an
assumed range of financing costs, the book value dilution, estimated earnings
accretion and impact to capital ratios as of September 30, 2002, assuming
130,911 shares, or approximately 5.6% of outstanding shares, are purchased in
the merger.
AGGREGATE TIER 1 TIER 1 TOTAL
TRANSACTION COST OF ACCRETION TO 2002 DILUTION TO LEVERAGE CAPITAL CAPITAL
MERGER PRICE VALUE FINANCING EARNINGS PER SHARE BOOK VALUE RATIO RATIO RATIO
- ------------ ----- --------- ------------------ ----------- ----- ----- -----
$152 $19,898,472 6.50% 1.2% (3.6%) 9.06% 11.26% 13.31%
$152 $19,898,472 7.50% 0.7% (3.6%) 9.06% 11.26% 13.31%
Total Return Analysis. KBW also performed a total return analysis over
various time periods for INTRUST versus the S&P 500 and the NASDAQ bank index.
TOTAL RETURN ANALYSIS NASDAQ
(TIME PERIOD) INTRUST S&P 500 BANK INDEX
------------- ------- ------- ----------
Three month -5.0% 15.2% -16.0%
One year -1.6% -18.3% 8.4%
Three year 0.1% -11.8% 10.7%
Five year 10.1% 1.0% 3.8%
Since August 31, 1995 14.2% 9.0% 15.0%
36
Selected Comparable Acquisitions. KBW also analyzed the consideration
paid in selected bank merger transactions. The analysis was based upon the
announced acquisition price of these transactions relative to the last twelve
months earnings, current earnings estimates, stated book value, tangible book
value, core deposit premiums and one month market premiums of the target
companies. The information analyzed was compiled by KBW from various industry
sources that monitor, compile and publish transaction summaries and descriptions
of mergers and acquisitions in the financial services industry.
KBW identified two groups of comparable bank acquisitions with
announced transaction values ranging from $150 million to $3 billion since the
beginning of 1995 that KBW deemed relevant. The first group consists of 138
nationwide bank transactions. The second group consisted of 11 transactions in
which the selling institution was headquartered in either Kansas, Iowa,
Missouri, Nebraska, North Dakota, South Dakota or Oklahoma, which states we
refer to collectively as the "Great Plains States."
For each group, KBW applied the median transaction multiples (price to:
book value, tangible book value, trailing earnings per share and estimated
earnings per share, as well as the premiums paid over core deposits and the one
month market price prior to announcement) to the related financial statistics
for INTRUST to derive a range of implied values. KBW took the median implied
values and averaged them to derive a single implied value for each comparable
acquisition group. KBW then adjusted the resulting two values to extract the
component of a merger premium that was determined to result from the synergistic
financial effect ("Synergy Cost-Savings Adjustment") of the comparable
acquisitions.
To determine the appropriate Synergy Cost-Savings Adjustment, KBW
modeled a merger of INTRUST with two distinct, reasonably likely, hypothetical
acquirors and measured the impact that synergies had on the buyer's targeted
earnings accretion/(dilution) and internal rate of return calculations. In the
first step, KBW calculated the acquiror's 2004 estimated EPS
accretion/(dilution) assuming a conservative synergy percentage. In the second
step, KBW assumed no synergies and decreased the purchase price paid for INTRUST
until the resulting 2004 accretion/(dilution) for the acquiror was the same in
both scenarios (with and without synergies). The same rationale was then applied
using internal rate of return as the acquiror's financial target.
The Synergy Cost-Savings Adjustment was derived from the percentage
difference in the hypothetical purchase price paid between the with synergy and
without synergy scenarios. This percentage difference ranged between 12% and
20%. The Synergy Cost-Savings Adjustment was then applied to the average implied
values of the National and Great Plains comparable acquisition groups to obtain
a going concern value range for INTRUST shares.
The following table outlines the median valuation multiples of the
National comparable acquisitions, the implied valuation of INTRUST in a control
transaction based on these control multiples and the adjusted going concern
valuation:
37
PER SHARE MEDIAN IMPLIED INTRUST
NATIONAL COMPARABLE ACQUISITIONS DATA MULTIPLES VALUATION
- -------------------------------- ---- --------- ---------
Price to:
Trailing 12 month earnings $ 10.19 20.7x $ 210.73
Estimated earnings $ 10.89 17.6x $ 191.57
Premium to:
Book value $ 86.70 250% $ 217.10
Tangible book value $ 75.70 260% $ 196.65
Core deposits NA 20% $ 225.12
Market (1) $ 129.50 32% $ 171.96
-----------
Average of implied company valuation (rounded) $ 202
Synergy Cost-Savings Adjustment (%) 20% - 12%
-----------
Going concern value range (rounded) $162 - $178
MIDPOINT OF RANGE (ROUNDED) $ 170
(1) Premium to market was based on the most recent trade in INTRUST's
shares, as publicly reported on the OTC Bulletin Board, of $129.50 on November
12, 2002.
The following table outlines the median merger multiples of the Great
Plains States comparable acquisitions, the implied valuation of INTRUST in a
control transaction based on these control multiples and the adjusted going
concern valuation:
PER SHARE MEDIAN IMPLIED INTRUST
GREAT PLAINS STATE COMPARABLE ACQUISITIONS DATA MULTIPLES VALUATION
- ------------------------------------------ ---- --------- ---------
Price to:
Trailing 12 month earnings $ 10.19 16.2x $ 164.98
Estimated earnings $ 10.89 NA NA
Premium to:
Book value $ 86.70 192% $ 166.36
Tangible book value $ 75.70 206% $ 156.06
Core deposits NA 13% $ 174.13
Market (1) $ 129.50 17% $ 152.16
-------------
Average of implied company valuation (rounded) $ 163
Synergy Cost-Savings adjustment (%) 20% - 12%
-------------
Going concern value range (rounded) $ 130 - $ 143
MIDPOINT OF RANGE (ROUNDED) $ 137
(1) Premium to market was based on the most recent trade in INTRUST's
shares, as publicly reported on the OTC Bulletin Board, of $129.50 on November
12, 2002.
Comparable Public Company Analysis. KBW compared financial, operating
and market performance information of INTRUST to a National peer group
("National Peers") and a Regional peer group ("Great Plains Peers"). The two
groups consist of banks with assets of $1 billion to $6 billion that KBW deemed
relevant. The National Peers consisted of 143 banks headquartered nationwide and
the Great Plains Peers consisted of 10 banks headquartered in the Great Plains
States.
The analysis was based on various financial measures, including
earnings performance, operating efficiency, capital adequacy and asset quality,
and various measures of market performance. For purposes of such analysis, the
financial information used by KBW for INTRUST and its comparable companies was
as of, and for the period ended, September 30, 2002 and market price information
was as of December 3, 2002, unless otherwise noted. Additionally, estimated
earnings per share data for the National and Great Plains Peers was obtained
from Institutional Broker's Estimate System ("IBES").
The following table compares the financial performance metrics of
INTRUST to the median financial metrics of the National and Great Plains Peers
as of September 30, 2002. KBW also compared
38
various growth and market performance metrics of the National and Great Plains
Peers to those of INTRUST. KBW's analysis showed the following as of December 3,
2002.
GREAT PLAINS PEER
INTRUST NATIONAL PEER GROUP GROUP
------- ------------------- -----
Assets (in millions) $ 2,516 $ 1,993 $ 2,014
Return on average assets (operating) 1.03% 1.19% 1.12%
Return on average equity (operating) 12.89% 14.34% 15.19%
Net interest margin 4.02% 4.25% 3.88%
Efficiency ratio 63.46% 57.36% 57.80%
Nonperforming assets to
Loans and OREO 1.04% 0.71% 0.67%
Net charge-offs to average loans 1.75% 0.24% 0.30%
Loan loss reserve to loans 1.41% 1.41% 1.35%
Leverage ratio 9.40% 8.40% 8.19%
Tier 1 capital ratio 11.90% 11.33% 10.50%
Total capital ratio 13.10% 12.73% 11.73%
MEDIAN OF MEDIAN OF
INTRUST (1) NATIONAL PEERS GREAT PLAINS PEERS
----------- -------------- ------------------
Compound annual growth (12/31/97 to 9/30/02)
Loan growth rate 7.07% 14.49% 16.06%
Deposit growth rate 4.99% 10.99% 8.38%
Revenue per share growth rate 4.60% 8.44% 12.80%
Earnings per share growth rate 9.83% 12.69% 15.99%
Ratio of market price to:
Last twelve months operating earnings per share 12.3x 15.3x 12.6x
Last quarter annualized earnings per share 11.8x 14.1x 12.3x
2002 estimated earnings per share 12.8x 14.5x 12.2x
2003 estimated earnings per share 11.9x 13.1x 11.4x
Book value per share 149% 189% 170%
Tangible book value per share 171% 217% 198%
Market Capitalization (in millions) $ 302 $ 320 $ 273
- ------------------------------------
(1) Projected earnings provided by management were used since there are no
public estimates available. Estimated earnings exclude non-recurring items.
KBW also examined the last five years financial, operating and market
performance of the National and Great Plains Peers and compared the data to
INTRUST's relevant financials and valuations. KBW observed that INTRUST
performance and valuation more closely resembled those of the Great Plains Peers
and that, on average, the Great Plains Peers had historically performed and
traded at values below the National Peers.
KBW applied the median trading multiples of the National and Great
Plains Peers (i.e., price to: historical earnings, projected operating earnings,
book value and tangible book value) to INTRUST's corresponding financial data.
That resulted in an implied freely tradable market value range for INTRUST which
KBW increased by the median merger market premiums (17% (for Great Plains
comparable acquisitions) and 32% (for National comparable acquisitions)) derived
from both the National and Great Plains States comparable acquisitions. The
merger market premiums increased the "freely tradable market values" up to
"control values" and those premiums were based upon the premium paid over the
target's price 30 days prior to announcement in the transactions analyzed in the
Selected Comparable Acquisitions section.
39
The resulting two valuations were then adjusted by the Synergy
Cost-Savings Adjustment (20% - 12%) to create a range of implied values that
excluded the component of the merger premium that was determined to result from
the synergistic financial effect (cost savings) of the comparable acquisitions.
KBW then selected the midpoint of this range of going concern values
for both the National and Great Plains Peers.
INTRUST MEDIAN IMPLIED INTRUST
NATIONAL PEERS PER SHARE MULTIPLES VALUATION
- -------------- --------- --------- ---------
Price to:
Trailing 12 month operating earnings $ 10.55 15.3x $ 160.94
Latest quarter annualized earnings $ 10.96 14.1x $ 154.87
2002 estimated earnings (1) $ 10.39 14.5x $ 150.23
2003 estimated earnings (1) $ 10.89 13.1x $ 142.39
Premium to:
Book value $ 86.70 189% $ 163.45
Tangible book value $ 75.70 217% $ 164.09
-------------
Average of all implied company valuations (rounded) $ 156
National merger market premium (%) 32%
-------------
Implied "control" value (rounded) $ 206
Synergy Cost Savings Adjustment (%) 20% - 12%
-------------
Going concern value range (rounded) $ 165 - $ 181
MIDPOINT OF RANGE (ROUNDED) $ 173
(1) Estimated earnings for INTRUST are based on management's projections
and exclude non-recurring items.
INTRUST MEDIAN IMPLIED INTRUST
GREAT PLAINS PEERS PER SHARE MULTIPLES VALUATION
- ------------------ --------- --------- ---------
Price to:
Trailing 12 month operating earnings $ 10.55 12.6x $ 132.96
Latest quarter annualized earnings $ 10.96 12.3x $ 134.90
2002 estimated earnings (1) $ 10.39 12.2x $ 127.04
2003 estimated earnings (1) $ 10.89 11.4x $ 124.66
Premium to:
Book value $ 86.70 170% $ 147.28
Tangible book value $ 75.70 198% $ 150.24
-------------
Average of all implied company valuations (rounded) $ 136
Great Plains merger market premium (%) 17%
-------------
Implied "control" value (rounded) $ 159
Synergy Cost Savings Adjustment 20% - 12%
-------------
Going concern value range (rounded) $ 127 - $ 140
MIDPOINT OF RANGE (ROUNDED) $ 134
(1) Estimated earnings for INTRUST are based on management's projections
and exclude non-recurring items
Comparable Share Redemption Analysis. KBW analyzed seven involuntary
going private share redemption transactions in the banking industry that were
announced in 2002. The "involuntary" going private transactions were selected
because they involved transactions where a stockholder did not have the ability
to elect whether or not he or she was cashed out, such as a reverse stock split
or a cash-out merger. In the INTRUST transaction, a stockholder would be
automatically cashed out even if he or she voted against the merger.
Accordingly, the cash-out merger was deemed to be similar to those "involuntary"
transactions, in particular because they were recent and were also in the
banking industry.
For each of the subject companies, KBW calculated the transaction price
in relation to trailing 12-months operating earnings per share and premium to
book value per share, tangible book value per share
40
and the 30-day average stock price. The medians were then used to imply values
for INTRUST based on its corresponding financial data. The following table
summarizes the median values in these transactions and, where applicable, the
corresponding implied valuations for INTRUST. The lowest and the highest implied
values were used as a range and weighted equally to derive a single hypothetical
going concern value.
INTRUST MEDIAN IMPLIED
PER SHARE MULTIPLE VALUATION (ROUNDED)
--------- -------- -------------------
Price to:
Trailing 12 month operating earnings per share $ 10.55 15.7x $ 165
Premium to:
Book value per share $ 86.70 154% $ 129
Tangible book value per share $ 75.70 171% $ 134
Thirty-day trading average $ 129.60 8.2% $ 140
-------------
Implied Valuation Range $ 129 - $ 165
MIDPOINT OF RANGE (ROUNDED) $ 147
KBW analyzed and compared the earnings and book value per share
accretion/(dilution) for these transactions. Ranges of the estimated pro forma
financial impact for the comparable share redemption group and of the merger to
earnings per share and book value per share are summarized below:
INTRUST PRO FORMA
COMPARABLE SHARE REDEMPTION ESTIMATED RANGES
--------------------------- ----------------
High Low Median
---- --- ------
Impact to:
Earnings 10% (16%) 3% 1% - 5%
Book value 2% (12%) (7%) (4%) - (3%)
Discounted Cash Flow Analysis. KBW used a discounted cash flow analysis
that analyzed a stream of dividendable cash flow and a terminal value which
could be derived from INTRUST over the next five years to determine a
theoretical valuation range which the general market would deem appropriate for
an independent institution. The analysis assumed the following:
- estimated net income of INTRUST for 2002 through 2007, as provided by
management;
- 8.0% leverage ratio assumption;
- a terminal multiple range of 14x - 18x dividendable cash flow, based
on comparable acquisition analysis; and
- discount rate of 13%, which KBW derived using the capital asset
pricing model to determine the appropriate discount rate for a
commercial bank with INTRUST's risk characteristics.
The analysis assumes that any free capital above the level necessary to
maintain an 8.0% leverage ratio, along with a terminal value based on different
acquisition multiples to earnings, is discounted back to present value using the
discount rate described above. Based on such assumptions, KBW's analysis implied
a theoretical range of values of $142 to $168 per share of INTRUST's common
stock, with an average valuation of $155. In KBW's experience, discounted cash
flow analysis is a widely-used valuation methodology, but it relies on numerous
assumptions, including projected earnings, terminal values and discount rates.
