<PAGE>
As filed with the Securities and Exchange Commission on March 31, 1998.
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMMUNITY FIRST BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
DELAWARE 6022 46-0391436
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
520 Main Avenue
Fargo, North Dakota 58124-0001
(701) 298-5600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive office)
------------------------
Donald R. Mengedoth
President
Community First Bankshares, Inc.
520 Main Avenue
Fargo, North Dakota 58124-0001
(701) 298-5600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
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<CAPTION>
<S> <C>
Patrick Delaney, Esq. Thomas L. Beckmann, Esq.
Martin R. Rosenbaum, Esq. Thomas L. Beckmann, P.C.
Lindquist & Vennum P.L.L.P. 1800 Industrial Circle, Suite A-1
4200 IDS Center Longmont, Colorado 80501
Minneapolis, Minnesota 55402 Telephone: (303) 776-7700
Telephone: (612) 371-3211
</TABLE>
Approximate date of commencement of proposed sale to public: As
soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
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<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share Offering Price(2) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value............ 720,000 shares (2) $8,845,335 $2,610
- ---------------------------------------- --------------------- ---------------- ------------------ -----------------
- ---------------------------------------- --------------------- ---------------- ------------------ -----------------
</TABLE>
(1) Represents the maximum number of shares issuable upon consummation of the
Merger as described in the Registration Statement.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2) of the Securities Act of 1933, as amended, based
upon the aggregate book value of the shares of common stock of Pioneer Bank
of Longmont as of December 31, 1997.
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 THAT 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.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
PIONEER BANK OF LONGMONT
1610 Hover Street
Longmont, CO 80501
(303) 651-7777
,1998
-------
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
Shareholders of Pioneer Bank of Longmont ("Pioneer") to be held on
, , 1998, at : a.m., local time, at 1610 Hover Street,
Longmont, Colorado.
The purpose of the meeting is to seek your approval of the Agreement
and Plan of Merger, as amended, among Pioneer, Community First National Bank,
a de novo national banking association ("Acquisition Subsidiary"), and
Community First Bankshares, Inc. ("CFB"), dated as of November 6, 1997 (the
"Merger Agreement") and the merger of Pioneer with and into the Acquisition
Subsidiary contemplated thereby (the "Merger"). If the Merger is consummated,
each outstanding share of common stock, par value $10.00 per share, of
Pioneer ("Pioneer Common Stock") (other than shares held by dissenting
shareholders) will be converted into shares of common stock, par value $.01
per share, of CFB ("CFB Common Stock"). The number of shares of CFB Common
Stock to be exchanged for shares of Pioneer Common Stock will be determined
by a formula set forth in the Merger Agreement, which is more fully described
in the accompanying Proxy Statement-Prospectus. Generally, assuming (i) the
book value of Pioneer is $8,100,000 as of the last day of the month preceding
consummation of the Merger, (ii) the "CFB Trading Value" (as defined in the
accompanying Proxy Statement - Prospectus) is between $46.00 and $52.50 per
share, and (iii) 50,000 shares of Pioneer Common Stock are outstanding
immediately prior to consummation of the Merger, 14 shares of CFB Common
Stock will be exchanged for each share of Pioneer Common Stock. If any of
these factors vary, the number of shares of CFB Common Stock that will be
exchanged for each share of Pioneer Common Stock will be altered. Fractional
shares will not be issued. Cash will be paid in lieu of fractional shares.
The accompanying Proxy Statement-Prospectus is a proxy statement for
the Special Meeting and a prospectus describing the shares of CFB Common
Stock to be issued in the Merger. The Proxy Statement-Prospectus and the copy
of the Merger Agreement attached as Appendix A describe the proposed Merger
more fully and include detailed information about Pioneer and CFB. Please
read this information carefully before voting on the proposed Merger.
AFTER CAREFUL CONSIDERATION OF THE TERMS OF THE PROPOSED MERGER,
YOUR BOARD OF DIRECTORS HAS CONCLUDED THAT THE ACQUISITION OF PIONEER BY CFB
IS IN THE BEST INTERESTS OF PIONEER AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER.
Your Board believes that the Merger will, among other things, give
Pioneer shareholders a fair price for their Pioneer Common Stock and the
opportunity to convert their shares of Pioneer Common Stock on a tax-free
basis to shares in a larger, more diversified enterprise engaged in the
banking business in many areas, including our region. CFB Common Stock is
traded in the over-the-counter market on the Nasdaq National Market. Provided
you are not an executive officer, director or significant shareholder of
Pioneer, your shares of CFB Common Stock will be freely tradable upon the
consummation of the Merger.
You should consult your own tax advisor concerning the federal
income tax consequences, and any applicable foreign, state, local or other
tax consequences, of the Merger.
We hope that you will be able to attend the Special Meeting. The
Merger Agreement must be approved by the holders of two-thirds of the
outstanding shares of Pioneer Common Stock. Whether or not you plan to
attend, we urge you to COMPLETE, SIGN, DATE AND RETURN the accompanying proxy
card to make certain that your shares will be represented at the Special
Meeting. If you decide to attend the Special Meeting and wish to vote your
shares personally, you may revoke your proxy at any time.
Sincerely,
Daniel L. Allen
PRESIDENT
<PAGE>
PIONEER BANK OF LONGMONT
1610 Hover Street
Longmont, CO 80501
(303) 651-7777
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
-----------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Pioneer Bank of Longmont, ("Pioneer") will be held on ______, ________, 1998,
at __:__ a.m., local time, at 1610 Hover Street, Longmont, Colorado, for the
following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of November 6, 1997, as amended (the "Merger
Agreement"), among Pioneer, First National Bank, a de novo national banking
association (the "Acquisition Subsidiary"), and Community First Bankshares,
Inc. ("CFB"), a copy of which is attached to the accompanying Proxy
Statement-Prospectus as Appendix A, pursuant to which Pioneer will be merged
with and into the Acquisition Subsidiary (the "Merger"). Upon consummation of
the Merger, each outstanding share of common stock, $10.00 per share par
value, of Pioneer ("Pioneer Common Stock") (other than shares held by
dissenting shareholders) will be converted into shares of CFB common stock,
the number of which will be determined by a formula set forth in the Merger
Agreement, which is more fully described in the accompanying Proxy
Statement-Prospectus; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
If the Merger is consummated, the shareholders of Pioneer who
dissent from the proposed Merger and comply with the requirements of Article
113 of the Colorado Business Corporation Act (the "COBCA") have the right to
seek appraisal for their shares. See "The Merger - Dissenters' Rights" in the
accompanying Proxy Statement-Prospectus for a statement of the rights of
dissenting shareholders and a description of the procedures required to be
followed by them to perfect their dissenters' rights. A copy of Article 113
of the COBCA is attached as Appendix C to the accompanying Proxy Statement-
Prospectus.
The affirmative vote of two-thirds of the outstanding shares of
Pioneer Common Stock is required to approve the Merger Agreement.
Only holders of record of outstanding shares of Pioneer Common Stock
at the close of business on , 1998 will be entitled to notice
of, and to vote at, the Special Meeting or any adjournment thereof.
Shareholders will be able to revoke their proxies by submitting a substitute
proxy bearing a later date or by attending the meeting, revoking their proxy
and voting in person.
By Order of the Board of Directors
Daniel L. Allen
PRESIDENT
Longmont, Colorado
, 1998
- -----------
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THE PROXY CARD.
<PAGE>
PROXY STATEMENT-PROSPECTUS
--------------------
PROXY STATEMENT FOR SPECIAL MEETING
OF
SHAREHOLDERS OF PIONEER BANK OF LONGMONT
TO BE HELD ON , 1998
------------
-------------------------
PROSPECTUS OF COMMUNITY FIRST BANKSHARES, INC.
-------------------------
This Proxy Statement-Prospectus constitutes the Proxy Statement of
Pioneer Bank of Longmont ("Pioneer") to be used in soliciting proxies of
Pioneer shareholders in connection with the Special Meeting of Shareholders
of Pioneer to be held on , , 1998. The purpose of the
Special Meeting is to consider and vote upon a proposal to approve the
Agreement and Plan of Merger, as amended (the "Merger Agreement"), among
Pioneer, Community First National Bank, a de novo national banking
association (the "Acquisition Subsidiary") and Community First Bankshares,
Inc. ("CFB"), pursuant to which Pioneer will be merged with and into the
Acquisition Subsidiary (the "Merger").
This Proxy Statement-Prospectus also constitutes the Prospectus of
CFB with respect to a maximum of 720,000 shares of CFB common stock, par
value $.01 per share ("CFB Common Stock"), to be issued in connection with
the Merger. CFB has filed a Registration Statement on Form S-4 under the
Securities Act of 1933, as amended (the "Securities Act"), covering such
shares of CFB Common Stock. When the Merger becomes effective, each
outstanding share of Pioneer common stock, par value $10.00 per share
("Pioneer Common Stock"), will be converted into shares of CFB Common Stock,
the number of which will be determined by a formula set forth in the Merger
Agreement, which is more fully described herein (the "Exchange Rate"), and
cash will be paid in lieu of fractional shares (cumulatively, the "Merger
Consideration"). Generally, assuming (i) the book value of Pioneer is
$8,100,000 as of the last day of the month preceding consummation of the
Merger, (ii) the "CFB Trading Value" (as defined herein) is between $46.00
and $52.50 per share, and (iii) 50,000 shares of Pioneer Common Stock are
outstanding immediately prior to consummation of the Merger, the Exchange
Rate will be 14 shares of CFB Common Stock for each outstanding share of
Pioneer Common Stock. If any of these factors vary, the Exchange Rate will be
altered. See "The Merger Conversion of Pioneer Common Stock".
The outstanding shares of CFB Common Stock are, and the shares of
CFB Common Stock offered hereby will be, traded on the Nasdaq National
Market. The last reported sale price of CFB Common Stock on the Nasdaq
National Market on , 1998 was $ per share.
This Proxy Statement-Prospectus and form of proxy are first being
mailed to shareholders of Pioneer on or about , 1998.
THE CFB COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER AND
RECEIVED BY PIONEER SHAREHOLDERS INVOLVES CERTAIN RISKS. SEE "SPECIAL
CONSIDERATIONS REGARDING CFB."
THE SECURITIES TO BE ISSUED PURSUANT TO THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Proxy Statement-Prospectus is , 1998
<PAGE>
AVAILABLE INFORMATION
CFB has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the offering of
CFB Common Stock to be issued in connection with the Merger, and this Proxy
Statement-Prospectus constitutes a prospectus of CFB filed as part of the
Registration Statement. This Proxy Statement-Prospectus does not contain all
of the information set forth in such Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission.
CFB is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by CFB can
be inspected and copies of such material can be obtained at prescribed rates
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048.
CFB's Common Stock is quoted on the Nasdaq National Market System, and such
reports, proxy statements and other information can also be inspected at the
offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
The Commission also maintains an Internet web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including CFB, that file electronically with the
Commission.
No person is authorized to give any information or make any
representation not contained in this Proxy Statement- Prospectus and if given
or made, such information or representation should not be relied upon. This
Proxy Statement- Prospectus shall not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction in which
it would be unlawful to make such offer or solicitation. Neither the delivery
of this Proxy Statement-Prospectus at any time, nor any offer or solicitation
made hereunder, shall under any circumstances imply that the information set
forth herein is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by CFB with the Commission are
incorporated by reference in this Proxy Statement- Prospectus:
(i) CFB's Annual Report on Form 10-K for the year ended December 31,
1997, as amended on Form 10-K/A filed with the Commission on March 27, 1998.
(ii) CFB's Proxy Statement for the Annual Meeting of Shareholders to
be held on April 28, 1998 (except to the extent portions of such document are
not deemed incorporated by reference into any filing under the Securities Act
or the Exchange Act); and
(iii) The description of CFB's securities set forth in CFB's Form 8-A
Registration Statement filed with the Commission on April 7, 1994 and amended
on September 19, 1994 and in CFB's Form 8-A Registration Statement filed with
the Commission on January 9, 1995.
All documents filed by CFB pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act on or after the date of this Proxy
Statement-Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference into this Proxy Statement-Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Proxy
Statement-Prospectus to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part of this Proxy Statement-Prospectus, except as so modified or superseded.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM MARK A. ANDERSON, SECRETARY, COMMUNITY FIRST
BANKSHARES, INC., 520 MAIN AVENUE, FARGO, NORTH DAKOTA 58124-0001; TELEPHONE
(701) 298-5600. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY , 1998.
2
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION........................................................2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................2
SUMMARY......................................................................5
Parties to the Merger...................................................5
Special Meeting of Pioneer Shareholders.................................6
Terms of the Merger.....................................................7
SPECIAL CONSIDERATIONS REGARDING CFB........................................18
RECENT DEVELOPMENTS REGARDING CFB...........................................21
Pending Acquisitions...................................................21
Recent Significant Acquisitions........................................21
GENERAL INFORMATION.........................................................23
Purpose of the Special Meeting.........................................23
Vote Required; Shares Entitled to Vote.................................23
Voting and Revocation of the Proxies...................................23
Solicitation of Proxies................................................24
MARKET PRICES AND DIVIDEND POLICY...........................................25
Market for CFB Common Stock............................................25
Market for Pioneer Common Stock........................................25
Shareholder Data.......................................................25
CFB Common Stock Dividend Payment History and
Restrictions.........................................................25
Pioneer Dividend Policy and Payment History............................25
THE MERGER..................................................................26
General ..............................................................26
Background of the Merger...............................................26
Reasons for the Merger.................................................26
Effective Time of the Merger...........................................27
Consequences of the Merger.............................................27
Conversion of Pioneer Common Stock.....................................28
Delivery of CFB Common Stock and Cash Consideration....................29
Certain Federal Income Tax Consequences................................29
Dissenters' Rights.....................................................30
Representations and Warranties.........................................32
Covenants; Conduct of Pioneer's Business Pending the Merger............32
Regulatory Approvals; Conditions to the Merger.........................34
Amendment; Waiver; Termination.........................................35
Effect on Pioneer Employee Benefit Plans...............................35
Expenses ..............................................................36
Accounting Treatment...................................................36
Interests of Certain Persons; Certain Transactions.....................36
Resale of CFB Common Stock.............................................36
BUSINESS OF PIONEER.........................................................38
General ..............................................................38
Market Price of and Dividends on Pioneer Stock.........................38
3
<PAGE>
Investment Activities..................................................38
Directors and Executive Officers.......................................38
Transactions with Officers, Directors and Other Affiliates.............39
Supervision and Regulation.............................................39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PIONEER...............41
Basis of Presentation..................................................41
Results of Operations..................................................41
Pioneer Condition......................................................44
PIONEER'S PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT.......................................53
MATERIAL DIFFERENCES IN RIGHTS OF PIONEER SHAREHOLDERS......................54
Capital Stock..........................................................54
Shareholders' Action Without a Meeting.................................54
Annual Meeting of Shareholders.........................................55
Special Meeting of Shareholders........................................55
Proxies ..............................................................55
Preemptive Rights......................................................55
Cumulative Voting......................................................55
Dissolution............................................................56
Required Vote for Authorization of Certain Actions.....................56
Dissenters' Rights.....................................................56
Conflicts of Interest..................................................57
Dividends and Distributions............................................57
Anti-takeover Provisions...............................................57
Charter Amendments.....................................................58
Amendment of Bylaws....................................................58
LEGAL MATTERS...............................................................58
EXPERTS ...................................................................59
INDEX TO FINANCIAL STATEMENTS...............................................F-1
Appendices:
Appendix A: Agreement and Plan of Merger, dated as of
November 6, 1997 among Pioneer, the
Acquisition Subsidiary and CFB ...........................A-1
Appendix B: First Amendment to Agreement and
Plan of Merger, dated as of the 19th
day of December, 1997 among CFB,
the Acquisition Subsidiary and Pioneer....................B-1
Appendix C: Statutory Rights of Dissenting
Shareholders (Article 113 of the
Colorado Business Corporation Act)........................C-1
Appendix D: Examples of Calculations of
the Exchange Rate.........................................D-1
4
<PAGE>
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED
ELSEWHERE IN THIS PROXY STATEMENT-PROSPECTUS. REFERENCE IS MADE TO, AND THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS, THE
APPENDICES HERETO AND DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
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General............................ CFB, the Acquisition Subsidiary and Pioneer have entered into the Merger
Agreement which provides that Pioneer will be merged with and into the Acquisition
Subsidiary, each outstanding share of Pioneer Common Stock, other than shares held
by shareholders who perfect statutory dissenters' rights, will be converted at the time
the Merger becomes effective into shares of CFB Common Stock, the number of
which will be determined by a formula set forth in the Merger Agreement and more
fully described below. See "The Merger - Conversion of Pioneer Common Stock."
Subject to the terms and conditions of the Merger Agreement, the Merger will
become effective on the date articles of merger are filed with the Secretary of State
of the State of Colorado and a certificate of merger is filed with the Secretary of State
of the State of Delaware. It is presently contemplated that the Merger will become
effective as soon as practicable after shareholder approval of the Merger. See "The
Merger".
PARTIES TO THE MERGER:
Community First
Bankshares, Inc.................... Community First Bankshares, Inc. ("CFB"), is a multi-bank holding company that as
of December 31, 1997 operated banks and bank branches (the "CFB Banks") in 109
communities in Arizona, Colorado, Iowa, Minnesota, Nebraska, North Dakota, South
Dakota, Wisconsin and Wyoming. Total assets of CFB were approximately $4.9
billion as of December 31, 1997. CFB operates community banks primarily in small
and medium-sized communities and the surrounding market areas. CFB provides a
full range of commercial and consumer banking services primarily to individuals and
businesses, including commercial and consumer banking, trust, insurance and
investment services.
CFB's strategy is to operate and continue to acquire banks and bank branches in
communities which generally have populations between 3,000 and 50,000 and
are located in CFB's key target acquisition states of Arizona, Colorado, Iowa,
Kansas, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and
Wyoming, and additionally in the adjacent states of Idaho, Illinois, Missouri,
New Mexico, Oklahoma and Utah (this seventeen state area is collectively referred to
as the "Acquisition Area"). Such communities are believed to provide CFB with the
opportunity for a stable, relatively low-cost deposit base. The individual banks
and bank branches sought to be acquired by CFB generally have approximately $20 million
to $150 million in assets.
CFB provides the CFB Banks with the advantages of affiliation with a multi-bank
holding company, such as data processing services, credit policy formulation and
review, investment management and specialized staff support, while granting substantial
autonomy to managers of the CFB Banks with respect to day-to-day operations, customer
service decisions and marketing. The CFB Banks are encouraged to participate in community
activities, support local charities and community development, and otherwise serve their
communities.
</TABLE>
5
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<TABLE>
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CFB's principal executive offices are located at 520 Main Avenue, Fargo, North Dakota
58124-0001 and its telephone number is (701) 298-5600.
Pioneer Bank of
Longmont........................... Pioneer Bank of Longmont ("Pioneer" or the "Bank") was organized on February 15, 1983.
As of December 31, 1997, Pioneer had consolidated total assets of $130 million and total
stockholders' equity of $8.8 million. Following the Merger, Pioneer will represent 2.6%
of the assets, 2.5% of the equity, 3.4% of the revenues, 4.2% of the net income and 3.3%
of the voting power of CFB, using data as of December 31, 1997 and based upon the
assumptions set forth in "Historical and Pro Forma Comparative Unaudited Per Share Data"
below.
The Bank is a community bank that serves a wide range of commercial, agricultural and
consumer borrowing needs within its market. The Bank is primarily engaged in attracting
deposits and investing those funds in loans and investment securities. The Bank extends
various types of loans, including short-and long-term residential, agricultural and
commercial real estate mortgage loans to individuals, farmers, and businesses; secured
and unsecured commercial loans; indirect installment loans; and second mortgages and
home equity lines. Commercial lending products include lines and letters of credit,
receivable and inventory financing and equipment financing. The Bank provides a full
range of deposit products, cluding checking, savings accounts, certificates of deposit,
and money market instruments. See "Business of Pioneer."
Pioneer's main office is located at 1610 Hover Street, Longmont, Colorado 80501, and its
telephone number is (303) 651-7777.
SPECIAL MEETING OF PIONEER SHAREHOLDERS:
Time and Date...................... : a.m., local time, on , , 1998.
Place.............................. 1610 Hover Street, Longmont, Colorado.
Purposes of Special Meeting........ To consider and vote upon a proposal to approve the Merger Agreement attached
hereto as Appendix A, which provides for the merger of Pioneer with and into the
Acquisition Subsidiary. Other terms and provisions related to the Merger are set
forth in the Merger Agreement and are summarized in this Proxy Statement-
Prospectus. See "The Merger."
Required Vote For the
Proposals; Record Date............. Only holders of record of shares of Pioneer Common Stock outstanding as of the
close of business on , 1998 (the "Record Date") are entitled to notice
of and to vote at the Pioneer Special Meeting. Approval of the proposal will require
the affirmative vote of two-thirds of the shares of Pioneer Common Stock outstanding
as of the close of business on the Record Date. See "General Information -Vote
Required; Shares Entitled to Vote."
</TABLE>
6
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Interests of
Certain Persons;
Certain Transactions............... As of the Record Date, the officers and directors of Pioneer and their affiliates bene
ficially owned all 50,000 shares of outstanding Pioneer Common Stock. Pursuant to
the Merger Agreement, the Board of Directors of Pioneer has agreed to use its best
efforts to obtain the requisite shareholder approval of the Merger. See "The Merger -
Interests of Certain Persons; Certain Transactions" and "Pioneer's Principal
Shareholders and Security Ownership of Management."
Dissenters' Rights................. Each holder of Pioneer Common Stock has the right to dissent from the Merger and
obtain payment of the fair value of such shareholder's stock in cash pursuant to
Article 113 of the Colorado Business Corporation Act (the "COBCA") in lieu of
receiving the Merger Consideration in the Merger. Any Pioneer shareholder
contemplating exercising the right to demand such payment should carefully review
Article 113 of the COBCA, a copy of which is attached hereto as Appendix C, and
in particular the required procedural steps. A shareholder who fails to comply with
these procedural requirements may lose the right to dissent and to obtain payment of
the fair value of such shareholder's stock. See "The Merger - Dissenters' Rights."
Special Considerations
Regarding CFB...................... For information regarding various risks and other considerations associated with CFB
Common Stock, see "Special Considerations Regarding CFB."
Board Recommendation............... THE BOARD OF DIRECTORS OF PIONEER UNANIMOUSLY
RECOMMENDS APPROVAL OF THE MERGER.
TERMS OF THE MERGER:
Conversion of Pioneer
Shares............................. Upon consummation of the Merger, each outstanding share of Pioneer Common
Stock (other than shares subject to dissenters' rights) will be converted into shares
of CFB Common Stock, the number of which (the "Exchange Rate") will be
determined by dividing 700,000 by the number of outstanding shares of Pioneer
Common Stock as of the closing date. Assuming that 50,000 shares of Pioneer
Common Stock are outstanding on such date, the Exchange Rate will be 14 shares
of CFB Common Stock for each share of Pioneer Common Stock, subject to
adjustment if (i) the average of the per-share closing price for the CFB Common
Stock on the Nasdaq Market for the 20 trading days ending at the end of the fourth
day immediately preceding the Closing Date (as defined below under "- Effective
Time of the Merger") (the "Trading Value of CFB Common Stock") is greater than
$52.50 and/or (ii) the Pioneer Value, (as such terms are defined below under "The
Merger - Conversion of Pioneer Shares") as of the last day of the month immediately
preceding the Effective Time of the Merger (as defined below under "- Effective
Time of the Merger"), is greater than $8,100,000. The Exchange Rate formula is
more fully described under "The Merger - Conversion of Pioneer Common Stock,"
and examples of calculations of the Exchange Rate (based on various assumptions)
are attached hereto as Appendix D.
The following table illustrates the estimated Exchange Rate, based on various assumed
levels of the Trading Value of CFB Common Stock, various assumed Pioneer Values and other
assumptions set forth in Appendix D:
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Assumed
Trading Value Assumed
of CFB Common Pioneer Hypothetical
STOCK VALUE EXCHANGE RATE
<S> <C> <C> <C>
$ 46.00 $ 8,100,000 14:1
46.00 8,500,000 14.17:1
54.00 8,500,000 13.76:1
54.00 8,100,000 13.61:1
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
THE EXAMPLES IN APPENDIX D, SUMMARIZED IN THE TABLE ABOVE, REPRESENT AN ESTIMATE OF
THE DATA THAT WILL BE USED TO DETERMINE THE EXCHANGE RATE. THE ACTUAL
EXCHANGE RATE MAY BE LOWER THAN THE LOWEST AMOUNT PRESENTED. IF THE ACTUAL PIONEER
VALUE IS LESS THAN $8,100,000, A CONDITION TO CONSUMMATION OF THE TRANSACTION WILL NOT
BE SATISFIED AND CFB WILL HAVE THE RIGHT UNDER THE MERGER AGREEMENT TO TERMINATE THE
TRANSACTION. SIMILARLY, IF THE ACTUAL TRADING VALUE OF CFB COMMON STOCK IS LESS THAN
$46.00 PER SHARE, PIONEER WILL HAVE THE RIGHT UNDER THE MERGER AGREEMENT TO TERMINATE
THE TRANSACTION.
Background of Merger............. The terms of the Merger were negotiated at arm's length by the management
personnel and Boards of Directors of CFB and Pioneer during the period from
August 7, 1997 through November 6, 1997. The Board of Directors of Pioneer
believes that the Merger is in the best interests of its shareholders. In reaching that
conclusion, the Board considered, among other things, the greater size and
geographic diversity of CFB, CFB's access to capital and opportunities for continued
growth in its larger market area, the economies to be achieved by integrating the
operations of the Bank with the CFB Banks, the likelihood of increased competition
as the result of the rapidly changing environment in the banking industry with regard
to branch banking, the present market price being paid for bank stocks as a whole
and the liquidity of the CFB Common Stock which is publicly traded in the national
over-the-counter market. See "The Merger - Background of the Merger" and "-
Reasons for the Merger."
Conditions to the Merger;
Termination...................... Consummation of the Merger is conditioned upon the fulfillment of certain conditions
set forth in the Merger Agreement. In addition to the requirement of regulatory
approval, Pioneer shareholder approval and certain other conditions, the completion
of the Merger is subject to the continuing accuracy of the representations of the
parties made in the Merger Agreement, the performance of the obligations of each
party under the Merger Agreement and the absence of threatened or pending
litigation challenging the Merger. In addition, the Merger Agreement may be
terminated by the mutual consent of the Boards of Directors of CFB and Pioneer; by
Pioneer or CFB if any requisite regulatory approval is denied or if any governmental
entity of competent jurisdiction issues a final nonappealable order enjoining or
otherwise prohibiting the Merger; by either Pioneer or CFB if the Merger is not
effective by May 30, 1998; by Pioneer or CFB if the other party materially breaches
any of the covenants and agreements contained in the Merger Agreement and such
party does not cure such breach within 20 business days after receipt of proper notice
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
of such breach; by Pioneer if the Trading Value of CFB Common Stock is less than $46.00 per
share; and by CFB if the Pioneer Value is less than $8,100,000. Subject to certain
limitations, CFB may also terminate the Merger Agreement if CFB objects to any exceptions
in the title insurance commitments for all real property owned by Pioneer and such
exceptions are not eliminated by Pioneer, or if CFB does not approve the Phase I Hazardous
Waste Assessment of all real properties owned by Pioneer and Pioneer does not correct or
satisfy CFB's objections to such Assessment. See "The Merger - Regulatory Approvals;
Conditions to the Merger" and "Amendment; Waiver; Termination."
Regulatory Approvals............. The Merger is subject to approval by the Federal Reserve Board and the Division of
Banking of the State of Colorado. CFB filed the required application with the Federal
Reserve Board on February 13, 1998 and received approval on March 11, 1998.
CFB filed the required application with the Division of Banking on February 13,
1998. See "The Merger - Regulatory Approvals; Conditions to the Merger."
Effective Time of the Merger..... Subject to the terms and conditions of the Merger Agreement, the Merger will be
effective when so declared by the Office of the Comptroller of the Currency after final
approval of the transaction (the "Effective Time of the Merger"). Such declaration
shall be requested by CFB following the satisfaction or waiver of the conditions set
forth in the Merger Agreement or on such other date upon which the parties may
agree (the "Closing Date"). The parties have agreed to use their best efforts to cause
the Merger to be completed within thirty business days after the satisfaction or waiver
of the conditions set forth in the Merger Agreement. The parties expect the Merger
to become effective as soon as practicable following shareholder approval of the
Merger. See "The Merger - Effective Time of the Merger."
Certain Federal Income
Tax Consequences................. The Merger is intended to qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). If the
Merger so qualifies, (i) no gain or loss will be recognized by the holders of Pioneer
Common Stock upon their receipt of CFB Common Stock in exchange for their
shares of Pioneer Common Stock, except with respect to cash received in lieu of
fractional shares which will result in a taxable gain or loss, (ii) the aggregate income
tax basis of the CFB Common Stock received generally will be equal to the aggregate
income tax basis of the Pioneer Common Stock surrendered, and (iii) the holding
period of the CFB Common Stock received generally will include the holding period
of the Pioneer Common Stock surrendered. Pioneer's obligation to consummate the
Merger is conditioned upon its receipt of an opinion to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code. EACH
HOLDER OF PIONEER COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, AS WELL
AS ANY APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES, BASED UPON
SUCH HOLDER'S OWN PARTICULAR FACTS AND CIRCUMSTANCES. See "The Merger -
Certain Federal Income Tax Consequences" and "- Regulatory Approvals;
Conditions to the Merger."
Accounting Treatment............. The Merger is expected to be accounted for as a pooling of interests for financial
reporting purposes. CFB shall have received a letter, prior to consummation, from
CFB's independent auditors regarding such firm's concurrence with CFB
management's and Pioneer management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting for the merger under Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance with the
Merger Agreement. Among other considerations, such letter will be subject to the
receipt by Ernst & Young LLP and CFB of a letter from Pioneer's independent
auditors relating to the eligibility of Pioneer to qualify for pooling treatment and to
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
the condition that less than 10% of the Merger Consideration will consist of cash,
including (i) cash paid to holders of outstanding shares of Pioneer Common Stock
who dissent from the proposed Merger and received cash for their shares of Common
Stock, and (ii) cash paid in the Merger in lieu of fractional shares of Pioneer Common
Stock. See "The Merger - Accounting Treatment."
Surrender of
Certificates..................... As soon as practicable after the Effective Time of the Merger, a letter of transmittal
with instructions for submission of stock certificates will be mailed to all Pioneer
shareholders of record as of the Closing Date (other than Pioneer shareholders who
have exercised and not subsequently withdrawn or lost statutory dissenters' rights).
SHAREHOLDERS SHOULD NOT SUBMIT THEIR PIONEER STOCK CERTIFICATES UNTIL SUCH TRANSMITTAL
LETTER AND INSTRUCTIONS ARE RECEIVED. See "The Merger - Delivery of CFB Common Stock."
Resale of CFB
Common Stock..................... The shares of CFB Common Stock issuable to shareholders of Pioneer upon
consummation of the Merger will be registered under the Securities Act. Such shares
may be traded freely and without restriction by those shareholders not deemed to be
"affiliates" of CFB or Pioneer as that term is defined in the rules under the Securities
Act. CFB Common Stock received by those shareholders of Pioneer who are deemed
to be "affiliates" of Pioneer may be resold without registration only as provided for
by Rule 145 under the Securities Act, or as otherwise permitted under the Securities
Act, following the public release by CFB of its financial results for a period that
includes thirty days of combined operations following the Merger. See "The Merger
- Resale of CFB Common Stock."
Certain Differences in
Rights of Shareholders........... Upon consummation of the merger of Pioneer with and into the Acquisition
Subsidiary, the Pioneer common shareholders will become CFB stockholders. As
a result, their rights as shareholders, which are now governed by Colorado state law
and by the Articles of Incorporation and the Bylaws of Pioneer, will be governed by
Delaware state law and the Certificate of Incorporation and the Bylaws of CFB. See
"Comparison of Delaware and Colorado Corporate Laws" for a summary of certain
material differences between the rights of holders of Pioneer Common Stock and the
rights of holders of CFB Common Stock.
In addition, Delaware law substantially restricts the ability of major shareholders
to effect business combinations with CFB in the absence of prior approval by the Board
of Directors. Although this legislation should not interfere with any merger or other
business combination approved by CFB's Board of Directors, certain shareholders may
consider such legislation to have disadvantageous effects. Such provisions may deter
the accumulation of sizable equity interests in CFB and may deprive shareholders of the
benefits of stock price increases typically associated with hostile tender offers
and other contests for control. CFB also has adopted a shareholder rights plan which
could in certain circumstances serve as a deterrent against a change of control not
approved by CFB's Board of Directors. The existence of such provisions and plan may,
in turn, depress the market price of CFB Common Stock. See "Comparison of Delaware
and Colorado Corporate Laws."
Market Prices.................... The CFB Common Stock is traded in the over-the-counter market on the Nasdaq
National Market under the symbol "CFBX", while the Pioneer Common Stock has
not been traded and has no established trading market. The first public
announcement of the proposed Merger was made during the trading day on
November 7, 1997. On that date and on ___________, 1998, the closing sales price
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
of the CFB Common Stock was $47.625 and $_______, respectively. For further
market data, see "Market Prices and Dividend Policy."
Pioneer shareholders are advised to obtain current market quotations for CFB Common
Stock. The market price for CFB Common Stock could fluctuate between the date of
this Proxy Statement-Prospectus and the Effective Time of the Merger, which may be
a period of several weeks or months. As a result, the market value of the CFB Common
Stock that Pioneer shareholders ultimately receive in the Merger could be more or less
than its market value on the date of this Proxy Statement- Prospectus or the date of
the Pioneer Special Meeting. No assurance can be given concerning the market price of
CFB Common Stock before or after the
Effective Time of the Merger.
</TABLE>
11
<PAGE>
HISTORICAL AND PRO FORMA COMPARATIVE UNAUDITED PER SHARE DATA
The following tables present selected comparative unaudited per share
data for CFB on an historical and pro forma combined basis, and for Pioneer
on an historical and pro forma equivalent basis, giving effect to the Merger
using the pooling of interests method of accounting. See "The Merger -
Accounting Treatment." The pro forma combined per share data is based on an
assumed Exchange Rate of 14:1 and an assumed Closing Date of December 31,
1997.
The per share data should be read in conjunction with the historical
consolidated financial statements (including the related notes thereto) and
the selected financial data regarding CFB and Pioneer presented elsewhere
herein or incorporated by reference herein. The per share data is not
necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger been consummated prior to
the periods indicated, nor is it necessarily indicative of the results of
operations of future periods or future combined financial position.
<TABLE>
<CAPTION>
BOOK VALUE PER COMMON SHARE: DECEMBER 31, 1997
-----------------
<S> <C>
CFB - Historical (A)......................................... $ 16.70
Pioneer - Historical (B)..................................... 176.91
CFB and Pioneer pro forma (C)................................ 16.56
Pioneer pro forma equivalent (D)............................. 231.84
</TABLE>
BASIC INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
CFB - Historical (E)................................ $ 2.48 $ 1.87 $ 1.85
Pioneer - Historical (F)............................ 41.10 34.47 26.28
CFB and Pioneer pro forma (G)....................... 2.50 1.90 1.85
Pioneer pro forma equivalent (H).................... 35.00 26.60 25.90
</TABLE>
DILUTED INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
CFB - Historical (I)................................ $ 2.40 $ 1.79 $ 1.75
Pioneer - Historical (J)............................ 41.10 34.47 26.28
CFB and Pioneer pro forma (K)....................... 2.42 1.82 1.75
Pioneer pro forma equivalent (L).................... 33.88 25.48 24.50
</TABLE>
12
<PAGE>
DIVIDENDS DECLARED PER SHARE:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
CFB - Historical................................... $0.70 $0.58 $0.48
Pioneer - Historical............................... 9.70 1.83 0.00
CFB and Pioneer pro forma (M)...................... 0.70 0.58 0.48
Pioneer pro forma equivalent (N)................... 9.80 8.12 6.72
</TABLE>
- --------------------
(A) Based on 20,323,046 shares of CFB's Common Stock outstanding as of
December 31, 1997.
(B) Based on 50,000 shares of Pioneer's Common Stock outstanding as of
December 31, 1997.
(C) Represents the pro forma combined net book value of CFB and Pioneer,
divided by the sum of (i) the number of shares of CFB's Common Stock
outstanding as of December 31, 1997, plus (ii) the number of shares of
CFB's Common Stock issuable pursuant to the Merger at an assumed Exchange
Rate of 14:1.
(D) Represents the amount computed pursuant to Note "C" above, at an assumed
Exchange Rate of 14:1.
(E) Based on average shares of CFB's Common Stock and Common Stock
equivalents outstanding of 18,474,749, 16,509,289 and 15,361,370 for the
years ended December 31, 1997, 1996 and 1995, respectively.
