As filed with the Securities and Exchange Commission on May 26, 2006

Registration No. 333-      

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

Commerce Bancshares, Inc.

(Exact name of registrant as specified in its charter)

 

 

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)

 

 

 

 

J. DANIEL STINNETT, ESQ.

Vice President, Secretary and General Counsel

Commerce Bancshares, Inc.

1000 Walnut

Kansas City, Missouri 64106

(816) 234-2350

Fax: (816) 234-2333

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

 

 

 

Copies to:

 

 

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 _ _

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

 

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.

 

 

PROSPECTUS

 

of

 

Commerce Bancshares, Inc.

 

1,678,772 Shares of Common Stock

 

$5.00 par Value

 

The boards of directors of Commerce Bancshares, Inc, CBI-Kansas, Inc. (a wholly-owned subsidiary of Commerce) and West Pointe Bancorp, Inc. have agreed to the merger of West Pointe into CBI-Kansas, whereby West Pointe shareholders will receive the merger consideration of approximately $70.44 per share of West Pointe common stock (assuming that 1,148,573 shares of West Pointe common stock will be outstanding on the effective date of the merger), consisting of Commerce common stock and/or the right to receive cash, within certain limits. Commerce Bank, N.A. is a direct wholly-owned subsidiary of CBI-Kansas. West Pointe owns all of the outstanding capital stock of West Pointe Bank And Trust Company. After the merger, West Pointe will cease to exist as a separate legal entity and CBI-Kansas will continue as the merger’s surviving corporation. In addition, West Pointe Bank And Trust Company will be merged with Commerce Bank, N.A. and Commerce Bank, N.A. will survive. As a result of the merger of West Pointe into CBI-Kansas, Commerce will (i) issue up to 1,678,772 and no less than 1,099,384 shares of Commerce common stock and (ii) pay up to $20,225,000, for all shares of West Pointe common stock held by West Pointe shareholders immediately before completion of the merger. Pursuant to the terms of the Agreement and Plan of Merger, the cash consideration is limited to 25% of the total consideration. The total merger consideration value is estimated to be $80,900,000. It is currently anticipated that 1,148,573 shares of West Pointe common stock will be outstanding on the effective date of the merger and that such shares of West Pointe common stock will be converted into shares of Commerce common stock and/or the right to receive cash. Commerce common stock is traded on The Nasdaq Stock Market under the symbol “CBSH.”

 

PROXY STATEMENT

 

of

 

West Pointe Bancorp, Inc.

 

For a Special Meeting of Shareholders

 

To be Held on          , 2006

 

The merger cannot be completed unless the West Pointe shareholders approve it by an affirmative vote of the holders of at least two-thirds of the outstanding shares. West Pointe’s Board of Directors has scheduled a special meeting for West Pointe shareholders to vote on the merger as follows:

 

          , 2006
10:00 a.m., local time
St. Clair Country Club
South 78th Street
Belleville, Illinois

 

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   . Please see “Where You Can Find More Information” beginning on page    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          , 2006.

 

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 May 26, 2006.

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   . You can obtain this information from Commerce without charge upon written or oral request by contacting:

 

Commerce Bancshares, Inc.
1000 Walnut
Kansas City, Missouri 64106
Attention: Corporate Finance
(816) 234-2000

 

To ensure timely delivery of the documents in advance of the special meeting, you should make your request no later than          , 2006.

 

          , 2006

 

Dear West Pointe Bancorp, Inc. Shareholder:

 

You are cordially invited to attend the Special Meeting of the Shareholders of West Pointe Bancorp, Inc. which will be held at St. Clair Country Club, South 78th Street, Belleville, Illinois, on [day],          , 2006, commencing at 10:00 a.m., local time. At this important meeting, holders of common stock of West Pointe will be asked to adopt an Agreement and Plan of Merger and approve a merger between West Pointe and CBI-Kansas, Inc., a wholly owned subsidiary of Commerce Bancshares, Inc. West Pointe presently owns all of the issued and outstanding shares of West Pointe Bank And Trust Company (the “Bank”). It is currently anticipated that 1,148,573 shares of West Pointe common stock will be outstanding on the effective date of the merger and shares of West Pointe common stock will be converted into shares of Commerce common stock and/or the right to receive cash.

 

The Agreement and Plan of Merger was executed on April 13, 2006 and provides for the merger of West Pointe into CBI-Kansas, after certain conditions are met, including the approval of West Pointe 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 Illinois law, holders of common stock of West Pointe 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” on page   . 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 West Pointe and its shareholders and unanimously recommends that shareholders vote “for” the proposal.

 

A two-thirds vote of all outstanding shares of West Pointe’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,

 

Terry W. Schaefer

President and Chief Executive Officer

 

Harry E. Cruncleton

Chairman of the Board

WEST POINTE BANCORP, INC.

5701 West Main Street

Belleville, Illinois 62226

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

To the Shareholders of West Pointe Bancorp, Inc.:

 

A Special Meeting of the shareholders of West Pointe Bancorp, Inc., an Illinois corporation, will be held at St. Clair Country Club, South 78th Street, Belleville, Illinois, on          , 2006 commencing at 10:00 a.m., local time for the following purposes:

 

To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of April 13, 2006 among Commerce Bancshares, Inc., CBI-Kansas, Inc. and West Pointe Bancorp, Inc., a copy of which is attached as Appendix A to the accompanying Proxy Statement/Prospectus.

 

Holders of West Pointe common stock of record at the close of business on          , 2006, 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 two-thirds of the outstanding shares of West Pointe common stock. Pursuant to Section 11.65 of the Illinois Business Corporation Act of 1983, West Pointe’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 WEST POINTE 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

 

J.E. Cruncleton

Corporate Secretary

 

Belleville, Illinois

          , 2006

 

TABLE OF CONTENTS

 

 

The number of shares of Commerce common stock and the right to receive cash into which one share of West Pointe common stock will be converted in the merger is referred to in this document as the “merger consideration.” In the merger, Commerce expects to (i) issue up to 1,678,772 and no less than 1,099,384 shares of Commerce common stock and (ii) pay up to $20,225,000 for all shares of West Pointe common stock held by West Pointe shareholders immediately before completion of the merger. Pursuant to the terms of the Agreement and Plan of Merger, the cash consideration is limited to 25% of the total merger consideration. The total merger consideration value is estimated to be $80,900,000. It is currently anticipated that 1,148,573 shares of West Pointe common stock will be outstanding on the effective date of the merger and that shares of West Pointe common stock will be converted into merger consideration of approximately $70.44 per share of West Pointe common stock, consisting of shares of Commerce common stock and/or the right to receive cash.

 

The actual value of the shares of Commerce common stock issued in the merger cannot be determined at this time since it is based on the market price of such shares at the time the merger is completed. The last reported sales price on May 25, 2006 for Commerce shares as reported by The Nasdaq Stock Market was $50.65. You should obtain current market prices for the Commerce common stock. See “Risk Factors” beginning at page   .

 

 

SUMMARY

 

The Companies

 

The Merger

 

The Merger Consideration

 

Election and Allocation Procedures

 

Reasons for the Merger

 

Recommendation to Shareholders

 

Vote Required

As of March 31, 2006, West Pointe’s directors, executive officers and their affiliates held in the aggregate approximately 217,385 shares of outstanding West Pointe common stock, representing approximately 21.1% of the total number of outstanding shares of West Pointe common stock. All directors and officers of West Pointe owning West Pointe common stock have indicated they intend to vote in favor of the Agreement and Plan of Merger.

 

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 Office of the Comptroller of Currency. Commerce will complete the filing of applications and notifications to obtain the required regulatory approvals. As of the date of this Proxy Statement/Prospectus, we have not received any of the necessary regulatory approvals. We cannot be certain of when or if we will obtain them.

 

The consummation of the merger is conditioned upon the receipt by Commerce and West Pointe 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”).

 

A West Pointe shareholder who exchanges all of such shareholder’s shares of West Pointe common stock solely for Commerce common stock in the merger will not recognize gain or loss. A West Pointe shareholder who exchanges all shares of West Pointe common stock solely for cash in the merger and does not actually or constructively own Commerce common stock immediately after the merger will recognize capital gain or loss (provided such shareholder’s shares are held as capital assets at the time of the merger). Depending on the West Pointe shareholder’s particular circumstances, a West Pointe shareholder who receives cash pursuant to the merger and either also receives Commerce common stock or actually or constructively owns Commerce common stock after the merger will recognize gain (but not loss), which may be capital gain or ordinary income. See “Federal Income Tax Consequences.”

 

All West Pointe shareholders should read carefully the discussion in “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:

 

 

 

Commerce, CBI-Kansas and West Pointe 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:

 

 

 

 

To induce Commerce to enter into the Agreement and Plan of Merger, West Pointe granted Commerce an option to purchase up to 217,000 shares of West Pointe common stock at a price per share of $48.75; however, in no event may Commerce acquire more than 19.9% of the outstanding shares of West Pointe common stock (without giving effect to any shares issued under the option) under this stock option agreement. Commerce cannot exercise the option unless the merger is not completed and specified triggering events occur. These events generally relate to business combinations or acquisition transactions involving West Pointe and a third party. We do not know of any event that has occurred as of the date of this document that would allow Commerce to exercise the option. The option will terminate on the earliest to occur of: (i) the Effective Time; (ii) the termination of the Agreement and Plan of Merger so long as a triggering event has not occurred; (iii) the date on which Commerce’s Total Profit (as defined below) equals $4,000,000; and (iv) December 31, 2006.

