1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 27, 1999
BY AND AMONG
EXCHANGE NATIONAL BANCSHARES, INC.,
ENB HOLDINGS, INC.
AND
CNS BANCORP, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS
PAGE NO.
Introductory Statement........................................................1
ARTICLE I
THE MERGER..............................................................1
----------
Section 1.1. Structure of the Merger....................................1
Section 1.2. Effect on Shares of CNS Common Stock.......................2
Section 1.3. Exchange Procedures........................................3
Section 1.4. Effect on Shares of Acquisition Sub Common Stock...........5
Section 1.5. Stock Options..............................................5
Section 1.6. Bank Merger................................................5
Section 1.7. Directors and Officers of CNS at Effective Time............6
Section 1.8. Alternative Structure......................................6
Section 1.9. Articles of Incorporation and Bylaws of the Surviving
Corporation................................................6
Section 1.10.Dissenters' Rights.........................................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES..........................................6
Section 2.1. Disclosure Letters.........................................6
Section 2.2. Standards..................................................7
Section 2.3. Representations and Warranties of CNS......................7
Section 2.4. Representations and Warranties of ENB.....................21
ARTICLE III
CONDUCT PENDING THE MERGER.............................................28
Section 3.1. Conduct of CNS's Business Prior to the Effective Time.....28
Section 3.2. Forbearance by CNS........................................29
Section 3.3. Conduct of ENB's Business Prior to the Effective Time.....32
ARTICLE IV
COVENANTS..............................................................32
Section 4.1. Acquisition Proposals.....................................32
Section 4.2. Certain Policies and Actions of CNS.......................33
Section 4.3. Access and Information....................................34
Section 4.4. Certain Filings, Consents and Arrangements................35
Section 4.5. Antitakeover Provisions...................................35
Section 4.6. Additional Agreements.....................................35
Section 4.7. Publicity.................................................35
Section 4.8. Stockholders Meeting......................................35
Section 4.9. Proxy Statement; Prospectus...............................36
Section 4.10.Notification of Certain Matters...........................36
Section 4.11.Employees, Directors and Officers.........................37
Section 4.12.Indemnification...........................................39
Section 4.13.Year 2000.................................................40
3
Section 4.15. Affiliate Letters........................................40
Section 4.16. Tax-Free Reorganization Treatment........................41
Section 4.17. Acquisition Sub..........................................41
ARTICLE V
CONDITIONS TO CONSUMMATION.............................................41
Section 5.1. Conditions to Each Party's Obligations....................41
Section 5.2. Conditions to the Obligations of ENB and ENB Bank.........43
Section 5.3. Conditions to the Obligations of CNS and CNS Bank.........43
ARTICLE VI
TERMINATION............................................................44
Section 6.1. Termination...............................................44
Section 6.2. Termination Fee...........................................45
Section 6.3. Effect of Termination.....................................45
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME.............................46
Section 7.1. Effective Date and Effective Time.........................46
Section 7.2. Deliveries at the Closing.................................46
ARTICLE VIII
CERTAIN OTHER MATTERS..................................................46
Section 8.1. Certain Definitions; Interpretation.......................46
Section 8.2. Survival..................................................47
Section 8.3. Waiver; Amendment.........................................47
Section 8.4. Counterparts..............................................47
Section 8.5. Governing Law.............................................47
Section 8.6. Expenses..................................................47
Section 8.7. Notices...................................................47
Section 8.8. Entire Agreement; etc.....................................48
Section 8.9. Successors and Assigns; Assignment........................48
4
AGREEMENT AND PLAN OF MERGER
----------------------------
This is an AGREEMENT AND PLAN OF MERGER, dated as of the 27th day of
October, 1999 ("AGREEMENT"), by and among Exchange National Bancshares, Inc., a
Missouri corporation ("ENB"), ENB Holdings, Inc., a Missouri corporation
("ACQUISITION SUB") and CNS Bancorp, Inc., a Delaware corporation ("CNS").
INTRODUCTORY STATEMENT
The Board of Directors of each of ENB and CNS (i) has determined
that this Agreement and the business combination and related transactions
contemplated hereby are in the best interests of ENB and CNS, respectively, and
in the best interests of their respective stockholders and (ii) has approved, at
meetings of each of such Boards of Directors, this Agreement.
The parties hereto intend that the merger shall qualify as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC"), for federal income tax purposes, and the
merger shall be accounted for as a purchase.
ENB and CNS desire to make certain representations, warranties and
agreements in connection with the business combination and related transactions
provided for herein and to prescribe various conditions to such transactions.