(F) Based on average shares of Pioneer's Common Stock and common share
equivalents outstanding of 50,000 for the years ended December 31, 1997,
1996, and 1995.
(G) Amount reflects primary earnings per common share and common share
equivalents before extraordinary item on a pro forma combined basis. Such
amount is determined by dividing pro forma combined net income by the
weighted average number of shares of CFB's Common Stock and common share
equivalents outstanding during the applicable period and the shares of
CFB's Common Stock assumed to be issued pursuant to the Merger at an
assumed Exchange Rate of 14:1.
(H) Represents the amount computed pursuant to Note "G" above, multiplied by
the assumed Exchange Rate of 14:1. (I) Based on average shares of CFB's
Common Stock and Common Stock equivalents outstanding on a fully diluted
basis of 19,069,078, 18,142,377 and 17,167,650 for the years ended
December 31, 1997, 1996 and 1995, respectively.
(J) Based on average shares of Pioneer's Common Stock and common share
equivalents outstanding on a fully-diluted basis of 50,000 for the years
ended December 31, 1997, 1996, and 1995.
(K) Footnote "G" on a fully-diluted basis.
(L) Represents the amount computed pursuant to Note "K" above, multiplied by
the assumed Exchange Rate of 14:1. (M) The pro forma combined dividends
declared assume no changes in the historical dividends declared per CFB
common share.
(N) Represents the amount computed pursuant to Note "M" above multiplied by
the assumed Exchange Rate of 14:1.
13
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth certain consolidated financial data
concerning CFB. The summary financial data for each of the five years ended
December 31, 1997 is derived from the audited consolidated financial
statements of CFB, and related notes thereto, incorporated herein by
reference except for end of period balance sheet amounts at December 31, 1993
which are derived from unaudited consolidated financial statements of CFB.
The summary financial data should be read in conjunction with the
consolidated financial statements of CFB, the related notes thereto, and
management's discussion and analysis of financial condition and results of
operations incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest income............................. $ 278,597 $ 229,426 $ 192,868 $ 143,237 $ 121,146
Interest expense............................ 117,253 95,234 82,891 53,468 47,271
----------- ----------- ----------- ----------- -----------
Net interest income......................... 161,344 134,192 109,977 89,769 73,875
Provision for loan losses................... 5,352 6,757 2,711 1,839 2,149
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses................ 155,992 127,435 107,266 87,930 71,726
Noninterest income.......................... 36,564 27,370 22,488 18,992 18,158
Noninterest expense......................... 125,190 104,288 82,593 70,241 60,854
----------- ----------- ----------- ----------- -----------
Income from continuing operations before
income taxes and extraordinary
item..................................... 67,366 50,517 47,161 36,681 29,030
Provision for income taxes.................. 21,516 18,007 17,208 13,952 10,775
----------- ----------- ----------- ----------- -----------
Income from continuing operations before
extraordinary items..................... 45,850 32,510 29,953 22,729 18,255
Discontinued Operations:
Income from discontinued operations,
net of taxes............................ 967 0 0 0 0
----------- ----------- ----------- ----------- -----------
Income before extraordinary item and
cumulative effect of accounting change 46,817 32,510 29,953 22,729 18,255
Extraordinary item, net of taxes............ (265) 0 0 0 0
Cumulative effect of accounting change...... 0 0 0 0 359
----------- ----------- ----------- ----------- -----------
Net income.................................. 46,552 32,510 29,953 22,729 18,614
Dividends on preferred stock................ 0 1,610 1,610 1,091 0
----------- ----------- ----------- ----------- -----------
Net income applicable to common equity...... $ 46,552 $ 30,900 $ 28,343 $ 21,638 $ 18,614
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings per common and
common equivalent share:
Basic income per share from continuing
operations before extraordinary item
and cumulative effect of
accounting change..................... $ 2.48 $ 1.87 $ 1.85 $ 1.50 $ 1.32
Discontinued operations.................. 0.05 0.00 0.00 0.00 0.00
Extraordinary item (1)................... (0.01) 0.00 0.00 0.00 0.00
Cumulative effect of accounting change 0.00 0.00 0.00 0.00 0.03
----------- ----------- ----------- ----------- -----------
Basic net income......................... $ 2.52 $ 1.87 $ 1.85 $ 1.50 $ 1.35
----------- ----------- ----------- ----------- -----------
Diluted income before extraordinary item and
cumulative effect of accounting change $ 2.40 $ 1.79 $ 1.75 $ 1.43 $ 1.27
Discontinued operations.................. 0.05 0.00 0.00 0.00 0.00
Extraordinary item (1)................... (0.01) 0.00 0.00 0.00 0.00
Cumulative effect of accounting
change.................................. 0.00 0.00 0.00 0.00 0.03
----------- ----------- ----------- ----------- -----------
Diluted net income....................... $ 2.44 $ 1.79 $ 1.75 $ 1.43 $ 1.30
----------- ----------- ----------- ----------- -----------
Average common shares outstanding:..........
Basic.................................... 18,474,749 16,509,289 15,361,370 14,378,903 13,838,334
Diluted.................................. 19,069,078 18,142,377 17,167,650 16,127,250 14,389,256
OPERATING RATIOS AND OTHER DATA:
Return on average assets ................... 1.31% 1.13% 1.24% 1.13% 1.10%
Return on average common shareholders'
equity.................................... 18.13% 15.69% 18.19% 16.77% 16.64%
Net interest margin......................... 5.17% 5.32% 5.06% 4.95% 4.74%
Net charge-offs to average loans............ 0.24% 0.22% 0.17% 0.00% 0.08%
Ratio of earnings to fixed charges (2):
Excluding interest on deposits.......... 5.61 4.14 4.46 5.23 7.60
Including interest on deposits.......... 1.57 1.52 1.55 1.66 1.61
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA
(END OF PERIOD):
Assets............................................ $4,855,526 $3,116,398 $2,769,976 $2,130,619 $1,883,794
Loans............................................. 2,637,057 2,064,108 1,767,193 1,330,146 1,037,666
Investment securities (3)......................... 1,679,389 729,236 717,342 613,239 653,722
Deposits.......................................... 3,619,334 2,537,440 2,359,716 1,794,565 1,627,989
Long-term debt.................................... 116,476 46,750 81,288 38,092 48,354
Company-obligated mandatorily redeemable preferred
securities of CFB Capital I and II.............. 120,000 0 0 0 0
Preferred shareholders' equity.................... 0 22,988 23,000 23,000 0
Common shareholders' equity....................... 339,294 221,583 181,004 134,701 125,071
Book value per common share....................... 16.70 12.92 12.01 9.69 9.10
Tangible book value per common share.............. 11.91 10.63 9.08 8.09 7.93
FINANCIAL CONDITION RATIOS
(END OF PERIOD):
Nonperforming assets to total loans and OREO...... 0.61% 0.70% 0.31% 0.34% 0.62%
Allowance for loan losses to total loans......... 1.37% 1.27% 1.29% 1.30% 1.38%
Allowance for loan losses to nonperforming
loans............................................ 286% 201% 608% 537% 296%
REGULATORY CAPITAL RATIOS (END OF PERIOD):
Tier 1 capital.................................... 10.65% 8.88% 8.51% 10.64% 10.16%
Total capital..................................... 14.24% 11.10% 11.18% 13.46% 13.44%
Leverage ratio.................................... 7.25% 6.62% 6.10% 7.12% 6.12%
NET INCOME AND RATIOS EXCLUDING
GOODWILL AND OTHER INTANGIBLE ASSETS
AMORTIZATION AND BALANCES ("CASH"):
Income applicable to common equity................ $ 51,017 $ 33,714 $ 30,522 $23,194 $19,948
Diluted earnings per common share................. 2.68 1.95 1.87 1.51 1.39
Return on average assets.......................... 1.46% 1.25% 1.34% 1.22% 1.18%
Return on average common shareholders equity...... 19.86% 17.12% 19.58% 17.98% 17.83%
</TABLE>
- ------------------------------------
(1) Represents the after-tax effect of prepayment penalties and unamortized
debt issuance costs in connection with redemption of certain indebtedness.
(2) For purposes of computing the ratio of earnings to fixed charges,
earnings represent income before income taxes, extraordinary items and
fixed charges. Fixed charges represent interest expense, including the
interest component of rental expense, and preferred stock dividends.
Fixed charges attributable to the preferred stock dividends are assumed
to equal the amount of pre-tax income that would be necessary to pay such
dividends.
(3) Includes available-for-sale securities and held-to-maturity securities.
15
<PAGE>
PIONEER HISTORICAL SELECTED FINANCIAL DATA
The following table sets forth certain financial data concerning Pioneer.
The selected historical financial data for the year ended December 31, 1997
is derived from the audited financial statements of Pioneer, including notes
thereto and the selected financial data for each of the two years ended
December 31, 1996 is derived from the unaudited compiled financial statements
of Pioneer. The unaudited compiled financial statements reflect, in the
opinion of management, all adjustments of a normal reoccurring nature
necessary for a fair presentation of financial condition and results of
operations. This information should be read in conjunction with the financial
statements of Pioneer, the related notes thereto, and Management's Discussion
and Analysis of Financial Condition and Results of Operations appearing
elsewhere in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995
------ ------- ------
(Unaudited) (Unaudited)
(Dollars in thousands, except share and per share data)
<S> <C> <C> <C>
OPERATING DATA:
Interest income....................................... $9,801 $7,573 $5,790
Interest expense...................................... 3,563 2,493 1,732
------ ------ ------
Net interest income................................... 6,238 5,080 4,058
Provision for loan losses............................. 30 75 109
------ ------ ------
Net interest income after provision for
loan losses........................................ 6,208 5,005 3,949
Noninterest income.................................... 1,183 1,019 890
Noninterest expense................................... 4,251 3,378 2,755
------ ------ ------
Income before income taxes, extraordinary item
and cumulative effect of accounting change.......... 3,140 2,646 2,084
Provision for income taxes............................ 1,085 922 770
------ ------ ------
Income before extraordinary item and
cumulative effect of accounting change............. 2,055 1,724 1,314
Extraordinary item.................................... 0 0 0
Cumulative effect of accounting change................ 0 0 0
Net income............................................ 2,055 1,724 1,314
------ ------ ------
Dividends on preferred stock.......................... N/A N/A N/A
Net income applicable to common equity................ $2,055 $1,724 $1,314
------ ------ ------
------ ------ ------
Earnings per common and common
equivalent share:
Basic................................................. $41.10 $34.47 $26.28
Diluted............................................... $41.10 $34.47 $26.28
------ ------ ------
------ ------ ------
Average common and common equivalent
shares outstanding:
Basic............................................... 50,000 50,000 50,000
Diluted............................................. 50,000 50,000 50,000
OPERATING RATIOS AND OTHER DATA:
Return on average assets ............................. 1.85 2.01 2.05
Return on average common shareholders'
equity ............................................. 25.21 26.70 26.22
Net interest margin .................................. 6.15 6.56 7.06
Net charge-offs (recoveries) to average loans ........ 0.04 0.07 0.04
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995
-------- -------- -------
(Unaudited) (Unaudited)
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
FINANCIAL CONDITION DATA (END OF PERIOD):
Assets................................................ $ 130,412 $ 91,049 $ 79,231
Loans................................................. 82,711 66,385 51,055
Investment securities (1)............................. 14,730 10,609 4,585
Deposits.............................................. 121,071 83,583 73,249
Long-term debt........................................ 0 0 0
Preferred shareholders' equity........................ 0 0 0
Common shareholders' equity........................... 8,845 7,275 5,643
Book value per common share........................... 176.91 145.51 112.86
Tangible book value per common share.................. 176.91 145.51 112.86
Cash dividends per share.............................. 9.70 1.83 0
FINANCIAL CONDITION RATIOS
(END OF PERIOD):
Nonperforming assets to total loans and OREO.......... 0.04% 0.03% 0.03%
Allowance for loan losses to total loans.............. 0.61% 0.76% 0.92%
Allowance for loan losses to nonperforming loans...... 1,625.81% 2,295.45% 3,357.14%
REGULATORY CAPITAL RATIOS:
Tier 1 capital....................................... 9.77% 10.30% 10.31%
Total capital........................................ 10.33% 11.02% 11.17%
Leverage ratio....................................... 7.97% 8.49% 8.79%
</TABLE>
- ------------------------------------
(1) Includes held-to-maturity securities.
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SPECIAL CONSIDERATIONS REGARDING CFB
IN ADDITION TO THE OTHER INFORMATION IN THIS PROXY
STATEMENT-PROSPECTUS, PIONEER'S SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE
FOLLOWING FACTORS REGARDING CFB. THIS PROXY STATEMENT-PROSPECTUS, INCLUDING THE
INFORMATION INCORPORATED BY REFERENCE HEREIN, MAY CONTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. FORWARD-LOOKING STATEMENTS
CAN BE IDENTIFIED BY THE USE OF TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT,"
"ANTICIPATE," "ESTIMATE," OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE FOLLOWING FACTORS AND OTHER
FACTORS NOTED THROUGHOUT THIS PROXY STATEMENT-PROSPECTUS AND ANY DOCUMENT
INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT- PROSPECTUS , AS WELL AS ANY
EXHIBITS AND ATTACHMENTS TO THIS PROXY STATEMENT-PROSPECTUS, CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO ANY SUCH
FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES. ACTUAL
RESULTS COULD DIFFER SIGNIFICANTLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT, IN PART, OF THE RISK FACTORS SET FORTH BELOW. IN
CONNECTION WITH THE FORWARD-LOOKING STATEMENTS WHICH APPEAR IN THESE
DISCLOSURES, PIONEER'S SHAREHOLDERS SHOULD CAREFULLY REVIEW THE FACTORS SET
FORTH BELOW.
RISKS INVOLVED IN ACQUISITION STRATEGY
CFB's acquisitions will continue to present material risks. CFB has
grown and intends to continue to grow primarily through acquisitions of banks
and other financial institutions. Such acquisitions involve risks of adversely
changing results of operations, unforeseen liabilities or asset quality problems
of acquired entities and other conditions beyond the control of CFB, such as
adverse personnel relations, loss of customers because of change of identity and
deterioration in local economic conditions. In connection with the acquisition
of financial institutions, CFB may from time to time acquire new businesses that
are different from its core business of commercial banking and which present
operating and strategic risks different from those confronted in its core
business. These various acquisition risks can be heightened by larger
transactions. To date, the acquisitions of the Bank One Branches, KeyBank
Wyoming and Mountain Parks Financial Corp. represent the largest institutions
acquired by CFB and have been completed at or near the same time as a number of
other completed or proposed mergers. See "Recent Developments -- Pending
Acquisitions."
Managing growth through acquisitions, including integration and
training of personnel, combination of office and operations procedures and
related matters, is a difficult process. In connection with its recent
significant acquisitions, CFB has experienced challenges with data and item
processing conversion, management training, staffing and other operational
integration areas. These issues have resulted in the need for management and
support personnel to allocate increased time to the integration process, in some
cases slowing the acquired institutions' marketing and business development
efforts. Although CFB has taken steps to address the issues resulting from
recent acquisitions, CFB may experience such issues in connection with future
acquisitions, and there can be no assurance that these problems will not result
in disruption or expense.
CFB's management believes future growth in the assets and earnings of
CFB will depend in significant part on consummation of further acquisitions. The
ability of CFB to pursue this strategy depends in part on its capital position
and, in the case of cash acquisitions, on its cash assets or ability to acquire
cash. Further, acquisition candidates may not be available in the future on
terms favorable to CFB. CFB must compete with a variety of individuals and
institutions, including major regional bank holding companies, for suitable
acquisition candidates. Although CFB has focused its attention on smaller
markets, in which CFB believed there was less competition from the money center
banks and major regional bank holding companies, CFB recently acquired
operations in metropolitan areas. CFB may make further acquisitions of companies
with operations in metropolitan areas, in which case it will face more
competition for such acquisitions from larger institutions. Further, certain
regional holding companies have focused in some cases on the smaller markets
traditionally targeted by CFB, and there can be no assurance that the
acquisition activities of competitors in these markets will not increase. Such
competition is likely to affect CFB's ability to make acquisitions, increase the
price that CFB pays for certain acquisitions and increase CFB's costs in
analyzing possible acquisitions.
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NEED FOR ADDITIONAL FINANCING
CFB's ability to execute its business strategy depends to a significant
degree on its ability to obtain additional indebtedness and equity capital. CFB
has no other commitments for additional borrowings or sales of equity capital
and there can be no assurance that CFB will be successful in consummating any
such future financing transactions on terms satisfactory to CFB, if at all.
Factors which could affect CFB's access to the capital markets, or the costs of
such capital, include changes in interest rates, general economic conditions and
the perception in the capital markets of the CFB's business, results of
operations, leverage, financial condition and business prospects. Each of these
factors is to a large extent subject to economic, financial, competitive and
other factors beyond CFB's control. In addition, covenants under CFB's current
and future debt securities and credit facilities may significantly restrict
CFB's ability to incur additional indebtedness and to issue preferred stock.
YEAR 2000 ISSUE
CFB is evaluating the potential impact of what is commonly referred to
as the "Year 2000" issue, concerning the inability of certain information
systems to properly recognize and process dates containing the year 2000 and
beyond. If not corrected, these systems could fail or create erroneous results.
CFB is in the process of determining which of its systems, if any, may present
Year 2000 issues, the magnitude of these issues, and the steps that may be
necessary to correct them. Therefore, the potential liabilities and costs
associated with Year 2000 compliance cannot be estimated with certainty at this
time. Regardless of the Year 2000 compliance of CFB's systems, there can be no
assurance that CFB will not be adversely affected by the failure of others to
become Year 2000 compliant. Such risks may include potential losses related to
loans made to third parties whose businesses are adversely affected by the Year
2000 issue, the disruption or inaccuracy of data provided by non-Year 2000
compliant third parties and business disruption caused by the failure of service
providers, such as security and data processing companies, to become Year 2000
compliant. Because of these uncertainties, there can be no assurance that the
Year 2000 issue will not have a material financial impact in any future period.
REGULATION
As a bank holding company, CFB is subject to extensive regulation by
the Federal Reserve Board. This regulation limits the manner in which CFB and
the CFB Banks conduct their businesses and obtain financing and is designed
primarily to protect depositors and not to benefit holders of securities of
financial institutions. In addition, the CFB Banks are subject to extensive
regulation by various federal and state regulatory authorities. The banking
industry is subject to changing laws and regulations. Recent trends have
steadily expanded the geographic scope of services that may be offered by the
banking industry and have allowed additional competition in many geographic
regions. In September 1994, the Interstate Banking and Branching Efficiency Act
of 1994 ("IBBEA") was enacted. The IBBEA largely eliminated restrictions on
interstate banking and since June 1, 1997 has permitted interstate branching,
subject to certain options which states were able to enact by law. Most states
have adopted implementing legislation. Certain aspects of the IBBEA were
clarified and amended in 1997, with the passage of the Riegle-Neal Clarification
Act. The Economics Growth and Regulatory Paperwork Reduction Act of 1996
("EGRPRA") streamlined application processes and eased regulations in several
areas, facilitating acquisitions and expansion of non-banking activities. The
IBBEA and EGRPRA may increase competition by both out-of-state and in-state
banking organizations or by other financial institutions. There can be no
assurance that implementation of and changes in laws and regulations affecting
banking will not adversely affect CFB. See Item 1 of CFB's Annual Report on Form
10-K for the year ended December 31, 1997, as amended, under the caption
"Supervision and Regulation."
KEY PERSONNEL
Continued profitability of the CFB Banks and CFB are dependent on a
limited number of key persons, including Donald R. Mengedoth, the President and
Chief Executive Officer, Mark A. Anderson, the Executive Vice President, Chief
Financial Officer and Chief Information Officer, Ronald K. Strand, the
Executive Vice President, Banking Group, and David E. Groshong, the Executive
Vice President, Financial Services, of CFB. There would likely be a difficult
transition
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period in case the services of any of these individuals were lost to CFB because
of death or other reasons. There is no assurance that CFB will be able to retain
its current key personnel or attract additional qualified key persons as needed.
COMPETITION
Banking is a highly competitive industry. The CFB Banks compete
directly with other banks, and lending and financial institutions in their local
communities. The CFB Banks also compete indirectly with regional and national
financial institutions, especially in larger metropolitan market areas in which
CFB has increased its operations as a result of recent acquisitions. Further,
changes in government regulation of banking, particularly recent legislation
which removes restrictions on interstate banking and permits interstate
branching, are likely to increase competition by out-of-state banking
organizations or by other financial institutions in CFB's smaller markets as
well as its metropolitan market areas.
STATUS OF CFB COMMON STOCK
CFB's Board of Directors is authorized, without stockholder approval,
to issue debt instruments or shares of classes or series of preferred stock with
terms and conditions to be determined by the Board of Directors, subject to
certain limitations. CFB is party to a shareholders' rights agreement which
could in certain circumstances serve as a deterrent against a possible change of
control not approved by CFB's Board of Directors. See "Material Differences in
Rights of Pioneer Shareholders -- Anti-Takeover Provisions."
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RECENT DEVELOPMENTS REGARDING CFB
PENDING ACQUISITIONS
CFB is in the process of completing the acquisitions described below,
in addition to the acquisition of Pioneer.
FNB, INC. On January 14, 1998, CFB signed a definitive merger agreement
with FNB, Inc. ("FNB"), a two-bank holding company headquartered in Greeley,
Colorado. At December 31, 1997, FNB had total assets of $118 million and offices
in Greeley and Fort Collins, Colorado. In the transaction, which is expected to
be accounted for using the pooling of interests method of accounting, CFB will
issue approximately 570,000 shares of common stock to holders of FNB common
stock. The transaction is subject to regulatory approval and is expected to
close during the second quarter of 1998.
COMMUNITY BANCORP, INC. On January 9, 1998, CFB signed a definitive
merger agreement with Community Bancorp, Inc. ("CBI"), a one-bank holding
company headquartered in Thornton, Colorado. At December 31, 1997, CBI had total
assets of $78 million and offices in Thornton and Arvada, Colorado. In the
transaction, which is expected to be accounted for using the pooling of
interests method of accounting, CFB will issue approximately 452,000 shares of
common stock to holders of CBI common stock. The transaction is subject to
regulatory approval and is expected to close during the second quarter of 1998.
RECENT SIGNIFICANT ACQUISITIONS
BANK ONE BRANCHES. On January 23, 1998, CFB acquired 37 banking offices
located in Arizona, Colorado and Utah (the "Bank One Branches") from three
subsidiary banks of Banc One Corporation (the "Bank One Banks"). At closing, the
Bank One Branches had total deposits of approximately $730 million and loans of
approximately $61 million. CFB paid a purchase price premium of approximately
$43.8 million, equal to 6% of the deposits of the Bank One Branches at closing.
The acquisition was accounted for as an acquisition of assets and assumption of
liabilities and resulted in the recognition by CFB of deposit-based intangibles
in an amount equal to the purchase price premium of approximately $43.8 million.
Following the closing, the 25 Arizona offices and four Utah offices acquired
from the Bank One Banks were merged into the Republic bank in Phoenix, Arizona
that was recently acquired by CFB. The eight acquired Colorado offices were
merged into CFB's existing Colorado affiliate bank. On January 28, 1998, CFB
signed an agreement to sell one of the former Bank One Branches located in
Colorado.
FIRST NATIONAL SUMMIT BANKSHARES, INC. AND REPUBLIC NATIONAL BANCORP,
INC. On December 1 and November 24, 1997, respectively, CFB acquired First
National Summit Bankshares, Inc., Gunnison, Colorado ("Summit") and Republic
National Bancorp, Inc., Phoenix, Arizona ("Republic"). At closing, Summit had
total assets of approximately $90 million, deposits of approximately $82 million
and banking offices in five Colorado communities, and Republic had total assets
of approximately $54 million, deposits of approximately $49 million and one
banking office in Phoenix, Arizona. In connection with the Summit and Republic
mergers, CFB issued 368,000 shares of its common stock to the holders of
Republic common stock and 314,800 shares of its common stock to the holders of
Summit common stock, respectively. In addition, the former holders of Summit
preferred stock received, in the aggregate, $1 million in cash for their
preferred stock surrendered in the merger plus accrued but unpaid dividends.
Each of these business combinations was accounted for as a pooling of interests.
KEYBANK NATIONAL ASSOCIATION. On July 14, 1997, CFB purchased KeyBank
National Association, Cheyenne, Wyoming ("KeyBank Wyoming"), from KeyCorp, its
parent corporation, ("KeyCorp"), for a purchase price of $135 million. KeyBank
Wyoming has been renamed "Community First National Bank." At closing, KeyBank
Wyoming had total assets of approximately $1.1 billion and 28 banking offices
located in 24 communities in Wyoming, including Cheyenne, Laramie, Casper,
Sheridan and Jackson. CFB believes its Wyoming banking network is the largest in
Wyoming, providing a full range of commercial and consumer banking services
throughout the state. The transaction was
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accounted for as a business combination using the purchase method of accounting
and resulted in the recognition of goodwill by CFB of approximately $60 million.
MOUNTAIN PARKS FINANCIAL CORP. On December 18, 1996, CFB acquired
Mountain Parks Financial Corp. ("Mountain Parks"), a bank holding company that
operated a state chartered bank with full service commercial banking facilities
in 17 Colorado communities. The facilities in two of these communities were sold
following the acquisition. At September 30, 1996, Mountain Parks had total
assets of approximately $600 million. CFB issued approximately 5.2 million
shares of common stock for a total transaction value of approximately $142.2
million, based on market value of the shares as of the date of closing. The
transaction was a business combination accounted for as a pooling of interests.
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GENERAL INFORMATION
This Proxy Statement-Prospectus is being furnished to the shareholders
of Pioneer in connection with the solicitation by the Board of Directors of
Pioneer of proxies to be voted at the Pioneer Special Meeting of Shareholders to
be held on _________, ___________, 1998 at _____ a.m., local time, and at any
and all adjournments thereof. This Proxy Statement-Prospectus and the enclosed
form of proxy are first being sent to shareholders of Pioneer on or about
___________, 1998.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of Pioneer Common Stock will be asked
to consider and vote upon the Merger Agreement providing for the Merger. A copy
of the Merger Agreement is attached hereto as Appendix A. If any other matters
are properly presented at the Special Meeting for consideration, including,
among other things, consideration of a motion to adjourn the Special Meeting to
another time or place, the persons named in the enclosed form of proxy and
acting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
Pursuant to the Merger Agreement, each holder of Pioneer Common Stock
will be entitled to receive, for each share of Pioneer Common Stock held at the
Effective Time of the Merger (other than shares held by dissenting
shareholders), a certain number of shares of CFB Common Stock, the number of
such shares to be determined pursuant to a formula described more fully below.
Cash will be paid in lieu of fractional shares. See "The Merger - Conversion of
Pioneer Common Stock," "- Dissenters' Rights" and Article 113 of the COBCA
attached hereto as Appendix B.
VOTE REQUIRED; SHARES ENTITLED TO VOTE
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Pioneer Common Stock will constitute a quorum for the
transaction of business at the Pioneer Special Meeting. APPROVAL OF THE MERGER
WILL REQUIRE THE AFFIRMATIVE VOTE OF TWO-THIRDS OF THE OUTSTANDING SHARES OF
PIONEER COMMON STOCK. Holders of record of Pioneer Common Stock at the close
of business on ______________, 1998 are entitled to receive notice of, and to
vote at, the Pioneer Special Meeting. At the close of business on ___________,
1998, there were 50,000 shares of Pioneer Common Stock outstanding. Each share
of Pioneer Common Stock will be entitled to one vote.
As of the Record Date, directors and officers of Pioneer and their
affiliates owned beneficially all 50,000 shares of outstanding Pioneer Common
Stock.
VOTING AND REVOCATION OF THE PROXIES
The Board of Directors of Pioneer has unanimously approved the Merger.
Pioneer Common shareholders are solicited on behalf of the Board of Directors of
Pioneer to SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. Shares
represented by proxies properly signed, dated and returned will be voted at the
applicable Special Meeting in accordance with the instructions set forth
therein. If a proxy is properly signed but contains no such instructions, the
shares represented thereby will be voted FOR the Merger and at the discretion of
the proxyholders as to any other matters which may properly come before the
Special Meeting. If an executed proxy card is returned by a broker holding
shares of Pioneer Common Stock in street name which indicates that the broker
does not have discretionary authority as to certain shares to vote on any
matter, or if a Pioneer shareholder abstains from voting on any proposal, the
shares represented by such proxy will be considered present at the Special
Meeting for purposes of determining a quorum and for purposes of calculating the
vote, but will not be voted with respect to such matter. Because the Merger
requires the affirmative vote of two-thirds of the total number of outstanding
shares of Pioneer Common Stock entitled to vote at the Special Meeting,
abstentions and "broker non-votes" will have the same effect as votes against
the proposal.
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Each proxy may be revoked at any time before it is voted by executing
and returning a proxy bearing a later date, by giving written notice of
revocation to the Secretary of the Special Meeting or by attending the Special
Meeting and voting in person.
PIONEER SHAREHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES WITH
THEIR PROXY CARDS. See "The Merger - Delivery of CFB Common Stock."
SOLICITATION OF PROXIES
Following the mailing of proxy soliciting materials, directors,
officers and employees of Pioneer (who will not be specifically compensated for
such services) may solicit proxies by mail, telephone, telegraph and personal
interviews. Pioneer will bear the expenses of proxy solicitation, including
reimbursement of reasonable out-of-pocket expenses incurred by brokerage houses
and other custodians, nominees and fiduciaries in forwarding proxy soliciting
material to the beneficial owners of stock held of record by such persons.
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MARKET PRICES AND DIVIDEND POLICY
MARKET FOR CFB COMMON STOCK
CFB Common Stock has been traded in the Nasdaq National Market System
under the symbol CFBX since the initial public offering on August 13, 1991. The
first public announcement of the proposed Merger was made during the trading day
on November 7, 1997. On that date and on _________, 1998, the closing sales
price per share of CFB Common Stock as quoted on the Nasdaq National Market
System was $47.625 and $______, respectively.
MARKET FOR PIONEER COMMON STOCK
Pioneer Common Stock is not traded on any established public trading
market or in the over-the-counter market. Pioneer is aware of only isolated
transactions involving the sale of Pioneer Common Stock. The prices for Pioneer
Common Stock in such transactions are not considered indicative of prices that
could be obtained in an active market involving a substantial number of shares.
SHAREHOLDER DATA
As of March 6, 1998, there were approximately 1,300 owners of record
of CFB Common Stock and an estimated 7,000 additional beneficial shareholders
whose stock was held in street name by brokerage houses.
As of March 31, 1998, there were 4 owners of record of Pioneer Common
Stock. See "Pioneer's Principal Shareholders and Security Ownership of
Management."
CFB COMMON STOCK DIVIDEND PAYMENT HISTORY AND RESTRICTIONS
Since its initial public offering in August, 1991, CFB has paid
quarterly cash dividends on the CFB Common Stock. The final determination of the
timing, amount and payment of dividends on the CFB Common Stock is at the
discretion of the CFB Board of Directors and will depend on conditions then
existing, including CFB's profitability, financial condition, capital
requirements and other relevant factors, including the restrictions described
below. The principal source of CFB's income (including the funds needed to pay
dividends on the CFB Common Stock) is dividends from the CFB Banks. The payment
of dividends by the CFB Banks is subject to certain restrictions imposed by
federal and state banking laws and regulations.
CFB's ability to pay cash dividends on the CFB Common Stock is also
subject to statutory restrictions and restrictions arising under the terms of
its outstanding securities. Under applicable law, cash dividends may be paid
only from surplus, or, if there is no surplus, from net profits earned in the
current and/or preceding fiscal year. Applicable federal regulation of bank
holding companies may also impose restrictions on the ability of a bank holding
company to pay dividends. CFB does not believe that Delaware corporate law,
applicable banking law, or the terms of its securities will materially inhibit
its plans to pay cash dividends on the CFB Common Stock for the foreseeable
future.
PIONEER DIVIDEND POLICY AND PAYMENT HISTORY
The Merger Agreement prohibits Pioneer from declaring and paying
dividends after the Determination Date (as defined below under "The Merger -
Conversion of Pioneer Common Stock"). Pioneer does not intend to pay a dividend
during the term of the Merger Agreement.
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THE MERGER
THE FOLLOWING DESCRIPTION CONTAINS, AMONG OTHER INFORMATION, SUMMARIES
OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT THEREOF, A COPY OF WHICH IS REPRODUCED AS APPENDIX
A TO THIS PROXY STATEMENT-PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE.
GENERAL
CFB and Pioneer have entered into the Merger Agreement, which provides
that Pioneer will be merged with and into the Acquisition Subsidiary of CFB. The
Merger Agreement provides that each outstanding share of Pioneer Common Stock,
other than shares held by shareholders who perfect statutory dissenters' rights,
will be converted at the Effective Time of the Merger into shares of CFB Common
Stock, the number of which will be determined by a formula set forth in the
Merger Agreement and more fully described below. See "The Merger - Conversion of
Pioneer Common Stock." Subject to the terms and conditions of the Merger
Agreement, the Effective Time of the Merger will be on the date the Office of
the Comptroller of the Currency declares the merger effective after final
approval of the transaction. It is presently contemplated that the Effective
Time of the Merger will be as soon as practicable after shareholder approval of
the Merger.
BACKGROUND OF THE MERGER
The terms and conditions of the Merger Agreement were determined
through arms-length negotiation between the managements and respective Boards of
Directors of CFB and Pioneer. The following is a brief summary of those
negotiations. In May 1995, the Board of Directors of Pioneer began considering
options regarding the potential sale of Pioneer. These discussions intensified
following a change in Colorado law effective January 1, 1997 which allows branch
banking. James Haas, the Chairman of Pioneer's Board, had a number of
discussions with various representatives of Mountain Parks Financial Corporation
during this time frame regarding a possible sale of Pioneer. Mountain Parks
Financial Corporation was subsequently purchased by CFB in December 1996 and
various representatives of Mountain Parks shared with CFB that Pioneer might be
interested in a possible acquisition. In early 1997, representatives of Pioneer
and CFB engaged in preliminary discussions regarding a possible acquisition,
although such discussions were suspended shortly thereafter. CFB again
approached Pioneer in July 1997, and the parties signed a non-disclosure and due
diligence agreement on August 7, 1997. A proposed letter of intent was given by
CFB to Pioneer on the same day. After discussion, CFB presented a revised letter
of intent dated August 19, 1997, which was executed by Pioneer on August 25,
1997. CFB performed its due diligence investigation of Pioneer in September 1997
and the parties negotiated the terms and conditions of the Merger Agreement
during October 1997. The Pioneer Board of Directors authorized Daniel Allen to
execute the Merger Agreement on October 31 and it was signed by both parties on
November 6, 1997. The Merger Agreement was subsequently amended on December 19,
1997.
REASONS FOR THE MERGER
The Pioneer Board of Directors believes the Merger with CFB is in the
best interests of the Pioneer shareholders. After careful consideration and
review, the Pioneer Board reached its decision based on an analysis of the
following critical factors:
o With the rapidly changing environment in the banking industry,
Pioneer would benefit from an association with a larger
banking organization and its resources.
o A business combination with a larger bank holding company
would likely be the most advantageous method for maximizing
shareholder value.
o CFB's offer provides greater economic value to Pioneer
shareholders than Pioneer would likely be able to generate in
the foreseeable future by remaining independent, which value
the Pioneer Board deemed greater than the other offers
received by Pioneer.
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o The Pioneer Board analyzed the possible impact of the pending
changes in the Colorado branch banking operation laws and the
likelihood of an impact of increased competition from lower
cost, non-capitalized branches operating in the markets of the
Bank.
o The Pioneer Board analyzed the present market and price being paid
for bank stocks as a whole.
o The Pioneer Board analyzed the business, financial condition,
results of operations and prospects of Pioneer on a
stand-alone basis and a pro-forma basis, assuming a
combination of Pioneer with CFB. The combined basis appeared
to the Pioneer Board to be favorable to the Pioneer
shareholders.
o CFB's offer involved a merger on a tax-free basis, giving
Pioneer shareholders the option of either continuing to
participate as a shareholder in a larger, more geographically
diverse regional banking organization or liquidating their
investment by selling their shares of CFB Common Stock, which
is publicly traded on the Nasdaq National Market, unlike
Pioneer Common Stock, for which there is no trading market.
o The Pioneer Board analyzed the combined strengths of Pioneer
and CFB in servicing the needs of the communities in Pioneer's
markets, CFB's management ability and the compatibility of
Pioneer's and CFB's operating philosophies.
o Pioneer's Board also considered the current market price of
CFB Common Stock, CFB's dividend payment history, book value
and recent earnings, the terms of the Merger Agreement and
other factors.
Based on all of these factors and without attributing relative weights
to any of the foregoing, the Pioneer Board unanimously recommends that the
shareholders of Pioneer vote for approval of the Merger.
EFFECTIVE TIME OF THE MERGER
Subject to the terms and conditions of the Merger Agreement, the
Effective Time of the Merger will be on the date declared effective by the
Office of the Comptroller of the Currency ("OCC"). Such declaration shall be
made following the issuance of the final approval of the transaction by the OCC.