 

Stock Certificates and Dividend Withholding

 

Comparative Stock Prices

 

Dissenters’ Rights

 

Comparison of Shareholder Rights

 

Opinion of Financial Advisor

 

Accounting Treatment

 

SELECTED FINANCIAL DATA

		Three Months Ended
		March 31,								For the Year Ended December 31,
		2006				2005				2005				2004				2003				2002				2001
Net interest income and other income:
Commerce		$	213,183			$	202,168			$	842,901			$	824,262			$	804,059			$	780,537			$	743,774
West Pointe Bancorp, Inc.		$	4,235			$	4,390			$	17,791			$	17,938			$	18,362			$	17,053			$	14,069
Net income:
Commerce		$	52,944			$	49,846			$	223,247			$	220,341			$	206,524			$	196,310			$	178,712
West Pointe Bancorp, Inc.		$	691			$	887			$	3,548			$	3,569			$	3,476			$	3,773			$	2,709
Diluted income per common and common equivalent share:
Commerce		$	0.78			$	0.69			$	3.16			$	2.95			$	2.67			$	2.46			$	2.20
West Pointe Bancorp, Inc.		$	0.64			$	0.84			$	3.32			$	3.43			$	3.42			$	3.79			$	2.73
Historical dividends paid per common share:
Commerce		$	0.245			$	0.229			$	0.914			$	0.834			$	0.674			$	0.535			$	0.501
West Pointe Bancorp, Inc.		$	0.200			$	0.18			$	0.740			$	0.620			$	0.540			$	0.440			$	0.360
Total assets (end of period):
Commerce		$	13,731,122			$	14,103,272			$	13,885,545			$	14,250,368			$	14,287,164			$	13,308,415			$	12,908,146
West Pointe Bancorp, Inc.		$	464,774			$	444,907			$	477,391			$	444,021			$	425,150			$	411,819			$	366,714
Long-term borrowings (end of period):
Commerce		$	258,616			$	388,328			$	269,390			$	389,542			$	400,977			$	338,457			$	392,586
West Pointe Bancorp, Inc.		$	10,310			$	10,310			$	10,310			$	10,310			$	—			$	—			$	—
Total shareholders’ equity (end of period):
Commerce		$	1,318,245			$	1,371,569			$	1,337,838			$	1,426,880			$	1,450,954			$	1,422,452			$	1,277,157
West Pointe Bancorp, Inc.		$	36,187			$	33,296			$	35,616			$	33,518			$	30,731			$	28,540			$	23,388
Book value per common share (end of period):
Commerce		$	19.74			$	19.45			$	19.79			$	19.91			$	19.38			$	18.33			$	16.07
West Pointe Bancorp, Inc.*		$	35.14			$	32.96			$	34.78			$	33.31			$	31.01			$	29.18			$	23.78

*		Book value of West Pointe’s common stock is determined by dividing total shareholders’ equity at period-end by the number of shares of common stock outstanding at period-end.

 

COMPARATIVE UNAUDITED PER SHARE DATA

	•	Commerce on a historical basis.
	•	West Pointe on a historical basis.
	•	Commerce and West Pointe combined on a pro forma basis assuming 75% of the merger consideration is comprised of Commerce common stock in the merger.
	•	Commerce and West Pointe combined on a pro forma basis assuming 100% of the merger consideration is comprised of Commerce common stock in the merger.
	•	Commerce and West Pointe combined on a pro forma basis stated on an equivalent West Pointe basis assuming 75% of the merger consideration is comprised of Commerce common stock in the merger.
	•	Commerce and West Pointe combined on a pro forma basis stated on an equivalent West Pointe basis assuming 100% of the merger consideration is comprised of Commerce common stock in the merger.

										Assuming 75% Stock Issued								Assuming 100% Stock Issued
														Equivalent								Equivalent
		Historical												Pro Forma								Pro Forma
						West Pointe				Pro Forma				West Pointe				Pro Forma				West Pointe
		Commerce				Bancorp, Inc.				Commerce				Bancorp, Inc.				Commerce				Bancorp, Inc.
Diluted income per common share:
Twelve months ended:
December 31, 2005		$	3.16			$	3.32			$	3.14			$	4.27			$	3.13			$	4.26
Three months ended:
March 31, 2006		$	0.78			$	0.64			$	0.77			$	1.05			$	0.77			$	1.05
Cash dividends paid per share:
Twelve months ended:
December 31, 2005		$	0.914			$	0.740			$	0.914			$	1.243			$	0.914			$	1.243
Three months ended:
March 31, 2006		$	0.245			$	0.200			$	0.245			$	0.333			$	0.245			$	0.333
Book value per common share:
December 31, 2005		$	19.79			$	34.78			$	20.33			$	27.65			$	20.51			$	27.89
March 31, 2006		$	19.74			$	35.14			$	20.18			$	27.44			$	20.47			$	27.84

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

	•	projected business increases following process changes and other investments are lower than expected;
	•	competitive pressure among financial services companies increases significantly;
	•	general economic conditions are less favorable than expected;
	•	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;
	•	changes in the interest rate environment reduce interest margins and impact funding sources;
	•	changes in foreign exchange rates increase exposure;
	•	changes in market rates and prices may adversely impact the value of financial products;
	•	legislation or regulatory environments, requirements or changes may adversely affect businesses in which either company is engaged;
	•	litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect either company or its businesses;
	•	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;
	•	the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
	•	the integration of West Pointe’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 West Pointe’s or Commerce’s existing businesses;
	•	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
	•	decisions to downsize, sell or close units or otherwise change the business mix of either company.

 

Because the Market Price of Commerce Common Stock Will Fluctuate, West Pointe Shareholders Cannot Be Sure of the Value of the Merger Consideration They Will Receive.

 

Upon completion of the merger, each share of West Pointe common stock will be converted into merger consideration consisting of (i) up to 1,678,772 and no less than 1,099,384 shares of Commerce common stock and (ii) up to $20,225,000. The market value of the stock portion of the merger consideration 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 West Pointe shareholders, on the date of the special meeting of the West Pointe 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 $48.19 and $55.19, 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 West Pointe shareholders will receive upon completion of the merger. Accordingly, at the time of the special meeting, West Pointe shareholders may not know or be able to calculate the market value of the merger consideration they would receive upon completion of the merger. Commerce or CBI-Kansas may terminate the Agreement and Plan of Merger if the per share Commerce stock price is greater than $61.69 (adjusted for stock splits, stock dividends, recapitalizations or other adjustments pertaining to or affecting the Commerce common stock prior to the Effective Time). West Pointe may terminate the Agreement and Plan of Merger if the per share Commerce stock price is less than $41.69 (adjusted for stock splits, stock dividends, recapitalizations or other adjustments pertaining to or affecting the Commerce common stock prior to the Effective Time). Stock price changes may result from a variety of factors, including general market and economic conditions, changes in West Pointe’s and Commerce’s respective businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond West Pointe’s and Commerce’s control. You should obtain current market quotations for shares of Commerce common stock and for shares of West Pointe common stock.

 

The Market Price of Commerce Common Stock after the Merger May Be Affected by Factors Different from Those Affecting the Shares of West Pointe or Commerce Currently.

 

The businesses of Commerce and West Pointe 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 West Pointe. For a discussion of the businesses of Commerce and West Pointe and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this document and referred to under “Where You Can Find More Information,” and the “Information About West Pointe Bancorp, Inc.”

 

The Opinion Obtained by West Pointe from its Financial Advisor Will Not Reflect Changes in Circumstances between Signing the Agreement and Plan of Merger and the Merger.

 

West Pointe has not obtained an updated opinion as of the date of this document from its financial advisor. Changes in the operations and prospects of Commerce or West Pointe, general market and economic conditions and other factors which may be beyond the control of Commerce and West Pointe, and on which the financial advisor’s opinion was based, may significantly alter the value of Commerce or West Pointe or the prices of shares of Commerce common stock or West Pointe common stock by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. Because West Pointe currently does not anticipate asking its financial advisor to update its opinion, the opinion will not address the fairness of the merger consideration, from a financial point of view, at the time the merger is completed. For a description of the opinion that West Pointe received from its financial advisor, please refer to “The Merger — Opinion of West Pointe Financial Advisor.” For a description of the other factors considered by the West Pointe Board of Directors in determining to approve the merger, please refer to “The Merger — Reasons for the Merger — West Pointe.”

The Agreement and Plan of Merger Limits West Pointe’s Ability to Pursue Alternatives to the Merger.

 

The Agreement and Plan of Merger contains “no shop” provisions that, subject to limited exceptions, limit West Pointe’s ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of West Pointe. In addition, West Pointe has granted to Commerce an option to acquire up to approximately 217,000 shares of West Pointe common stock under the stock option agreement. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of West Pointe 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 West Pointe than it might otherwise have proposed to pay.

 

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.

 

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 Office of the Comptroller of Currency. These governmental entities may impose conditions on the completion of the merger or require changes to the terms of the merger. Although Commerce and West Pointe 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.

 

West Pointe Executive Officers and Directors Have Financial Interests in the Merger that Are Different from, or in Addition to, the Interests of West Pointe Shareholders.

 

Executive officers of West Pointe negotiated the terms of the Agreement and Plan of Merger with their counterparts at Commerce, and the West Pointe Board of Directors approved the Agreement and Plan of Merger and unanimously recommended that West Pointe shareholders vote to approve the merger. In considering these facts and the other information contained in this document, you should be aware that West Pointe’s executive officers and directors have financial interests in the merger that are different from, or in addition to, the interests of West Pointe shareholders. For example, certain executive officers have entered into agreements with West Pointe that provide, among other things, change in control payments and other benefits following the merger. These and some other additional interests of West Pointe 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.

 

This Proxy Statement/Prospectus is provided to the shareholders of West Pointe in connection with the solicitation of proxies by the West Pointe Board of Directors for use at the West Pointe special meeting to be held on          , 2006 at 10:00 a.m., local time, at St. Clair Country Club, South 78th Street, Belleville, Illinois.

 

At the special meeting, West Pointe’s shareholders will consider and vote upon a proposal to approve the Agreement and Plan of Merger. Under West Pointe’s Articles of Incorporation, no other business may properly be brought before the special meeting by a shareholder unless the shareholder has given notice of their intention to do so by          , 2006.

 

The Agreement and Plan of Merger provides, among other things, for the merger of West Pointe 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 West Pointe may receive shares of Commerce common stock and/or cash in the merger.

 

The West Pointe Board of Directors has established the close of business on          , 2006 as the date to determine those record holders of West Pointe common stock entitled to notice of and to vote at the West Pointe special meeting. On that date, there were approximately           shares of West Pointe common stock outstanding held by approximately           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, although the vote of two-thirds 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 West Pointe 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 two-thirds of the outstanding shares of West Pointe common stock outstanding on           , 2006. 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 March 31, 2006, there were 1,029,808 shares of West Pointe common stock outstanding. As of March 31, 2006, the directors and executive officers of West Pointe beneficially owned approximately 21.1% of the outstanding shares of West Pointe common stock. All officers and directors of West Pointe owning West Pointe common stock have indicated they intend to vote in favor of the Agreement and Plan of Merger.

 

All shares of West Pointe 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:

 

 

Attendance at the special meeting will not, in and of itself, constitute the revocation of a proxy.

 

West Pointe will appoint one or more inspectors, who may be employees of West Pointe to determine, among other things, the number of shares of West Pointe 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 West Pointe in connection with the solicitation of proxies by the West Pointe 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 West Pointe special meeting will be borne by West Pointe. In addition to solicitation by mail, West Pointe may cause proxies to be solicited personally or by telephone or email by West Pointe’s regular employees.

