forms4a_072313.htm
As filed with the Securities and Exchange Commission on July 25, 2013
Registration No. 333-189535
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
Commerce Bancshares, Inc.
(Exact name of registrant as specified in its charter)
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Missouri
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6022
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43-0889454
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial Classification Code Number)
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(I.R.S. Employer
Identification No.)
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1000 Walnut
Kansas City, Missouri 64106
(816) 234-2000
(Address including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
________________
JEFFERY D. ABERDEEN
Controller
Commerce Bancshares, Inc.
1000 Walnut
Kansas City, Missouri 64106
(816) 234-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
________________
Copies to:
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JEFFREY T. HAUGHEY, ESQ.
KATHARINE MILBERGER HAYNES, ESQ.
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C. BRUCE CRUM, ESQ.
McAfee & Taft A Professional Corporation
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Husch Blackwell LLP
4801 Main, Suite 1000
Kansas City, Missouri 64112
(816) 983-8000
Fax: (816) 983-8080
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Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102
(405) 235-9621
Fax: (405) 235-0439
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Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective and all other conditions to the merger (as described herein) have been satisfied or waived.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _________
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o
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(Do not check if a smaller
reporting company)
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If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
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Exchange Act Rule 13e-4(i)(Cross-Border Issuer Tender Offer) |
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Exchange Act Rule 14d-1(d) (Cross-Border Third Party Tender Offer) |
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_______________________
CALCULATION OF REGISTRATION FEE
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Title of Each Class of
Securities to be Registered
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Amount to be
Registered(1)
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Proposed Maximum
Offering Price per Share
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Proposed Maximum
Aggregate Offering
Price(2)
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Amount of
Registration Fee(3)(4)
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Common Stock, par value $5.00 per share
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1,109,593 shares
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Not applicable
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$26,316,298.85
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$3,589.54
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(1)
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The maximum number of shares of Commerce common stock issuable to shareholders of Summit Bancshares Inc. (“Summit”), upon consummation of the merger of Summit with and into Commerce.
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(2)
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Pursuant to Rule 457(f)(2) under the Securities Act of 1933, and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price represents the book value of the maximum amount of Summit common stock, $20.00 par value per share, estimated to be outstanding immediately prior to, and to be canceled in, the merger described herein and is based on the book value of Summit common stock as of March 31, 2013.
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(3)
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Calculated by multiplying (a) the proposed maximum aggregate offering price for all securities to be registered by (b) .00013640.
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this Proxy Statement/Prospectus is subject to completion or amendment. A Registration Statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. This Proxy Statement/Prospectus shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY – SUBJECT TO COMPLETION – DATED JULY 25, 2013
PROSPECTUS
of
Commerce Bancshares, Inc.
1,109,593 Shares of Common Stock
$5.00 par Value
The Boards of Directors of Commerce Bancshares, Inc. (“Commerce”), CBI-Kansas, Inc. (a wholly-owned subsidiary of Commerce) and Summit Bancshares Inc. (“Summit”) have agreed to the merger of Summit into CBI-Kansas, Inc. (“CBI-Kansas”). The total merger consideration value is estimated to be $40,600,000. If the merger is approved, each Summit shareholder will receive Commerce common stock with a value of $170.49 per share of Summit common stock, assuming all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options.
The per share merger consideration will be equal to $170.49 in shares of Commerce common stock if the Commerce stock price is between $36.59 and $40.59. Thus, if the Commerce stock price is within this range, each shareholder of Summit will receive between approximately 4.20 and 4.66 shares of Commerce common stock per share of Summit common stock. If the Commerce stock price is less than $36.59, each shareholder of Summit will receive approximately 4.66 shares of Commerce common stock per share of Summit common stock (which results in the value of the Commerce stock received being less than $170.49). On the other hand, if the Commerce stock price is greater than $40.59, each shareholder of Summit will receive approximately 4.20 shares of Commerce common stock per share of Summit common stock (which results in the value of the Commerce stock received being more than $170.49). This result is because the parties agreed not to adjust the amount of Commerce common stock received beyond these limits. If holders of options use shares of Summit common stock to pay the exercise price of such options, or, if such holders do not exercise their options, the per share merger consideration will be greater than that disclosed above. See “What Summit Shareholders Will Receive in the Merger” on page iv, “Summary — The Merger Consideration” on page 1, and “The Merger — Conversion of Summit Common Stock” on page 14.
Commerce Bank is a direct wholly-owned subsidiary of CBI-Kansas. Summit owns all of the outstanding capital stock of Summit Bank. After the merger, Summit will cease to exist as a separate legal entity and CBI-Kansas will continue as the merger’s surviving corporation. In addition, Summit Bank will be merged with and into Commerce Bank and Commerce Bank will survive. Commerce common stock is traded on The Nasdaq Stock Market under the symbol “CBSH.”
PROXY STATEMENT
of
Summit Bancshares Inc.
For a Special Meeting of Shareholders
To be Held on ___________, 2013
The merger cannot be completed unless the Summit shareholders approve it by an affirmative vote of the holders of at least a majority of the outstanding shares. Summit’s Board of Directors has scheduled a special meeting for Summit shareholders to vote on the merger as follows:
_____________, 2013
4:30 p.m., local time
5314 Yale, 7th Floor
Tulsa, Oklahoma
This document gives you detailed information about the proposed merger. We encourage you to read this entire document carefully, including the section titled “Risk Factors” beginning on page 10. Please see “Where You Can Find More Information” beginning on page 40 for additional information about Commerce on file with the Securities and Exchange Commission.
This Proxy Statement/Prospectus is first being mailed to shareholders on or about ____________, 2013.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the Commerce Common Stock to be issued under this Proxy Statement/Prospectus or determined if the Proxy Statement/Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The shares of Commerce common stock are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Stock is subject to investment risks, including loss of value.
Subject to completion, dated __________, 2013.
DOCUMENTS INCORPORATED BY REFERENCE
This Proxy Statement/Prospectus incorporates by reference important business and financial information about Commerce that we are not delivering with this document. The Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information into this document, which means that we can disclose important information to you by referring you to another document separately filed with the SEC. See “Where You Can Find More Information” beginning on page 40. You can obtain this information from Commerce without charge upon written or oral request by contacting:
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Commerce Bancshares, Inc.
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1000 Walnut
Kansas City, Missouri
Attention: Corporate Finance
(816) 234-2000
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To ensure timely delivery of the documents in advance of the special meeting, you should make your request no later than ______________, 2013.
(GRAPHICS)
________, 2013
Dear Summit Bancshares Inc. Shareholder:
You are cordially invited to attend the Special Meeting of the Shareholders of Summit Bancshares Inc. which will be held on the 7th floor of our corporate office building, 5314 Yale, Tulsa, Oklahoma on _____________, 2013, commencing at 4:30 p.m., local time. At this important meeting, holders of common stock of Summit will be asked to adopt an Agreement and Plan of Merger and approve a merger between Summit and CBI-Kansas, Inc., a wholly owned subsidiary of Commerce Bancshares, Inc. Summit presently owns all of the issued and outstanding shares of Summit Bank. As a result of the merger, shares of Summit common stock will be converted into shares of Commerce common stock.
The Agreement and Plan of Merger was executed on May 15, 2013 and provides for the merger of Summit into CBI-Kansas, after certain conditions are met, including the approval of Summit shareholders. The merger is also subject to certain required regulatory approvals and will be completed shortly after the necessary regulatory approvals are obtained and other conditions are satisfied or waived. Under Oklahoma law, holders of common stock of Summit have dissenters’ rights of appraisal with respect to the merger.
The enclosed Proxy Statement/Prospectus describes the terms of the merger in more detail. You should review the Proxy Statement/Prospectus carefully, including the section titled “Risk Factors” beginning on page 10. Your Board of Directors has carefully reviewed and considered the terms and conditions of the merger and believes that it is fair and in the best interests of Summit and its shareholders and unanimously recommends that shareholders vote “for” the proposal.
A majority vote of all outstanding shares of Summit’s common stock is required to approve the merger. To ensure your shares will be represented at the meeting, whether or not you plan to attend, we urge you to promptly sign, date and mail your proxy in the enclosed self-addressed envelope, which requires no postage. You may cancel your proxy by attending the meeting and voting in person.
Sincerely,
Wade Edmundson
President
Summit Bancshares Inc.
SUMMIT BANCSHARES INC.
5314 Yale, Suite 100
Tulsa, Oklahoma 74135
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Summit Bancshares Inc.:
A Special Meeting of the shareholders of Summit Bancshares Inc., an Oklahoma corporation, will be held on the 7th floor of our corporate office building, 5314 Yale, Tulsa, Oklahoma, on ___________, 2013 commencing at 4:30 p.m., local time for the following purpose:
To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of May 15, 2013 among Commerce Bancshares, Inc., CBI-Kansas, Inc. and Summit Bancshares Inc., a copy of which is attached as Appendix A to the accompanying Proxy Statement/Prospectus.
Holders of Summit common stock of record at the close of business on ___________, 2013, will be entitled to notice of and to vote at the Special Meeting or any adjournment or postponement thereof. Approval of the Agreement and Plan of Merger, which is a condition to the consummation of the transactions contemplated by the Agreement and Plan of Merger, requires the affirmative vote of the holders of a majority of the outstanding shares of Summit common stock. Pursuant to Section 1091 of the Oklahoma General Corporation Act, Summit’s shareholders are entitled to dissenters’ rights.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENT AND PLAN OF MERGER AND THE MERGER. YOUR BOARD BELIEVES THAT THE MERGER IS FAIR AND IN THE BEST INTERESTS OF SUMMIT AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF MERGER AND THE MERGER.
By Order of the Board of Directors
Tulsa, Oklahoma
_____________, 2013
TABLE OF CONTENTS
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| Summit's Financial Advisor |
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WHAT SUMMIT SHAREHOLDERS WILL RECEIVE IN THE MERGER
The number of shares of Commerce common stock into which one share of Summit common stock will be converted in the merger is referred to in this document as the “merger consideration.” The total merger consideration value is estimated to be $40,600,000. There are currently 224,788 shares of Summit common stock issued and outstanding, and options to purchase 13,347 shares of Summit common stock. Outstanding shares of Summit common stock will be converted into merger consideration calculated as $40,600,000 divided by the number of shares of Summit common stock issued and outstanding as of the Effective Time. If all options to purchase shares of Summit common stock are exercised prior to the Effective Time and all holders of options use cash to pay the exercise price of such options, and if the Commerce stock price (as determined under the Agreement and Plan of Merger) is between $36.59 and $40.59, the consideration per share of Summit common stock, consisting of shares of Commerce common stock, will equal $170.49. Thus, if the Commerce stock price is within this range, each shareholder of Summit will receive between approximately 4.20 and 4.66 shares of Commerce common stock per share of Summit common stock.
If the Commerce stock price is less than $36.59, the Commerce stock price will nevertheless be deemed to be $36.59, which results in the merger consideration being less than $170.49 per share of Summit common stock. If the Commerce stock price is greater than $40.59, the Commerce stock price will nevertheless be deemed to be $40.59, which results in the merger consideration being more than $170.49 per share of Summit common stock. If the Commerce stock price (calculated as of the proposed closing date pursuant to the terms of the Agreement and Plan of Merger) is greater than $48.59 or is less than $28.59, either Commerce or Summit may terminate the Agreement and Plan of Merger. The last reported sales price on _______, 2013 for Commerce shares as reported by The Nasdaq Stock Market was $____. You should obtain current market prices for the Commerce common stock. See “Risk Factors” beginning at page 10. Please refer to the table below for an illustration of how the per share merger consideration will be determined under the various possible Commerce stock price scenarios. Each scenario assumes that all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options. If holders of options use shares of Summit common stock to pay the exercise price thereof, or if such holders do not exercise their options, the per share merger consideration will be greater than that disclosed above. See “Summary — The Merger Consideration” on page 1 and “The Merger — Conversion of Summit Common Stock” on page 14.
Possible Per Share Merger Consideration Scenarios*
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Commerce stock price
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Per Share Merger Consideration ($)
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Exchange Ratio
(Shares of Commerce common
stock per share of Summit
common stock)
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Less than $36.59
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Less than $170.49
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4.66
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$36.59 - $40.59
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$170.49
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4.20 – 4.66
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Greater than $40.59
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Greater than $170.49
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4.20
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*All data in this table assumes that all options to acquire Summit common stock are exercised prior to the Effective Time, with cash used to pay the exercise price.
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
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Q:
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What is the purpose of this document?
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A:
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This document serves as both a proxy statement of Summit and a prospectus of Commerce. As a proxy statement, this document is being provided to you by Summit because the Summit Board of Directors is soliciting your proxy for use at the special meeting of shareholders called to vote on the proposed merger of Summit with and into CBI-Kansas, a subsidiary of Commerce. We have entered into an Agreement and Plan of Merger with Commerce and CBI-Kansas. A copy of the Agreement and Plan of Merger is attached to this Proxy Statement/Prospectus as Appendix A. In order to complete the merger, our shareholders must vote to adopt the Agreement and Plan of Merger. The Summit Board of Directors is providing this Proxy Statement/Prospectus to give you information for use in determining how to vote on the proposal submitted to the shareholders at the special meeting of our shareholders. You should read this Proxy Statement/Prospectus and the appendices carefully. The enclosed proxy card allows you, as our shareholder, to vote your shares without attending the special meeting.
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As a prospectus, this document is being provided to you by Commerce because Commerce is offering shares of its common stock in exchange for your shares of Summit common stock in connection with the merger.
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When and where will the special meeting be held?
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The special meeting will be held on ___________________, 2013 at 4:30 p.m., local time, at 5314 Yale, 7th Floor, Tulsa, Oklahoma.
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What matters will be voted on at the special meeting?
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You will vote on a proposal to adopt the Agreement and Plan of Merger.
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What vote of the shareholders is required to approve the Agreement and Plan of Merger?
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To approve the Agreement and Plan of Merger, shareholders of record as of ____________, 2013 holding at least a majority of the outstanding shares of Summit common stock must vote “FOR” the approval of the Agreement and Plan of Merger. There are 224,788 shares of Summit common stock entitled to be voted at the special meeting.
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What will I receive for my Summit common stock?
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You will receive merger consideration with a value of $170.49 per share of Summit common stock (assuming all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options) you hold immediately prior to the Effective Time (as defined in the Agreement and Plan of Merger), and if the Commerce stock price falls between $36.59 and $40.59. See the following question and answer. This amount will consist of shares of Commerce common stock with an approximate exchange ratio between 4.20 and 4.66 shares of Commerce common stock per share of Summit common stock. If holders of options do not exercise their rights to purchase shares of Summit common stock, or if some holders use shares of Summit common stock to pay the exercise price of such options, the consideration received will be greater per share of Summit common stock. See “What Summit Shareholders Will Receive in the Merger” on page iv, and “Summary — The Merger Consideration” on page 1.
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Is the per share value of $170.49 fixed?
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Only if all options to purchase shares of Summit common stock are exercised prior to the Effective Time and all holders of options use cash to pay the exercise price of such options, and if the Commerce stock price falls between $36.59 and $40.59. If the price is above the range, the per share value will be more, and if it falls below the range, the per share value will be less. This occurs because the Agreement and Plan of Merger only adjusts the number of shares of Commerce common stock to be issued when the price is between $36.59 and $40.59.
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For example, if the Commerce stock price is less than $36.59, all options to purchase shares of Summit common stock are exercised prior to the Effective Time, and all holders of options use cash to pay the exercise price of such options, each shareholder of Summit will receive approximately 4.66 shares of Commerce common stock per share of Summit common stock (which results in the value of the Commerce stock received being less than $170.49). On the other hand, if the Commerce stock price is greater than $40.59, all options to purchase shares of Summit common stock are exercised prior to the Effective Time, and all holders of options use cash to pay the exercise price of such options, each shareholder of Summit will receive approximately 4.20 shares of Commerce common stock per share of Summit common stock (which results in the value of the Commerce stock received being more than $170.49). See “What Summit Shareholders Will Receive in the Merger” on page iv, and “Summary — The Merger Consideration” on page 1.
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Why should Summit merge with Commerce?
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Summit’s Board of Directors believes that the merger will benefit Summit and its shareholders because, among other reasons:
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The advantages of combining with a larger, publicly traded financial institution, thereby enabling the Summit shareholders to become shareholders of a larger combined entity having more liquid shares and greater resources to compete in the banking industry;
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The expected financial strength of the combined company following the merger and the ability of the combined company to realize cost savings and to take advantage of various business opportunities with greater financial resources;
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The creation of significant synergies and a stronger competitor in the changing banking industry following the merger;
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The creation of a stronger banking franchise by combining Summit’s strong banking presence in Oklahoma with Commerce’s strong banking presence throughout Missouri, Kansas, and central Illinois, as well as Tulsa, Oklahoma and Denver, Colorado; and
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The favorable position of Commerce among Summit’s and Commerce’s peer group of national and regional financial institutions in terms of profitability, capital adequacy and asset quality.
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What do I need to do now?
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You should carefully read and consider the information contained in this document. If you hold stock in your name as a shareholder of record, you should complete, sign, date and mail your proxy card in the enclosed return envelope as soon as possible. If the card does not specify a choice, your shares will be voted “FOR” the merger and all other proposals. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instructions you receive from your bank or broker. Submitting your proxy card or directing your bank or broker to vote your shares will ensure that your shares are represented and voted at the special meeting.
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Why is my vote important?
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If you do not vote by proxy or vote in person at the special meeting, it will be more difficult for us to obtain the necessary quorum to hold our special meeting. In addition, your failure to vote, by proxy or in person, will have the same effect as a vote against the merger. The merger must be approved by the holders of a majority of the outstanding shares of Summit common stock entitled to vote at the special meeting. Commerce shareholders do not have to approve the merger; accordingly, Commerce shareholders will not vote on approval of the Agreement and Plan of Merger. Completion of the merger is also subject to other specified conditions. See “The Merger — Conditions to the Merger,” beginning at page 22. The Summit Board of Directors unanimously recommends that you vote to approve the merger.
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Are there regulatory or other conditions to the completion of the merger?
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Yes. The merger must be approved by the Board of Governors of the Federal Reserve System and the Missouri Division of Finance, and by the affirmative vote of the holders of a majority of the shares entitled to vote at the Summit special meeting, assuming a quorum is present. Commerce has completed the filing of the application with the Board of Govenors of the Federal Reserve System and will complete the filing of applications and notifications to obtain the required regulatory approvals. See “The Merger — Regulatory Approvals Required for the Merger” beginning at page 25.
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Do I have rights to dissent from the merger?
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Yes. Under Oklahoma law, Summit shareholders have the right to dissent from the Agreement and Plan of Merger and to exercise appraisal rights to receive a payment in cash for the fair value of their shares of Summit common stock. This value may be more or less than the value you would receive in the merger if you do not dissent. If you dissent and properly exercise your appraisal rights, you will receive a cash payment for the value of your shares that will be fully taxable to you. To perfect your appraisal rights, you must follow precisely the required statutory procedures. See “The Merger — Rights of Dissenting Shareholders,” beginning at page 21 and the information in Appendix B.
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What if I abstain from voting?