The parties have agreed to use their best efforts to cause the Merger to be
completed within thirty business days after the satisfaction or waiver of the
conditions set forth in the Merger Agreement. The parties expect the Merger to
become effective as soon as practicable following approval of the Merger by the
shareholders of Pioneer.
CONSEQUENCES OF THE MERGER
At the Effective Time of the Merger, Pioneer will merge with and into
the Acquisition Subsidiary. The surviving national banking association will be a
wholly-owned subsidiary of CFB and the separate existence of Pioneer shall
cease. All properties and assets of every kind held by Pioneer at the Effective
Time of the Merger will become properties and assets of the national bank and
the new bank will become liable for all of the debts, liabilities and other
obligations of Pioneer. CFB will conduct its business under its existing
Certificate of Incorporation and Bylaws. The Board of Directors of CFB will
consist of the existing directors of CFB. The officers of CFB will be designated
by its Board. Initially such officers will consist of the current officers of
CFB. At the Effective Time of the Merger, the holders of certificates
representing shares of Pioneer Common Stock will cease to have any rights as
shareholders of Pioneer except such rights, if any, as they may have as a
dissenter from the Merger and their sole rights shall be their right to receive
(i) the number of whole shares of CFB Common Stock into which their shares of
Pioneer Common Stock have been converted in the Merger (as discussed below), and
(ii) the cash value of any fraction of a share of CFB Common Stock into which
their shares of Pioneer Common Stock have been converted.
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CONVERSION OF PIONEER COMMON STOCK
At the Effective Time of the Merger, each share of Pioneer Common Stock
which is not owned by a shareholder exercising dissenter's rights will be
converted at the Exchange Rate into a certain number of shares of CFB Common
Stock, determined as described in this section. Estimates of the Exchange Rate
given various assumptions are set forth in Appendix D.
Under the Merger Agreement, all of the issued and outstanding shares of
Pioneer Common Stock and any outstanding options, warrants or other rights to
Pioneer Common Stock shall be exchanged for 700,000 shares of CFB Common Stock.
This Exchange Rate is subject to adjustment based on CFB Trading Value and based
upon Pioneer Value.
The "Trading Value" of the CFB Common Stock shall be the average of the
per-share closing price for the CFB Common Stock as reported by the NASDAQ
National Market for the 20 trading days ending at the end of the fourth trading
day immediately preceding the Closing Date. Calculations will be rounded to
three decimal places. If the CFB Trading Value is less than or equal to $52.50
per share, then the Exchange Rate shall be as set forth above. If the CFB
Trading Value is greater than $52.50 per share, then the Exchange Rate shall be
reduced so that the product of the CFB Trading Value multiplied by the Exchange
Rate shall be $36,750,000.
The "Pioneer Value" is calculated by using financial statements
prepared by Pioneer that will be dated as of the last day of the month
immediately preceding the Effective Time of the Merger (the "Determination
Date"), which financial statements will be provided to CFB and its auditors, and
which financial statements shall include a consolidated balance sheet of Pioneer
(the "Determination Date Balance Sheet"). The "Pioneer Value" shall be equal to
the total consolidated assets of Pioneer minus the sum of the total consolidated
liabilities of Pioneer, as reflected on the Determination Date Balance Sheet.
Total consolidated liabilities of Pioneer shall include, without limitation,
provisions for taxes and the expenses of the preparation of the final tax return
for Pioneer. Certain non-recurring expenses of Pioneer to consummate the Merger,
currently estimated to be $35,000, will be the responsibility of Pioneer and
will have the effect of reducing the Pioneer Value. If the Pioneer Value is
greater than $8,100,000, at Pioneer's election, either (i) the difference will
be paid by special dividend to Pioneer's shareholders immediately prior to the
Determination Date or (ii) the Exchange Rate shall be subject to increase to be
determined by subtracting the difference between the Pioneer Value and
$8,100,000 and then dividing such difference by the CFB Trading Value.
CFB and Pioneer agreed upon this formula in order to ensure that the
shares of Pioneer Common Stock are valued fairly to both Pioneer shareholders
and to CFB. If the Trading Value of the CFB Common Stock is greater than $52.50,
then under the formula described above, the number of shares of CFB Common Stock
received by Pioneer shareholders for the share of Pioneer Common Stock will
decline. Pioneer Shareholders should note that virtually all components of the
Pioneer Value used in the above calculation may fluctuate and will not be
determined until after the Special Meeting of Shareholders. If the CFB Trading
Value is less than $46.00, then Pioneer shall have the right to terminate the
transaction. Similarly, if the Pioneer Value is less than $8,100,000, then CFB
shall have the right to terminate the transaction.
No fractional shares of CFB Common Stock will be issued in connection
with the Merger, but in lieu thereof each holder of shares of Pioneer Common
Stock otherwise entitled to a fraction of a share of CFB Common Stock will be
paid in cash. The amount paid for a fractional share shall be an amount equal to
such fraction multiplied by the Trading Value of the CFB Common Stock. No
shareholder will be entitled to voting or other rights in respect of any
fractional share.
DELIVERY OF CFB COMMON STOCK AND CASH CONSIDERATION
Within five business days after the Closing Date, letters of
transmittal will be mailed to each holder of Pioneer Common Stock. Each such
holder will be requested to complete the letter of transmittal and return such
letter, together with the stock certificates representing all of the shares of
Pioneer Common Stock previously owned by such holder, to the exchange agent
designated in the letter of transmittal (the "Exchange Agent"). The letter of
transmittal will specify that delivery shall be effective and risk of loss and
title to Pioneer certificates shall pass only upon delivery of the
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certificates to the Exchange Agent and shall include instructions for effecting
the surrender of the Pioneer Common Stock certificates in exchange for a
certificate representing shares of CFB Common Stock and the cash to be paid in
lieu of any fractional share. Certificates for CFB Common Stock will be
delivered to or for the account of a holder of Pioneer Common Stock only after
the Merger is consummated and the holder has surrendered to the Exchange Agent
the old certificates for such holder's Pioneer Common Stock, accompanied by a
duly executed letter of transmittal in proper form.
At the Closing, CFB shall deposit with the Exchange Agent for the
benefit of the holders of shares of Pioneer Common Stock, certificates dated the
Closing Date representing the shares of CFB Common Stock and the cash to be paid
in lieu of fractional shares to be issued and paid in exchange for the
outstanding shares of Pioneer Common Stock.
If CFB declares a dividend or makes any other distribution declared or
made with respect to shares of CFB Common Stock to be issued or transferred to
holders of Pioneer Common Stock, no such dividend or distribution will be paid
or made to persons otherwise entitled to receive them until the certificates for
their Pioneer Common Stock have been surrendered following the Closing Date. The
Exchange Agent shall receive and hold such distributions in its name as agent.
No interest will be paid on the cash in lieu of fractional shares and unpaid
dividends and distributions, if any, payable to Pioneer shareholders. Holders of
unsurrendered Pioneer Common Stock certificates shall not be entitled to vote at
any meeting of CFB shareholders after the Closing Date until they have exchanged
their Pioneer Common Stock certificates.
No transfer taxes will be payable by Pioneer's shareholders in
connection with the exchange of old certificates representing Pioneer Common
Stock for new certificates representing CFB Common Stock except that if any new
certificate is to be issued in a name other than that in which the Pioneer
certificate surrendered in exchange therefor is registered, it will be a
condition of such exchange that the person requesting such exchange pay to the
Exchange Agent any transfer or other taxes required in connection therewith or
satisfy the Exchange Agent that such tax has been paid or is not applicable. At
the Effective Time of the Merger, the stock transfer books of Pioneer will be
closed and no transfer of Pioneer Common Stock will thereafter be made on such
books.
PIONEER SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
CFB and Pioneer expect that the Merger will be treated as a tax-free
reorganization within the meaning of Section 368(a) of the Code and that for
federal income tax purposes, no gain or loss will be recognized by any
shareholder of Pioneer upon receipt of CFB Common Stock pursuant to the Merger,
except upon receipt of cash in lieu of any fractional share interests of CFB
Common Stock or the exercise of dissenters' rights. The Internal Revenue Service
(the "Service") has not been and will not be asked to rule upon the tax
consequences of the Merger. However, it is a condition to the consummation of
the Merger that Pioneer receive the opinion of tax counsel that the Merger will
qualify as a tax-free reorganization. The opinion is being supplied by Kane &
Associates, P.C., the auditors for Pioneer, and will be addressed to Pioneer.
The following summary of the material United States federal income tax
consequences of the Merger is set forth in reliance upon that opinion. The
conclusions discussed herein are based, in part, upon certain representations
made by Pioneer and CFB. These conclusions also are based upon the Code,
regulations now in effect thereunder, current administrative rulings practiced,
and judicial authority, all of which are subject to change. An opinion of
counsel is not binding upon the Service, and there can be no assurance, and none
is hereby given, that the Service will not take a position contrary to one or
more of the positions reflected herein or that the opinion will be upheld by the
courts if challenged by the Service. EACH HOLDER OF PIONEER COMMON STOCK IS
URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISORS AS TO THE EFFECT OF
SUCH FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS OR
CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER FEDERAL TAX
CONSEQUENCES ARISING OUT OF THE MERGER.
Based upon the facts and representations provided to it, and subject to
various assumptions and qualifications, Kane & Associates, P.C. will opine
substantially to the effect that, with regard to the shareholders of Pioneer,
the following federal income tax consequences will result from the Merger:
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(i) The Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code;
(ii) CFB and Pioneer will each be a party to that
reorganization within the meaning of Section 368(b) of the Code;
(iii) shareholders of Pioneer who exchanged their shares of
Pioneer Common Stock for shares of CFB Common Stock will not recognize
gain or loss, for purposes of federal income tax, except to the extent
of the cash received in lieu of fractional shares; and
(iv) Pioneer will not recognize gain or loss, for purposes of
federal income tax, as a result of the consummation of the Merger.
The foregoing is only a general description of certain federal income
tax consequences of the Merger and does not discuss all the tax considerations
that may be relevant to particular Pioneer shareholders in light of their
personal investment circumstances, or to certain types of shareholders that may
be entitled to special treatment under the Code (such as insurance companies,
dealers in securities, exempt organizations or foreign holders) or to
shareholders of Pioneer who acquired their Pioneer Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation. The summary set
forth above does not purport to be a complete analysis of all potential tax
facts of the transactions contemplated by the Merger Agreement or the Merger
itself. No information is provided herein with respect to the tax consequences,
if any, of the Merger under state, local, foreign or other tax laws.
DISSENTERS' RIGHTS
Any common shareholder of Pioneer may, as an alternative to receiving
the consideration specified in the Merger Agreement, dissent from the Merger and
obtain of the fair value of such shareholder's Pioneer Common Stock, pursuant to
Article 113 of the COBCA. "Fair Value" with respect to a dissenter's shares
means the value of the shares immediately before the Effective Time of the
Merger, excluding any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable. Any Pioneer shareholder
contemplating exercising the right to demand such payment should carefully
review Article 113 of the COBCA, a copy of which is included as Appendix C to
this Proxy Statement-Prospectus, and in particular the required procedural
steps. A SHAREHOLDER WHO FAILS TO COMPLY WITH THESE PROCEDURAL REQUIREMENTS MAY
LOSE THE RIGHT TO DISSENT.
Set forth below, to be read in conjunction with the full text of
Article 113 of the COBCA, is a summary of the procedures relating to the
exercise of dissenter's rights. The following summary does not purport to be
complete and is qualified in its entirety by reference to Appendix C. As used in
the following discussion, "Pioneer" means Pioneer before the Effective Time of
the Merger and "CFB" as Pioneer's successor after the Effective Time of the
Merger.
A record shareholder may assert dissenter's rights as to fewer than all
of the shares registered in his name only if such shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
such shareholder asserts dissenter's rights. In that event, such shareholder's
rights shall be determined as if the shares as to which such shareholder
dissents and such shareholder's other shares were registered in the name of
different shareholders. A beneficial shareholder may assert dissenter's rights
as to shares held on such shareholder's behalf only if such shareholder submits
to the corporation a written consent by the record holder to the dissent not
later than the time the beneficial shareholder asserts dissenter's rights and
such shareholder does so with respect to all shares of which the shareholder is
the beneficial owner or over which such shareholder has power to direct the
vote.
Any Pioneer shareholder who wishes to dissent must deliver to Pioneer,
prior to the vote on the Merger Agreement, a written notice of intent to demand
payment for such shareholder's shares if the Merger is effected. In addition,
the shareholder must refrain from voting in favor of the Merger Agreement. A
shareholder who fails to deliver the notice on time or who votes in favor of the
Merger Agreement will not have any dissenter's rights. If a shareholder returns
a signed proxy but does not specify a vote against approval of the Merger
Agreement or a direction to abstain, the
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proxy will be voted for approval of the Merger Agreement, which will have the
effect of waiving that shareholder's dissenter's rights. If the Merger Agreement
is approved by the required vote, Pioneer is required to deliver written
dissenter's notice to all shareholders who timely gave notice of intent to
demand payment and who did not vote in favor of the Merger Agreement. The notice
must be sent no later than ten (10) days after the Merger Agreement is approved
and must (i) state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited, (ii) inform shareholders
of uncertificated shares to what extent transfer of the shares will be
restricted after payment is received, (iii) supply a form for demanding payment
that includes the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action and that requires the
person asserting dissenter's rights to certify whether or not such shareholder
acquired beneficial ownership of the shares before that date, (iv) set a date by
which Pioneer must receive the payment demand and certificates for certificated
shares, which date shall not be less than 30 days after the date the required
dissenter's notice is given, (v) may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must certify to Pioneer that the
beneficial shareholder and the record shareholder or record shareholders of all
of the shares owned beneficially by the beneficial shareholder have asserted, or
will timely assert, dissenter's rights as to all such shares as to which there
is no limitation on the ability to exercise dissenter's rights, and (vi) be
accompanied by a copy of Article 113 of the COBCA.
A shareholder who is sent the dissenter's notice described above must
demand payment, certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the dissenter's notice,
and deposit such shareholder certificates in accordance with the terms of the
notice. A shareholder who does not demand payment or deposit certificates where
and when required is not entitled to payment for such shareholder's shares. A
shareholder who demands payment and deposits his certificates as requested by
the dissenter's notice retains all rights of a shareholder until such shares are
canceled or modified by the consummation of the Merger. Pioneer may restrict the
transfer of uncertificated shares from the date of demand for payment until the
Merger is consummated; however, the holder of uncertificated shares retains all
other rights of a shareholder until those rights are canceled or modified by the
consummation of the Merger. Except as provided in the following paragraph, as
soon as the Merger is effected or upon receipt of the payment demand, Pioneer
must pay each shareholder who has complied with the foregoing requirements the
amount Pioneer estimates to be the Fair Value of the dissenter's shares, plus
accrued interest. The payment must be accompanied by certain financial
information concerning Pioneer, a statement of Pioneer's estimate of the Fair
Value of the shares, an explanation of how the interest was calculated, a
statement of the dissenter's rights to demand payment if the dissenter is
dissatisfied with the payment or offer (as further described in the next
paragraph), and a copy of Article 113 of the COBCA. If the Merger does not occur
within 60 days after the date set in the dissenter's notice for demanding
payment and depositing certificates, Pioneer must return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares. Notwithstanding the foregoing, Pioneer may elect to withhold payment
from any dissenter with respect to shares which the dissenter or the person on
whose behalf the dissenter acts was not the beneficial owner before November 7,
1997, the date of the first announcement to news media of the terms of the
Merger. If Pioneer elects to withhold such payments, after the consummation of
the Merger, Pioneer must estimate the Fair Value of the shares, plus accrued
interest, and pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. Pioneer must send with its offer a statement of its
estimate of Fair Value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment if the
dissenter is dissatisfied with the offer.
A dissenter may notify Pioneer in writing of the dissenter's own
estimate of the Fair Value of the dissenter's shares and the amount of interest
with respect thereto and may demand payment of the dissenter's estimate, less
any previous payments or reject Pioneer's offer and demand payment of the Fair
Value of the dissenter's shares and the interest due if (i) the dissenter
believes the amount paid or offered is less than the Fair Value of the
dissenter's shares or that the interest due is incorrectly calculated, (ii)
Pioneer fails to make payment within 60 days after the date set for demanding
payment, or (iii) Pioneer having failed to effect the Merger does not return the
deposited certificates or release the transfer restrictions on uncertificated
shares within 60 days after the date set for demanding payment. A dissenter
waives the right to demand payment unless the dissenter notifies the corporation
of his demand in writing within 30 days after Pioneer made or offered payment
for the dissenter's shares.
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Within 60 days after such subsequent demand is submitted by a
shareholder, if such demand remains unsettled, Pioneer is required to file in an
appropriate court in Colorado a petition to determine the Fair Value of the
shares and accrued interest. If Pioneer does not commence the proceeding within
the 60-day period, it is to pay each dissenter whose demand remains unsettled
the amount demanded. Each dissenter made a party to the proceeding is entitled
to judgment for the amount, if any, by which the court finds the Fair Value of
the dissenter's shares, plus interest, exceeds the amount paid by Pioneer or for
the Fair Value, plus accrued interest, of the dissenter's after-acquired shares
for which Pioneer elected to withhold payment. The costs and expenses of any
such court proceedings will be assessed against Pioneer, except that the court
may access any part of those costs as an expense against all or some of the
dissenters who are party to the proceeding and whose action in demanding payment
in addition to that offered by Pioneer, the court finds to be arbitrary
vexatious or not in good faith. The court may also assess the fees and expenses
of counsel and experts for the respective parties, in amounts the court finds
equitable, against Pioneer and in favor of any or all of the dissenters if the
court finds that Pioneer failed to comply substantially with the statutory
requirements or against either Pioneer or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith. If the court
finds that the services of counsel for any dissenter were of substantial benefit
to other dissenters similarly situated and should not be assessed against
Pioneer, it may award to the counsel reasonable fees to be paid out of the
amount awarded to the dissenters who are benefitted.
Pioneer shareholders considering exercising dissenter's rights should
bear in mind that the Fair Value of their Pioneer Common Stock determined under
Article 113 of the COBCA could be more than, the same as, or less than the value
of consideration they will receive pursuant to the Merger Agreement if they do
not exercise their dissenter's rights.
REPRESENTATIONS AND WARRANTIES
Pioneer and CFB have made customary warranties and representations to
each other regarding, among other things, their businesses, assets, liabilities,
financial condition and results of operations. Generally, warranties,
representations and covenants will have no continuing legal effect after the
Merger is consummated, except for certain provisions, such as (i) CFB's
representation that, with certain exceptions, it has no plan or intention to
dispose of any assets of Pioneer, and (ii) CFB's obligation to file certain
reports with the Commission to permit affiliates of Pioneer to rely on certain
exemptions in selling CFB Common Stock.
COVENANTS; CONDUCT OF PIONEER'S BUSINESS PENDING THE MERGER
Pioneer has agreed, among other things, that prior to the Effective
Time of the Merger, Pioneer will carry on its business in the usual and ordinary
course. Pioneer has further agreed that it will not, among other things, (i)
enter into any new material line of business, (ii) increase or decrease the
current number of the directors of Pioneer, (iii) change its lending,
investment, liability management or other material banking policies in any
respect that is material to such party; or (iv) incur or commit to any capital
expenditures (or any obligations of liabilities in connection therewith) other
than capital expenditures (and obligations or liabilities in connection
therewith) incurred or committed to in the ordinary course of business
consistent with past practices.
In addition, Pioneer has also agreed to refrain from taking certain
actions, except with the prior written consent of CFB, including the following:
(i) selling any shares of its capital stock; (ii) redeeming any shares of its
capital stock; (iii) certain reclassifications of its capital stock; (iv)
borrowing for a material amount, except in the ordinary course of business; (v)
discharging any lien or encumbrance on Pioneer's properties other than in the
ordinary course of business; (vi) amending its articles of incorporation or
bylaws; (vii) declaring or paying any dividends after the Determination Date;
(viii) mortgaging, pledging or subjecting to any lien or other encumbrance any
of its assets except (a) in the ordinary course of business, (b) liens and
encumbrances for current property taxes not yet due and payable and (c) liens
and encumbrances which do not materially affect or interfere with the current
use or ability to convey the property subject thereto or effected thereby; (ix)
selling, assigning or transferring any tangible or intangible assets with a book
value greater than $10,000 except in the ordinary course of business; (x)
entering into any individual employment, agency or other contract or arrangement
for the performance of personal services for an amount in excess of $10,000,
except for service agreements in the ordinary course of business; (xi) canceling
any material debt or claim or waiving any right of material value except in the
ordinary course of business; (xii) repurchasing or entering into any agreement
to repurchase all or any portion of any loan previously participated in any
other financial institution other than loans repurchased in compliance with
applicable laws and regulations; (xiii) originating any loan which is thereafter
participated to another financial
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institution providing for payment upon default on any basis other than pro rata;
(xiv) making or committing to make any further advances on any loan which is
either in default or classified, whether such classification is a result of a
federal or state bank regulatory examination or internal classification of
substandard or lower by the Bank's officers or directors, unless the Bank is
under a legal obligation to do so; (xv) (a) making or agreeing to make, any
fully secured loan or increasing any existing fully secured loan for an amount
in excess of $500,000 to any one borrower, unless such loan is made pursuant to
a properly documented and legally enforceable commitment of the Bank to the
borrower made prior to the date of the Merger Agreement; (b) making, or agreeing
to make, any unsecured loan or increasing any unsecured loan by $50,000 or more,
unless such loan is made pursuant to a properly documented and legally
enforceable commitment of the Bank to the borrower made prior to the date of the
Merger Agreement; (c) making, or agreeing to make, any new loan or advance on
any existing loan except in conformity with the Bank's current loan policies; or
(d) making any change with respect to the terms of any existing loan, except in
the ordinary course of business; with certain additional provisions applicable
to the renewal of existing loans, advances under existing loans or increases to
existing loans; (xvi) making or agreeing to make any loan to any Bank principal
of or any person in violation of any state or federal law or regulation; (xvii)
incurring any obligation or liability with respect to capital expenditures which
exceed $10,000 for any single matter or $50,000 in the aggregate except for
certain disclosed capital expenditures; (xviii) failing to timely pay and
discharge all federal and state taxes and other accounts payable for which it is
liable; (xix) paying or committing to pay any additional salary or other
compensation to any of the banks, officers, directors or employees except as
provided in certain employee plans or as may be fully accrued for on the
Determination Date; (xx) entering into, adopting, amending, terminating, making
or granting any increase above current funding levels in any of the Bank's
plans, except as otherwise required under the Merger Agreement; (xxi) purchasing
or selling any bonds or other investment securities without written consent of
CFB or make or agreeing to make any investment in violation of any federal law
or regulation, except that the Bank may purchase U.S. Treasury or agency
securities with maturity dates of 36 months or less; (xxii) failing to charge
and pay interest rates on loans and deposits, respectively, not materially
inconsistent with practices in the Bank's marketplace; (xxiii) failing to use
its reasonable efforts to comply with any law, rule, regulation or order
applicable to the Bank if such failure would have a material adverse effect upon
Pioneer; (xxiv) failing to make all appropriate and required transfers of the
Bank's loan loss reserves based upon existing policies of the Bank or at the
request of any regulatory agency; (xxv) changing any accounting methods,
practices or procedures with respect to the accumulation and presentation of
financial information, except as directed by applicable law or regulation or to
confirm with accounting standards; (xxvi) failing to use reasonable efforts to
obtain the consent or approvals required in order to permit a succession by the
surviving corporation following the Merger to any obligation, right or interest
of Pioneer under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument; or (xxvii) failing to maintain a
reserve for losses and costs associated with certain litigation matters to the
extent required by generally accepted accounting principles.
Pioneer has also agreed with CFB that it will: (i) hold a special
shareholder meeting to approve the Merger Agreement not later than forty-five
(45) days following the effective date of the Registration Statement; (ii)
recommend by the affirmative vote of a majority of the Pioneer Board a vote in
favor of approval of the Merger Agreement and use its best efforts to solicit
proxies from its shareholders in favor of the Merger Agreement; (iii) provide
relevant information for, and cooperate in the preparation of, the Registration
Statement; (iv) hold in confidence all information concerning CFB furnished to
Pioneer; (v) take certain action with respect to its employee benefit plans and
employee compensation; (vi) with certain exceptions, not acquire a substantial
equity interest or a substantial portion of the assets of another entity; (vii)
maintain its current insurance coverage through the Effective Date; (viii) not
take any action which would disqualify the merger as a pooling of interests for
accounting purposes; (ix) prepare and submit certain statements to CFB; (x) not
acquire any business or a substantial portion of the assets of any business
except as disclosed or agreed to by CFB; and (xi) not solicit any inquiries or
proposals from any person or entity for the merger, consolidation or acquisition
of all or substantially all the assets of, or a substantial equity interest in,
Pioneer, or participate in any discussions or negotiations, or provide third
parties with any nonpublic information, relating to any such inquiry or
proposal. Pioneer is required to notify CFB promptly upon receiving any such
oral or written offer, giving all relevant details of such offer. Pioneer has
received no such oral or written offer as of the date hereof.
Pioneer and CFB have also agreed that between the date of the Merger
Agreement and the Effective Time of the Merger, with certain exceptions, (i)
neither party will amend its Certificate or Articles of Incorporation or Bylaws;
(ii) neither party shall take any action that is intended to result in any of
the representations or warranties in the Merger Agreement to be untrue or that
would adversely affect the ability of the parties to obtain the requisite
regulatory approvals; (iii) Pioneer will have delivered to CFB within 30 days of
the Merger Agreement, title insurance commitments for all Pioneer property
located in the State of Colorado and (iv) Pioneer will have engaged an
independent, qualified
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environmental engineering firm, acceptable to CFB, to conduct Phase I Hazardous
Waste Assessments of all Pioneer properties. CFB and Pioneer have agreed to
cooperate with each other in obtaining the requisite regulatory approvals and
generally to afford to each other access to their books and records during each
parties' normal business hours. In addition, Pioneer and CFB must use their
reasonable best efforts to cause each director, executive officer or other
person who may be deemed an "affiliate" (for purposes of Rule 145 under the
Securities Act) of Pioneer or CFB to deliver to the other party at least 32 days
prior to the Closing Date, a written agreement providing that the affiliate will
not engage in certain transactions with respect to Pioneer Common Stock or CFB
Common Stock held by the affiliate.
REGULATORY APPROVALS; CONDITIONS TO THE MERGER
The Merger must be approved by applicable federal and state banking
regulators and by the affirmative vote of a majority of the outstanding shares
of Pioneer Common Stock. CFB submitted its application for approval of the
Merger to the Federal Reserve Board, the applicable federal regulator, on
February 13, 1998. Such approval was granted on March 11, 1998. CFB filed its
application with the Division of Banking of the State of Colorado on February
13, 1998.
When received, the approvals of these agencies reflect only the regulators'
view that the transaction does not contravene the competitive standards of the
law and is consistent with regulatory concerns relating to bank management and
to the safety and soundness of the subject banking organizations and banks. Such
approvals are not to be interpreted as an opinion by such regulators that the
Merger is favorable to the shareholders of CFB or Pioneer from a financial point
of view or that the regulators have considered the adequacy of the Exchange
Rate. Such regulatory approvals in no way constitute an endorsement or
recommendation of the Merger by such regulators.
CFB and Pioneer's obligations to consummate the Merger are further
subject to various other conditions set forth in the Merger Agreement,
including, but not limited to: (i) the shares of CFB Common Stock issuable to
the Pioneer shareholders pursuant to the Merger shall have been approved for
listing on the NASDAQ National Market (ii) all consents, orders or approvals of,
or declarations or filings with, and all expirations of waiting periods imposed
by, any governmental entity (collectively, the "Consents") which are prescribed
by law as necessary for the consummation of the Merger and the other
transactions contemplated pursuant to the Merger Agreement (other than
immaterial Consents) shall have been filed, occurred or been obtained; (iii) the
Registration Statement of which this Proxy Statement-Prospectus is a part shall
have become effective under the Securities Act, and no stop order suspending the
effectiveness of such Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
Commission; (iv) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger or any of the transactions
contemplated pursuant to the Merger Agreement shall be in effect, nor shall any
proceeding by any governmental entity seeking any such Injunction be pending,
and no statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, or enforced by any governmental entity which prohibits,
restricts or makes illegal consummation of the Merger; (v) there shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger or any of the transactions
contemplated pursuant to the Merger Agreement, by any federal or state
governmental entity which, in connection with the grant of a permit, consent or
authorization by a governmental entity necessary to consummate the Merger (a
"Requisite Regulatory Approval"), imposes any condition or restriction upon CFB,
Pioneer, or any of their subsidiaries which would so materially adversely impact
the economic or business benefits of the transaction contemplated by the Merger
Agreement as to render inadvisable, in the reasonable business judgment of the
Board of Directors of either CFB or Pioneer, the consummation of the Merger.
The obligation of CFB to consummate the Merger is also subject to
certain additional conditions set forth in the Merger Agreement, including but
not limited to: (i) the continued accuracy of the representations and warranties
of Pioneer set forth in the Merger Agreement; (ii) the performance by Pioneer in
all material respects of its obligations required to be performed under the
Merger Agreement; (iii) the Pioneer Value as of the Determination Date shall not
be less than $8,100,000; (iv) the Pioneer Loan Loss Reserve shall have been
supplemented by a transfer of $400,000 on or before the Determination Date; (v)
CFB shall have received a letter from both Ernst & Young LLP expressing an
opinion that the Merger shall qualify as a "pooling of interests" in accordance
with generally accepted accounting principles and such opinion shall be
supported by a letter from Pioneer's accountants delivered to Ernst & Young LLP
and CFB confirming certain facts on behalf of Pioneer(see "Accounting Treatment"
below); and (vi) CFB shall have received the opinion of Thomas L. Beckmann,
counsel to Pioneer, in form and substance satisfactory to CFB.
34
<PAGE>
The obligation of Pioneer to consummate the Merger is also subject to
certain additional conditions set forth in the Merger Agreement, including but
not limited to: (i) the continued accuracy of the representations and warranties
of CFB set forth in the Merger Agreement; (ii) the performance by CFB in all
material respects of its obligations to be performed pursuant to the Merger
Agreement; (iii) CFB shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the transactions
contemplated thereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument to which CFB or any
of its subsidiaries is a party or is otherwise bound, except those for which
failure to obtain such consents and approvals would not, in the reasonable
opinion of Pioneer, individually or in the aggregate, have a material adverse
effect on CFB or upon the consummation of the transactions contemplated pursuant
to the Merger Agreement; (iv) Pioneer shall have received the opinion of tax
counsel to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that CFB and Pioneer will each be a party to that reorganization within the
meaning of Section 368(b) of the Code and that shareholders of Pioneer who
exchange their shares of the Pioneer Common Stock for shares of CFB Common Stock
will not recognize a gain or loss, for purposes of federal income tax, except to
the extent of the cash received in lieu of fractional shares; (v) Pioneer shall
have received an opinion of CFB's legal counsel, Lindquist & Vennum P.L.L.P.,
confirming the due incorporation and good standing of CFB and the Acquisition
Subsidiary and authority to consummate the transaction and that, when issued,
the shares will be legally issued, fully paid and non-assessable.
AMENDMENT; WAIVER; TERMINATION
The Merger Agreement may be amended by written instrument in such
manner as may be agreed upon by the parties, whether before or after approval of
the Merger by the shareholders of Pioneer, and any provision of the Merger
Agreement may be waived by the party entitled to the benefit thereof; provided,
however, that after the Special Meeting, no amendment may be made which by law
requires further approval of Pioneer shareholders. Notice of any material
amendment or modification will be sent to Pioneer shareholders.
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time of the Merger, notwithstanding approval of
Pioneer's shareholders, only in the following circumstances: (i) the mutual
consent of the Board of Directors of CFB and Pioneer; (ii) by either party if
(a) any Requisite Regulatory Approval shall have been denied or (b) any
governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger; (iii) by
either party if the Effective Time of the Merger has not occurred by May
30,1998, unless such failure of consummation is due to the failure of the party
seeking termination to perform or observe in all material respects the covenants
and agreements to be performed or observed by it under the Merger Agreement;
(iv) by either party if the other party shall have materially breached any of
the covenants and agreements contained in the Merger Agreement and such party
does not cure such breach before the earliest of the Closing Date or within
twenty (20) business days following receipt by the breaching party of written
notice of such breach from the other party; (v) by Pioneer if the CFB Trading
Value shall be less than $46.00 or (vi) by CFB in the event (a) CFB objects to
certain exceptions in the attorney's title opinion or title insurance
commitments delivered to CFB by Pioneer for all real property owned by Pioneer
or the Bank and such objected to exceptions are not eliminated or satisfied to
the reasonable satisfaction of CFB or (b) CFB does not approve the Phase I
Hazardous Waste Assessment of all real property owned by Pioneer and the Bank
and Pioneer does not correct or satisfy CFB's objections to the Assessment. Upon
termination, the Merger Agreement shall become null and void and, with certain
exceptions, shall have no effect, provided that no party will be relieved from
liabilities arising out of a willful breach of the Merger Agreement.
EFFECT ON PIONEER EMPLOYEE BENEFIT PLANS
Each person who is an employee of the Bank as of the Effective Time of
the Merger ("Bank Employees") shall be participants in the employee welfare
plans, and shall be eligible for participation in the pension plans of CFB, as
in effect from time to time, subject to any eligibility requirements (with full
credit for years of past service with the Bank, or to any
predecessor-in-interest of the Bank to the extent such service is presently
given credit under the current benefit plans of the Bank, for the purpose of
satisfying any eligibility and vesting requirements) applicable to such plans
(but not subject to any pre-existing condition exclusions). Such eligible
employees shall enter each welfare plan immediately after the Effective Time of
the Merger and shall enter each pension plan not later than the first day of the
calendar quarter which begins at least 32 days after the Effective Time. For the
purpose of determining each Bank Employee's benefit for the year in which the
Merger occurs under the CFB vacation program, vacation taken by a Bank Employee
in the year in which
35
<PAGE>
the Merger occurs will be deducted from the total CFB benefit. Each Bank
Employee shall be eligible for participation, as a new employee, in the CFB
Pension Plan under the terms thereof.
EXPENSES
CFB and Pioneer will pay their own expenses in connection with the
Merger and the transactions contemplated thereby, including professional fees.
Pioneer has agreed to accrue on the Determination Date Balance Sheet all of the
unpaid expenses relating to the Merger, including the cost of the preparation of
the final tax return.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for using the pooling
of interests method of accounting. CFB shall have received a letter, prior to
consummation, from Ernst & Young LLP regarding such firm's concurrence with CFB
management's and Pioneer management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting for the merger under
Accounting principles Board Opinion No. 16 if closed and consummated in
accordance with the Merger Agreement. Among other considerations, such letter
will be subject to receipt by Ernst & Young LLP and CFB of a letter from
Pioneer's independent auditors relating to the eligibility of Pioneer to qualify
for pooling treatment and to the condition that less than 10% of the Merger
Consideration will consist of cash, including (i) cash paid to holders of
outstanding shares of Pioneer Common Stock who dissent from the proposed Merger
and receive cash for their shares of Common Stock, and (ii) cash paid in the
Merger in lieu of fractional shares of Pioneer Common Stock. In order to satisfy
certain conditions precedent for the qualification of the Merger as a pooling of
interests for accounting purposes, the affiliates of Pioneer will enter into
agreements with CFB providing that each such person will not sell or otherwise
reduce his or her risk relative to any shares of the CFB Common Stock received
pursuant to the Merger until financial results covering at least 30 days of
post-Merger combined operations are published or until such later time as such
person is notified by CFB so as to ensure that the Merger qualifies as a pooling
of interests for accounting purposes. Pursuant to the Merger Agreement, Pioneer
has agreed that neither it nor the Bank shall take any action, with certain
exceptions, which would disqualify the Merger as a pooling of interests for
accounting purposes.
Under pooling of interests accounting, as of the Effective Time of the
Merger, the assets and liabilities of Pioneer will be added to those of CFB at
their recorded book values and the shareholders' equity account of Pioneer will
be included on CFB's consolidated balance sheet. The Merger will have an
immaterial impact on the consolidated financial statements of CFB. Accordingly,
the consolidated financial statements for preceding periods will not be
restated.
The unaudited pro forma combined financial data contained in this Proxy
Statement-Prospectus has been prepared using the pooling of interests accounting
method to account for the Merger. See "Summary - Historical and Pro Forma
Comparative Unaudited Per Share Data."
INTERESTS OF CERTAIN PERSONS; CERTAIN TRANSACTIONS
The Board of Directors of Pioneer is aware of the agreements and
interests of certain persons in the Merger described below and considered them,
among other matters, in recommending approval of the Merger and the transactions
contemplated thereby.
As of ____________, 1998, the officers and directors of Pioneer
beneficially owned all 50,000 shares of outstanding Pioneer Common Stock.