The analysis does not purport to be indicative of the actual values or expected
values of INTRUST's common stock.
Other Analyses. In addition to the analyses described above, KBW
presented a number of other analyses and summaries to INTRUST's Board,
including:
41
- summary financial, market and franchise information about INTRUST;
- summary of the historical trading price and trading volumes of
INTRUST's common stock;
- summary of the historical multiple of market price of INTRUST's common
stock to last twelve months' earnings per share and to book value per
share, in each case of INTRUST; and
- summary of INTRUST's prior share repurchase activity and the
composition of its stockholder base.
The summary contained herein provides a description of the material
analyses and does not purport to be a complete description of the analyses
prepared by KBW in connection with the valuation analysis and in rendering its
opinion. The preparation of the valuation analysis and a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to the particular
circumstances and, therefore, such a valuation or opinion is not necessarily
susceptible to partial analysis or summary description. KBW believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, or
selecting part of the above summary, without considering all factors and
analyses, would create an incomplete view of the processes underlying the
analyses set forth in KBW's presentations to the Board or the Special Pricing
Committee, and in the KBW Opinion. The valuations or ranges of valuations
resulting from any particular analysis described above should not be taken to be
KBW's view of the actual present or future value of INTRUST or of INTRUST's
common stock, and are not necessarily indicative of actual values or actual
future results which may be significantly more or less favorable than suggested
by such analyses.
In performing its analyses, KBW made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of INTRUST. Such analyses were
prepared solely as part of KBW's role as financial advisor to INTRUST in
connection with the merger and were provided to INTRUST's Board in connection
with the delivery of KBW's valuation and opinion. KBW's valuation and opinion
were only a portion of the factors taken into consideration by the Board in
making its determination to approve the merger. The analyses do not purport to
be appraisals or to reflect the prices at which a company actually might be sold
or the prices at which any securities may trade at the present time or at any
time in the future. KBW selected comparable public companies and comparable
acquisitions on the basis of various factors, including the size and similarity
of selected companies, their business mix and similar characteristics of the
transactions; however, no company or transaction utilized as a comparison in
these analyses summarized above is identical to INTRUST or to the merger.
Pursuant to its engagement letter, INTRUST has paid KBW a financial
advisory fee of $50,000, a valuation fee of $200,000 and a fairness opinion fee
of $250,000. INTRUST has also agreed to reimburse KBW for its reasonable
out-of-pocket expenses and to indemnify KBW, its affiliates, and their
respective partners, directors, officers, agents, consultants, employees and
controlling persons against certain liabilities, including liabilities under the
Federal securities laws. Under separate engagement, KBW also earned
approximately $625,000 for acting as placement agent for INTRUST's private
placement of trust preferred securities in December 2002 and in March 2003. KBW
could potentially earn an additional placement agent fee of up to $187,500 for
trust preferred securities INTRUST may issue in private placements in the
balance of 2003. See "Special Factors--Redemption of Publicly Held Trust
Preferred Securities."
In the ordinary course of its business as a broker-dealer, KBW may,
from time to time, purchase securities from, and sell securities to INTRUST, and
as a market maker in securities, KBW may, from time to time, have a long or
short position in, and buy or sell, equity securities of INTRUST for its own
account and for the accounts of its customers. To the extent that KBW had any
such position as of the date of its opinion, it has been disclosed to INTRUST.
42
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF INTRUST
The directors and executive officers of INTRUST are:
NAME AND TITLE OTHER THAN DIRECTOR PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
---------------------------------- -----------------------------------------------
Ronald L. Baldwin, President Banking, INTRUST Bank, N.A., Wichita, Kansas
of INTRUST Bank President of Zenith Drilling Co., an oil and gas drilling and
C. Robert Buford exploration company, Wichita, Kansas
Frank L. Carney Private investor, restaurant management, Wichita, Kansas
Charles Q. Chandler, Chairman of the Banking, INTRUST Financial Corporation, Wichita, Kansas
Board and Chief Executive Officer
Charles Q. Chandler IV, President Banking, INTRUST Financial Corporation, Wichita, Kansas
George T. Chandler Banking, First National Bank, Pratt, Kansas
Stephen L. Clark President of Clark Investment Group, a real estate company, Wichita,
Kansas
Robert L. Darmon Retired; former executive officer of INTRUST; private investor,
Wichita, Kansas
Charles W. Dieker Retired; former Vice President - Marketing of Beech Aircraft; private
investor, Wichita, Kansas
Martin K. Eby, Jr. President of Martin K. Eby Construction, a construction company,
Wichita, Kansas
Richard M. Kerschen President of The Law Co., Inc., a construction company, Wichita,
Kansas
Thomas D. Kitch Attorney, Coulson & Kitch, Wichita, Kansas
Eric T. Knorr President of HQS&C Management Co., LLC, a restaurant
management company, Andover, Kansas
Charles G. Koch Chairman of Koch Industries, an integrated energy company, Wichita,
Kansas
J.V. Lentell, Vice Chairman of INTRUST Bank Banking, INTRUST Bank, N.A., Wichita, Kansas
William B. Moore Chief Operating Officer of Westar Energy and energy industry
consultant, Wichita, Kansas
Paul A. Seymour, Jr. Retired, private investor, Wichita, Kansas
Kenneth F. Shannon Chief Executive Officer of Metal-Fab, Inc., a manufacturing company,
Wichita, Kansas
Donald C. Slawson Oil and gas, real estate development, Wichita, Kansas
Jay L. Smith, Executive Vice President and Banking, INTRUST Financial Corporation, Wichita, Kansas
Chief Financial Officer
John T. Stewart III Banking, Wellington, Kansas
Jeffrey L. Turner Vice President, Boeing of Wichita, Wichita, Kansas
Rick L. Beach, Executive Vice Banking, INTRUST Financial Corporation, Wichita, Kansas
President and Chief Credit Officer
Steve L. Hipp, Executive Vice Banking, INTRUST Bank, N.A., Wichita, Kansas
President
During the last five years, neither INTRUST nor, to its knowledge, any
of the directors or executive officers thereof has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to any judicial or administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws, or finding any
43
violation of federal or state securities laws. Each of the directors and
executive officers of INTRUST is a citizen of the United States.
OWNERSHIP TABLE
Based upon information received by INTRUST upon request from the
persons concerned, each person known by INTRUST to be the beneficial owner of
more than five percent of INTRUST common stock, each director, named executive
officer and all directors and executive officers of INTRUST as a group, owned
beneficially as of February 14, 2003, the number and percentage of outstanding
shares indicated in the following table:
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
PERCENTAGE OF
OWNED AT PERCENTAGE OF OWNED (PRO FORMA) AT COMMON STOCK(1)
NAME FEBRUARY 14, 2003(2) COMMON STOCK(1) DECEMBER 31, 2002(2) (PRO FORMA)
- -------------------------------------------------------------------------------------------------------------
Ronald L. Baldwin 12,726(3) * 12,633(3) *
C. Robert Buford 2,053 * 2,053 *
Frank L. Carney 1,133 * 1,133 *
Charles Q. Chandler 93,489(4) 4.0% 93,489(4) 4.2%
Charles Q. Chandler IV 77,779(5) 3.3% 77,779(5) 3.5%
Anderson W. Chandler** 274,588(6) 11.9% 276,933(6) 12.6%
David T. Chandler** 261,967(6) 11.3% 264,312(6) 12.0%
George T. Chandler** 222,861(6) 9.7% 225,206(6) 10.3%
Stephen L. Clark 425 * 7 *
Robert L. Darmon 5,880(7) * 5,880(7) *
Charles W. Dieker 2,866 * 2,866 *
Martin K. Eby, Jr. 6,799 * 6,799 *
Richard M. Kerschen 25 * 7 *
Thomas D. Kitch 25 * 7 *
Eric T. Knorr 29,954(8) 1.3% 29,954(8) 1.4%
Charles G. Koch 99,084 4.3% 99,084 4.5%
J.V. Lentell 15,332(9) * 15,332(9) *
William B. Moore 100 * 7 *
Paul A. Seymour, Jr. 121,033(10) 5.2% 121,033(10) 5.5%
Kenneth F. Shannon 25 * 7 *
Donald C. Slawson 4,260(11) * 4,260(11) *
Jay L. Smith 7,102(12) * 7,002(12) *
John T. Stewart III 145,226 6.3% 145,226 6.6%
Jeffrey L. Turner 25 * 7 *
Directors and Executive
Officers as a Group
(26 persons) 848,202(13) 35.6% 847,426(13) 37.6%
* Represents less than 1.0% of the total outstanding shares of common stock.
**Includes shares directly owned and shares controlled as co-trustees. See (6).
(1) The officers, executive officers, and directors who
beneficially owned more than 1.0% of the outstanding shares
and other persons who beneficially owned more than 5.0% of the
outstanding shares.
(2) Includes shares issuable upon exercise of common stock
options.
(3) Mr. Baldwin's beneficial ownership includes 100 (7 pro forma)
shares of common stock over which he shares voting and
investment powers with his wife, Cindy Baldwin and currently
exercisable options to purchase 12,626 shares of common stock.
(4) Includes currently exercisable options to purchase 13,308
shares of common stock. Does not include 225,206 shares of
common stock beneficially owned by George T. Chandler (uncle),
and 77,779 shares of common stock beneficially owned by
Charles Q. Chandler IV (son).
(5) Includes currently exercisable options to purchase 29,790
shares of common stock.
(6) Anderson, David and George Chandlers' beneficial ownership is
comprised of the following:
(a) Shares beneficially owned by all three over which
they share voting and investment power: 126,128
shares of common stock held as co-trustees for the
Olive C. Clift Trust.
(b) Shares beneficially owned by David and George
Chandler over which they share voting and investment
power:
(1) 10 shares of common stock held as
co-trustees for the George T. Chandler Trust
#1.
(2) 1,353 shares of common stock held as
co-trustees for the Barbara A. Chandler
Trust #1.
(3) 95,370 shares of common stock held as
partners in Chandler Enterprises, L. P.
44
(c) Shares beneficially owned by David Chandler who has
sole voting and investment power:
(1) 9,275 shares of common stock held in the
George T. Chandler Trust #2 for benefit of
David T. Chandler.
(2) 9,278 shares of common stock held in the
George T. Chandler Trust #2 for benefit of
George T. Chandler, Jr.
(3) 9,275 shares of common stock held in the
George T. Chandler Trust #2 for benefit of
Paul T. Chandler.
(4) 9,278 shares of common stock held in the
George T. Chandler Trust #2 for benefit of
Barbara Ann Chandler.
(d) 100 shares of common stock held in the Anderson W.
Chandler Trust and 148,360 shares of common stock
held by the Anderson W. Chandler Limited Partnership
all of which are beneficially owned by Anderson
Chandler over which he has sole voting and investment
power.
(e) 2,000 shares of common stock held in David Chandler's
name over which he has sole voting and investment
power.
(7) Mr. Darmon's beneficial ownership is comprised of 45 shares of
common stock held in his name over which he has sole voting
and investment power and 5,835 shares of common stock held in
a trust with his wife, Beatrice F. Darmon, with whom he shares
voting and investment power.
(8) Mr. Knorr's beneficial ownership is comprised of: (a) 26,918
shares held in a revocable trust in which he is grantor and
has sole voting and investment power; (b) 1,252 shares of
common stock held by him in an Individual Retirement Account;
and (c) 1,784 shares of common stock held in a trust over
which he has sole voting and investment power. Does not
include 3,373 shares of common stock, owned by Darlene R.
Knorr, in which Mr. Knorr disclaims beneficial ownership.
(9) Includes currently exercisable options to purchase 12,011
shares of common stock.
(10) Mr. Seymour's beneficial ownership is comprised of the
following: (a) 100 shares of common stock held in his name
over which he has sole voting and investment power; (b) 28,100
shares of common stock held by John Wofford Seymour and 4,000
shares held in the John Wofford Seymour family trust over
which he shares voting and investment power with Dorothea W.
Seymour; (c) 31,353 shares of common stock held by William
Todd Seymour over which he shares voting and investment power
with Dorothea W. Seymour; (d) 28,740 shares of common stock
held in the Elizabeth Seymour Trust U/A over which he shares
voting and investment power with Dorothea W. Seymour; and (e)
28,740 shares of common stock held in the Katherine Seymour
Trust U/A over which he shares voting and investment power
with Dorothea W. Seymour.
(11) Mr. Slawson's beneficial ownership is comprised of (a) 100
shares of common stock held in his name over which he has sole
voting and investment power; and (b) 4,160 shares of common
stock held by the Judith A. Slawson (wife) Living Trust over
which he has shared voting and investment power.
(12) Includes currently exercisable options to purchase 7,002
shares of common stock.
(13) Includes shares as to which beneficial owner shares investment
and/or voting power with others, after eliminating duplication
within the table.
There were no transactions involving the acquisition or disposition of
INTRUST Financial Corporation common stock by any directors or executive
officers during the 60 days prior to the date of this Proxy Statement.
SUBSEQUENT SALE OF QUALIFYING SHARES
Seven of our directors hold of record fewer than 1,000 of our common
stock and will be cashed out in the merger. However, immediately following the
effectiveness of the merger, we intend to issue seven shares of our common stock
so that those directors will own at least $1,000 worth of "qualifying" shares in
INTRUST, as required under The National Bank Act and the implementing
regulations of the Office of the Comptroller of the Currency.
45
PROPOSAL:
APPROVAL OF THE MERGER AGREEMENT
OVERVIEW
INTRUST and Merger Corp. entered into the merger agreement as of
December 10, 2002. A copy of the merger agreement is attached to this Proxy
Statement as ANNEX A. If the merger agreement is approved by INTRUST's
stockholders, stockholders of INTRUST holding fewer than 1,000 shares of INTRUST
stock will receive a cash payment of $152.00 per share (the "Merger
Consideration"). The merger agreement and the merger requires the approval of
the holders of at least two-thirds (2/3) of the shares of INTRUST common stock
entitled to vote at the Special Meeting.
Our primary reason for the merger is that after the merger, and as a
result of the redemption of our trust preferred securities, we will no longer be
registered under the Securities Exchange Act or required to file periodic
reports with the SEC. An additional reason for the merger is to decrease the
expense and burden of dealing with INTRUST's high number of stockholders holding
small positions in INTRUST's stock. INTRUST's Board of Directors and management
are of the view that the recurring expense and burden of maintaining so many
small stockholder accounts coupled with the costs associated with maintaining
registration of INTRUST trust preferred securities under Section 12 of the
Securities Exchange Act and continuing to file periodic reports with the SEC is
not cost efficient for INTRUST. Finally, INTRUST believes that there is a very
limited market for the shares of INTRUST common stock, especially for sales of
large blocks of such shares, and that INTRUST's stockholders derive little
benefit from INTRUST's status as a publicly held corporation. See "--Reasons for
the Merger" below.
THE PARTIES
- INTRUST is a Kansas corporation and registered bank holding company.
- Merger Corp. is a recently-formed Kansas corporation organized for the
sole purpose of the merger. Charles Q. Chandler, IV is a director of
both INTRUST and Merger Corp. Rick L. Beach is Executive Vice
President and Chief Credit Officer of INTRUST and is the President and
a director of Merger Corp. Jay L. Smith is the Chief Financial Officer
and Executive Vice President of INTRUST and is the Secretary and a
director of Merger Corp.