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If you abstain from voting, the abstention will be counted toward a quorum at the special meeting, but it will have the same effect as a vote against the merger.
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If I am not going to attend the special meeting, should I return my proxy card?
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Yes. Returning your proxy card ensures that your shares will be represented at the special meeting, even if you are unable or do not want to attend.
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Q:
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Can I change my vote after I mail my proxy card?
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A:
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Yes. You can change your vote at any time before we vote your proxy at the special meeting. You can do this in three ways. First, you can send a written notice stating that you would like to revoke your proxy. Second, you can complete and submit a new proxy card. If you choose either of these two methods, you must submit your notice of revocation or your new proxy card to Summit Bancshares Inc., c/o Summit Bank, 5314 Yale, Suite 100, Tulsa, Oklahoma 74135, Attention: Corporate Secretary. Third, you can attend the special meeting and vote in person. Simply attending the meeting, however, will not revoke your proxy; you must request a ballot and vote the ballot at the meeting.
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Q:
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Should I send in my stock certificates now?
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A:
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No. You will receive separate instructions for exchanging your stock certificates for the merger consideration once the merger is approved and certain other conditions are met. The shares of Commerce common stock that the Summit shareholders will receive in the merger will be issued in book-entry form.
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Q:
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When do you expect to complete the merger?
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A:
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We expect to complete the merger in the third quarter of 2013. However, we cannot assure you when or if the merger will occur. We must first obtain the approval of the Summit shareholders at the special meeting and the necessary regulatory approvals and satisfy the other conditions to the merger.
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Q:
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Who can help answer questions?
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A:
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You should not contact Commerce other than to request Commerce SEC filings incorporated by reference. If you have more questions about the merger, you should contact:
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Summit Bancshares Inc.
c/o Summit Bank
5314 Yale, Suite 100
Tulsa, Oklahoma 74135
Attention: Wade Edmundson
Telephone: (918) 481-8811
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This summary highlights selected information from this Proxy Statement/Prospectus and may not contain all of the information that is important to you. To understand the merger more fully and for a complete description of the legal terms of the merger, you should read carefully this entire document and the documents to which we have referred you. See “Where You Can Find More Information” beginning on page 40.
Commerce Bancshares, Inc.
1000 Walnut
Kansas City, Missouri 64106
(816) 234-2000
Website: www.commercebank.com
Commerce Bancshares, Inc., a bank holding company as defined in the Bank Holding Company Act of 1956, as amended, was incorporated under the laws of Missouri on August 4, 1966. Through a second tier wholly-owned bank holding company, it owns all of the outstanding capital stock of Commerce Bank, which is headquartered in Missouri. Commerce Bank engages in general banking business, providing a broad range of retail, corporate, investment, trust, and asset management products and services to individuals and businesses. Commerce Bancshares, Inc. also owns, directly or through Commerce Bank, various non-banking subsidiaries. Their activities include underwriting credit life and credit accident and health insurance, selling property and casualty insurance (relating to consumer loans made by Commerce Bank), private equity investment, securities brokerage, mortgage banking, and leasing activities.
The total assets of Commerce, on a consolidated basis as of March 31, 2013 were approximately $22.2 billion, loans were $10.0 billion, deposits were $18.5 billion, and equity was $2.2 billion.
Commerce’s common stock is traded on The Nasdaq Stock Market under the symbol “CBSH.”
Summit Bancshares Inc.
c/o Summit Bank
5214 Yale, Suite 100
Tulsa, Oklahoma 74135
Telephone: (918) 481-8811
Website: www.summitbankok.com
Summit is a bank holding company whose principal activity is the ownership and management of its wholly-owned subsidiary, Summit Bank. Summit Bank is an Oklahoma state-chartered bank that serves the Tulsa and Oklahoma City metropolitan areas through two full-service community banking branches. Through Summit Bank, Summit provides a full range of banking and financial services to individuals and corporate customers in the Tulsa and Oklahoma City metropolitan and surrounding areas. At March 31, 2013, Summit Bank had total assets of $260.6 million, total deposits of $230.9 million and total loans (net of allowance for loan losses of $3.06 million) of $206.4 million.
Commerce and Commerce’s wholly owned subsidiary, CBI-Kansas, Inc., entered into an Agreement and Plan of Merger on May 15, 2013 with Summit. In the proposed merger, Summit will be merged with and into CBI-Kansas, with CBI-Kansas as the surviving corporation. In addition, immediately after the merger of Summit with and into CBI-Kansas, Summit Bank will be merged with and into Commerce Bank, with Commerce Bank as the surviving corporation.
As more fully set forth below, the Agreement and Plan of Merger provides, generally, that each share of Summit common stock, par value $20.00 per share, outstanding immediately prior to the Effective Time (as defined in the Agreement and Plan of Merger) will be converted into the right to receive Commerce common stock, par value $5.00 per share, in the merger. The exact number of shares into which each share of Summit common will be converted is dependent on the number of shares of Summit common stock issued
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and outstanding as of the Effective Time. Assuming all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options, the consideration received for each share of Summit common stock will be $170.49. The total merger consideration value is estimated to be $40,600,000 (or between approximately 4.20 and 4.66 shares of Commerce common stock per share of Summit common stock). If holders of options use shares of Summit common stock to pay the exercise price thereof, or if such holders do not exercise their options, the per share merger consideration will be greater than that disclosed above.
The Agreement and Plan of Merger provisions are intended, within certain limits, to adjust the value of the Commerce stock consideration in the merger. This adjustment will occur if the Commerce stock price is between $36.59 and 40.59. If the Commerce stock price is less than $36.59, the value of Commerce stock received will be less, and each shareholder of Summit will receive approximately 4.66 shares of Commerce common stock per share of Summit common stock (assuming all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options). On the other hand, if the Commerce stock price is greater than $40.59, the value of Commerce stock received will be greater, and each shareholder of Summit will receive approximately 4.20 shares of Commerce common stock per share of Summit common stock (assuming all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options). See “Summary — The Merger Consideration,” beginning at page 1 and “The Merger — Conversion of Summit Common Stock” on page 14.
We have attached the Agreement and Plan of Merger to this Proxy Statement/Prospectus as Appendix A. We encourage you to read the Agreement and Plan of Merger as it is the legal document that governs the merger.
Summit and Commerce are proposing to merge because we believe, among other things, that this combination can create a stronger and more diversified company that will provide significant benefits to our shareholders and customers alike. See “The Merger — Reasons for the Merger,” beginning at page 17.
Recommendation to Shareholders
The Summit Board of Directors believes that the merger is fair to you and in your best interests and unanimously recommends that you vote “FOR” the proposal to approve the merger.
At the special meeting of Summit shareholders, the Agreement and Plan of Merger and merger must be approved by the affirmative vote of the holders of at least a majority of the shares of Summit common stock outstanding at the close of business on ____________, 2013. Each share of Summit common stock is entitled to one vote.
Approval of the Agreement and Plan of Merger and merger by Commerce shareholders is not required. Accordingly, Commerce has not called a special meeting of its shareholders.
We cannot complete the merger unless we obtain approval of the Board of Governors of the Federal Reserve System and the Missouri Division of Finance. Commerce has filed an application with the Board of Govenors of the Federal Reserve System and received approval for the transaction on July 19, 2013. Commerce will complete the filing of applications and notifications to obtain the remaining required regulatory approvals. As of the date of this Proxy Statement/Prospectus, we have not received the approval of the Missouri Division of Finance. We cannot be certain of when or if we will obtain it.
The consummation of the merger is conditioned upon the receipt by Commerce and Summit of an opinion of counsel that for federal income tax purposes, the merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
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A Summit shareholder who exchanges all of such shareholder’s shares of Summit common stock solely for Commerce common stock in the merger will not recognize gain or loss. See “Material Federal Income Tax Consequences,” beginning at page 27. The receipt of cash in lieu of a fractional share of Commerce common stock will result in the recognition of taxable gain or loss.
All Summit shareholders should read carefully the discussion in “Material Federal Income Tax Consequences” and the other sections of the Proxy Statement/Prospectus referred to therein and are urged to consult their own tax advisors as to specific consequences to them of the merger under federal, state, local or any other applicable tax laws.
The completion of the merger depends on the satisfaction of a number of conditions, including, but not limited to, the following:
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• |
approval by the Summit shareholders; |
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the continued accuracy of each company’s representations and warranties and compliance by each company with its obligations contained in the Agreement and Plan of Merger;
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receipt of a legal opinion from Commerce’s counsel as to the tax consequences of the merger;
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receipt of legal opinions from Commerce's counsel and Summit's counsel covering customary corporate law matters; |
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receipt of the required regulatory approvals; |
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the absence of any legal action or court order that prohibits the merger; |
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• |
the declaration of effectiveness of this registration statement; |
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the absence of any material adverse change in the financial condition or assets of either Commerce or Summit; |
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the satisfaction of certain financial measures applicable to Summit; |
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dissenters’ rights shall not have been exercised with respect to more than 10% of the outstanding shares of Summit common stock on the closing date; |
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• |
the cancellation of all outstanding unexercised stock options under Summit’s stock option plans; |
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• |
the termination by Summit of specified plans, contracts and arrangements; |
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Summit shall be a validly constituted S Corporation as defined in the Code and Summit Bank shall be a validly constituted Qualified Subchapter S Subsidiary as defined in the Code; and |
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Summit shall have obtained specified consents, approvals and waivers. |
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Termination of the Agreement and Plan of Merger
Commerce, CBI-Kansas and Summit can agree to terminate the Agreement and Plan of Merger without completing the merger, and either company can terminate the Agreement and Plan of Merger on its own without completing the merger under various circumstances, including if any of the following occur:
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by any of the companies if the merger has not been consummated by October 31, 2013, but such date may be extended in certain circumstances; |
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by any of the companies if any banking regulatory approval of the merger is denied or if any governmental entity has issued an order imposing a burdensome condition on any of the companies; |
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by Commerce or CBI-Kansas, on the one hand, or Summit on the other, if the other party has materially breached the Agreement and Plan of Merger and has not cured such breach within 30 days of notice of the breach;
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•
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by Commerce or CBI-Kansas if the Summit Board of Directors fails to recommend adoption of the Agreement and Plan of Merger by the shareholders of Summit, or amends or modifies such recommendation in a manner materially adverse to Commerce, or withdraws such recommendation; |
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•
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by any of the companies if the shareholders of Summit fail to approve the Agreement and Plan of Merger; |
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•
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by Commerce or CBI-Kansas, on the one hand, and Summit on the other hand, if there has been a material adverse change in the business or financial condition of the other party and such change has not been cured within 30 days of notice of the change or the closing date, whichever is earlier; |
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•
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by Summit prior to the vote of the shareholders if Summit desires to enter into a definitive agreement with respect to a superior proposal; or |
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•
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by any of the companies if the Commerce stock price is greater than $48.59 or is less than $28.59. |
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When instructed, Summit shareholders, other than those Summit shareholders who perfect their dissenters’ rights of appraisal, must surrender the certificates for their shares of Summit common stock to Commerce and inform Commerce of their federal taxpayer identification number before receiving the number of shares of Commerce common stock and any cash in lieu of fractional shares to which such shareholders are entitled. Until a Summit shareholder surrenders the certificates for his or her Summit common stock and informs Commerce of his or her federal taxpayer identification number, Commerce may withhold the payment of any or all dividends which would otherwise be payable to such shareholder as a shareholder of Commerce. See “The Merger — Conversion and Exchange of Shares and Related Matters” on page 15.
Shares of Commerce common stock are traded on The Nasdaq Stock Market. The last sale price of Commerce common stock as reported on Nasdaq on May 14, 2013 (the last trading day preceding the execution of the Agreement and Plan of Merger) was $41.47. The last sale price for Commerce common stock as reported on Nasdaq on _______, 2013 (the most recent date for which it was practicable to obtain market price data prior to the printing of this Proxy Statement/Prospectus) was $_____.
There is no public or active market for Summit common stock. The last sale price of Summit common stock, of which management is aware preceding the execution of the Agreement and Plan of Merger and the printing of this Proxy Statement/Prospectus (other than pursuant to the exercise of options), was $125.00 on June 6, 2012. As of ____________, 2013, there were approximately 129 holders of record of Summit common stock. See “Commerce Common Stock and Summit Common Stock Comparative Per Share Prices and Dividends” on page 39.
Under the Oklahoma General Corporation Act (“OGCA”), each holder of Summit common stock who dissents from the merger has the right to have the fair value of his or her shares appraised by a court and paid to him or her in cash. In order to exercise dissenters’ rights, the shareholder must comply with specific procedural requirements. If the shareholder fails to comply with these requirements, dissenters’ rights will not be available. See “The Merger — Rights of Dissenting Shareholders” beginning on page 24.
When the merger closes, Summit shareholders will become Commerce shareholders. Their rights will be governed by Missouri law and Commerce’s governing corporate documents rather than Oklahoma law and Summit’s governing corporate documents, as is currently the case. Accordingly, in a number of respects, the rights of Summit’s shareholders will change as a result of the merger. For a description of these changes, see “Differences in Rights of Shareholders” beginning on page 31.
In reaching its decision that the merger was fair from a financial point of view to Summit’s shareholders and deciding to approve the merger, the Summit Board of Directors considered advice from its financial advisor, D. A. Davidson & Co. (“D. A. Davidson”), regarding the consideration to be received by Summit’s shareholders under the terms of the Agreement and Plan of Merger, but did not request, and therefore did not receive, a fairness opinion from D.A. Davidson. See “Summit’s Financial Advisor” beginning on page 19.
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In accordance with current accounting guidance, the merger will be accounted for using the acquisition method. The result of this is that the recorded assets and liabilities of Commerce will be carried forward at their recorded amounts, the historical operating results will be unchanged for the prior periods being reported on and that the assets and liabilities of Summit will be adjusted to fair value at the date of the merger. In addition, all identified intangibles will be recorded at fair value and included as part of the net assets acquired. To the extent that the purchase price, consisting of shares of Commerce common stock to be issued to former Summit shareholders and option holders at fair value, exceeds the fair value of the net assets including identifiable intangibles of Summit at the merger date, that amount will be reported as goodwill. In accordance with current accounting guidance, goodwill will not be amortized but will be evaluated for impairment annually. Identified intangibles will be amortized over their estimated lives. Further, the acquisition method of accounting results in the operating results of Summit being included in the operating results of Commerce beginning from the date of completion of the merger.
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(Amounts in thousands, except per share data)
We are providing the following financial information to aid you in your analysis of the financial aspects of the merger. This information is only a summary and you should read it in conjunction with the historical financial statements of Commerce and the related notes. The summary selected historical consolidated financial information set forth below for Commerce for each of the years ended December 31, 2012, 2011, 2010, 2009 and 2008 has been derived from Commerce’s audited consolidated financial statements. The summary historical consolidated financial information for Commerce as of and for the three months ended March 31, 2013 and 2012 (unaudited) is derived from Commerce’s unaudited interim consolidated financial statements. See “Where You Can Find More Information” beginning on page 40. The summary selected historical financial information set forth below for Summit has been derived from the unaudited financial statements of Summit and Summit Bank, as described in the footnotes to the table. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
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Three Months Ended March 31,
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For the Year Ended December 31,
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2013(5)
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2012(3)
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2012(4)
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2011(3)
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2010(3)
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2009(3)
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2008(3)
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Net interest income and other income: (1)
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Commerce
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$ |
248,055 |
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$ |
258,360 |
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$ |
1,044,364 |
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$ |
1,049,799 |
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$ |
1,049,258 |
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$ |
1,024,566 |
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$ |
998,745 |
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Summit
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$ |
2,665 |
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$ |
2,421 |
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$ |
10,517 |
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$ |
9,163 |
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$ |
7,599 |
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$ |
7,937 |
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$ |
7,240 |
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Net income:
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Commerce
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$ |
61,017 |
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$ |
65,799 |
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$ |
269,329 |
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$ |
256,343 |
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$ |
221,710 |
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$ |
169,075 |
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$ |
188,655 |
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Summit.(2)
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$ |
900 |
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|
$ |
618 |
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$ |
3,454 |
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$ |
2,563 |
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$ |
2,126 |
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$ |
(2,229 |
) |
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$ |
460 |
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Diluted income per common and common equivalent share:
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Commerce
|
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$ |
.67 |
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$ |
.70 |
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$ |
2.90 |
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|
$ |
2.69 |
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$ |
2.29 |
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|
$ |
1.78 |
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|
$ |
2.04 |
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Summit (2)
|
|
$ |
3.78 |
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$ |
2.60 |
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|
$ |
14.50 |
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$ |
10.74 |
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$ |
9.26 |
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$ |
(9.69 |
) |
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$ |
2.01 |
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Historical dividends paid per common share:
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Commerce
|
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$ |
.225 |
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|
$ |
.219 |
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$ |
2.305 |
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|
$ |
.834 |
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$ |
.812 |
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$ |
.790 |
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$ |
.784 |
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Summit.
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$ |
0 |
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|
$ |
0 |
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$ |
5.59 |
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$ |
3.10 |
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|
$ |
2.42 |
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$ |
.72 |
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$ |
2.75 |
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Total assets (end of period):
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Commerce
|
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$ |
22,227,208 |
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|
$ |
20,526,917 |
|
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$ |
22,159,589 |
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|
$ |
20,649,367 |
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|
$ |
18,502,339 |
|
|
$ |
18,120,189 |
|
|
$ |
17,532,447 |
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Summit
|
|
$ |
260,586 |
|
|
$ |
228,129 |
|
|
$ |
264,984 |
|
|
$ |
219,587 |
|
|
$ |
204,066 |
|
|
$ |
205,707 |
|
|
$ |
228,369 |
|
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Long-term borrowings (end of period):
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|
|
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|
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Commerce
|
|
$ |
502,783 |
|
|
$ |
511,520 |
|
|
$ |
503,710 |
|
|
$ |
511,817 |
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|
$ |
512,273 |
|
|
$ |
1,236,062 |
|
|
$ |
1,447,781 |
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Summit
|
|
$ |
3,357 |
|
|
$ |
5,504 |
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|
$ |
5,325 |
|
|
$ |
10,082 |
|
|
$ |
11,039 |
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|
$ |
16,879 |
|
|
$ |
20,012 |
|
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Total shareholders’ equity (end of period):
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Commerce
|
|
$ |
2,179,191 |
|
|
$ |
2,199,206 |
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|
$ |
2,171,574 |
|
|
$ |
2,170,361 |
|
|
$ |
2,023,464 |
|
|
$ |
1,885,905 |
|
|
$ |
1,579,467 |
|
|
Summit
|
|
$ |
24,373 |
|
|
$ |
21,556 |
|
|
$ |
23,251 |
|
|
$ |
20,887 |
|
|
$ |
18,618 |
|
|
$ |
17,000 |
|
|
$ |
19,422 |
|
|
Book value per common share (end of period):
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|
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|
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|
|
|
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|
|
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Commerce
|
|
$ |
24.02 |
|
|
$ |
23.64 |
|
|
$ |
23.76 |
|
|
$ |
23.24 |
|
|
$ |
21.19 |
|
|
$ |
19.63 |
|
|
$ |
17.14 |
|
|
Summit
|
|
$ |
110.51 |
|
|
$ |
98.72 |
|
|
$ |
106.49 |
|
|
$ |
95.74 |
|
|
$ |
87.11 |
|
|
$ |
79.72 |
|
|
$ |
91.08 |
|
| |
|
|
|
| |
(1) Other income includes investment securities gains (losses), net. |
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| |
(2) Summit Bancshares Inc. is a subchapter S corporation and Summit Bank is a qualified subchapter S subsidiary and, therefore, these amounts do not include income taxes. |
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(3) Summit Bancshares Inc. acquired Summit Bank on April 19, 2012. Summit financial information for periods prior to this date is the financial information of Summit Bank. |
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| |
(4) Summit end of period information represents consolidated (holding company and bank) information. Income and income/dividends per share information represents the combination of the holding company and the bank.