Acquisition Sub has been organized as a wholly-owned subsidiary of
Exchange to facilitate the business combination contemplated hereby.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
----------
Section 1.1. Structure of the Merger. On the Effective Date, CNS
-----------------------
will merge with and into Acquisition Sub ("MERGER"), with Acquisition Sub being
the surviving entity, pursuant to the provisions of, and with the effect
provided in, the General and Business Corporation Law of Missouri ("MGBCL") and
the Delaware General Corporation Law ("DGCL"). Upon consummation of the Merger,
the separate corporate existence of CNS shall cease. Acquisition Sub shall be
the surviving corporation in the Merger and shall continue to be governed by the
laws of the State of Missouri and its separate corporate existence, with all of
its rights, privileges, immunities, powers and franchises, shall continue
unaffected by the Merger. The name of Acquisition Sub, as the surviving
corporation in the Merger, shall be ENB Holdings, Inc. From and after the
Effective Time, Acquisition Sub shall possess all of the properties and
5
rights and be subject to all of the liabilities and obligations of CNS, all as
more fully described in the MGBCL and the DGCL.
Section 1.2. Effect on Shares of CNS Common Stock.
------------------------------------
(a) By virtue of the Merger, automatically and without any action on
the part of the holder thereof, each share of common stock, par value $.01 per
share, of CNS ("CNS COMMON STOCK") that is issued and outstanding at the
Effective Time, other than Excluded Shares (as defined below), shall cease to be
outstanding and shall be converted into and become the right to receive (subject
to adjustment as described below) $8.80 in cash (the "CASH CONSIDERATION") and
0.15 of a share (the "STOCK CONSIDERATION") of common stock, par value $1.00 per
share, of ENB ("ENB COMMON STOCK"). The aggregate of the Cash Consideration and
Stock Consideration payable and/or issuable pursuant to this Agreement at the
Effective Time is sometimes hereinafter collectively referred to as the "MERGER
CONSIDERATION." If, between the date of this Agreement and the Effective Time,
the outstanding shares of ENB Common Stock shall have been changed into a
different number of outstanding shares or into a different class by reason of
any stock dividend, subdivision, reclassification, recapitalization. split,
combination or exchange of shares, the Stock Consideration shall be adjusted
correspondingly to the extent appropriate to reflect such change in the number
of outstanding shares.
"EXCLUDED SHARES" shall consist of (i) shares of CNS Common
Stock as to which the respective holders thereof have properly demanded
appraisal rights and have not failed to perfect, have not effectively withdrawn
and have not lost their rights to appraisal and payment pursuant to any
applicable law providing for dissenters' or appraisal rights (the "DISSENTERS'
SHARES"), (ii) shares held directly or indirectly by ENB (other than shares held
in a fiduciary capacity or in satisfaction of a debt previously contracted) and
(iii) shares held by CNS as treasury stock.
(b) The Cash Consideration to be payable pursuant to Section 1.2(a)
with respect to each share of CNS Common Stock issued and outstanding at the
Effective Time, shall be decreased by the amount, if any, that the Adjusted Net
Worth (as defined below) of CNS as of the last day of the month prior to the
month in which the Effective Time shall occur ("VALUATION DATE") is less than
$20,950,000 divided by the number of shares of CNS Common Stock issued and
outstanding at the Effective Time. For the purposes of the foregoing, "ADJUSTED
NET WORTH" shall mean the consolidated stockholders' equity of CNS determined in
accordance with generally accepted accounting principles, consistently applied
("GAAP"), but excluding the effect of (a) any severance pay or employee benefit
which would not have been paid or accrued except for the Merger, (b) any income
tax benefit which may be recorded in respect of any realized or unrealized loss
on mutual fund shares held by CNS Bank on September 30, 1999, and (c) the
proceeds of any stock options which may have been exercised after the date
hereof. Adjusted Net Worth shall be further reduced by the amount by which CNS
Bank's total allowance for loan losses as of the Valuation Date is less than
$500,000.
(c) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be canceled and retired and shall cease to exist, and
no exchange or payment shall be
2
6
made with respect thereto. In addition, no Dissenters' Shares shall be converted
into the Merger Consideration pursuant to this Section 1.2 but instead shall be
treated in accordance with the procedures set forth in Section 1.10 of this
Agreement.
(d) Notwithstanding any other provision hereof, no fraction of a
share of ENB Common Stock and no certificates or scrip therefor will be issued
in the Merger. Instead, ENB shall pay to each holder of CNS Common Stock who
would otherwise be entitled to a fraction of a share of ENB Common Stock an
amount in cash, rounded to the nearest whole cent, determined by multiplying
such fraction by an amount equal to the then market value of ENB stock based on
the most recent transaction.
Section 1.3. Exchange Procedures.
-------------------
(a) Appropriate transmittal materials ("LETTER OF TRANSMITTAL")
shall be mailed as soon as reasonably practicable after the Effective Time, and
in no event later than five business days thereafter, to each holder of record
of CNS Common Stock as of the Effective Time. A Letter of Transmittal will be
deemed properly completed only if accompanied by certificates representing all
shares of CNS Common Stock to be converted thereby.