In addition, INTRUST, Merger Corp. and the Other Filing Persons have
filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 with the SEC. The
business address of INTRUST and Merger Corp. and of each of the Other Filing
Persons is 105 North Main Street, Wichita, Kansas 67202, and the business
telephone number for each such entity or person is (316) 383-1111.
EFFECT ON STOCKHOLDERS
If approved at the Special Meeting, the merger will affect INTRUST
stockholders as follows after completion of the merger, based on their holding
as of the effective time of the merger (the "Effective Time"):
46
STOCKHOLDER AS OF EFFECTIVE TIME NET EFFECT AFTER MERGER
-------------------------------- -----------------------
Stockholders holding 1,000 or more shares of Shares of common stock will continue to be
INTRUST common stock outstanding and stockholder will receive no cash.
Stockholders holding fewer than 1,000 Shares of common stock will be cashed out at a
shares of INTRUST common stock price of $152.00 per share.
As described below under "--The Merger Agreement--Conversion of Shares
in the Merger," the merger agreement contains specific provisions regarding the
treatment of shares held in nominee form, or "street name." In determining the
number of shares held beneficially in street name by any stockholder, INTRUST
may, in its discretion, rely on "no objection" lists provided by any nominee
holder. Further, after the Effective Time, INTRUST will deliver to each
stockholder who would appear to be entitled to receive cash in the merger in
consideration for his or her shares a letter of transmittal requesting certain
information from such stockholder and requiring the stockholder to certify as to
the number of shares actually held, whether in registered form or in street
name. Letters of transmittal will be delivered to any stockholder who (a) holds
of record fewer than 1,000 shares, (b) according to records made available to
INTRUST from the nominee holder for any shares held in street name, holds fewer
than 1,000 shares in street name or holds shares in street name and with respect
to which INTRUST is not provided by the nominee holder the number of shares so
held.
In general, the merger can be illustrated by the following examples:
HYPOTHETICAL SCENARIO RESULT
--------------------- ------
Ms. Smith is a registered stockholder who Ms. Smith's 500 shares will be canceled and converted
holds 500 shares of INTRUST stock in her into the right to receive cash in the amount of $152.00
record account at the Effective Time. Ms. per share. (Note: If Ms. Smith wants to continue her
Smith holds no other shares. investment in INTRUST, she can buy at least 500 more
shares of INTRUST stock (preferably in her record
account so as to make it more readily apparent that she
holds 1,000 or more shares). Ms. Smith would have to act
far enough in advance of the Effective Time so that the
purchase is complete and registered on the books of
INTRUST before the Effective Time.)
Mr. Brown holds 500 shares of INTRUST Mr. Brown's 500 shares will be converted into the right
stock in a brokerage account as of the to receive cash in an amount equal to $152.00 per share.
Effective Time. Mr. Brown holds no other
shares.
Mr. Jones holds 600 shares of INTRUST If either INTRUST or Mr. Jones can establish to INTRUST's
stock in registered form and 700 shares satisfaction that he in fact holds greater than 1,000
in a brokerage account as of the shares, Mr. Jones' 1,000 shares will remain outstanding
Effective Time. Mr. Jones holds no other after the merger. Otherwise, INTRUST will presume that
shares. all of the shares are held by a holder of fewer than
1,000 shares and were, therefore, canceled in the
merger and converted into
47
the right to receive cash in an amount equal to
$152.00 per share. However, Mr. Jones would not be
entitled to receive any cash for his shares in the
merger, because he cannot certify to INTRUST that he
holds fewer than 1,000 shares as required by the
merger agreement. Mr. Jones will be able to rebut the
presumption that his shares were cashed out in the
merger by certifying in the letter of transmittal
sent to him after the Effective Time that he holds
greater than 1,000 shares and providing INTRUST such
other information as it may request to verify that
fact.
REASONS FOR THE MERGER
INTRUST's reason for the merger is to cash-out the equity interests in
INTRUST of the approximately 250 record and beneficial holders of common stock
that, as of the Effective Time, own fewer than 1,000 shares of common stock at a
price determined to be fair by the entire Board of Directors in order to:
- reduce the number of stockholders of record of INTRUST to fewer than
300 persons in order to relieve INTRUST of the administrative burden
and cost associated with filing reports and otherwise complying with
the requirements of registration under the Securities Exchange Act, by
deregistering its common stock under the Securities Exchange Act;
- decrease the expense and burden of dealing with INTRUST's high number
of stockholders holding small positions in INTRUST's stock; and
- permit cashed-out stockholders to receive cash for their shares
without having to pay brokerage commissions.
See "Special Factors--Background of the Merger Proposal" and "Special
Factors--The Effects of the Merger" for a discussion regarding the burden of
continued registration of the INTRUST common stock and the intended benefits to
INTRUST of the Merger Proposal. If the merger is implemented, the officers and
directors of INTRUST (and other holders of 1,000 or more shares) will benefit by
an increase in their percentage ownership of INTRUST common stock, although the
net book value of their holdings will decrease.
The merger will provide those stockholders with fewer than 1,000 shares
with a cost-effective way to cash out their investments, because INTRUST will
pay all transaction costs in connection with the merger. Moreover, INTRUST will
benefit from cost savings as a result of the merger, as more fully described
below.
The Board of Directors believes that the disadvantages of having
INTRUST continue to be a public company outweigh any advantages. The Board of
Directors has no present intention to raise capital through sales of securities
in a public offering in the future or to acquire other business entities using
stock as the consideration for any such acquisition. Accordingly, INTRUST is not
likely to make use of any advantage (for raising capital, effecting acquisitions
or other purposes) that INTRUST's status as a public company may offer.
48
INTRUST incurs direct and indirect costs associated with compliance
with the SEC's filing and reporting requirements imposed on public companies.
These indirect costs include the management and executive time spent in the
preparation and review of such filings. The time spent by certain executive
officers in connection with the preparation and review of these filings is
significant. It is anticipated that recent regulatory actions will result in an
increasing amount of time spent by executive management in complying with the
SEC's filing and reporting requirements imposed on public companies. INTRUST's
direct and indirect costs related to being a public company are estimated to
approximate $100,000 annually as follows:
Independent Auditors $ 20,000
SEC Counsel 10,500
Executive time (including general counsel's office) 46,000
Transfer agent 3,500
Printing and Mailing 20,000
--------
TOTAL $100,000
In light of these disproportionate costs, the Board of Directors
believes that it is in the best interests of INTRUST and its stockholders as a
whole to eliminate the administrative burden and costs associated with being a
public company.
Although many of these factors have existed for some time, INTRUST
began to consider the merger during the summer of 2002, and based upon an
analysis of its options, risks and expenses relating to remaining a public
company which is detailed in this Proxy Statement, approved the Merger Proposal.
Another reason the Board of Directors approved the Merger Proposal is the
continued illiquidity of the INTRUST stock. You should read the discussion under
"Special Factors--Background of the Merger Proposal" for more information
relating to the background of the Merger Proposal and INTRUST's reasons for the
Merger Proposal.
The Board of Directors has determined that the Merger Proposal is the
most expeditious and economical way of liquidating the holdings of stockholders
having small share positions and changing INTRUST's status from that of a public
company to that of a more closely held, non-reporting company. You should read
the discussion under "Special Factors--Recommendation of the Board of Directors;
Fairness of the Merger Proposal" for more information regarding the Board of
Director's reasons for the Merger Proposal.
The Merger Proposal, if approved, will have divergent effects depending
on whether you hold more, or fewer, than 1,000 shares of INTRUST common stock as
of the Effective Time. You should read the discussions under "Special
Factors--The Effects of the Merger"; "Special Factors--Recommendation of the
Board of Directors; Fairness of the Merger Proposal"; and "Proposal One--Effect
of the Merger Proposal on INTRUST Stockholders" for more information regarding
the effects of the merger.
The merger is structured to be part of a "going private" transaction as
defined in Rule 13e-3 promulgated under the Securities Exchange Act because it
is intended to, and, if completed, will likely terminate INTRUST's reporting
requirements under Section 12(b) and 15(d) of the Securities Exchange Act. In
connection with the Merger Proposal, INTRUST, Merger Corp. and the Other Filing
Persons have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 with the
SEC.
49
EFFECT OF THE MERGER PROPOSAL ON INTRUST STOCKHOLDERS
STOCKHOLDERS WITH FEWER THAN 1,000 SHARES. If the Merger Proposal is
implemented and you are a cashed-out stockholder (i.e., a stockholder holding
fewer than 1,000 shares of INTRUST common stock as of the Effective Time):
- You will receive cash equal to $152.00 for each share you hold.
- After the merger, you will have no further interest in INTRUST with
respect to your cashed-out shares, and you will no longer be entitled
to vote as a stockholder or share in INTRUST's assets, earnings, or
profits, if any. Your only right will be to receive cash for these
shares.
- You will not have to pay any service charges or brokerage commissions
in connection with the merger.
- All amounts owed to you will be subject to applicable federal and
state income taxes and state abandoned property laws.
- You will not receive any interest on cash payments owed to you as a
result of the merger.
- You will receive a transmittal letter from INTRUST as soon as
practicable after the Effective Time. The letter of transmittal will
contain instructions on how to surrender your existing certificate(s),
if applicable, to INTRUST for your cash payment. You will not receive
your cash payment until you surrender your outstanding certificate(s),
if applicable, in accordance with the instructions provided to you by
INTRUST, together with a completed and executed copy of the letter of
transmittal. Please do not send your certificates until you receive
your letter of transmittal.
Note that if you want to continue to hold INTRUST stock after the
merger, you may do so by purchasing a sufficient number of shares of INTRUST
stock on the open market prior to the Effective Time so that you hold at least
1,000 shares as of the Effective Time.
Seven of our directors hold of record fewer than 1,000 shares of our
common stock and will be cashed out in the merger. However, immediately
following the effectiveness of the merger, we intend to issue seven shares of
our common stock so that those directors will own at least $1,000 worth of
"qualifying" shares in INTRUST, as required under The National Bank Act and the
implementing regulations of the Office of the Comptroller of the Currency.
STOCKHOLDERS WITH 1,000 OR MORE SHARES. If you hold 1,000 or more
shares of INTRUST common stock as of the Effective Time, your shares will remain
outstanding after the merger unless you exercise dissenters' rights.
EFFECT OF THE MERGER PROPOSAL ON INTRUST
The Merger Proposal and redemption of and termination of the
registration of the trust preferred securities will terminate INTRUST's
obligation to file periodic reports with the SEC. INTRUST intends to deregister
the trust preferred securities and to terminate its reporting requirements as
soon as practicable after the merger. You should read the discussion under
"Special Factors--The Effects of the Merger--Termination of Securities Exchange
Act Registration" for more information regarding the effect of the merger on
INTRUST's reporting requirements.
50
The Merger Proposal, if approved and effected, will reduce
significantly the number of INTRUST stockholders and the number of outstanding
shares. You should read the discussion under "Special Factors--The Effects of
the Merger--Reduction in the Number of Stockholders and the Number of
Outstanding Shares" for more information regarding the reduction in the number
of INTRUST's stockholders that would result from the merger. INTRUST believes
that completion of the merger and deregistration of INTRUST common stock under
the Securities Exchange Act will cause the public market for shares of INTRUST
common stock to be eliminated.
INTRUST has no current plans to issue shares of its common stock other
than pursuant to INTRUST's existing stock option plans and other than to certain
of its existing directors who will be cashed out in the merger but who need to
continue to own $1,000 of "qualifying shares" for bank regulatory purposes, but
INTRUST reserves the right to otherwise issue shares of its common stock at any
time and from time to time at such prices and on such terms as INTRUST's Board
of Directors determines to be in the best interests of INTRUST and its then
stockholders. Persons who continue as stockholders following implementation of
the Merger Proposal will not have any preemptive or other preferential rights to
purchase any of INTRUST's stock that may be issued by INTRUST in the future,
unless such rights are specifically granted to the stockholders. INTRUST's
articles of incorporation expressly deny preemptive rights.
INTRUST does not know the total number of shares that will be purchased
and the total cash to be paid by INTRUST in the merger. Based on its stockholder
records, INTRUST believes that approximately 130,000 shares of common stock will
have to be cashed out by INTRUST. The actual amounts will depend on the number
of cashed-out stockholders as of the Effective Time, which may vary from the
number of such stockholders currently.
EXCHANGE AND PAYMENT PROCEDURES
Soon after the merger becomes effective, INTRUST will mail to each
stockholder who appears may be entitled to a cash payment pursuant to the merger
a letter of transmittal and instructions explaining how to exchange their stock
certificates for cash. Upon surrender to INTRUST of valid share certificates and
properly completed letters of transmittal, along with such other documents as
INTRUST may reasonably require, cashed-out stockholders will be entitled to
receive $152.00 in cash per share. Until surrendered in this manner, each stock
certificate representing cashed-out shares will represent only the right to
receive the cash consideration payable in the merger. No service charges will be
payable by stockholders in connection with the exchange of certificates or the
payment of cash pursuant to the merger agreement, all expenses of which will be
borne by INTRUST.
YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES NOW. YOU SHOULD SEND THEM
ONLY AFTER YOU RECEIVE A LETTER OF TRANSMITTAL FROM INTRUST. LETTERS OF
TRANSMITTAL WILL BE MAILED SOON AFTER THE MERGER IS COMPLETED.
DISSENTERS' AND APPRAISAL RIGHTS
INTRUST STOCKHOLDERS WILL HAVE THE RIGHT TO DISSENT FROM THE MERGER IN
ACCORDANCE WITH K.S.A. 17-6712, WHICH WE REFER TO AS "SECTION 17-6712." IF THE
STATUTORY PROCEDURES ARE COMPLIED WITH AND THE MERGER IS CONSUMMATED, DISSENTING
HOLDERS WOULD BE ENTITLED TO RECEIVE CASH EQUAL TO THE "VALUE" (AS DEFINED UNDER
KANSAS LAW) OF THE INTRUST SHARES HELD BY THEM. YOU SHOULD READ "ANNEX C -
K.S.A. 17-6712," WHICH CONTAINS A COMPLETE COPY OF THESE PROVISIONS. ANY
JUDICIAL DETERMINATION OF THE VALUE OF THE SHARES COULD BE BASED UPON
CONSIDERATIONS OTHER THAN OR IN ADDITION TO THE CASH CONSIDERATION PAYABLE IN
THE MERGER AND THE MARKET VALUE OF THE SHARES,
51
INCLUDING ASSET VALUES, THE INVESTMENT VALUE OF THE INTRUST SHARES AND ANY OTHER
VALUATION CONSIDERATIONS GENERALLY ACCEPTED IN THE INVESTMENT COMMUNITY. THE
VALUE SO DETERMINED FOR DISSENTING SHARES COULD BE MORE OR LESS THAN THE CASH
CONSIDERATION PAYABLE IN THE MERGER, AND PAYMENT OF SUCH CONSIDERATION WOULD
TAKE PLACE SUBSEQUENT TO PAYMENT PURSUANT TO THE MERGER.
The statutory dissenters' rights remedy provided under Section 17-6712
to a stockholder objecting to the merger is the exclusive remedy for the
recovery of the value of such stockholder's shares or for money damages to such
stockholder with respect to the merger. If INTRUST complies with the
requirements of Section 17-6712, any stockholder who fails to comply with the
requirements of that Section shall not be entitled to bring suit for the
recovery of the value of his or her shares or for money damages to the
stockholder with respect to the merger.