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(5) Summit financial information for this period represents consolidated (holding company and bank) information.
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COMPARATIVE UNAUDITED PER SHARE DATA
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The following table sets forth per share data of: |
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Commerce on a historical basis. |
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Summit on a historical basis. |
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The table below should be read in conjunction with the historical financial statements and notes thereto for Commerce incorporated by reference into this Proxy Statement/Prospectus.
Pursuant to the Agreement and Plan of Merger, Commerce has agreed to pay $170.49 for each outstanding share of Summit common stock (assuming all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options). The exchange ratio is based on a ten-day average closing price of Commerce common stock as reported on the Nasdaq Stock Market with limits such that it can be no higher than $40.59 nor lower than $36.59. Thus, the actual price may vary to the extent the Commerce common stock price falls outside those limits. For purposes of the pro forma and equivalent pro forma calculations, it has been assumed that at the Effective Time there will be 238,135 shares of Summit common stock outstanding, and the Commerce common stock price will be $41.47 (the closing Commerce common stock price on May 14, 2013, the business day prior to the announcement of the Agreement and Plan of Merger). Based on these assumptions, the pro forma per share amounts assume an exchange ratio of 4.20 shares of Commerce common stock for each share of Summit common stock. This exchange ratio has been used to calculate the Summit equivalent pro forma per share information below. See “The Merger — Conversion of Summit Common Stock” on page 14.
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Historical
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Commerce
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Summit(1)
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Diluted income per common share:
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Twelve months ended:
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December 31, 2012
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$2.90 |
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$14.50 |
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Three months ended:
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March 31, 2013
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$.67 |
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$3.78 |
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Cash dividends paid per share:
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Twelve months ended:
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December 31, 2012
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$2.305 |
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$5.59 |
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Three months ended:
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March 31, 2013
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$.225 |
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$0 |
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Book value per common share:
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December 31, 2012
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$23.76 |
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$106.49 |
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March 31, 2013
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$24.02 |
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$110.51 |
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(1) Refer to notes in the preceding table.
The following table summarizes (i) the closing price per share of Commerce common stock on May 14, 2013, the business day prior to the announcement of the proposed merger, and as of the most recent date practicable preceding the date of this Proxy Statement/Prospectus and (ii) the equivalent pro forma value of a share of Summit common stock at such dates based on the exchange ratio. Historical market value information regarding Summit common stock is not provided because there is no active market for Summit common stock. Shares of Summit common stock will be converted into merger consideration of $170.49 per share of Summit common stock (assuming all options to purchase shares of Summit common stock are exercised prior to the Effective Time and that all holders of options use cash to pay the exercise price of such options), consisting of shares of Commerce common stock. You should obtain current market quotations for Commerce common stock. See “What Summit Shareholders Will Receive in the Merger” on page iv, “Summary — The Merger Consideration” on page 1, and “The Merger — Conversion of Summit Common Stock” on page 14.
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Commerce
Historical (1)
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Equivalent Pro Forma
Per Share of Summit
Common Stock (2)
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May 14, 2013
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$41.47
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$174.19
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________, 2013
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(1) Represents the closing price of Commerce common stock on the Nasdaq Stock Market.
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(2) Represents the value of the merger consideration per share of Summit common stock pursuant to the terms of the Agreement and Plan of Merger. |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains or incorporates by reference a number of forward-looking statements, including statements about the financial conditions, results of operations, earnings outlook and prospects of Commerce, Summit and the potential combined company and may include statements for the period following the completion of the merger. You can find many of these statements by looking for words such as “plan,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “potential,” “possible” or other similar expressions.
The forward-looking statements involve certain risks and uncertainties. The ability of either Commerce or Summit to predict results or the actual effects of its plans and strategies, or those of the combined company, is subject to inherent uncertainty. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, the following:
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projected business increases following process changes and other investments are lower than expected; |
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competitive pressure among financial services companies increases significantly; |
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general economic conditions are less favorable than expected; |
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political conditions including the threat of future terrorist activity and related actions by the United States abroad may adversely affect either company’s businesses and economic conditions as a whole; |
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changes in the interest rate environment reduce interest margins and impact funding sources; |
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changes in foreign exchange rates increase exposure; |
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changes in market rates and prices may adversely impact the value of financial products; |
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legislation or regulatory environments, requirements or changes may adversely affect businesses in which either company is engaged; |
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litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect either company or its businesses; |
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completion of the merger is dependent on, among other things, receipt of shareholder and regulatory approvals, the timing of which cannot be predicted with precision and which may not be received at all; |
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the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; |
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the integration of Summit’s business and operations with those of Commerce may take longer than anticipated, may be more costly than anticipated and may have unanticipated adverse results relating to Summit’s or Commerce’s existing businesses;
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the anticipated cost savings and other synergies of the merger may take longer to be realized or may not be achieved in their entirety, and attrition in key customer, partner and other relationships relating to the merger may be greater than expected; and |
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decisions to downsize, sell or close units or otherwise change the business mix of either company. |
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Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this document or the date of any document incorporated by reference in this document.
All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this document and attributable to Commerce or Summit or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this document. Except to the extent required by applicable law or regulation, Commerce and Summit undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.
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In addition to the other information contained in or incorporated by reference into this Proxy Statement/Prospectus (see “Where You Can Find More Information” on page 40 and “Incorporation By Reference” on page 41), including the risk factors included in the reports filed by Commerce with the SEC, you should consider carefully the risk factors described below in deciding whether to vote for approval of the merger agreement, as we believe these risk factors to be material to a decision on how to vote your shares. You should keep these risk factors in mind when you read forward-looking statements in this document and in the documents incorporated by reference into this document. If any of the following risks and uncertainties develops into actual events, the combined company, its results of operations or its financial condition could be adversely impacted. Please also refer to the section of this Proxy Statement/Prospectus entitled “Cautionary Statement Regarding Forward-Looking Statements” on page 8.
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Because the Market Price of Commerce Common Stock Will Fluctuate, Summit Shareholders Cannot Be Sure of the Value of the Merger Consideration They Will Receive.
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Upon completion of the merger, each share of Summit common stock will be converted into merger consideration consisting of $170.49 of Commerce common stock (or between approximately 4.20 and 4.66 shares of Commerce common stock). The market value of the Commerce common stock may vary from the closing price of Commerce common stock on the date we announced the merger, on the date that this document was mailed to Summit shareholders, on the date of the special meeting of the Summit shareholders and on the date we complete the merger and thereafter. While the exchange ratio will be appropriately adjusted if the Commerce common stock price is between $36.59 and $40.59, any change in the market value of Commerce common stock prior to completion of the merger outside of that range will affect the value of the merger consideration that Summit shareholders will receive upon completion of the merger. In addition, if the Commerce stock price (calculated as of the proposed closing date pursuant to the terms of the Agreement and Plan of Merger) is greater than $48.59 or is less than $28.59, either Commerce or Summit may terminate the Agreement and Plan of Merger. Accordingly, at the time of the special meeting, Summit shareholders may not know or be able to calculate the market value of the merger consideration they would receive upon completion of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in Summit’s and Commerce’s respective businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond Summit’s and Commerce’s control. You should obtain current market quotations for shares of Commerce common stock and for shares of Summit common stock.
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The Market Price of Commerce Common Stock after the Merger May Be Affected by Factors Different from Those Affecting the Shares of Summit or Commerce Currently.
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The businesses of Commerce and Summit differ in important respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of Summit. For a discussion of the businesses of Commerce and Summit and of certain factors to consider in connection with those businesses, see “The Companies” and “Information About Summit Bancshares Inc.” and the documents incorporated by reference in this document and referred to under “Where You Can Find More Information.”
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The Summit Board Did Not Obtain a Fairness Opinion in Determining Whether or Not to Proceed with the Merger.
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In analyzing the merger, the Summit board engaged D.A. Davidson to advise it regarding the transaction and conducted due diligence on Summit and Commerce. The Summit board believes that because of the financial skills and background of its directors, the Summit board was qualified to conclude that the merger is fair from a financial perspective to Summit’s shareholders. Accordingly, the Summit board did not request, and therefore did not obtain, a fairness opinion to assist it in its determination. The Summit board may be incorrect in its assessment of the fairness of the business combination from a financial point of view to the shareholders of Summit.
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The Agreement and Plan of Merger Limits Summit’s Ability to Pursue Alternatives to the Merger.
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The Agreement and Plan of Merger contains “no shop” provisions that, subject to limited exceptions, limit Summit’s ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of Summit. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Summit from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquirer proposing to pay a lower per share price to acquire Summit than it might otherwise have proposed to pay.
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Summit Shareholders Will Have Less Influence As Shareholders of Commerce Than As Shareholders of Summit.
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Summit shareholders currently have the right to vote in the election of the board of directors of Summit and on other matters affecting Summit. When the merger occurs, each shareholder who receives shares of Commerce common stock will become a shareholder of Commerce with a percentage ownership of the combined organization much smaller than such shareholder’s percentage ownership of Summit. Assuming that at the Effective Time there will be 238,135 shares of Summit common stock outstanding, and the Commerce common stock price will be $41.47 (which was the closing price of Commerce common stock on May 14, 2013, the last trading day before the Agreement and Plan of Merger), it is currently expected that the former shareholders of Summit as a group will receive shares in the merger constituting approximately 1% of the outstanding shares of Commerce common stock immediately after the merger. Because of this, Summit shareholders will have less influence on the management and policies of Commerce than they may now have on the management and policies of Summit.
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The Businesses Will Be Subject to Uncertainties and Contractual Restrictions While the Merger is Pending and During Post-Merger Integration.
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Uncertainty about the effect of the merger on employees and customers may have an adverse effect on both Commerce and Summit. These uncertainties may impair either company’s ability to attract or motivate key personnel until the merger is completed and could cause customers and other counterparties to seek to change existing business relationships. If key employees depart because of issues relating to the uncertainty and/or difficulty of integration or a desire not to remain with the business, the combined company’s business following the merger could be negatively affected. In addition, the merger agreement restricts Summit from taking or permitting certain actions without the consent of Commerce until the merger occurs. These restrictions may prevent Summit from pursuing beneficial business opportunities that may arise prior to the completion of the merger.
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The Merger is Subject to the Receipt of Consents and Approvals from Government Entities that May Impose Conditions that Could Have an Adverse Effect on Commerce.
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Before the merger may be completed, various approvals or consents must be obtained from the Board of Governors of the Federal Reserve System and the Missouri Division of Finance. These governmental entities may impose conditions on the completion of the merger or require changes to the terms of the merger. Although Commerce and Summit do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of Commerce following the merger, any of which might have a material adverse effect on Commerce following the merger.
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Summit Executive Officers and Directors Have Financial Interests in the Merger that Are Different from, or in Addition to, the Interests of Summit Shareholders.
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Executive officers of Summit negotiated the terms of the Agreement and Plan of Merger with their counterparts at Commerce, and the Summit Board of Directors approved the Agreement and Plan of Merger and unanimously recommended that Summit shareholders vote to approve the merger. In considering these facts and the other information contained in this document, you should be aware that Summit’s executive officers and directors have financial interests in the merger that are different from, or in addition to, the interests of Summit shareholders. For example, certain directors and executive officers have entered into agreements with Summit and Commerce that provide, among other things, the grant by Commerce of Commerce restricted stock and the payment of other benefits following the merger in consideration for such directors’ and executive officers’ agreements related to non-solicitation and non-disclosure. These and some other additional interests of Summit directors and executive officers may create potential conflicts of interest and cause some of these persons to view the proposed transaction differently than you may view it, as a shareholder. Please see “Financial Interests of Directors and Officers” for information about these financial interests.
You should read and consider risk factors specific to Commerce’s business that will also affect the combined company after the merger, described in Part I, Item 1A of Commerce’s Annual Report on Form 10-K for the year ended December 31, 2012, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed by Commerce with the SEC and incorporated by reference into this document. See “Incorporation By Reference” on page 41 for the location of information incorporated by reference into this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus is provided to the shareholders of Summit in connection with the solicitation of proxies by the Summit Board of Directors for use at the Summit special meeting to be held on ____________, 2013 at 4:30 p.m., local time, at 5314 Yale, 7th Floor, Tulsa, Oklahoma.
At the special meeting, Summit’s shareholders will consider and vote upon a proposal to approve the Agreement and Plan of Merger.
The Agreement and Plan of Merger provides, among other things, for the merger of Summit with and into CBI-Kansas. CBI-Kansas will be the surviving corporation and the Articles of Incorporation, Bylaws, directors and officers of CBI-Kansas will remain the Articles of Incorporation, Bylaws, directors and officers of CBI-Kansas. Shareholders of Summit will receive shares of Commerce common stock in the merger.
The Summit Board of Directors has established the close of business on ___________, 2013 as the date to determine those record holders of Summit common stock entitled to notice of and to vote at the Summit special meeting. On that date, there were ______ shares of Summit common stock outstanding held by approximately 129 holders of record. A majority of the shares outstanding and entitled to vote on the record date are required to be represented in person or by proxy in order for a quorum to be present for purposes of approving the merger at the special meeting, and a vote of a majority of the outstanding shares is required for approval of the merger. In the event a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies. Holders of record of Summit common stock on the record date are each entitled to one vote per share on the merger to be considered at the special meeting.
The approval and adoption of the Agreement and Plan of Merger requires the affirmative vote of the holders of a majority of the outstanding shares of Summit common stock outstanding on __________, 2013. Shares which are present but not voted, either by abstention or non-vote (including broker non-vote) will be counted for purposes of establishing a quorum but will not be counted to determine whether the merger is approved.
As of __________, 2013, there were 224,788 shares of Summit common stock outstanding. As of _______, 2013, the directors and officers of Summit beneficially owned, directly and indirectly, approximately 27.35% of the outstanding shares of Summit common stock (based on 231,267 shares outstanding, including 6,479 options). All officers and directors of Summit owning Summit common stock have indicated they intend to vote in favor of the Agreement and Plan of Merger.
All shares of Summit common stock represented at the special meeting by properly executed proxies received before or at the special meeting, unless the proxies have been revoked, will be voted at the special meeting, including any postponement or adjournment of the special meeting. If no instructions are indicated, the proxies will be voted FOR approval of the Agreement and Plan of Merger. In addition, the persons designated in the proxies will have the discretion to vote upon any adjournment of the special meeting to solicit additional proxies.
A person giving a proxy pursuant to this solicitation may revoke it at any time before the proxy is voted at the special meeting. A proxy may be properly revoked by:
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filing with the Corporate Secretary of Summit, at 5314 Yale, Suite 100, Tulsa, Oklahoma, before the voting of the proxy, a written instrument revoking the proxy;
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completing a new proxy card and sending it to the address above, in which case the new proxy card will automatically replace any earlier dated proxy card; or
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voting in person at the special meeting.
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Attendance at the special meeting will not, in and of itself, constitute the revocation of a proxy.
Summit will appoint one or more inspectors, who may be employees of Summit to determine, among other things, the number of shares of Summit common stock represented at the special meeting and the validity of the proxies submitted for vote at the special meeting. The inspector(s) of election appointed for the special meeting will tabulate votes cast by proxy and in person.
This Proxy Statement/Prospectus is being furnished to the shareholders of Summit in connection with the solicitation of proxies by the Summit Board of Directors for use at the special meeting and at any adjournment or adjournments of the special meeting.
Except for the cost of preparing this Proxy Statement/Prospectus, the cost of solicitation of proxies for the Summit special meeting will be borne by Summit. In addition to solicitation by mail, Summit may cause proxies to be solicited personally or by telephone or email by Summit’s regular employees.
Commerce Bancshares, Inc., a bank holding company as defined in the Bank Holding Company Act of 1956, as amended, was incorporated under the laws of Missouri on August 4, 1966. Through a second tier wholly-owned bank holding company, it owns all of the outstanding capital stock of Commerce Bank, which is headquartered in Missouri. Commerce Bank engages in general banking business, providing a broad range of retail, corporate, investment, trust, and asset management products and services to individuals and businesses. Commerce Bancshares, Inc. also owns, directly or through Commerce Bank, various non-banking subsidiaries. Their activities include underwriting credit life and credit accident and health insurance, selling property and casualty insurance (relating to consumer loans made by Commerce Bank), private equity investment, securities brokerage, mortgage banking, and leasing activities. The total assets of Commerce, on a consolidated basis as of March 31, 2013 were approximately $22.2 billion, loans were $10.0 billion, deposits were $18.5 billion, and equity was $2.2 billion. Net income attributable to Commerce Bancshares, Inc. for the year ended December 31, 2012 was approximately $269.3 million.
See “Where You Can Find More Information” beginning on page 40 and “Selected Financial Data” on page 6. The principal executive offices of Commerce are at the Commerce Bank Building, 1000 Walnut, Kansas City, Missouri 64106 (telephone number: (816) 234-2000).
Summit Bancshares Inc. was incorporated in December 2011 for the purpose of acquiring all of the capital stock of Summit Bank in a stock exchange transaction with Summit Bank’s shareholders. In April, 2012 that transaction was completed and Summit Bank became a wholly-owned subsidiary of Summit. Summit is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, and is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System. Summit Bank accounts for substantially all of Summit’s consolidated assets, liabilities and operating results.
Summit Bank commenced business operations in 2002, and is an Oklahoma state-chartered bank. The Tulsa office of Summit Bank is located at 5314 Yale, Suite 100 in Tulsa, Oklahoma. In 2011, Summit Bank established a full-service branch office located at 1001 N.W. 63rd Street in Oklahoma City. These are the only banking offices operated by Summit Bank.
Summit Bank conducts a general banking business, including the customary functions of commercial banking, including deposit accounts, commercial, industrial and consumer lending, safe deposit operations and other services tailored to individual customer needs. See “Information About Summit Bancshares Inc.” beginning on page 37.
The Agreement and Plan of Merger and certain related matters are summarized below. This summary does not purport to be a complete statement of the terms and conditions of the merger and is qualified in its entirety by reference to the Agreement and Plan of Merger, which is attached as Appendix A to this Proxy Statement/Prospectus and is incorporated herein by reference.