 

Commerce Bancshares, Inc., a bank holding company as defined in the Bank Holding Company Act of 1956, as amended (the “1956 BHC Act”), was incorporated under the laws of Missouri on August 4, 1966. Commerce presently owns all of the outstanding capital stock of three national banking associations. One bank is limited in its activities to the issuance of credit cards. The remaining two banking subsidiaries engage in general banking business, providing a broad range of retail, corporate, investment, trust and asset management products and services to individuals and businesses. Commerce also owns, directly, or through its banking subsidiaries, various non-banking subsidiaries. Their activities include owning real estate leased to Commerce’s banking subsidiaries, underwriting credit life and credit accident and health insurance, selling property and casualty insurance (relating to consumer loans made by the banking subsidiaries), venture capital investment, securities brokerage, mortgage banking and leasing activities. The total assets of Commerce on a consolidated basis, as of December 31, 2005, were approximately $13.9 billion and net income for the year ended December 31, 2005, was approximately $223.2 million, and for the three months ended March 31, 2006, was approximately $52.9 million.

 

See “Where You Can Find More Information” beginning on page    and “Selected Financial Data” on page   . The principal executive offices of Commerce are at the Commerce Bank Building, 1000 Walnut, Kansas City, Missouri 64106 (telephone number: (816) 234-2000).

 

West Pointe Bancorp, Inc. is headquartered in Belleville, Illinois and owns all of the outstanding capital stock of the Bank, which provides commercial banking services in Monroe and St. Clair counties in Illinois, and St. Louis City and St. Louis County in Missouri. The total assets of West Pointe on a consolidated basis, as of December 31, 2005, were approximately $477.4 million and net income for the year ended December 31, 2005, was approximately $3.5 million, and for the three months ended March 31, 2006, was approximately $691,000. See West Pointe’s financial statements beginning on page F-i and “Selected Consolidated Financial Data of West Pointe Bancorp, Inc.” on page   . The principal executive offices of West Pointe are at 5701 West Main Street, Belleville, IL 62226 (telephone number: (618) 234-5700).

 

West Pointe was incorporated in 1997 under the Illinois Business Corporation Act of 1983 (the “IBCA”). West Pointe is registered as a bank holding company under the Illinois Bank Holding Company Act of 1957, as amended, and the 1956 BHC Act. The Bank was established in 1990 under the Illinois Banking Act, and operates in the financial services segment. Since its establishment, it has conducted a general banking business embracing the customary functions of commercial banking, including residential real estate, commercial, industrial and consumer lending, collections, safe deposit operations, and other services tailored to individual customer needs. On April 8, 1997, the Bank became a wholly-owned subsidiary of West Pointe pursuant to the Plan of Reorganization and Exchange dated as of February 12, 1997.

 

West Pointe’s primary geographic market areas consist of St. Clair, Monroe and Madison counties in Illinois and St. Louis City and St. Louis County in Missouri. West Pointe has five branch locations in East and West Belleville, Columbia, Dupo and Swansea, Illinois and 25 ATMs serve to meet the convenience and financial needs of its customers. West Pointe’s strategy has been to operate as an independent, retail oriented financial institution dedicated to serving the needs of customers in its market areas.

 

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.

 

West Pointe shareholders will receive a combination of (i) up to 1,678,772 and no less than 1,099,384 shares of Commerce common stock and (ii) up to $20,225,000 in the merger. The number of shares of Commerce common stock that a holder of West Pointe common stock would receive in an exchange will vary depending on the price of the Commerce common stock and the number of shares of West Pointe common stock outstanding at the time of the merger. For example, if the number of shares of West Pointe common stock is 1,148,573 (assuming all of the options to purchase West Pointe common stock are exercised prior to the Effective Time and that certain holders of options use shares of West Pointe common stock to pay the exercise price of such options) the number of shares of Commerce common stock that a holder of a share of West Pointe common stock will receive will be between 1.2762 and 1.4616 as the price of Commerce common stock varies between $55.19 and $48.19. Assuming 1,148,573 shares of West Pointe common stock are outstanding immediately prior to the merger, the cash that a holder of a share of West Pointe common stock receives would be $70.44 unless the price of Commerce common stock is greater than $55.19 or less than $48.19. If the total amount of cash payable to electing shareholders would exceed $20,225,000, the shares exchanged for cash will be reduced pro rata to avoid exceeding that figure and shareholders electing cash instead will receive shares of Commerce 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 March 31, 2006, options to purchase 214,000 shares of West Pointe common stock were issued and outstanding to certain officers and directors of West Pointe. Prior to the merger, all of West Pointe’s outstanding stock options will fully vest and become exercisable. Because option holders with sufficient ownership of West Pointe common stock may surrender currently owned shares of West Pointe common stock to satisfy the option exercise price, West Pointe expects less than 214,000 shares of West Pointe common stock will be issued by West Pointe prior to the merger. If any options to purchase shares of West Pointe 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.

 

Once the merger is approved, and certain other conditions are met, you will be receiving by separate mailing a form of election which will allow you to elect the combination of Commerce common stock and cash that you would like to receive in the merger. Included with the form of election will be a letter of transmittal, as well as instructions on how to complete the form of election. We will initially mail forms of election at least 35 days before the expected completion of the merger. If you do not receive a form of election, you should contact the Exchange Agent or your broker to obtain a form of election. You are entitled to make an election with respect to your West Pointe shares even if you vote against the merger. However, any form of election submitted by a West Pointe shareholder who dissents and seeks to exercise appraisal rights will be invalid and will be rejected. If any dissenting shareholder ceases to be a dissenting shareholder but does not submit a valid form of election prior to the election deadline, each West Pointe share held by that dissenting shareholder will be treated as a share for which the shareholder has indicated no preference as to the receipt of the cash consideration or the stock consideration and,

thus, will receive stock consideration. The form of election will allow you to make a cash election for some or all of your West Pointe shares. West Pointe shares as to which you do not make a valid election prior to the election deadline will be treated as though no election had been made and will be converted into Commerce common stock.

 

The U.S. federal income tax consequences of the merger to you will vary depending on whether you receive cash or shares of Commerce common stock, or a combination of cash and shares, in exchange for your West Pointe shares. However, at the time you will be required to make a cash election, you will not know if, and to what extent, the proration procedures will change the mix of consideration that you will receive in the merger. As a result, you will not know the tax consequences to you with certainty at the time you make your election. For more information regarding the tax consequences of the merger to West Pointe shareholders, please see “— Federal Income Tax Consequences.”

 

Exchange Agent

 

Prior to the completion of the merger, Commerce will appoint Commerce Bank, N.A. or a commercial bank or trust company that is acceptable to West Pointe, to act as the Exchange Agent. The Exchange Agent will effect the election and proration provisions.

 

Non-Electing Holders

 

If you do not dissent from the merger and if (i) you do not make an election to receive cash consideration in the merger, (ii) your form of election is not received by the Exchange Agent by the election deadline or (iii) your form of election is improperly completed or is not signed, you will be deemed not to have made an election. West Pointe shareholders not making an election in respect of their West Pointe shares will receive stock consideration for their West Pointe shares, regardless of the elections that have been made by other West Pointe shareholders. See “— Proration Procedures” below.

 

Proration Procedures

 

You should be aware that elections you make are subject to the proration procedures provided in the Agreement and Plan of Merger. Regardless of the elections made by West Pointe shareholders, these procedures provide that, in the aggregate:

 

 

West Pointe shares held by West Pointe shareholders who properly exercise their dissenters’ rights will be treated as electing shares for purposes of these proration procedures.

 

References to receipt of the stock consideration include the receipt of cash in lieu of any fractional Commerce shares.

 

Scenario:  The Cash Consideration is Over-Subscribed:

 

This scenario will occur if holders of more than 25% the outstanding West Pointe shares (which 25% includes dissenting shares, if any) properly elect to receive the cash consideration for their West Pointe shares.

 

If You Made a Cash Election.  In this scenario, if you properly elected to receive cash consideration for all of your West Pointe shares, you would receive cash consideration for only a pro rata portion of each of the West Pointe

shares for which you properly made a cash election. You will receive stock consideration for the remaining portion of each of your West Pointe shares.

 

If You Failed to Make an Election.  In this scenario, if you failed to properly make an election for any of your West Pointe shares, you would receive only stock consideration for your West Pointe shares, including cash in lieu of any fractional shares.

 

We are not making any recommendation as to whether you should elect to receive cash consideration in lieu of stock consideration. You must make your own decision with respect to your election. We cannot make any guarantee that you will receive the amount of cash consideration you elect. As a result of the proration procedures and other limitations described in this document and in the Agreement and Plan of Merger, you may receive stock consideration or cash consideration in amounts that are different from the amounts you elect to receive.

 

Notwithstanding the above, the number of West Pointe shares to be converted into the cash consideration will not be greater than the number that would permit Commerce and West Pointe to receive the tax opinions described under “The Merger — Conditions to the Merger,” which relate to the merger qualifying as a “reorganization” under the Code.

 

Holders of unexchanged West Pointe 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 unexchanged West Pointe stock certificates (other than West Pointe stock certificates representing dissenting shares) a letter of transmittal and instructions for surrendering West Pointe stock certificates in exchange for the merger consideration that a holder of non-electing shares is entitled to receive, along with any dividends and other distributions and any cash in lieu of fractional shares. After a holder of West Pointe stock certificates sends the West Pointe stock certificates to the Exchange Agent together with the properly completed letter of transmittal or form of election, and any other documents that the Exchange Agent may reasonably require, the holder of West Pointe stock certificates will be entitled to receive such consideration. No interest will be paid or will accrue on any cash paid to holders of West Pointe stock certificates.

 

If there has been a transfer of ownership of West Pointe common stock that is not registered in the transfer records of West Pointe, such holder must present to the Exchange Agent the certificate representing such shares of West Pointe 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 West Pointe 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 ten (10) 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.

 

The management of West Pointe has been aware of the increasing competition and continuing consolidation in the banking and financial services industry. From time to time, the management of West Pointe has been approached by the management of other financial institutions regarding the possibility of business combinations involving West Pointe and such other financial institutions. However, none of those preliminary inquiries resulted in significant discussions or a concrete proposal that West Pointe’s management was in a position to consider in a material way or recommend to the West Pointe Board of Directors and shareholders.

In the late summer and early fall of 2005, West Pointe’s management and Board of Directors considered estate planning objectives for certain major shareholders and began to consider the overall strategic plan for West Pointe, which included transfers to trusts and gifts of West Pointe stock to family members of such individuals.

 

In response to previous indications of interest from the management of Commerce, on September 23, 2005, West Pointe’s management responded to Commerce as a potential acquiror of West Pointe. Commerce indicated a willingness to discuss a strategic transaction and, on that same date, West Pointe and Commerce executed a Confidentiality Agreement to govern the use of non-public information during the negotiation process.

 

A special meeting of the Board of Directors of West Pointe was held on September 28, 2005 to discuss the potential transaction and the Board of Directors’ fiduciary duties in considering both the proposal from Commerce and any other proposal which would arise.