Pursuant to the Merger Agreement, the Board of Directors of Pioneer has agreed
to use its best efforts to obtain the requisite shareholder approval. See
"Principal Shareholders and Security Ownership of Management."
RESALE OF CFB COMMON STOCK
The shares of CFB Common Stock issuable to common shareholders of
Pioneer upon consummation of the Merger have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Such shares may be
traded without restriction on transferability by those shareholders not deemed
to be "affiliates" of Pioneer or CFB as that term is defined in the rules under
the Securities Act. "Affiliates" are generally defined as persons who control,
are controlled by or are under common control with Pioneer or CFB at the time of
the determination. Accordingly, "affiliates"
36
<PAGE>
generally will include directors and executive officers of Pioneer. CFB Common
Stock received by those shareholders of Pioneer who are deemed to be
"affiliates" of Pioneer or CFB may be resold without registration as provided
for by Rules 144 and 145, or as otherwise permitted under the Securities Act;
PROVIDED, that no such resale will be permitted until the public release by CFB
of its financial results for a period that includes thirty days of combined
operations following the Merger. Assuming CFB continues to be subject to, and
complies with, the Exchange Act reporting requirements, Rule 145(d) allows
limited resales by such affiliates without registration if the holder: (i) has
held the shares of CFB Common Stock for one year and is not an affiliate of CFB
at the time of sale; or (ii) has held the shares of CFB Common Stock for two
years and has not been an affiliate of CFB for at least three months; or (iii)
sells the shares in a Rule 144 brokers' transaction in the manner and subject to
the quantity limitations of such rule. In the Merger Agreement, CFB has agreed
to file all reports and data with the Commission necessary to permit the
affiliates of Pioneer to sell the CFB Common Stock received by them in the
Merger pursuant to Rules 144 and 145 under the Securities Act. This Proxy
Statement-Prospectus does not cover any resales of CFB Common Stock received by
affiliates of Pioneer, their family members or related interests. CFB Common
Stock is traded in the Nasdaq National Market System under the symbol "CFBX."
EACH SHAREHOLDER WHO MAY BE DEEMED TO BE AN AFFILIATE IS URGED TO CONSULT
INDEPENDENT COUNSEL CONCERNING APPLICABLE RESTRICTIONS ON RESALE.
37
<PAGE>
BUSINESS OF PIONEER
GENERAL
Pioneer Bank (the "Bank") was chartered in 1983. The Bank is
headquartered in Longmont, Colorado, a community of approximately 55,000
located in Boulder County, Colorado. Major economic activities in the county
included high technology development and manufacturing, general manufacturing
and services.
Because of this market, Pioneer is a small business and commercial
retail services lender. As of December 31, 1997, Pioneer had $130 million in
total assets and $68 million in commercial loans outstanding. Also, Pioneer
is an active consumer lender, with $15 million in consumer loans at December
31, 1997. Pioneer also originates but generally does not hold long-term
residential mortgage loans. Pioneer's loan-to-deposit ratio averaged 72% and
the investment-to-asset ratio averaged 22% for 1997.
EMPLOYEES. Pioneer has 63 employees consisting of 11 officers and 52
non-officers. Thirty three percent (33%) of the employees have been
associated with the Bank for a minimum of three years.
MARKET PRICE OF AND DIVIDENDS ON PIONEER STOCK
There is no established trading market for the Pioneer Common Stock.
Pioneer is aware of only isolated transactions involving the sale of Pioneer
Stock. The prices for Pioneer Stock in such transactions are not considered
indicative of prices that could be attained on an active market involving a
substantial number of shares. As of March 31, 1998, there were 4 shareholders
of record of Pioneer Common Stock. Pioneer declared its most recent cash
dividend of $210,000 ($4.20 per share of Pioneer Common Stock) on August 25,
1997.
INVESTMENT ACTIVITIES
Pioneer relies on investment securities for 13% of its earning
assets. These investments are concentrated in United States treasuries,
federal agencies, mortgage-backed securities and, to a lesser degree,
corporate and municipal bonds. Pioneer maintains a strong liquidity position
through federal funds sold in short-term U.S. Treasury and agency securities.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
directors and executive officers of Pioneer:
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD
---- --- ------------------------
<S> <C> <C>
James O. Haas 52 Chairman of the Board
Daniel L. Allen 45 President, CEO, Director
Roger Kopman 49 EVP, Director
Stuart W. Losey 71 Director
Roger E. Jurgens 57 Director
</TABLE>
JAMES O. HAAS, Chairman of the Board of Pioneer since 1990, is a
graduate of the United States Military Academy at West Point, New York. His
career includes employment as President and CEO of Barnes & Noble College
Bookstores, headquartered in New York City, and President of ARA Services,
Community and Schools Division. He was an organizer and past director of
Carnegie Bank, Princeton, New Jersey, leaving that board in 1996.
DANIEL L. ALLEN has been President and Chief Executive Officer of
Pioneer since 1984. He is a graduate of the University of Utah, with a B.S.
in Management and Finance, and completed the University of Colorado's
Graduate School of Banking. Prior to joining Pioneer, he was senior lender at
the Bank of Boulder, Boulder, Colorado.
38
<PAGE>
ROGER KOPMAN has been Executive Vice President of Pioneer since its
founding in 1983. He received a B.S. in Economics from the University of
Missouri and completed the University of Colorado's Graduate School of
Banking. His responsibilities at Pioneer are operations, administration and
investments. Prior to this employment with Pioneer, Mr. Kopman was Senior
Vice President of operations for First National Bank, Westminster, Colorado,
which he joined in 1973.
STUART W. LOSEY is a retired Longmont, Colorado businessman who
operated an automobile service business of over 30 years. He was one of the
original shareholders of Pioneer, and has been a director since its founding
in 1983. Mr. Losey has been active in a variety of community non-profit
agencies, including an association with the Longs Peak Council of the Boy
Scouts of America for over 50 years.
ROGER E. JURGENS is a retired Longmont, Colorado orthodontist. He
has served as a director of Pioneer since 1993 and is a past president of the
Longmont Area Chamber of Commerce. Prior to moving to Longmont, Dr. Jurgens
was in private practice in Lincoln, Nebraska, where he also taught at the
University of Nebraska School of Dentistry and in the Orthodontics Department.
TRANSACTIONS WITH OFFICERS, DIRECTORS AND OTHER AFFILIATES
Pioneer has entered into transactions with officers and directors
and their affiliates on terms which management believes are comparable to
those which Pioneer would have offered to other non-related third parties.
SUPERVISION AND REGULATION
To the extent the information below consists of summaries of certain
statutory provisions, it is qualified in its entirety by reference to the
statutory provisions so described.
Pioneer, as a Colorado non-member bank, is subject to the
supervision and regulation of, and is regularly examined by the Division of
Banking of the State of Colorado and ("Division") of the Federal Deposit
Insurance Corporation ("FDIC"). Among the requirements and restrictions
imposed upon Colorado banks are the requirements to maintain reserves against
deposits, restrictions of nature and amounts of loans that may be made,
restrictions relating to investments, opening of bank offices, and other
activities. Colorado law prohibits the payment of dividends by national banks
if such dividends would impair the bank's capital, or the bank's surplus is
not equal to its common capital. In addition, approval of the Division is
required prior to payment of dividends by a Colorado bank if the dividends
declared in any year exceed the total of net profits for that year combined
with retained net profits for the preceding two years, less any required
transfers to surplus or to a fund for the retirement of preferred stock.
Pioneer is required to comply with capital adequacy standards.
There are two basic measures of capital adequacy: a risk-based measure and a
tier-one leverage measure.
The risk-based capital measure was adopted to assist in the
assessment of capital adequacy of financial institutions by (i) making
regulatory capital requirements more sensitive to differences in risk
portfolios among organizations, (ii) introducing off-balance sheet items into
the assessment of capital adequacy, (iii) reducing dis-incentives to holding
liquid, low-risk assets, and (iv) achieving greater consistency in evaluation
of capital adequacy of major banking organizations throughout the world. The
risk-based measures include both a definition of capital and a framework for
calculating risk-weighted assets by assigning assets and off-balance sheet
items to broad-risk categories. An institution's risk-based capital ratio is
calculated by dividing its qualifying capital by its risk-weighted assets.
An important component of qualifying capital is the core capital or
tier-one capital. Tier-one capital for a national bank generally consists of
(i) common shareholders equity, (ii) non-cumulative perpetual preferred stock
and related surplus, and (iii) minority interest in the equity accounts of
consolidated subsidiaries, less good will. The tier-one component of an
institution's qualifying capital must represent at least 50% of the
qualifying total capital. Supplementary capital (tier-two capital) consists
of such additional capital elements as (i) allowance for loan losses (subject
to limitations); (ii) cumulative perpetual preferred stock, convertible
preferred stock, and (iv) any related surplus (subject to certain
conditions); (iii) hybrid capital instruments and mandatory convertible debt
securities; and (iv) term
39
<PAGE>
subordinated debt and intermediate term preferred stock (subject to
limitations). The maximum amount of tier-two capital that may be included in
qualifying total capital is limited to 100% of tier-one capital (net of good
will).
Pioneer's risk-based capital ratios are reviewed by the Division and
the FDIC by analysis of Pioneer's quarterly financial reports, review of any
applications filed by Pioneer and through the examination process. Although
the risk- based capital ratio focuses on broad categories of credit risk and,
to a lesser extent, interest rate and market risk, the risk- based ratio does
not incorporate other factors that can affect an organization's financial
condition. These factors include overall interest rate exposure, liquidity,
funding, and market risks; the quality and level of earnings; investment or
loan portfolio concentration; the quality of loans and investments; the
effectiveness of loan and investment policy; and management's ability to
monitor and control financial and other operational risks.
The primary federal regulatory agencies have also adopted a minimum
leverage ratio, defined as a ratio of tier- one capital to total assets,
which is intended to be used as a supplement to the risk-based capital
measure. An institution must meet both capital adequacy standards to be in
compliance. Banking organizations considered to be among the most highly
rated, based upon examination results, must maintain a minimum leverage ratio
of 3% and a minimum risk-based capital ratio of 8%. Banks that are not among
the most highly rated are expected to maintain capital ratios of at least 100
to 200 basis points above the minimum levels.
Pioneer is in compliance with all capital standards currently
applicable to it.
The deposits of Pioneer are insured under the provisions of the
Federal Deposit Insurance Act. Pioneer is subject to assessments by the FDIC.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PIONEER
BASIS OF PRESENTATION
The following is Pioneer's management's discussion and analysis of
the results of operations and the historical financial condition of Pioneer.
This should be read in conjunction with Pioneer's audited and compiled
(unaudited) financial statements and accompanying footnotes and other
selected financial data presented elsewhere herein.
The financial information discussed below reflects the operation of
Pioneer. Pioneer began operations in 1983 as a bank.
RESULTS OF OPERATIONS
EARNINGS PERFORMANCE. Pioneer earned $2,055,000 in 1997, $1,724,000
in 1996, and $1,314,000 in 1995. The increase in earnings from 1996 to 1997
is primarily attributed to increased loans. Earnings from 1995 to 1996
increased $410,000 and is primarily attributed to increased loans. The
increase in net interest income during these years reflects the decreasing
interest rate environment at that time and an aggressive search for quality
loan growth. Net interest income increased 23% from 1996 to 1997, primarily
due to increased lending activities.
The following is a condensed summary of the statement of operations
(dollars in thousands), along with selected profitability ratios:
PIONEER BANK OF LONGMONT
ANALYSIS OF NET INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
-------- -------- ------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net interest income................ $6,238 $5,080 $4,058
Provision for loan losses.......... 30 75 109
Other operating income............. 1,183 1,019 890
Other operating expense............ 4,251 3,378 2,755
Net income......................... 2,055 1,724 1,314
Return on average assets........... 1.85% 2.01% 2.05%
Return on average equity........... 25.21% 26.70% 26.22%
Dividend payout ratio.............. 15.45% 3.46% 0%
Equity to assets................... 6.78% 7.99% 7.12%
</TABLE>
41
<PAGE>
NET INTEREST INCOME. Net interest income is affected by changes in
both interest rates and the volume of average earning assets and
interest-bearing liabilities. The following table presents Pioneer's average
balance sheets, interest earned or paid, and the related yields and rates on
major categories of Pioneer's earning assets and interest-bearing liabilities
for the periods indicated:
PIONEER BANK OF LONGMONT
ANALYSIS OF AVERAGE RATES AND BALANCES
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ ----------------------------- -------------------------------
Interest Interest Interest Interest Interest Interest
Average Income/ Yields and Average Income/ Yields and Average Income/ Yields and
BALANCE EXPENSE RATES (1) BALANCE EXPENSE RATES (1) BALANCE EXPENSE RATES (1)
------- ------- --------- ------- ------- --------- ------- ------- ---------
(Unaudited) (Unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans (1)(2).................. $ 77,513 $ 8,434 10.88% $ 57,638 $ 6,476 11.24% $44,302 $5,046 11.39%
Investment securities (2)..... 12,862 780 6.06% 9,423 571 6.06% 5,275 303 5.74%
Other earning assets.......... 11,087 587 5.29% 10,340 526 5.09% 7,930 441 5.56%
-------- ------- -------- ------- ------- ------
Total interest earning
assets..................... 101,462 9,801 9.66% 77,401 7,573 9.78% 57,507 5,790 10.07%
Noninterest earning
assets.................... 9,579 8,300 6,716
-------- -------- -------
Total assets.............. $111,041 $ 85,701 $64,223
-------- -------- -------
-------- -------- -------
LIABILITIES
Savings/int. bearing
checking..................... $ 39,380 $ 1,038 2.64% $ 33,444 $ 848 2.54% $27,418 $ 700 2.55%
Time deposits................. 44,277 2,525 5.70% 29,643 1,645 5.55% 18,237 1,032 5.66%
-------- ------- -------- ------- ------- ------
Total interest bearing
liabilities................ 83,657 3,563 4.26% 63,087 2,493 3.95% 45,655 1,732 3.79%
Non-interest bearing
demand accounts............. 19,232 16,159 13,557
Other non-interest bearing
liabilities................. 0 0 0
-------- -------- -------
Total liabilities......... 19,232 16,159 13,557
Common Shareholders'
equity....................... 8,152 6,455 5,011
-------- -------- -------
Total liabilities &
equity................... $111,041 $ 85,701 $64,223
-------- -------- -------
Net interest income........... $6,238 $5,080 $4,058
------ ------ ------
------ ------ ------
Net interest spread........... 5.40% 5.83% 6.28%
Net interest margin (2)....... 6.15% 6.56% 7.06%
</TABLE>
- ------------------------
(1) Includes nonaccrual loans and loan fees.
(2) Net interest margin is the net yield on interest earning assets computed
by dividing net interest income by average interest earning assets.
42
<PAGE>
The following table reflects changes in interest income and expense
attributable to changes in volume and interest rates of significant
interest-bearing assets and liabilities (in thousands):
PIONEER BANK OF LONGMONT
ANALYSIS OF VOLUME AND INTEREST RATES
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 COMPARED TO 1996 1996 COMPARED TO 1995
------------------------- --------------------------
ATTRIBUTABLE TO CHANGE ATTRIBUTABLE TO CHANGE
------------------------- --------------------------
Total in in Total in in
CHANGE VOLUME RATE CHANGE VOLUME RATE
------ ------- ----- ------ -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans...................... $1,955 $2,162 $(207) $1,404 $1,499 $(95)
Investment securities...... 209 205 4 267 248 19
Other interest earning
assets.................... 64 40 24 112 121 (9)
------ ------- ----- ------ -------- ----
Total interest income.... 2,228 2,407 (179) 1,783 1,868 (85)
Interest Expense:
Savings/interest bearing
deposits.................. 190 157 33 148 152 (4)
Time deposits.............. 880 834 46 613 633 (20)
Short term borrowings...... 0 0 0 0 0 0
Long term borrowings....... 0 0 0 0 0 0
------ ------- ----- ------ -------- ----
Total interest expense... 1,070 991 79 761 785 (24)
Increase (decrease) in net
interest income.......... $1,158 $1,416 $(258) $1,022 $1,083 $(61)
------ ------- ----- ------ -------- ----
------ ------- ----- ------ -------- ----
</TABLE>
The change in interest income/expense attributable to volume
reflects the change in volume times the prior year's rate and the change in
interest income/expense attributable to rate reflects the change in rates
times the current year's volume.
Net interest income in 1997 increased $1,158,000 from 1996 due to
increasing interest rates on the interest earning assets at a rate greater
than the increase on the interest bearing liabilities.
PROVISION FOR LOAN LOSSES. Pioneer made a provision to its "loan
loss reserve" in 1997 and 1996 of $30,000 and $75,000, respectively, and
provided $109,000 in 1995. The provisions were determined based on
management's assessment of an adequate reserve for possible loan losses.
Management continually assesses the adequacy of the loan loss
reserve by evaluating the collectability of loans. This process includes
assigning risk ratings to loans and reserving percentages of these balances
according to reserve allocation formulas. This evaluating process takes into
consideration such factors as changes in the nature and volume of Pioneer's
loan portfolio, prior loan loss experience, overall loan portfolio quality,
review of specific problem loans and current and anticipated economic
conditions that may affect a borrower's ability to pay. For the year 1997, as
with previous years, management utilized this process in evaluating the
adequacy of the allowance for loan loss.
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<PAGE>
NON-INTEREST INCOME. The following table presents a summary of
non-interest income (in thousands):
PIONEER BANK OF LONGMONT
ANALYSIS OF NON-INTEREST INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
-------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Service charges................ $ 1,042 $ 877 $ 788
Insurance commissions.......... 0 12 4
Other.......................... 141 130 98
-------- -------- --------
Total....................... $ 1,183 $ 1,019 $ 890
</TABLE>
Non-interest Income continues to be a significant source of revenues
for Pioneer and increased $164,000 or 16% in 1997 over 1996 and $129,000 or
14% in 1996 over 1995. The increase in non-interest income in 1997 is
attributed to service charges. In 1996, the increase in non-interest was also
due to service charges.
NON-INTEREST EXPENSE. The following table presents a summary of
non-interest expense (in thousands):
PIONEER BANK OF LONGMONT
ANALYSIS OF NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
-------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Salaries and benefits.......... $ 2,532 $ 1,872 $ 1,497
Premises and equipment......... 690 581 506
Other expenses................. 1,029 925 752
-------- -------- --------
Total......................... $ 4,251 $ 3,378 $ 2,755
-------- -------- --------
-------- -------- --------
</TABLE>
The non-interest expense increased to $4.3 million in 1997 from $3.4
million in 1996 and $2.8 million in 1995. The increase in 1997 is largely
attributable to salaries and wages and 401(k) contributions.
INCOME TAXES. Pioneer's income tax provision for 1997 was $1,085,000
compared with $923,000 in 1996 and $770,000 in 1995. The effective tax rates
were 35% in 1997, 35% in 1996 and 37% in 1995. The effective tax rate differs
from the federal statutory rate primarily as a result of tax-exempt interest
income.
PIONEER CONDITION
OVERVIEW. Pioneer's total assets were $130 million, $91 million and
$79 million for the years ending 1997, 1996 and 1995, respectively. Pioneer's
assets increased 43% from 1996 to 1997 and 15% from 1995 to 1996. The
increase in 1997 and 1996 is primarily attributed to an increase in loans and
deposits.
LOANS. The following table presents the balance of each major
category of loans (dollars in thousands) at the dates indicated:
44
<PAGE>
PIONEER BANK OF LONGMONT
ANALYSIS OF LOANS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995
---------------- --------------- ---------------
% of % of % of
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------- ------ -------- ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Loan Category:
Commercial................... $12,224 14.8% $ 8,927 13.4% $ 6,829 13.4%
Real estate:
Construction............... 22,025 26.6 15,409 23.2 11,437 22.4
Farmland................... 567 0.7 202 0.3 0 0.0
Residential................ 19,990 24.1 14,575 22.0 10,040 19.7
Other...................... 22,297 27.0 21,441 32.3 16,558 32.4
Agricultural................. 412 0.5 620 0.9 960 1.9
Consumer/other............... 5,196 6.3 5,211 7.9 5,231 10.2
------- ------ -------- ------ ------ ------
Total loans................ 82,711 100.0% 66,385 100.0% 51,055 100.0%
Less allowance for loan
losses...................... (504) .61% (505) .76% (470) .92%
------- ------ -------- ------ ------ ------
Total net loans............ $82,207 $ 65,880 $50,585
------- -------- -------
------- -------- -------
</TABLE>
A principal component of Pioneer's earning assets is its loan
portfolio. On December 31, 1997, total loans totaled $83 million. This
represented a 26% increase over December 31, 1996 total loans of $66 million.
December 31, 1996 total loans increased 29% over December 31, 1995 loans of
$51 million. The increase in 1997 is mainly attributable to the real estate
market and growth in the Longmont, Colorado area.
COMMERCIAL LOANS. Loans in this category principally include loans
to service, retail, wholesale and manufacturing businesses; including
agricultural service businesses.
REAL ESTATE LOANS. The majority of Pioneer's real estate loan
portfolio consists of short-term local residential first mortgages. The large
majority of these mortgages are fixed-rate mortgages with short-term balloon
payments or adjustable rate short-term mortgages. The practice has been for
the short-term real estate mortgages to be retained by Pioneer rather than
selling them on the secondary market. Long-term first mortgage loans have
typically been originated by Pioneer for other mortgage investment companies.
AGRICULTURAL LOANS. Loans classified as agricultural loans primarily
include operating and equipment loans to local farmers. Loans secured by farm
land are listed in the real estate classification. Loans to agri-business
companies are in the commercial classification.
CONSUMER/OTHER LOANS. Loans classified as consumer and other include
automobile, home improvement not secured by real estate, dealer paper, tax
exempt, financing of business' receivables and lease financing. Lease
financing is offered on a very limited basis.
45
<PAGE>
NON-PERFORMING ASSETS. Pioneer follows regulatory guidelines with
respect to placing loans on non-accrual status. When a loan is placed on
non-accrual status, all previously accrued and uncollected interest is
reversed. Certain non-performing assets of Pioneer are summarized (in
thousands) in the following table:
PIONEER BANK OF LONGMONT
NONACCRUAL, RESTRUCTURED AND PAST DUE LOANS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
-------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Nonaccrual loans................. $ 16 $ 0 $ 14
Restructured loans............... 0 0 2
Loans past due 90 days or more... 15 22 0
Interest which would have been
earned on nonaccrual loans if
they were on accrual basis...... 1 0 1
</TABLE>
ALLOWANCE FOR LOAN LOSSES. Pioneer's loan loss reserve is available
to absorb future loan losses. The current level of the loan loss reserve is a
result of management's assessment of the risk within the loan portfolio based
on the information revealed in the credit reporting processes. Pioneer
utilizes a risk-rating system on loans and a monthly credit review and
reporting process which results in the calculation of the guideline reserves
based on the risk within the portfolio. This assessment of risk takes into
account the composition of the loan portfolio, previous loan experience,
current economic conditions and other factors that, in management's judgment,
deserve recognition.
46
<PAGE>
The following table sets forth changes in Pioneer's loan loss
reserve as of the dates indicated (in thousands):
PIONEER BANK OF LONGMONT
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
-------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Balance beginning of year........ $ 505 $ 470 $ 380
Provision for loan losses........ 30 75 109
Charge-offs:
Commercial..................... 20 34 11
Consumer....................... 9 3 9
Real estate.................... 0 0 0
Other.......................... 6 11 6
-------- ------- ------
Total loan losses.............. 35 48 26
Recoveries:
Commercial..................... 2 4 2
Consumer....................... 0 3 1
Real estate.................... 0 0 0
Other.......................... 2 1 4
-------- ------- ------
Total loan recoveries........ 4 8 7
-------- ------- ------
Net charge-offs.............. 31 40 19
Balance end of year.............. $ 504 $ 505 $ 470
-------- ------- ------
-------- ------- ------
Allowance for loan losses to:
Total loans at year-end........ 0.61% 0.76% 0.92%
Net charge-offs to average loans. 0.04% 0.07% 0.04%
</TABLE>
The following table allocates the loan loss reserve based on
management's judgment of potential losses in the respective areas. While
management has allocated reserves to various portfolio segments for purposes
of this table, the reserve is general in nature and is available for the
portfolio in its entirety:
47
<PAGE>
PIONEER BANK OF LONGMONT
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(In thousands)
<TABLE>
<CAPTION>
Real
Years Ended December 31 COMMERCIAL AGRICULTURAL ESTATE CONSUMER UNALLOCATED TOTAL
- ----------------------- ---------- ------------ ------ -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
1997
Allowance for loan losses $122 $ 6 $329 $ 47 $ 0 $504
% to loans in category 1.00% 1.46% 0.51% 0.90% 0% 0.61%
1996
(Unaudited)
Allowance for loan losses $ 89 $ 6 $363 $ 47 $ 0 $505
% to loans in category 1.00% 1.00% 0.70% 0.90% 0% 0.76%
1995
(Unaudited)
Allowance for loan losses $ 68 $ 10 $340 $ 52 $ 0 $470
% to loans in category 1.00% 1.04% 0.89% 0.99% 0% 0.92%
</TABLE>
INVESTMENT PORTFOLIO. The investment activities of Pioneer are designed
to provide an investment alternative for funds not presently required to meet
loan demand; assist the bank in meeting potential liquidity requirements; assist
in maximizing income consistent with quality and liquidity requirements; supply
collateral to secure public funds and retail repurchase agreements; provide a
means for balancing market and credit risks; and provide consistent income and
market value throughout changing economic times.
Pioneer's portfolio consists primarily of obligations of U.S.
government, U.S. government agency, state and local governments, as well as
agency collateralized obligation securities. Pioneer's investment portfolio
does not contain concentration of investments in any one issuer in excess of
10% of Pioneer's total investment portfolio. Exempt from this calculation
are securities of the U.S. government and U.S. government agencies.
48
<PAGE>
The following table sets forth the composition of Pioneer's
investment portfolio at the dates indicated:
PIONEER BANK OF LONGMONT
INVESTMENT PORTFOLIO
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
-------- ---------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
U.S. Treasuries......................................... $ 3,495 $ 3,489 $ 0
Agencies................................................ 9,669 5,981 3,703
Municipal............................................... 1,566 1,139 882
-------- --------- -------
Total investments..................................... $ 14,730 $ 10,609 $ 4,585
======== ========= =======
</TABLE>
For the investment portfolio as of December 31, 1997, the following
tables set forth a summary of yield and maturities:
<TABLE>
<CAPTION>
PIONEER BANK OF LONGMONT
ANALYSIS OF INVESTMENT YIELDS AND MATURITIES
DECEMBER 31, 1997
(In thousands)
ONE YEAR OR LESS ONE YEAR THROUGH 5 OVER 5 YEARS THROUGH 10 OVER TEN YEARS TOTAL
---------------- ------------------ ----------------------- ------------------- ------------------
Weighted Weighted Weighted Weighted Weighted
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------- ------- -------- -------- --------- -------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries..... $1,498 6.05% $1,997 6.17% $ 0 0.00% $ 0 0.00% $3,495 6.12%
U.S. Agencies....... 4,185 5.80% 5,484 6.03% 0 0.00% 0 0.00% 9,669 5.93%
Municipals.......... 285 3.99% 1,136 4.65% 120 5.14% 25 4.10% 1,566 4.55%
------- ------ ----- ----- -------
Total............. $5,968 5.49% $8,617 5.88% $120 5.14% $25 4.10% $14,730 5.68%
====== ====== ==== === =======
</TABLE>
49
<PAGE>
DEPOSITS. The following table sets forth a summary of Pioneer's
deposits as of the dates indicated and the maturity of time deposits over
$100,000:
PIONEER BANK OF LONGMONT
ANALYSIS OF DEPOSITS
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
--------- -------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Noninterest bearing................................... $ 19,828 $ 17,153 $ 15,038
Interest bearing:
Savings and NOW..................................... 46,898 38,592 29,919
Time Deposits less than $100M....................... 39,560 19,054 20,020
Time Deposits greater than $100M.................... 14,785 8,784 8,272
--------- -------- ---------
Total Deposits.................................... $ 121,071 $ 83,583 $ 73,249
========= ======== =========
</TABLE>
PIONEER BANK OF LONGMONT
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
(In thousands)
<TABLE>
<CAPTION>
LESS GREATER
THAN THAN
6 MONTHS 6-12 MONTHS 12 MONTHS TOTAL
---------- ----------- ----------- -----
<S> <C> <C> <C> <C>
December 31, 1997................. $9,998 $4,379 $408 $14,785
</TABLE>
ANALYSIS OF DEPOSITS. Year-end deposits for 1997 were $121,071,000
as compared to $83,583,000 for year-end 1996 and $73,249,000 for year-end
1995. The increase in total deposits from 1995 to 1996 was attributable to
increase in savings and NOW deposits, and in non-interest bearing deposits.
The increase in total deposits from 1996 to 1997 was attributable to an
increase in time deposits, primarily under $100,000, but including some over
$100,000, and in savings and NOW deposits.
CAPITAL. Bank regulatory agencies measure capital adequacy through
standardized risk-based capital guidelines which compare different levels of
capital (as defined by such guidelines) to risk-weighted asset and
off-balance sheet obligations. Under final rules effective December 31, 1992,
all financial institutions are required to maintain a level of core capital
(known as Tier 1 capital), which must be at least 4.0% of risk-weighted
assets, and a minimum level of total capital of at least 8.0% of
risk-weighted assets. The Federal Reserve Board and the FDIC have adopted
final regulations defining what capital ratios were necessary to be "well
capitalized." See: "Business of Pioneer" for a detailed discussion of these
capital ratios.
The following table presents regulatory capital requirements and
risk-based capital levels:
REGULATORY CAPITAL REQUIREMENTS:
<TABLE>
<CAPTION>
Tier 1 Total Leverage
CAPITAL RISK-BASED CAPITAL RATIO
-------- ------------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1997
Minimum.................... 4.0% 8.0% 4.0%
Well capitalized........... 6.0% 10.0% 5.0%
Actual..................... 9.77% 10.32% 7.97%
</TABLE>
50
<PAGE>
PIONEER BANK OF LONGMONT
RISK BASED CAPITAL
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
AMOUNT RATIO
------ ------
<S> <C> <C>
Capital Category:
Tier 1 Capital................................................ $8,845 9.77%
Total Capital................................................. 9,349 10.32%
Total risk weighted assets...................................... 90,520
Leverage ratio.................................................. 7.97%
</TABLE>
As of December 31, 1997, Pioneer exceeded each of the capital
requirements set forth by federal or state banking regulatory agencies.
LIQUIDITY AND FUNDS MANAGEMENT. Liquidity management requires an
ability to meet financial commitments when contractually due and to respond
to other requirements for funds. The Bank's asset and liability management is
directed by the President and Executive Vice President who are responsible
for managing balance sheet and off-balance sheet commitments to meet the
needs of customers while achieving Pioneer's financial objectives. Management
monthly reviews funding capacities, current and forecasted loan demand, and
investment opportunities. Management provides regular monthly reports on
these activities and forecasts to the board.
Asset liquidity is provided by regular maturities of loans and by
maintaining relatively short-term marketable investment securities and
federal funds. (See investment portfolio investment maturity table.)
Pioneer's investment securities due within one year and federal funds sold
represented 43% of rate-sensitive assets and 22.0% of total assets as of
December 31, 1997.
INTEREST RATE SENSITIVITY. Significant changes in interest rates affect
the composition, yield and cost of balance sheet components. The rate
sensitivity of these assets and liabilities is monitored and matched to
control the risk associated with movements in rates. Management for the Bank
meets regularly to monitor and formulate strategies and policies to provide
sufficient levels of net interest income while maintaining acceptable levels
of interest rate sensitivity, risk and liquidity. The primary object of rate
sensitivity management is to ensure earnings stability by minimizing the
sensitivity of net interest income to fluctuations in interest rates. The
Bank uses gap and other systems to measure, monitor and adapt to changing
interest rate environments.
51
<PAGE>
The following table sets forth Pioneer's interest rate sensitivity
analysis by contractual repricing or maturity at December 31, 1997:
PIONEER BANK OF LONGMONT
INTEREST RATE SENSITIVITY
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
REPRICING OR MATURING IN
------------------------------------------
1 Year Over 1 to Over 5
OR LESS 5 YEARS YEARS TOTAL
------- ------- ----- -----
<S> <C> <C> <C>
(Dollars in thousands)
Rate Sensitive Assets:
Loans.......................................... $37,454 $33,626 $11,631 $82,711
Investment securities......................... 5,968 8,600 162 14,730
Other interest-bearing assets.................. 22,662 0 0 22,662
------ ---------- ---------- ------
Total rate sensitive assets.................. 66,084 42,226 11,793 120,103
Rate Sensitive Liabilities:
Savings/interest
bearing checking............................. 46,898 0 0 46,898
Time deposits.................................. 51,429 2,916 0 54,345
------ ------- ---------- ------
Total rate sensitive liabilities............. 98,327 2,916 0 101,243
Rate sensitive gap............................... (32,243) 39,310 11,793 18,860
Cumulative rate sensitive gap.................... (32,243) 7,067 18,860 18,860
Rate sensitive gap %............................. (48.8)% 93.1% 100.0% 15.7%
Cumulative rate sensitive gap %.................. (48.8)% 6.5% 15.7% 15.7%
</TABLE>
The following tables set forth Pioneer's interest rate sensitivity
analysis at the dates indicated with respect to individual categories of loans
and provides separate analyses with respect to fixed interest rate loans and
floating interest rate loans (in thousands):
PIONEER BANK OF LONGMONT
LOAN REPRICING OR MATURING
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
REPRICING OR MATURING IN
------------------------------------------
1 Year Over 1 to Over 5
OR LESS 5 YEARS YEARS TOTAL
------- ------- ----- -----
<S> <C> <C> <C> <C>
Loan Category
Commercial ...................................... $5,794 $4,313 $2,117 $12,224
Real Estate...................................... 30,317 25,306 9,256 64,879
Agricultural..................................... 392 20 0 412
Consumer and Other............................... 951 3,987 258 5,196
------- ------- -------- -------
Total Loans.................................... 37,454 33,626 11,631 82,711
Rate Sensitive Loans
Fixed Interest Rate Loans........................ 17,518 33,626 11,631 62,775
Floating Interest Rate Loans..................... 19,936 0 0 19,936
------ ---------- ---------- ------
Total Loans.................................... 37,454 33,626 11,631 82,711
</TABLE>
52
<PAGE>
PIONEER'S PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below are the names and addresses and the number of shares
of Pioneer Common Stock held as of the Record Date by the officers and
directors of Pioneer and each beneficial owner of more than 5% of its
outstanding common stock:
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS POSITION HELD OF SHARES PERCENT
- ---------------- ------------- --------- -------
<S> <C> <C> <C>
James O. Haas Chairman of the Board 41,000 82.0%
1610 Hover Road
Longmont, CO 80501
Stuart W. Losey Director 3,495 7.0%
8916 Niwot Road
Longmont, CO 80503
Daniel L. Allen President, CEO, Director 2,753 5.5%
7150 pine Cone Ct.
Longmont, CO 80503
Roger Kopman EVP, Director 2,752 5.5%
----- ---
1040 Kay St.
Longmont, CO 80501
OFFICERS AND DIRECTORS 50,000 100.0%
AS A GROUP (4 PERSONS):
</TABLE>
53
<PAGE>
MATERIAL DIFFERENCES IN RIGHTS OF PIONEER SHAREHOLDERS
The rights of Pioneer shareholders are governed by the Articles of
Incorporation and Bylaws of Pioneer and the laws of the State of Colorado.
The rights of CFB stockholders are governed by the Certificate of
Incorporation and Bylaws of CFB and the laws of the State of Delaware. After
the Merger becomes effective and Pioneer is subsequently merged with and into
the Acquisition Subsidiary, the rights of Pioneer shareholders who become CFB
stockholders will be governed by the CFB Certificate, the CFB Bylaws and the
laws of the State of Delaware. In certain respects, rights of Pioneer
shareholders and CFB stockholders are similar. While it is not practical to
describe all changes in the rights of Pioneer shareholders that will result
from the application of Delaware law in lieu of Colorado law and the
differences between the Pioneer Articles and Bylaws and the CFB Certificate
and Bylaws, the following is a summary of certain significant differences. It
should be understood that such description of the differences is a summary
only and does not purport to be a complete description of the differences
between Delaware and Colorado corporation laws.
CAPITAL STOCK
The Pioneer Articles authorize the issuance of 50,000 shares of
common stock, par value $10.00 per share. Pioneer currently has outstanding
50,000 shares of common stock. All Pioneer common shareholders have equal
rights and preferences with respect to dividends and distributions upon
liquidation.