(b) At and after the Effective Time, each certificate ("CNS
CERTIFICATE") previously representing shares of CNS Common Stock (except as
specifically set forth in Section 1.2) shall represent only the right to receive
the Merger Consideration multiplied by the number of shares of CNS Common Stock
previously represented by the CNS Certificate.
(c) Prior to the Effective Time, ENB shall deposit, or shall cause
to be deposited, in a segregated account with ENB Bank (as defined in Section
1.6) or another bank or trust company selected by ENB and reasonably acceptable
to CNS, which shall act as exchange agent ("EXCHANGE AGENT") for the benefit of
the holders of shares of CNS Common Stock, for exchange in accordance with this
Section 1.3, an amount of cash sufficient to pay the aggregate amount of Cash
Consideration to be paid pursuant to Section 1.2 and the aggregate amount of
cash to be paid in lieu of fractional shares, and ENB shall reserve for issuance
with the Exchange Agent, its Transfer Agent and Registrar, a sufficient number
of shares of ENB Common Stock to provide for payment of the Stock Consideration.
At the Effective Time, ENB shall have granted the Exchange Agent the requisite
power and authority to effect for and on behalf of ENB the issuance of the
number of shares of ENB Common Stock issuable in the share exchange.
(d) The Letter of Transmittal (which shall be subject to the
reasonable approval of CNS and ENB) shall (i) specify that delivery shall be
effected, and risk of loss and title to the CNS Certificates shall pass, only
upon delivery of the CNS Certificates to the Exchange Agent, (ii) be in a form
and contain any other provisions as ENB may reasonably determine and (iii)
include instructions for use in effecting the surrender of the CNS Certificates
in exchange for the Merger Consideration. Upon the proper surrender of the CNS
Certificates to the Exchange Agent, together with a properly completed and duly
executed Letter of Transmittal, the holder of such CNS Certificates shall be
entitled to receive in exchange therefor (a) a certificate representing that
number of whole shares of ENB Common Stock that such holder has
3
7
the right to receive pursuant to Section 1.2 and (b) a check in the amount equal
to the cash that such holder has the right to receive pursuant to Section 1.2
(including any cash in lieu of any fractional shares of ENB Common Stock to
which such holder is entitled and any dividends or other distributions to which
such holder is entitled pursuant to this Section 1.3). CNS Certificates so
surrendered shall forthwith be canceled. As soon as practicable, but no later
than 10 business days following receipt of the properly completed Letter of
Transmittal and any necessary accompanying documentation, the Exchange Agent
shall distribute ENB Common Stock and cash as provided herein. The Exchange
Agent shall not be entitled to vote or exercise any rights of ownership with
respect to the shares of ENB Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the account of
the persons entitled thereto. If there is a transfer of ownership of any shares
of CNS Common Stock not registered in the transfer records of CNS, the Merger
Consideration shall be issued to the transferee thereof if the CNS Certificates
representing such CNS Common Stock are presented to the Exchange Agent,
accompanied by all documents required, in the reasonable judgment of ENB and the
Exchange Agent, (x) to evidence and effect such transfer and (y) to evidence
that any applicable stock transfer taxes have been paid.
(e) From and after the Effective Time there shall be no transfers on
the stock transfer records of CNS of any shares of CNS Common Stock. If, after
the Effective Time, CNS Certificates are presented to ENB, they shall be
canceled and exchanged for the Merger Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Section 1.3. No dividends or other distributions declared or made after
the Effective Date with respect to ENB Common Stock shall be remitted to any
person entitled to receive shares of ENB Common Stock hereunder until such
person surrenders his or her CNS Certificates in accordance with this Section
1.3. Upon the surrender of such person's CNS Certificates, such person shall be
entitled to receive any dividends or other distributions, without interest
thereon, which theretofore had become payable with respect to shares of ENB
Common Stock represented by such person's CNS Certificates.
(f) Any portion of the aggregate amount of cash to be paid pursuant
to Section 1.2, any dividends or other distributions to be paid pursuant to this
Section 1.3 or any proceeds from any investments thereof that remain unclaimed
by the stockholders of CNS for nine months after the Effective Time shall be
repaid by the Exchange Agent to ENB upon the written request of ENB. After such
request is made, any stockholders of CNS who have not theretofore complied with
this Section 1.3 shall look only to ENB for the Merger Consideration deliverable
in respect of each share of CNS Common Stock such stockholder holds, as
determined pursuant to Section 1.2 of this Agreement, without any interest
thereon. If outstanding CNS Certificates are not surrendered prior to the date
on which such payments would otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed items shall, to the extent permitted
by any abandoned property, escheat or other applicable laws, become the property
of ENB (and, to the extent not in its possession, shall be paid over to it),
free and clear of all claims or interest of any person previously entitled to
such claims. Notwithstanding the foregoing, neither the Exchange Agent nor any
party to this Agreement (or any affiliate thereof) shall be
4
8
liable to any former holder of CNS Common Stock for any amount delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(g) ENB and the Exchange Agent shall be entitled to rely upon CNS's
stock transfer books to establish the identity of those persons entitled to
receive the Merger Consideration, which books shall be conclusive with respect
thereto. In the event of a dispute with respect to ownership of stock
represented by any CNS Certificate, ENB and the Exchange Agent shall be entitled
to deposit any Merger Consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any claims
thereto.