The rights of dissenting holders of shares are governed by Section
17-6712. The following summary of applicable provisions of Section 17-6712 is
not intended to be a complete statement of such provisions and is qualified in
its entirety by reference to the full text of Section 17-6712 which is included
herein as ANNEX C.
A holder of INTRUST shares as of the record date for the Special
Meeting who files a written objection to the merger with INTRUST prior to or at
the Special Meeting before the taking of the vote on the Merger Proposal, whose
shares either were not entitled to vote or were not voted in favor of the merger
and who has made a demand for compensation as provided under Section 17-6712 is
entitled under such provisions, as an alternative to receiving the consideration
offered in the merger for his or her INTRUST shares, to the value of his or her
INTRUST shares. The following is a summary of the procedural steps that must be
taken if the dissenters' rights are to be validly exercised.
Any stockholder of INTRUST may elect to exercise his or her right to
dissent from the merger by filing with INTRUST, at the address set forth below,
prior to or at the Special Meeting before the taking of the vote on the Merger
Proposal, a written objection to the merger. Any such stockholder must either
not be entitled to vote on the Merger Proposal or must not vote in favor of the
Merger Proposal. A dissenting stockholder's written objection to the merger and
demand for payment must be in addition to and separate from any vote against the
merger. Voting against the merger will not constitute the written notice
required to be filed by a dissenting INTRUST stockholder. A stockholder voting
for the merger will be deemed to have waived his or her dissenters' rights.
INTRUST will promptly deliver or mail to such stockholder written
notice that the merger has been effected within ten (10) days after the
Effective Time, and the stockholder may, within twenty (20) days from the
mailing of such notice, make written demand on INTRUST for the payment of the
value of his or her INTRUST shares. INTRUST shall pay to any dissenting
stockholder, within thirty (30) days after the expiration of the period of
twenty (20) days, the value of the stockholder's stock on the Effective Date,
exclusive of value arising from the expectation or accomplishment of the merger.
If during a period of thirty (30) days following the period of twenty
(20) days, INTRUST and the stockholder cannot agree upon the value of the stock,
any such stockholder or INTRUST may demand a determination of the value of the
stock of all dissenting stockholders by an appraiser appointed by the district
court by filing a petition with the court within four (4) months after the
expiration of the thirty (30) day period.
Upon the filing of such a petition by a stockholder, service of a copy
of the petition will be made upon INTRUST, which shall file with the clerk of
the court, within ten (10) days after such service a duly verified list
containing the names and addresses of all stockholders who have dissented and
with whom INTRUST has not been able to agree upon the value of their shares. If
the petition is filed by INTRUST,
52
the petition shall be accompanied by such a list. The clerk of the court shall
give notice of the hearing to the stockholders and INTRUST.
After the hearing on the petition, the court shall determine the
stockholders who have complied with the provisions of Section 17-6712 and are
entitled to valuation of and payment for their shares. The court shall appoint
an appraiser to determine the value, based upon an investigation deemed
appropriate by the appraiser. The appraiser shall determine the value of the
stock and file a report with the clerk of the court. The court will determine
the value of the stock and order payment of the value to the stockholder.
The cost of any such appraisal, including a reasonable fee to and the
reasonable expenses of the appraiser, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties as deemed equitable, except that the cost of notice shall be paid by
INTRUST. The court, on application of any party, shall determine the amount of
interest, if any, to be paid upon the value of the stock.
Under Section 17-6712 holders of record of INTRUST shares are entitled
to dissenters' rights as described above, and the procedures to perfect such
rights must be carried out by and in the name of holders of record. Persons who
are beneficial but not record owners of INTRUST shares and who wish to exercise
dissenters' rights with respect to the merger should consult promptly with the
record holders of their shares as to the exercise of such rights. All written
objections and demands for payment should be addressed to INTRUST Financial
Corporation, 105 North Main Street, Wichita, Kansas 67202, Attention: Brian E.
Sullivan, Secretary. All written objections and demand for payment must be
received before the Special Meeting or be delivered at such meeting prior to the
vote. Demands for payment must be made as described above.
Upon filing a demand for the value of his or her shares, the dissenting
stockholder shall cease to have any of the rights of a stockholder except for
the rights accorded by Section 17-6712.
Any INTRUST stockholder contemplating the exercise of dissenters'
rights is urged to review carefully the provisions of Section 17-6712 relating
to dissenters' rights, which are attached hereto as ANNEX C.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
We refer you to the information under the heading "Security Ownership
of Certain Beneficial Owners and Management" for information regarding our
current officers and directors and their stock ownership in INTRUST. As a result
of the merger, INTRUST expects that (a) the percentage of ownership of INTRUST
common stock held by current officers and directors of INTRUST as a group will
increase from 35.6% to approximately 37.6%, and (b) the collective book value as
of December 31, 2002, of the shares of INTRUST common stock held by INTRUST's
current officers and directors, as a group, will decrease from $75,023,000 on a
historical basis to approximately $71,250,000 on a pro forma basis. For a
description of the assumptions INTRUST used in determining the numbers of shares
and related percentages that INTRUST expects to be held by current officers and
directors immediately after the merger, please see footnote (2) under "Security
Ownership of Certain Beneficial Owners and Management."
FEES AND EXPENSES
INTRUST estimates that merger-related fees and expenses payable by
INTRUST, consisting primarily of financial advisory fees, SEC filing fees, fees
and expenses of investment bankers, attorneys
53
and accountants and other related charges, will total approximately $750,000,
assuming the merger is completed. This amount consists of the following
estimated fees:
DESCRIPTION AMOUNT
----------- ------
Advisory fees and expenses $ 560,000
Legal fees and expenses 150,000
Accounting fees and expenses 20,000
SEC filing fee 4,000
Printing, solicitation and mailing costs 10,000
Miscellaneous expenses 6,000
------------
TOTAL $ 750,000
============
ANTICIPATED ACCOUNTING TREATMENT
INTRUST anticipates that it will account for the transaction by
treating the shares repurchased in the merger as cancelled and retired.
REGULATORY REQUIREMENTS
In connection with the merger, INTRUST will be required to make a
number of filings with and obtain a number of approvals from various federal and
state governmental agencies, including:
- filing of certificate of merger with the Secretary of State of Kansas
in accordance with Kansas law after the approval of the merger
agreement and the merger by INTRUST's stockholders;
- complying with federal and state securities laws, including filing by
INTRUST, Merger Corp. and the Other Filing Persons prior to the date
of this Proxy Statement, of a Rule 13e-3 Transaction Statement on
Schedule 13E-3 with the Securities and Exchange Commission; and
- notifying the Federal Reserve Board of Kansas City of the merger.
THE MERGER AGREEMENT
This section is a summary of the material terms of the merger
agreement, a copy of which is attached as ANNEX A to this document. Because this
is a summary, it does not include all of the information that may be important
to you. You should read the entire merger agreement and this Proxy Statement and
related annexes before deciding how to vote at the Special Meeting.
THE MERGER. INTRUST Merger Corp., formed for the sole purpose of
effecting the merger, will be merged with and into INTRUST, which will be the
surviving corporation. The merger will occur following the approval of the
merger agreement by the INTRUST stockholders and the satisfaction of other
conditions to the merger.
CONVERSION OF SHARES IN THE MERGER. The merger agreement provides that,
at the effective time of the merger:
(a) all outstanding shares of INTRUST stock, whether Record Shares (as
defined below) or Street Shares (as defined below), held of record by
a Holder (as defined below) holding fewer than 1,000 shares of INTRUST
stock immediately prior to the Effective Time shall, without any
action on the part of the holder thereof, be canceled and converted
into the right to receive cash equal to $152.00 per share (the "Merger
Consideration"); provided, however, that INTRUST may
54
presume that all Street Shares are held by Holders holding fewer than
1,000 shares immediately prior to the Effective Time unless INTRUST or
a beneficial owner of Street Shares is able to demonstrate to
INTRUST's satisfaction that such shares are held beneficially by a
Holder holding 1,000 or more Shares immediately prior to the Effective
Time, in which event such Shares shall remain outstanding with all
rights, privileges, and powers existing immediately before the
Effective Time;
(b) all outstanding shares of INTRUST stock other than those described in
paragraph (a) as being converted into the right to receive the Merger
Consideration shall remain outstanding with all rights, privileges,
and powers existing immediately before the Effective Time; and
(c) the outstanding shares of Merger Corp. shall, without any action on
the part of the holder thereof, be canceled.
The merger agreement further provides that:
- no Holder holding, of record or beneficially, immediately prior to the
Effective Time 1,000 or more shares (including any combination of
Record Shares and Street Shares) in the aggregate shall be entitled to
receive any Merger Consideration with respect to the shares so held;
and
- it is a condition precedent to the right of any Holder to receive the
Merger Consideration, if any, payable with respect to the shares held
by such Holder that such Holder certify to INTRUST in the letter of
transmittal delivered by INTRUST as described below that such Holder
held, of record and beneficially, immediately prior to the Effective
Time fewer than 1,000 shares (including any combination of Record
Shares and Street Shares) in the aggregate.
For purposes of the merger agreement:
- the term "Record Shares" means shares of INTRUST stock other than
Street Shares, and any Record Share shall be deemed to be held by the
registered holder thereof as reflected on the books of INTRUST;
- the term "Street Shares" means shares of INTRUST stock held of record
in street name, and any Street Share shall be deemed to be held by the
beneficial owner thereof as reflected on the books of the nominee
holder thereof;
- the term "Holder" means
(a) any record holder or holders of Record Shares who would be
deemed, under Rule 12g5-1 under the Securities Exchange Act as
described below, to be a single "person" for purposes of
determining the number of record stockholders of INTRUST, and
(b) any other person or persons who would be deemed to be a "Holder"
under the above clause if the shares it holds beneficially in
street name were held of record by such person or persons.
The merger agreement provides that INTRUST (along with any other person
or entity to which it may delegate or assign any responsibility or task with
respect thereto) shall have full discretion and exclusive authority (subject to
its right and power to so delegate or assign such authority) to:
55
- make such inquiries, whether of any stockholder(s) or otherwise, as it
may deem appropriate for purposes of the above provisions;
- resolve and determine, in its sole discretion, all ambiguities,
questions of fact and interpretive and other matters relating to such
provisions, including, without limitation, any questions as to the
number of Shares held by any Holder immediately prior to the Effective
Time. All such determinations by INTRUST shall be final and binding on
all parties, and no person or entity shall have any recourse against
INTRUST or any other person or entity with respect thereto. For
purposes of the above provisions, INTRUST may in its sole discretion,
but shall not have any obligation to do so;
- presume that any shares of INTRUST common stock held in a discrete
account (whether record or beneficial) are held by a person distinct
from any other person, notwithstanding that the registered or
beneficial holder of a separate discrete account has the same or a
similar name as the holder of a separate discrete account; and
- aggregate the shares held (whether of record or beneficially) by any
person or persons that INTRUST determines to constitute a single
Holder for purposes of determining the number of shares held by such
Holder.
Rule 12g5-1 under the Securities Exchange Act provides that, for the
purpose of determining whether an issuer is subject to the registration
provisions of the Securities Exchange Act, securities shall be deemed to be
"held of record" by each person who is identified as the owner of such
securities on records of security holders maintained by or on behalf of the
issuer, subject to the following:
- In any case where the records of security holders have not been
maintained in accordance with accepted practice, any additional person
who would be identified as such an owner on such records if they had
been maintained in accordance with accepted practice shall be included
as a holder of record.
- Securities identified as held of record by a corporation, a
partnership, a trust whether or not the trustees are named, or other
organization shall be included as so held by one person.
- Securities identified as held of record by one or more persons as
trustees, executors, guardians, custodians or in other fiduciary
capacities with respect to a single trust, estate or account shall be
included as held of record by one person.
- Securities held by two or more persons as co-owners shall be included
as held by one person.
- Each outstanding unregistered or bearer certificate shall be included
as held of record by a separate person, except to the extent that the
issuer can establish that, if such securities were registered, they
would be held of record, under the provisions of this rule, by a
lesser number of persons.
- Securities registered in substantially similar names where the issuer
has reason to believe because of the address or other indications that
such names represent the same person, may be included as held of
record by one person.
56
Rule 12g5-1 further provides in pertinent part that, notwithstanding
the foregoing provisions:
- Securities held, to the knowledge of the issuer, subject to a voting
trust, deposit agreement or similar arrangement shall be included as
held of record by the record holders of the voting trust certificates,
certificates of deposit, receipts or similar evidences of interest in
such securities; provided, however, that the issuer may rely in good
faith on such information as is received in response to its request
from a non-affiliated issuer of the certificates or evidences of
interest.
- If the issuer knows or has reason to know that the form of holding
securities of record is used primarily to circumvent the provisions of
Section 12(g) or 15(d) of the Securities Exchange Act, the beneficial
owners of such securities shall be deemed to be the record owners
thereof.
EXCHANGE OF CERTIFICATES. The merger agreement provides that promptly
after the Effective Time, INTRUST will mail to each holder of a certificate or
certificates which immediately prior to the Effective Time evidenced outstanding
shares that appear, based on information available to INTRUST, may have been
converted into the right to receive the Merger Consideration (other than shares
as to which rights of dissent have been perfected) ("Certificates"), a letter of
transmittal (which shall contain a certification as to the number of shares held
and such other matters as INTRUST may determine and shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to INTRUST) and instructions to effect
the surrender of the Certificates in exchange for the Merger Consideration, if
any, payable with respect to such Certificates. Upon surrender of a Certificate
for cancellation to INTRUST, together with such letter of transmittal, duly
completed and executed and containing the certification that the holder of the
Certificate holds fewer than 1,000 shares, and such other customary documents as
may be required pursuant to such instructions, the holder of such Certificate
shall, subject to the above provisions of the merger agreement, be entitled to
receive in exchange therefor the Merger Consideration payable with respect to
the shares formerly represented by such Certificate and the Certificate so
surrendered shall be canceled. In the event of a transfer of ownership of shares
which is not registered in the share transfer records of INTRUST, the Merger
Consideration, if any, payable in respect of such shares may be paid or issued
to the transferee if the Certificate representing such shares is presented to
INTRUST, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid.
TIMING OF CLOSING. If the merger agreement is approved by the INTRUST
stockholders, the merger closing will take place as soon as practicable after
the Special Meting, provided that all other conditions to the closing have been
satisfied or waived. On the date the merger closes, a certificate of merger will
be filed with the Secretary of State of the State of Kansas. The merger will
become effective when a certificate of merger has been duly filed with the
Secretary of State of the State of Kansas.
DIRECTORS AND OFFICERS. The merger agreement provides that the
directors and officers of INTRUST immediately prior to the Effective Time of the
merger shall be the directors and officers of INTRUST, as the surviving
corporation, immediately after the merger.
ARTICLES OF INCORPORATION AND BYLAWS. The merger agreement provides
that the Restated Articles of Incorporation and Bylaws of INTRUST in effect
immediately prior to the Effective Time of the merger shall be the Restated
Articles of Incorporation and Bylaws of INTRUST, as the surviving corporation,
immediately after the merger.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties made by INTRUST and Merger Corp. regarding
various matters, including representations as to the enforceability of the
merger agreement.