The CFB Certificate authorizes the issuance of 32,000,000 shares of
stock, consisting of 30,000,000 shares of Common Stock, par value $0.01 per
share, and 2,000,000 shares of Preferred Stock, $.01 par value per share, of
which 150,000 shares are designated as Series A Junior Participating
Preferred Stock. On April 28, 1998, CFB's shareholders will consider and vote
on approval of an amendment to the CFB Certificate to increase the number of
authorized shares of CFB's Common Stock from 30,000,000 shares to 80,000,000
shares. The number of authorized shares of Preferred Stock would not be
changed. On February 3, 1998, CFB's Board of Directors approved a two-for-one
stock split in the form of a 100% stock dividend, subject to approval of the
amendment to the Certificate of Incorporation. The stock dividend would be
paid on May 15, 1998 to shareholder of record on May 1, 1998. As of March 6,
1998, CFB had issued and outstanding 20,324,732 shares of Common Stock, net
of treasury shares, and no issued and outstanding shares of Preferred Stock.
As of such date, there were approximately 1,300 holders of record of the
outstanding shares of Common Stock and an additional estimated 7,000
beneficial holders. In addition, CFB anticipates issuing approximately
1,722,000 shares of Common Stock in the aggregate in connection with its
pending acquisitions of FNB, CBI and Pioneer.
The relative rights and preferences of any CFB capital securities or
preferred stock issued in the future may be established by the CFB Board of
Directors without stockholder action, and such shares, when and if issued,
could have dividend, liquidation, voting, and other rights superior to those
of CFB Common Stock.
SHAREHOLDERS' ACTION WITHOUT A MEETING
Delaware law provides that, unless otherwise provided in the
certificate of incorporation, any action which may be taken at any annual or
special meeting of shareholders of a corporation may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents
in writing, setting forth the actions so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted.
Colorado law also permits written actions by shareholders, but
requires that a written consent be signed by all of the shareholders entitled
to vote thereon.
54
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS
If a Delaware corporation fails to hold an annual meeting for a
period of thirteen months after its last annual meeting, the Court of
Chancery may summarily order a meeting to be held upon the application of any
shareholder or director. The shares of stock represented at such meeting,
either in person or by a proxy, and entitled to vote thereat, shall
constitute a quorum for the purpose of such meeting.
Colorado law provides that if an annual meeting of shareholders has
not been held within the earlier of six months after the end of the
corporation's fiscal year or fifteen months after its last annual meeting, a
shareholder may demand an annual meeting of shareholders by written notice of
demand to the district court of the county where the corporation's principal
office is located.
SPECIAL MEETING OF SHAREHOLDERS
Delaware law provides that special meetings of the shareholders may
be called by the board of directors or by such person or persons as may be
authorized by the certificate of incorporation or by the bylaws. CFB's Bylaws
authorize the Chairman of the Board of Directors, the President or by any two
or more directors to call a special meeting of shareholders.
Colorado law provides that special meetings of the shareholders may
be called by any of the following: the board of directors; a person
authorized in the bylaws to call special meetings; or a shareholder or
shareholders holding 10% or more of the voting power of all shares entitled
to vote. Pioneer's Bylaws allow a special meeting of shareholders to be
called by one-third of the directors or by shareholders holding 25% or more
of the outstanding common stock.
PROXIES
Both Delaware and Colorado law permit proxies of indefinite
duration. In the event that the proxy is indefinite as to its duration,
Colorado law provides that it will be valid for 11 months and Delaware law
provides that it will be valid for 3 years.
PREEMPTIVE RIGHTS
Under Delaware law, no shareholder shall have any preemptive right
to subscribe to an additional issue of stock or to any security convertible
into such stock unless, and to the extent that, such right is expressly
granted in the certificate of incorporation. CFB's Certificate does not grant
preemptive rights to CFB shareholders.
Under Colorado law, a shareholder of a corporation has a preemptive
right to acquire unissued shares or rights to purchase such shares of the
corporation before the corporation may offer them to other persons, unless
such rights are denied or limited in the articles of incorporation. Pioneer's
Articles provide that shareholders have pre-emptive rights to purchase any
shares or securities of the corporation which it may issue or sell.
CUMULATIVE VOTING
Under Delaware law, shareholders do not have cumulative voting
rights unless the rights are granted to them in the corporation's certificate
of incorporation. If cumulative voting is provided for in the certificate or
articles of incorporation, each holder of stock shall be entitled to as many
votes as shall equal the number of votes which he or she would be entitled to
cast for the election of directors with respect to his or her shares of stock
multiplied by the number of directors to be elected by him or her, and that
he or she may cast all such votes for a single director or may distribute
them among the number to be voted for, or for any two or more of them as he
or she may see fit. CFB's Certificate provides for cumulative voting.
55
<PAGE>
Under Colorado law, cumulative voting is generally mandatory for
corporations incorporated after December 31, 1958 unless specifically
prohibited in the corporation's articles of incorporation. Pioneer's Articles
prohibit cumulative voting.
DISSOLUTION
A Delaware corporation may be dissolved by the voluntary action of
the holders of a majority of the outstanding stock of the corporation
entitled to vote thereon. Additionally, a Delaware corporation may be
dissolved without the action of the directors if all of the shareholders
entitled to vote thereon shall consent in writing. A Colorado corporation may
be dissolved upon a proposal of the corporation's board of directors and the
affirmative vote of the holders of a majority of the voting power of all
shares entitled to vote.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
The COBCA generally requires the affirmative vote of the holders of
a majority of the outstanding shares of each class entitled to vote to
approve a merger or share exchange. In certain circumstances, the holders of
outstanding shares of a class of capital stock of a Colorado corporation are
entitled to vote as a separate voting group, regardless of whether the
articles of incorporation provide that such shares of capital stock are
entitled to vote. However, no vote of shareholders of a Colorado corporation
is required to approve a merger if (i) that corporation is the surviving
corporation of the merger, (ii) the articles of incorporation of the
surviving corporation, with certain exceptions, will not differ from its
articles of incorporation before the merger, (iii) each shareholder of the
surviving corporation whose shares are outstanding immediately before the
merger will hold the same number of shares, with identical designations,
preferences, limitations, and relative rights, immediately after the merger,
and (iv) the number of shares of the corporation to be issued in the merger,
or to be issuable upon conversion of any convertible instruments to be issued
in the merger, does not exceed 20% of the voting stock of that corporation
outstanding immediately before the merger.
Under Delaware law, the vote of a simple majority of the outstanding
shares of CFB Common Stock entitled to vote thereon is required to approve a
merger or consolidation, or the sale, lease, or exchange of substantially all
of CFB's corporate assets. With respect to a merger, no vote of the
stockholders of CFB is required if CFB is the surviving corporation and (i)
the related agreement of merger does not amend the CFB Certificate, (ii) each
share of stock of CFB outstanding immediately before the merger is an
identical outstanding or treasury share of CFB after the merger, and (iii)
the number of shares of CFB stock to be issued in the merger (or to be
issuable upon conversion of any convertible instruments to be issued in the
merger) does not exceed 20% of the shares of CFB Common Stock outstanding
immediately before the merger.
In addition to being subject to the laws of Delaware, respectively,
CFB, as a bank holding company, is subject to various provisions of federal
law with respect to mergers, consolidations and certain other corporate
transactions.
DISSENTERS' RIGHTS
Under the COBCA, any shareholder of a corporation is entitled to
receive payment of the fair value of such shareholder's shares of capital
stock if such shareholder properly dissents from (i) any merger, share
exchange or consummation of a sale or exchange of all or substantially all of
the assets of the corporation not made in the regular course of business for
which a vote of such shareholder is required, (ii) any corporate action that
results in an amendment of the articles of incorporation, which materially
and adversely affects rights with respect to a dissenter's shares because it
alters or abolishes a preferential right of the shares, creates, alters or
abolishes a right in respect of redemption, excludes or limits the right of
the shares to be voted on any matter or to cumulate votes, or reduces the
number of shares owned by the shareholder to a fraction of a share if the
fractional share so created is to be acquired for cash, (iii) any other
corporate action taken pursuant to a shareholder vote to the extent the
bylaws or resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and to obtain payment for
their shares. See the more detailed discussion of the procedures for
asserting dissenters rights under "The Merger - Dissenters' Rights."
56
<PAGE>
Under Delaware law, a stockholder is generally entitled to receive
payment of the appraised value of such stockholder's shares if the
stockholder dissents from a merger or consolidation. However, appraisal
rights are not available to holders of (i) shares listed on a national
securities exchange or held of record by more than 2,000 persons or (ii)
shares of the corporation surviving a merger, if the merger did not require
the approval of the stockholders of such corporation, unless in either case,
the holders of such stock are required by the terms of the merger to accept
anything other than (a) shares of stock of the surviving corporation, (b)
shares of stock of another corporation which are also listed on the national
securities exchange or held by more than 2,000 holders, or (c) cash in lieu
of fractional shares of such stock. Appraisal rights are not available for a
sale of assets or an amendment to the CFB Certificate of Incorporation.
Because shares of CFB Common Stock are traded in the Nasdaq National Market,
its stockholders are not, subject to the aforementioned exceptions, entitled
to any rights of appraisal in connection with mergers or consolidations
involving CFB.
CONFLICTS OF INTEREST
Under Delaware law, a contract or transaction between a corporation
and one or more of its directors or officers, or between a corporation and
any other corporation, partnership, association, or other organization in
which one or more of its directors or officers are directors or officers, or
have a financial interest, shall not be void or voidable solely for that
reason, or solely because the director or officer was present at or
participated in the meeting of the board or committee thereof which
authorized the contract or transaction, or solely because his or her vote was
counted for such purpose, provided that the contract or transaction is (i)
authorized in good faith by the board of directors, or (ii) ratified by the
corporation's shareholders, or (iii) fair to the corporation. Common or
interested directors may be counted in determining the presence of a quorum
at a meeting of the board which authorizes the contract or transaction.
In general, Colorado's conflicts of interest statute is the same as
Delaware's statute, except that Colorado's conflict of interest statute does
not cover transactions between the corporation and its officers.
DIVIDENDS AND DISTRIBUTIONS
Distributions to shareholders of a Colorado corporation may not be
made if any such distribution would render the corporation unable to meet its
liabilities in the ordinary course of business or, if as a result of such
distribution, the excess of the corporation's assets over its liabilities
would be less than the liquidation preference of all shares having a
preference on liquidation over the class or series to which the distribution
is made.
A Delaware corporation may make repurchases or redemptions that do
not impair capital and may pay dividends out of any surplus account
(generally the stockholders' equity of the corporation less the par value of
the capital stock outstanding) or, if there exists no surplus, out of net
profits of the current and preceding fiscal years (provided that certain
provisions must be made for preferences of outstanding stock having a
liquidation preference). To determine the surplus, assets and liabilities are
valued at their current fair market value. Assuming that such assets have a
fair market value greater than their book value and that liabilities have not
increased in value to a greater extent, such revaluation will increase the
surplus of the corporation and thereby permit the corporation to pay an
increased dividend and/or to repurchase a greater number of shares.
Pioneer and CFB are also subject to the policies of federal
regulatory authorities regarding payment of dividends, which generally limit
dividends to operating earnings. See "Business of Pioneer - Supervision and
Regulation."
ANTI-TAKEOVER PROVISIONS
Pursuant to Delaware's Business Combinations Statute, if a person
acquires 15% or more of the voting stock of a Delaware corporation, that
person is designated an interested shareholder and the corporation may not
engage in certain business combinations with such person for a period of
three years. However, an otherwise prohibited business combination may be
permitted if one of these conditions is met: (1) if prior to the date the
person became an interested shareholder, the board of directors approved
either the business combination or the transaction which resulted in the
shareholder becoming an interested shareholder; (2) the tender offer or other
transaction by which the person acquires 15% stock ownership is attractive
enough that he is able to acquire ownership in the same transaction of at
least 85% of the outstanding voting stock; or (3) the business combination is
approved by the board and authorized at an annual or
57
<PAGE>
special meeting of shareholders by the affirmative vote of two-thirds of the
outstanding voting shares held by uninterested shareholders. A business
combination is defined to include any of the following: any merger or
consolidation with the interested shareholder; any sale, transfer or other
disposition of assets to the interested shareholder if the assets have a
market value equal to or greater than 10% of the aggregate market value of
all of the corporation's assets; any transfer of stock of the corporation to
the interested shareholder, except for transfers in a conversion or exchange
or a pro rata distribution; and any receipt by the interested shareholder of
any loans, advances, guarantees, pledges or other financial benefits, except
for a pro rata transfer.
Colorado does not have a comparable statute.
CFB is party to a shareholders' rights agreement which could in
certain circumstances serve as a deterrent against a possible change of
control not approved by CFB's Board of Directors. Under the agreement, upon
the occurrence of certain events which result in a change of control as
defined by the agreement, registered holders of shares of CFB Common Stock
are entitled to purchase one-hundredth of a share of junior participating
preferred stock of CFB at a stated price, or to purchase shares of common
stock in the acquiring entity with a market value equal to two times the
exercise price. The rights may be redeemed by CFB in certain circumstances
and expire in 2005.
CHARTER AMENDMENTS
Delaware law does not provide for shareholders, independently from
the board, to propose amendments to the certificate of incorporation.
Delaware law generally requires that, absent a greater requirement in the
certificate or articles of incorporation, a majority of the outstanding stock
entitled to vote thereon, and a majority of the outstanding stock of each
class entitled to vote as a class, must vote in favor of the amendment.
Under Colorado law, the holders of shares representing at least 10%
of the votes entitled to be cast on the amendment may propose an amendment to
the articles of incorporation. Colorado law, generally requires that the
amendment be approved by a majority of the votes entitled to be cast on the
amendment by any voting group with respect to which the amendment would
create dissenters' rights.
AMENDMENT OF BYLAWS
Delaware law provides that the power to adopt, amend or repeal
bylaws shall be in the shareholders entitled to vote; provided, however, any
corporation may, in its certificate of incorporation, confer the power to
adopt, amend, or repeal bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the shareholders,
nor limit their power to adopt, amend or repeal bylaws.
Generally, Colorado law provides that the board may amend or repeal
the bylaws unless the articles reserve the power exclusively to the
shareholders or the bylaw expressly provides that the board shall not amend
or repeal that bylaw. A corporation's shareholders may amend or repeal the
corporation's bylaws even though the bylaws may also be amended or repealed
by its board of directors.
LEGAL MATTERS
The validity of the CFB Common Stock to be issued to the
shareholders of Pioneer in connection with the Merger will be passed upon for
CFB by Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota. Patrick Delaney,
a partner of Lindquist & Vennum P.L.L.P., is a director of CFB and an owner
of CFB Common Stock and options to purchase CFB Common Stock.
58
<PAGE>
EXPERTS
The consolidated financial statements of CFB at December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997, incorporated by reference in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing and incorporated by reference elsewhere herein
which, as to the year 1995, are based in part on the report of Arthur
Andersen LLP, formerly independent auditors for Mountain Parks Financial
Corp. As of the date of their report and during the period covered by the
financial statements on which they reported, Arthur Andersen LLP were
independent certified public accountants with respect to CFB and Mountain
Parks Financial Corp., as the case may be, within the meaning of the
Securities Act and the applicable published rules and regulations thereunder.
The consolidated financial statements referred to above are incorporated by
reference in reliance upon such reports given upon the authority of such
firms as experts in accounting and auditing.
The financial statements of KeyBank National Association (Wyoming)
as of and for the year ended December 31, 1996 appearing in CFB's Current
Report on Form 8-K/A filed on September 22, 1997 with the Securities and
Exchange Commission have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance on such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Pioneer at December 31, 1997 and for the
year ended December 31, 1997 included herein have been included herein in
reliance upon the report of Kane & Associates, P.C. Certified Public
Accountants, independent auditors, appearing elsewhere herein, and given upon
the authority of such firm as experts in accounting and auditing. The
financial statements of Pioneer as of December 31, 1996 and for the two-year
period ended December 31, 1996 included herein have not been audited but have
been compiled by Kane & Associates, P.C. Certified Public Accountants.
Certain federal income tax consequences in connection with this Merger will
be passed upon for Pioneer by Kane & Associates, P.C. Certified Public
Accountants.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
The following financial statements of Pioneer are included in this
Proxy Statement-Prospectus:
<TABLE>
<CAPTION> PAGE
----
<S> <C>
Independent Auditors' Report on the Financial Statements for the year ended
December 31, 1997 and Compilation Report on the Financial Statements for the
years ended December 31, 1996 and 1995 ................................................................... F-2
Statements of Financial Condition as of December 31, 1997, 1996 and 1995.................................. F-3
Statements of Financial Condition as of December 31, 1997 and 1996........................................ F-4
Statements of Income for the years ended
December 31, 1997, 1996 and 1995.......................................................................... F-5
Statement of Changes in Shareholders' Equity for the years
ended December 31, 1997, 1996 and 1995 ................................................................... F-6
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................................................................... F-7
Notes to Financial Statements............................................................................. F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Pioneer Bank of Longmont
Longmont, Colorado 80501
We have audited the accompanying statement of financial condition of Pioneer
Bank of Longmont as of December 31, 1997, and the related statements of
income, changes in shareholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pioneer Bank of Longmont as
of December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
ACCOUNTANTS' COMPILATION REPORT
We have compiled the accompanying statements of financial condition of
Pioneer Bank of Longmont as of December 31, 1996 and the related statements
of income, changes in shareholders' equity and cash flows for the years ended
December 31, 1996 and 1995, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements as of December 31, 1996 and 1995
and for the years then ended and, accordingly, do not express an opinion or any
other form of assurance on them.
Denver, Colorado
January 15, 1998
F-2
<PAGE>
PIONEER BANK OF LONGMONT
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION> 1997 1996
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks....................................... $6,394,034 $ 5,956,724
Interest-bearing deposits with banks.......................... 99,000 0
Federal funds sold............................................ 22,200,000 3,975,000
Securities held to maturity................................... 14,730,248 10,609,268
Loans receivable, net of allowance for loan
losses of $503,811 in 1997 and $505,315 in 1996............... 82,207,312 65,879,941
Accrued interest receivable................................... 847,045 597,233
Premises and equipment........................................ 3,234,781 3,345,534
Other assets.................................................. 699,565 685,182
----------- -----------
Total assets................................ $130,411,985 $91,048,882
============ ===========
</TABLE>
See accompanying notes to financial statements and accountants' compilation
report for 1996.
F-3
<PAGE>
PIONEER BANK OF LONGMONT
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------------------- ----------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits.............................................. $55,075,540 $45,357,174
Savings deposits............................................. 11,650,700 10,387,827
Other time deposits.......................................... 54,345,131 27,837,750
----------------------- ----------------------
Total deposits.......................................... 121,071,371 83,582,751
Accrued expenses and other liabilities: 495,279 190,718
----------------------- ----------------------
Total liabilities....................................... 121,566,650 83,773,469
Shareholders' equity:
Common stock - $100 par value;
50,000 shares authorized and issued..................... 500,000 500,000
Surplus...................................................... 500,000 500,000
Retained earnings............................................ 7,845,335 6,275,413
----------------------- ----------------------
Total shareholders' equity.............................. 8,845,335 7,275,413
----------------------- ----------------------
Total liabilities and shareholders' equity.............. $130,411,985 $91,048,882
======================= ======================
</TABLE>
See accompanying notes to financial statements and accountants' compilation
report for 1996.
F-4
<PAGE>
PIONEER BANK OF LONGMONT
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Interest income:
Loans............................................. $8,433,560 $6,475,788 $5,045,518
Securities held to maturity....................... 779,852 570,800 303,753
Federal funds sold................................ 584,449 523,787 411,846
Deposits with banks............................... 3,617 2,809 29,218
-------------------- ------------------ ------------------
Total interest income........................ 9,801,478 7,573,184 5,790,335
Interest expense:
Deposits.......................................... 3,562,515 2,493,223 1,732,201
-------------------- ------------------ ------------------
Net interest income..................................... 6,238,963 5,079,961 4,058,134
Provision for loan losses............................... (30,000) (75,000) (109,000)
-------------------- ------------------ ------------------
Net interest income after provision for 6,208,963 5,004,961 3,949,134
loan losses..................................
Other income:
Service charges on deposit accounts............... 938,316 798,833 725,973
Other service charges and fees.................... 167,789 126,540 118,744
Other income...................................... 76,735 93,915 45,636
-------------------- ------------------ ------------------
Total other income........................... 1,182,840 1,019,288 890,353
-------------------- ------------------ ------------------
Other expenses:
Salaries and employee benefits.................... 2,532,427 1,872,066 1,497,218
Occupancy expense................................. 690,431 581,465 505,631
Other expense..................................... 1,029,123 924,556 752,266
-------------------- ------------------ ------------------
Total other expenses......................... 4,251,981 3,378,087 2,755,115
-------------------- ------------------ ------------------
Income before income taxes $3,139,822 $2,646,162 $2,084,372
Income tax expense...................................... 1,084,900 922,500 770,250
-------------------- ------------------ ------------------
Net income.............................................. $2,054,922 $1,723,662 $1,314,122
==================== ================== ==================
Net income per share of common stock.................... $ 41.10 $ 34.47 $ 26.28
==================== ================== ==================
Average shares outstanding.............................. 50,000 50,000 50,000
==================== ================== ==================
</TABLE>
See accompanying notes to financial statements and accountants' compilation
report for 1996 and 1995.
F-5
<PAGE>
PIONEER BANK OF LONGMONT
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Total
Common Retained Shareholders'
Stock Surplus Earnings Equity
--------------- --------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994................
(Unaudited) $500,000 $400,000 $3,429,129 $4,329,129
Net income for 1995................... 1,314,122 1,314,122
--------------- --------------- ---------------- --------------------
Balance at December 31, 1995................
(Unaudited) 500,000 400,000 4,743,251 5,643,251
Net income for 1996................... 1,723,662 1,723,662
Cash dividends paid -
$1.83 per share.................. (91,500) (91,500)
Transfer to surplus................... 100,000 (100,000) 0
--------------- --------------- ---------------- --------------------
Balance at December 31, 1996................
(Unaudited) 500,000 500,000 6,275,413 7,275,413
Net income for 1997................... 2,054,922 2,054,922
Cash dividend paid -
$9.70 per share.................. (485,000) (485,000)
--------------- --------------- ---------------- --------------------
Balance at December 31, 1997................ $500,000 $500,000 $7,845,335 $8,845,335
=============== =============== ================ ====================
</TABLE>
See accompanying notes to financial statements and accountants' compilation
report for 1996 and 1995.
F-6
<PAGE>
PIONEER BANK OF LONGMONT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------ -------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net income........................................ $2,054,922 $1,723,662 $1,314,122
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................. 281,839 231,858 191,754
Provision for loan losses.................... 30,000 75,000 109,000
Deferred income taxes........................ 0 (27,000) (25,000)
(Increase) in accrued interest
receivable.............................. (249,812) (173,186) (138,495)
Increase (decrease) in accrued
expense and other liabilities........... 304,561 (148,632) 74,516
(Increase) in other assets................... (16,583) (157,707) (136,332)
------------------- ------------------ -------------------
Total adjustments....................... 350,005 (199,667) 75,443
------------------- ------------------ -------------------
Net cash provided by operating activities............... 2,404,927 1,523,995 1,389,565
Cash flows from investing activities....................
Net (increase) decrease in interest
bearing deposits with banks.................. (99,000) 194,000 1,189,000
Net (increase) decrease in federal
funds sold................................... (18,225,000) 11,775,000 (12,550,000)
Purchase of held-to-maturity securities........... (8,195,980) (10,010,289) (3,000,829)
Proceeds from maturities of held-to-
maturity securities.......................... 4,075,000 3,986,000 3,744,400
Net increase in loans............................. (16,357,371) (15,370,045) (12,000,782)
Net purchases of premises and
equipment.................................... (168,886) (797,843) (748,033)
------------------- ------------------ -------------------
Net cash (used) in investing activities................. (38,971,237) (10,223,177) (23,366,244)
</TABLE>
See accompanying notes to financial statements and accountants' compilation
report for 1996 and 1995.
F-7
<PAGE>
PIONEER BANK OF LONGMONT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from financing activities....................
Net increase in non-interest bearing..............
demand, savings, and NOW.....................
deposit accounts............................. $10,981,239 $10,791,482 $4,953,855
Net increase (decrease) in time deposits.......... 26,507,381 (457,520) 17,568,431
Dividends paid.................................... (485,000) (91,500) 0
-------------------- ------------------ ------------------
Net cash provided by financing activities............... 37,003,620 10,242,462 22,522,286
-------------------- ------------------ ------------------
Net increase in cash and due from banks................. 437,310 1,543,280 545,607
Cash and due from banks at January 1.................... 5,956,724 4,413,444 3,867,837
-------------------- ------------------ ------------------
Cash and due from banks at December 31.................. $6,394,034 $5,956,724 $4,413,444
==================== ================== ==================
Interest paid........................................... $3,451,652 $2,487,993 $1,673,529
==================== ================== ==================
Income taxes paid....................................... $1,104,569 $1,049,480 $ 701,961
==================== ================== ==================
</TABLE>
See accompanying notes to financial statements and accountants' compilation
report for 1996 and 1995.
F-8
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of banking activities:
Pioneer Bank of Longmont ("Pioneer" or the "Bank") provides a full range of
banking services to its commercial, residential and consumer customers through
it's five branches located in the Boulder and Larimer counties.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash
equivalents are defined as those amounts included in the balance-sheet caption
"cash and due from banks".
Securities held to maturity:
Securities for which the Bank has the positive intent and ability to hold to
maturity are reported at cost, adjusted for premiums and discounts that are
recognized in interest income using the interest method over the period to
maturity. Mortgage-backed securities represent participating interests in pools
of long-term first mortgage loans originated and serviced by issuers of the
securities. Mortgage-backed securities are carried at unpaid principal balances,
adjusted for unamortized premiums and unearned discounts. Premiums and discounts
are amortized using methods approximating the interest method over the remaining
period to contractual maturity, adjusted for anticipated prepayments.
Loans:
Loans are stated at unpaid principal balances, less the allowance for loan
losses and net deferred loan fees and unearned discounts.
Loan origination and commitment fees, as well as certain direct origination
costs, are deferred and amortized on a straight line basis over the lives of the
related loans. Amortization of deferred loan fees is discontinued when a loan is
placed on nonaccrual status.
Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
on other impaired loans is recognized only to the extent of interest payments
received.
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, economic conditions and other risks inherent in the portfolio. Allowances
for impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by a provision
for loan losses, which is charged to expense, and reduced by charge-offs, net of
recoveries.
Foreclosed real estate:
F-9
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from operations and
changes in the valuation allowance are included in loss on foreclosed real
estate. The historical average holding period for such properties is less than
three months.
Income taxes:
Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Premises and equipment:
Land is carried at cost. Bank premises, furniture and equipment, and leasehold
improvements are carried at cost, less accumulated depreciation and amortization
computed principally by the straight-line method.
Retirement plan:
The company has a 401-K plan that covers substantially all of it's employees.
Annually, the company may in its discretion elect to contribute amounts into the
Plan.
Fair values of financial instruments:
The following methods and assumptions were used by the Bank in estimating fair
values of financial instruments as disclosed herein:
Cash and short-term instruments. The carrying amounts of cash and short-term
instruments approximate their fair value.
Held-to-maturity securities. Fair value for securities, excluding restricted
equity securities, are based on quoted market prices. The carrying values of
restricted equity securities approximate fair values.
Loans. For all loans, fair values are based on carrying values.
Deposit liabilities. The fair value disclosed for demand deposits and time
deposits are equal to the amount payable on demand at the reporting date (that
is, their carrying amounts).
Accrued interest. The carrying amounts of accrued interest approximate their
fair values.
Net income per share:
Net income per share of common stock has been computed based on the actual
number of shares outstanding which has remained constant since 1983 at 50,000
shares.
Current accounting pronouncements:
Effective for fiscal years beginning after December 15, 1997, FASB has issued
Statement No. 130, Reporting Comprehensive Income. Statement No. 130 requires
that an enterprise (a) classify items of other comprehensive income (as defined
in the Statement) by their nature in a financial statement and (b) display the
accumulated balance of other
F-10
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
comprehensive income separately from retained earnings and additional paid in
capital in the equity section of the statement of financial position. Management
does not believe the application of this Statement will materially affect the
Company's financial reporting.
INVESTMENT SECURITIES
Investment securities have been classified in the statement of financial
condition according to management's intent. The carrying amounts of securities
and their approximate fair values are as follows:
F-11
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
Securities held-to-maturity:
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
U.S. Government and
agency securities $13,165,087 $29,000 $(20,000) $13,174,087
State and municipal securities 1,565,161 60,000 (1,000) 1,624,161
------------------- ------------------ ------------------ ------------------
$14,730,248 $89,000 $(21,000) $14,798,248
=================== ================== ================== ==================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
(Unaudited)
-------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
U.S. Government and
agency securities $9,469,727 $12,000 $(65,000) $9,416,727
State and municipal securities 1,139,541 14,000 0 1,153,541
------------------- ------------------ ------------------ ------------------
$10,609,268 $26,000 $(65,000) $10,570,268
=================== ================== ================== ==================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
(Unaudited)
-------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
U.S. Government and
agency securities $3,702,917 $6,000 $(8,000) $3,700,917
State and municipal securities 882,062 2,000 (6,000) 878,062
------------------- ------------------ ------------------ ------------------
$4,584,979 $8,000 $(14,000) $4,578,979
=================== ================== ================== ==================
</TABLE>
F-12
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
The scheduled maturities of securities held-to-maturity at December 31, 1997,
were as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
-------------------- ---------------------
<S> <C> <C>
Due in one year or less $6,868,237 $6,861,973
Due from one to five years 7,699,520 7,771,029
Due from five to ten years 120,000 123,022
Due after ten years 42,491 42,224
-------------------- ----------------------
$14,730,248 $14,798,248
==================== ======================
</TABLE>
For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated over maturity groupings based
on the weighted-average contractual maturities by underlying collateral. The
mortgage-backed securities may mature earlier then their weighted-average
contractual maturities because of principal prepayments.
Assets, principally securities, carried at approximately $14,547,000, at
December 31, 1997, $6,427,000 in 1996 and $3,011,764 in 1995, were pledged to
secure public deposits and for other purposes required or permitted by law.
LOANS
Loans are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
1997 1996 1995
------------ ------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Commercial $ 8,938,719 $8,370,170 $ 7,774,451
Construction 19,758,389 15,384,465 11,436,623
Commercial real estate 39,239,031 29,346,219 21,233,148
Ready cash accounts 495,268 399,953 365,670
Installment 4,787,936 5,133,667 5,109,301
Installment real estate 9,786,504 8,047,647 5,380,128
------------- ------------- -------------
Subtotal 83,005,847 66,682,121 51,299,321
Net deferred loan fees (294,724) (296,865) (244,338)
Allowance for loan losses (503,811) (505,315) (470,087)
------------- ------------- -------------
$82,207,312 $65,879,941 $50,584,896
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-13
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
An analysis of the change in the allowance for losses follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Balance at January 1, $505,315 $470,087 380,286
Provision for loan losses 30,000 75,000 109,000
--------------------- ---------------------- ---------------------
Loans charged off, net of recoveries (31,504) (39,772) (19,199)
--------------------- ---------------------- ---------------------
Balance at December 31, $503,811 $505,315 $470,087
===================== ====================== =====================
</TABLE>
PREMISES AND EQUIPMENT
A summary of premises and equipment is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cost:
Land $812,165 $812,165 $812,165
Bank premises 2,060,389 2,060,389 1,609,846
Furniture and equipment 1,105,917 1,035,928 945,565
Leasehold improvements 41,696 41,696 41,696
--------------------- ---------------------- ---------------------
Total cost 4,020,167 3,950,178 3,409,272
Less accumulated depreciation (785,386) (604,644) (523,351)
--------------------- ---------------------- ---------------------
$3,234,781 $3,345,534 $2,885,921
===================== ====================== =====================
</TABLE>
Depreciation expense included in the financial statements is $270,700 for 1997,
$242,342 for 1996 (unaudited) and $200,359 for 1995 (unaudited).
Certain Bank facilities are leased under an operating lease. Rental expense
totaled approximately $41,760 in 1997, $41,874 and $0, for the years ended
December 31, 1996 (unaudited) and 1995 (unaudited), respectively and is included
in occupancy expenses.
F-14
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
At December 31, 1997, future minimum rental commitments under noncancelable
leases are:
<TABLE>
<CAPTION>
<S> <C>
1998............................................... $ 41,760
1999............................................... 41,760
2000............................................... 41,760
2001............................................... 41,760
2002............................................... 41,760
2003 and thereafter................................ 104,400
--------
$313,200
</TABLE>
DEPOSITS
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $14,784,818, $8,319,619 and
$8,272,387 at December 31, 1997, 1996 and 1995, respectively.
The aggregate maturities of time certificates is as follows:
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------------------------
Over Under
$100,000 $100,000 Total
--------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Three months or less $4,923,608 $4,654,810 $9,578,418
Three through twelve months 9,453,002 32,429,022 41,882,024
One through five years 408,208 2,476,481 2,884,689
--------------------- ---------------------- ---------------------
$14,784,818 $39,560,313 $54,345,131
===================== ====================== =====================
</TABLE>
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the statement of
financial condition. The contract or notional amounts of those instruments
reflect the extent of the Bank's involvement in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit, is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
The Bank requires collateral or other security to support financial instruments
with credit risk in the same manner in which it underwrites similar loans.
F-15
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
A summary of the notional amounts of the Bank's financial instruments with
off-balance-sheet risk are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
<S> <C> <C> <C>
(Unaudited) (Unaudited)
Commitments to extend credit $2,638,683 $1,418,740 $1,294,815
Commercial letters of credit 737,603 471,784 735,340
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank's experience has been that less
than 10 percent of loan commitments are drawn upon by customers. While
approximately 90 percent of commercial letters of credit are utilized, a
significant portion of such utilization is on an immediate payment basis. The
Bank evaluates each customer's creditworthiness on a cash-by-case basis. The
amount of collateral obtained, if it is deemed necessary by the Bank upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable;
inventory, property, plant, and equipment; and income-producing commercial
properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. Most guarantees
extend for no more than one year and expire at that time. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Bank holds collateral supporting
those commitments for which collateral is deemed necessary.
The Bank has not been required to perform on any financial guarantees during the
past two years. The Bank has not incurred any losses on its commitments in 1997.
F-16
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------
Carrying Fair
Amount Value
------------------------ -----------------------
<S> <C> <C>
Financial assets:
Cash and due from banks, interest-bearing
deposits with banks, and federal funds sold $28,693,034 $28,693,034
Securities held to maturity 14,730,248 14,798,248
Loans 82,207,312 82,207,312
Accrued interest receivable 847,045 847,045
Financial liabilities: (121,071,371) (121,071,371)
Deposit liabilities
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------
(Unaudited)
Carrying Fair
Amount Value
------------------------ -----------------------
<S> <C> <C>
Financial assets:
Cash and due from banks, interest-bearing
deposits with banks, and federal funds sold $9,931,724 $9,931,724
Securities held to maturity 10,609,268 10,570,268
Loans 65,879,941 65,879,941
Accrued interest receivable 597,223 597,223
Financial liabilities: (83,582,751) (83,582,751)
Deposit liabilities
</TABLE>
F-17
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
December 31, 1995
---------------------------------------------------
(Unaudited)
Carrying Fair
Amount Value
------------------------ -----------------------
<S> <C> <C>
Financial assets:
Cash and due from banks, interest-bearing
deposits with banks, and federal funds sold $20,357,444 $20,357,444
Securities held to maturity 4,584,979 4,578,979
Loans 50,584,896 50,584,896
Accrued interest receivable 424,047 424,047
Financial liabilities: (73,248,789) (73,248,789)
Deposit liabilities
</TABLE>
CONCENTRATIONS OF CREDIT RISK AND GEOGRAPHIC LOCATION
Nearly all of the Bank's business activity is with customers located within the
market it serves. Investment in state and municipal securities involve
governmental entities within the Bank's market area. A substantial portion of
the Bank's customers abilities to honor their contracts is dependent on the
business economy in Boulder, Larimer and Weld counties, Colorado and the
surrounding area. The Bank's loan policy contains comprehensive collateral
requirements for commercial, consumer and real estate loans. The policy also
directs lenders to follow specific requirements depending on both the loan
purpose and collateral pledged. The policy also details unsecured lending
requirements.
The distribution of commitments to extend credit approximates the distribution
of loans outstanding. Commercial and standby letters of credit were granted
primarily to commercial borrowers.
The contractual amounts of credit-related financial instruments such as
commitments to extend credit and letters of credit represent the amounts of
potential accounting loss should the contract be fully drawn upon, the customer
default, and the value of any existing collateral become worthless.
F-18
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
CONCENTRATION BY INSTITUTION
The Bank has a concentration of funds on deposit at Bankers' Bank of the West as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- ---------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Noninterest bearing accounts $ 4,660,462 $3,957,055 $2,920,183
Federal funds sold 22,200,000 3,975,000 15,750,000
--------------------- ---------------------- ---------------------
$26,860,462 $7,932,055 $18,670,183
===================== ====================== =====================
</TABLE>
INCOME TAXES
The Bank files federal and state income tax returns on a calendar-year basis.
The Bank uses the specific charge-off method for determining its bad debt
deduction.