Summit shareholders will receive Commerce common stock with a value of $170.49 per share, which equals to an exchange ratio within the range of approximately 4.20 and 4.66 shares of Commerce common stock per share of Summit common stock assuming all options to purchase shares of Summit common stock are exercised prior to the effective time and that all holders of options use cash to pay the exercise price of such options. The per share value that a holder of Summit common stock would receive will vary if all options to purchase shares of Summit common stock are not exercised or if the holders of such options use shares of Summit common stock to pay the exercise price of such options. The value of Commerce common stock that a holder of Summit common stock would receive in an exchange will also vary if the price of Commerce common stock falls outside the range of $36.59 and $40.59 because the merger consideration is not further adjusted if the Commerce stock price is below $36.59 or above $40.59.
For example, if the Commerce stock price is below $36.59, the value of Commerce stock received will be less than $170.49, and each shareholder of Summit will receive approximately 4.66 shares of Commerce common stock per share of Summit common stock. On the other hand, if the Commerce stock price is greater than $40.59, the value of Commerce stock received will be greater than $170.49, and each shareholder of Summit will receive approximately 4.20 shares of Commerce common stock per share of Summit common stock.
If between the date of the Agreement and Plan of Merger and the Effective Time, the outstanding shares of Commerce common stock shall have been further changed into a different number of shares or a different class, by reason of any issuance of common stock, recapitalization, reclassification, split-up, combination, exchange, readjustment, reorganization, merger, consolidation, distribution, stock split, stock or other dividend, or similar transaction, the Agreement and Plan of Merger shall be adjusted to the extent appropriate to reflect such event.
As of _____________, 2013, options to purchase 13,347 shares of Summit common stock were held by certain officers and directors of Summit and its subsidiary, Summit Bank. As of _____, 2013, 6,651 of these options are fully vested and exercisable, and 6,696 of these options are unvested. All unvested stock options will vest immediately prior to the Effective Time. Summit’s stock option plan currently requires the use of cash to pay the option exercise price. Prior to the merger, Summit expects to amend certain of its option award agreements which will enable the option holders under those agreements to surrender shares of Summit common stock to satisfy the option exercise price with respect to the stock options which such persons hold. As a result, although options to purchase 13,347 shares currently are outstanding, fewer than 13,347 shares of Summit common stock may be issued by Summit prior to the merger if option holders surrender vested stock options to satisfy the option exercise price. If any options to purchase shares of Summit stock are outstanding at the closing of the merger, the Agreement and Plan of Merger provides that such options will be cancelled as of the Effective Time.
Prior to the completion of the merger, Commerce will appoint Commerce Bank or a commercial bank or trust company that is acceptable to Summit, to act as the Exchange Agent. The Exchange Agent will effect the exchange of shares of Summit common stock into shares of Commerce common stock.
Holders of unexchanged Summit shares will not be entitled to receive any dividends or other distributions payable by Commerce until their certificates are surrendered after the merger is completed. Upon surrender, however, subject to applicable laws, the holders will receive accumulated dividends and distributions, without interest, together with cash in lieu of any fractional shares.
Promptly after the completion of the merger, the Exchange Agent will mail to holders of Summit stock certificates (other than Summit stock certificates representing dissenting shares) a letter of transmittal and instructions for surrendering Summit stock certificates in exchange for the merger consideration that a holder of shares of Summit common stock is entitled to receive, along with any dividends and other distributions and any cash in lieu of fractional shares. After a holder of Summit stock certificates sends the Summit stock certificates to the Exchange Agent together with the properly completed letter of transmittal, and any other documents that the Exchange Agent may reasonably require, the holder of Summit stock certificates will be entitled to receive such consideration. No interest will be paid or will accrue on any cash paid to holders of Summit stock certificates.
If there has been a transfer of ownership of Summit common stock that is not registered in the transfer records of Summit, such holder must present to the Exchange Agent the certificate representing such shares of Summit common stock, along with all documents required to evidence and effect the transfer of ownership and to evidence that any applicable stock transfer taxes have been paid prior to receiving any merger consideration.
No fractional shares will be issued by Commerce in connection with the merger. If you are a Summit shareholder who would otherwise have been entitled to a fraction of a share of Commerce common stock, you will be paid the cash value of such fraction determined by multiplying such fraction by the average of the closing sale prices of Commerce common stock as reported by Nasdaq on each of the ten (10) consecutive trading days preceding the fifth trading date prior to the Effective Time.
Management of Summit has been aware of the increasing competition and continuing consolidation in the banking and financial services industry. However, because of general economic conditions experienced since the fall of 2007 and its resulting negative impact on stock prices in general and, in particular, the valuations of companies in the financial services industry, Summit’s management believed it was in the best interest of its shareholders to continue its strategy of building Summit Bank in its Tulsa market and expanding into the Oklahoma City market rather than seeking to be acquired.
In March and April, 2012, Summit’s management met with representatives of Commerce on two occasions. These meetings were initiated by Commerce. While the conversations were of a general nature, Summit’s management believed Commerce’s purpose in requesting these meetings was to inquire whether Summit would consider a possible merger with Commerce. No further discussions occurred until August, 2012 when two representatives of Commerce called on management of Summit to again discuss the possibility of an acquisition of Summit by Commerce. Once again, the conversation was of a general nature.
In mid-September, 2012 another meeting occurred. Although there were no discussions with respect to price during this meeting, there were discussions regarding Commerce’s strategy in the Oklahoma market and the manner in which Summit Bank would fit into that strategy. Approximately one month later, a representative of Commerce met with Summit Bank’s Chairman, Edward Keller and its Chief Executive Officer, Wade Edmundson, and was advised that if Commerce wished Summit’s Board of Directors to consider whether an acquisition would be in the best interest of Summit’s shareholders, Commerce should submit a written proposal to Summit.
On November 9, 2012, Summit received Commerce’s letter proposing an acquisition of Summit by Commerce in a stock exchange transaction with pricing indicated in a range of 150% to 175% of Summit’s tangible book value. Commerce’s proposal also indicated that Commerce would be willing to consider a cash component to the purchase price. Following receipt of this letter, Summit Bank’s Chief Executive Officer contacted Summit’s directors on November 14, 2012 to assess the Board’s level of interest in
pursuing a transaction with Commerce on the terms outlined in the Commerce proposal. Each director indicated that he believed the entire Board of Summit Bank would be interested in continuing discussions with Commerce but only at the upper end of the pricing range proposed by Commerce.
Prior to receiving Commerce’s written proposal, Summit’s management had had discussions with a representative of D.A. Davidson with respect to pricing and structure of a possible transaction involving Summit. As a result of the decision to pursue discussions with Commerce, Summit decided to retain D.A. Davidson as its financial advisor with respect to a proposed transaction and requested D.A. Davidson to obtain a confidentiality agreement from Commerce on behalf of Summit. D.A. Davidson was formally retained in December, 2012.
On December 20, 2012, a joint meeting of the Boards of Directors of Summit and Summit Bank was held. At this meeting the directors reviewed the status of discussions with Commerce about a possible transaction and the terms proposed by Commerce in its proposal received in November, 2012. At these meetings, the Boards informally authorized Summit’s management to continue discussions with Commerce and ratified Summit’s retention of D.A. Davidson as Summit’s financial advisor.
Following the execution of a confidentiality agreement, Commerce commenced its due diligence process and obtained additional information regarding Summit. There followed a meeting between representatives of Commerce and certain executive officers of Summit Bank, as well as two representatives from Summit and Summit Bank’s Boards of Directors. This meeting occurred in Kansas City at Commerce’s offices in late January, 2013. Following that meeting and completion of its initial due diligence, Commerce submitted a revised written proposal to Summit in which it proposed an acquisition of all of the outstanding shares of Summit for $39,500,000 in a stock exchange transaction.
Although Summit was in discussions with Commerce, it also held discussions with an Oklahoma-based bank significantly larger than Summit that had expressed an interest in acquiring Summit. These discussions grew out of a conversation between the President of Summit and the Chief Executive Officer of the other bank that occurred in late November, 2012. Following that conversation, Summit’s financial advisor had further discussions with representatives of that bank. Those discussions led to two meetings between Summit’s management and representatives of the bank that occurred in January, 2013. On February 20, 2013 that bank entered into a Confidentiality Agreement with Summit and another meeting then followed with a representative of that bank on February 22, 2013.
On the morning of February 27, 2013, a representative of Commerce advised Edward Keller that Commerce would be submitting a second revised proposal to Summit. That afternoon Mr. Keller received the revised proposal in an email which proposed a total acquisition price of $40,600,000, all of which would be paid in the form of Commerce stock. In addition, the proposal provided that Summit would be permitted to distribute to its shareholders a special cash dividend prior to closing any capital in excess of $23.251 million. The terms of this proposal were conveyed to the Boards of Directors of Summit and Summit Bank at a joint meeting held the afternoon of February 28, 2013. At that meeting, the Board of Directors of Summit approved a resolution accepting in principle Commerce’s revised proposal and authorizing management to move forward with the negotiation of a formal merger agreement with Commerce. Following written confirmation of Commerce’s revised proposal which was made by its letter to Summit dated March 1, 2013, Summit contacted representatives of the other bank that had expressed interest in acquiring Summit to advise them that Summit was electing to suspend discussions with that bank at that time.
In early April, 2013 Commerce provided to Summit a proposed form of acquisition agreement, as well as related agreements to be entered into between Commerce, Summit and certain executive officers of Summit Bank in conjunction with the signing of a definitive acquisition agreement. Negotiations with respect to the terms of those agreements continued over the next several weeks. At a special joint meeting of the Boards of Directors of Summit and Summit Bank held on May 6, 2013, Summit and Summit Bank’s Boards of Directors considered the Agreement and Plan of Merger and the related agreements to which each would be a party. At that meeting, counsel for Summit and Summit Bank reviewed the terms and conditions of each of these agreements and responded to questions from the directors. In addition, Summit’s financial advisor, D.A. Davidson, presented an overview of the proposed transaction that addressed the financial aspects of the transaction, pricing with respect to other transactions involving financial institutions having similar characteristics to Summit, financial information with respect to Commerce and its stock, as well as other information pertinent to the proposed transaction between Summit and Commerce. See “Summit's Financial Advisor” beginning on page 19. Following these presentations and after further discussion by the directors, Summit’s Board of Directors unanimously approved the Agreement and Plan of Merger and the related agreements to which Summit would be a party and submitted the Agreement and Plan of Merger for approval to Summit’s shareholders with its recommendation that the Agreement and Plan of Merger be approved. In addition, the Board of Directors of Summit Bank approved the various related agreements to which Summit Bank would be a party.
On May 15, 2013, Commerce and Summit executed the Agreement and Plan of Merger. In addition, Commerce, Summit and Summit Bank executed the related agreements with certain executive officers of Summit Bank.
Summit. Summit’s Board of Directors has determined that the merger is advisable and in the best interests of Summit and its shareholders. The Summit Board of Directors believes that the merger presents an opportunity to merge with a similar financial institution and create a combined company that will have significantly greater financial strength and earnings power than Summit would have on its own. Accordingly, the Summit Board of Directors has approved the merger. In reaching its decision to approve the Agreement and Plan of Merger and recommend its approval by Summit’s shareholders, the Summit Board of Directors consulted with Summit’s management, as well as Summit’s legal and financial advisors, and considered a number of factors, including, but not limited to, those discussed below.
Financial Considerations. The Summit Board of Directors considered the financial terms of the merger based on, among other things, the following factors:
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The belief that the value of the consideration to be received by Summit represents a fair multiple of Summit per share book value and earnings, based on historical and anticipated trading ranges for Commerce common stock;
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The potential for stock price appreciation to Summit shareholders;
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The increased liquidity for Summit shareholders resulting from the merger, and the fact that Commerce’s common stock is traded on The Nasdaq Stock Market;
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The current and prospective competitive regulatory environments in which Summit operates;
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The quality and history of Commerce’s earnings and strong capital position;
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The ability to maintain those earnings given the management quality and depth, diversification of risk, representation in growing market areas and ability to grow internally;
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The belief that the merger will result in significant dividend income, as compared to other alternatives, based on the assumption that Commerce would continue to pay cash and stock dividends at its current rate and with the understanding that current dividends are not necessarily indicative of future dividends;
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The advantages of combining with a larger financial institution, thereby enabling the Summit shareholders to become shareholders of a larger combined entity having greater resources to compete in the banking industry;
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The expected financial strength of the combined company following the merger and the ability of the combined company to realize cost savings and to take advantage of various business opportunities with greater financial resources;
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The presentation by D. A. Davidson on May 6, 2013 to the Boards of Directors of Summit and Summit Bank, which, in the opinion of Summit's Board of Directors, reflected that the merger consideration was fair from a financial point of view to holders of Summit common stock; and
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The expected treatment of the merger as a tax-free reorganization under the Code.
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Strategic Considerations. The Summit Board of Directors also considered a number of strategic advantages of the merger in comparison to a stand-alone strategy, including, but not limited to, the following factors:
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The creation of significant synergies and a stronger competitor in the changing banking industry following the merger;
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The complementary nature of Summit’s and Commerce’s geographic markets for consumer financial service products; and
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The creation of a stronger banking franchise by combining Summit’s strong banking presence in Tulsa and its banking office in Oklahoma City with Commerce’s strong banking presence throughout Missouri, Kansas, and central Illinois, as well as Tulsa, Oklahoma and Denver, Colorado.
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Social Considerations. The Summit Board of Directors considered the social and economic effect on the Summit shareholders, employees, customers and community, including, but not limited to, the following factors:
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The improbability that there would be customer and employee disruption from the merger, based on the merger record of Commerce;
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The favorable position of Commerce among Summit’s and Commerce’s peer group of national and regional financial institutions in terms of profitability, capital adequacy and asset quality;
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Commerce’s large menu of banking and banking related products and services;
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Commerce’s strong management record;
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Commerce’s acquisition experience and history of operating acquired banking locations as community banks; and
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The opportunity for Summit shareholders to participate in the future growth of a larger and more diversified bank holding company having greater financial resources, competitive strengths and business opportunities than would be possible for Summit as a standalone entity.
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While the Summit Board of Directors considered the foregoing and other factors individually, the Summit Board of Directors did not collectively assign any specific or relative weight to the factors considered and did not make any determination with respect to any individual factor. The Summit Board of Directors collectively made its determination with respect to the Agreement and Plan of Merger based on the unanimous conclusion reached by its members, in light of the factors that each of them considered appropriate, that the Agreement and Plan of Merger is fair and in the best interests of the Summit shareholders.
Commerce. In reaching its decision to approve the Agreement and Plan of Merger, the Board of Directors of Commerce considered a variety of factors, including the following:
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The merger will allow Commerce to increase its market share in the demographically attractive markets of Tulsa and Oklahoma City, Oklahoma;
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Commerce’s belief that the merger will provide an opportunity for Commerce to improve Summit’s operating performance and funding mix, and to expand Summit’s product offering;
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Commerce’s familiarity with and review of Summit’s business, operations, management, markets, competitors, financial condition, earnings and prospects;
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Summit’s financial strength, stable credit quality and concentration in the attractive metropolitan areas of Tulsa and Oklahoma City, Oklahoma;
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Commerce’s belief that after the merger the combined company will be able to continue to generate high revenue and growth rates; and
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The merger will allow Commerce to continue its strategy of geographically diversifying its revenues and earnings.
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The foregoing discussion of the information and factors considered by Commerce is not intended to be exhaustive. In reaching its determination to enter into the Agreement and Plan of Merger, Commerce did not assign any relative or specific weights to the foregoing factors.
Summit’s Financial Advisor
Summit engaged D.A. Davidson as its financial advisors to assist with the merger. D.A. Davidson and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions. Summit selected D.A. Davidson as its financial advisor because it is a recognized investment banking firm that has substantial experience in transactions similar to the merger. If the merger transaction closes, D.A. Davidson is entitled to a fee of approximately $235,000 (assuming the total merger consideration is equal to $40,600,000, that all options to purchase Summit’s Common Stock are exercised prior to the Effective Time, and that payment of the exercise price for all options is made in cash). D.A. Davidson is also entitled to reimbursement from Summit of certain of its expenses in connection with its engagement as Summit’s financial advisor.
As indicated above, on May 6, 2013, D.A. Davidson made a presentation to the Summit and Summit Bank Boards of Directors regarding the proposed merger transaction with Commerce. In its presentation to the Boards of Directors, D.A. Davidson provided publicly available information regarding precedent transactions, Commerce and its publicly traded peers and Commerce’s acquisition history as described in more detail below, among other information.
D.A. Davidson described the general terms of the proposed transaction, including the stock consideration, estimated cash dividend at closing and proposed break-up fee of $1.975 million. They noted that, assuming merger consideration of $40.6 million and estimating a pre-closing dividend of $1.3 million and based upon financial information as of or for the quarter ended March 31, 2013, in aggregate the expected transaction value-to-book value, transaction value-to-core 8.0% capital, and transaction value-to-last twelve months C-corporation earnings per share would be 180.2%, 189.5% and 20.4x, respectively. D.A. Davidson also reviewed the structure of the transaction, including variable versus fixed exchange ratio, cap, collars and walk away price.
Precedent Transactions Analysis. D.A. Davidson presented publicly available information for two separate groups of precedent transactions in the commercial banking industry selected by D.A. Davidson. The two precedent transaction groups consisted of: (1) “Nationwide Mergers” which included 16 transactions announced since January 1, 2011 that included target companies with (i) total assets between $100 million and $2.0 billion, (ii) a nonperforming assets to total assets ratio of less than 3.0%, and (iii) last twelve months return on average assets of at least 0.70%; and (2) “Oklahoma Whole Bank Mergers” which consisted of all whole bank merger transactions in Oklahoma since January 2008 (13 transactions). D.A. Davidson excluded transactions for which no pricing information was publicly available.