(h) If any CNS Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such CNS 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 the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such CNS Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed CNS Certificate the Merger
Consideration deliverable in respect thereof pursuant to Section 1.2.
Section 1.4. Effect on Shares of Acquisition Sub Common Stock. Each
------------------------------------------------
share of common stock of Acquisition Sub that is issued and outstanding at the
Effective Time shall continue to be an issued and outstanding share of
Acquisition Sub common stock from and after the Effective Time.
Section 1.5. Stock Options. At the Effective Time, each option to
-------------
acquire shares of CNS Common Stock (a "CNS OPTION") granted pursuant to the CNS
Bancorp, Inc. 1997 Stock Option Plan (the "CNS OPTION PLAN") that is then
outstanding and unexercised shall be canceled, and in lieu thereof the holders
of such options shall be paid in cash an amount equal to the product of (i) the
number of shares of CNS Common Stock subject to such option at the Effective
Time and (ii) an amount by which $9.00 plus the Cash Consideration per share
exceeds the exercise price per share of such option, net of any cash which must
be withheld under federal and state income and employment tax requirements. In
the event that the exercise price of a CNS Option is greater than the Merger
Consideration, then at the Effective Time such CNS Option shall be canceled
without any payment made in exchange therefor. At the Effective Time the CNS
Option Plan shall be deemed terminated.
Section 1.6. Bank Merger. Concurrently with or as soon as
-----------
practicable after the execution and delivery of this Agreement, The Exchange
National Bank of Jefferson City ("ENB BANK"), a wholly-owned subsidiary of ENB,
and City National Savings Bank, FSB ("CNS BANK"), a wholly-owned subsidiary of
CNS, shall enter into the Plan of Bank Merger, in the form attached hereto as
EXHIBIT A, pursuant to which the merger of CNS Bank with and into ENB Bank
---------
("BANK MERGER") will be effected. The parties hereto intend that the Bank Merger
shall become effective on the Effective Date and shall take all actions
necessary or appropriate to cause the Bank Merger to become effective
immediately following the Effective Time.
5
9
Section 1.7. Directors and Officers of CNS at Effective Time. At the
-----------------------------------------------
Effective Time, the directors and officers of Acquisition Sub shall consist of
the directors and officers of Acquisition Sub serving immediately prior to the
Effective Time, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the surviving corporation until their respective
successors are duly elected or appointed and qualified.
Section 1.8. Alternative Structure. Notwithstanding anything to the
---------------------
contrary contained in this Agreement, prior to the Effective Time, ENB may
specify that the structure of the transactions contemplated hereby be revised
and the parties shall enter into such alternative transactions as ENB may
determine to effect the purposes of this Agreement; PROVIDED, HOWEVER, that such
revised structure shall not (i) adversely affect the tax effects of the Merger
to the holders of CNS Common Stock or alter or change the amount or kind of the
Merger Consideration or the treatment of CNS Options or the economic benefits of
the transactions contemplated hereby to the holders of CNS Common Stock, (ii)
diminish the benefits to be received by the directors, officers or employees of
CNS or CNS Bank as set forth in or as contemplated by this Agreement, or (iii)
materially impede or delay the receipt of any approval referred to in this
Agreement. This Agreement and any related documents shall be appropriately
amended in order to reflect any such revised structure.
Section 1.9. Articles of Incorporation and Bylaws of the Surviving
-----------------------------------------------------
Corporation. The Articles of Incorporation and Bylaws of Acquisition Sub in
-----------
effect immediately prior to the Effective Time shall be the Articles of
Incorporation and Bylaws of the surviving corporation from and after the
Effective Time until amended as provided by law.
Section 1.10. Dissenters' Rights.
------------------
(a) ENB shall pay for any Dissenters' Shares in accordance with
applicable law providing for dissenters' or appraisal rights, and the holders
thereof shall not be entitled to receive any Merger Consideration; provided,
that if appraisal rights under applicable law with respect to any Dissenters'
Shares shall have been effectively withdrawn or lost, such shares will thereupon
cease to be treated as Dissenters' Shares and shall be converted into the right
to receive the Merger Consideration pursuant to Section 1.2(b).