 

West Pointe engaged Legg Mason Wood Walker, Incorporated (“Legg Mason”) on October 11, 2005 to provide a fairness opinion in connection with any potential transaction involving West Pointe. Substantially all of the capital markets business of Legg Mason was acquired on December 1, 2005 by Stifel Financial Corp., parent company of Stifel, Nicolaus & Company, Incorporated. On October 12, 2005, the West Pointe Board of Directors reviewed the consideration proposed in the potential transaction as well as various strategic alternatives. Legg Mason provided a financial analysis on October 21, 2005 to the West Pointe Board of Directors on the consideration proposed in the potential transaction.

 

West Pointe and Commerce negotiated the deal terms between September 28, 2005 and March 8, 2006. These negotiations included in-person meetings with Commerce management and correspondence between the two companies throughout this period. During this period, West Pointe management also met with senior executives of another considerably larger bank holding company to discuss such other company’s potential interest in a business combination with West Pointe, and such party conducted a limited off-site review of West Pointe, but both parties decided to not proceed beyond those preliminary discussions. Negotiations with Commerce also included offer letters Commerce to West Pointe dated October 20, 2005, November 1, 2005, February 16, 2006, February 24, 2006, March 1, 2006 and March 8, 2006. In connection with this initial agreement, Commerce executed an offer letter dated March 8, 2006.

 

Commerce conducted due diligence on West Pointe between March 13 and March 17, 2006, whereby West Pointe provided to Commerce various regulatory documentation, legal documentation (e.g., contracts and litigation files), tax/accounting and financial documentation and operational documentation. Commerce conducted additional due diligence prior to April 13, 2006.

 

West Pointe, Commerce and their respective counsel negotiated the final terms of the transaction, including the Agreement and Plan of Merger and the stock option agreement, between March 8, 2006 and April 13, 2006.

 

On April 12, 2006, the West Pointe Board of Directors held a special meeting regarding the Agreement and Plan of Merger. At the meeting, counsel for West Pointe reviewed the terms and conditions of the Agreement and Plan of Merger and responded to questions from the West Pointe Board of Directors. Stifel delivered an oral opinion, subsequently confirmed in writing, that, as of the date of its opinion, and based upon and subject to the considerations described in its opinion, the per share consideration to be received by the holders of shares of West Pointe common stock in the merger pursuant to the Agreement and Plan of Merger was fair to the holders of West Pointe common stock from a financial point of view. In support of its fairness opinion, representatives of Stifel provided a presentation to the West Pointe Board of Directors summarizing its analyses and responded to questions from the West Pointe Board of Directors. At this special meeting, the West Pointe Board of Directors unanimously determined that the Agreement and Plan of Merger and the transactions contemplated under the Agreement and Plan of Merger, including the merger, were advisable to, fair to and in the best interests of West Pointe and its shareholders. Further, the West Pointe Board of Directors directed that the Agreement and Plan of Merger be submitted for approval and adoption by the shareholders of West Pointe, with its recommendation.

 

On April 13, 2006, West Pointe and Commerce executed the Agreement and Plan of Merger and stock option agreement and distributed a joint press release announcing the proposed merger.

 

West Pointe.  West Pointe’s Board of Directors has determined that the merger is advisable and in the best interests of West Pointe and its shareholders. The West Pointe 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 West Pointe would have on its own. Accordingly, the West Pointe Board of Directors has approved the merger. In reaching its decision to approve the Agreement and Plan of Merger and recommend its approval by West Pointe’s shareholders, the West Pointe Board of Directors consulted with West Pointe’s management, as well as West Pointe’s legal and financial advisors, and considered a number of factors, including, but not limited to, those discussed below.

 

Financial Considerations.  The West Pointe Board of Directors considered the financial terms of the merger based on, among other things, the following factors:

 

 

Strategic Considerations.  The West Pointe 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:

 

 

Social Considerations.  The West Pointe Board of Directors considered the social and economic effect on the West Pointe shareholders, employees, customers and community, including, but not limited to, the following factors:

 

 

While the West Pointe Board of Directors considered the foregoing and other factors individually, the West Pointe 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 West Pointe 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 West Pointe 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:

 

 

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.

 

Stifel acted as West Pointe’s financial advisor in connection with the merger. Stifel is a nationally recognized investment banking firm with substantial expertise in transactions similar to the merger. Stifel is an investment banking and securities firm with membership on all the principal United States’ securities exchanges. As part of its investment banking activities, Stifel is regularly engaged in the independent valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

On April 12, 2006, Stifel rendered its oral opinion, which was subsequently confirmed in writing, to the Board of Directors of West Pointe that, as of such date, the per share consideration to be paid to the holders of West Pointe common stock by Commerce pursuant to the Agreement and Plan of Merger was fair to such holders, from a financial point of view.

 

The full text of Stifel’s written opinion dated April 12, 2006, which sets forth the assumptions made, matters considered and limitations of the review undertaken, is attached as Appendix C to this Proxy Statement/Prospectus and is incorporated herein by reference. Holders of West Pointe common stock are urged to, and should, read this opinion carefully and in its entirety in connection with this Proxy Statement/Prospectus. The summary of the opinion of Stifel set forth in this Proxy Statement/Prospectus is qualified in its entirety by reference to the full text of such opinion. The opinion of Stifel will not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger. Stifel has no obligation to update, revise or reaffirm its opinion, and West Pointe does not currently expect that it will request an updated opinion from Stifel.

 

No limitations were imposed by West Pointe on the scope of Stifel’s investigation or the procedures to be followed by Stifel in rendering its opinion. Stifel was not requested to and did not make any recommendation to West Pointe’s Board of Directors as to the form or amount of the consideration to be paid to West Pointe or its shareholders, which was determined through arm’s length negotiations between the parties. In arriving at its opinion, Stifel did not ascribe a specific range of values to West Pointe. Its opinion is based on the financial and comparative analyses described below. Stifel’s opinion was directed solely to West Pointe’s Board of Directors for its use in connection with its consideration of the merger. Stifel’s opinion addressed only the fairness of the per share consideration to the holders of West Pointe common stock from a financial point of view, did not address any other aspect of the merger, and was not intended to be and does not constitute a recommendation to any shareholder of West Pointe as to how such shareholder should vote with respect to the merger. Stifel’s opinion also did not make any recommendation to West Pointe’s shareholders as to whether such shareholders should elect to receive cash in lieu of shares of Commerce common stock (or any combination of cash or Commerce common stock) as per share consideration in exchange for any such shareholder’s shares of West Pointe common stock in connection with the merger. Stifel was not requested to opine as to, and its opinion does not address, West Pointe’s underlying business decision to proceed with or effect the merger or the relative merits of the merger compared to any alternative transaction that might be available to West Pointe. Stifel was not asked to opine on, and its opinion does not address, the fairness of any consideration paid or exchanged in connection with the proposed merger of the Bank, a subsidiary of West Pointe, with Commerce Bank, N.A., a subsidiary of Commerce’s merger subsidiary, CBI-Kansas, Inc.

 

In connection with its opinion, Stifel, among other things:

 

 

 

In rendering its opinion, Stifel relied upon and assumed, without independent verification, the accuracy and completeness of all of the financial and other information that was provided to Stifel, by or on behalf of West Pointe and Commerce, or that was otherwise reviewed by Stifel and did not assume any responsibility for independently verifying any of such information. With respect to the financial forecasts supplied to Stifel by West Pointe and Commerce (including, without limitation, potential cost savings and operating synergies realized by a potential acquiror), Stifel assumed that they were reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of West Pointe and Commerce as to the future operating and financial performance of West Pointe and Commerce, that cost saving and operating synergies would be realized in the amounts and time periods estimated by Commerce and that they provided a reasonable basis upon which Stifel could form its opinion. Such forecasts and projections were not prepared with the expectation of public disclosure. All such projected financial information is based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in such projected financial information. Stifel has relied on this projected information without independent verification or analyses and does not in any respect assume any responsibility for the accuracy or completeness thereof.

 

Stifel also assumed that there was no material change in the assets, liabilities, financial condition, results of operations, business or prospects of either West Pointe or Commerce since the date of the last financial statements made available to it. Stifel has also assumed, without independent verification and with West Pointe’s consent, that the aggregate allowances for loan losses set forth in the financial statements of West Pointe and Commerce are in the aggregate adequate to cover all such losses. Stifel did not make or obtain any independent evaluation, appraisal or physical inspection of West Pointe’s or Commerce’s assets or liabilities, the collateral securing any of such assets or liabilities, or the collectibility of any such assets nor did it review loan or credit files of West Pointe or Commerce. Stifel relied on advice of West Pointe’s counsel as to certain legal matters with respect to West Pointe, the Agreement and Plan of Merger and the transactions and other matters contained or contemplated therein. Stifel has assumed, with West Pointe’s consent, that there are no factors that would delay or subject to any adverse conditions any necessary regulatory or governmental approval and that all conditions to the merger will be satisfied and not waived. In addition, Stifel has assumed that the definitive Agreement and Plan of Merger will not differ materially from the draft it reviewed. Stifel has also assumed that the merger will be consummated substantially on the terms and conditions described in the Agreement and Plan of Merger, without any waiver of material terms or conditions by West Pointe and Commerce.

 

Stifel’s opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to it as of, the date of its opinion. It is understood that subsequent developments may affect the conclusions reached in its opinion and that Stifel does not have any obligation to update, revise or reaffirm its opinion.

 

The financial forecasts furnished to Stifel for West Pointe and estimates of potential cost savings and operating synergies to be realized by a potential acquiror were prepared by the management of West Pointe and constitute forward-looking statements. As a matter of policy, West Pointe and Commerce do not publicly disclose internal management forecasts, projections or estimates of the type furnished to Stifel in connection with its analysis of the financial terms of the merger, and such forecasts and estimates were not prepared with a view towards public disclosure. These forecasts and estimates were based on numerous variables and assumptions which are inherently uncertain and which may not be within the control of the management of West Pointe and Commerce, including, without limitation, factors related to the integration of West Pointe and general economic, regulatory and competitive conditions. Accordingly, actual results could vary materially from those set forth in such forecasts and estimates.

In connection with rendering its opinion, Stifel performed a variety of financial analyses that are summarized below. Such summary does not purport to be a complete description of such analyses. Stifel believes that its analyses and the summary set forth herein must be considered as a whole and that selecting portions of such analyses and the factors considered therein, without considering all factors and analyses, could create an incomplete view of the analyses and processes underlying its opinion. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. In arriving at its opinion, Stifel considered the results of all of its analyses as a whole and did not attribute any particular weight to any analyses or factors considered by it. The range of valuations resulting from any particular analysis described below should not be taken to be Stifel’s view of the actual value of West Pointe. In its analyses, Stifel made numerous assumptions with respect to industry performance, business and economic conditions, and other matters, many of which are beyond the control of West Pointe or Commerce. Any estimates contained in Stifel’s analyses are not necessarily indicative of actual future values or results, which may be significantly more or less favorable than suggested by such estimates. Estimates of values of companies do not purport to be appraisals or necessarily reflect the actual prices at which companies or their securities actually may be sold. No company or transaction utilized in Stifel’s analyses was identical to West Pointe or Commerce or the merger. Accordingly, an analysis of the results described below is not mathematical; rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other facts that could affect the public trading value of the companies to which they are being compared. None of the analyses performed by Stifel was assigned a greater significance by Stifel than any other, nor does the order of analyses described represent relative importance or weight given to those analyses by Stifel. The analyses described below do not purport to be indicative of actual future results, or to reflect the prices at which West Pointe common stock or Commerce common stock may trade in the public markets, which may vary depending upon various factors, including changes in interest rates, dividend rates, market conditions, economic conditions and other factors that influence the price of securities.