57
CONDITIONS TO THE COMPLETION OF THE MERGER. The obligations of INTRUST
and merger subsidiary to complete the merger are subject to the satisfaction or
waiver of all of the following conditions:
- approval of the merger agreement by the holders of at least two-thirds
(2/3) of the shares of INTRUST common stock entitled to vote at the
Special Meeting; and
- no litigation pending by any governmental agency regarding the merger.
TERMINATION OF THE MERGER AGREEMENT. The merger agreement may be
terminated by either INTRUST or Merger Corp. at any time prior to closing.
DIVIDEND POLICIES
On October 8, 2002 the Board of Directors approved a regular quarterly
cash dividend of $.80 per share payable on November 1, 2002, to stockholders of
record as of October 8, 2002. Other regular quarterly dividends of $.80 per
share were declared by the Board of Directors on January 8, 2002, April 9, 2002
and July 9, 2002 to stockholders of record on those dates. These dividends were
payable on February 1, 2002, May 1, 2002 and August 1, 2002, respectively.
INTRUST paid total dividends during each of 2001 and 2002 of $3.20 per share.
See discussion under "Capital" in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Stockholders' Equity" in
Note 15 to the consolidated financial statements herein incorporated by
reference from INTRUST's 2002 Annual Report on Form 10-K for further discussion
of the payment of dividends and restrictions.
The INTRUST Board, in its discretion, will determine whether to declare
and pay dividends in the future. Any future declaration and payment of dividends
will depend upon:
- INTRUST's results of operations;
- INTRUST's earnings and financial condition;
- contractual limitations;
- cash requirements;
- future prospects;
- applicable law; and
- other factors deemed relevant by INTRUST's Board of Directors.
58
FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical consolidated financial data are
derived from, and qualified by reference to, INTRUST's Consolidated Financial
Statements and the notes thereto included in INTRUST's 2002 Annual Report on
Form 10-K, which is available to stockholders upon request. You should read the
selected historical consolidated financial information in conjunction with the
Consolidated Financial Statements of INTRUST and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in INTRUST's 2002 Annual Report on Form 10-K.
Year Ended December 31,
-----------------------
2002 2001 2000
---- ---- ----
(Dollars in thousands, except ratios and per share amounts)
RESULTS OF OPERATIONS:
Interest income $ 133,375 $ 168,210 $ 183,147
Interest expense 43,694 74,192 88,225
Net interest income 89,681 94,018 94,922
Provision for loan losses 11,300 13,105 10,620
Net interest income after provision for loan
losses 78,381 80,913 84,302
Noninterest income 57,878 56,005 49,875
Noninterest expense 95,444 94,557 92,502
Income before provision for income taxes 40,815 42,361 41,675
Provision for income taxes 13,924 15,842 16,540
Net income 26,891 26,519 25,135
FINANCIAL CONDITION:
Total assets $ 2,524,548 $ 2,555,497 $ 2,418,457
Total deposits 1,907,064 1,969,137 1,844,302
Net loans 1,748,135 1,748,714 1,701,684
Short-term borrowings 308,794 299,348 303,774
Stockholders' equity 205,600 188,746 169,466
Average assets 2,500,792 2,475,783 2,380,540
Average stockholders' equity 197,099 180,323 159,255
FINANCIAL RATIOS:
Return on average assets 1.08% 1.07% 1.06%
Return on average stockholders' equity 13.64% 14.71% 15.78%
Dividend Payout Ratio 27.79% 28.31% 28.34%
PER SHARE DATA
Earnings, basic $ 11.52 $ 11.31 $ 10.60
Earnings, diluted 11.41 11.21 10.50
Cash dividends declared 3.20 3.20 3.00
Book value 88.45 80.55 72.01
59
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma consolidated balance sheet as of December 31,
2002 and the unaudited pro forma consolidated income statements for the years
ended December 31, 2002 and December 31, 2001 give effect to the following:
- We have assumed that the merger occurred as of December 31, 2002, for
purposes of the consolidated balance sheet as of December 31, 2002,
and as of January 1, 2002 and January 1, 2001, respectively, with
respect to the consolidated income statements for the years ended
December 31, 2002 and December 31, 2001.
- We have assumed that a total of 130,000 shares are cashed out in the
merger at a price of $152.00 per share for a total of $19,760,000.
Additionally, we have assumed that we will incur $750,000 in costs and
expenses relating to the merger, $100,000 of which had not yet been
incurred as of December 31, 2002.
- We have assumed that the cash required to consummate the merger will
be funded through working capital of INTRUST.
- We have calculated lost income resulting from the merger, net of tax
effect, at an average rate of 2.81% for the year ended December 31,
2001, and an average rate of 1.66% for the year ended December 31,
2002.
- We have assumed that INTRUST's 8.24% publicly-traded trust preferred
securities are redeemed as of December 31, 2002 for purposes of the
consolidated balance sheet as of December 31, 2002 and as of January
1, 2002 and January 1, 2001, respectively with respect to the
consolidated statements of income for the years ended December 31,
2002 and December 31, 2001.
- We have assumed that INTRUST has issued $60,000,000 in
privately-placed trust preferred securities as of December 31, 2002
for purposes of the consolidated balance sheet as of December 31, 2002
and as of January 1, 2002 and January 1, 2001, respectively with
respect to the consolidated statements of income for the years ended
December 31, 2002 and December 31, 2001. The issuance carries an
interest rate of 4.66%.
- We have not reflected the anticipated annual cost savings, estimated
to be approximately $100,000 per year, that we expect as a result of
the merger and the redemption and deregistration of the trust
preferred securities.
The unaudited pro forma information is not necessarily indicative of
the results that would have occurred had the merger actually taken place at the
respective time periods specified nor does such information purport to project
the results of operations for any future date or period. Significant assumptions
and adjustments are disclosed in the accompanying notes.
The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements and accompanying footnotes
of INTRUST included in our 2002 Annual Report on Form 10-K. These documents may
be obtained by contacting INTRUST.
60
INTRUST FINANCIAL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 2002
(Unaudited - dollars in thousands except per share data)
HISTORICAL ADJ. PRO FORMA
DECEMBER 31, PRO FORMA ENTRY DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
2002 ADJUSTMENTS NO. 2002
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 120,018 $ 120,018
Federal funds sold 93,910 (43,235) 1,2,5 50,675
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS 213,928 (43,235) 170,693
INVESTMENT SECURITIES:
Held-to-maturity (fair value of $12,007) 11,692 11,692
Available-for-sale, at fair value 450,121 450,121
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES 461,813 461,813
LOANS HELD-FOR-SALE 5,910 5,910
LOANS, NET OF ALLOWANCE FOR LOAN LOSSES OF $26,093 1,742,225 1,742,225
LAND, BUILDINGS AND EQUIPMENT, NET 46,515 46,515
INTANGIBLE ASSETS 20,947 20,947
OTHER ASSETS 33,210 (1,133) 3,5 32,077
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,524,548 (44,368) $ 2,480,180
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 1,907,064 $ 1,907,064
SHORT-TERM BORROWINGS:
Federal funds purchased & securities sold under agreements to repurchase 299,091 299,091
Other 9,703 9,703
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM BORROWINGS 308,794 308,794
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 18,090 (770) 2,4 17,320
NOTES PAYABLE 2,500 2,500
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE
COMPANY'S SUBORDINATED DEBENTURES 82,500 (22,500) 5 60,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,318,948 (23,270) 2,295,678
STOCKHOLDERS' EQUITY:
Common stock, $5 par value; 10,000,000 shares authorized,
2,783,650 shares issued and 2,653,650 as adjusted 13,918 (650) 1 13,268
Capital surplus 21,728 (19,110) 1 2,618
Retained earnings 213,092 (1,338) 2,3,4 211,754
Treasury stock, at cost (459,276 shares) (45,731) (45,731)
Accumulated other comprehensive income, net of tax 2,593 2,593
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 205,600 (21,098) 184,502
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,524,548 (44,368) $ 2,480,180
Description of entries:
1. To record repurchase of 130,000 shares of common stock at
$152/share.
2. To record estimated remaining transaction costs of $100,000, net of
applicable income taxes of $37,000.
3. To record write-off of capitalized debt issuance costs on existing
8.24% trust preferred issue.
4. To record tax effect of debt issuance cost write-off.
5. To record issuance of an additional $35,000,0000 in privately-placed
trust preferred securities and related debt issuance costs and
redemption of existing $57,500,000 publicly-held trust preferred
issue.
61
INTRUST FINANCIAL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
YEAR ENDED DECEMBER 31, 2001
(Unaudited - dollars in thousands except per share data)
HISTORICAL PRO FORMA
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED ADJ. YEAR ENDED
- ----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, PRO FORMA ENTRY DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
2001 ADJUSTMENTS NO. 2001
INTEREST INCOME:
Loans $ 141,080 $ 141,080
Taxable investment securities 24,542 24,542
Nontaxable investment securities 515 515
Federal funds sold and other 2,073 (548) 3,4 1,525
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 168,210 (548) 167,662
INTEREST EXPENSE:
Savings and interest-bearing demand deposits 17,367 17,367
Time deposits 41,216 41,216
Federal funds purchased and securities sold under
agreement to repurchase 10,067 10,067
Subordinated debentures 4,738 227 1,5 4,965
Other borrowings 804 804
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 74,192 227 74,419
NET INTEREST INCOME 94,018 (775) 93,243
PROVISION FOR LOAN LOSSES 13,105 13,105
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 80,913 (775) 80,138
NONINTEREST INCOME:
Service charges on deposit accounts 17,886 17,886
Fiduciary income 12,055 12,055
Credit card fees 11,014 10,035
Other service charges, fees and income 15,050 15,050
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 56,005 55,026
NONINTEREST EXPENSE:
Salaries and employee benefits 47,562 47,562
Net occupancy and equipment expense 13,793 13,793
Advertising and promotional activities 4,301 4,301
Data processing expense 5,454 5,454
Professional services 4,412 750 2 5,162
Supplies 2,669 2,669
Postage and dispatch 2,623 2,623
Goodwill amortization 1,312 2,391
Intangible assets amortization 2,058 989
Other 10,373 9,384
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 94,557 750 94,328
INCOME BEFORE PROVISION FOR INCOME TAXES 42,361 (1,525) 40,836
- --------------------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 15,842 (540) 6 15,302
NET INCOME 26,519 (985) 25,534
- --------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME - UNREALIZED GAINS ON SECURITIES, NET 1,860 1,860
- --------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 28,379 $ (985) $ 27,394
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Basic earnings per share $ 11.31 $ 11.53
Diluted earnings per share $ 11.21 $ 11.42
Description of entries:
1. To record write-off of 8.24% trust preferred securities debt
issuance costs.
2. To record projected transaction costs.
3. To record interest earned on funds provided from new trust preferred
issuance.
4. To record foregone interest on funds used in repurchase of 130,000
shares of common stock and related transaction expense.
5. To record reduction in interest expense on trust preferred
redemption and replacement.
6. To record income tax effect of above entries.
62
INTRUST FINANCIAL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
YEAR ENDED DECEMBER 31, 2002
(Unaudited - dollars in thousands except per share data)
HISTORICAL PRO FORMA
---------- ---------
YEAR YEAR
- ----------------------------------------------------------------------------------------------------------------------------------
ENDED ADJ. ENDED
- ----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, PRO FORMA ENTRY DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
2002 ADJUSTMENTS NO. 2002
INTEREST INCOME:
Loans $ 111,535 $ 111,535
Taxable investment securities 19,919 19,919
Nontaxable investment securities 408 408
Federal funds sold and other 1,513 (323) 3,4 1,190
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 133,375 (323) 133,052
INTEREST EXPENSE:
Savings and interest-bearing demand deposits 8,864 8,864
Time deposits 27,181 27,181
Federal funds purchased and securities sold under
agreement to repurchase 2,630 2,630
Subordinated debentures 4,780 116 1,5 4,896
Other borrowings 239 239
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 43,694 116 43,810
NET INTEREST INCOME 89,681 (439) 89,242
PROVISION FOR LOAN LOSSES 11,300 11,300
- --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 78,381 (439) 77,942
NONINTEREST INCOME:
Service charges on deposit accounts 19,319 19,319
Fiduciary income 11,289 11,289
Credit card fees 8,343 8,343
Gain on sale of bank branches 3,091 3,091
Other service charges, fees and income 15,836 15,836
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 57,878 57,878
NONINTEREST EXPENSE:
Salaries and employee benefits 48,580 48,580
Net occupancy and equipment expense 12,857 12,857
Advertising and promotional activities 4,397 4,397
Data processing expense 5,462 5,462
Professional services 7,838 100 2 7,938
Supplies 2,069 2,069
Postage and dispatch 2,377 2,377
Goodwill amortization 0 0
Intangible assets amortization 1,896 1,896
Other 9,968 9,968
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 95,444 100 95,544
INCOME BEFORE PROVISION FOR INCOME TAXES 40,815 (539) 40,276
- --------------------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 13,924 (179) 6 13,745
NET INCOME 26,891 (360) 26,531
- --------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME - UNREALIZED GAINS ON SECURITIES AND MINIMUM 163 163
PENSION LIABILITY ADJUSTMENT, NET
- --------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 27,054 $ (360) $ 26,694
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Basic earnings per share $ 11.52 $ 12.03
Diluted earnings per share $ 11.41 $ 11.92
Description of entries:
1. To record write-off of 8.24% trust preferred securities debt
issuance costs.
2. To record projected transaction costs.
3. To record interest earned on funds provided from new trust preferred
issuance.
4. To record foregone interest on funds used in repurchase of 130,000
shares of common stock and related transaction expense.
5. To record reduction in interest expense on trust preferred
redemption and replacement.
6. To record income tax effect of above entries.
63
PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The INTRUST common stock is traded in the local over-the-counter market
on a limited basis and price quotations are reported on the OTC Bulletin Board.
These quotations will no longer be available after the consummation of the going
private transaction. Transactions in the common stock are relatively infrequent.
The following table sets forth the per share high and low bid quotations for the
periods indicated as reported by the National Quotation Bureau, Incorporated
(NQB).
DIVIDENDS
HIGH LOW DECLARED
--------- ---------- ---------
2003
First Quarter (through March 26, 2003) $ 151.00 $ 143.00 $ .80
2002
First Quarter $ 131.50 $ 125.35 $ .80
Second Quarter $ 134.40 $ 128.50 $ .80
Third Quarter $ 135.00 $ 127.30 $ .80
Fourth Quarter $ 151.00 $ 129.00 $ .80
2001
First Quarter $ 120.00 $ 120.00 $ .80
Second Quarter $ 122.00 $ 120.00 $ .80
Third Quarter $ 125.00 $ 122.00 $ .80
Fourth Quarter $ 125.00 $ 124.00 $ .80
2000
First Quarter $ 134.00 $ 134.00 $ .75
Second Quarter $ 135.00 $ 134.00 $ .75
Third Quarter $ 135.00 $ 108.00 $ .75
Fourth Quarter $ 121.00 $ 108.00 $ .75
The quotations in the above table reflect inter-dealer quotations,
without retail mark-up, mark-down, or commission and may not necessarily
represent actual transactions. On March 26, 2003, there were approximately 450
stockholders of record for the 2,309,278 shares of outstanding common stock.
Approximately 70% of the shares are held by Kansas resident individuals,
institutions or trusts, with the remainder held by residents of 27 other states,
with no singular concentrations.