Nationwide Mergers:
CNB Financial Corporation (Acquirer) / FC Banc Corp. (Target)*
CBTCO Bancorp (Acquirer) / Bradley Bancorp (Target)*
Glacier Bancorp, Inc. (Acquirer) / Wheatland Bankshares, Inc. (Target)*
Old Florida Bancshares, Inc. (Acquirer) / New Traditions National Bank (Target)*
F.N.B. Corporation (Acquirer) / Annapolis Bancorp, Inc. (Target)
NBT Bancorp Inc. (Acquirer) / Alliance Financial Corporation (Target)
Prosperity Bancshares, Inc. (Acquirer) / Coppermark Bancshares Inc. (Target)
MidSouth Bancorp, Inc. (Acquirer) / PSB Financial Corporation (Target)
Overton Financial Corporation (Acquirer) / First National Bank of Canton (Target)
Penns Woods Bancorp, Inc. (Acquirer) / Luzerne National Bank Corporation (Target)*
Bank of Commerce (Acquirer) / State Bank & Trust Company (Target)
Carlile Bancshares, Inc. (Acquirer) / Northstar Financial Corporation (Target)
First Financial Corporation (Acquirer) / Freestar Bank, National Association (Target)
Goering Management Company, LLC (Acquirer) / Home State Bancshares, Inc. (Target)
American State Bancshares, Inc. (Acquirer) / Rose Hill Bancorp, Inc. (Target)
Valley National Bancorp (Acquirer) / State Bancorp, Inc. (Target)
Oklahoma Whole Bank Mergers
CrossFirst Holdings, LLC (Acquirer) / Tulsa National Bancshares, Inc. (Target)*
Investor group (Acquirer) / Grand Savings Bank (Target)
Security Bancshares Corporation (Acquirer) / First State Bank (Target)*
Investor group (Acquirer) / S G Bancshares, Inc. (Target)*
Prosperity Bancshares, Inc. (Acquirer) / Coppermark Bancshares, Inc. (Target)
American Bancorporation, Inc. (Acquirer) / Highland Ban-Corp., Inc. (Target)
Vision Bancshares, Inc. (Acquirer) / Sulphur Community Bancshares, Inc. (Target)
American Bancorporation, Inc. (Acquirer) / Osage Bancshares, Inc. (Target)
BancFirst Corporation (Acquirer) / FBC Financial Corporation (Target)
BancFirst Corporation (Acquirer) / Union National Bancshares, Inc. (Target)
Cache Holdings, Inc. (Acquirer) / Healthcare Bancorp, Inc. (Target)
Investor group (Acquirer) / First Keyes Bancshares, Incorporated (Target)
FSB Investments, LLC (Acquirer) / MidWest Community Financial Corporation (Target)
*Indicates transaction was pending as of May 6, 2013
D.A. Davidson reviewed the following valuation information it had calculated for both sets of comparable mergers and acquisitions: transaction price to tangible book value, transaction price at announcement to last twelve months earnings per share and core deposit premium. The presentation also contained other operating financial data of the targets in the comparable mergers and acquisitions. The median multiples of the comparable transaction groups were as follows:
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Comparable Group Medians
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Nationwide Mergers Median
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Oklahoma Whole Bank Mergers Median
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Transaction Value / Tangible Book Value Per Share
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151.6%
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133.8%
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Transaction Value / Last Twelve Months Earnings Per Share
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16.4x
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14.0x
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Core Deposit Premium
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5.82%
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4.94%
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Publicly Traded Peers of Commerce. D.A. Davidson also presented publicly available financial information of publicly traded bank holding companies that D.A. Davidson had determined to be comparable to Commerce. The criteria that D.A. Davidson used to determine the peer banks were NASDAQ-listed banks located in Arkansas, Colorado, Kansas, Missouri, Oklahoma and Texas with (i) total assets between $2.0 billion and $30.0 billion; (ii) a nonperforming assets to total assets ratio of less than 3%, and (iii) prior twelve months return on average assets exceeding 0.00%. D.A. Davidson excluded pending merger targets.
Publicly Traded Peers:
BOK Financial Corporation
Cullen/Frost Bankers, Inc.
UMB Financial Corporation
Prosperity Bancshares, Inc.
International Bancshares Corporation
Texas Capital Bancshares, Inc.
BancFirst Corporation
National Bank Holdings Corporation
Home BancShares, Inc.
Great Southern Bancorp, Inc.
Bank of the Ozarks, Inc.
Simmons First National Corporation
Enterprise Financial Services Corp
CoBiz Financial Inc.
Southwest Bancorp, Inc.
The information provided regarding Commerce and the publicly traded peers included market data and financial information. Set forth in the following table are the data for Commerce and the median data for the peer group as of the quarter ended March 31, 2013 or most recently reported period, with pricing data as of May 3, 2013 as presented by D.A. Davidson. The 2013 and 2014 Earnings Per Share estimates used in the table below were based on SNL Financial estimates.
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Commerce
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Peer Group Median
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Price / Tangible Book Value
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177.4%
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162.9%
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Price / 2013E Earnings Per Share
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14.2x
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13.6x
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Price / 2014E Earnings Per Share
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13.8x
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13.6x
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Commerce Acquisition History. In addition, D.A. Davidson presented publicly available information regarding previous acquisition transactions completed by Commerce since 1991. The information presented included target information, deal value, valuation and operating financials for the target company. The acquisition targets reviewed by D.A. Davidson were as follows:
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Announce Date
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Name of Acquired Company
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4/02/2007
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Commerce Bank
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12/04/2006
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South Tulsa Financial Corporation
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4/13/2006
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West Pointe Bancorp, Incorporated
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4/04/2006
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Boone National S&LA
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10/23/2000
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Breckenridge Bancshares Company
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7/02/1998
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Fidelity Bankshares, Inc.
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6/10/1998
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Columbus Bancshares Inc.
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10/29/1997
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Pittsburg Bancshares, Inc.
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6/11/1997
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CNB Bancorp, Inc. ESOP
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1/17/1997
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Shawnee Bank Shares, Inc.
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12/21/1994
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Chillicothe State Bancorp, Inc.
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11/01/1994
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Union Bancshares, Inc.
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9/26/1994
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Peoples Mid-Illinois Corporation
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8/16/1994
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Cotton Exchange Bancshares, Inc.
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6/24/1994
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Twin City Corporation
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4/06/1994
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Moniteau National Bank of California
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2/18/1994
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Liberty Bancshares, Inc.
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11/09/1993
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Walnut Valley Corporation
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7/13/1993
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Lawrence County Bancshares, Inc.
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4/07/1993
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Firstbank Investment Co.
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2/08/1993
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Midwest Bancorporation, Inc.
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10/19/1992
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Republic Bancshares, Inc.
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8/04/1992
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Union Financial Corporation
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4/08/1992
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AMCORE Bank, NA
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3/26/1992
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Manufacturers Bancorp, Inc.
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1/24/1992
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Lenexa Bancorporation, Inc.
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12/06/1991
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First Peoria Corp.
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11/04/1991
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First National Bank of Bonner Springs
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The median for the valuation data for the previous Commerce acquisitions, as determined by D.A. Davidson, were as follows: transaction value / tangible book value per share: 166.1%; transaction value / last twelve months earnings per share: 17.8x; and core deposit premium: 6.31%.
D.A. Davidson’s presentation also included general financial and franchise information on Commerce, including but not limited to, geographic market coverage, growth and profitability trends, credit quality, loan and deposit mix, stock price performance vs. indices, return analysis, and cash and stock dividends.
The Summit board believes that because of the financial skills and background of its directors, the Summit board was qualified to conclude that the merger is fair from a financial perspective to Summit’s shareholders. Therefore, the Summit board did not request, and therefore will not receive, a fairness opinion from D.A. Davidson in connection with the merger. For more information, please refer to “Risk Factors” on page 10.
At the Effective Time, the separate corporate existence of Summit will terminate as it merges with and into CBI-Kansas. The Articles of Incorporation and Bylaws of CBI-Kansas as in effect immediately prior to the effective time will remain the Articles of Incorporation and Bylaws of CBI-Kansas from and after the effective time until amended as provided by law. The officers and directors of CBI-Kansas will remain the officers and directors of CBI-Kansas from and after the Effective Time. In addition, immediately after the merger of Summit with and into CBI-Kansas, Summit Bank will be merged with and into Commerce Bank, with Commerce Bank as the surviving corporation.
It is expected that existing management of the surviving corporation will be supplemented with personnel from Commerce or Commerce Bank who will assist in bringing new methods and systems to the surviving corporation which have been developed by Commerce. Commerce also expects to enhance the net interest margin and non-interest income of the combined company by
expanding the products and services offered. Commerce will also analyze the combined company operations for potential efficiencies and anticipates achieving operating cost savings through the proposed consolidation and the elimination of redundant costs. While there can be no assurances that operating cost savings will be realized or in what fiscal period the savings will actually be recorded, plans are currently being developed to realize operating cost savings. It is expected that the annualized level of operating cost savings achieved will be realized unevenly throughout the period of consolidation, with the majority of any savings realized in the latter part of the period. The extent to which the operating cost savings will be achieved depends, among other things, on the regulatory environment and economic conditions, and may be affected by unanticipated changes in business activities, inflation and operating costs.
The merger is conditioned on the fulfillment prior to the closing of certain conditions set forth in the Agreement and Plan of Merger, including, among other things, the following:
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The approval of the Agreement and Plan of Merger by the holders of a majority of all of the outstanding shares of Summit common stock;
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The accuracy of representations of Commerce, CBI-Kansas and Summit made in the Agreement and Plan of Merger and the performance of their respective obligations thereunder;
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The absence of a material adverse event since May 15, 2013 affecting the financial condition, properties, assets, liabilities, rights or business of Summit;
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The absence of a material adverse event since May 15, 2013 affecting the financial condition, properties, assets, liabilities, rights or business of Commerce or CBI-Kansas;
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The receipt by Commerce and Summit of an opinion from Husch Blackwell LLP relating to certain tax matters;
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The receipt by Commerce of an opinion from McAfee & Taft A Professional Corporation as to certain corporate matters regarding Summit;
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The receipt by Summit of an opinion from Husch Blackwell LLP as to certain corporate matters regarding Commerce;
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The receipt of necessary regulatory approvals;
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A minimum amount of equity and minimum loan loss reserve of Summit;
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Dissenters’ rights shall not have been exercised with respect to more than 10% of the outstanding shares of Summit common stock on the Closing Date;
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The absence of any temporary restraining order, preliminary or permanent injunction or other order or legal restraint that would prevent the consummation of the merger;
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The cancellation of all outstanding unexercised options for Summit common stock under Summit’s stock option plans;
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The termination of specified plans, contracts and arrangements by Summit;
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Summit shall be a validly constituted S Corporation and Summit Bank shall be a validly constituted Qualified Subchapter S Subsidiary; and
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Summit shall have obtained specified consents, approvals and waivers.
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Pursuant to the Agreement and Plan of Merger, Summit has agreed to carry on its business and cause Summit Bank and its other subsidiaries to carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as conducted prior to the execution of the Agreement and Plan of Merger. Summit has agreed to certain restrictions on its ability to take specified actions and engage in specified material transactions, as described in the Agreement and Plan of Merger. Summit is permitted to pay dividends to its shareholders prior to the closing of the transaction, so long as specified financial conditions are met.
The Agreement and Plan of Merger provides that unless and until the Agreement and Plan of Merger has been terminated, neither Summit nor any of its subsidiaries will solicit or encourage or, subject to the fiduciary duties of their directors as advised by counsel, hold discussions or negotiations with, or provide information to, any person in connection with any proposal from any person relating to the acquisition of all or a substantial portion of the business, assets or stock of Summit, Summit Bank, or any other subsidiary of Summit. Summit is required to promptly advise Commerce of its receipt of, and the substance of, any such proposal or inquiry.
Prior to or at the Effective Time, any provision of the Agreement and Plan of Merger, including, without limitation, the conditions to consummation of the merger, may be (i) waived, to the extent permitted under law, in writing by the party which is entitled to the benefits thereof; or (ii) amended at any time by written agreement of the parties, whether before or after approval of the Agreement and Plan of Merger by the shareholders of Summit; provided, however, that after any such approval, no such amendment shall alter the amount or change the form of the consideration or alter or change any of the terms of the Agreement and Plan of Merger if such alteration or change would adversely affect the holders of Summit common stock or would legally require further approval of such holders. It is anticipated that a condition to consummate the merger would be waived only in those circumstances where the Board of Directors of Commerce, CBI-Kansas or Summit, as the case may be, deems such waiver to be in the best interests of such company and its shareholders.
Termination of the Agreement and Plan of Merger
The Agreement and Plan of Merger and the merger may be terminated at any time prior to the closing date, provided that the terminating party is not then in material breach of the Agreement and Plan of Merger, by:
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The mutual consent of Commerce, CBI-Kansas and Summit;
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Commerce, CBI-Kansas or Summit if the merger has not been consummated by October 31, 2013 unless extended up to 60 days thereafter by Commerce or Summit under certain circumstances;
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Commerce, CBI-Kansas or Summit if regulatory approval has been denied or the merger has been enjoined or if any regulator has issued an order with respect to the merger which imposes a non-customary restriction or condition on Summit that would materially and adversely affect Summit Bank’s operations;
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Commerce or CBI-Kansas, on the one hand, or Summit, on the other hand, if the other party has materially breached the Agreement and Plan of Merger and has not cured such breach within 30 days of notice of the breach;
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Commerce or CBI-Kansas if the Summit Board of Directors fails to recommend adoption of the Agreement and Plan of Merger by the Summit shareholders or amends or modifies the recommendation in a manner materially adverse to Commerce or CBI-Kansas or withdraws such recommendation;
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Summit prior to the vote of the shareholders if Summit desires to enter into a definitive agreement with respect to a superior proposal;
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Commerce, CBI-Kansas or Summit if the Summit shareholders do not approve the merger at a duly held meeting of the Summit shareholders;
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Commerce, or CBI-Kansas, on the one hand, or Summit on the other hand, if there has been a material adverse change or event with respect to the other party’s business, financial condition or results of operations and such change or effect has not been cured within 30 days or the closing date, whichever is earlier; or
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By Summit, Commerce or CBI-Kansas if the Commerce stock price (determined pursuant to the terms of the Agreement and Plan of Merger) is greater than $48.59 or is less than $28.59.
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Effect of Termination. If the Agreement and Plan of Merger is terminated, it will become void, and there will be no liability on the part of Commerce or Summit, except that (1) both Commerce and Summit will remain liable for any willful breach of the Agreement and Plan of Merger and (2) designated provisions of the Agreement and Plan of Merger, including the payment of fees and expenses, the confidential treatment of information and publicity restrictions, will survive the termination.
Termination Fee and Expense Reimbursement. If the Agreement and Plan of Merger is terminated because Summit desires to enter into an acquisition agreement with another party that it considers to be a superior proposal, Summit must pay Commerce a termination fee of $1.975 million (the “Termination Fee”). The Termination Fee is also payable if the Agreement and Plan of Merger is terminated and, within 12 months, Summit enters into an agreement to be acquired by another party, if the Agreement and Plan of Merger was terminated because (i) the Summit board of directors did not recommend approval of the Agreement and Plan of Merger to the stockholders, (ii) the stockholders of Summit failed to approve the Agreement and Plan of Merger, or (iii) the merger is not consummated by October 31, 2013, or the relevant later date, as applicable, by reason of a voluntary breach of a material representation of warranty by Summit (and prior to such termination Summit had not held its shareholder meeting to consider and vote on the Agreement and Plan of Merger) or a material required regulatory approval needed by Summit to consummate the merger has not been obtained (and prior to such termination Summit had not held its shareholder meeting to consider and vote on the Agreement and Plan of Merger). In addition, whenever the Termination Fee is payable, Summit must also reimburse Commerce for certain of Commerce’s expenses, including all reasonable out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to Commerce) incurred by Commerce or on its behalf in connection with or related to the authorization, preparation and execution of the Agreement and Plan of Merger, this registration statement, the solicitation of Summit shareholder approval and all other matters related to the closing of the transactions contemplated by the Agreement and Plan of Merger.
It is presently anticipated that the Effective Time will occur in the third quarter of 2013, but no assurance can be given to that effect.
Under Oklahoma law, the relevant provisions of which are attached to this document as Appendix B (Section 1091 of the OGCA), each Summit shareholder who dissents from the merger and who complies with various procedural requirements of Section 1091 of the OGCA is entitled to “appraisal rights,” pursuant to which the shareholder will receive the fair value of his or her shares of Summit common stock in cash, with accrued interest. Specifically, a Summit shareholder may dissent from the merger, and CBI-Kansas, as the merger’s surviving corporation, must pay to the shareholder, upon the surrender of certificates representing his or her shares, the fair value of the shares as of the day prior to Summit’s special meeting, with accrued interest. If CBI-Kansas and the dissenting shareholder cannot agree on the fair value of such shares, then the OGCA provides for a judicial determination of these amounts. The value as determined by an Oklahoma court may be more or less than the value Summit shareholders are entitled to under the Agreement and Plan of Merger. If you desire to dissent and exercise your appraisal rights, you should refer to Section 1091 of the OGCA in its entirety and should consult with legal counsel prior to taking any action to ensure that you comply strictly with the applicable statutory provisions.
To dissent and exercise your appraisal rights, you must do all of the following:
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deliver to Summit a written demand for appraisal of your shares before the _____________, 2013 meeting of Summit shareholders to vote on the merger;
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not vote in favor of the merger (note that a vote, in person or by proxy, against the merger will not satisfy the statutory requirements that you make a written demand for an appraisal of your shares); and
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continue to hold your shares of Summit common stock through the Effective Time.
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If you do not vote against the merger, it will not constitute a waiver of your appraisal rights under the OGCA if you make written demand for payment before the vote is taken at the ____________, 2013 shareholders’ meeting. Conversely, voting against the merger will not, by itself, be sufficient to satisfy your obligations if you dissent and want to exercise your appraisal rights. You must follow the procedures set forth in Section 1091 of the OGCA to exercise your appraisal rights.
Each outstanding share of Summit common stock as to which a legally sufficient demand in accordance with Section 1091 of the OGCA has been made and that did not vote in favor of approval of the merger retains all other rights of a shareholder until those rights are cancelled by consummation of the merger. However, after the Effective Time, no dissenting shareholder who has demanded appraisal rights shall be entitled to vote the stock for any purpose or to receive payment of dividends (except dividends payable to shareholders of records prior to the Effective Time).
Within 10 days after the effective date of the merger, CBI-Kansas will notify the dissenting shareholders who have complied with the provisions of Section 1091 that the merger has become effective. Within 120 days after the effective date of the merger, CBI-Kansas will send to such dissenting shareholders, upon written request, a statement setting forth the aggregate number of shares not voted in favor of the merger and with respect to which demands for appraisal have been received and the aggregate number of holders of the shares. The written statement will be mailed to the dissenting shareholders within 10 days after the written request is received by CBI-Kansas or within 10 days after expiration of the period for delivery of demands for appraisal, whichever is later.
Also within 120 days after the effective date of the merger, any dissenting shareholder who has complied with the provisions of Section 1091 or CBI-Kansas may file a petition in district court demanding a determination of the value of the stock of the dissenting shareholders; however, at any time within 60 days after the effective date of the merger, each of the dissenting shareholders has the right to withdraw the shareholder’s demand for appraisal and to accept the terms offered in the Agreement and Plan of Merger. The court shall provide notice to CBI-Kansas of any such petition filed by a shareholder, and upon receipt of that notice, CBI-Kansas shall provide to the court a list of all shareholders who have demanded payment for their shares and with whom agreements regarding the value of their shares have not been reached by CBI-Kansas. After providing proper notice of the proceeding, the court will determine the shareholders who are entitled to appraisal rights and will direct CBI-Kansas to pay the fair value of the shares, together with interest, to the shareholders entitled to such payment. The court will determine the costs of the proceeding and may tax the parties as it deems appropriate. Upon request by a dissenting shareholder, the court may order all or a portion of the expenses incurred by any shareholder, including attorneys’ fees and expenses of experts, be charged pro rata against the value of all of the shares entitled to an appraisal.
The shares for which a dissenting shareholder has properly exercised appraisal rights and followed the required procedures in the OGCA will not be converted into, or represent, the right to receive Commerce common stock as provided under the Agreement and Plan of Merger. None of these shares will, after the Effective Time, be entitled to vote for any purpose or receive any dividends or other distributions. If, however, the holder of such shares fails to properly perfect, effectively withdraw, waive or lose, or otherwise become ineligible to exercise dissenting shareholder’s rights of appraisal under the OGCA, then at that time shares held by you will be converted into Commerce common stock as provided in the Agreement and Plan of Merger.