 

In accordance with customary investment banking practice, Stifel employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses that Stifel used in providing its opinion on April 12, 2006. Some of the summaries of financial analyses are presented in tabular format. In order to understand the financial analyses used by Stifel more fully, you should read the tables together with the text of each summary. The tables alone do not constitute a complete description of Stifel’s financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by Stifel. The summary data set forth below do not represent and should not be viewed by anyone as constituting conclusions reached by Stifel with respect to any of the analyses performed by it in connection with its opinion. Rather, Stifel made its determination as to the fairness to the shareholders of West Pointe of the per share merger consideration, from a financial point of view, on the basis of its experience and professional judgment after considering the results of all of the analyses performed. Accordingly, the data included in the summary tables and the corresponding imputed ranges of value for West Pointe should be considered as a whole and in the context of the full narrative description of all of the financial analyses set forth in the following pages, including the assumptions underlying these analyses. Considering the data included in the summary table without considering the full narrative description of all of the financial analyses, including the assumptions underlying these analyses, could create a misleading or incomplete view of the financial analyses performed by Stifel.

 

In connection with rendering its opinion and based upon the terms of the draft Agreement and Plan of Merger reviewed by it, Stifel assumed the aggregate consideration to be $80.9 million, and at the time of the opinion, the per share consideration to be $70.44.

 

Pro Forma Effect of the Merger.  Stifel reviewed certain estimated future operating and financial information developed by West Pointe, publicly available financial estimates of Commerce (including its recently announced agreement to acquire Boone National Savings & Loan Association FA) and certain estimated future operating and financial information for the pro forma combined entity resulting from the merger for the twelve month periods ended December 31, 2006 and December 31, 2007. Based on this analysis, Stifel compared certain of West Pointe’s estimated future per share results with such estimated figures for the pro forma combined entity. Based on this analysis on a pro forma basis, the merger is forecast to be accretive to West Pointe’s earnings per share for the twelve month period ended December 31, 2007. Stifel also reviewed certain financial information in order to determine the

estimated effect of the merger on West Pointe’s book value, tangible book value and dividend. Based on this analysis on a pro forma basis, the merger is forecast to be dilutive to both West Pointe’s book value per share and West Pointe’s tangible book value per share. Based on historical dividend rates, Stifel noted that West Pointe’s shareholders who elect to receive Commerce shares would receive an increase in their dividends.

 

Analysis of Bank Merger Transactions.  Stifel analyzed certain information relating to recent transactions in the banking industry, consisting of (1) 196 U.S. bank acquisitions announced since April 10, 2005, with announced transaction values and excluding merger of equals transactions, referred to below as Group A, (2) 17 selected Central U.S. bank acquisitions announced since April 10, 2005, involving sellers headquartered in the Central U.S. with total assets between $150 million and $1 billion and excluding merger of equals transactions, referred to below as Group B. Stifel calculated the following ratios with respect to the merger and the selected transactions:

 

 

This analysis resulted in a range of imputed values for West Pointe common stock of between $68.32 and $82.98 per share based on the median multiples for Group A, and between $62.97 and $74.42 per share based on the median multiples for Group B.

 

Present Value Analysis.  Applying present value analysis to the theoretical future earnings and dividends of West Pointe, Stifel compared the per share consideration to the calculated present value of one share of West Pointe’s common stock on a stand-alone basis. The analysis was based upon West Pointe’s management’s projected earnings growth, a range of assumed price/earnings ratios, and a 13.0%, 13.5% and 14.2% discount rate. Stifel selected the range of terminal price/earnings ratios on the basis of past and current trading multiples for other publicly-traded comparable banks. The stand-alone present value of West Pointe’s common stock calculated on this basis ranged from $32.09 to $38.03 per share.

 

Discounted Cash Flow Analysis.  Using a discounted cash flow analysis, Stifel estimated the net present value of the future streams of after-tax cash flow that West Pointe could produce for dividends to a potential acquiror, referred to below as dividendable net income. In this analysis, Stifel assumed that West Pointe would perform in accordance with management’s estimates and calculated assumed after-tax distributions to a potential acquiror such that West Pointe’s tangible common equity ratio would be maintained at 6.5% of assets. Stifel calculated the sum of the assumed perpetual dividendable net income streams per share beginning in the year 2006 discounted to present values at assumed discount rates ranging from 12.5% to 17.5%, reflecting the general range for the bank industry based on Stifel’s historical experience, and based upon West Pointe’s estimated cost savings of 0% and 22% of West Pointe’s non-interest expense. This discounted cash flow analysis indicated an implied equity value reference range of $16.20 to $61.78 per share of West Pointe common stock. This analysis did not purport to be indicative of actual future results and did not purport to reflect the prices at which shares of West Pointe common stock may trade in the public markets. A discounted cash flow analysis was included because it is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, including estimated cost savings and operating synergies, earnings growth rates, dividend payout rates and discount rates.

 

Analysis of Premium to Market Price for Merger Transactions.  Stifel analyzed the premiums paid to the then current market price one day, one week and one month prior to the date of announcement of a transaction for 847

transactions in the bank and thrift industries announced in the United States between April 10, 1996 and April 10, 2006. Stifel calculated the following ratios with respect to the merger and such transactions:

 

 

This analysis resulted in a range of imputed values for West Pointe common stock of $65.00, $63.86 and $66.00 based on the median premiums for such transactions.

 

Comparison of Selected Companies.  Stifel reviewed and compared certain multiples and ratios for the merger with a peer group of 10 selected banks in the Midwest with assets between $150 million and $1 billion and comparable Return on Average Equity, Return on Average Assets, Equity to Assets, and Loans to Assets ratios to West Pointe. In order to calculate a range of imputed values for a share of West Pointe common stock, Stifel applied a 33.3% control premium to the trading prices of the selected group of comparable companies and compared the resulting theoretical offer price to each of the following categories: book value, tangible book value, adjusted 6.5% equity, latest 12 months earnings, estimated 2006 earnings as provided by First Call, estimated 2007 earnings as provided by First Call, assets, tangible book value to deposits and deposits. Stifel then applied the resulting range of multiples and ratios for the peer group specified above to the appropriate financial results of West Pointe. This analysis resulted in a range of imputed values for West Pointe common stock of between $48.58 and $70.06 per share based on the median multiples and ratios for the peer group. The 33.3% control premium selected by Stifel was based on a 10 year analysis of one month market premiums paid in bank and thrift merger transactions.

 

Additionally, Stifel calculated the following ratios with respect to the 10 selected comparable companies after application of the 33.3% control premium:

 

 

 

 

Also, Stifel reviewed and compared certain multiples and ratios for the merger with the same peer group of 10 selected banks in the Midwest with assets between $150 million and $1 billion and comparable Return on Average Equity, Return on Average Assets, Equity to Assets, and Loans to Assets ratios to West Pointe without applying the control premium of 33.3%. Stifel then applied the resulting range of multiples and ratios for the peer group specified

above to the appropriate financial results of West Pointe. This analysis resulted in a range of imputed values for West Pointe common stock of between $36.44 and $52.54 per share based on the median multiples and ratios for the peer group.

 

Additionally, Stifel calculated the following ratios with respect to the 10 selected comparable companies without application of the control premium:

 

 

 

 

As described above, Stifel’s opinion was among the many factors taken into consideration by the West Pointe Board of Directors in making its determination to approve the merger. West Pointe’s Board of Directors did not find it practical to, and did not, make any specific observations or draw any conclusions with respect to any of the individual analyses presented by Stifel, but rather the West Pointe Board of Directors reviewed and digested the analyses in their totality in reaching its conclusions with respect to the advisability of the merger.

 

Pursuant to the terms of Stifel’s engagement, West Pointe paid Stifel a nonrefundable cash fee upon the delivery of its fairness opinion that was not contingent upon consummation of the merger, agreed to reimburse Stifel for certain out-of-pocket expenses and has agreed to indemnify Stifel, its affiliates and their respective partners, directors, officers, agents, consultants, employees and controlling persons against certain liabilities, including liabilities under the federal securities laws. In the ordinary course of business, Stifel makes a market in Commerce’s equity securities and actively trades equity securities of West Pointe and Commerce for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. In the past, Stifel has provided investment banking and other brokerage services to West Pointe and Commerce for which Stifel received customary fees for its services. Stifel may seek to provide investment banking and other brokerage services to Commerce in the future. Certain employees of Stifel’s Investment Banking Department own less than one percent (1%) of Commerce’s equity securities in the aggregate.

 

The West Pointe Board of Directors recommends that West Pointe shareholders vote FOR approval of the Agreement and Plan of Merger.

 

At the Effective Time the separate corporate existence of West Pointe 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. It is expected that existing management of the surviving corporation will be supplemented with personnel from Commerce 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 surviving corporation by expanding the products and services offered. Commerce will also analyze the surviving corporation’s 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:

 

 

Pursuant to the Agreement and Plan of Merger, West Pointe has agreed to carry on its business and cause the 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. West Pointe has agreed to certain limitations on its ability to engage in material transactions.

 

The Agreement and Plan of Merger provides that unless and until the Agreement and Plan of Merger has been terminated, neither West Pointe 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 West Pointe, the Bank, or any other subsidiary of West Pointe. West Pointe 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 West Pointe; 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 West Pointe 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 West Pointe, as the case may be, deems such waiver to be in the best interests of such company and its shareholders.

 

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:

 

 

 

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 West Pointe, except that (1) both Commerce and West Pointe 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. In addition, if the Agreement and Plan of Merger is terminated, under certain specified circumstances the stock option agreement will remain in effect in accordance with its terms.

 

It is presently anticipated that the Effective Time will occur in the third quarter of 2006, but no assurance can be given to that effect.