In 2002, INTRUST received cash dividends in the amount of $50,000,000
from INTRUST Bank, $500,000 from NestEgg Consulting, Inc. and $147,000 from
INTRUST Capital Trust. In 2001, INTRUST received cash dividends in the amount of
$20,800,000 from INTRUST Bank, $500,000 from NestEgg Consulting, Inc. and
$183,000 from INTRUST Capital Trust. INTRUST declared and paid cash dividends of
$7,474,000, or $3.20 per share, during 2002, $7,507,000, or $3.20 per share,
during 2001 and $7,125,000, or $3.00 per share, during 2000. During 2002,
dividend declaration dates were January 8, April 9, July 9 and October 8. During
2001, dividend declaration dates were January 9, April 10, July 10 and October
9. During 2000, dividend declaration dates were January 11, April 11, July 11,
and October 10. The payment of dividends by INTRUST is primarily dependent upon
receipt of cash dividends from INTRUST Bank. Regulatory authorities can restrict
the payment of dividends by national and state banks when such payments might,
in their opinion, impair the financial condition of the bank or otherwise
constitute unsafe and unsound practices in the conduct of banking business.
Additional information concerning dividend restrictions may be found in the
"Notes to Consolidated Financial Statements" (note 15) and in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
"Liquidity and Asset/Liability Management" in INTRUST's Form 10-K for the year
ended December 31, 2001. The priorities for use of cash dividends paid to
INTRUST will be the quarterly interest payments and annual principal payments on
the variable rate term loan payable to another
64
financial institution. Additional information concerning the term loan may be
found in the "Notes to Consolidated Financial Statements" (notes 10 and 11) in
INTRUST's Form 10-K for the year ended December 31, 2002. The Board of Directors
will review the cash dividends on INTRUST common stock each quarter with
consideration given to the earnings, business conditions, financial position of
INTRUST and such other factors as may be relevant at the time.
PRIOR STOCK PURCHASES
Between January 1, 2001 and December 10, 2002, INTRUST repurchased
79,155 shares of its common stock at prices ranging from $113.00 to $137.75 per
share. As of the date of this Proxy Statement, INTRUST has repurchased 15,896
shares of its common stock subsequent to December 10, 2002 (and subsequent to
the announcement of the proposed transaction) at prices ranging from $144 per
share to $150 per share. On a quarterly basis, the average price of such shares
repurchases was as follows:
2001
First Quarter $ 124.81
Second Quarter 125.61
Third Quarter 129.75
Fourth Quarter 130.52
2002
First Quarter $ 131.34
Second Quarter 132.38
Third Quarter 132.14
Fourth Quarter 130.36
2003
First Quarter (through March 26, 2003) $ 148.65
Between January 1, 2001 and the date of this Proxy Statement, the Other
Filing Persons have made the following purchases of shares of INTRUST common
stock at the prices indicated:
- On December 19, 2001, C.Q. Chandler exercised options to acquire 1,000
shares of our common stock at an exercise price of $86.00 per share and
2,983 shares at an exercise price of $114.00 per share.
- On December 26, 2001, C.Q. Chandler IV exercised options to acquire
1,971 shares of our common stock at an exercise price of $86.00 per
share and 4,444 shares at an exercise price of $114.00 per share.
- On December 31, 2001, C.Q. Chandler IV exercised options to acquire 340
shares of our common stock at an exercise price of $58.00 per share.
- On December 6, 2002, C.Q. Chandler exercised options to acquire 1,000
shares of our common stock at an exercise price of $86.00 per share.
- On December 9, 2002, C.Q. Chandler IV exercised options to acquire
1,633 shares of our common stock at an exercise price of $58.00 per
share and 838 shares at an exercise price of $86.00 per share.
65
OTHER MATTERS
Management of INTRUST knows of no other business to be presented at the
meeting, but if other matters do properly come before the meeting, unless
otherwise instructed, it is intended that the persons named in the proxy will
vote shares according to their best judgment.
WHERE YOU CAN FIND MORE INFORMATION
INTRUST files reports and other information with the SEC. Copies of
these reports and other information may be inspected and copied at the public
reference facilities maintained by the SEC at the following locations:
WASHINGTON, D.C. CHICAGO, ILLINOIS
Judiciary Plaza Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Chicago, Illinois 60661
Copies of these reports and other information can also be obtained by
mail at prescribed rates from the Public Reference Section of the SEC located at
450 Fifth Street, N.W., Washington, D.C. 20549, or by calling the SEC at
1-800-SEC-0330. The SEC also maintains a website, located at http://www.sec.gov,
which contains reports and other information regarding INTRUST, including the
reports and other information incorporated by reference herein as more fully
described below.
INTRUST, Merger Corp. and the Other Filing Persons are filing a
Schedule 13E-3 under the Securities Exchange Act in connection with the merger.
You may inspect and copy the Schedule 13E-3 at any of the SEC locations listed
above. This document does not contain all of the information contained in the
Schedule 13E-3 because certain parts have been omitted in accordance with the
rules and regulations of the SEC. You may inspect and copy the Schedule 13E-3 at
any of the SEC locations listed above.
ADDITIONAL DOCUMENTS AND OTHER INFORMATION
INCORPORATED BY REFERENCE
The rules and regulations of the SEC allow INTRUST to incorporate into
this document by reference certain reports and other information, which means
that important information may be disclosed to you by INTRUST by referring you
to another report or other information filed separately by INTRUST with the SEC.
The reports and other information incorporated into this document by reference
are deemed to be part of this document, except for any information superseded by
information contained in, or incorporated by reference into, this document. This
document hereby incorporates by reference the report listed below, which have
been previously filed by INTRUST with the SEC, provided that any reference to
any claim of reliance on the Private Securities Litigation Reform Act's forward
looking statement safe harbor contained in such document is excluded, and is not
incorporated herein by reference. The following report contains information
about INTRUST and its financial condition, results of operations and business
that are important to you, and we encourage you to read it carefully in
connection with your review of this document.
(1) Annual Report on Form 10-K, filed by INTRUST with the SEC on
March 27, 2003.
INTRUST is also incorporating by reference all additional reports and
other information filed by INTRUST with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act between the date of this document and
the Special Meeting described herein.
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INTRUST has supplied all information contained in or incorporated by
reference in this document relating to INTRUST, provided that any reference to
any claim of reliance on the Private Securities Litigation Reform Act's forward
looking statement safe harbor contained in any such document is excluded, and is
not incorporated herein by reference.
YOU MAY HAVE BEEN SENT SOME OF THE REPORTS AND OTHER INFORMATION
INCORPORATED BY REFERENCE IN THIS DOCUMENT BY INTRUST, BUT YOU CAN ALSO OBTAIN
ANY OF THEM THROUGH THE SEC AT THE LOCATIONS DESCRIBED ABOVE, OR THROUGH INTRUST
AT THE ADDRESS BELOW. INTRUST WILL PROVIDE TO YOU, WITHOUT CHARGE, BY FIRST
CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS DAY OF ANY WRITTEN
OR ORAL REQUEST BY YOU, A COPY OF ANY REPORT OR OTHER INFORMATION INCORPORATED
BY REFERENCE IN THIS DOCUMENT BY INTRUST OR ANY PROXY OR INFORMATION STATEMENT
OF INTRUST. YOU SHOULD DIRECT YOUR REQUEST TO THE FOLLOWING ADDRESS:
INTRUST FINANCIAL CORPORATION
105 North Main Street
Wichita, Kansas 67202
Attn: Jay L. Smith, Chief Financial Officer
By Order of the Board of Directors
Brian E. Sullivan
Secretary
Dated: April 11, 2003
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ANNEX A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger dated effective as of December 10,
2002 (this "Agreement"), is entered into by and between INTRUST Financial
Corporation, a Kansas corporation (the "Company"), and INTRUST Merger
Corporation, a Kansas corporation ("Merger Corp.").
WITNESSETH
WHEREAS, the Company is a corporation duly incorporated and validly
existing under the laws of the State of Kansas having its principal office in
Wichita, Kansas, with authorized capital stock consisting of Ten Million
(10,000,000) shares (the "Shares") of common stock, $5.00 par value per share,
and Five Million (5,000,000) shares of preferred stock (the "Company Stock"), of
which 2,325,174 Shares are issued and outstanding and no shares of preferred
stock are issued and outstanding; and
WHEREAS, Merger Corp. is a corporation duly organized and validly
existing under the laws of the State of Kansas, with authorized capital stock
consisting of ten (10) shares of common stock, $1.00 par value per share (the
"Merger Corp. Stock"), of which ten (10) shares are issued and outstanding; and
WHEREAS, the Boards of Directors of the Company and Merger Corp. have
approved the terms and conditions of this Agreement pursuant to which Merger
Corp. will be merged with and into the Company (the "Merger"), with the Company
surviving the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and undertakings contained herein, and for such other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE I
MERGER
1.01. GENERAL. At the Effective Time (as defined in Article VIII
below) of the Merger and pursuant to the provisions of this Agreement, the
corporate existence of Merger Corp. will be merged with and into the Company
(hereinafter referred to as the "Surviving Corporation" whenever reference is
made to it as of the Effective Time or thereafter) and continued in the
Surviving Corporation, and the Surviving Corporation shall be deemed to be a
continuation of the entities and identities of Merger Corp. and the Company.
1.02. NAME AND ORGANIZATION. The name of the Surviving Corporation
shall remain and thereafter be "INTRUST Financial Corporation." The Articles of
Incorporation and Bylaws of the Company in effect at the Effective Time shall
remain the Articles of Incorporation and Bylaws of the Surviving Corporation
until changed as provided therein or by law. The established offices and
facilities of the Company shall remain the established offices and facilities of
the Surviving Corporation. The registered office and registered agent of the
Company shall remain the registered office and registered agent of the Surviving
Corporation.
1.03. RIGHTS AND INTERESTS. At the Effective Time, all rights,
franchises, and interests of the Company and Merger Corp., respectively, in and
to every type of property shall be transferred to and vested in the Surviving
Corporation by virtue of the Merger without any deed or other transfer. The
Surviving Corporation at the Effective Time, and without any order or other
action on the part of any
court or otherwise, shall hold and enjoy all rights of property, franchises, and
interests, including appointments, powers, designations, and nominations, and
all other rights and interests as trustee, executor, administrator, agent,
transfer agent, registrar of stocks and bonds, administrator of estates,
assignee, and receiver, and in every other fiduciary and agency capacity in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by the Company and Merger Corp., respectively, immediately
prior to the Effective Time.
1.04. LIABILITIES AND OBLIGATIONS. Except as otherwise provided
herein, the Surviving Corporation shall be liable for all liabilities of the
Company and Merger Corp. All debts, liabilities, obligations, and contracts of
the Company and Merger Corp., matured or unmatured, whether accrued, absolute,
contingent, or otherwise, and whether or not reflected or reserved against on
the balance sheets, books of account, or records of the Company or Merger Corp.,
as the case may be, shall be those of, and are hereby expressly assumed by, the
Surviving Corporation and shall not be released or impaired by the Merger. All
rights of creditors and other obligees and all liens on property of either the
Company or Merger Corp. shall be preserved unimpaired.
1.05. DIRECTORS AND OFFICERS. The directors, advisory directors, and
officers of the Surviving Corporation at the Effective Time shall be those
persons who were directors, advisory directors, and officers, respectively, of
the Company immediately before the Effective Time. The committees of the Board
of Directors of the Surviving Corporation at the Effective Time shall be the
same as, and shall be composed of the same persons who were serving on, the
committees appointed by the Board of Directors of the Company as they existed
immediately before the Effective Time.
1.06. ADOPTION. Unless contrary to the laws of the State of Kansas
or the United States of America or other applicable laws, all corporate acts,
plans, policies, applications, agreements, orders, registrations, licenses,
approvals, and authorizations of the Company and Merger Corp., their respective
stockholders, Boards of Directors, committees elected or appointed by their
Boards of Directors or officers, and agents that were valid and effective
immediately before the Effective Time shall be taken for all purposes at and
after the Effective Time as the acts, plans, policies, applications, agreements,
orders, registrations, licenses, approvals, and authorizations of the Surviving
Corporation and shall be effective and binding thereon as the same were with
respect to the Company and Merger Corp. immediately before the Effective Time.
ARTICLE II
TERMS OF THE MERGER
2.01. GENERAL. The manner of exchanging and converting the issued
and outstanding Shares and Merger Corp. Stock shall be as hereinafter provided
in this Article II.
2.02. CONVERSION AND CANCELLATION OF STOCK.
(a) At the Effective Time,
(i) all outstanding Shares, whether Record Shares (as hereinafter
defined), or Street Shares (as hereinafter defined), held by a Holder
(as hereinafter defined) holding fewer than 1,000 Shares immediately
prior to the Effective Time shall, without any action on the part of
the Holder thereof, be canceled and converted into the right to receive
cash equal to $152.00 per Share (the "Merger Consideration"); provided,
however, that the Company may presume that all Street Shares are held
by Holders holding fewer than 1,000 Shares immediately prior to the
Effective Time unless either the Company or a beneficial owner of
Street Shares are able to demonstrate to the Company's satisfaction
that such shares are held beneficially by a Holder holding 1,000 or
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more Shares immediately prior to the Effective Time, in which event
such Shares shall remain outstanding with all rights, privileges, and
powers existing immediately before the Effective Time;
(ii) all outstanding Shares other than those described in paragraph
(i) as being converted into the right to receive the Merger
Consideration shall remain outstanding with all rights, privileges, and
powers existing immediately before the Effective Time; and
(iii) the outstanding shares of Merger Corp. Stock shall, without
any action on the part of the Holder thereof, be canceled.
(b) In no event shall any Holder holding, of record or
beneficially, immediately prior to the Effective Time 1,000 or more Shares
(including any combination of Record Shares and Street Shares) in the aggregate
be entitled to receive any Merger Consideration with respect to the Shares so
held. It shall be a condition precedent to the right of any Holder to receive
the Merger Consideration, if any, payable with respect to the Shares held by
such Holder that such Holder certify to the Company in the letter of transmittal
delivered by the Company as described in Section 2.03 that such Holder held, of
record and beneficially, immediately prior to the Effective Time fewer than
1,000 Shares (including any combination of Record Shares and Street Shares) in
the aggregate.
(c) For purposes hereof,
(i) the term "Record Shares" shall mean Shares other than Street
Shares, and any Record Share shall be deemed to be held by the
registered holder thereof as reflected on the books of the Company;
(ii) the term "Street Shares" shall mean Shares held of record in
street name, and any Street Share shall be deemed to be held by the
beneficial owner thereof as reflected on the books of the nominee
holder thereof;
(iii) the term "Holder" shall mean (A) any record holder or holders
of Record Shares who would be deemed, under Rule 12g5-1 promulgated
under the Securities Exchange Act of 1934, as amended, to be a single
"person" for purposes of determining the number of record stockholders
of the Company, and (B) any other person or persons who would be deemed
to be a "Holder" under clause (A) above if the Shares such person holds
beneficially either in street name or as a customer of a bank or broker
were held of record by such person or persons; and
(iv) the term "Cash-Out Shares" shall mean any Shares that are
converted into the right to receive the Merger Consideration pursuant
to this Section 2.02.