The regulatory approvals required to complete the transactions contemplated by the Agreement and Plan of Merger include approval from the Board of Governors of the Federal Reserve System and the Missouri Division of Finance. Commerce filed an application with the Board of Govenors of the Federal Reserve System and will complete the filing of applications and notifications to obtain the remaining required regulatory approvals.
Federal Reserve System. The merger is subject to approval of the Board of Governors of the Federal Reserve System pursuant to Section 3 of the Bank Holding Company Act of 1956. The Board of Governors of the Federal Reserve System is prohibited from approving any transaction under the applicable statutes that (1) would result in a monopoly, (2) would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States, or (3) may have the effect in any section of the United States of substantially lessening competition, tending to create a monopoly or resulting in a restraint of trade, unless the Board of Governors of the Federal Reserve System finds that the anti-competitive effects of the transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the communities to be served. The Board of Governors of the Federal Reserve System may not approve an interstate acquisition without regard to state law if the applicant controls, or after completion of the acquisition the combined entity would control, more than 10 percent of the total deposits of insured depository institutions in the United States.
In addition, in reviewing a transaction under the applicable statutes, the Board of Governors of the Federal Reserve System will consider the financial and managerial resources of the companies and their subsidiary banks and the convenience and needs of the community to be served as well as the companies’ effectiveness in combating money-laundering activities. In connection with its review, the Board of Governors of the Federal Reserve System will provide an opportunity for public comment on the application for the merger, and is authorized to hold a public meeting or other proceeding if it determines that would be appropriate.
Under the Community Reinvestment Act of 1977, as amended (the “CRA”), the Board of Governors of the Federal Reserve System must take into account the record of performance of each of Commerce and Summit in meeting the credit needs of the entire communities, including low-and moderate-income neighborhoods, served by the company and its subsidiaries. Commerce’s principal depository institution has received an “outstanding” CRA rating from the Board of Governors of the Federal Reserve System. Summit’s principal depository institution has received a “satisfactory” CRA rating from the Federal Deposit Insurance Corporation.
Antitrust Considerations. At any time before or after the acquisition is completed, the Antitrust Division of the United States Department of Justice or the United States Federal Trade Commission, which we refer to as the Antitrust Division and the FTC, respectively, could take action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition or seeking divestiture of substantial assets of Commerce or Summit or their subsidiaries. Private parties also may seek to take legal action under the antitrust laws under some circumstances. Based upon an examination of information available relating to the businesses in which the companies are engaged, Commerce and Summit believe that the completion of the merger will not violate U.S. antitrust laws. However, Commerce and Summit can give no assurance that a challenge to the merger on antitrust grounds will not be made, or, if such a challenge is made, that Commerce and Summit will prevail.
In addition, the merger may be reviewed by the state attorneys general in the various states in which Commerce and Summit operate. Although Commerce and Summit believe there are substantial arguments to the contrary, these agencies may claim the authority, under the applicable state and federal antitrust laws and regulations, to investigate and/or disapprove the merger. There can be no assurance that one or more state attorneys general will not attempt to file an antitrust action to challenge the merger.
Timing. We cannot assure you that all of the regulatory approvals described above will be obtained, and, if obtained, we cannot assure you as to the date of any approvals or the absence of any litigation challenging such approvals. Likewise, we cannot assure you that the Antitrust Division, the FTC or any state attorney general will not attempt to challenge the merger on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its results.
Pursuant to the Bank Holding Company Act, a transaction approved by the Board of Governors of the Federal Reserve System may not be completed until 30 days after approval is received, during which time the Antitrust Division may challenge the merger on antitrust grounds. The commencement of an antitrust action would “stay”— that is, suspend-the effectiveness of an approval unless a court specifically were to order otherwise. With the approval of the Board of Governors of the Federal Reserve System and the concurrence of the Antitrust Division, the waiting period may be reduced to no less than 15 days.
Other Requisite Approvals and Consents. Approvals or notices are also required from or to the Missouri Division of Finance and the Oklahoma State Banking Department, and may be required from or to certain other regulatory agencies
Commerce submitted an application with the Board of Governors of the Federal Reserve System regarding the merger. The Board of Governors of the Federal Reserve System provided its approval on July 19, 2013. The approval requires the observance by the parties of certain waiting periods before the merger may be consummated. Commerce and Summit can give no assurance that there will not be any litigation challenging the approval.
Commerce and Summit believe that the merger does not raise substantial antitrust or other significant regulatory concerns and that they will be able to obtain all remaining requisite regulatory approvals on a timely basis without the imposition of any condition that would have a material adverse effect on Commerce or Summit.
We are not aware of any material governmental approvals or actions that are required for completion of the merger other than those described above. It is presently contemplated that if any such additional governmental approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.
No shares of Summit common stock are presently owned by Commerce or by any of its subsidiaries or principals, or by trustees for the benefit of Commerce or any of its subsidiaries, shareholders or employees as a class or by an escrow arrangement instituted by Commerce.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following general discussion sets forth the anticipated material United States federal income tax consequences of the merger to holders of Summit common stock that exchange their shares of Summit common stock for shares of Commerce common stock in the merger. This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any United States federal laws other than those pertaining to income tax. This discussion is based upon the Code, the regulations promulgated under the Code and court and administrative rulings and decisions in effect on the date of this document. These laws may change, possibly retroactively, and any change could affect the continuing validity of this discussion.
This discussion addresses only those Summit shareholders that hold their shares of Summit common stock as capital assets within the meaning of Section 1221 of the Code. Further, this discussion does not address all aspects of United States federal income taxation that may be relevant to you in light of your particular circumstances or that may be applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:
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a holder of Summit common stock subject to the alternative minimum tax provisions of the Code;
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a holder of Summit common stock that received Summit common stock through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation; and
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a holder of Summit common stock that holds Summit common stock as part of a hedge, straddle, constructive sale or conversion transaction.
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Determining the actual tax consequences of the merger to you may be complex. They will depend on your specific situation and on factors that are not within our control. You should consult with your own tax advisor as to the tax consequences of the merger in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, foreign or other tax laws and of changes in those laws.
The parties intend for the merger to qualify as a reorganization for United States federal income tax purposes. The consummation of the merger is conditioned on the delivery, by Husch Blackwell LLP, of an opinion to Commerce and to Summit to the effect that the merger will be a tax-free reorganization within the meaning of Section 368(a) of the Code.
This opinion will be based in part on representation letters provided by Commerce and Summit and on customary factual assumptions, all of which must continue to be true and accurate in all material respects as of the Effective Time. None of the opinions described above will be binding on the Internal Revenue Service. Commerce and Summit have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, there can be no assurance that the Internal Revenue Service will not disagree with or challenge any of the conclusions described herein.
As a result of the merger qualifying as a reorganization within the meaning of Section 368(a) of the Code, if you exchange your Summit common stock exclusively for Commerce common stock, you will recognize no gain or loss.
Each Summit shareholder’s aggregate tax basis in any shares of Commerce common stock received in exchange for his or her Summit common stock upon the merger will be the same as the aggregate tax basis of the shares of Summit common stock the Summit shareholder surrendered in exchange therefor.
Each Summit shareholder’s holding period in any shares of Commerce common stock received upon the merger, including any fractional shares deemed received and redeemed, will, in each instance, include the period during which the shares of Summit common stock surrendered in exchange therefor were held, to the extent such shares constitute capital assets in the hands of the applicable shareholder on the date of the exchange.
Summit is a corporation that is taxed on a modified pass-through basis under Subchapter S of the Code. Upon the consummation of the merger, Summit will be required to file a final short-period S corporation corporate income tax return for the period ending on the closing date of the merger. The former holders of Summit common stock will include in their individual returns, as appropriate, the items of income, gain, loss, deduction or credit realized from Summit’s final short period.
In contrast, Commerce is a corporation that is taxed at the corporate level under Subchapter C of the Code. As a result, Commerce is subject to taxation on income realized from its operations. There is no “pass-through” of any items of income or loss to the shareholders of Commerce. Shareholders of Commerce are generally taxed on distributions received by Commerce as ordinary dividend income. Under current law, dividends received from Commerce that meet the requirements of the Code to be “qualified” dividends are subject to U.S. federal income tax at graduating rates up to 20%. Non-qualified dividends will be subject to federal income tax at ordinary income tax rates. In addition, shareholders of Commerce stock may be subject to the 3.8% federal Unearned Income Medicare Contribution Tax on net investment income, as defined by the Code.
If you receive cash in lieu of a fractional share of Commerce common stock, you will be treated as having received the fractional share of Commerce common stock pursuant to the merger and then as having exchanged the fractional share of Commerce common stock for cash in a redemption by Commerce. As a result, assuming that the redemption of a fractional share of Commerce common stock is treated as a sale or exchange and not as a dividend, you generally will recognize gain or loss equal to the difference between the amount of cash received and the basis of the fractional share of Commerce common stock as set forth above. This gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the holding period for the shares is greater than one year. The deductibility of capital losses is subject to limitations.
You may be subject to information reporting and backup withholding at a rate of 28% if the cash payment is $20 or more. You generally will not be subject to backup withholding, however, if you:
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furnish a correct taxpayer identification number and certify that you are not subject to backup withholding on the substitute Form W-9 or successor form included in the election form/letter of transmittal you will receive; or
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are otherwise exempt from backup withholding.
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Any amounts withheld under the backup withholding rules will generally be allowed as a refund or credit against your United States federal income tax liability, provided you timely furnish the required information to the Internal Revenue Service.
If you receive shares of Commerce common stock as a result of the merger, you will be required to retain records pertaining to the merger and you will be required to file with your United States federal income tax return for the year in which the merger takes place a statement setting forth certain facts relating to the merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH SUMMIT SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
The following table sets forth certain information as of July 24, 2013, regarding the beneficial ownership of Summit common stock by (a) the directors of Summit, (b) the principal executive officer of Summit, (c) the principal financial officer of Summit, (d) the three other most-highly compensated executive officers of Summit or its subsidiary, Summit Bank, (e) any person (including any group) who is known to Summit to be the beneficial owner of more than 5% of Summit common stock; and (f) the directors of Summit and executive officers of Summit or its subsidiary, Summit Bank, as a group.
Under the rules of the SEC, beneficial ownership includes voting or investment power that is sole or shared. Unless otherwise indicated in the footnotes, the percentage beneficial ownership for the following table is based upon 224,788 shares of Summit common stock outstanding as of the record date. To Summit’s knowledge, unless indicated in the footnotes to this table, each person named in the table has sole voting and investment power with respect to all shares of stock attributed to him or her. The references to ownership are derived from Summit’s share transfer records. The business address of each person listed is 5314 South Yale Avenue, Suite 100, Tulsa, Oklahoma 74135.
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Name
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Number of Shares
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Percentage of Beneficial
Ownership
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| 5% shareholders: |
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John Massey
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10.48%
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Directors and Executive Officers:
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Wade Edmundson (Director & President of Summit)
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4.66%8
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Kent Harrell (Director of Summit)
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7,9893
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3.55%
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Edward Keller (Director of Summit)
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7,9894
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3.55%
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John Massey (Director of Summit)
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23,5471
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10.48%
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John Williams, Sr. (Director of Summit)
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1,000
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M. Paige Miller (Secretary/Treasurer of Summit and Chief Financial Officer of Summit Bank)
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2,6505
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1.18%9
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Mark Poole (President of Summit Bank)
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6,4056
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2.84%10
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James L. Gibson (Executive Vice President, Chief Operating Officer and Chief Lending Officer of Summit Bank)
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3,0307
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1.33%11
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All directors and named executive officers as a group (8 persons)
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63,247
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27.35%12
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*Represents beneficial ownership of less than 1%.
1 Includes 11,592 shares held by the Massey Family Foundation.
2 Includes 7,162 shares held by the Wade Edmundson Trust; 3,380 vested options; and 95 unvested options, which will vest upon the closing of the merger.
3 Consists of 7,989 shares held by the Kent J. Harrell Revocable Trust dated January 19, 1995.
4 Includes 1,000 shares held by the Edward F. Keller Revocable Living Trust and 6,989 shares held by the Marilyn E. Keller Revocable Trust.
5 Includes 2,365 shares held by M. Paige Miller and Jan L. Miller, as joint tenants with rights of survivorship; 80 vested options; and 205 unvested options, which will vest upon the closing of the merger.
6 Includes 2,740 shares held by Mark A. Poole and Liz Poole as joint tenants with rights of survivorship; 133 vested options and 336 unvested options, which will vest upon the closing of the merger.
7 Includes 450 vested options and 1,800 unvested options that will vest upon the closing of the merger.
8 Based on 228,263 shares outstanding (including 3,380 vested options and 95 unvested options).
9 Based on 225,073 shares outstanding (including 80 vested options and 205 unvested options).
10 Based on 225,257 shares outstanding (including 133 vested options and 336 unvested options).
11 Based on 227,038 shares outstanding (including 450 vested options and 1,800 unvested options).
12 Based on 231,267 shares outstanding (including 6,479 options).
FINANCIAL INTERESTS OF DIRECTORS AND OFFICERS
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Certain members of management of Summit and Summit Bank, and their Boards of Directors, may have interests in the transaction in addition to their interests as shareholders of Summit which are summarized below. The Summit Board of Directors was aware of these factors and considered them, among other matters, in approving the Agreement and Plan of Merger.
As a condition to Commerce’s willingness to enter into the Agreement and Plan of Merger, Wade Edmundson, Mark Poole and James L. Gibson, each of whom is an executive officer of Summit and/or Summit Bank, entered into agreements with Commerce and Summit that will become effective upon the consummation of the merger. These agreements are referred to in this Proxy Statement/Prospectus as the “Officer Agreements.” Under the Officer Agreements, following consummation of the merger, each of the executives are expected to continue with Commerce or an affiliate and will receive a one-time stock award pursuant to the Commerce 2005 Equity Incentive Plan for restricted shares of Commerce common stock with a fair market value in the following amounts: Wade Edmundson - $487,200, Mark Poole - $420,000, and James L. Gibson - $372,000. One-fourth of the restricted shares granted will vest each year beginning on the first anniversary of the date of grant; provided that an executive will forfeit any unvested
restricted shares in the event that the executive is terminated for “Cause” or the executive terminates his employment under circumstances not constituting “Good Reason,” each as defined in his respective Officer Agreement.
The Officer Agreements also provide that these executives are subject to certain non-solicitation and confidentiality restrictions. The term of the obligations varies among the Officer Agreements. Certain other employees of Summit, in addition to the executive officers, have entered into similar agreements with Commerce for the award of restricted shares of Commerce common Stock with an aggregate fair market value of $453,000, which will vest over specified periods.
On May 15, 2013, Summit Bank, Summit, Commerce, and M. Paige Miller, Summit’s Executive Vice President and Chief Financial Officer, entered into an Agreement to Amend Change in Control Agreement, which amended the Change in Control Agreement between Summit Bank and Ms. Miller dated April 26, 2007 (the Change in Control Agreement, as amended, is referred to as the “Amended Change in Control Agreement”). Pursuant to the Amended Change in Control Agreement, (i) Ms. Miller’s base salary will not be reduced before the six month anniversary of the closing; (ii) her Survivor Income Benefit Agreement may be terminated without liability to make any payment assuming she survives beyond such termination; (iii) her Incentive-Based Salary Continuation Agreement may be terminated in accordance with its terms and the Accrual Balance paid (which was $55,563 as of the agreement date); and (iv) if she assists and supports conversion of Summit Bank’s systems to Commerce’s systems and satisfies the other requirements of the agreement, she will be entitled to severance of $185,385. Such payment will be made following: (x) termination of her employment by action of Summit Bank (or, following the merger, Commerce Bank) without cause (as defined in the agreement) or by her due to reduction in base salary or her work location being moved by more than 15 miles, in either case during the six months following closing; (y) termination of her employment by her action for good reason (as defined in the agreement) during the period beginning on her “Free to Leave Date” and ending on the six month anniversary of closing. Her Free to Leave Date is the earlier of the fifth day before the six month anniversary of the Closing Date or 30 days following completion of the systems conversion. Such $185,385 payment would alternatively be paid following termination of the agreement by Summit Bank or Commerce in accordance with Internal Revenue Code section 409A.
As a condition to the closing of the merger, Summit has agreed to terminate certain plans, contracts and arrangements specified by Commerce. The terminated agreements include Incentive-Based Salary Continuation Agreements and Deferred Cash Incentive Agreements to which executives are party, and Director Phantom Stock Plan Award Agreements under the Summit Bank Director Phantom Stock Plan, effective January 1, 2008, as amended and restated by the Summit Bank Amended and Restated Director Phantom Stock Plan, effective December 21, 2011 (the “Director Phantom Stock Plan”).
In February 2008, Summit Bank entered into Incentive-Based Salary Continuation Agreements (“Salary Continuation Agreements”) with Wade Edmundson, Mark Poole and Paige Miller. Summit Bank entered into a similar Salary Continuation Agreement with James L. Gibson in early March 2013. Under the terms of these Salary Continuation Agreements, the named officer is entitled to a percentage, as specified in each agreement, of his or her compensation payable annually for a 10-year period if he or she retires at normal retirement age. To reflect the obligation to make these payments, Summit Bank has accrued a monthly expense which is reflected as a liability on its balance sheet. That liability for each officer is referred to in each agreement as the “accrual balance.”
Each Salary Continuation Agreement provides that the Bank may terminate the agreement at any time if it is being terminated in conjunction with the termination of all similar Salary Continuation Agreements. If terminated before the commencement of payment benefits, as in the case in each of Summit Bank’s existing Salary Continuation Agreements, each participating officer is entitled to 100% of his or her accrual balance. The accrual balance for each participating executive officer as of the closing of the merger is estimated as follows: Wade Edmundson – $364,304, Mark Poole – $118,682, Paige Miller – $60,774, and James L. Gibson – $19,694. In accordance with the terms of each Salary Continuation Agreement, these amounts will be paid to the named officer in conjunction with Summit Bank’s termination of the agreements.
Pursuant to the termination of the Director Phantom Stock Plan and the payout of the awards thereunder, the following members of Summit Bank’s board of directors will receive the following lump sum, cash payments (assuming the per share merger consideration is equal to $170.49):
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Participant Name
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Number of Vested Shares
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Total Benefit
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Jack Allen
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315
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$53,704.35
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Steve Brown
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270
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$46,032.30
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Gary Christopher
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315
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$53,704.35
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John Frame
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315
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$53,704.35
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Kent Harrell
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315
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$53,704.35
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Ed Keller
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315
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$53,704.35
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John Massey
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315
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$53,704.35
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Tom Maxwell
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315
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$53,704.35
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John Neas
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315
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$53,704.35
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John Williams
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315
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$53,704.35
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Summit currently has outstanding stock options to purchase 13,347 shares of Summit’s common stock at various exercise prices. These options were granted under the Summit Bank Stock Option Plan as Amended and Restated as of March 24, 2011. Of these 13,347 options outstanding, options to purchase 6,651 shares are fully vested. All of the unvested stock options will vest and become exercisable immediately prior to the Effective Time.