The provision for income taxes consisted of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- ---------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Current tax provision
Federal $970,400 $839,500 $690,500
State 114,500 110,000 104,750
--------------------- ---------------------- ---------------------
1,084,900 949,500 795,250
Deferred tax federal 0 (27,000) (25,000)
--------------------- ---------------------- ---------------------
$1,084,900 $922,500 $770,250
===================== ====================== =====================
</TABLE>
The reasons for the differences between the statutory Federal income tax rates
and the effective tax rates are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ----------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Expected tax provision at a 34% rate $1,028,609 $862,295 $673,071
Effect of tax-exempt income (79,694) (41,417) (17,069)
Interest and other nondeductible expenses 21,485 18,622 34,498
Decrease in deferred tax asset 0 (27,000) (25,000)
State income taxes 114,500 110,000 104,750
------------------- ----------------- ------------------
$1,084,900 $922,500 $770,250
=================== ================= ==================
</TABLE>
F-19
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
Deferred tax assets have been provided for deductible temporary differences
related to the allowance for loan losses, accumulated depreciation, and accrued
officer salaries. The net deferred tax assets in the accompanying statements of
financial condition include the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ----------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Allowance for Loan Losses $127,562 $128,124 $114,949
Depreciation (65,416) (79,620) (61,232)
Other 9,954 23,596 (23,617)
------------------- ----------------- ------------------
Net deferred tax assets $ 72,100 $ 72,100 $ 30,100
=================== ================= ==================
</TABLE>
RELATED PARTIES
The Bank has entered into transactions with its directors, shareholders, and
their affiliates (related parties). The aggregate amount of loans to such
related parties at December 31, 1997, was $17,114. During 1997, activity on the
revolving line-of-credit to such related parties amounted to $761,048 of
advances and repayments of $847,813.
CONTINGENCIES
In the normal course of business, the Bank is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Bank's financial
statements.
In October 1997, the Bank received a demand letter on behalf of a payee of a
check drawn on an account at Pioneer Bank of Longmont. The demand letter alleged
late return of an NSF check in the amount of $110,000 in December 1996, and
stated intent to file suit as a result of the alleged late return. In the
opinion of Bank's legal counsel, there were several mitigating factors regarding
this claim, which would have allowed the Bank to offer successful defense to
this legal action. To expedite the resolution of the matter, the Bank entered
into negotiations with claimant's attorney. A settlement in the amount of
$25,000 was agreed upon and paid as of January 1998, with claimant giving full
release of future liability to the Bank.
RETIREMENT PLAN
The company has a 401-K plan that covers substantially all of it's employees.
Annually, the company may in its discretion elect to contribute amounts into the
Plan. The 401-K contribution expense recorded in the financial statements is
$43,700 for 1997, $26,730 for 1996 (unaudited) and $20,987 for 1995 (unaudited).
RESTRICTIONS ON RETAINED EARNINGS
The Bank is subject to certain restrictions on the amount of dividends that it
may declare without prior regulatory approval. At December 31, 1997,
approximately $1,000,000 of retained earnings were available for dividend
declaration without prior regulatory approval.
F-20
<PAGE>
PIONEER BANK OF LONGMONT
NOTES TO FINANCIAL STATEMENTS
REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
Federal and State banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory- and possibly additional discretionary-actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the Federal Reserve
Bank of Kansas City categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.
The Bank's actual capital ratios are presented in the following table:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------- ------------------ ------------------
<S> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total capital
(to risk-weighted assets) 10.32% 8.0% 10.0%
Tier I capital
(to risk-weighted assets) 9.77% 4.0% 6.0%
Tier I capital
(to average assets) 7.97% 4.0% 5.0%
AS OF DECEMBER 31, 1996:
(Unaudited)
Total capital
(to risk-weighted assets) 11.02% 8.0% 10.0%
Tier I capital
(to risk-weighted assets) 10.30% 4.0% 6.0%
Tier I capital
(to average assets) 8.49% 4.0% 5.0%
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------- ----------------- -------------------
<S> <C> <C> <C>
AS OF DECEMBER 31, 1995:
(Unaudited)
Total capital
(to risk-weighted assets) 11.17% 8.0% 10.0%
Tier I capital
(to risk-weighted assets) 10.31% 4.0% 6.0%
Tier I capital 8.79% 4.0% 5.0%
(to average assets)
</TABLE>
PLAN OF MERGER
On November 6, 1997, Pioneer Bank of Longmont entered into an Agreement and Plan
of Merger with Community First Bankshares, Inc. Under the terms of the
agreement, shareholders of Pioneer Bank of Longmont will be entitled to receive
approximately 700,000 shares of Community First Bankshares, Inc. common stock
based upon a formula which allows a trading value of Community First Bankshares,
Inc. stock and an excess equity amount to be determined prior to closing date.
This agreement is subject to the approval of certain regulatory agencies.
F-22
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
dated as of November 6, 1997
among
COMMUNITY FIRST BANKSHARES, INC.
COMMUNITY FIRST NATIONAL BANK
and
PIONEER BANK OF LONGMONT
A-i
<PAGE>
INDEX TO AGREEMENT AND PLAN OF MERGER
<TABLE>
<S> <C>
AGREEMENT AND PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Calculation of Pioneer Value. . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT BANKS;
EXCHANGE OF CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . 3
(a) Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Exchange Rate. . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Adjustments to Exchange Rate Based on CFB Trading Value. . . . 4
(d) Adjustments to Exchange Rate Based on Pioneer Value. . . . . . 4
(e) Shareholders' Right of Dissent . . . . . . . . . . . . . . . . 4
2.2 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . 5
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . 5
(c) Distributions with Respect to Unexchanged Shares; Voting . . . 5
(d) Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . 6
(f) Termination of Exchange Fund . . . . . . . . . . . . . . . . . 6
(g) Lost or Destroyed Shares . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 7
3.1 Representations and Warranties of Pioneer . . . . . . . . . . . . . 7
(a) Pioneer Organization . . . . . . . . . . . . . . . . . . . . . 7
(b) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Limitation of Pioneer's Powers . . . . . . . . . . . . . . . . 7
(d) Corporate Records. . . . . . . . . . . . . . . . . . . . . . . 7
(e) Insured Status of Pioneer. . . . . . . . . . . . . . . . . . . 7
(f) No Default; Creation of Liens. . . . . . . . . . . . . . . . . 8
(g) Financial Statements . . . . . . . . . . . . . . . . . . . . . 8
(h) Fidelity Insurance . . . . . . . . . . . . . . . . . . . . . . 9
(i) Employment Contracts . . . . . . . . . . . . . . . . . . . . . 9
(j) Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 9
(k) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(l) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(m) Title to Property. . . . . . . . . . . . . . . . . . . . . . .10
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C>
(n) Insurance Policies . . . . . . . . . . . . . . . . . . . . . .10
(o) Pioneer Property . . . . . . . . . . . . . . . . . . . . . . .10
(p) Conduct of Business. . . . . . . . . . . . . . . . . . . . . .10
(q) Loan Allowance and Documentation . . . . . . . . . . . . . . .11
(r) Leases and Contracts . . . . . . . . . . . . . . . . . . . . .11
(s) Shareholder List . . . . . . . . . . . . . . . . . . . . . . .12
(t) Principals . . . . . . . . . . . . . . . . . . . . . . . . . .12
(u) Information Supplied . . . . . . . . . . . . . . . . . . . . .12
(v) Agreements with Regulators . . . . . . . . . . . . . . . . . .12
3.2 Representations and Warranties of CFB . . . . . . . . . . . . . . .13
(a) CFB Organization . . . . . . . . . . . . . . . . . . . . . . .13
(b) Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(c) Enforceability . . . . . . . . . . . . . . . . . . . . . . . .13
(d) No Default; Creation of Liens. . . . . . . . . . . . . . . . .13
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . .14
(f) No Plan to Transfer Assets . . . . . . . . . . . . . . . . . .14
ARTICLE 4 COVENANTS OF PIONEER AND CFB. . . . . . . . . . . . . . . . . . . .14
4.1 Covenants of Pioneer. . . . . . . . . . . . . . . . . . . . . . . .14
(a) Ordinary Course. . . . . . . . . . . . . . . . . . . . . . . .14
(b) Shareholder Meeting. . . . . . . . . . . . . . . . . . . . . .15
(c) Registration Statement . . . . . . . . . . . . . . . . . . . .15
(d) Confidential Information . . . . . . . . . . . . . . . . . . .15
(e) Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . .15
(f) No Solicitations . . . . . . . . . . . . . . . . . . . . . . .16
(g) No Acquisitions. . . . . . . . . . . . . . . . . . . . . . . .16
(h) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .16
(i) Pooling Restrictions . . . . . . . . . . . . . . . . . . . . .17
(j) Financial Statements . . . . . . . . . . . . . . . . . . . . .17
(k) Additional Covenants of Pioneer. . . . . . . . . . . . . . . .17
4.2 Covenants of CFB. . . . . . . . . . . . . . . . . . . . . . . . . .20
(a) Ordinary Course. . . . . . . . . . . . . . . . . . . . . . . .20
(b) Application. . . . . . . . . . . . . . . . . . . . . . . . . .20
(c) Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . .20
(d) Registration Statement . . . . . . . . . . . . . . . . . . . .20
(e) Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
(f) Shares to be Issued. . . . . . . . . . . . . . . . . . . . . .21
(g) Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . .21
(h) Confidential Information . . . . . . . . . . . . . . . . . . .21
(i) Registration Statement . . . . . . . . . . . . . . . . . . . .21
4.3 Covenants of Pioneer and CFB. . . . . . . . . . . . . . . . . . . .22
(a) Governing Documents. . . . . . . . . . . . . . . . . . . . . .22
(b) Other Actions. . . . . . . . . . . . . . . . . . . . . . . . .22
(c) Advice of Changes; Government Filings. . . . . . . . . . . . .22
</TABLE>
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(d) Title of Property. . . . . . . . . . . . . . . . . . . . . . .22
(e) Environmental Assessment . . . . . . . . . . . . . . . . . . .23
ARTICLE 5 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . .23
5.1 Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . . . .23
5.2 Letters of Financial Officers . . . . . . . . . . . . . . . . . . .24
5.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . .24
5.4 Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.5 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . .24
5.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.7 Additional Agreements; Best Efforts . . . . . . . . . . . . . . . .25
ARTICLE 6 CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . .25
6.1 Conditions to Each Party's Obligation to Effect the Merger. . . . .25
(a) Stockholder Approval . . . . . . . . . . . . . . . . . . . . .25
(b) Nasdaq Market System Listing . . . . . . . . . . . . . . . . .25
(c) Other Approvals. . . . . . . . . . . . . . . . . . . . . . . .25
(d) Registration Statement . . . . . . . . . . . . . . . . . . . .26
(e) No Injunctions or Restraints; Illegality . . . . . . . . . . .26
(f) No Unduly Burdensome Condition . . . . . . . . . . . . . . . .26
6.2 Conditions to Obligations of CFB. . . . . . . . . . . . . . . . . .26
(a) Representations and Warranties . . . . . . . . . . . . . . . .26
(b) Performance of Obligations of Pioneer. . . . . . . . . . . . .26
(c) Minimum Pioneer Value. . . . . . . . . . . . . . . . . . . . .27
(d) Supplement to Loan Loss Reserve. . . . . . . . . . . . . . . .27
(e) Pooling Letter . . . . . . . . . . . . . . . . . . . . . . . .27
(f) Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . .27
6.3 Conditions to Obligations of Pioneer. . . . . . . . . . . . . . . .27
(a) Representations and Warranties . . . . . . . . . . . . . . . .27
(b) Performance of Obligations of CFB. . . . . . . . . . . . . . .27
(c) Consents Under Agreements. . . . . . . . . . . . . . . . . . .27
(d) Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . .28
(e) Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . .28
(f) Employment Agreement . . . . . . . . . . . . . . . . . . . . .28
ARTICLE 7 TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . .28
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . .29
7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
7.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . .29
ARTICLE 8 GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .30
8.1 Non-Survival of Representations and Warranties. . . . . . . . . . .30
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
8.3 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . .30
</TABLE>
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8.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
8.5 Entire Agreement: Third Party Beneficiaries; Rights of Ownership. .31
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . .31
8.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
8.8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
8.9 Enforcement of Agreement. . . . . . . . . . . . . . . . . . . . . .31
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 6, 1997 (the
"Agreement"), by and among Community First Bankshares, Inc., a Delaware
corporation ("CFB"), Community First National Bank, a de novo national
banking association ("Acquisition Subsidiary") and Pioneer Bank of Longmont,
a Colorado banking corporation ("Pioneer").
WHEREAS, the Boards of Directors of CFB, Acquisition Subsidiary and
Pioneer have approved, and deem it advisable and in the best interests of
their respective companies and their stockholders to consummate the business
combination transaction provided for herein in which Pioneer will be merged
with and into Acquisition Subsidiary (the "Merger");
WHEREAS, CFB and Pioneer desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, articles of merger (the "Articles of Merger") in substantially the
form as attached hereto as EXHIBIT A shall be duly prepared, executed and
acknowledged by Acquisition Subsidiary and Pioneer and thereafter delivered
for filing to the Office of the Comptroller of the Currency (the "OCC"), as
provided in the National Bank Act (the "Act"), on the Closing Date (as
defined in Section 1.2). The Merger shall become effective when so declared
by the OCC, upon the filing of the Articles of Merger (the "Effective Time").
Notwithstanding the immediately preceding sentence, however, the parties
intend that the effective date and time of the Closing, as defined in Section
1.2 below, for both financial and tax reporting purposes, shall be as of the
close of business on the Closing Date.
1.2 CLOSING. Subject to the terms and conditions hereof, the closing
of the Merger (the "Closing") will take place after the satisfaction or
waiver (subject to applicable law) of the latest to occur of the conditions
set forth in Article 6 hereof (the "Closing Date"), at the offices of
Lindquist, Vennum & Christensen P.L.L.P., in Denver, Colorado, unless another
time, date or place is agreed to in writing by the parties hereto. Each of
the parties agrees to use its best efforts
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to cause the Merger to be completed within thirty (30) business days after
the satisfaction or waiver of the conditions set forth in Article 6 of this
Agreement.
1.3 EFFECTS OF THE MERGER.
(a) At the Effective Time: (i) the separate existence of Pioneer
shall cease and Pioneer shall be merged with and into Acquisition Subsidiary;
(ii) the Articles of Association of the Acquisition Subsidiary, as in effect
immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Bank until duly amended in accordance with
applicable law; (iii) the Bylaws of the Acquisition Subsidiary, as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Bank until amended in accordance with applicable law; (iv) CFB, as the holder
of all of the outstanding common stock of the Acquisition Subsidiary, shall
continue as sole shareholder of the Surviving Bank, and (v) the holders of
certificates representing shares of Pioneer Common Stock (as defined in
Section 2.1(a) below) shall cease to have any rights as shareholders of
Pioneer, except such rights, if any, as they may Article 113 of the Colorado
Business Corporation (the "Colorado Act") Act, and their sole right shall be
the right to receive (A) the number of whole shares of CFB Common Stock (as
defined in Section 2.1(a) below) into which their shares of Pioneer Common
Stock have been converted in the Merger as provided herein (together with any
dividend payments with respect thereto, to the extent provided in Section
2.2(c) below), and (B) the cash value of any fraction of a share of CFB
Common Stock into which their shares of Pioneer Common Stock have been
converted as provided herein.
(b) As used in this Agreement, the term "Constituent Banks" shall
mean Pioneer and the Acquisition Subsidiary. The term "Surviving Bank" shall
mean the Acquisition Subsidiary, after giving effect to the Merger.
(c) At and after the Effective Time, the Merger will have the
effects set forth in Section 215a of the Act.
1.4 CALCULATION OF PIONEER VALUE. As of the last day of the month
immediately preceding the Effective Time (the "Determination Date"), Pioneer
shall prepare a consolidated balance sheet of Pioneer in accordance with
generally accepted accounting principles, but excluding the effects of any
adjustments otherwise required by FASB 115 and excluding any footnotes that
might be required to be included with such financial statements (the
"Determination Date Balance Sheet"), together with a consolidated statement
of income (the "Interim Income") for the period from January 1, 1997 to the
Determination Date (the "Interim Income Statement"), such consolidated
statement of income shall be prepared in accordance with generally accepted
accounting principles, but excluding the effects of any adjustments otherwise
required by FASB 115 and excluding any footnotes that might be required to be
included with such statements (the "Determination Date Balance Sheet and
Interim Income Statement are herein referred to as the "Determination Date
Financial Statements"). The Determination Date Financial Statements shall be
delivered to CFB as soon as they are prepared so that CFB and its accountants
may review and confirm their accuracy. For purposes of this Agreement, the
"Pioneer Value" shall be equal to the total consolidated assets of Pioneer
minus the total consolidated liabilities of Pioneer, all as reflected on the
Determination Date Balance Sheet, prepared in accordance with this Section
1.4.
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Total consolidated liabilities of Pioneer shall include, without limitation,
provision for taxes and the expenses of the preparation of the final tax
return for Pioneer.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT BANKS; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK.
(a) CONVERSION. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of shares of common stock,
par value $10.00 per share, of Pioneer ("Pioneer Common Stock"), subject to
Section 2.2(e), each issued and outstanding share of Pioneer Common Stock,
other than shares of Pioneer Common Stock held by persons who have taken all
steps required to perfect their right to be paid the fair value of such
shares under Article 113 of the Colorado Act, shall be converted into validly
issued, fully paid and nonassessable shares of common stock of CFB, $.01 par
value ("CFB Common Stock"). The number of shares of CFB Common Stock
exchanged for shares of Pioneer Common Stock shall be calculated in
accordance with Section 2.1(b). All such shares of Pioneer Common Stock
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist. Each Pioneer shareholder's certificate or
certificates previously representing shares of Pioneer Common Stock (each a
"Pioneer Certificate") shall be aggregated (if a single stockholder holds
more than one Pioneer Certificate) and exchanged for a certificate
representing whole shares of CFB Common Stock and cash in lieu of any
fractional share issued in consideration therefor upon the surrender of such
Pioneer Certificates in accordance with Section 2.2, without any interest
thereon. In the event that, subsequent to the date of this Agreement but
prior to the Effective Time, the outstanding shares of CFB Common Stock shall
have been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split, or other similar change in CFB's capitalization, then an
appropriate and proportionate adjustment shall be made to the "Exchange
Rate", as hereinafter defined, so that the number of shares of CFB Common
Stock into which a share of Pioneer Common Stock shall be converted will
equal the number of shares of CFB Common Stock that the holders of shares of
Pioneer Common Stock would have received pursuant to such reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar change had the record date therefor been
immediately following the Closing Date.
(b) EXCHANGE RATE. Subject to the adjustments provided in Section
2.1(c) hereof, all of the issued and outstanding shares of Pioneer Common
Stock and any outstanding options, warrants or other rights to Pioneer Common
Stock shall be exchanged for Seven Hundred Thousand (700,000) shares of CFB
Common Stock (the aforementioned exchange rate is hereinafter referred to as
the "Exchange Rate"). On or before the Effective Time, all stock options and
other rights with respect to Pioneer Common Stock shall be (i) accelerated
and exercised by the holder thereof, in accordance with the terms of the
stock option plan or
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agreement, or (ii) released and terminated by written acknowledgment and
agreement by the holder thereof, obtained by Pioneer less than ten (10)
business days prior to the Closing Date.
(c) ADJUSTMENTS TO EXCHANGE RATE BASED ON CFB TRADING VALUE.
Notwithstanding anything to the contrary in this Article 2, the Exchange Rate
shall be subject to modification as set forth below:
(i) If the CFB Trading Value is less than $46.00 per share, then
Pioneer shall have the right to terminate the transaction pursuant to
Section 7.1 hereof;
(ii) If the CFB Trading Value is greater than $50.50 per share,
then the Exchange Rate shall be reduced so that the product of the CFB
Trading Value multiplied by the Exchange Rate shall be $35,350,000.
For purposes of this Agreement, the "CFB Trading Value" of the CFB
Common Stock shall be the average of the per share closing price for the CFB
Common Stock as reported by the Nasdaq Market System National Market System
for the 20 trading days ending at the end of the fourth trading day
immediately preceding the Closing Date (as appropriately and proportionately
adjusted in the event that, between the date hereof and the termination of
such twenty trading day period, shares of CFB Common Stock shall be changed
into a different number of shares or a different class of shares by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment or stock dividend). Calculations will be rounded to
three decimal places. Any fractional share of CFB Common Stock will be paid
in cash in accordance with Section 2.2(e). Illustrations of the above
Exchange Rate calculations are attached as EXHIBIT 2.1(c) hereto and
incorporated herein by reference.
(d) ADJUSTMENTS TO EXCHANGE RATE BASED ON PIONEER VALUE. In the
event that the Pioneer Value, calculated in accordance with Section 1.4,
above, shall be greater than $8,100,000, then, at the election of Pioneer and
subject to the requirements of Section 6.2(e) hereof, either (i) the
difference shall be paid by special dividend to Pioneer shareholders
immediately prior to the Determination Date or (ii) the Exchange Rate
determined in accordance with Section 2.1(c) shall be subject to increase.
The amount of increase shall be determined by (i) subtracting the difference
between the Pioneer Value and $8,100,000, and then (ii) dividing such
difference by the CFB Trading Value.
(e) SHAREHOLDERS' RIGHT OF DISSENT. Any holder of shares of Pioneer
Common Stock who does not vote in favor of the Merger at the meeting of
shareholders of Pioneer and has given notice in writing to the presiding officer
prior to the Merger vote that he or she intends to demand payment for his or her
shares of Pioneer Common Stock if the Merger is effectuated,
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shall be entitled to receive the value of the Pioneer Common Stock so held by
him or her in accordance with Article 113 of the Colorado Act.
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At the Closing, CFB shall deposit with
Norwest Bank Minnesota, N.A. or such other bank or trust company acceptable
to the parties (the "Exchange Agent"), for the benefit of the holders of
shares of Pioneer Common Stock, certificates dated the Closing Date
representing the shares of CFB Common Stock and the cash to be paid in lieu
of fractional shares (such cash and certificates for shares of CFB Common
Stock together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") to be issued and paid
pursuant to Section 2.1 in exchange for the outstanding shares of Pioneer
Common Stock.
(b) EXCHANGE PROCEDURES. Within five (5) business days after the
Closing Date, CFB shall cause the Exchange Agent to mail to each holder of
record of a Pioneer Certificate or Pioneer Certificates (i) a letter of
transmittal which shall specify that delivery shall be effective, and risk of
loss and title to the Pioneer Certificate(s) shall pass, only upon delivery
of the Pioneer Certificate(s) to the Exchange Agent and which shall be in
such form and have such other provisions as CFB and Pioneer may reasonably
specify not later than five business days before the Closing Date and (ii)
instructions for use in effecting the surrender of the Pioneer Certificate(s)
in exchange for a certificate representing shares of CFB Common Stock and the
cash to be paid in lieu of any fractional share. Upon surrender of a
shareholder's Pioneer Certificate or Pioneer Certificates for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed,
the holder of such Pioneer Certificate(s) shall be entitled to receive in
exchange therefor (1) a certificate representing the number of whole shares
of CFB Common Stock and (2) a check representing the amount of the cash to be
paid in lieu of a fractional share, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect
of the Pioneer Certificate(s) surrendered, as provided in Section 2.2(c)
below, and the Pioneer Certificate(s) so surrendered shall forthwith be
canceled. No interest will be paid on the cash in lieu of fractional shares
and unpaid dividends and distributions, if any, payable to holders of Pioneer
Certificates. In the event of a transfer of ownership of Pioneer Common
Stock which is not registered in the transfer records of Pioneer, a CFB
Certificate representing the proper number of shares of CFB Common Stock,
together with a check for the cash to be paid in lieu of a fractional share,
may be issued to such a transferee if the Pioneer Certificate representing
such Pioneer Common Stock is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer. Any applicable
stock transfer taxes shall be paid by CFB.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES; VOTING. The
Exchange Agent shall receive and hold, for distribution without interest to
the first record holder of the certificate or certificates representing
shares of Pioneer Common Stock, all dividends and other distributions paid on
shares of CFB Common Stock held in the Exchange Agent's name as agent.
Holders of unsurrendered Pioneer Certificates shall not be entitled to vote
after the Closing Date at any meeting of CFB shareholders until they have
exchanged their Pioneer Certificates.
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(d) TRANSFERS. After the Effective Time, there shall be no
transfers on the stock transfer books of Pioneer of the shares of Pioneer
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Pioneer Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for the shares of
CFB Common Stock and cash, in an amount as determined in accordance with the
provisions of Section 2.1(a) and this Section 2.2, deliverable in respect
thereof pursuant to this Agreement. Pioneer Certificates surrendered for
exchange by any person constituting an "affiliate" of Pioneer for purposes of
Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act"), shall not be exchanged until CFB has received a written agreement from
such person as provided in Section 5.4.
(e) FRACTIONAL SHARES. No fractional shares of CFB Common Stock
shall be issued pursuant hereto. In lieu of the issuance of any fractional
share, cash adjustments will be paid to holders in respect of any fractional
share of CFB Common Stock that would otherwise be issuable, and the amount of
such cash adjustment shall be equal to such fractional proportion of the
Trading Value of a share of CFB Common Stock. For purposes of calculating
fractional shares, a holder of Pioneer Common Stock with more than one
Pioneer Certificate shall receive cash only for the fractional share
remaining after aggregating all of its, his or her Pioneer Common Stock to be
exchanged.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund (including the proceeds of any investments thereof and any CFB Common
Stock) that remains unclaimed by the shareholders of Pioneer for twelve
months after the Closing Date shall be paid to CFB. Any shareholders of
Pioneer who have not theretofore complied with this Article 2 shall
thereafter look only to CFB for payment of their shares of CFB Common Stock,
and cash in an amount as determined in accordance with the provisions of
Section 2.1(a) and this Section 2.2, without any interest thereon.
Notwithstanding the foregoing, none of CFB, the Exchange Agent nor any other
person shall be liable to any former holder of shares of Pioneer Common Stock
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(g) LOST OR DESTROYED SHARES. In the event any Pioneer
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Pioneer Certificate to be
lost, stolen or destroyed and, if required by the Exchange Agent, the posting
by such person of a bond in such amount as CFB may direct as indemnity
against any claim that may be made against it with respect to such Pioneer
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Pioneer Certificate the shares of CFB Common Stock, and cash in
an amount as determined in accordance with the provisions of Section 2.1(a)
and this Section 2.2, deliverable in respect thereof pursuant to this
Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF PIONEER. In order to induce CFB
to enter into this Agreement, Pioneer represents and warrants to CFB, in all
material respects, as of the date of this Agreement (except as otherwise
expressly provided), as follows, except as disclosed on the attached EXHIBIT
B (the "Pioneer Disclosure Schedule") and the schedules thereunder which are
numbered to correspond to the representations set forth below:
(a) PIONEER ORGANIZATION. Pioneer is a Colorado banking
corporation duly organized and validly existing and in good standing under
the laws of the State of Colorado with an authorized capital of $500,000,
consisting of 50,000 shares of one class of common stock, par value $10.00
per share. All of the shares of stock of Pioneer which are presently issued
and outstanding, have been validly issued, fully paid and non-assessable, and
there are no stock options or other commitments outstanding pursuant to which
Pioneer is obligated to issue additional shares of such stock or purchase or
redeem any outstanding shares of such stock. Pioneer has all requisite power,
authority, charters, licenses and franchises necessary or required by law to
carry on the business activity in which it is presently engaged, except where
the failure to have any such power, authority, charters, licenses or
franchises would not reasonably be expected to have a material adverse effect
on Pioneer. Pioneer has no direct or indirect subsidiaries and is not a
partner to any partnership.
(b) ENFORCEABILITY. Subject to the required approval of the
Merger by the shareholders of Pioneer, Pioneer has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement by
Pioneer and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Pioneer. Subject to
approval by the Pioneer shareholders and of government agencies and other
governing bodies having regulatory authority over Pioneer as may be required
by statute or regulation, this Agreement constitutes a valid and binding
obligation of Pioneer, enforceable against it in accordance with its terms.
(c) LIMITATION OF PIONEER'S POWERS. There are no proceedings or
actions pending by any federal or state regulatory body having authority over
Pioneer to limit or impair any of Pioneer's powers, rights and privileges, to
terminate deposit insurance or to dissolve Pioneer.
(d) CORPORATE RECORDS. Pioneer's Articles of Incorporation and
Bylaws are each unchanged from the form in which they were delivered to CFB
on or before the date of this Agreement. The minute books of Pioneer contain
reasonably complete and accurate records of all meetings and corporate
actions of each of their respective shareholders and Boards of Directors
(including committees of the Boards of Directors).
(e) INSURED STATUS OF PIONEER. Pioneer is an insured bank under
the provisions of Chapter 16 of Title 12, United States Code Annotated, known
as the "Federal Deposit Insurance Act," and no act or default on the part of
Pioneer exists that could reasonably be expected to have
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a material adverse effect on its status as an insured bank thereunder.
Pioneer possesses and is in full compliance with all licenses, franchises,
permits and other governmental authorizations that are legally required to
hold its properties or conduct its business, except where the failure to
possess any such licenses, franchises, permits or other governmental
authorizations would not reasonably be expected to have a material adverse
effect on Pioneer.
(f) NO DEFAULT; CREATION OF LIENS. Neither the execution and
delivery of this Agreement, nor the consummation of the Merger will (i)
conflict with, result in the breach of, constitute a default under or
accelerate the performance provided by the terms of (A) any judgment, order
or decree of any court or other governmental agency to which Pioneer may be
subject, (B) any of the "Material Contracts," as hereinafter defined, or (C)
the Articles of Incorporation or Bylaws of Pioneer, or (ii) constitute an
event that, with the lapse of time or action by a third party, would result
in a default under any of the foregoing or result in the creation of any
lien, charge or encumbrance upon Pioneer Common Stock.
(g) FINANCIAL STATEMENTS. The following financial statements of
Pioneer (the "Financial Statements") have been delivered to CFB and are
incorporated by reference herein:
(i) The Consolidated Reports of Condition and Income as of
December 31 for each of the years 1994, 1995 and 1996 and the period ending
September 30, 1997; and
(ii) The financial statements of Pioneer, prepared in the
ordinary course of business for each of the years ended December 31,
1994, 1995 and 1996.
Each of the aforementioned Financial Statements is, and the Determination
Date Financial Statements will be (when delivered pursuant to Section 1.4),
true and correct in all material respects, and together they fairly present,
in accordance with generally accepted accounting principles (applied on a
consistent basis except as disclosed in the footnotes thereto and except that
the unaudited financial statements are subject to any adjustments which might
be required as a result of an examination of independent accountants) the
financial position and results of operation of Pioneer as of the dates and
for the periods therein set forth. To the knowledge of Pioneer, such
Financial Statements did not, as of the date of the preparation thereof,
include any material assets or omit to state any material liability, absolute
or contingent, the inclusion or omission of which renders such Financial
Statements, in light of the circumstances in which they were made, misleading
in any material respect. Since December 31, 1996, there has been no material
adverse change in the financial condition, results of operation or business
of Pioneer, taken as a whole (other than changes in banking laws or
regulations, changes in generally accepted accounting principles or
interpretations thereof that affect the banking industry generally, or
changes in general economic conditions that affect the banking industry on a
nationwide basis, including changes in the general level of interest rates).
(h) FIDELITY INSURANCE. Pioneer is insured under a Banker's
Blanket Bond which is in full force and effect and Pioneer has not received
notice of cancellation or non-renewal thereof, or filed any claim thereunder
during the past five years. There are no unresolved claims.
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(i) EMPLOYMENT CONTRACTS. Except as set forth in Section 3.1(i)
of the Pioneer Disclosure Schedule, Pioneer is not a party to or bound by any
written or oral (i) employment or consulting contract that is not terminable
without penalty by Pioneer on 30 days' or less notice or (ii) any collective
bargaining agreement covering employees.
(j) EMPLOYEE BENEFITS. Section 3.1(j) of the Pioneer Disclosure
Schedule lists every employee benefit plan within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
which Pioneer maintains or to which Pioneer contributes on behalf of current
or former employees of Pioneer. All of the plans and programs listed in
Section 3.1(j) of the Pioneer Disclosure Schedule (hereinafter referred to as
the "Plans") are in compliance in all material respects with all applicable
requirements of ERISA and all other applicable federal and state laws. Each
of the Plans that is a defined benefit pension plan has assets with an
aggregate value that exceeds the present value of its liability for accrued
benefits, all as determined on a termination basis. None of the Plans has
engaged in a "prohibited transaction", within the meaning of Section 4975 of
the Code or Section 406 of ERISA, none of the Plans which is subject to Title
IV of ERISA or any trust created thereunder has been terminated nor have
there been any "reportable events" as that term is defined in Section 4043 of
ERISA with respect to any Plan and none of the Plans has incurred an
accumulated funding deficiency within the meaning of Section 412(a) of the
Code.
(k) LITIGATION. Except as described in Section 3.1(k) of the
Pioneer Disclosure Schedule, no claims have been asserted by written notice
to Pioneer and no relief has been sought against Pioneer or any of the Plans
in any pending litigation or governmental proceedings or otherwise. Pioneer
is not a party to any unsatisfied order, judgment or decree which is adverse
to Pioneer and Pioneer (i) is not the subject of any cease and desist order,
or other formal or informal enforcement action by any regulatory authority;
or (ii) has not made any commitment to or entered into any agreement with any
regulatory authority that restricts or adversely affects its operations or
financial condition. To the knowledge of Pioneer, there do not exist facts
that would reasonably be expected to give rise to a material claim against
Pioneer after the Closing Date.
(l) TAXES. Pioneer has filed all federal and state income tax
returns and all other returns with respect to any taxes, either federal,
state or local, which it is required to have filed; said returns have been
correctly and accurately prepared; all taxes reflected thereon have been paid
or adequately accrued for; no notice of any deficiency, assessments or
additions to tax have been received by Pioneer; Pioneer has not waived any
statute of limitations with respect to any taxes reflected on said returns;
and deferred taxes have been properly reflected on the Pioneer Statements.
Except as set forth in Section 3.1(l) of the Pioneer Disclosure Schedule,
there are no other taxes of any kind or character for which Pioneer is or may
be liable which are now past due, delinquent and/or unpaid.
(m) TITLE TO PROPERTY. Pioneer has good and marketable title to all
material assets and properties, whether real or personal, that it purports to
own, including without limitation all real and personal assets and properties
reflected in its Financial Statement as of December 31, 1996, or acquired
subsequent thereto (except to the extent that such assets and properties have
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been disposed of for fair value in the ordinary course of business since
December 31, 1996) subject to no liens, mortgages, security interests,
encumbrances or charges of any kind, except (i) as noted in subsequent
Consolidated Reports of Income and Condition of Pioneer or the Schedules
thereto; (ii) statutory liens for taxes not yet delinquent; (iii) security
interests granted to secure deposits of funds by federal, state or other
governmental agencies; (iv) minor defects and irregularities in title and
encumbrances that do not materially impair the use thereof for the purposes for
which they are held by Pioneer as of the date hereof; and (v) such liens,
mortgages, security interests, encumbrances and charges that are not in the
aggregate material to the assets and properties of Pioneer.
(n) INSURANCE POLICIES. Pioneer has delivered to CFB true,
accurate and complete copies of all insurance policies of Pioneer as of the
date of this Agreement. Each such policy is in full force and effect, with
all premiums due thereon on or prior to the date of this Agreement having
been paid as and when due.
(o) PIONEER PROPERTY. All buildings, structures, fixtures, and
appurtenances comprising the premises of Pioneer are in good condition
subject to ordinary wear and tear. Except for the facts set forth in the
Assessment (as hereinafter defined), Pioneer is, and has been at all times,
in substantial compliance with all applicable Environmental Laws (as defined
below), and have not engaged in any activity resulting in a material
violation of any applicable Environmental Law. To the best knowledge of
Pioneer, there is no legal, administrative, or other proceeding, claim,
investigation (with respect to which Pioneer is aware), inquiry, order,
hearing or action of any nature seeking to impose, or that would reasonably
be expected to result in the imposition on Pioneer of any liability arising
from any violation of or obligation under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("Environmental Laws"), pending or, to the knowledge of
Pioneer, threatened against Pioneer; and there is no reasonable basis for any
such proceeding, claim, investigation, inquiry, order, hearing or action; and
Pioneer is not subject to any agreement, order, judgment, or decree by or
with court, governmental authority or third party imposing any such
environmental liability. No claims have been made by any governmental
authority or third party against Pioneer during the past ten (10) years
relating to damage, contribution, cost recovery, compensation, loss or
inquiry resulting from any violation of or obligation under any Environmental
Laws.
(p) CONDUCT OF BUSINESS. Pioneer is in compliance in all material
respects with all laws, regulations and orders (including zoning ordinances)
applicable to it and to the conduct of its business, including without
limitation, all statutes, rules and regulations pertaining to the conduct of
its banking activities (including the exercise of fiduciary and trust
powers), except where the failure to comply would not reasonably be expected
to have a material adverse effect on Pioneer.