 

The shares of Commerce to be issued pursuant to the merger have been registered under the Securities Act of 1933, as amended. The provisions of Rule 145 under the Securities Act allow such shares to be sold without restriction by shareholders of West Pointe who are not deemed to be “affiliates” (as that term is defined in the rules under the Securities Act) of West Pointe. An “affiliate” of West Pointe is a person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, West Pointe. These restrictions are expected to apply to the directors and executive officers of West Pointe and the holders of 10% or more of the outstanding West Pointe common stock. The same restrictions apply to the spouses and certain relatives of those persons and any trusts, estates, corporations or other entities in which those persons have a 10% or greater beneficial or equity interest.

 

Shareholders not falling into the category of affiliate have no restrictions on when they may sell the Commerce stock received in the merger. The shares of Commerce to be issued to affiliates of West Pointe will be registered with the SEC on a separate registration form and may be sold by such affiliates pursuant to that registration statement. If an affiliate elects not to be included in that registration statement, then the Commerce shares will be issued to that affiliate with a legend requiring such shares be sold for one year pursuant to Rule 145 under the Securities Act, or in transactions otherwise exempt from registration under the Securities Act.

 

Under Illinois law, the relevant provisions of which are attached to this document as Appendix D (Sections 11.65 and 11.70 of the IBCA), each West Pointe shareholder who dissents from the merger and who complies with various procedural requirements of Section 11.70 of the IBCA is entitled to receive the fair value of his or her shares of West Pointe common stock in cash, with accrued interest. Specifically, a West Pointe 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 West Pointe’s special meeting, with accrued interest. If CBI-Kansas and you cannot agree on the fair value of your shares, then the IBCA provides for a judicial determination of these amounts. The value as determined by an Illinois court may be more or less than the value you are entitled to under the Agreement and Plan of Merger. If you desire to exercise dissenters’ rights, you should refer to the Section 11.70 of the IBCA 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.

However, to exercise dissenters’ rights, you must do all of the following:

 

 

Your failure to vote against the proposal to adopt and approve the merger and Agreement and Plan of Merger will not constitute a waiver of your dissenters’ rights under the IBCA if you make written demand for payment before the vote is taken. Conversely, a vote against approval and adoption of the merger and Agreement and Plan of Merger will not by itself be sufficient to satisfy your obligations if you are seeking dissenters’ rights. You must follow the procedures set forth in Section 11.70 of the IBCA to obtain dissenters’ rights.

 

Each outstanding share of West Pointe common stock as to which a legally sufficient demand in accordance with Section 11.70 of the IBCA 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, each share held by a dissenting shareholder will represent only the rights of a dissenting shareholder under the IBCA, which includes the right to obtain payment for the estimated fair value of those shares.

 

Within 10 days after the effective date of the merger or 30 days after you have delivered your written demand for payment, whichever is later, CBI-Kansas will send to you a statement setting forth its opinion as to the fair value of your shares, as well as certain financial statements and a commitment to pay to you such estimated fair value for your shares or instructions to sell your shares within 10 days. If you do not agree with the opinion of CBI-Kansas as to the estimated fair value of the shares or the amount of interest due, then within 30 days of your receipt of CBI-Kansas’ valuation statement, you must notify CBI-Kansas as to what you estimate the fair value of your shares to be and the amount of interest due and demand the difference between your estimated fair value and the amount of the payment by CBI-Kansas or the proceeds of the sale of your shares.

 

If, within 60 days from delivery of CBI-Kansas’ notice to the dissenting shareholders, you and CBI-Kansas have not agreed in writing as to the fair value of the shares and interest due, CBI-Kansas will either pay the difference in value demanded by you, with interest, or file a petition in the circuit court requesting the court to determine the fair value of the shares and interest due. CBI-Kansas will be required to then make all dissenters, whose demands remain unsettled, a party to such proceeding. If CBI-Kansas does not commence the action, you may commence an action as permitted by law.

 

In a proceeding brought by CBI-Kansas to determine value, the court will determine the costs of the proceeding, including the reasonable compensation of expenses of the appraisers appointed by the court and excluding fees and expenses of counsel and experts for the respective parties. If the fair value of the shares as determined by the court materially exceeds the price that CBI-Kansas estimated to be the fair value of the shares or if no estimate was given, then all or any part of the costs may be assessed against CBI-Kansas. If the amount that any dissenter estimated to be the fair value of the shares materially exceeds the fair value of the shares as determined by the court, then all or any part of the costs may be assessed against that dissenter. The fees and expenses for counsel and experts may be awarded to the dissenter if the court finds that CBI-Kansas did not substantially comply with the procedure to dissent in the statute. In addition, the fees and expenses for counsel and experts can be assessed against either party if the court finds that such party acted arbitrarily, vexatiously, or not in good faith with respect to the dissenter’s rights.

 

The shares for which you have properly exercised your dissenters’ rights and followed the right to dissent procedures in the IBCA 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, you, as the holder of such shares, fail to properly perfect, effectively withdraw, waive or lose, or otherwise become ineligible to exercise dissenting shareholder’s rights under the IBCA, 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 Office of the Comptroller of Currency. Commerce will complete the filing of applications and notifications to obtain the 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 West Pointe in meeting the credit needs of the entire communities, including low-and moderate-income neighborhoods, served by the company and its subsidiaries. Each of Commerce’s and West Pointe’s principal depository institution has received an “outstanding” CRA rating from the United States Office of the Comptroller of the Currency, and its other depository institutions have received either an outstanding or satisfactory CRA rating.

 

Commerce’s right to exercise its option under the stock option agreement is also subject to the prior approval of the Board of Governors of the Federal Reserve System, to the extent that the exercise of Commerce’s option under the stock option agreement would result in Commerce owning more than 5% of the outstanding shares of West Pointe common stock. In considering whether to approve Commerce’s right to exercise its option, including its right to purchase more than 5% of the outstanding shares of West Pointe common stock, the Board of Governors of the Federal Reserve System would generally apply the same statutory criteria it will apply to its consideration of the merger.

 

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 West Pointe 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 West Pointe believe that the completion of the merger will not violate U.S. antitrust laws. However, Commerce and West Pointe 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 West Pointe will prevail.

 

In addition, the merger may be reviewed by the state attorneys general in the various states in which Commerce and West Pointe operate. Although Commerce and West Pointe 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.

 

Commerce and West Pointe believe that the merger does not raise substantial antitrust or other significant regulatory concerns and that they will be able to obtain all requisite regulatory approvals on a timely basis without the imposition of any condition that would have a material adverse effect on Commerce or West Pointe.

 

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 West Pointe 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.

 

The following description which sets forth the material provisions of the stock option agreement under which West Pointe has granted an option to Commerce to purchase shares of West Pointe common stock in specified circumstances, is subject to the full text of, and qualified in its entirety by reference to, the stock option agreement, which is attached to this document as Appendix B and which is incorporated by reference to this document. We urge you to read the stock option agreement carefully and in its entirety, as it is the legal document governing the stock option.

 

When we entered into the Agreement and Plan of Merger, we also entered into a stock option agreement. Under the terms of the stock option granted by West Pointe to Commerce, Commerce may purchase up to 217,000 shares of West Pointe common stock at an exercise price of $48.75 per share (the “Option Price”). However, the number of shares issuable upon exercise of the option cannot exceed 19.9% of West Pointe common stock outstanding without giving effect to any shares issued under the option. In the event that any additional shares of common stock are either issued or redeemed after the date of the stock option agreement, the number of shares of common stock subject to the option will be adjusted so that such number equals 19.9% of the number of shares of common stock then issued and outstanding without giving effect to any shares of common stock subject to or issued under the option. The terms of the stock option agreement are summarized below.

 

The stock option agreement may have the effect of making an acquisition or other business combination of West Pointe by a third party more costly because of the need in any transaction to acquire any shares of common

stock issued under the stock option agreement or because of any cash payments made under the stock option agreement. The stock option agreement may, therefore, discourage third parties from proposing an alternative transaction to the merger, including one that might be more favorable, from a financial point of view, to West Pointe shareholders than the merger.

 

To our knowledge, no event giving rise to the right to exercise the stock option has occurred as of the date of this document.

 

Commerce may exercise its option in whole or in part if a Triggering Event (as defined below) occurs prior to the Effective Time, as these terms are described below. The purchase of any shares of West Pointe common stock under the option is subject to compliance with applicable law, which may require regulatory approval.

 

The term “Triggering Event” generally occurs if: (i) any person (other than Commerce or any of its subsidiaries) shall have publicly announced or delivered to West Pointe a proposal, or disclosed publicly or to West Pointe an intention to make a proposal, to purchase 20% or more of the assets or any equity securities of, or to engage in a merger, reorganization, tender offer, share exchange, consolidation or similar transaction involving West Pointe or any of its subsidiaries and West Pointe shall not have rejected such proposal within 10 business days thereafter (an “Acquisition Transaction”); (ii) West Pointe or any of its subsidiaries shall have authorized, recommended, proposed or publicly announced an intention to authorize, recommend or propose, or entered into, an agreement, including without limitation, an agreement in principle, with any person (other than Commerce or any of its subsidiaries) to effect or provide for an Acquisition Transaction; or (iii) any person (other than Commerce or any of its subsidiaries) shall have acquired beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or the right to acquire beneficial ownership of, or any “group” (as such term is defined under the Exchange Act) shall have been formed which beneficially owns or has the right to acquire beneficial ownership of, shares of West Pointe common stock (other than trust account shares) aggregating 20% or more of the then outstanding shares of West Pointe common stock. As used in this Agreement, “person” shall have the meaning specified in Sections 3(a)(9) and 13(d) of the Exchange Act.

 

If the option becomes exercisable, it may be exercised, in whole or in part, within three months following the occurrence of a Triggering Event. Commerce’s right to exercise its option and certain other rights under the stock option agreement are subject to an extension in order to obtain required regulatory approvals and comply with applicable regulatory waiting periods. The option is exercisable for shares of West Pointe common stock.

 

The stock option agreement will terminate on the earliest to occur of: (i) the Effective Time, (ii) the termination of the Agreement and Plan of Merger, so long as a Triggering Event has not occurred, (iii) the date on which Commerce’s total profit equals $4,000,000 and (iv) December 31, 2006.

 

Upon West Pointe entering into a definitive agreement with respect to a Triggering Event, following a request of Commerce, West Pointe may be required to repurchase the option and all or any part of the shares issued under the option. The repurchase of the option will be at a price equal to the number of shares for which the option may be exercised multiplied by the amount by which the market/offer price, as that term is defined in the stock option agreement, exceeds the option price. At the request of the owner of option shares from time to time, West Pointe may be required to repurchase such number of the option shares from the owner as designated by the owner at a price equal to the market/offer price, as that term is defined in the stock option agreement, multiplied by the number of option shares so designated.

 

The stock option agreement provides that the total profit realized by Commerce as a result of a stock option agreement may in no event exceed $4,000,000.