(b) CNS shall (i) give ENB prompt written notice of the receipt of
any notice from a stockholder purporting to exercise any dissenters' rights,
(ii) not settle nor offer to settle any demand for payment without the prior
written consent of ENB and (iii) not waive any failure to comply strictly with
any procedural requirements of applicable corporate statutes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 2.1. Disclosure Letters. Prior to the execution and delivery
------------------
of this Agreement, CNS and ENB each shall have delivered to the other a letter
(each, its "DISCLOSURE LETTER") setting forth, among other things, facts,
circumstances and events the disclosure of which
6
10
is required or appropriate in relation to any or all of their respective
representations and warranties (and making specific reference to the Section of
this Agreement to which they relate); PROVIDED, that (a) no such fact,
circumstance or event is required to be set forth in the Disclosure Letter as an
exception to a representation or warranty if its absence is not reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect under the standards established by Section 2.2 and (b) the mere
inclusion of a fact, circumstance or event in a Disclosure Letter shall not be
deemed an admission by a party that such item represents a material exception or
that such item is reasonably likely to result in a Material Adverse Effect (as
defined in Section 2.2(b)).
Section 2.2. Standards.
---------
(a) No representation or warranty of CNS or ENB contained in
Sections 2.3 or 2.4, respectively, shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, on
account of the existence of any fact, circumstance or event unless, as a direct
or indirect consequence of such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Sections 2.3 or 2.4, as applicable, there is reasonably likely
to exist a Material Adverse Effect. CNS's representations, warranties and
covenants contained in this Agreement shall not be deemed to be untrue or
breached as a result of effects arising solely from actions taken pursuant to
this Agreement or in compliance with a written request of ENB.
(b) As used in this Agreement, the term "MATERIAL ADVERSE EFFECT"
means an effect which is material and adverse to the business, financial
condition or results of operations of CNS or ENB, as the context may dictate,
and its Subsidiaries (as defined herein) taken as a whole; PROVIDED, HOWEVER,
that any such effect resulting from any (i) changes in laws, rules or
regulations or GAAP or regulatory accounting requirements or interpretations
thereof that apply to both ENB and ENB Bank and CNS and CNS Bank, as the case
may be, or to similarly situated financial and/or depository institutions or
(ii) changes in economic conditions affecting financial institutions generally,
including but not limited to, changes in the general level of market interest
rates shall not be considered in determining if a Material Adverse Effect has
occurred.
(c) For purposes of this Agreement, "KNOWLEDGE" shall mean, with
respect to a party hereto, actual knowledge of any of the members of the Board
of Directors of that party or any officer of that party with the title ranking
not less than vice president.
Section 2.3. Representations and Warranties of CNS. Subject to
-------------------------------------
Sections 2.1 and 2.2, CNS represents and warrants to ENB that, except as
disclosed in CNS's Disclosure Letter:
(a) Organization.
------------
(i) CNS is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is registered as a
savings and loan holding company under the Home Owners' Loan Act, as amended
("HOLA"). CNS Bank is a stock
7
11
savings bank duly organized, validly existing and in good standing under the
laws of the United States of America and is a wholly-owned Subsidiary (as
defined below) of CNS. Each Subsidiary of CNS other than CNS Bank is a
corporation, limited liability company or partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of CNS and its Subsidiaries has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. As used in this Agreement,
unless the context requires otherwise, the term "SUBSIDIARY" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes or which is controlled, directly or indirectly, by
such party.
(ii) CNS and each of its Subsidiaries has the requisite
corporate power and authority and is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
(iii) CNS's Disclosure Letter sets forth all of CNS's
Subsidiaries and all entities (whether corporations, partnerships or similar
organizations), including the corresponding percentage ownership, in which CNS
owns, directly or indirectly, 5% or more of the ownership interests as of the
date of this Agreement and indicates for each of CNS's Subsidiaries, as of such
date, its jurisdiction of organization and the jurisdiction(s) wherein it is
qualified to do business. All such Subsidiaries and ownership interests are in
compliance with all applicable laws, rules and regulations relating to direct
investments in equity ownership interests. CNS owns, either directly or
indirectly, all of the outstanding capital stock of each of its Subsidiaries. No
Subsidiary of CNS other than CNS Bank is an "insured depository institution" as
defined in the Federal Deposit Insurance Act, as amended ("FDIA"), and the
applicable regulations thereunder. All of the shares of capital stock of CNS's
Subsidiaries are fully paid, nonassessable and not subject to any preemptive
rights and are owned by CNS or a Subsidiary of CNS free and clear of any claims,
liens, encumbrances or restrictions (other than those imposed by applicable
federal and state securities laws), and there are no agreements or
understandings with respect to the voting or disposition of any such shares.
(iv) The deposits of CNS Bank are insured by the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC")
to the extent provided in the FDIA.
(b) Capital Structure.