The bylaws for Summit provide for the indemnification of each officer and employee of Summit against any liabilities and expenses related to his or her capacity as a director, officer or employee of Summit, subject to certain exceptions.
The Agreement and Plan of Merger provides that Commerce will indemnify the present directors, officers, employees and agents of Summit and Summit Bank following the Effective Time against all damages in connection with any action arising out of actions or omissions occurring prior to the Effective Time to the fullest extent permitted under Missouri law. The Agreement and Plan of Merger further provides that CBI-Kansas will cause all persons covered under Summit’s directors’ and officers’ liability insurance at the Effective Time to be covered by a directors’ and officers’ liability tail policy for a period of at least five years following the Effective Time.
Summit is incorporated in the State of Oklahoma, while Commerce is incorporated in the State of Missouri. As a result of the merger, Summit shareholders, whose rights are currently governed by the Summit Certificate of Incorporation (the “Summit Certificate of Incorporation”), Bylaws (the “Summit Bylaws”) and the Oklahoma General Corporation Act (“OGCA”), will, upon consummation of the merger, become Commerce shareholders. Following the merger, their rights will be governed by Missouri law (rather than Oklahoma law), and will also be governed by the Commerce Articles of Incorporation, as amended (the “Commerce Articles of Incorporation”) and Bylaws, as amended (the “Commerce Bylaws”). The material differences between the rights of Summit’s shareholders and Commerce’s shareholders result from differences in the governing state law and the companies’ governing corporate documents.
The following summary is not intended to be an exhaustive description of the provisions discussed. It is qualified in its entirety by reference to the OGCA, the General and Business Corporation Law of Missouri (the “MGBCL”), the Summit Certificate of Incorporation, the Summit Bylaws, the Commerce Articles of Incorporation and Commerce Bylaws.
Summit is authorized under the Summit Certificate of Incorporation to issue 400,000 shares of common stock, $20.00 par value per share.
Commerce is authorized under the Commerce Articles of Incorporation to issue 102,000,000 shares of capital stock, consisting of 100,000,000 common shares, $5.00 par value per share, and 2,000,000 preferred shares, $1.00 par value per share.
Pursuant to the OGCA and the Commerce Articles of Incorporation, holders of shares of Summit common stock and Commerce common stock are entitled to dividends when and if declared by the Board of Directors of their respective corporations; upon liquidation, such holders are entitled to share pro rata in the assets of their respective corporations remaining after payments to creditors and any preferred shareholders.
Under the OGCA, no shareholder of a corporation shall have any preemptive right to acquire additional shares of the corporation unless, and to the extent that, such right is expressly granted in the certificate of incorporation. The Summit Certificate of Incorporation contains a provision stating that preemptive rights are available to holders of common stock upon additional issuance of common stock by Summit. Preemptive rights do not, however, extend to fractional shares or common stock allocated for the Summit Bank Stock Option Plan.
Under the MGBCL, the preemptive right of a shareholder to acquire additional shares of a corporation may be limited or denied to the extent provided in the articles of incorporation. The Commerce Articles of Incorporation provide that no holder of any of the shares of any class of stock shall have any preemptive rights.
Under the OGCA, a corporation shall have a board of directors consisting of one or more members (who need not be shareholders unless required under the certificate of incorporation or bylaws), the number of which is to be fixed by the certificate of incorporation or bylaws. The Summit Bylaws provide that the Summit Board of Directors shall have not less than five directors, the exact number of which is to be fixed by resolution of a majority of the Summit Board of Directors. There is no requirement that directors be shareholders of Summit. Currently, the Summit Board of Directors consists of five directors.
Under the MGBCL, a corporation shall have a board of directors consisting of one or more members, the number of which shall be specified in the corporation’s articles of incorporation or bylaws. Under the Commerce Bylaws, the Commerce Board of Directors consists of 12 directors; however, the Commerce Board of Directors has the authority to increase or decrease the number of directors, provide that the number of directors shall not fall below three. Currently, the Commerce Board of Directors consists of 12 directors.
The OGCA permits classification of an Oklahoma corporation’s board of directors into one, two or three classes, if the corporation’s certificate of incorporation or bylaws so provide. Neither the Summit Certificate of Incorporation nor the Summit Bylaws provide for more than one class of directors. The OGCA and the Summit Bylaws provide that a shareholders’ meeting shall be held each year to elect directors.
The MGBCL permits classification of a Missouri corporation’s board of directors, with as equal of number in each class as possible, if the corporation’s articles of incorporation or bylaws so provide. The Commerce Articles of Incorporation and Commerce Bylaws provide for a staggered board of directors comprised of three classes as equal in size as possible. The MGBCL permits a corporation to elect each director to a term of between one and three years. The Commerce Articles of Incorporation and the Commerce Bylaws provide that directors are elected to a three year term.
The OGCA provides that one or more directors of a corporation may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors, except in certain circumstances, including for corporations having cumulative voting, that no director may be removed without cause if the votes casts against such director’s removal would be sufficient to elect that director if cumulatively voted at an election of the entire corporation’s board of directors. The Summit Bylaws provide that the shareholders may remove a director from office at any meeting, but only for cause. This provision of the Summit Bylaws may only be amended by the approval of ¾ of the shares entitled to vote for the election of directors.
The MGBCL provides that, unless the articles of incorporation or bylaws provide otherwise, one or more directors of a corporation may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. The MGBCL also provides that any director may be removed for cause by action of a majority of the entire board of directors if the director, at the time of removal, fails to meet the qualifications stated in the articles of incorporation or bylaws for election as a director or is in breach of any agreement between such director and the corporation relating to such director’s services as a director or employee of the corporation. The Commerce Articles of Incorporation provide that the entire Commerce Board of Directors may be removed only by a vote of 80% of the holders of the shares then entitled to vote generally in the election of directors, voting together as one class.
The OGCA and the MGBCL each provide that, unless otherwise provided in the corporation’s certificate or articles of incorporation or bylaws, the board of directors can fill vacancies by a majority vote until the next election of directors by shareholders at regular or special meeting. The Summit Bylaws provide that any vacancy shall be filled by a vote of a majority of the remaining Summit Board of Directors. This provision of the Summit Bylaws may only be amended by the approval of 3/4 of the shares entitled to vote for the election of directors. The Commerce Bylaws provide that any vacancy or newly created directorship shall be filled by a vote of the majority of the Commerce Board of Directors.
The Summit Bylaws provide that special meetings of the Summit Board of Directors may be called by the Chairman, President, or a majority of the Summit Board of Directors. Notice must be provided at least 10 days prior to any special meeting, and the notice must state the time and place, but not the purpose (unless otherwise required by law).
The MGBCL provides that special meetings of the board of directors shall be held upon such notice as prescribed by the bylaws. The Commerce Bylaws provide that special meetings of the Commerce Board of Directors shall be called by the Secretary of Commerce at the written request of the Chairman, Vice-Chairman, President or a majority of the Commerce Board of Directors and that such request shall state the purpose of the proposed special meeting.
Under the OGCA and the MGBCL, a corporation may indemnify any person made or threatened to be made a party to any legal proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation in any such capacity with respect to another enterprise, against expenses and other amounts reasonably incurred by him in connection with such legal proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The foregoing notwithstanding, no indemnification may be made in respect to any claim brought by or in the name of the corporation as to which such person is adjudged to be liable to the corporation unless and only to the extent that a proper court determines that in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses that the court deems proper. A corporation is required to indemnify its directors or officers, and also under the MGBCL, its employees or agents, to the extent that such persons have been successful in defending an action, suit or proceeding or any claim, issue or matter therein. These indemnification rights are not exclusive of any other rights to which the person seeking indemnification is entitled and do not limit a corporation’s right to provide further indemnification.
The Summit Bylaws provide rights of indemnification similar to those set forth in the OGCA as described above, except that the right of indemnification in the Summit Bylaws: (i) is limited to directors, officers, and employees; and (ii) may not be extended to matters as to which parties are finally adjudged liable for negligence or misconduct. The Commerce Bylaws provide rights of indemnification generally as set forth in the MGBCL as described above, except that the right of indemnification is limited to directors and officers.
Insofar as indemnification of directors, officers or persons controlling Commerce for liabilities arising under the Securities Act of 1933 may be permitted pursuant to the foregoing provisions, Commerce has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable.
Cumulative voting. The OGCA provides for cumulative voting for directors if a corporation’s certificate of incorporation so states. Neither the Summit Certificate of Incorporation nor the Summit Bylaws provides for cumulative voting.
The MGBCL provides for cumulative voting for directors; however, a corporation’s articles of incorporation may limit or eliminate cumulative voting rights. The Commerce Bylaws provide that there shall be no cumulative voting by shareholders for the election of directors.
Quorum. The OGCA and the MGBCL each provide that, unless provided in the corporation’s certificate or articles of incorporation or bylaws, a majority of votes of shares entitled to vote on a matter shall constitute a quorum. Under the OGCA, a quorum must be at least 1/3, and under the MGBCL, a quorum must be at least a majority. The Summit Bylaws and the Commerce Bylaws each state that a majority of the outstanding shares of stock entitled to vote, represented in person or by proxy at a meeting of shareholders, constitutes a quorum at such meeting.
Majority voting. The OGCA and the MGBCL each provide that the affirmative vote of a majority of the holders of the shares represented at a meeting where a quorum is present shall constitute the act of the shareholders, unless a greater number or percent is required by the corporation’s certificate or articles of incorporation, bylaws or by statute (except that, under the OGCA, or under the MGBCL when cumulative voting is permitted, a plurality may elect directors). The Summit Bylaws and the Commerce Bylaws both contain provisions requiring majority voting on all matters except for those where otherwise specified in the company’s certificate or articles of incorporation, bylaws or by statute.
Special voting. Special voting provisions apply in the case of a merger or change in control. See “— Shareholders’ Vote for Mergers” on page 35 and “— Anti-takeover Statutes” on page 36.
Under the OGCA, a special meeting of shareholders may be called by the board of directors or by the person or persons that may be authorized in the certificate of incorporation or bylaws. The Summit Bylaws provide that special meetings of shareholders may be called by the Summit Board of Directors, the President, or by the President or Secretary upon the request of shareholders owning, in the aggregate, not less than 25% of the stock of Summit.
Under the MGBCL, a special meeting of shareholders may be called by the board of directors or by such other person or persons as may be authorized by the articles of incorporation or the bylaws. The Commerce Bylaws provide that special meetings of Commerce shareholders may be called only by the Chairman of the Commerce Board of Directors (or any Vice-Chairman or President in the Chairman’s absence) or by a majority of the Commerce Board of Directors.
Under the OGCA, any shareholder shall have the right to examine, in person or by agent, during the usual hours of business, the corporation’s stock ledger, list of shareholders and its other books and records (and the books and records of a subsidiary, to some extent), and to make copies and extracts therefrom, but only if for a proper purpose. In order to exercise this right, a shareholder must make written demand upon the corporation, under oath, stating the records sought to be examined and the purpose of the examination.
Under the MGBCL, any shareholder may at all proper times inspect the corporation’s amount of assets and liabilities, minutes, officer information, stock ledger, shareholder list and other books and records as may be regulated by the corporation’s bylaws. Missouri statutory law and Missouri case law, however, do not provide specific guidance as to whether a shareholder may appoint an agent for the purpose of examining books and records or the extent to which a shareholder must have a “proper purpose.”
Under the OGCA, a corporation may amend its certificate of incorporation upon (i) a resolution of the board of directors (setting forth the proposed amendment, declaring its advisability and either calling a special meeting of shareholders entitled to vote or directing that the proposed amendment be considered at the next annual meeting of shareholders) and (ii) an affirmative vote of at
least a majority of all of the outstanding shares entitled to vote on the amendment and a majority of the votes of the outstanding shares of each class entitled to vote as a class on the proposed amendment.
Under the MGBCL, a corporation may amend its articles of incorporation upon a resolution of the board of directors, proposing the amendment and its submission to the shareholders for their approval by the holders of a majority of the shares of common stock entitled to vote thereon. The Commerce Articles of Incorporation provide that provisions of the Commerce Articles of Incorporation dealing with the number, term, and removal of directors, and certain business combinations may not be repealed or amended without the affirmative vote of holders of at least 75% of the outstanding shares of voting stock. The Commerce shareholders may otherwise amend, alter, change or repeal any provision of the Commerce Articles of Incorporation as provided by the MGBCL.
Under the OGCA, the bylaws of a corporation may be adopted, amended or repealed by the board of directors. The Summit Certificate of Incorporation and Summit Bylaws provide that the Summit Board of Directors may adopt, amend or repeal the Summit Bylaws by a vote of a majority of the board of directors. The Summit Bylaws further state that the shareholders may also amend or repeal the Summit Bylaws at any annual or special meeting.
Under the MGBCL, the bylaws of a corporation may be made, altered, amended or repealed by the shareholders, unless and to the extent that such power is vested in the board of directors by the articles of incorporation. The Commerce Articles of Incorporation and Commerce Bylaws authorize the Commerce Board of Directors to make, alter, amend or repeal the Commerce Bylaws, subject to the rights of shareholders at any regular or special meeting to alter or repeal bylaws made by the Commerce Board of Directors.
The Summit Bylaws do not provide a procedure for shareholders to nominate a director for election to the Summit Board of Directors.
The Commerce Bylaws provide that any shareholder who intends to bring a matter before the annual meeting of shareholders must deliver written notice of such shareholder’s intent to the Secretary of Commerce. Such notice must be received by the Secretary not less than 60 days nor more than 90 days in advance of such meeting. Such written notice must set forth (i) a brief description of the business to be brought before the meeting and the reasons for it, (ii) the name and address of the shareholder, (iii) the class or series and number of shares of capital stock of Commerce which are beneficially owned by the shareholder, (iv) any arrangement between such shareholder and any other person in connection with the proposal and any material interest of the shareholder in the proposed business described in the notice, and (v) a representation that such shareholder will appear in person or by proxy at the annual meeting. Such written notice with respect to nominations for the election of directors shall set forth (i) the name, age, business address and residential address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class or series and number of shares of capital stock of Commerce which are beneficially owned by the nominee, and (iv) any other information about the nominee that is required by Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder, to be disclosed in the proxy materials for the meeting involved as if he or she were a nominee of the corporation for election as one of its directors.
Under the OGCA, an Oklahoma corporation must obtain the affirmative vote of the holders of a majority of the outstanding shares of the corporation entitled to vote thereon to approve a merger or consolidation. Under the MGBCL, a Missouri corporation must obtain the affirmative vote of the holders of 2/3 of the outstanding shares of the corporation entitled to vote thereon to approve a merger or consolidation. A vote of Commerce shareholders is not required for the merger of CBI-Kansas and Summit because Summit is merging with and into a subsidiary of Commerce, rather than Commerce.
Neither the OGCA nor the MGBCL require a vote of a corporation’s shareholders if such corporation is merged with and into a parent corporation that owns 90% or more of such corporation’s stock.
Dissenters’ rights, also known as appraisal rights, are rights afforded to shareholders who dissent from specific transactions.
The OGCA and the MGBCL each provide dissenters’ rights to shareholders entitled to vote in mergers and consolidations. The dissenting shareholders, if they comply with the procedural requirements of the respective statutes, are entitled to elect not to participate in the subject transaction and to receive instead the fair value of their shares in cash.
The OGCA and the MGBCL each have statutes known as a “business combination statute.” These statutes restrict certain “business combinations” between a corporation in that state and an “interested shareholder.” For this purpose, a “business combination” means one of various types of transactions, including mergers, that increases the proportionate voting power of the interested shareholder. Under the OGCA, an “interested shareholder” means any person who owns or controls 15% or more of the outstanding shares of the corporation’s voting stock. Under the MGBCL, an “interested shareholder” means any person who owns or controls twenty percent (20%) or more of the outstanding shares of the corporation’s voting stock.
Under the OGCA, a corporation may not engage in a business combination with an interested shareholder for a period of three years following the time that the shareholder became an “interested shareholder” unless:
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prior to such time the board of directors of the corporation approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder;
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upon consummation of the transaction which resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting shares of the corporation outstanding at the time the transaction commenced (excluding voting shares owned by directors and officers and employee stock plans for purposes of determining the outstanding voting shares, but not the outstanding voting shares owned by the interested shareholder); or
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at or subsequent to such time the business combination is approved by the board of directors and authorized at a shareholder meeting by the affirmative vote of at least 2/3 of the outstanding voting stock not owned by the interested shareholder.
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Under the MGBCL, a corporation may not engage in a business combination with an interested shareholder for a period of five (5) years following the time that the shareholder became an “interested shareholder” other than:
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a business combination approved by the corporation’s board of directors prior to the date on which the interested shareholder became an interested shareholder;
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a business combination approved by the holders of a majority of the outstanding voting stock not owned by the interested shareholder at a meeting called no earlier than 5 years after the date on which the interested shareholder became an interested shareholder; or
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a business combination that satisfies certain fairness and procedural requirements.
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Both the OGCA and the MGBCL provide that a corporation in that state may opt out of coverage by the business combination statute by including a provision to that effect in its governing corporate documents. Neither Summit nor Commerce has done so.
The OGCA provides procedures for control share acquisitions; however, the statute does not apply to Summit.
The MGBCL provides certain procedures for control share acquisitions to be followed unless the corporation’s articles of incorporation or bylaws provide that the statute does not apply. The Commerce Bylaws specifically provide that the provision in the MGBCL regarding control share acquisitions shall not apply to Commerce.
Summit was incorporated in December 2011 for the purpose of acquiring all of the capital stock of Summit Bank in a stock exchange transaction with Summit Bank’s shareholders. In April, 2012 that transaction was completed and Summit Bank became a wholly-owned subsidiary of Summit Bancshares. Summit is registered as a bank holding company under the Bank Holding Company Act of 1986, as amended, and is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System. Summit does not engage in any separate business operations other than its ownership of Summit Bank.
Summit Bank was organized in 2001 as an Oklahoma-chartered bank. Summit Bank is subject to regulation, supervision and examination by the Oklahoma State Banking Department and the Federal Deposit Insurance Corporation. Summit Bank was initially capitalized with approximately $6 million and commenced business in January 2002 through the acquisition of substantially all of the assets and all of the deposit liabilities associated with the Tulsa branch office of a bank headquartered in Durant, Oklahoma. As a result of its initial capitalization and the acquisition of the branch banking office, Summit Bank commenced operations with approximately $24 million in assets (which included $13.6 million in loans) and $18 million in deposit liabilities.
Since it commenced business in January 2002, Summit Bank has conducted a general banking business embracing the customary functions of commercial banking, including commercial, industrial and consumer lending, safe deposit operations, and other services tailored to individual customer needs. It has specialized in serving the credit and deposit needs of professionals and executives and small to medium size businesses. Summit Bank also engages in energy lending to small and medium size oil and gas companies. At March 31, 2013, Summit Bank had total assets of $260.6 million, total deposits of $230.9 million and total loans (net of allowance for loan losses of $3.06 million) of $206.4 million. Net income for Summit Bank for the year ended December 31, 2012 was approximately $3.45 million.
Summit Bank offers similar types of deposit accounts to those offered by other financial institutions. The categories of deposit accounts within Summit Bank’s portfolio include non-interest bearing demand deposits, interest bearing demand deposits, savings and money market deposits and time deposits.