At any time after December 31, 2006 and provided that West Pointe has not entered into a definitive agreement with respect to a Triggering Event prior to December 31, 2006, West Pointe has the right, at its election, to repurchase from the holder of the option any shares purchased under the stock option agreement. The repurchase price for such shares is the Option Price. West Pointe may exercise its right to repurchase from the holder of the option, in whole or in part, any shares then owned by such holder by delivering a written notice or notices stating that West Pointe elects to repurchase the shares in accordance with the stock option agreement (each such notice, a “Call Notice”). As promptly as practicable, West Pointe must deliver to the holder the applicable Option Price.

 

To the extent that, upon or following the delivery of a Call Notice, West Pointe is prohibited under applicable law or regulation from repurchasing the shares set out in the Call Notice, West Pointe must notify the holder in writing and thereafter deliver, from time to time, to the holder the portion of the Option Price that West Pointe is no longer prohibited from delivering, within two business days after the date on which it is no longer so prohibited.

 

The following general discussion sets forth the anticipated material United States federal income tax consequences of the merger to U.S. holders (as defined below) of West Pointe common stock that exchange their shares of West Pointe common stock for cash, shares of Commerce common stock, or a combination of cash and 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 West Pointe shareholders that hold their shares of West Pointe common stock as a capital asset 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:

 

 

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.

 

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of West Pointe common stock that is (i) an individual citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) a trust, if a United States court can exercise primary supervision over it, and one or more United States persons have authority to control substantial decisions that affect it, or (iv) an estate subject to United States income tax on its worldwide income.

 

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 Blackwell Sanders Peper Martin LLP, of an opinion to Commerce and to West Pointe to the effect that (1) the merger will be a tax-free reorganization within the meaning of Section 368(a) of the Code, and (2) no gain or loss will be recognized by the shareholders of West Pointe to the extent they receive Commerce common stock in exchange for shares of West Pointe common stock.

 

This opinion will be based on representation letters provided by Commerce and West Pointe 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 West Pointe 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.

 

If you exchange your West Pointe common stock exclusively for cash and neither you nor certain persons or entities related to you own Commerce common stock after the merger, you will recognize gain or loss on the difference between the cash you receive and your tax basis for that stock.

 

As a result of the merger qualifying as a reorganization within the meaning of Section 368(a) of the Code, if you exchange your West Pointe common stock exclusively for Commerce common stock, you will recognize no gain or loss, and if you exchange your West Pointe common stock for a combination of cash and Commerce common stock, you will generally recognize gain (but not loss) in an amount equal to the lesser of:

 

 

For this purpose, gain or loss must be calculated separately for each identifiable block of shares surrendered in the exchange, and a loss realized on one block of shares may not be used to offset a gain realized on another block of shares. If you have different bases or holding periods in respect of shares of West Pointe common stock, you should consult your tax advisor prior to the exchange with regard to identifying the bases or holding periods of the particular shares of Commerce common stock received in the merger.

 

Any recognized gain or loss will generally be long-term capital gain or loss if your holding period with respect to the West Pointe common stock surrendered is more than one year at the Effective Time. In some cases, cash received in the merger could be treated as having the effect of the distribution of a dividend, under the tests set forth in Section 302 of the Code, in which case such cash received would be treated as dividend income. In the case of U.S. holders who are individuals, trusts or estates, any such dividend income will be subject to tax at the same preferential rates as net capital gains if the applicable requirements are satisfied. These rules are complex and dependent upon the specific factual circumstances particular to you. Consequently, if you may be subject to these rules, you should consult your tax advisor as to the application of these rules to the particular facts relevant to you. The aggregate tax basis in the shares of Commerce common stock that you receive in the merger, including any fractional share interests deemed received by you under the treatment described below, will equal your aggregate adjusted tax basis in the West Pointe common stock you surrender, increased by the amount of taxable gain, if any, that you recognize on the exchange (including any portion of the gain that is treated as a dividend but excluding any

gain or loss resulting from the deemed receipt and redemption of a fractional share interest described below) and decreased by the amount of any cash received by you in the merger (excluding any cash received in lieu of a fractional share interest). Your holding period for the shares of Commerce common stock that you receive in the merger (including a fractional share interest deemed received and redeemed as described below) will include your holding period for the shares of West Pointe common stock that you surrender in the exchange.

 

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.

 

If you are a non-corporate holder of West Pointe common stock you may be subject to information reporting and backup withholding at a rate of 28% on any cash payments you receive. You generally will not be subject to backup withholding, however, if you:

 

 

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 WEST POINTE 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 March 31, 2006, relating to the beneficial ownership of West Pointe common stock by (a) each person known to West Pointe to be the beneficial owner of 5% or more of the outstanding West Pointe common stock, (b) each director and executive officer of West Pointe, and (c) all directors and executive officers of West Pointe as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission which generally attribute beneficial ownership of securities to persons who possess sole or shared voting power and/or investment power with respect to those securities. The business address of each person listed is 5701 West Main Street, Belleville, Illinois 62226. Except as otherwise indicated, each person indicated below has sole voting and investment power with respect to the shares of West Pointe common stock reported as beneficially owned by such person.

 

 

 

 

Certain members of management of West Pointe and the Bank, and their Boards of Directors, may have interests in the transaction in addition to their interests as shareholders of West Pointe which are summarized below. The West Pointe Board of Directors was aware of these factors and considered them, among other matters, in approving the Agreement and Plan of Merger.

 

Under the terms of the West Pointe 1998 Stock Option Plan, upon approval of the Agreement and Plan of Merger and merger by the West Pointe shareholders, a change of control will be deemed to have occurred. The effective date of such change of control will be determined by the West Pointe Board of Directors, but such change of control will occur prior to the Effective Time of the merger. On the effective date of the change of control, all currently unvested stock options held by West Pointe officers and directors will become fully vested and exercisable. Prior to the Effective Time, each outstanding West Pointe stock option will be exercised by the option holder or, pursuant to the Agreement and Plan of Merger, will be terminated. As a result, it is expected that all of the outstanding stock options to purchase 214,000 shares of West Pointe common stock will be exercised by the option holders prior to the Effective Time.

 

The following table sets forth the number of options held by West Pointe’s officers and directors expected to be exercised prior to the Effective Time. The estimated value assumes a West Pointe common stock price of $70.44, less the cost of exercise of the stock option.

 

 

The West Pointe Articles of Incorporation provide for the indemnification of each director, officer and employee of West Pointe against any liabilities and expenses related to his or her capacity as a director, officer or employee of West Pointe, subject to certain exceptions.

 

The Agreement and Plan of Merger provides that CBI-Kansas will indemnify the present directors, officers, employees and agents of West Pointe and the 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 West Pointe’s directors’ and officers’ liability insurance at the Effective Time to be covered for a period of at least three years following the Effective Time by CBI-Kansas’ directors’ and officers’ liability policy, or any equivalent substitute for that policy.

 

West Pointe and the Bank have entered into salary continuation agreements with Terry W. Schaefer, Bruce A. Bone, Anthony T. Holdener, Jr., Bonnie M. Hettenhausen, Robert G. Cady, Dale A. Hoepfinger, William M. Metzger, Albert A. Miller and Kory A. Kunze. Each of these agreements contains a change in control provision pursuant to which the officer may be entitled to receive certain benefits, as described below, in the event of a change in control of either West Pointe or the Bank. The merger will constitute a change in control under each of the salary continuation agreements.

 

Under the terms of the salary continuation agreement with Terry W. Schaefer, Mr. Schaefer is entitled to a change in control benefit of $153,200 payable immediately for 15 years following the event of a change in control of West Pointe or the Bank. Under the terms of salary continuation agreements with the other officers, if there is a change in control of West Pointe or the Bank, the executive would be entitled to an annual retirement benefit for 15 years payable beginning when the executive reaches age 65, provided that the executive is still employed by West Pointe and/or the Bank. The estimated annual retirement benefit payable to each other executive officer is as follows (which amount would be multiplied by 15 in the event the executive elected to receive a lump sum payment): Bruce A. Bone — $71,933; Anthony T. Holdener, Jr. — $38,824; Bonnie M. Hettenhausen — $29,597; Robert G. Cady — $32,612; Dale A. Hoepfinger — $25,269; William M. Metzger — $32,660; Albert A. Miller — $22,966; and Kory A. Kunze — $36,400. In the event that the executive officer dies, his or her beneficiary generally is entitled to receipt of the benefits otherwise payable to the executive.

 

Payments under each of the salary continuation agreements are capped to the extent that payments would result in the imposition of an excise tax payable under the excess parachute rules of Section 280G of the Code. Additionally, no payments will be made under the agreement if a payment will constitute a prohibited payment under any applicable law or regulation.

 

The Bank has entered into split dollar agreements or supplemental life insurance agreements with Harry E. Cruncleton, Terry W. Schaefer, Bruce A. Bone, Anthony T. Holdener, Jr., Bonnie M. Hettenhausen, Robert G. Cady, Dale A. Hoepfinger, Albert A. Miller and Kory A. Kunze. Each of these agreements contains a change in control provision pursuant to which the executive may be entitled to receive certain benefits, as described below, in the event of a change in control of either West Pointe or the Bank. The merger will constitute a change in control under each of the split dollar agreements.

 

Pursuant to the split dollar or supplemental life insurance agreements, the Bank pays the premiums on the life insurance policies covering the life of each executive officer. The Bank will receive a portion of the proceeds payable upon the death of the executive officer and the executive’s beneficiary will receive the remaining portion. The agreement with Mr. Cruncleton provides that the Bank will be the beneficiary of the net death proceeds (the net cash surrender value of the policy on February 1, 1996 plus the total premiums paid by the Bank since that date) under any life insurance policy insuring Mr. Cruncleton’s life. The approximate amount of proceeds that each other executive’s beneficiary will receive under the agreement is as follows: Terry W. Schaefer — $500,000 to $1,000,000, depending on the year of death; Bruce A. Bone — $250,000; Anthony T. Holdener, Jr. — $150,000; Bonnie M. Hettenhausen — $150,000; Robert G. Cady — $250,000; Dale A. Hoepfinger — 

$150,000; Albert A. Miller — $150,000; and Kory A. Kunze — $150,000. The agreements for each executive provide that the payments are contingent upon the executive not being terminated prior to age 65 and that such amount does not exceed the net death proceeds under the policy. Upon termination of the executive’s employment following a change of control in West Pointe or the Bank, the Bank is required to maintain the policy in full force and effect; however, the Bank may replace the policy with comparable insurance.

 

Each of the agreements described above may be amended prior to the Effective Time for compliance with Section 409A of the Code.

 

West Pointe is incorporated in the State of Illinois, while Commerce is incorporated in the State of Missouri. As a result of the merger, West Pointe shareholders, whose rights are currently governed by the West Pointe Articles of Incorporation, as amended (the “West Pointe Articles of Incorporation”), Bylaws (the “West Pointe Bylaws”) and the IBCA will, upon consummation of the merger, become Commerce shareholders. Following the merger, their rights will be governed by Missouri law (rather than Illinois 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 West Pointe’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 IBCA, the General and Business Corporation Law of Missouri (the “MGBCL”), the West Pointe Articles of Incorporation, the West Pointe Bylaws, the Commerce Articles of Incorporation and Commerce Bylaws.