-----------------
(i) The authorized capital stock of CNS consists of 6,000,000
shares of CNS Common Stock and 1,000,000 shares of preferred stock, par value
$.01 per share. As of the date of this Agreement (A) 1,418,286 shares of CNS
Common Stock were issued and outstanding, (B) no shares of CNS preferred stock
were issued and outstanding, (C) no shares of CNS Common Stock were reserved for
issuance, except that 165,313 shares of CNS Common Stock were reserved for
issuance pursuant to the CNS Option Plan, (D) no shares of CNS preferred stock
were reserved for issuance and (E) 234,839 shares of CNS Common Stock were
8
12
held by CNS in its treasury or by its Subsidiaries. The authorized capital stock
of CNS Bank consists of 1,000 shares of common stock, par value $1.00 per share,
and 9,000 shares of preferred stock, par value $1.00 per share. As of the date
of this Agreement, 1,000 shares of such common stock were outstanding, no shares
of such preferred stock were outstanding and all outstanding shares of such
common stock were, and as of the Effective Time will be, owned by CNS. All
outstanding shares of capital stock of CNS and CNS Bank are duly authorized and
validly issued, fully paid and nonassessable and not subject to any preemptive
rights and, with respect to shares of CNS held by CNS in its treasury or by its
Subsidiaries and shares of CNS Bank, are free and clear of all liens, claims,
encumbrances or restrictions (other than those imposed by applicable federal and
state securities laws) and there are no agreements or understandings with
respect to the voting or disposition of any such shares. CNS's Disclosure Letter
sets forth a complete and accurate list of all outstanding options to purchase
CNS Common Stock that have been granted pursuant to the CNS Option Plan,
including the names of the optionees, dates of grant, exercise prices, dates of
vesting, dates of termination and shares subject to each grant.
(ii) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which stockholders may vote of CNS are
issued or outstanding.
(iii) As of the date of this Agreement, except for options
granted pursuant to the CNS Option Plan, neither CNS nor any of its Subsidiaries
has or is bound by any outstanding subscriptions, options, warrants, calls,
rights, convertible securities, commitments or agreements of any character
obligating CNS or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, any additional shares of capital stock of CNS or
any of its Subsidiaries or obligating CNS or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right, convertible
security, commitment or agreement. As of the date hereof, there are no
outstanding contractual obligations of CNS or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of CNS or
any of its Subsidiaries.
(c) Authority.
---------
(i) CNS has all requisite corporate power and authority to
enter into this Agreement, and, subject to approval of this Agreement by the
requisite vote of CNS's stockholders and receipt of all required regulatory or
governmental approvals, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and, subject to the approval of this
Agreement by CNS's stockholders, the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions on the part of CNS. This Agreement has been duly and validly executed
and delivered by CNS and constitutes a valid and binding obligation of CNS,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, whether
applied in a court of law or a court of equity.
(ii) CNS Bank has all requisite corporate power and authority
to enter into the Plan of Bank Merger and, subject to approval of the Plan of
Bank Merger by CNS as the
9
13
sole stockholder of CNS Bank and the receipt of all required regulatory or
governmental approvals, to consummate the transactions contemplated thereby. The
execution and delivery of the Plan of Bank Merger and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
corporate actions on the part of CNS Bank. The Plan of Bank Merger, upon
execution and delivery by CNS Bank, will be duly and validly executed and
delivered by CNS Bank and will constitute a valid and binding obligation of CNS
Bank, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity,
whether applied in a court of law or a court of equity.
(d) Stockholder Approval; Fairness Opinion. The affirmative vote of
--------------------------------------
a majority of the outstanding shares of CNS Common Stock entitled to vote on
this Agreement is the only vote of the stockholders of CNS required for approval
of this Agreement and the consummation of the Merger and the related
transactions contemplated hereby. CNS has received the written opinion of RP
Financial, LC. to the effect that, as of the date hereof, the Merger
Consideration to be received by CNS's stockholders is fair, from a financial
point of view, to such stockholders.
(e) No Violations; Consents. The execution, delivery and performance
-----------------------
of this Agreement by CNS do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all Requisite
Regulatory Approvals (as defined in Section 2.4(d)) and requisite stockholder
approvals, a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license to
which CNS or any of its Subsidiaries (or any of their respective properties) is
subject, (ii) a breach or violation of, or a default under, the certificate of
incorporation or bylaws of CNS or the similar organizational documents of any of
its Subsidiaries or (iii) a breach or violation of, or a default under (or an
event which, with due notice or lapse of time or both, would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of CNS or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which CNS or any of its Subsidiaries is a party, or
to which any of their respective properties or assets may be subject. The
consummation by CNS and CNS Bank of the transactions (including the Bank Merger)
contemplated hereby (exclusive of the effect of any changes effected pursuant to
Section 1.7) will not require any approval, consent or waiver under any such
law, rule, regulation, judgment, decree, order, governmental permit or license
or the approval, consent or waiver of any other party to any such agreement, or
instrument, other than (x) the approval of the holders of a majority of the
outstanding shares of CNS Common Stock entitled to vote thereon, (y) the
approval of CNS as the sole stockholder of CNS Bank and (z) the consent of the
Office of Thrift Supervision ("OTS"). As of the date hereof, the executive
officers of CNS know of no reason pertaining to CNS why any of the approvals
referred to in this Section 2.3(e) should not be obtained without the imposition
of any material condition or restriction described in the last sentence of
Section 5.1(b).