(q) LOAN ALLOWANCE AND DOCUMENTATION. Pioneer's consolidated
allowance for losses on loans included in the Financial Statement as of June
30, 1997 was $510,000, representing .6% of its total consolidated loans held
in portfolio. The amount of such allowance for losses on loans was adequate
to absorb reasonably expectable losses in the loan portfolio of
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Pioneer. To the knowledge of Pioneer, there are no facts which would cause
it to increase the level of such allowance for losses on loans. The loan
portfolio of Pioneer, as of June 30, 1997 in excess of such reserves is, to
the best knowledge and belief of the executive officers of Pioneer, after due
inquiry as to potential losses, and based on past loan loss experience, fully
collectible in accordance with the terms of the documentation relating to the
loans in such portfolio. The documentation relating to loans made by Pioneer
and relating to all security interests, mortgages and other liens with
respect to all collateral for such loans, taken as a whole, is adequate for
the enforcement of the material terms of such loans and of the related
security interests, mortgages and other liens. The terms of such loans and of
the related security interests, mortgages and other liens comply in all
material respects with all applicable laws, rules and regulations (including
laws, rules and regulations relating to the extension of credit). There are
no loans, leases, other extensions of credit or commitments to extend credit
of Pioneer that have been or should in accordance with generally acceptable
accounting principles, have been classified by Pioneer as nonaccrual, as
restructured, as 90 days past due, as still accruing and doubtful of
collection or any comparable classification. Pioneer has provided to CFB
true, correct and complete in all material respects such written information
concerning the its loan portfolio as CFB has requested.
(r) LEASES AND CONTRACTS. Except as described on Section 3.1(r)
of the Pioneer Disclosure Schedule, Pioneer is not a party to or bound by any
written or oral (i) lease or license with respect to any property, real or
personal, with a value in excess of $20,000, whether as a lessor, lessee,
licensor or licensee; (ii) contract or commitment for capital expenditures in
excess of $20,000 for any one project or $50,000 in the aggregate; (iii)
contract or commitment for total expenses in excess of $20,000 made in the
ordinary course of business for the purchase of materials, supplies, or for
the performance of services for a period of more than 180 days from the date
of this Agreement; or (iv) contract or option for the purchase or sale of any
real or personal property other than in the ordinary course of business (all
such agreements, contracts, and commitments collectively are herein referred
to as the "Material Contracts"). Neither Pioneer nor any affiliate has
entered into any written or oral broker agreement or understanding regarding
fees or commissions due upon a sale or transfer of control of Pioneer.
Pioneer has performed in all material respects all obligations required to be
performed by it to date, and is not in material default under, and no event
has occurred which, with the lapse of time or action by a third party, could
result in a material default under any of the Material Contracts to which
Pioneer is a party or by which Pioneer is bound. Each of the Material
Contracts is a valid and legally binding obligation of Pioneer and the other
party or parties thereto, subject to (i) all applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and (ii) the application of equitable principles
if equitable remedies are sought.
(s) SHAREHOLDER LIST. Pioneer has furnished to CFB a current
shareholder list as of the date set forth therein that (i) sets forth the
record name and number of shares held by each holder of common stock of
Pioneer and (ii) identifies each shareholder who is an officer or director of
Pioneer.
(t) PRINCIPALS. No director or executive officer of Pioneer, nor
any holder of ten percent or more of the outstanding capital stock of
Pioneer, nor any affiliate of such person as that term is defined under 12
USC 371(c) ("Principal") (i) is or has during the period subsequent
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to December 31, 1994, been a party (other than as a depositor) to any
transaction with Pioneer, whether as a borrower or otherwise, which (a) was
made other than in the ordinary course of business; (b) was made on other
than substantially the same terms, including interest rate and collateral, as
those prevailing at the time for comparable transactions for other persons;
or (c) involves more than the normal risk of collectibility or presents other
unfavorable features; or (ii) is a party to any loan or loan commitment,
whether written or oral, from Pioneer involving an amount in excess of
$10,000. Except as set forth in Section 3.1(t) of the Pioneer Disclosure
Schedule, no Principal holds any position with any depository organization
other than Pioneer. For the purposes of this provision, the term "depository
organization" means a commercial bank (including a private bank), a savings
bank, a trust company, a savings and loan association, a homestead
association, a cooperative bank, an industrial bank, a credit union, or a
depository holding company.
(u) INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Pioneer for inclusion or incorporation by reference in (i) the
"Registration Statement" (as hereinafter defined) will, at the time the
Registration Statement becomes effective under the Securities Act of 1993, as
amended (the "Securities Act"), contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading and (ii) the "Prospectus-Proxy Statement"
(as hereinafter defined) and any amendment or supplement thereto will, at the
date of mailing to the Pioneer stockholders and at the times of the meeting
of stockholders of Pioneer to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. Pioneer will use its reasonable best efforts to cause
those portions of the Registration Statement supplied by Pioneer to comply in
all material respects with applicable law.
(v) AGREEMENTS WITH REGULATORS. Except as set forth in Section
3.1(v) of the Pioneer Disclosure Schedule, Pioneer: (i) is not a party to
any written agreement or memorandum of understanding with; (ii) is subject to
any order or directive by; (iii) is not subject to any extraordinary
supervisory letter from; or (iii) has not adopted any board resolutions at
the request of, federal or state governmental entities charged with the
supervision or regulation of banks or engaged in the insurance of bank
deposits ("Regulators"), nor has Pioneer been advised by any Regulator that
it is contemplating issuing or requesting any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
3.2 REPRESENTATIONS AND WARRANTIES OF CFB. CFB represents and warrants
to Pioneer, in all material respects, as of the date of this Agreement
(except as otherwise expressly provided) as follows, except as disclosed on
the attached EXHIBIT C (the "CFB Disclosure Schedule") and the schedules
thereunder which are numbered to correspond to the representations set forth
below:
(a) CFB ORGANIZATION. CFB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
authorized capital stock consisting of 30,000,000 shares of common stock, par
value of $.01 per share, of which 18,672,914 shares
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were issued and outstanding as of June 30, 1997 and 2,000,000 shares of
preferred stock, none of which were issued and outstanding as of June 30,
1997. CFB has all requisite power, authority, charters, licenses and
franchises necessary or required by law to carry on the business activity in
which it is presently engaged. CFB is registered as a corporation under
Section 1841 of Title 12, United States Code, as amended (the "Bank Holding
Company Act").
(b) REPORTS. CFB and each of its subsidiary banks and nonbanking
corporations (the "CFB Subsidiaries") have filed all reports, registrations
and statements, together with any required amendments thereto, that they were
required to file with (i) the Securities and Exchange Commission ("SEC"),
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements,
(ii) the Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and (v)
any applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "CFB Reports." As of their respective dates, the
CFB Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and any applicable state securities or banking authorities, as
the case may be, and did not contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. CFB has timely filed with the SEC all reports,
statements and forms required to be filed pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(c) ENFORCEABILITY. The execution, delivery and performance of
this Agreement by CFB and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of CFB. Subject
to approval by the government agencies and other governing bodies having
regulatory authority over CFB as may be required by statute or regulation,
this Agreement constitutes a valid and binding obligation of CFB, enforceable
against it in accordance with its terms. This Agreement does not require the
approval of CFB shareholders.
(d) NO DEFAULT; CREATION OF LIENS. Neither the execution and
delivery of this Agreement nor the consummation of the transaction
contemplated hereby will conflict with, result in the breach of, constitute a
default under or accelerate the performance provided by the terms of any
judgment, order or decree of any court or other governmental agency to which
CFB or any of the CFB Subsidiaries may be subject, or any contract, agreement
or instrument to which CFB or any of the CFB Subsidiaries is a party or by
which CFB or any of the CFB Subsidiaries is bound or committed, or the
Articles of Incorporation or Bylaws of CFB, or constitute an event that, with
the lapse of time or action by a third party, could result in a default under
any of the foregoing or result in the creation of any lien, charge or
encumbrance upon the CFB Common Stock or the capital stock of any of the CFB
Subsidiaries.
(e) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by CFB or the CFB Subsidiaries for inclusion or incorporation by
reference in (i) the Registration Statement will, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
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stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading and (ii) the
Prospectus-Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to Pioneer stockholders and at the times of the meetings of
stockholders of Pioneer to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The Registration Statement will comply as to form in all material
respects with applicable law.
(f) NO PLAN TO TRANSFER ASSETS. CFB has no plan or intention to
sell or otherwise dispose of any of the assets of Pioneer to be acquired in
the Merger, except for dispositions in the ordinary course of business or
transfers to controlled subsidiaries as described in Section 368(a)(2)(C) of
the Code.
ARTICLE 4
COVENANTS OF PIONEER AND CFB
4.1 COVENANTS OF PIONEER. During the period from the date of this
Agreement and continuing until the Effective Time, Pioneer agrees as follows:
(a) ORDINARY COURSE. Except as otherwise required under this
Agreement or by CFB, Pioneer shall carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use all reasonable efforts to preserve intact its present
business organization, maintain its rights and franchises and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that their goodwill and ongoing businesses shall not be
impaired in any material respect. Pioneer shall not (i) enter into any new
material line of business, (ii) increase or decrease the current number of
the directors of Pioneer, (iii) change its lending, investment, liability
management or other material banking policies in any respect that is material
to such party; or (iv) incur or commit to any capital expenditures (or any
obligations or liabilities in connection therewith) other than capital
expenditures (and obligations or liabilities in connection therewith)
incurred or committed to in the ordinary course of business consistent with
past practices. Any and all transaction costs incurred by Pioneer, including
legal, accounting and other professional fees and costs, shall be based
solely upon usual and customary rates and charges.
(b) SHAREHOLDER MEETING. Pioneer will cause to be duly called,
and will cause to be held not later than forty-five (45) days following the
effective date of the Registration Statement, a meeting of its shareholders
and will direct that this Agreement be submitted to a vote at such meeting.
Pioneer will (i) cause proper notice of such meeting to be given to its
shareholders in compliance with the Colorado Act and other applicable laws
and regulations; (ii) recommend by the affirmative vote of a majority of the
Board of Directors a vote in favor of approval of this Agreement; and (iii)
use its best efforts to solicit from its shareholders proxies in favor
thereof.
(c) REGISTRATION STATEMENT. Pioneer will furnish or cause to be
furnished to CFB all of the information concerning Pioneer required for
inclusion in, and will cooperate with CFB in
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the preparation of, the Registration Statement and Prospectus-Proxy Statement
(including audited financial statements, prepared in accordance with
generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement and Prospectus-Proxy Statement), or any statement
or application made by CFB to any governmental body in connection with the
Merger. Pioneer agrees promptly to advise CFB if at any time prior to the
Effective Date of the Merger, any information provided by or on behalf of
Pioneer becomes incorrect or incomplete in any material respect and to
provide the information needed to correct such inaccuracy or omission.
(d) CONFIDENTIAL INFORMATION. Pioneer will hold in confidence all
documents and nonpublic information concerning CFB and the CFB Subsidiaries
furnished to Pioneer and its representatives in connection with the Merger
and will not release or disclose such information to any other person, except
as required by law and except to Pioneer's outside professional advisers in
connection with this Agreement, with the same undertaking from such
professional advisers. If the Merger contemplated by this Agreement shall
not be consummated, such confidence shall be maintained and such information
shall not be used in competition with CFB (except to the extent that such
information can be shown to be previously known to Pioneer, in the public
domain, or later acquired by Pioneer from other legitimate sources) and, upon
request, all such documents, any copies thereof and extracts therefrom shall
immediately thereafter be returned to CFB.
(e) BENEFIT PLANS. Pioneer will, to the extent legally
permissible, take all action necessary or required (i) to terminate or amend,
if requested by CFB and at CFB's cost, all qualified pension and welfare
benefit plans and all non-qualified benefit plans and compensation
arrangements as of the Effective Time; (ii) to amend the Plans to comply with
the provisions of the Tax Reform Act of 1986, as amended, and regulations
thereunder and other applicable law as of the Effective Time; and (iii) to
submit application to the Internal Revenue Service for a favorable
determination letter for each of the Plans which is subject to the
qualification requirements of Section 401(a) of the Code prior to the
Effective Time.
Except as set forth in Section 3.1(j) of the Pioneer Disclosure
Schedule, and except as otherwise required pursuant to this Section 4.1(e),
Pioneer agrees that it will not, without the prior written consent of CFB,
(i) enter into, adopt, amend (except as may be required by law) or terminate
any Plan, as the case may be, or any other employee benefit plan or any
agreement, arrangement, plan or policy between Pioneer and one or more of its
directors or officers; provided, however, that Pioneer may amend any of the
Plans to reduce or eliminate a requirement of mandatory periodic
contributions provided that if any of the Plans do not have assets with an
aggregate value that exceeds the present value of its liability for accrued
benefits, all as determined on a termination basis, then Pioneer shall accrue
on its Determination Date Financial Statements the amount by which any of the
Plans are underfunded; (ii) except for normal increases in the ordinary
course of business consistent with past practice that in the aggregate do not
result in aggregate annual base compensation expense to Pioneer in excess of
105% of that in effect as of June 30, 1997, increase in any manner the
compensation of any director, officer, or employee, or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or (iii) enter into or renew
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any contract, agreement, commitment or arrangement providing for the payment
to any director, officer or employee of Pioneer of compensation or benefits
contingent, or the terms of which are materially altered, upon the occurrence
of the Merger.
(f) NO SOLICITATIONS. Pioneer shall not authorize or permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative or agent retained by it
to solicit, or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to
lead to, any takeover proposal (as defined below), or agree or endorse any
takeover proposal, or participate in any discussions or negotiations, or
provide third parties with any nonpublic information, relating to any such
inquiry or proposal. Pioneer shall promptly advise CFB orally and in writing
of any such inquiries or proposals, including all of the material terms
thereof. As used in this Agreement, "takeover proposal" shall mean any
tender or exchange offer, proposal for a merger, consolidation or other
business combination involving Pioneer or any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial portion of the
assets of Pioneer other than the transactions contemplated or permitted by
this Agreement.
(g) NO ACQUISITIONS. Other than (i) acquisitions described in
Section 4.1(g) of the Pioneer Disclosure Schedule, as the case may be, or
(ii) acquisitions which may be mutually agreed to by the parties, Pioneer
shall not acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or division thereof or otherwise acquire or agree to
acquire any substantial amount of assets in each case; PROVIDED, however,
that the foregoing shall not prohibit (i) foreclosures and other acquisitions
related to previously contracted debt, in each case in the ordinary course of
business, or (ii) acquisitions of assets in each case in the ordinary course
of business.
(h) INSURANCE. Pioneer shall maintain the insurance coverage (or
coverage of a like kind and amount) referenced in Section 3.1(o) through the
Effective Time.
(i) POOLING RESTRICTIONS. From and after the date of this
Agreement, Pioneer shall not take any action which would disqualify the
Merger as a "pooling of interests" for accounting purposes.
(j) FINANCIAL STATEMENTS. Pioneer shall have prepared, filed and
submitted to CFB all quarterly and management prepared financial statements
for any periods ending at least 30 days before the Closing Date.
(k) ADDITIONAL COVENANTS OF PIONEER. From the date of this
Agreement to the Closing Date or the earlier termination of this Agreement,
Pioneer, EXCEPT WITH THE PRIOR WRITTEN CONSENT OF CFB (except as otherwise
specifically provided in clauses (xiv) and (xv) of this Section 4.1(k)), or
as specifically required under the Agreement, shall not, nor shall it allow
the Bank to:
(i) Except as set forth in Section 4.1(g) of the Pioneer
Disclosure Schedule, issue, sell or commit to issue or sell any shares
of capital stock of Pioneer, securities
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convertible into or exchangeable for capital stock of Pioneer,
warrants, options or other rights to acquire such stock, or enter
into any agreement with respect to the foregoing;
(ii) Redeem, purchase or otherwise acquire (except for trust
account shares) directly or indirectly, any shares of capital stock of
Pioneer or any securities convertible or exercisable for any shares of
capital stock of Pioneer;
(iii) Split, combine or reclassify any of capital stock of
Pioneer or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for shares of
capital stock of Pioneer;
(iv) Borrow, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
individual, corporation or other entity, in any material amount;
(v) Other than in the ordinary course of business, discharge or
satisfy any material lien or encumbrance on the properties or assets
of Pioneer or pay any material liability;
(vi) Mortgage, pledge or subject to any lien or other encumbrance
any of its assets, except (A) in the ordinary course of business, (B)
liens and encumbrances for current property taxes not yet due and
payable, and (C) liens and encumbrances which do not materially affect
the value or interfere with the current use or ability to convey the
property subject thereto or affected thereby;
(vii) Sell, assign or transfer any tangible or intangible assets
with a book value greater than $10,000, except in the ordinary course
of business;
(viii) Enter into any individual employment, agency or other
contract or arrangement for the performance of personal services for
an amount in excess of $10,000 (except for service agreements in the
ordinary course of business);
(ix) Amend Pioneer's Articles of Incorporation, Bylaws or other
governing documents;
(x) Fail to maintain a reserve for loss and cost associated with
those litigation matters reflected in Section 3.1(k) of the Pioneer
Disclosure Schedule to the extent required by generally accepted
accounting principles;
(xi) Cancel any material debt or claim or waive any right of
material value, except in the ordinary course of business;
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(xii) Repurchase or enter into any agreement to repurchase all or
any portion of any loan previously participated to any other financial
institution other than loans repurchased in compliance with all
applicable laws and regulations;
(xiii) Originate any loan which is thereafter participated to
another financial institution providing for payment upon default on
any basis other than pro rata;
(xiv) Make or commit to make any further advances on any loan
which is either in default or classified, whether such classification
is a result of a federal or state bank regulatory examination or
internal classification of substandard or lower by Pioneer's officers
or directors, unless Pioneer is under a legal obligation to do so;
(xv) (A) make, or agree to make, any fully secured loan or
increase any existing fully secured loan for an amount in excess of
$500,000, to any one borrower, unless said loan is made pursuant to a
properly documented and legally enforceable commitment of Pioneer to
the borrower made prior to the date of this Agreement; (B) make, or
agree to make, any unsecured loan or increase any unsecured loan by
$50,000 or more, unless said loan is made pursuant to a properly
documented and legally enforceable commitment of Pioneer to the
borrower made prior to the date of this Agreement; (C) make, or agree
to make any new loan or advance on any existing loan, except in
conformity with Pioneer's current loan policies; or (D) make any
change with respect to the terms of any existing loan, except in the
ordinary course of business (the provisions of parts A and B of this
section shall not apply to renewals of existing loans, advances under
existing loans or increases to existing loans for an amount below the
applicable limit set forth in parts A and B);
(xvi) Make or agree to make any loan to any Bank principal or any
person, corporation or entity in violation of any state or federal law
or regulation;
(xvii) Incur any obligation or liability with respect to capital
expenditures which exceeds $10,000 for any single matter or $50,000 in
the aggregate, except for capital expenditures described in Section
3.1(s) of the Pioneer Disclosure Schedule;
(xviii) Fail to timely pay and discharge all federal and state
taxes and other accounts payable for which it is liable, provided,
that Pioneer may deposit an amount equal to any such taxes, in lieu of
the payment thereof, into a reserve account, determined consistently
with prior practices, from which such taxes will be paid when and to
the extent they are found to be properly due and payable;
(xix) Except in accordance with (i) compensation schedules and
Plans in effect on June 30, 1997 and (ii) special compensation and
bonus arrangements which shall be fully accrued for on the
Determination Date, pay or commit to pay any additional salary or
other compensation to any of Pioneer's officers, directors or
employees;
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(xx) Except as otherwise required pursuant to Section 4.1(e),
enter into, adopt, amend (except as may be required by law), terminate
or make or grant any increase above current funding levels in any of
the Plans (other than normal premium increases on current health care
insurance) or arrangement;
(xxi) Purchase or sell any bonds or other investment securities
prior to maturity without prior written consent of CFB or make or
agree to make any investment in violation of any federal law or
regulation except that Pioneer may purchase U.S. Treasury or Agencies
securities with maturity dates of 36 months or less;
(xxii) Fail to charge and pay interest rates on loans and
deposits, respectively, not materially consistent with practices in
Pioneer's marketplace;
(xxiii) Fail to use its reasonable best efforts to comply with
any law, rule, regulation or order applicable to Pioneer if such
failure would have a material adverse effect upon Pioneer;
(xxiv) Fail to make all appropriate and required transfers to
Pioneer's loan loss reserves based upon its existing policies or at
the request of any regulatory agency;
(xxv) Change any accounting methods, practices or procedures with
respect to the accumulation and presentation of financial information,
except as directed by applicable law or regulation or to conform with
accounting standards;
(xxvi) Declare or pay any dividends or distributions with respect
to its stock after the Determination Date; or
(xxvii) Fail to use its reasonable best efforts to obtain the
consent or approval of each person (other than the government
authorities referred to in Section 6.1(c)) whose consent or approval
is required in order to permit a succession by the Surviving
Corporation pursuant to the Merger to any obligation, right or
interest of Pioneer under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument.
4.2 COVENANTS OF CFB. During the period from the date of this Agreement
and continuing until the Effective Time, CFB agrees as follows:
(a) ORDINARY COURSE. Except as set forth in Section 4.2(a) of the
CFB Disclosure Schedule, CFB shall carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted.
(b) APPLICATION. Subject to the required cooperation of Pioneer and
its affiliates, CFB shall use its reasonable best efforts to prepare and submit
within thirty (30) days of the date hereof an application to the Office of the
Comptroller of the Currency for approval of the proposed transaction, and to
prosecute all required federal and state applications.
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(c) COOPERATION. CFB will furnish to Pioneer all the information
concerning CFB required for inclusion in, and will cooperate in the
preparation of, the Prospectus-Proxy Statement to be sent to the shareholders
of Pioneer. CFB agrees promptly to advise Pioneer if at any time prior to the
Effective Date of the Merger, any information provided by CFB in the
Prospectus-Proxy Statement becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such inaccuracy or
omission.
(d) REGISTRATION STATEMENT. As promptly as practicable after the
execution of this Agreement, CFB will file with the SEC appropriate documents
required under the Securities Act to register the exchange of CFB Common
Stock for Pioneer Common Stock, and will use its best efforts to cause any
registration statement or other filing to become effective under the
Securities Act and applicable state securities laws as soon as practicable.
CFB shall advise Pioneer promptly when such registration statement has become
effective with respect to this transaction and of any supplements or
amendments thereto, and CFB shall furnish Pioneer with copies of all such
documents. At the time such registration statement becomes effective, the
Prospectus-Proxy Statement will comply in all material respects with the
provisions of the Securities Act and the published rules and regulations
thereunder, and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under
which they are made, not misleading. At the time of mailing thereof to the
Pioneer shareholders, at the time of the Pioneer shareholders' meeting
referred to in Section 4.1(b) hereof and at the Effective Time of the Merger,
the Prospectus-Proxy Statement included as part of such registration
statement or any amendment thereof or supplement thereto, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading or omit to state a
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Pioneer shareholders'
meeting; PROVIDED, HOWEVER, that none of the provisions of this subparagraph
shall apply to statements in or omissions from such registration statement or
any amendment or supplement thereto or the Prospectus-Proxy Statement made in
reliance upon and in conformity with information furnished by Pioneer or the
Bank for use in such registration statement or the Prospectus-Proxy
Statement. CFB shall bear the costs of all SEC filing fees with respect to
such registration statement, the costs of printing the Prospectus-Proxy
Statement, and the costs of qualifying the shares of CFB Common Stock under
state blue sky laws as necessary.
(e) LISTING. CFB will file all documents required to be filed to
obtain approval for listing the CFB Common Stock to be issued pursuant to the
Merger on the Nasdaq Market System and use its best efforts to effect said
listing.
(f) SHARES TO BE ISSUED. The shares of CFB Common Stock to be
issued by CFB to the shareholders of Pioneer pursuant to this Agreement will,
upon such issuance and delivery to said shareholders pursuant to the
Agreement, be duly authorized, validly issued, fully paid and nonassessable.
The shares of CFB Common Stock to be delivered to the shareholders of Pioneer
pursuant to this Agreement are and will be free of any preemptive rights of
the stockholders of CFB.
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(g) BLUE SKY. CFB will file all documents required to obtain
prior to the Effective Time of the Merger all necessary Blue Sky permits and
approvals, if any, required to carry out the transactions contemplated by
this Agreement, will pay all expenses incident thereto and will use its best
efforts to obtain such permits and approvals.
(h) CONFIDENTIAL INFORMATION. CFB will hold in confidence all
documents and information concerning Pioneer furnished to it and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other
person, except as required by law and except to its outside professional
advisers in connection with this Agreement, with the same undertaking from
such professional advisers. If the transactions contemplated by this
Agreement shall not be consummated, such confidence shall be maintained and
such information shall not be used in competition with Pioneer (except to the
extent that such information can be shown to be previously known to CFB, in
the public domain, or later acquired by CFB from other legitimate sources)
and, upon request, all such documents, copies thereof or extracts therefrom
shall immediately thereafter be returned to Pioneer.
(i) REGISTRATION STATEMENT. CFB will furnish or cause to be
furnished all of the information concerning CFB and the CFB Subsidiaries
required for inclusion in, and will cooperate with Pioneer in the preparation
of any registration statement or amendment or supplement thereto, or any
statement or application made by Pioneer to any governmental body in
connection with the transactions contemplated by this Agreement. CFB agrees
to advise Pioneer if at any time prior to the Effective Time, any information
provided by or on behalf of CFB becomes incorrect or incomplete in any
material respect and to provide the information needed to correct such
inaccuracy or omission.
4.3 COVENANTS OF PIONEER AND CFB. During the period from the date of
this Agreement and continuing until the Effective Time, Pioneer and CFB agree
as to themselves and their subsidiaries that, except as expressly
contemplated or permitted by this Agreement, or to the extent that the
parties shall otherwise consent in writing:
(a) GOVERNING DOCUMENTS. No party shall amend its Certificate or
Articles of Incorporation or Bylaws.
(b) OTHER ACTIONS. Unless such action is required by law or sound
banking practice, no party knowingly and intentionally shall, or shall permit
any of its subsidiaries to, take any action that (i) is intended to result in
any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect, or in any of the conditions to
the Merger set forth in Article VI not being satisfied or in a violation of
any provision of this Agreement, or (ii) would adversely affect the ability
of any of them to obtain any of the Requisite Regulatory Approvals (as
defined in Section 5.1(b)) without imposition of a condition or restriction
of the type referred to in Section 6.1(f) hereof except, in every case, as
may be required by applicable law or this Agreement.
(c) ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall
promptly advise the other orally and in writing of any change or event
constituting a material breach of any of the
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representations, warranties or covenants of such party contained herein. CFB
shall file all reports required to be filed by it with the SEC between the
date of this Agreement and the Effective Time and shall deliver to Pioneer
copies of all such reports promptly after the same are filed. CFB, Pioneer
and each subsidiary of CFB that is a bank shall file all Consolidated Reports
of Income and Condition with the appropriate bank regulators and all other
reports, applications and other documents required to be filed with the
appropriate bank regulators between the date hereof and the Closing Date and
shall make available to the other party copies of all such reports promptly
after the same are filed.
(d) TITLE OF PROPERTY. Pioneer agrees to deliver to CFB (at
Pioneer's expense) within 30 days of the date hereof, a title insurance
commitment for all real property owned by Pioneer in the State of Colorado
(other than property held as OREO) (the "Title Opinions"). CFB shall have 15
days after receipt by CFB's counsel of said Title Opinions within which to
notify Pioneer, in writing, of CFB's objection to any exceptions (other than
any exception of the type described in Section 3.1(m)(i) through (iv)) to the
title shown in said Title Opinions. In the event of any such objection, then
Pioneer shall have 30 days from the date of such objection within which to
attempt to eliminate such objected to exceptions to title from the Title
Opinions. In the event such objected to exceptions are not eliminated or
satisfied to the reasonable satisfaction of CFB, CFB may terminate this
Agreement pursuant to Section 7.1 hereof and such termination shall be the
sole and exclusive remedy for the failure to eliminate or satisfy such
exceptions..
(e) ENVIRONMENTAL ASSESSMENT. Pioneer shall engage at its expense
an independent, qualified environmental engineering firm, acceptable to CFB,
for the purpose of conducting a Phase I Hazardous Waste Assessment (the
"Assessment") of all real properties owned or controlled by Pioneer. The
Assessment shall satisfy ASTM's E-1527 Standard Practice and shall include a
record review of publicly available federal, state and local sources of
environmental records. The Assessment shall be completed within thirty (30)
days after the date hereof. CFB shall have a period of fifteen (15) days
from the date of receipt of such Assessment to review such Assessment and
give written notice to Pioneer stating either that (i) such Assessment is
approved by CFB or (ii) such Assessment is not approved by CFB and the
reasons therefor.
If CFB gives a notice pursuant to (ii) above which sets forth specific
objections to the Assessment, then CFB may, at its option, terminate this
Agreement as of the date which is sixty (60) days after the date of such
notice unless during such sixty (60) day period Pioneer corrects or satisfies
such objections, or indemnifies CFB against loss, liability or expense, to
the reasonable satisfaction of CFB.
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ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 REGULATORY MATTERS.
(a) CFB shall use its reasonable best efforts to have any
registration statement or amendment or supplement thereto declared effective
under the Securities Act as promptly as practicable after such filing, and,
following the respective record dates for the stockholder meeting of Pioneer,
thereafter mail the Prospectus-Proxy Statement to the stockholders of
Pioneer.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
filings and other documents, and to obtain as promptly as practicable all
necessary permits, consents, and authorizations of all governmental entities
necessary to consummate the Merger ("Requisite Regulatory Approvals").
Pioneer and CFB shall have the right to review in advance, and to the extent
practicable each will consult the other on, subject to applicable laws
relating to the exchange of information, all the information relating to
Pioneer or CFB, as the case may be, and any of their respective subsidiaries,
which appear in any filing made with, or written materials submitted to any
governmental entity in connection with the Merger. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable.
(c) Pioneer and CFB shall promptly furnish each other with copies
of written communications received by Pioneer or CFB, as the case may be, or
any of their respective Subsidiaries, Affiliates or Associates (as such items
are defined in Rule 12b-2 under the Exchange Act as in effect on the date
hereof) from, or delivered by any of the foregoing to, any governmental
entity in respect of the Merger.
5.2 LETTERS OF FINANCIAL OFFICERS. Pioneer shall cause to be delivered
to CFB a letter of Pioneer's chief financial officer in substantially the
form shown on EXHIBIT 5.2A dated (i) the date on which the Registration
Statement shall become effective and (ii) the business day prior to the
Closing Date, and addressed to CFB.
CFB shall cause to be delivered to Pioneer a letter of CFB's chief
financial officer in substantially the form shown on EXHIBIT 5.2B dated (i)
the date on which the Registration Statement shall become effective and (ii)
the business day prior to the Closing Date, and addressed to Pioneer.
5.3 ACCESS TO INFORMATION. Upon reasonable notice and subject to
applicable laws relating to the exchange of information, Pioneer and CFB
shall each (and cause each of its subsidiaries to) afford to the officers,
employees, accountants, counsel and other representatives of CFB, access
during normal business hours during the period prior to the Effective Time,
to all its properties, books, contracts, commitments and records for the
purpose of updating any review
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of such items performed prior to the date of this Agreement and, during such
period, Pioneer and CFB shall (and shall cause each of its subsidiaries to)
make available to the other: (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal or state securities laws or
federal or state banking laws (other than reports or documents which either
party is not permitted to disclose under applicable law); and (b) all other
information concerning its business, properties and personnel as either party
may reasonably request. It is the intention of the parties that CFB shall
conduct an examination of Pioneer prior to the Closing Date in order to
confirm compliance with the representations, warranties and covenants set
forth in this Agreement. No investigation by either party shall affect the
representations and warranties set forth herein.
5.4 AFFILIATES. Each of Pioneer and CFB shall use its reasonable best
efforts to cause each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act) of Pioneer or
CFB to deliver to the other party hereto, as soon as practicable after the
date hereof, and at least 32 days prior to the Closing Date, a written
agreement substantially in the form of EXHIBIT 5.5.
5.5 EMPLOYEE BENEFIT PLANS. Each person who is an employee of Pioneer
as of the Effective Time ("Employees") shall be participants in the employee
welfare plans, and shall be eligible for participation in the pension plans
of CFB, as in effect from time to time, subject to any eligibility
requirements (with full credit for years of past service to Pioneer, or to
any predecessor-in-interest of Pioneer to the extent such service is
presently given credit under the Plans described in Section 3.1(j) hereof,
for the purpose of satisfying any eligibility and vesting periods) applicable
to such plans (but not subject to any pre-existing condition exclusions) and
shall enter each welfare plan immediately after the Effective Time and shall
enter each pension plan not later than the first day of the calendar quarter
which begins at least 32 days after the Effective Time. For the purpose of
determining each Employee's benefit for the year in which the Merger occurs
under the CFB vacation program, vacation taken by an Employee in the year in
which the Merger occurs will be deducted from the total CFB benefit. Each
Employee shall be eligible for participation, as a new employee with the
credit for past service described above, in the CFB Plans under the terms
thereof.
5.6 EXPENSES. Except as otherwise stated herein, whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement, and the transactions contemplated hereby shall be paid by the
party incurring such expense, except as may be permitted by Section 7.2. All
of the expenses (including but not limited to professional fees) incurred or
to be incurred by Pioneer in connection with the Merger shall be accrued as
expenses on the Determination Date Balance Sheet.
5.7 ADDITIONAL AGREEMENTS; BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its
reasonable best efforts to take all action and to do all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, cooperating fully with the other party hereto, providing
the other party hereto
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with any appropriate information and making all necessary filings in
connection with the Requisite Regulatory Approvals.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been approved
and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Pioneer Common Stock entitled to vote thereon.
(b) NASDAQ MARKET SYSTEM LISTING. The shares of CFB Common Stock
issuable to the Pioneer stockholders pursuant to this Agreement shall have
been approved for listing on the Nasdaq Market System upon notice of issuance.
(c) OTHER APPROVALS. Other than the filing provided for by
Section 1.1, all consents, orders or approvals of, or declarations or filings
with, and all expirations of waiting periods imposed by, any governmental
entity (collectively, the "Consents") which are prescribed by law as
necessary for the consummation of the Merger and the other transactions
contemplated hereby (other than immaterial Consents) shall have been filed,
occurred or been obtained and all such Requisite Regulatory Approvals shall
be in full force and effect.
(d) REGISTRATION STATEMENT. The registration statement or
amendment or supplement thereto shall have become effective under the
Securities Act and no stop order suspending such effectiveness shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order,
injunction or decree issued by any court or agency of competent jurisdiction
or other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the transactions contemplated hereby
shall be in effect, nor shall any proceeding by any governmental entity
seeking any such Injunction be pending. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, or enforced by any
governmental entity which prohibits, restricts or makes consummation of the
Merger illegal.
(f) NO UNDULY BURDENSOME CONDITION. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced
or deemed applicable to the Merger or any of the transactions contemplated
hereby, by any federal or state governmental entity which, in connection with
the grant of a Requisite Regulatory Approval, imposes any condition or
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restriction upon CFB or any of its Subsidiaries which would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement as to render inadvisable, in the reasonable
business judgment of the Board of Directors of CFB; the consummation of the
Merger.
6.2 CONDITIONS TO OBLIGATIONS OF CFB. The obligation of CFB to effect
the Merger is also subject to the satisfaction or waiver by CFB prior to the
Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pioneer set forth in this Agreement shall be true and correct
in all material respects as of the date of the Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on the Closing Date, except where the failure
to be true and accurate in all material respects would not have or would not
be reasonably expected to have a material adverse effect on Pioneer, and CFB
shall have received a certificate signed on behalf of Pioneer by the
President of Pioneer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PIONEER. Pioneer shall have
performed in all materials respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and CFB shall
have received a certificate signed on behalf of Pioneer by the President of
Pioneer to such effect.
(c) MINIMUM PIONEER VALUE. The Value of Pioneer as of the
Determination Date shall not be less than $8,100,000. The confirmation of
the minimum Pioneer Value shall be made pursuant to the procedures set forth
in Section 1.4.
(d) SUPPLEMENT TO LOAN LOSS RESERVE. The Pioneer loan loss
reserve shall have been supplemented by a transfer of $400,000 on or before
the Determination Date, and reflected in the Determination Date financial
statements and the calculation of Pioneer Value, in accordance with the
procedures set forth in Section 1.4.
(e) POOLING LETTER. CFB shall have received a letter from Ernst &
Young, in form and substance reasonably satisfactory to CFB, approving the
accounting treatment of the Merger as a "pooling of interests" in accordance
with generally accepted accounting principles, as of a date no more than five
business days prior to the Closing Date; in support of the Ernst & Young
pooling letter, Ernst & Young and CFB shall have received a letter from
Pioneer's accountants, in form and substance reasonably satisfying to Ernst &
Young, confirming certain facts on behalf of Pioneer. Without limiting the
foregoing, it shall be a condition of receipt of such pooling letter that
James O. Haas shall refinance that certain outstanding loan secured by stock
of Pioneer with a bank not affiliated with CFB.