 

West Pointe is authorized under the West Pointe Articles of Incorporation to issue 10,050,000 shares of capital stock, consisting of 10,000,000 common shares, $1.00 par value per share, and 50,000 preferred shares, $1.00 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 Commerce Articles of Incorporation and West Pointe Articles of Incorporation, holders of shares of Commerce common stock and West Pointe 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 IBCA, the shareholders of a corporation organized on or after January 1, 1982 shall have no preemptive rights to acquire unissued shares of the corporation except to the extent, if any, that such right is provided in the articles of incorporation. West Pointe was organized in 1997 and the West Pointe Articles of Incorporation provide that no holder of any of the shares of any class or series of stock shall have any preemptive rights.

 

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 IBCA, the board of directors of a corporation shall consist of one or more members, the number of which is to be fixed by the bylaws. The bylaws may establish a variable range for the size of the board by prescribing a minimum and maximum (which maximum may not exceed the prescribed minimum by more than five (5)) number of directors. The West Pointe Articles of Incorporation and West Pointe Bylaws state that the West Pointe Board of Directors shall have not less than six (6) nor more than fifteen (15) directors (exclusive of directors, if any, to be elected by holders of preferred stock of West Pointe, voting separately as a class). Currently the West Pointe Board of Directors consists of eight (8) directors.

 

Under the MGBCL, a corporation shall have a board of directors consisting of at least 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 twelve (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 (3). Currently, the Commerce Board of Directors consists of twelve (12) directors.

 

The IBCA permits classification of an Illinois corporation’s board of directors into two (2) or three (3) classes, divided as equally as possible, if the corporation’s articles of incorporation or bylaws so provide and if the board consists of six or more directors. The West Pointe Articles of Incorporation and West Pointe Bylaws provide for a staggered board of directors comprised of three classes, divided as nearly equal in size as possible. The West Pointe Articles of Incorporation and West Pointe Bylaws provide that directors are elected to a three (3) year term.

 

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 (1) and three (3) years. The Commerce Articles of Incorporation and the Commerce Bylaws provide that directors are elected to a three (3) year term.

 

The IBCA 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 in the case of a corporation with a classified board (see above) where the articles of incorporation may provide that directors may be removed only for cause. The West Pointe Articles of Incorporation provide for the removal of any director or the entire West Pointe Board of Directors, at any time, but only for cause (as defined in the West Pointe Articles of Incorporation), and only by the affirmative vote of the holders of at least 80% of the outstanding shares of capital stock of West Pointe entitled to vote generally in the election of directors, voting together as one class. The preceding sentence does not apply with respect to any director elected by the holders of preferred stock who have the right, voting separately as a class, to elect one or more 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 IBCA provides that director vacancies are to be filled by election of the shareholders at an annual or special meeting and by the board of directors between shareholder meetings unless otherwise provided in the bylaws. The West Pointe Articles of Incorporation and West Pointe Bylaws provide that any vacancy or newly created directorship shall be filled by a vote of two-thirds of the West Pointe Board of Directors.

 

The MGBCL provides that, unless otherwise provided in the articles of incorporation or the bylaws, the board of directors can fill vacancies by a majority vote until the next election of directors by shareholders. 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.

 

Both the IBCA and MGBCL provide that special meetings of the board of directors shall be held upon such notice as prescribed by the bylaws. The West Pointe Bylaws provide that special meetings of the West Pointe Board of Directors may be called by or at the request of the Chairman, President or one-third of the West Pointe Board of Directors and that such request need not state the purpose of the proposed special meeting. 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 IBCA and the MGBCL, a corporation may indemnify any person made or threatened to be made a party to any legal proceeding, including any suit by or in the name of the corporation, 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, officers, 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 West Pointe Articles of Incorporation provide rights of indemnification generally as set forth in the IBCA as described above. 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 IBCA and the MGBCL each provide for cumulative voting of directors; however, a corporation’s articles of incorporation may limit or eliminate cumulative voting rights. The West Pointe Articles of Incorporation provide that there shall be no cumulative voting by shareholders of any class or series in the election of directors of the Corporation. The Commerce Bylaws also provide that there shall be no cumulative voting by shareholders for the election of directors.

Quorum.  The IBCA and the MGBCL each provide that, unless provided in the corporation’s articles of incorporation or bylaws, a majority of votes of shares entitled to vote on a matter shall constitute a quorum but that the articles of incorporation may require any number or percent greater than a majority of votes to constitute a quorum. The West Pointe Bylaws and the Commerce Bylaws each state that 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 IBCA 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 articles of incorporation, bylaws or by statute. The West Pointe Bylaws and the Commerce Bylaws both contain provisions requiring majority voting on all matters except for those where otherwise specified in the company’s 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    and “— Anti-takeover Statutes” on page   .

 

Under the IBCA, special meetings of shareholders may be called by the president, the board of directors, by the holders of not less than one-fifth (1/5) of all of the outstanding shares entitled to vote on the matter at issue, or by such other officers or persons provided in the articles of incorporation or bylaws. The West Pointe Articles of Incorporation and West Pointe Bylaws provide that special meetings of shareholders may be called at any time by the West Pointe Board of Directors or by a committee of the West Pointe Board of Directors which has been duly designated and has been granted such authority by a resolution of the West Pointe Board of Directors.

 

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 IBCA, any shareholder shall have the right to examine, in person or by agent, at any reasonable time, the corporation’s books and records of account, minutes, voting trust agreements, and record of shareholders and to make extracts therefrom, but only if for a proper purpose. In order to exercise this right, a shareholder must make written demand upon the corporation, 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 IBCA, generally, a corporation may amend its articles of incorporation upon (1) a majority vote of the entire board, without shareholder action, for certain matters that do not adversely affect any class of shareholders and (2) by a resolution of the board and affirmative vote of at least two-thirds of the votes of the shares entitled to vote on the amendment for most matters. The West Pointe Articles of Incorporation provide that certain provisions of the West Pointe Articles of Incorporation (pertaining to shareholder meetings, cumulative voting, notice for nominations and proposals, directors, removal of directors, approval of certain business combinations, evaluation of business combinations, indemnification, elimination of directors’ liability and amendment of bylaws and articles of incorporation) require a vote of the holders of not less than 80% of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as one class, in order to

repeal, alter, amend or rescind such articles. The West Pointe shareholders may otherwise repeal, alter, amend or rescind any other provision of the West Pointe Articles of Incorporation as prescribed by the IBCA.

 

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 IBCA, the bylaws of a corporation may be made, altered, amended or repealed by the shareholders or the board of directors unless the articles of incorporation reserve this power for the shareholders. The West Pointe Articles of Incorporation and West Pointe Bylaws provide that the West Pointe Board of Directors may make, repeal, alter, amend or rescind the West Pointe Bylaws by a vote of two-thirds of the board of directors. The West Pointe Bylaws shall not be adopted, repealed, altered, amended or rescinded by the shareholders of West Pointe except by the vote of the holders of not less than 80% of outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as one class.

 

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 West Pointe Articles of Incorporation 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 West Pointe. Such notice must be received by the Secretary not less than 30 days nor more than 60 days prior to such meeting. Such written notice with respect to business proposals must set forth (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on West Pointe’s books, of the shareholder proposing such business, (iii) the class and number of shares of stock of West Pointe which are beneficially owned by such shareholder, and (iv) any material interest of the shareholder in such business. Such written notice with respect to nominations for election of directors must set forth (i) the name, age, business address and, if known, residential address of each proposed nominee, (ii) the principal occupation or employment of each nominee, (iii) the number of shares of stock of West Pointe that are beneficially owned by the nominee, (iv) such other information as would be required to be included in a proxy statement soliciting proxies for the election of the proposed nominee pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, and (v) as to the shareholder giving such notice, (a) his, her or its name and address, as they appear on West Pointe’s books, and (b) the class and number of shares of stock of West Pointe which are beneficially owned by such shareholder.

 

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 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 IBCA, an Illinois corporation must obtain the affirmative vote of the holders of two-thirds of the outstanding shares of the corporation entitled to vote thereon to approve a merger or consolidation, provided that the corporation’s articles of incorporation may supersede the two-thirds statutory requirement by specifying a larger or smaller vote so long as at least a majority vote is required. However, the West Pointe Articles of Incorporation do not amend the two-thirds statutory requirement.

 

Under the MGBCL, a Missouri corporation must obtain the affirmative vote of the holders of two-thirds of the outstanding shares of the corporation entitled to vote thereon to approve a merger or consolidation.

 

Neither the IBCA 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 IBCA provides dissenters’ rights to shareholders entitled to vote in merger transactions (except as indicated below), in a sale, lease or exchange of all, or substantially all, of the property and assets of the corporation other than in the usual and regular course of business, certain amendments of the articles of incorporation that materially and adversely affects the dissenters’ shares, or as may otherwise be provided in the articles of incorporation, bylaws or board or shareholders resolution. The dissenting shareholders, if they comply with the procedural requirements of the IBCA, are entitled to elect not to participate in the subject transaction and to receive instead the fair value of their shares in cash.

 

The MGBCL provides dissenters’ rights to shareholders entitled to vote in mergers or consolidations. The dissenting shareholders, if they comply with the procedural requirements of the MGBCL, are entitled to elect not to participate in the subject transaction and to receive instead the fair value of their shares in cash.

 

The IBCA 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. An “interested shareholder” means any person who owns or controls 15% or more of the outstanding shares of the corporation’s voting stock in Illinois or 20% or more in Missouri.

 

Under the IBCA, a corporation may not engage in a business combination with an interested shareholder for a period of three (3) years following the time that the shareholder became an “interested shareholder” unless:

 

 

 

Under the MGBCL, a corporation may not engage in a business combination with an interested shareholder for a period of 5 years following the time that the shareholder became an “interested shareholder” other than:

 

 

Both the IBCA 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 West Pointe nor Commerce has done so.

 

The IBCA does not contain a control share acquisition statute, and neither the West Pointe Articles of Incorporation nor the West Pointe Bylaws address the issue.

 

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.

 

SELECTED CONSOLIDATED FINANCIAL DATA OF

(unaudited, in thousands except per share data)

 

The following table sets forth selected consolidated financial information of West Pointe for the periods ended March 31, 2006 and 2005 and for the years ended December 31, 2005, 2004, 2003, 2002 and 2001. The information contained in this table should be read in conjunction with West Pointe’s historical Consolidated Financial Statements and related notes thereto included elsewhere in this Proxy Statement/Prospectus.