(d) The Company (along with any other person or entity to which it
may delegate or assign any responsibility or task with respect thereto) shall
have full discretion and exclusive authority (subject to its right and power to
so delegate or assign such authority) to (i) make such inquiries, whether of any
Holder(s) or otherwise, as it may deem appropriate for purposes of this Section
2.02 and (ii) resolve and determine, in its sole discretion, all ambiguities,
questions of fact and interpretive and other matters relating to this Section
2.02, including, without limitation, any questions as to the number of Shares
held by any Holder immediately prior to the Effective Time. All determinations
by the Company under this Section 2.02 shall be final and binding on all
parties, and no person or entity shall have any recourse against the Company or
any other person or entity with respect thereto.
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(e) For purposes of this Section 2.02, the Company may in its sole
discretion, but shall not have any obligation to do so, (i) presume that any
Shares held in a discrete account (whether record or beneficial) are held by a
person distinct from any other person, notwithstanding that the registered or
beneficial Holder of a separate discrete account has the same or a similar name
as the Holder of a separate discrete account; and (ii) aggregate the Shares held
(whether of record or beneficially) by any person or persons that the Company
determines to constitute a single Holder for purposes of determining the number
of Shares held by such Holder.
2.03 EXCHANGE OF CERTIFICATES.
(a) PAYMENT PROCEDURE. Promptly after the Effective Time, the
Surviving Corporation will mail to each holder of a certificate or certificates
which immediately prior to the Effective Time evidenced outstanding Shares that
appear, based on information available to the Company, may have been converted
into the right to receive the Merger Consideration (other than Shares as to
which rights of dissent have been perfected as provided in Section 2.04)
("Certificates"), a letter of transmittal (which shall contain the certification
described in Section 2.02 and such other matters as the Surviving Corporation
may determine and shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Surviving Corporation) and instructions to effect the
surrender of the Certificates in exchange for the Merger Consideration, if any,
payable with respect to such Certificates. Upon surrender of a Certificate for
cancellation to the Surviving Corporation, together with such letter of
transmittal, duly completed and executed and containing the certification
contemplated by Section 2.02, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificates shall,
subject to the provisions of Section 2.02, be entitled to receive in exchange
therefor the Merger Consideration payable with respect to the Shares formerly
represented by such Certificates, and the Certificates so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the share transfer records of the Company, the Merger
Consideration, if any, payable in respect thereof may be paid or issued to the
transferee if the Certificate representing such Shares is presented to the
Surviving Corporation, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid.
(b) ABANDONED PROPERTY LAWS. The Surviving Corporation shall not
be liable to any holder of a Certificate for any cash properly delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.04 APPRAISAL RIGHTS OF STOCKHOLDERS. Stockholders may dissent
from the Merger and exercise their appraisal rights pursuant to and subject to
the provisions of K.S.A. 17-6712.
ARTICLE III
REPRESENTATIONS, WARRANTIES, AND COVENANTS
OF THE COMPANY
The Company hereby represents, warrants, and covenants to and with
Merger Corp. as of the date of this Agreement and as of the Closing Date (as
defined in Article VIII below) as follows:
3.01. ORGANIZATION. The Company is a business corporation duly
incorporated, validly existing, and in good standing under the laws of the State
of Kansas. The Company has the corporate power to carry on its business as is
presently being conducted and is qualified to do business in every jurisdiction
in which the character and location of the assets owned by it or the nature of
the business transacted by it requires qualification.
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3.02. GOVERNMENTAL AUTHORIZATIONS. The Company is in compliance in
all material respects with all applicable federal, state, and local laws, rules,
regulations, and orders, including, without limitation, those imposing taxes.
The approval, execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, subject to the receipt of
the consents and approvals described in Sections 6.03 and 6.04 below, will not
violate in any material respect any provision of, or constitute a default under,
any applicable law, rule, or regulation of any governmental agency or
instrumentality, either domestic or foreign, applicable to the Company.
3.03. NO CONFLICT WITH OTHER INSTRUMENTS. The consummation of the
Merger in accordance with the terms, conditions, and provisions of this
Agreement will not conflict with, or result in a breach of, any term, condition,
or provision of, or constitute a default under, any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
and will not conflict with any provisions of the Articles of Incorporation or
Bylaws of the Company or any of its subsidiaries, and will not constitute an
event that with the lapse of time or action by a third party could result in any
default under any of the foregoing or result in the creation of any lien,
charge, or encumbrance upon any of the assets or properties of the Company or
upon the Company Stock.
3.04. NO CONFLICT WITH JUDGMENTS OR DECREES. The consummation of the
transactions in accordance with the terms, conditions, and provisions of this
Agreement will not conflict with, or result in a breach of, any term, condition,
or provision of any judgment, order, injunction, decree, writ, or ruling of any
court or tribunal, either domestic or foreign, to which the Company is a party
or is subject.
3.05. APPROVAL OF AGREEMENTS. The Board of Directors of the Company
has approved this Agreement and the transactions contemplated hereby and has
authorized the execution and delivery of this Agreement by the Company in
accordance with K.S.A. 17-6701. The Company has full corporate power, authority,
and legal right to enter into this Agreement.
3.06. CAPITAL STOCK. The authorized capital stock of the Company
consists solely of the Company Stock, all of the shares of which are validly
issued, fully paid, and not issued in violation of the preemptive rights of any
stockholder.
ARTICLE IV
REPRESENTATIONS, WARRANTIES, AND COVENANTS
OF MERGER CORP.
Merger Corp. hereby represents, warrants, and covenants to and with the Company
as of the date of this Agreement and as of the Closing Date as follows:
4.01. ORGANIZATION. Merger Corp. is a Kansas corporation duly
incorporated, validly existing, and in good standing under the laws of the State
of Kansas. Merger Corp. has the corporate power and authority to carry on its
business as is presently being conducted and is qualified to do business in
every jurisdiction in which the character and location of the assets owned by it
or the nature of the businesses conducted by it requires qualification.
4.02. CAPITAL STOCK. The authorized capital stock of Merger Corp.
consists solely of the Merger Corp. Stock, of which ten (10) shares are
currently issued and held by the Company. There are no outstanding
subscriptions, warrants, options, or rights of any kind to acquire from Merger
Corp. any shares of Merger Corp. Stock, other equity securities, or debt
securities.
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4.03. SUBSIDIARIES OR AFFILIATES. Merger Corp. does not own of
record or beneficially, and is not obligated to acquire any capital stock, other
equity securities, debt securities, or other interest of or in any corporation,
government, or other entity. Between the date hereof and the Effective Time,
Merger Corp. will not create or acquire any subsidiaries without the prior
written consent of the Company.
4.04. APPROVAL OF AGREEMENTS. The Board of Directors of Merger Corp.
has approved this Agreement and the transactions contemplated hereby and has
authorized the execution and delivery by Merger Corp. of this Agreement in
accordance with K.S.A. 17-6701. Merger Corp. has full corporate power,
authority, and legal right to enter into this Agreement and, upon appropriate
vote of the stockholders of Merger Corp., to approve this Agreement and
consummate the transactions contemplated hereby.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF MERGER CORP.
The obligations of Merger Corp. to cause the Merger to be consummated
shall be subject to the satisfaction on or before the Closing Date of all of the
following conditions, except as Merger Corp. may waive such conditions in
writing:
5.01. LITIGATION. On the Closing Date, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board, or agency with a view to seeking, or in which it is sought,
to restrain or prohibit consummation of the Merger, or in which it is sought to
obtain divestiture, rescission, or damages in connection with the Merger or the
consummation of the Merger, and to the knowledge of any of the parties hereto,
no investigation by any governmental agency shall be pending or threatened that
might result in any such suit, action, or other proceeding.
5.02. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Company contained in this Agreement, other than any
representations and warranties as to future events, shall be true in all
material respects on and as of the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and the Company shall have
performed all agreements and covenants required by this Agreement to be
performed by it on or prior to the Closing Date.
5.03. STOCKHOLDER APPROVAL. This Agreement shall have been approved
by a vote of the holders of not less than two-thirds (2/3) of the shares of
common stock of the Company entitled to vote at the special meeting of the
stockholders and by the written consent of the sole stockholder of Merger Corp.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to cause the Merger to be consummated
shall be subject to the satisfaction on or before the Closing Date of all the
following conditions, except as the Company may waive such conditions in
writing:
6.01. LITIGATION. On the Closing Date, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board, or agency with a view to seeking, or in which it is sought,
to restrain or prohibit consummation of the Merger, or in which it is sought to
obtain divestiture, rescission, or damages in connection with the Merger or the
consummation of the
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Merger, and to the knowledge of any of the parties hereto, no investigation by
any governmental agency shall be pending or threatened that might result in any
such suit, action, or other proceeding.
6.02. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Merger Corp. contained in this Agreement, other than any
representations and warranties as to future events, shall be true in all
material respects on and as of the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and Merger Corp. shall have
performed all agreements and covenants required by this Agreement to be
performed by it on or prior to the Closing Date.
6.03. STOCKHOLDER APPROVAL. This Agreement shall have been approved
by a vote of the holders of not less than two-thirds (2/3) of the shares of
INTRUST common stock entitled to vote at the special meeting and by the written
consent of the sole stockholder of Merger Corp.
6.04 REGULATORY APPROVAL. The Company shall have received an
approval, consent or non-objection of or by all bank regulatory authorities
having jurisdiction over the Company and Merger Corp. with respect to the
Merger.
ARTICLE VII
EXPENSES
Costs and expenses relating to the negotiation and drafting of this
Agreement and the transactions contemplated hereby shall be borne and paid by
the Company.
ARTICLE VIII
CLOSING DATE AND EFFECTIVE TIME
The closing of this Agreement and the transactions contemplated hereby
shall be held on the Closing Date (as defined in this Article VIII) at such time
and place as the parties hereto may mutually agree upon. The "Closing Date"
shall be such date as the Presidents of the Company and Merger Corp.,
respectively, may agree upon. Subject to the terms and upon satisfaction on or
before the Closing Date of all requirements of law and conditions specified in
this Agreement, the Company and Merger Corp. shall, at the Closing Date,
execute, acknowledge, and deliver such other documents and instruments and take
such further action as may be necessary or appropriate to consummate the Merger.
The "Effective Time" is the date on and time at which the Merger is effective,
which shall be on the date and at the time of filing of the certificate of
merger with the Secretary of State of Kansas in accordance with K.S.A. 17-6003.
ARTICLE IX
AMENDMENTS
The Board of Directors of the Company and Merger Corp. may amend this
Agreement in writing at any time prior to the filing of the certificate of
merger with the Secretary of State of Kansas, except that an amendment made
subsequent to the adoption of this Agreement by the stockholders of either
constituent corporation shall not: (a) alter or change the amount or kind of
shares, securities, cash, property or rights, or any of the proceedings, in
exchange for or on conversion of all or any of the shares of any class or series
thereof of such constituent corporation, (b) alter or change any term of the
Articles of Incorporation of the Company, or (c) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series thereof of such constituent
corporation.
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ARTICLE X
TERMINATION
At any time prior to the filing of the certificate of merger with the
Secretary of State of Kansas, this Agreement may be terminated by the Board of
Directors of either the Company or Merger Corp., notwithstanding the approval of
this Agreement by the Holders. In the event of a termination of this Agreement,
this Agreement shall become void and shall have no effect and create no
liability on the part of any of the parties hereto or their respective
directors, officers, or stockholders.
ARTICLE XI
NOTICES
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given at the
time either personally delivered or sent by registered or certified mail,
postage prepaid, as follows:
If to the Company or
Surviving Corporation, at: If to Merger Corp., at:
105 North Main Street 105 North Main Street
Wichita, Kansas 67202 Wichita, Kansas 67202
Attn: President Attn: President
ARTICLE XII
MISCELLANEOUS
12.01. FURTHER ASSURANCES. Each party hereto agrees to perform any
further acts and to execute and deliver any further documents that may be
reasonably necessary to carry out the provisions of this Agreement.
12.02. SEVERABILITY. In the event that any of the provisions, or
portions thereof, of this Agreement are held to be illegal, unenforceable, or
invalid by any court of competent jurisdiction, the legality, enforceability,
and validity of the remaining provisions, or portions thereof, shall not be
affected thereby, and, in lieu of the illegal, unenforceable, or invalid
provision, or portion thereof, there shall be added a new legal, enforceable,
and valid provision as similar in scope and effect as is necessary to effectuate
the results intended by the deleted provision or portion.
12.03. CONSTRUCTION. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular.
12.04. GENDER. Any references herein to the masculine gender, or to
the masculine form of any noun, adjective, or possessive, shall be construed to
include the feminine or neuter gender and form, and vice versa.
12.05. HEADINGS. The headings contained in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
of any of the provisions contained herein.
12.06. MULTIPLE COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same instrument.
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12.07. GOVERNING LAW. THIS AGREEMENT HAS BEEN EXECUTED IN AND SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF KANSAS, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS RULES THEREOF OR OF ANY STATE.
12.08. COURT COSTS AND ATTORNEYS' FEES. If any action at law or in
equity, including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover costs of court and reasonable attorneys' fees from the other
party or parties to such action, which fees may be set by the court in the trial
of such action or may be enforced in a separate action brought for that purpose,
and which fees shall be in addition to any other relief that may be awarded.
12.09. INUREMENT. Subject to any restrictions against transfer or
assignment as may be contained herein, the provisions of this Agreement shall
inure to the benefit of, and shall be binding on, the assigns and successors in
interest of each of the parties hereto.
12.10. WAIVERS. No waiver of any provision or condition of this
Agreement shall be valid unless executed in writing and signed by the party to
be bound thereby and then only to the extent specified in such waiver. No waiver
of any provision or condition of this Agreement shall be construed as a waiver
of any other provision or condition of this Agreement, and no present waiver of
any provision or condition of this Agreement shall be construed as a future
waiver of such provision or condition.
12.11. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto concerning the subject matter contained
herein. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties hereto relating to
the subject matter of this Agreement that are not fully expressed herein.
12.12. SECTION 17-6701. This Agreement has been approved, adopted,
certified and executed by each of the constituent corporations in accordance
with K.S.A. 17-6701.
12.13. COPIES OF THIS AGREEMENT. The executed Agreement is on file at
the principal place of business of the Surviving Corporation at the address
specified in Article XI. A copy of this Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
Remainder of page intentionally left blank. Signature page to follow.
A-9
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by as of the date first written above.
INTRUST FINANCIAL CORPORATION INTRUST MERGER CORPORATION
By: /s/ Charles Q. Chandler IV By: /s/ Rick L. Beach
---------------------------------- ------------------------
Name: Charels Q. Chandler IV Name: Rick L. Beach
Title: President Title: President
ATTEST: ATTEST:
/s/ Brian Sullivan /s/ Jay L. Smith
- -------------------------------------- --------------------------------
Name: Brian Sullivan Name: Jay L. Smith
Title: Assistant Secretary Title: Secretary
A-10
ANNEX B
OPINION OF
KEEFE, BRUYETTE & WOODS, INC.