(f) Reports and Financial Statements.
--------------------------------
10
14
(i) CNS and each of its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1997 with (a) the FDIC, (b) the OTS, (c) the National Association
of Securities Dealers, Inc. ("NASD") and (d) the Securities and Exchange
Commission ("SEC") (collectively, "CNS'S REPORTS") and, to CNS's knowledge, have
paid all fees and assessments due and payable in connection therewith. As of
their respective dates, none of CNS's Reports contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. All of CNS's Reports
filed with the SEC complied in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended ("EXCHANGE ACT")
and the rules and regulations of the SEC promulgated thereunder.
(ii) Each of the financial statements of CNS included in CNS's
Reports complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto and have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited financial statements, as permitted by the SEC). Each of
the consolidated statements of condition contained or incorporated by reference
in CNS's Reports (including in each case any related notes and schedules) and
each of the consolidated statements of operations, consolidated statements of
cash flows and consolidated statements of changes in stockholders' equity,
contained or incorporated by reference in CNS's Reports (including in each case
any related notes and schedules) fairly presented (a) the financial position of
the entity or entities to which it relates as of its date and (b) the results of
operations, stockholders' equity and cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end
adjustments that are not material in amount or effect).
(g) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
CNS's Reports filed on or prior to the date of this Agreement, since December
31, 1998, (i) CNS and its Subsidiaries have not incurred any liability, except
in the ordinary course of their business consistent with past practice, (ii) CNS
and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses consistent with their past
practices, (iii) there has not been any Material Adverse Effect with respect to
CNS and its Subsidiaries, taken as a whole, (iv) there has been no increase in
the salary, compensation, pension or other benefits payable or to become payable
by CNS or any of its Subsidiaries to any of their respective directors, officers
or employees, other than in conformity with the policies and practices of such
entity in the usual and ordinary course of its business, (v) neither CNS nor any
of its Subsidiaries has paid or made any accrual or arrangement for payment of
bonuses or special compensation of any kind or any severance or termination pay
to any of their directors, officers or employees, and (vi) there has been no
change in any accounting principles, practices or methods of CNS or any of its
Subsidiaries other than as required by GAAP.
11
15
(h) Absence of Claims. No litigation, controversy, claim, action,
-----------------
suit or other legal administrative or arbitration proceeding before any court,
governmental agency or arbitrator is pending against CNS or any of its
Subsidiaries and no such litigation, controversy, claim, action, suit or
proceeding has been threatened. To the knowledge of CNS, there are no
investigations, reviews or inquiries by any court or governmental agency pending
or threatened against CNS or any of its Subsidiaries.
(i) Absence of Regulatory Actions. Since December 31, 1996, neither
-----------------------------
CNS nor any of its Subsidiaries has been a party to any cease and desist order,
written agreement or memorandum of understanding with, or any commitment letter
or similar undertaking to, or has been subject to any action, proceeding, order
or directive by, or has been a recipient of any extraordinary supervisory letter
from any federal or state governmental authority charged with the supervision or
regulation of depository institutions or depository institution holding
companies or engaged in the insurance of bank and/or savings and loan deposits
("GOVERNMENT REGULATORS"), or has adopted any board resolutions at the request
of any Government Regulator, or has been advised by any Government Regulator
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such action, proceeding, order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
There is no unresolved violation, criticism or exception by any Government
Regulators with respect to any report or statement relating to any examinations
of CNS or any of its Subsidiaries.
(j) Taxes. All federal, state, local and foreign tax returns
-----
required to be filed by or on behalf of CNS or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
such returns, all taxes required to be shown on returns for which extensions
have been granted and all other taxes required to be paid by CNS or any of its
Subsidiaries have been paid in full or adequate provision has been made for any
such taxes on CNS's balance sheet (in accordance with GAAP). For purposes of
this Section 2.3(j) and Section 2.4(i), the term "TAXES" shall include all
income, franchise, gross receipts, real and personal property, real property
transfer and gains, wage and employment taxes. As of the date of this Agreement,
there is no audit examination, deficiency assessment, tax investigation or
refund litigation with respect to any taxes of CNS or any of its Subsidiaries,
and no claim has been made by any authority in a jurisdiction where CNS or any
of its Subsidiaries do not file tax returns that CNS or any such Subsidiary is
subject to taxation in that jurisdiction. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or concluded
litigation relating to CNS or any of its Subsidiaries have been paid in full or
adequate provision has been made for any such taxes on CNS's balance sheet (in
accordance with GAAP). CNS and its Subsidiaries have not executed an extension
or waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect. CNS and each of its Subsidiaries
has withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party, and CNS and each of its Subsidiaries
has timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the IRC and similar applicable state and
local
12
16
information reporting requirements. Neither CNS nor any of its Subsidiaries (i)
has made an election under Section 341(f) of the IRC, or (ii) has issued or
assumed any obligation under Section 279 of the IRC, any high yield discount
obligation as described in Section 163(i) of the IRC or any
registration-required obligation within the meaning of Section 163(f)(2) of the
IRC that is not in registered form.