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(f) LEGAL OPINION. CFB shall have received the opinion of Thomas
L. Beckmann, counsel to Pioneer, dated the Closing Date, in substantially the
form shown on Exhibit 6.2, and such opinion shall not have been withdrawn
prior to the Effective Time.
6.3 CONDITIONS TO OBLIGATIONS OF PIONEER. The obligation of Pioneer to
effect the Merger is also subject to the satisfaction or waiver by Pioneer
prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CFB set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on the Closing Date, except as otherwise
contemplated by this Agreement, and Pioneer shall have received a certificate
signed on behalf of CFB by the Chairman and Chief Executive Officer of CFB to
such effect.
(b) PERFORMANCE OF OBLIGATIONS OF CFB. CFB and the Acquisition
Subsidiary shall have performed in all material respects all obligations
required to be performed by either of them under this Agreement at or prior
to the Closing Date, and Pioneer shall have received a certificate signed on
behalf of CFB and the Acquisition Subsidiary by the Chairman and Chief
Executive Officer of CFB to such effect.
(c) CONSENTS UNDER AGREEMENTS. CFB shall have obtained the
consent or approval of each person (other than the governmental entities
referred to in Section 6.1(c)) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument to which CFB or any of its subsidiaries is a party or is otherwise
bound, except those for which failure to obtain such consents and approvals
would not, in the reasonable opinion of Pioneer, individually or in the
aggregate, have a material adverse effect on CFB or upon the consummation of
the transactions contemplated hereby.
(d) TAX OPINION. Pioneer shall have received the opinion of Kane
& Associates, P. C., advisors to Pioneer, dated the Closing Date, to the
effect that (i) the Merger will be treated for Federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code, (ii) CFB
and Pioneer will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, (iii) shareholders of Pioneer who exchange their
shares of Pioneer Common Stock for shares of CFB Common Stock will not
recognize gain or loss, for purposes of federal income tax, except to the
extent of the cash received in lieu of fractional shares, and (iv) Pioneer
will not recognize gain or loss, for purposes of federal income tax, as a
result of consummation of the Merger.
(e) LEGAL OPINION. Pioneer shall have received the opinion of
Lindquist and Vennum, P.L.L.P., counsel to CFB, dated the Closing Date, in
substantially the form shown on Exhibit 6.3, and such opinion shall not have
been withdrawn prior to the Effective Time.
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(f) EMPLOYMENT AGREEMENT. Daniel L. Allen and CFB shall have
entered into an Employment Agreement, for a term of two (2) years beginning
the Effective Time, providing for payment of base salary no less in amount
than that currently due and providing for benefits comparable to those
currently enjoyed. Mr. Allen shall be eligible for participation in CFB's
Annual Incentive Plan for executive officers.
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated in writing at any
time prior to the Effective Time, whether before or after approval of the
Merger by the stockholders of Pioneer or CFB, only in the following
circumstances:
(a) by mutual consent of CFB and Pioneer in a written instrument,
if the Board of Directors of each so determines by a vote of a majority of
the members of its entire Board;
(b) by either CFB or Pioneer if (i) any Requisite Regulatory
Approval shall have been denied; or (ii) any governmental entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by either CFB or Pioneer if the Merger shall not have been
consummated on or before March 1, 1998, unless the failure of consummation
shall be due to the failure of the party seeking to terminate to perform or
observe in all material respects the covenants and agreements hereunder to be
performed or observed by such party; or
(d) by either CFB or Pioneer if there shall have been a material
breach of any of the covenants or agreements set forth in this Agreement on
the part of the other party, which breach shall not have been cured before
closing or within twenty (20) business days following receipt by the
breaching party of written notice of such breach from the other party,
whichever occurs first.
(e) by Pioneer if the CFB Trading Value shall be less than $46.00;
(f) by CFB pursuant to the terms of Section 4.3(d) or 4.3(e), as
applicable.
7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either CFB or Pioneer as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect except that the obligations
under Sections 4.1(d), 4.2(h), 5.6, and 7.2 shall survive termination of this
Agreement; provided, however, that no party shall be relieved or released
from any liabilities or damages arising out of the willful breach by such
party of any provision of this Agreement.
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7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of Pioneer, provided, however, that after any
such approval, no amendment shall be made which by law requires further
approval by such stockholders, without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto; (ii) waive any inaccuracies in the representations and warranties
contained herein or in any of the Schedules; and (iii) waive compliance with
any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation
or warranty contained in this Agreement shall survive the Merger or the
termination of this Agreement, except that Sections 3.2, 4.2(c), 4.2(d),
4.2(e), 4.2(f), 4.2(h), 4.2(i), 5.6 and 8.5 shall survive the Merger, and
Sections 4.1(d) and 4.2(h), 5.6 and 7.2 shall survive the termination of this
Agreement.
8.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when received by the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to CFB or
Acquisition Subsidiary, to: Community First Bankshares, Inc.
Attn: Donald R. Mengedoth, President
520 Main Avenue
Fargo, ND 58124
with copies to: Steven J. Johnson, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South 8th Street
Minneapolis, MN 55402-2205
and
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(b) if to Pioneer, to: Pioneer Bank of Longmont
Attn: Dan Allen, President
1610 Hover Street
Longmont, CO 80501
with copies to: Thomas L. Beckmann, Esq.
1880 Industrial Circle
Suite A-1
Longmont, CO 80501
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include", "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation".
8.4 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
8.5 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP.
This Agreement (including the documents and the instruments referred to
herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof. This Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder, except
that Sections 3.2 and 4.2(i) are intended for the benefit of the Pioneer
shareholders; and Section 5.5 is intended for the benefit of employees of the
Bank. CFB shall be liable to such third-party beneficiaries for damages
caused by the breach of such Sections. No party shall have the right to
acquire or shall be deemed to have acquired shares of common stock of the
other party pursuant to the Merger until consummation thereof.
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Colorado.
8.7 PUBLICITY. Except as otherwise required by law or the rules of the
Nasdaq Market System or the National Association of Securities Dealers, so
long as this Agreement is in effect, neither CFB nor Pioneer shall, nor shall
either of them permit any of its subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the
other party, which consent shall not be unreasonably withheld.
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8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.9 ENFORCEMENT OF AGREEMENT. Each of the parties hereto agrees that
it will not object if the other party seeks to obtain an injunction to
prevent breaches of this Agreement or to enforce specifically the terms and
provision hereof in any court in the United States or any state have
jurisdiction. The enforcing party shall be entitled to recover its attorneys
fees incurred in the successful enforcement of the terms and provisions of
this Agreement.
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IN WITNESS WHEREOF, CFB, Acquisition Subsidiary and Pioneer have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first above written.
COMMUNITY FIRST BANKSHARES, INC.
By: /s/ Gary A. Knutson
------------------------------------
Name: Gary Knutson
Attest: Title: Senior Vice President
/s/ Bruce A. Heysse
- -----------------------------
Name: Bruce A.Heysse
Title: Senior Vice President COMMUNITY FIRST NATIONAL BANK
By: /s/ Gary A. Knutson
------------------------------------
Name: Gary A. Knutson
Title: Senior Vice President
Attest:
/s/ Bruce A. Heysse
- -----------------------------
Name: Bruce A. Heysse
Title: Senior Vice President
PIONEER BANK OF LONGMONT
By: /s/ Daniel L. Allen
------------------------------------
Attest: Name: Daniel L. Allen
Title: President
/s/ Roger L. Kopman
- -----------------------------
Name: Roger L. Kopman
Title: Executive Vice President
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<PAGE>
APPENDIX B
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER is dated as of the
19th day of December, 1997 and made and entered into by and among COMMUNITY
FIRST BANKSHARES, INC., a Delaware corporation ("CFB"), COMMUNITY FIRST NATIONAL
BANK, a de novo national banking association, ("Acquisition Subsidiary") and
PIONEER BANK OF LONGMONT, a Colorado banking corporation ("Pioneer").
WHEREAS, the parties hereto are parties to an Agreement and Plan of Merger
dated November 6, 1997 (the "Merger Agreement"); and
WHEREAS, the parties desire to make certain changes to the Merger
Agreement, as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 2.1(C)(II) OF THE MERGER AGREEMENT. Section
2.1(c)(ii) of the Merger Agreement is amended and restated in its entirety as
follows:
(ii) If the CFB Trading Value is greater than $52.50 per share,
then the Exchange Rate shall be reduced so that the product of the CFB
Trading Value multiplied by the Exchange Rate shall be $36,750,000.
2. AMENDMENT OF SECTION 7.1(C) OF THE MERGER AGREEMENT. Section 7.1(c)
of the Merger Agreement is amended and restated in its entirety as follows:
(c) by either CFB or Pioneer if the Merger shall not have been
consummated on or before May 30, 1998, unless the failure of
consummation shall be due to the failure of the party seeking to
terminate to perform or observe in all material respects the covenants
and agreements hereunder to be performed or observed by such party; or
Except as hereinabove set forth, there are no other changes to the Merger
Agreement, and the same is expressly ratified and confirmed.
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IN WITNESS WHEREOF, CFB, Acquisition Subsidiary and Pioneer have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first above written.
COMMUNITY FIRST BANKSHARES, INC.
By: /s/ Gary A. Knutson
---------------------------------
Name: Gary Knutson
Title: Senior Vice President
COMMUNITY FIRST NATIONAL BANK
By: /s/ Gary A. Knutson
---------------------------------
Name: Gary Knutson
Title: Senior Vice President
PIONEER BANK OF LONGMONT
By: /s/ Daniel L. Allen
---------------------------------
Name: Daniel L. Allen
Title: President
B-2
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APPENDIX C
ARTICLE 113
DISSENTERS' RIGHTS
PART I
RIGHT OF DISSENT--PAYMENT FOR SHARES
7-113-101 DEFINITIONS.--For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in
a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102 RIGHT TO DISSENT.-- (1) A shareholder, whether or not entitled to
vote, is entitled to dissent and obtain payment of the fair value of the
shareholder's shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
if:
(I) Approval by the shareholders of that corporation is required for the
merger by section 7-111-103 or 7-111-104 or by the articles of incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of the corporation for which a shareholder
vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the corporation
if the shareholders of the corporation were entitled to vote upon the consent of
the corporation to the disposition pursuant to section 7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain payment,
under subsection (1) of this section, of the fair value of the shares of any
class or series of shares which either were listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the National Association of
Securities Dealers Automated Quotation System, or were held of record by more
than two thousand shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporation action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action; or
(c) The effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
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(1.8) The limitation set forth in subsection (1.3) of this section
shall not apply if the shareholder will receive for the shareholder's shares,
pursuant to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the National Association of
Securities Dealers Automated Quotation System, or will be held of record by more
than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu of
fractional shares.
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(1) A record shareholder
may assert dissenters' rights as to fewer than all the shares registered in the
record shareholder's name only if the record shareholder dissents with respect
to all shares beneficially owned by any one person and causes the corporation to
receive written notice which states such dissent and the name, address, and
federal taxpayer identification number, if any, of each person on whose behalf
the record shareholder asserts dissenters' rights. The rights of a record
shareholder under this subsection (1) are determined as if the shares as to
which the record shareholder dissents and the other shares of the record
shareholder were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS.--(1) If a proposed corporate action
creating dissenters' rights under section 7-113-102 is submitted to a vote at a
shareholders' meeting, the notice of the meeting shall be given to all
shareholders, whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this article and the materials, if
any, that, under articles 101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as provided by this subsection (1)1 shall not affect any action
taken at the shareholders' meeting for which the notice was to have been given,
but any shareholder who was entitled to dissent but who was not given such
notice shall not be precluded from demanding payment for the shareholder's
shares under this article by reason of the shareholder's failure to comply with
the provisions of section 7-113-202(1).
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(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection
(2) shall not affect any action taken pursuant to section 7-107-104 for which
the notice was to have been given, but any shareholder who was entitled to
dissent but who was not given such notice shall not be precluded from demanding
payment for the shareholder's shares under this article by reason of the
shareholder's failure to comply with the provisions of section 7-113-202(2).
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.--(1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to a
vote at a shareholders' meeting and if notice of dissenters' rights has been
given to such shareholder in connection with the action pursuant to section
7-113-201(1), a shareholder who wishes to assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the shareholder's
shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201(2) a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
7-113-203 DISSENTERS' NOTICE.--(1) If a proposed corporate action creating
dissenters' rights under section 7-113-102 is authorized, the corporation shall
give a written dissenters' notice to all shareholders who are entitled to demand
payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the
corporation action creating dissenters' rights under section 7-113-102 and
shall:
(a) State that the corporate action was authorized and state the effective
date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment demands
and the address of a place where certificates for certificated shares must be
deposited;
(c) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment demand
and certificates for certificated shares, which date shall not be less than
thirty days after the date the notice required by subsection (1) of this section
is given;
(f) State the requirement contemplated in section 7-113-103(3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who is given a
dissenters' notice pursuant to section 7-113-203 and who wishes to assert
dissenters' rights shall, in accordance with the terms of the dissenters'
notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203(2)(d), duly completed, or
may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the
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shareholder's exercise of dissenters' rights and has only the right
to receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this article.
7-113-205 UNCERTIFICATED SHARES.--(1) Upon receipt of a demand for payment
under section 7-113-204 from a shareholder holding uncertificated shares, and in
lieu of the deposit of certificates representing the shares, the corporation may
restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.--(1) Except as provided in section 7-113-208, upon the
effective date of the corporate action creating dissenters' rights under section
7-113-102 or upon receipt of a payment demand pursuant to section 7-113-204,
whichever is later, the corporation shall pay each dissenter who complied with
section 7-113-204, at the address stated in the payment demand, or if no such
address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, the amount the corporation estimates to be the fair
value of the dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet as of
the end of a fiscal year ending not more than sixteen months before the date of
payment, an income statement for that year, and, if the corporation customarily
provides such statements to shareholders, a statement of changes in
shareholders' equity for that year and a statement of cash flow for that year,
which balance sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under section
7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.--(1) If the effective date of the corporate
action creating dissenters' rights under section 7-113-102 does not occur within
sixty days after the date set by the corporation by which the corporation must
receive the payment demand as provided in section 7-113-203, the corporation
shall return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set
by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, then the corporation shall send a new
dissenters' notice, as provided in section 7-113-203, and the provisions of
sections 7-113-204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT OF
PROPOSED CORPORATE ACTION.--(1) The corporation may, in or with the dissenters'
notice given pursuant to section 7-113-203, states the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action creating dissenters' rights under section 7-113-102 and state
that the dissenter shall certify in writing, in or with the dissenter's payment
demand under section 7-113-204, whether or not the dissenter (or the person on
whose behalf dissenters' rights are asserted) acquired beneficial ownership of
the shares before that date. With respect to any dissenter who does not so
certify in writing, in or with the payment demand, that the dissenter or the
person on whose behalf the dissenter asserts dissenters' rights acquired
beneficial ownership of the shares before such date, the corporation may, in
lieu of making the payment provided in section 7-113-206, offer to make such
payment if the dissenter agrees to accept it in full satisfaction of the demand.
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(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.--(1)
A dissenter may give notice to the corporation in writing of the dissenter's
estimate of the fair value of the dissenter's shares and of the amount of
interest due and may demand payment of such estimate, less any payment made
under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest
due, if:
(a) The dissenter believes that the amount paid under section 7-113-206 or
offered under section 7-113-208 is less than the fair value of the shares or
that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206 within
sixty days after the date set by the corporation by which the corporation must
receive the payment demand; or
(c) The corporation does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares as required by
section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
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APPENDIX D
EXAMPLES OF CALCULATIONS OF THE EXCHANGE RATE
The following examples are presented for informational purposes only to
illustrate the procedure for determining the Exchange Rate in the Merger
given a variety of assumptions. The information presented below is not
intended as an estimate or projection of any of the data that will be used to
determine the Exchange Rate or of the amount that a holder of Pioneer Common
Stock may ultimately receive in the Merger. Further, the examples are not
intended to provide a range of such amounts; the actual Exchange Rate may be
higher than the highest amount presented or lower than the lowest amount
presented.
The examples illustrate the effects of various assumed levels of the
Trading Value of CFB Common Stock and the Pioneer Value as of the
Determination Date (as adjusted pursuant to the Merger Agreement) on the
Exchange Rate and the resulting aggregate consideration to be received by
holders of Pioneer Common Stock in the Merger. The actual Trading Value of
CFB Common Stock in connection with the Merger will be equal to the average
of the per share closing price for the CFB Common Stock for the 20 trading
days ending at the end of the fourth trading day immediately preceding the
Closing Date. The Pioneer Value shall be equal to the total consolidated
assets of Pioneer minus the sum of the total consolidated liabilities of
Pioneer, as reflected on the Determination Date Balance Sheet. Total
consolidated liabilities of Pioneer shall include, without limitation,
provisions for taxes and the expenses of the preparation of the final tax
return for Pioneer. See "The Merger--Conversion of Pioneer Common Stock."
Certain non-recurring expenses to consummate the Merger, currently estimated
to be $35,000, will be the responsibility of Pioneer and will have the effect
of reducing the Pioneer Value.
Examples I and IV below is based on the minimum Pioneer Value of
$8,100,000. Examples II and III are based on an assumed Pioneer Value of
$8,500,000 as of the Determination Date. If the actual Pioneer Value is less
than $8,100,000, the conditions to consummation of the transaction will not
be satisfied and CFB will have the right under the Merger Agreement to
terminate the transaction.
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EXAMPLE I
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$46.00 (based on the average closing price of CFB Common Stock for the
twenty trading days ended on the fourth trading day preceding closing).
Outstanding shares of Pioneer Common Stock:
50,000 shares (based on number outstanding on December 31, 1997).
Pioneer Value on Determination Date:
$8,100,000
CALCULATION OF EXCHANGE RATE:
<TABLE>
<S> <C>
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 700,000
b. ADJUSTMENT FOR TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $52.50 PER SHARE:
[No adjustment, given assumed Trading Value of $46.00 per share] --
c. ADJUSTMENT FOR PIONEER VALUE
Minimum Pioneer Value per Merger Agreement $8,100,000
Less Assumed Pioneer Value $8,100,000
[No adjustment]
Aggregate number of shares of CFB Common Stock to be
issued in the Merger: 700,000
Resulting calculation of Exchange Rate:
700,000 shares of CFB Common Stock divided by 50,000 shares of
Pioneer Common Stock outstanding: 14:1
Aggregate dollar value of the Merger consideration:
(shares of CFB Common Stock to be issued
multiplied by Trading Value) $32,200,000
Dollar value of the Merger consideration per share of Pioneer Common
Stock $644.00
</TABLE>
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EXAMPLE II
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$46.00
Outstanding shares of Pioneer Common Stock:
50,000 shares
Pioneer Value on Determination Date:
$8,500,000
<TABLE>
<S> <C>
CALCULATION OF EXCHANGE RATE:
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 700,000
b. ADJUSTMENT FOR EXCESS TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $52.50 PER SHARE:
[No adjustment]
c. ADJUSTMENT FOR PIONEER VALUE
Minimum Pioneer Value per Merger Agreement $8,100,000
Assumed Pioneer Value 8,500,000
Additional Pioneer Value: 400,000
Adjustment:
(i) Divide $400,000 excess by $46.00 (Trading Value
of CFB Common Stock): 8,696
(ii) Add 8,696 share adjustment to 700,000 shares
to determine adjusted shares of CFB Common Stock issued: 708,696
Resulting calculation of Exchange Rate:
708,696 shares of CFB Common Stock divided by 50,000 shares of
Pioneer Common Stock outstanding: 14.17:1
Aggregate dollar value of the Merger consideration:
(shares of CFB Common Stock to be issued multiplied
by Trading Value) $32,600,000
Dollar value of the Merger consideration per share of Pioneer Common
Stock $652.00
</TABLE>
D-3
<PAGE>
EXAMPLE III
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$54.00
Outstanding shares of Pioneer Common Stock:
50,000 shares
Pioneer Value on Determination Date:
$8,500,000
<TABLE>
<S> <C>
CALCULATION OF EXCHANGE RATE:
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 700,000
b. ADJUSTMENT FOR EXCESS TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $52.50 PER SHARE:
Aggregate number of shares of CFB Common Stock issued (before
adjustment for Pioneer Value) is adjusted to equal the number
determined by dividing $36,750,000 by the Trading Value: 680,556
c. ADJUSTMENT FOR PIONEER VALUE
Minimum Pioneer Value per Merger Agreement $8,100,000
Assumed Pioneer Value 8,500,000
Additional Pioneer Value: 400,000
Adjustment:
(i) Divide $400,000 excess by $54.00 (Trading Value
of CFB Common Stock): 7,407
(ii) Add 7,407 share adjustment to 680,556 shares
(result of adjustment in b. above) to determine adjusted
shares of CFB Common Stock issued: 687,963
Resulting calculation of Exchange Rate:
687,963 shares of CFB Common Stock divided by 50,000 shares of
Pioneer Common Stock outstanding: 13.76:1
Aggregate dollar value of the Merger consideration:
</TABLE>
D-4
<PAGE>
<TABLE>
<S> <C>
(shares of CFB Common Stock to be issued
multiplied by Trading Value) $37,150,000
Dollar value of the Merger consideration per share of Pioneer Common
Stock $743.00
</TABLE>
D-5
<PAGE>
EXAMPLE IV
ASSUMPTIONS:
Trading Value of CFB Common Stock:
$54.00
Outstanding shares of Pioneer Common Stock:
50,000 shares
Pioneer Value on Determination Date:
$8,100,000
<TABLE>
<S> <C>
CALCULATION OF EXCHANGE RATE:
a. SHARES OF CFB COMMON STOCK TO BE ISSUED PURSUANT
TO MERGER AGREEMENT, PRIOR TO ADJUSTMENT: 700,000
b. ADJUSTMENT FOR EXCESS TRADING VALUE OF CFB COMMON STOCK
GREATER THAN $52.50 PER SHARE:
Aggregate number of shares of CFB Common Stock issued is
adjusted to equal the number determined by dividing
$36,750,000 by the Trading Value: 680,556
c. ADJUSTMENT FOR PIONEER VALUE
[No adjustment, since Pioneer Value is equal
to $8,100,000] --
Resulting calculation of Exchange Rate:
680,556 shares of CFB Common Stock divided by 50,000 shares of
Pioneer Common Stock outstanding: 13.61:1
Aggregate dollar value of the Merger consideration:
(shares of CFB Common Stock to be issued multiplied
by Trading Value) $36,750,000
Dollar value of the Merger consideration per share
of Pioneer Common Stock $735.00
</TABLE>
D-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
CFB's Bylaws require indemnification of directors and officers of CFB
in accordance with, and to the fullest extent permitted by, Delaware law as
it may be amended from time to time. Section 145 of the Delaware General
Corporation Law generally provides that any person who was or is a director
or officer may be indemnified against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with the defense or settlement of any threatened,
pending or completed legal proceedings in which he is involved by reason of
the fact that he is or was a director or officer if he acted in good faith
and in a manner that he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action
or proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. However, if the legal proceeding is by or in the right of the
corporation, the director or officer may not be indemnified in respect of any
claim, issue or matter as to which he shall have been adjudged to be liable
to the corporation unless the court in which such action was brought deems it
proper.
CFB currently has in effect policies of insurance which provide
insurance protection to its directors and officers against some liabilities
which may be incurred by them on account of their services to CFB. CFB has
also entered into indemnification agreements with each of its directors and
officers, which agreements provide for indemnification to the fullest extent
permitted by Delaware law, except that with respect to an action commenced by
an indemnitee against CFB or by the indemnitee as a derivative action by or
in the right of CFB, such indemnitees shall be indemnified at the discretion
of the Board of Directors. Subject to certain limitations, the agreements
also provide for indemnification against any and all expenses (including
attorneys fees), judgments, fines, and amounts paid in settlement actually
and reasonably incurred by the indemnitee in connection with any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (including, without limitation, any
derivative action by or in the right of CFB) to which the indemnitee is, was,
or at any time becomes a party or is threatened to be made a party by reason
of the fact that the indemnitee is or was at any time a director, officer,
employee, or agent of CFB or is or was serving or at any time serves at the
request of CFB as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<S> <C>
2.1 Stock Purchase Agreement dated as of February 18, 1997, among the
Registrant, KeyCorp and Key Bank of the Rocky Mountains, Inc.
(incorporated by reference to Exhibit 2.8 to the Registrant's
Amendment No. 1 to its Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the Securities and Exchange
Commission (the "Commission") as of May 8, 1997
[the "1996 Form 10-K"]).
2.2 Agreement and Plan of Reorganization dated as of June 25, 1996, between
Registrant and Mountain Parks Financial Corp. (incorporated by
reference to Exhibit 2.1 to the Registrant's Registration Statement on
Form S-4 (File No. 333-14439) as declared effective by the Commission
on November 7, 1996).
2.3 Agreement and Plan of Merger dated as of March 8, 1996, between
Registrant, Trinidad Acquisition Corporation and Financial
Bancorp., Inc. (incorporated by reference to Exhibit 2.1 to the
Registrant's Registration Statement on Form S-4 (File No. 333-6239) as
declared effective by the Commission on August 9, 1996).
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
2.4 Restated Agreement and Plan of Merger dated as of August 22, 1997,
including Agreement and First Amendment to Agreement dated as of the
same date, between the Registrant and First National Summit
Bankshares, Inc. (incorporated by reference to Appendices A and B,
respectively, of the Proxy Statement contained in Registrant's
Registration Statement on Form S-4 [File No. 333-3899]), as declared
effective by the Commission on November 10, 1997).
2.5 Restated Agreement and Plan of Merger dated as of August 28, 1997,
between the Registrant and Republic National Bancorp, Inc.
(incorporated by reference to Appendix A to the Proxy Statement-
Prospectus contained in Registrant's Registration Statement on Form S-4
[File No. 333-38225], as declared effective by the Commission on
October 24, 1997).
2.6 Agreement and Plan of Merger dated as of November 6, 1997 among the
Registrant, Community First National Bank and Pioneer Bank of Longmont
(incorporated by reference to Exhibit 2.7 to the Registrant's
Registration Statement on Form S-4 [File No. 333-37527], filed with
the Commission on November 21, 1997).
2.7 Office Purchase and Assumption Agreement dated as of the 10th day of
September, 1997 by and between Bank One, Arizona, National Association,
Bank One, Colorado, National Association, Bank One, Utah, National
Association and the Registrant, (incorporated by reference to
Exhibit 2.6 to the Registrant's Registration Statement on Form S-4
[File No. 333-36091], filed with the Commission on September 22, 1997).
2.8 Agreement and Plan of Merger dated as of November 7, 1997 among the
Registrant, Community First National Bank and Pioneer Bank of Longmont
(incorporated by reference to Exhibit 2.7 to the Registrant's
Registration Statement on Form S-4 [File No. 333-37527], filed with
the Commission on November 21, 1997).
2.9 First Amendment to Agreement and Plan of Merger dated as of the 19th
day of December, 1997 by and among the Registrant, Community First
National Bank and Pioneer Bank of Longmont (incorporated by reference
to Exhibit 2.13 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, filed with the Commission on
March 10, 1998).
3.1 Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996.)
3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2
to the Registrant's Registration Statement on Form S-1 (File No.
33-41246) as declared effective by the Commission on August 13,
1991).
4.1 Certificate of Designations, Preferences and Rights of 7% Cumulative
Convertible Preferred Stock of the Registrant (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement
on Form S-3 (File No. 33- 77398) as declared effective by the
Commission on May 4, 1994 (the "1994 Form S-3")).
4.2 Deposit Agreement dated as of May 4, 1994 by and among the
Registrant, Norwest Bank Minnesota, National Association, as
Depositary, and the Holders from time to time of the Depositary
Receipts (incorporated by reference to Exhibit 4.2 to the 1994 Form
S-3).
4.3 Certificate of Designations, Preferences and Rights of Series A
Junior Participating Preferred Stock (incorporated by reference to
Exhibit A to Exhibit 1 to the Registrant's Registration Statement on
Form 8-A filed with the Commission on January 9, 1995 (the "Form
8-A")).
4.4 Form of Rights Agreement dated as of January 5, 1995 by and between
the Registrant and Norwest Bank Minnesota, N.A. (incorporated by
reference to Exhibit 1 to the Form 8-A).
5.1 Opinion and Consent of Lindquist & Vennum P.L.L.P., counsel to the
Registrant.
8.1 Opinion of Kane & Associates, P.C., special tax counsel, as to certain
tax matters.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Lindquist & Vennum P.L.L.P. (see Exhibit 5.1 above).
23.4 Consent of Kane & Associates, P.C.
24.1 A Power of Attorney is set forth on the signature pages of this
Registration Statement.
99.1 Form of proxy for Special Meeting of Shareholders of Pioneer Bank of
Longmont.
99.2 Report of Arthur Andersen LLP regarding financial statements of
Mountain Parks Financial Corp.
</TABLE>
- -------------------
* To be filed by amendment.
(b) Financial Statement Schedules
Not applicable.
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes:
1. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
2. (a) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
II-3
<PAGE>
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
3. That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
4. To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
5. To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
6. To to deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the latest annual report
to security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not
set forth in the prospectus, to deliver, or cause to be delivered to each
person to whom the prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the prospectus to provide
such interim financial information.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fargo, State of North
Dakota, on March 30, 1998.
COMMUNITY FIRST BANKSHARES, INC.
By: /S/ DONALD R. MENGEDOTH
---------------------------
Donald R. Mengedoth
President, Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Donald R. Mengedoth and Mark A.
Anderson, and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him or her and
in his or her name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting upon said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either
of them, or their or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 30th day of March, 1998,
by the following persons in the capacities indicated.
SIGNATURE TITLE
/S/ DONALD R. MENGEDOTH President, Chief Executive Officer and
- ----------------------------- Chairman of the Board of Directors and
Donald R. Mengedoth Director (principal executive officer)
/S/ MARK A. ANDERSON Executive Vice President, Chief Financial
- ----------------------------- Officer, Chief Information Officer, Secretary
Mark A. Anderson and Treasurer (principal financial and
accounting officer)
/S/ PATRICIA A. ADAM Director
- -----------------------------
Patricia A. Adam
/S/ JAMES T. ANDERSON Director
- -----------------------------
James T. Anderson
II-5
<PAGE>
/S/ PATRICK E. BENEDICT Director
- -----------------------------
Patrick E. Benedict
/S/ PATRICK DELANEY Director
- -----------------------------
Patrick Delaney
/S/ JOHN H. FLITTIE Director
- -----------------------------
John H. Flittie
/S/ DENNIS M. MATHISEN Director
- -----------------------------
Dennis M. Mathisen
/S/ DARRELL G. KNUDSON Director
- -----------------------------
Darrell G. Knudson
/S/ THOMAS C. WOLD Director
- -----------------------------
Thomas C. Wold
/S/ HARVEY L. WOLLMAN Director
- -----------------------------
Harvey L. Wollman
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------
5.1 Opinion and Consent of Lindquist & Vennum P.L.L.P., counsel
to the Registrant
8.1 Opinion of Kane & Associates, P.C. as special tax counsel
23.1 Consent of Ernst & Young LLP
23.2 Consent of Arthur Andersen LLP
23.4 Consent of Kane & Associates, P.C.
99.1 Form of Proxy for Special Meeting of Shareholders of Pioneer
Bank of Longmont
99.2 Report of Arthur Andersen LLP regarding financial statements
of Mountain Parks Financial Corp.
<PAGE>
EXHIBIT 5.1
[Lindquist & Vennum P.L.L.P. Letterhead]
March 30, 1998
Community First Bankshares, Inc.
520 Main Avenue
Fargo, North Dakota 58124
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by Community First Bankshares, Inc. (the
"Company") with the Securities and Exchange Commission on or about March 30,
1998 relating to the registration of 720,000 shares of Common Stock, $.01 par
value (the "Shares"), to be issued by the Company in connection with the
proposed merger of Pioneer Bank of Longmont with and into the Company (the
"Merger"), please be advised that as counsel to the Company, upon examination of
such corporate documents and records as we have deemed necessary or advisable
for the purposes of this opinion, it is our opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. All necessary corporate action on the part of the Company has been
taken to authorize the issuance of the Shares to be issued in connection with
the Merger and, when issued pursuant to the Merger and paid for as contemplated
by the Registration Statement, the Shares will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to
the Registration Statement and to the reference to our firm under the
headings "The Merger--Regulatory Approvals; Conditions to the Merger" and
"Legal Matters" in the Proxy Statement--Prospectus comprising a part of the
Registration Statement.
Very truly yours,
LINDQUIST & VENNUM P.L.L.P.
cc: Galen Skarphol
Thomas L. Beckmann, Esq.
Martin R. Rosenbaum, Esq.
<PAGE>
Exhibit 8.1
[Letterhead of Kane & Associates, P.C.]
March 13, 1998
It is the opinion of Kane & Associates, P.C., advisors to Pioneer that (i) the
Merger will be treated for Federal income tax purposes as a reoganization within
the meaning of Section 368(a) of the Code, (ii) CFB and Pioneer will each be a
party to that reorganization within the meaning of Section 368(b) of the Code,
(iii) shareholders of Pioneer who exchange their shares of Pioneer Common Stock
for shares of CFB Common Stock will not recognize gain or loss, for purposes of
federal income tax, except to the extent of the cash received in lieu of
fractional shares, and (iv) Pioneer will not recognize gain or loss, for
purposes of federal income tax, as a result of consummation of the Merger.
/s/Kane & Associates, P.C.
Kane & Associates, P.C.
Certified Public Accountants
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"Accounting Treatment" in the Registration Statement (Form S-4) and related
Prospectus of Community First Bankshares, Inc. and related Proxy
Statement--Prospectus of Pioneer Bank of Longmont for the registration of
720,000 shares of Community First Bankshares, Inc. common stock (the
"Registration Statement") and to the incorporation by reference therein of
our report dated January 22, 1998, with respect to the consolidated financial
statements and schedules of Community First Bankshares, Inc. incorporated by
reference in its Annual Report, as amended, on Form 10-K/A No. 1 (the
"Annual Report") for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm under the caption "Experts" in
the Registration Statement and to the use of our report dated September 19,
1997, with respect to the financial statements of KeyBank National
Association (Wyoming), included in the Annual Report.
/s/ Ernst & Young LLP
Minneapolis MN
March 25, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
March 27, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and "The
Merger -- Certain Federal Income Tax Consequences," to the inclusion of our
tax opinion dated March 13, 1998 and to the use of our audit report dated
January 15, 1998, with respect to the financial statements of Pioneer Bank of
Longmont included in the Registration Statement (Form S-4) and related Proxy
Statement-Prospectus of Community First Bankshares, Inc. (the "Company") for
the registration of up to 720,000 shares of common stock of the Company.
KANE & ASSOCIATES, P.C.
Kane & Associates, P.C.
Certified Public Accountants
Denver, Colorado
March 27, 1998
<PAGE>
EXHIBIT 99.1
PIONEER BANK OF LONGMONT
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON ,
1998
The undersigned hereby appoints and ,
or either of them, as proxies, with full power of substitution to vote all the
shares of common stock which the undersigned would be entitled to vote if
personally present at the Special Meeting of Shareholders of Pioneer Bank of
Longmont, to be held on , , 1998, at
:00 a.m., local time, at 1610 Hover Street, Longmont, Colorado 80501, or at
any adjournments thereof, upon any and all matters which may properly be brought
before the meeting or adjournments thereof, hereby revoking all former proxies.
The undersigned authorizes and directs said proxies to vote as follows:
1. Proposal to approve the Agreement and Plan of Merger dated as of November
6, 1997, as amended, among Pioneer Bank of Longmont, Community First
National Bank and Community First Bankshares, Inc.
/ / FOR / / AGAINST
2. In their discretion upon such other matters as may properly come before the
meeting.
___________________________________
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
"FOR" PROPOSAL NUMBER ONE SUMMARIZED ON THE
REVERSE SIDE OF THIS CARD UNLESS OTHERWISE
SPECIFIED.
Number of Shares:______________________
Dated________________________, 1998
____________________________________
Signature
____________________________________
Signature if held jointly
Please date and sign exactly as your name(s) appears at
left indicating, where proper, official position or
representative capacity in which you are signing. When
signing as executor, administrator, trustee or
guardian, give full title as such; when shares have
been issued in names of two or more persons, all should
sign.
<PAGE>
Exhibit 99.2
REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
To Mountain Parks Financial Corp.
We have audited the consolidated statement of financial condition of
Mountain Parks Financial Corp. (a Delaware corporation) and subsidiaries as of
December 31, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for the year ended December 31, 1995, not
presented separately herein. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, not presented
separately herein, present fairly, in all material aspects, the financial
position of Mountain Parks Financial Corp. and subsidiaries as of December 31,
1995, and the results of their operations and their cash flows for the year
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
March 1, 1996