December 10, 2002
The Board of Directors
INTRUST Financial Corporation
105 N. Main Street
Wichita, KS 67201
Members of the Board:
You have requested our opinion as investment bankers as to the fairness
of the $152.00 per share consideration offered in the Company's proposed merger
transaction (the "Merger"), from a financial point of view, to the shareholders
of INTRUST Financial Corporation (the "Company"), including both those
shareholders who will receive cash in the Merger and those shareholders who will
remain shareholders after the Merger. In the Merger, INTRUST Merger Corporation,
a newly-formed, wholly-owned subsidiary of the Company will merge with and into
the Company, with the Company being the surviving corporation. Pursuant to the
Merger, each share of the Company's common stock held of record by a shareholder
who owns, as of the effective date of the Merger, fewer than 1,000 shares of
common stock (excluding shares held by the Company's shareholders who have
perfected their dissenters rights of appraisal), will be converted into the
right to receive $152.00 in cash from the Company and each share of the
Company's common stock held of record by a shareholder who owns, as of the
effective date of the Merger, 1,000 or more shares of common stock, will not be
affected by the merger and will remain validly issued and outstanding shares of
Company common stock after the Merger.
Keefe, Bruyette & Woods, Inc., as part of its investment banking
business, is continually engaged in the valuation of bank and bank holding
company securities in connection with acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for various other purposes. As specialists in the securities of
banking companies, we have experience in, and knowledge of, the valuation of
banking enterprises. In the ordinary course of our business as a broker-dealer,
we may, from time to time purchase securities from, and sell securities to, the
Company, and as a market maker in securities, we may from time to time have a
long or short position in, and buy or sell, debt or equity securities of the
Company for our own account and for the accounts of our customers. To the extent
we are aware of any such position as of the date of this opinion it has been
disclosed to the Company. We have acted exclusively for the board of directors
of the Company (the "Board of Directors"), and the special committee of the
Board of Directors (the "Special Pricing Committee"), in rendering this fairness
opinion and will receive a fee from the Company for our services.
In connection with this opinion, we have reviewed, analyzed and relied
upon material bearing upon the financial and operating condition of the Company,
including among other things, the following: (i) a draft of a definitive merger
agreement relating to the Merger dated December 11, 2002, which we assume will
correspond in all material respects to the final definitive merger agreement to
be executed by the Company; (ii) the Annual Reports to Stockholders and Annual
Reports on Form 10-K for the three years ended December 31, 2001 of the Company;
(iii) certain Quarterly Reports on Form 10-Q of the Company and certain other
communications from the Company to its stockholders; and (iv) other financial
information concerning the businesses and operations of the Company furnished to
us by the Company for purposes of our analysis. We have also held discussions
with senior management of the
Company regarding the past and current business operations, regulatory
relations, financial condition and future prospects of the Company and such
other matters as we have deemed relevant to our inquiry. In addition, we have
compared certain financial and stock market information for the Company with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the banking industry and performed such other studies and
analyses as we considered appropriate.
In conducting our review and arriving at our opinion, we have relied
upon the accuracy and completeness of all of the financial and other information
provided to us or publicly available and we have not assumed any responsibility
for independently verifying the accuracy or completeness of any such
information. We have relied upon the management of the Company as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to us, and we have
assumed that such forecasts and projections reflect the best currently available
estimates and judgments of management and that such forecasts and projections
will be substantially realized in the amounts and in the time periods currently
estimated by management. With your consent, we relied on advice of counsel and
independent accountants to the Company as to legal and financial matters,
respectively, concerning the Company and the Merger, and have assumed that the
Merger will be conducted in a manner that complies in all respects with
applicable statutes, law, rules and regulations. With respect to the financial
impact to shareholders of the Company who will have an ongoing equity interest
in the Company after completion of the Merger, we considered only the financial
impact on the Company of the consideration to be offered in the Merger, and did
not ascribe a material financial impact to the regulatory or legal
considerations associated with the effects of the Merger. We are not experts in
the independent verification of the adequacy of allowances for loan and lease
losses and we have assumed, with your consent, that the aggregate allowances for
loan and lease losses for the Company are adequate to cover such losses. In
rendering our opinion, we have not made or obtained any evaluations or
appraisals of the property of the Company, nor have we examined any individual
credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company; (ii) the assets and liabilities of the Company; and (iii) the nature
and terms of certain other similar transactions involving banks and bank holding
companies. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in other similar
transactions, as well as our experience in securities valuation and knowledge of
the banking industry generally. Our opinion is necessarily based upon conditions
as they exist and can be evaluated on the date hereof and the information made
available to us through the date hereof.
It is understood that this letter is for the information of the Board
of Directors of the Company and the Special Pricing Committee only and may not
be used for any other purpose without our prior written consent; provided
however, that the Company may include the opinion in its entirety as an exhibit
or appendix to any report, statement, or schedule filed by the Company with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 in
connection with the Merger.
This opinion does not constitute a recommendation to any shareholder of
the Company as to whether any shareholder should or should not vote his or her
shares in favor of the Merger. This opinion does not address the relative merits
of the Merger and any other transactions or business strategies discussed by the
Board of Directors or Special Pricing Committee as alternatives to the Merger or
the decision of the Board of Directors or Special Pricing Committee with respect
to the merger.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the $152.00 per share consideration offered in the Merger is
fair, from a financial point of view, to shareholders of the
B-2
Company, including both those shareholders who will receive cash in the Merger
and those shareholders who will remain shareholders after the Merger.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc.
B-3
ANNEX C
K.S.A. 17-6712
RIGHTS OF DISSENTING STOCKHOLDERS
KANSAS REVISED STATUTES
CHAPTER 17. CORPORATIONS
ARTICLE 67. MERGER OR CONSOLIDATION
SECTION 6712. PAYMENT FOR STOCK OF STOCKHOLDER OBJECTING TO MERGER OR
CONSOLIDATION; DEFINITIONS; NOTICE TO OBJECTING STOCKHOLDERS; DEMAND FOR
PAYMENT; APPRAISAL AND DETERMINATION OF VALUE BY DISTRICT COURT, WHEN; TAXATION
OF COSTS; RIGHTS OF OBJECTION STOCKHOLDERS; STATUS OF STOCK; SECTION
INAPPLICABLE TO CERTAIN SHARES OF STOCK
(a) When used in this section, the word "stockholder" means a
holder of record of stock in a stock corporation and also a member of record of
a nonstock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of a
member of a nonstock corporation.
(b) The corporation surviving or resulting from any merger or
consolidation, within 10 days after the effective date of the merger or
consolidation, shall notify each stockholder of any corporation of this state so
merging or consolidating who objected thereto in writing and whose shares either
were not entitled to vote or were not voted in favor of the merger or
consolidation, and who filed such written objection with the corporation before
the taking of the vote on the merger or consolidation, that the merger or
consolidation has become effective. If any such stockholder, within 20 days
after the date of mailing of the notice, shall demand in writing, from the
corporation surviving or resulting from the merger or consolidation, payment of
the value of the stockholder's stock, the surviving or resulting corporation
shall pay to the stockholder, within 30 days after the expiration of the period
of 20 days, the value of the stockholder's stock on the effective date of the
merger or consolidation, exclusive of any element of value arising from the
expectation or accomplishment of the merger or consolidation.
(c) If during a period of 30 days following the period of 20 days
provided for in subsection (b), the corporation and any such stockholder fail to
agree upon the value of such stock, any such stockholder, or the corporation
surviving or resulting from the merger or consolidation, may demand a
determination of the value of the stock of all such stockholders by an appraiser
or appraisers to be appointed by the district court, by filing a petition with
the court within four months after the expiration of the thirty-day period.
(d) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the corporation, which shall file with the
clerk of such court, within 10 days after such service, a duly verified list
containing the names and addresses of all stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have
not been reached by the corporation. If the petition shall be filed by the
corporation, the petition shall be accompanied by such duly verified list. The
clerk of the court shall give notice of the time and place fixed for the hearing
of such petition by registered or certified mail to the corporation and to the
stockholders shown upon the list at the addresses therein stated and notice
shall also be given by publishing a notice at least once, at least one week
before the day of the hearing, in a newspaper of general circulation in the
county in which the court is located. The court may direct such additional
publication of notice as it deems advisable. The forms of the notices by mail
and by publication shall be approved by the court.
(e) After the hearing on such petition the court shall determine
the stockholders who have complied with the provisions of this section and
become entitled to the valuation of and payment for their
shares, and shall appoint an appraiser or appraisers to determine such value.
Any such appraiser may examine any of the books and records of the corporation
or corporations the stock of which such appraiser is charged with the duty of
valuing, and such appraiser shall make a determination of the value of the
shares upon such investigation as seems proper to the appraiser. The appraiser
or appraisers shall also afford a reasonable opportunity to the parties
interested to submit to the appraiser or appraisers pertinent evidence on the
value of the shares. The appraiser or appraisers, also, shall have the powers
and authority conferred upon masters by K.S.A. 60-253 and amendments thereto.
(f) The appraiser or appraisers shall determine the value of the
stock of the stockholders adjudged by the court to be entitled to payment
therefor and shall file a report respecting such value in the office of the
clerk of the court, and notice of the filing of such report shall be given by
the clerk of the court to the parties in interest. Such report shall be subject
to exceptions to be heard before the court both upon the law and facts. The
court by its decree shall determine the value of the stock of the stockholders
entitled to payment therefor and shall direct the payment of such value,
together with interest, if any, as hereinafter provided, to the stockholders
entitled thereto by the surviving or resulting corporation. Upon payment of the
judgment by the surviving or resulting corporation, the clerk of the district
court shall surrender to the corporation the certificates of shares of stock
held by the clerk pursuant to subsection (g). The decree may be enforced as
other judgments of the district court may be enforced, whether such surviving or
resulting corporation be a corporation of this state or of any other state.
(g) At the time of appointing the appraiser or appraisers, the
court shall require the stockholders who hold certificated shares and who
demanded payment for their shares to submit their certificates of stock to the
clerk of the court, to be held by the clerk pending the appraisal proceedings.
If any stockholder fails to comply with such direction, the court shall dismiss
the proceedings as to such stockholder.
(h) The cost of any such appraisal, including a reasonable fee to
and the reasonable expenses of the appraiser, but exclusive of fees of counsel
or of experts retained by any party, shall be determined by the court and taxed
upon the parties to such appraisal or any of them as appears to be equitable,
except that the cost of giving the notice by publication and by registered or
certified mail hereinabove provided for shall be paid by the corporation. The
court, on application of any party in interest, shall determine the amount of
interest, if any, to be paid upon the value of the stock of the stockholders
entitled thereto.
(i) Any stockholder who has demanded payment of the stockholder's
stock as herein provided shall not thereafter be entitled to vote such stock for
any purpose or be entitled to the payment of dividends or other distribution on
the stock, except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation, unless the appointment of an appraiser or appraisers shall not be
applied for within the time herein provided, or the proceeding be dismissed as
to such stockholder, or unless such stockholder with the written approval of the
corporation shall deliver to the corporation a written withdrawal of the
stockholder's objections to and an acceptance of the merger or consolidation, in
any of which cases the right of such stockholder to payment for the
stockholder's stock shall cease.
(j) The shares of the surviving or resulting corporation into
which the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
(k) This section shall not apply to the shares of any class or
series of a class of stock, which, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the meeting of
stockholders at which the agreement of merger or consolidation is to be acted
on, were either (1) registered on a national securities exchange or designated
as a national market system security on an
C-2
interdealer quotation system by the national association of securities dealers,
inc., or (2) held of record by not less than 2,000 stockholders, unless the
articles of incorporation of the corporation issuing such stock shall otherwise
provide; nor shall this section apply to any of the shares of stock of the
constituent corporation surviving a merger, if the merger did not require for
its approval the vote of the stockholders of the surviving corporation, as
provided in subsection (f) of K.S.A. 17-6701 and amendments thereto. This
subsection shall not be applicable to the holders of a class or series of a
class of stock of a constituent corporation if under the terms of a merger of
consolidation pursuant to K.S.A. 17-6701 or 17-6702, and amendments thereto,
such holders are required to accept for such stock anything except (i) stock or
stock and cash in lieu of fractional shares of the corporation surviving or
resulting from such merger or consolidation, or (ii) stock or stock and cash in
lieu of fractional shares of any other corporation, which at the record date
fixed to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders at which the agreement of merger or consolidation is
to be acted on, were either registered on a national securities exchange or held
of record by not less than 2,000 stockholders, or (iii) a combination of stock
or stock and cash in lieu of fractional shares as set forth in (i) and (ii) of
this subsection.
C-3
INTRUST FINANCIAL CORPORATION
105 NORTH MAIN STREET
WICHITA, KANSAS 67202
(316) 383-1111
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY___, 2003
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of INTRUST Financial Corporation (the "Company")
hereby appoints __________, __________ and __________, and each of them
separately, with full power of substitution, proxies to vote all shares of
Company common stock, par value $5.00 per share, that the undersigned is
entitled to vote at the close of business on April 8, 2003, at the Special
Meeting of Stockholders to be held on May 6, 2003 at 4:00 p.m., local time, or
any adjournment(s) thereof, on the following proposals:
1. PROPOSAL TO APPROVE AND ADOPT the Agreement and Plan of Merger
by and between the Company and INTRUST Merger Corp., and the consummation of the
transactions contemplated thereby.
/ / FOR / / AGAINST / / ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE STOCKHOLDER'S MEETING OR ANY
ADJOURNMENT OR ADJOURNMENTS THEREOF, EXCEPT SUCH DISCRETIONARY AUTHORITY TO VOTE
SHALL BE LIMITED TO MATTERS OF WHICH THE COMPANY DID NOT HAVE NOTICE A
REASONABLE TIME BEFORE MAILING OF THE PROXY STATEMENT AND THIS PROXY.
ANY PROXY GIVEN PURSUANT TO THIS SOLICITATION MAY BE REVOKED BY THE
PERSON GIVING IT ANY TIME BEFORE IT IS VOTED AT THE SPECIAL MEETING. PROXIES MAY
BE REVOKED BY DELIVERING TO THE SECRETARY OF THE COMPANY, BRIAN E. SULLIVAN, 105
NORTH MAIN STREET, WICHITA, KANSAS 67202, A WRITTEN NOTICE OF REVOCATION BEARING
A LATER DATE THAN THE PROXY, BY DULY EXECUTING AND DELIVERING TO THE SECRETARY A
SUBSEQUENTLY DATED PROXY RELATING TO THE SAME SHARES OR BY ATTENDING THE SPECIAL
MEETING AND VOTING IN PERSON (ALTHOUGH ATTENDANCE AT THE SPECIAL MEETING WILL
NOT IN AND OF ITSELF CONSTITUTE REVOCATION OF A PROXY).
THIS PROXY WILL BE VOTED AS MARKED. SIGNED BUT UNMARKED PROXIES WILL BE
VOTED IN FAVOR OF THE PROPOSAL.
The undersigned acknowledges receipt of the NOTICE OF STOCKHOLDERS'
MEETING to be held May 6, 2003 and the PROXY STATEMENT dated April 11, 2003 and
hereby revokes all Proxies heretofore given by the undersigned.
Dated: ___________________, 2003
_____________________________________
Signature
_____________________________________
Number of Shares
_____________________________________
Signature (If Held Jointly)
_____________________________________
Title or Authority (If Applicable)
SIGNATURES OF STOCKHOLDER(s) SHOULD CORRESPOND WITH THE NAME IN WHICH SHARES ARE
REGISTERED. JOINT HOLDERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY-IN-FACT,
TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, PARTNER, OR DULY AUTHORIZED OFFICER,
PLEASE GIVE YOUR TITLE OR AUTHORITY AND ATTACH AUTHORIZATION DOCUMENTS.