Core deposits continue to be Summit Bank’s most reliable and most important source of funds. Deposit products are offered to individuals, partnerships, corporations, public entities and not-for-profit organizations. Within each deposit category, customers have a variety of product options to choose from, each of which may have characteristics specifically suited to their needs. These product options may have variations in service fees, minimum balance requirements and interest rates. In the case of time deposits, Summit Bank offers a wide variety of products with varying maturity terms and rates. Summit Bank operates in a highly competitive market place for deposits and strives to price its deposit products accordingly.
Summit Bank’s primary geographic market area consists of the Tulsa metropolitan area that is comprised of Tulsa County and portions of Okmulgee County to the south, Creek County to the west and Wagoner and Rogers Counties to the east. It maintains its main and only office in its Tulsa market at 5314 South Yale Avenue where it leases approximately 13,100 square feet.
In May 2011, Summit Bank established a full-service branch office in Oklahoma City. That facility is located at 1001 N.W. 63rd Street where Summit Bank occupies approximately 3,480 square feet of leased space. From its Oklahoma City office, Summit Bank is primarily engaged in lending to small and medium size businesses, as well as energy firms, located in the Oklahoma City metropolitan area.
Summit Bank’s strategy has been to operate as a niche institution emphasizing relationship banking with professionals and executives, small to medium size businesses, and oil and gas companies located in its market areas. Its commitment is to provide a broad range of personalized products and services in order to meet the needs of its customers.
As of June 30, 2012, Summit Bank ranked 20th in total deposits within its Tulsa market area, with .85% of the total deposits within the Tulsa metropolitan statistical area. At June 30, 2012, Summit Bank’s total deposits at its Oklahoma City branch office amounted to $21.5 million, representing .08% in the Oklahoma City metropolitan statistical area. Each activity in which Summit Bank is engaged involves competition with other banks, as well as with non-banking financial institutions and non-financial enterprises. In addition to competing with other commercial banks within and outside its primary service areas in Tulsa and Oklahoma City, Summit Bank competes with other financial institutions such as savings and loan associations, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking companies, private equity funds and other financial intermediaries. Many of these competitors have substantially greater resources and lending limits, and may offer certain services that Summit Bank does not currently provide. In addition, many of Summit Bank’s non-bank competitors are not subject to the same extensive federal regulations that govern federally-insured banks.
As of March 31, 2013, Summit Bank had 43 full-time equivalent employees. Summit Bancshares does not have any separate employees and utilizes the employees of Summit Bank.
From time to time Summit Bank is involved in litigation as part of the normal conduct of its business. However, Summit Bank is not currently involved in any litigation that management believes, either individually or in the aggregate, could reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of either Summit Bancshares or Summit Bank.
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
Shares of Commerce common stock are traded on The Nasdaq Stock Market. The following table sets forth the high and low sales prices Commerce common stock, and cash dividends paid thereon during the periods indicated (restated for the 5% stock dividend distributed in December of 2012):
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Commerce Common Stock
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High
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Low
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Cash
Dividend
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2011
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First Quarter
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$ |
38.70 |
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$ |
34.96 |
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$ |
.209 |
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Second Quarter
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39.82 |
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36.33 |
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.209 |
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Third Quarter
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39.91 |
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30.14 |
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.209 |
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Fourth Quarter
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36.83 |
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29.99 |
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.209 |
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2012
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First Quarter
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$ |
39.31 |
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$ |
35.78 |
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$ |
.219 |
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Second Quarter
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39.05 |
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34.45 |
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.219 |
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Third Quarter
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40.70 |
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35.91 |
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.219 |
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Fourth Quarter
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38.70 |
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34.69 |
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1.648 |
* |
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2013
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First Quarter
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$ |
40.89 |
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$ |
35.40 |
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$ |
.225 |
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*Includes a special dividend of $1.429 per share
The last sale price for Commerce common stock as reported by The Nasdaq Stock Market on _______, 2013 (the most recent date for which it was practicable to obtain market price data prior to the printing of this Proxy Statement/Prospectus), was $____.
There is no established public trading market for Summit common stock, and no market for Summit common stock is expected to develop if the merger does not occur. As of __________, 2013, there were 129 holders of record of Summit common stock.
Summit was incorporated in December 2011 for the purpose of acquiring all of the capital stock of Summit Bank in a stock exchange transaction with Summit Bank’s shareholders. In April, 2012 that transaction was completed and Summit Bank became a wholly-owned subsidiary of Summit Bancshares. The most recent sale of Summit common stock (other than pursuant to the exercise of options) occurred on June 6, 2012 at a price of $125.00 per share.
The holders of Summit’s common stock are entitled to dividends when, as and if declared by the Board of Directors, subject to the restrictions imposed by law. Historically, Summit has paid dividends only to cover shareholder taxes. During the years 2007 to 2012, Summit paid dividends in an amount equal to 40% of its taxable income. Through June 15, 2013, Summit has paid dividends in an amount equal to 45% of its taxable income. Summit is permitted to pay dividends to its shareholders prior to the closing of the transaction, so long as specified financial conditions are met.
The Federal Reserve Board generally prohibits a bank holding company from declaring or paying a cash dividend that would impose undue pressure on the capital of subsidiary banks or would be funded only through borrowing or other arrangements that might adversely affect a bank holding company’s financial position. The Federal Reserve Board’s policy is that a bank holding company should not initiate or continue cash dividends on its common stock unless its net income is sufficient to fully fund each dividend and its prospective rate of earnings retention appears consistent with its capital needs, asset quality and overall financial condition. A bank holding company is expected to act as a source of financial strength for each of its subsidiary banks and to commit resources to support its banks in circumstances when it might not do so in the absence of such policy. There are no contractual restrictions that currently limit Summit’s ability to pay dividends that Summit reasonably believes are likely to limit materially the future payment of dividends on Summit common stock.
The legality of the Commerce common stock offered hereby will be passed upon by Husch Blackwell LLP. Husch Blackwell LLP will also render an opinion to Commerce and Summit regarding the material U.S. federal income tax consequences of the merger.
The consolidated financial statements of Commerce Bancshares, Inc. as of December 31, 2012 and 2011, and for each of the years in the three-year period ended December 31, 2012, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2012, have been incorporated by reference herein and in the registration statement in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
If the merger is consummated, shareholders of Summit will become shareholders of Commerce at the Effective Time. If a Commerce shareholder intends to present a proposal for consideration at Commerce’s annual meeting to be held on April 16, 2014 and have the proposal included in Commerce’s proxy statement, the proposal must be in proper form pursuant to SEC Rule 14a-8 and must be received by the Secretary of Commerce at its principal offices no later than November 13, 2013.
Shareholder nominations for directors and shareholder proposals that are not presented pursuant to SEC Rule 14a-8 must comply with Commerce’s Bylaws. In order to be considered, shareholders must provide timely notice to the Secretary. To be timely, the notices for the April 16, 2014 annual meeting must be received by the Secretary no later than February 18, 2014 nor before January 16, 2014. The notice must contain the name and record address of the shareholder, and the class or series and the number of shares of Commerce capital stock owned beneficially or of record by the shareholder.
Any notice proposing to nominate a director must also provide a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) or shareholder proposal is made; and a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the person or bring the business proposal before the meeting. The notice must also set forth as to each person the shareholder proposes to nominate for election as a director the name, age, business and residence address of the nominee; the principal occupation or employment of the nominee; the class or series and number of shares of capital stock of Commerce which are owned beneficially or of record by the nominee; and any other information relating to the nominee or the nominating shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act. Lastly, the notice must also be accompanied by a written consent of each proposed nominee to be named a nominee and to serve as a director if elected.
If the notice is for a shareholder proposal, the notice must also set forth a brief description of the business to be brought before the meeting, and the reasons for conducting such business at the meeting, and any material interest of such shareholder in such business.
Commerce files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information that Commerce files at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. Commerce’s SEC filings are also available to the public from commercial retrieval services and at the website maintained by the SEC at http://www.sec.gov.
The reports and other information filed by Commerce with the SEC are also available on Commerce’s internet website. The address of the site is http://www.commercebank.com. We have included the web addresses of the SEC, Commerce and Summit as
inactive textual references only. Except as specifically incorporated by reference into this document, information on those websites is not part of this document.
Commerce has filed a Registration Statement on Form S-4 with the SEC to register the Commerce common stock to be issued to Summit’s shareholders in the merger. This document is a part of that registration statement and constitutes a prospectus of Commerce in addition to being a proxy statement of Summit for its special meeting. As allowed by the SEC rules, this document does not contain all the information you can find in the registration statement or the exhibits to the registration statement.
The SEC allows Commerce to “incorporate by reference” information into this Proxy Statement/Prospectus, which means that Commerce can disclose important information to you by referring you to another document separately filed with the SEC. The information incorporated by reference is deemed to be a part of this Proxy Statement/Prospectus, except for any information superseded by information in, or incorporated by reference in, this Proxy Statement/Prospectus. This Proxy Statement/Prospectus incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about Commerce and its financial status.
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Commerce SEC Filings (SEC File No. 0-2989; CIK No. 0000022356)
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Period or Date Filed
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Annual Report on Form 10-K
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Fiscal year ended December 31, 2012
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Quarterly Report on Form 10-Q
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Quarter ended March 31, 2013
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Current Reports on Form 8-K
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January 24, 2012, January 26, 2012, February 16, 2012, April 12, 2012, April 20, 2012, July 12, 2012, July 26, 2012, October 16, 2012, January 15, 2013, February 5, 2013, February 14, 2013, April 11, 2013, April 23, 2013 and May 16, 2013 (excluding any portions of those documents that have been “furnished” but not “filed” for purposes of the Exchange Act)
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Definitive Proxy Statement on Schedule 14A
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March 13, 2013
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In addition the description of Commerce common stock set forth in a registration statement filed pursuant to Section 12 of the Exchange Act and any amendment or report filed for the purpose of updating those descriptions is also incorporated by reference.
Additional documents that Commerce may file with the SEC between the date of this Proxy Statement/Prospectus and the date of the Summit special meeting are also incorporated by reference. These include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as proxy statements.
Commerce has supplied all information contained or incorporated by reference in this document relating to Commerce and Summit has supplied all information relating to Summit.
We may have sent you some of the documents incorporated by reference, but you can obtain any of them through Commerce or the SEC. Documents incorporated by reference are available from Commerce without charge, but without exhibits unless Commerce has specifically incorporated by reference an exhibit in this Proxy Statement/Prospectus. Summit shareholders may obtain documents incorporated by reference in this Proxy Statement/Prospectus by requesting them in writing or by telephone from Commerce at the following address:
Commerce Bancshares, Inc.
1000 Walnut, Suite 700
Kansas City, Missouri 64106
Attention: Corporate Finance
Telephone Number: (816) 234-2000
In order to ensure timely delivery of the documents, any request should be made by __________, 2013.
You should rely only on the information contained or incorporated by reference in this document to vote your shares at the special meeting. We have not authorized anyone to provide you with information that is different from what is contained in this Proxy Statement/Prospectus. This Proxy Statement/Prospectus is dated ________, 2013, and you should not assume that the information contained in the Proxy Statement/Prospectus is accurate as of any other date. Neither the mailing of this Proxy Statement/Prospectus to Summit shareholders nor the issuance of Commerce common stock in connection with the merger shall create any implication to the contrary.
AGREEMENT AND PLAN OF MERGER
among
COMMERCE BANCSHARES, INC.,
SUMMIT BANCSHARES INC.
and
CBI-KANSAS, INC.
Dated May 15, 2013
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Page
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THE MERGER
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A-1
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1.1
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Effective Time of the Merger.
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A-1
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1.2
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Closing.
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A-1
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1.3
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Effects of the Merger.
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A-1
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1.4
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Absence of Control.
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A-2
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1.5
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Further Assurances.
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A-2
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1.6
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The Bank Merger.
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A-2
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1.7
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Tax Consequences.
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A-2
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF COMPANY AND SUB; EXCHANGE OF
CERTIFICATES
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A-2
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2.1
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Effect of Merger on Sub Stock.
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A-2
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2.2
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Conversion of Company Shares in the Merger.
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A-2
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2.3
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No Further Ownership Rights in Company Common Stock.
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A-3
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2.4
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Fractional Shares.
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A-3
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2.5
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Surrender of Shares of Company Common Stock.
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A-3
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2.6
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Appraisal Rights.
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A-3
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2.7
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Shareholder Approval.
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A-4
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REPRESENTATIONS AND WARRANTIES
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A-4
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3.1
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Representations and Warranties of Company.
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A-4
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(a)
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Organization, Standing and Power.
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A-4
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(b)
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Capital Structure; Ownership of Company Common Stock.
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A-5
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(c)
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Authority; No Violation.
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A-6
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(d)
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Financial Statements.
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A-7
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(e)
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Company Information Supplied.
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A-8
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(f)
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Compliance with Applicable Laws.
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A-8
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(g)
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Litigation.
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A-8
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(h)
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Taxes.
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A-8
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(i)
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Certain Agreements.
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A-9
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(j)
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Benefit Plans.
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A-10
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(k)
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Subsidiaries.
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A-12
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(l)
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Agreements with Bank or Other Regulators.
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A-12
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(m)
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Absence of Certain Changes or Events.
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A-12
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(n)
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Undisclosed Liabilities.
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A-13
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(o)
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Governmental Reports.
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A-13
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(p)
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Environmental Liability.
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A-13
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(q)
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Properties.
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A-14
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(r)
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Brokers or Finders.
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A-15
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(s)
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Intellectual Property.
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A-15
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(t)
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Insurance.
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A-15
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(u)
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Loans and Other Assets.
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A-15
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(v)
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Labor Matters.
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A-16
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(w)
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Internal Controls and Records.
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A-16
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(x)
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Fees from Employee Plans.
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A-16
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(y)
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Employee Matters.
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A-16
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3.2
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Representations and Warranties of Commerce.
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A-16
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(a)
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Organization and Authority.
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A-16
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(b)
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Valid and Binding Agreement; No Violation.
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A-17
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(c)
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Capital Stock of Commerce.
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A-17
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(d)
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Financial Statements.
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A-17
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(e)
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SEC Reports.
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A-18
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(f)
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Status of Commerce Common Stock to be Issued.
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A-18
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(g)
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Governmental Regulation.
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A-18
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(h)
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Litigation.
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A-18
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(i)
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Taxes.
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A-18
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(j)
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Defaults.
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A-18
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(k)
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Information Supplied.
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A-18
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(l)
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Employee Matters.
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A-19
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COVENANTS RELATING TO CONDUCT OF BUSINESS
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A-19
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4.1
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Covenants of Company.
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A-19
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4.2
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Cooperation With Commerce.
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A-22
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4.3
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Covenants of Commerce and Sub.
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A-22
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(a)
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Regulatory Approvals.
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A-22
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(b)
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Information.
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A-22
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(c)
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Tax-Free Reorganization Treatment.
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A-23
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(d)
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Employee Matters.
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A-23
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ADDITIONAL AGREEMENTS
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A-23
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5.1
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Regulatory Matters.
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A-23
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(a)
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Registration Statement and Proxy Statement.
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A-23
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(b)
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State Securities Laws.
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A-23
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(c)
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Indemnification.
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A-23
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(d)
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Governmental Entity Communications.
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A-23
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5.2
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Shareholders’ Meetings.
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A-24
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5.3
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Acquisition Proposals.
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A-24
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5.4
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Legal Conditions.
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A-25
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5.5
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Plan Termination.
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A-25
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5.6
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Additional Agreements.
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A-25
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5.7
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Fees and Expenses.
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A-25
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5.8
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Cooperation.
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A-25
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5.9
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Advice of Changes.
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A-25
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5.10
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Dissenters’ Rights.
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A-25
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5.11
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Indemnification; Directors’ and Officers’ Insurance.
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A-26
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5.12
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Certain Financial Statement Adjustments.
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A-26
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5.13
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Termination of Certain Plans, Arrangements, and Agreements.
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A-26
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5.14
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Payment of Expenses.
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A-26
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5.15
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Option Plan Amendment.
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A-27
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5.16
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Tax Matters.
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A-27
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CONDITIONS PRECEDENT
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A-27
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6.1
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Conditions to Each Party’s Obligation.
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A-27
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(a)
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Shareholder Approval.
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A-27
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(b)
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Other Approvals.
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A-27
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(c)
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No Injunctions or Restraints.
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A-27
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(d)
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Registration Statement.
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A-28
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6.2
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Conditions to Obligations of Commerce and Sub.
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A-28
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(a)
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Representations and Warranties.
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A-28
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(b)
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Performance of Obligations.
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A-28
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(c)
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Corporate Action.
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A-28
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(d)
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Material Adverse Effect.
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A-28
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(e)
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Closing Documents.
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A-28
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(f)
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Financial Measures.
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A-28
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(g)
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Tax Representations.
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A-28
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(h)
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Dissenting Shareholders.
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A-28
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(i)
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Tax Opinion.
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A-28
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(j)
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Cancellation of Unexercised Options.
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A-29
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(k)
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Opinion of Counsel.
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A-29
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(l)
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Termination of Contracts.
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A-29
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(m)
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Loan Portfolio.
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A-29
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(n)
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Termination of Plan and Agreements.
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A-29
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(o)
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S Corporation Election.
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A-29
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(p)
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Consents, Approvals and Waivers.
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A-29
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6.3
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Conditions to Obligations of Company.
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A-29
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(a)
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Representations and Warranties.
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A-29
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(b)
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Performance of Obligations.
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A-29
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(c)
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Corporate Action.
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A-29
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(d)
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Tax Opinion.
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A-29
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(e)
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Material Adverse Effect.
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A-30
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(f)
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Closing Documents.
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A-30
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(g)
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Opinion of Counsel.
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A-30
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(h)
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Restricted Stock Grants.
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A-30
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TERMINATION AND AMENDMENT
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A-30
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7.1
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Termination.
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A-30
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7.2
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Effect of Termination.
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A-31
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7.3
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Amendment.
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A-32
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7.4
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Extension; Waiver.
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A-32
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7.5
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Termination Fee.
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A-32
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GENERAL PROVISIONS
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A-33
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8.1
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Survival of Representations, Warranties and Covenants.
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A-33
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8.2
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Notices.
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A-33
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8.3
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Interpretation.
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A-34
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8.4
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Counterparts.
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A-34
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8.5
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Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.
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A-34
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8.6
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Governing Law.
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A-34
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8.7
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Severability.
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A-34
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8.8
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Assignment.
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A-34
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8.9
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Publicity.
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A-34
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8.10
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Appointment of Representative.
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A-35
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List of Schedules:
Schedule 3.1(a)
Schedule 3.1(a)(v)
Schedule 3.1(b)(i)
Schedule 3.1(b)(iii)
Schedule 3.1(c)
Schedule 3.1(c)(ii)
Schedule 3.1(g)
Schedule 3.1(h)
Schedule 3.1(i)
Schedule 3.1(j)
Schedule 3.1(k)
Schedule 3.1(l)
Schedule 3.1(m)
Schedule 3.1(n)
Schedule 3.1(o)