(k) Agreements.
----------
(i) CNS and its Subsidiaries are not bound by any material
contract (as defined in Item 601(b)(10) of Regulation S-B promulgated by the
SEC), to be performed after the date hereof that has not been filed with or
incorporated by reference in CNS's Reports. Neither CNS nor any of its
Subsidiaries is a party to an oral or written (A) consulting agreement
(including data processing and software programming contracts) not terminable on
60 days' or less notice, (B) agreement with any present or former director,
officer or employee of CNS or any of its Subsidiaries the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving CNS or any of its Subsidiaries of the nature
contemplated by this Agreement, (C) agreement with respect to any employee or
director of CNS or any of its Subsidiaries providing any term of employment or
compensation guarantee extending for a period longer than 60 days, (D) agreement
or plan, including any stock option plan, phantom stock or stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting or payment of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or (E) agreement containing covenants that limit the ability of CNS or
any of its Subsidiaries to compete in any line of business or with any person,
or that involve any restriction on the geographic area in which, or method by
which, CNS (including any successor thereof) or any of its Subsidiaries may
carry on its business (other than as may be required by law or any regulatory
agency) or (F) any lease or license with respect to any property, real or
personal, whether as landlord, tenant, licensor or licensee, involving a
liability or obligation as obligor in excess of $5,000 on an annual basis. To
the knowledge of CNS, each of the agreements and other documents referenced in
CNS's Disclosure Letter with respect to this Section 2.3(k)(i) is a valid,
binding and enforceable obligation of the parties sought to be bound thereby,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability to
general principles of equity, whether applied in a court of law or a court of
equity. CNS has previously delivered to ENB true and complete copies of each
agreement and other documents referenced in CNS's Disclosure Letter with respect
to this Section 2.3(k)(i).
(ii) Neither CNS nor any of its Subsidiaries is in default
under (and no event has occurred which, with due notice or lapse of time or
both, would constitute a default under) or is in violation of any provision of
any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject and, to the knowledge of CNS,
no other party to any such agreement (excluding any loan or extension of credit
made by CNS or any of its Subsidiaries) is in default in any respect thereunder.
13
17
(iii) CNS and each of its Subsidiaries owns or possesses valid
and binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, service marks and trademarks used in its
businesses, and neither CNS nor any of its Subsidiaries has received any notice
of conflict with respect thereto that asserts the right of others. Each of CNS
and its Subsidiaries has performed all the obligations required to be performed
by it and are not in default under any contact, agreement, arrangement or
commitment relating to any of the foregoing.
(l) Labor Matters. CNS and its Subsidiaries are in material
-------------
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice. Neither CNS nor any of its Subsidiaries is
or has ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization with respect to its employees, nor is CNS or any of
its Subsidiaries the subject of any proceeding asserting that it has committed
an unfair labor practice or seeking to compel it or any such Subsidiary to
bargain with any labor organization as to wages and conditions of employment nor
has any such proceeding been threatened, nor is there any strike, other labor
dispute or organizational effort involving CNS or any of its Subsidiaries
pending or threatened.
(m) Employee Benefit Plans. CNS's Disclosure Letter contains a
----------------------
complete and accurate list of all written or oral pension, retirement, stock
option, stock purchase, stock ownership, savings, stock appreciation right,
profit sharing, deferred compensation, consulting, bonus, group insurance,
severance and other benefit plans, funds, contracts, agreements and
arrangements, including, but not limited to, "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of CNS or any of its
Subsidiaries (hereinafter collectively referred to as the "CNS EMPLOYEE PLANS").
All of the CNS Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws; with
respect to the CNS Employee Plans, no event has occurred that would subject CNS
or any of its Subsidiaries to a material liability under ERISA, the IRC or any
other applicable law; there has occurred no "prohibited transaction" (as defined
in Section 406 of ERISA or Section 4975 of the IRC) which is likely to result in
the imposition of any penalties or taxes under Section 502(i) of ERISA or
Section 4975 of the IRC upon CNS or any of its Subsidiaries; and all required
contributions to the CNS Employee Plans through the date hereof have been made.
Neither CNS nor any of its Subsidiaries has provided, or is required to provide,
security to any CNS pension plan or to any single-employer plan of an ERISA
Affiliate (as defined under Section 4001(b)(1) of ERISA or Section 414 of the
IRC) pursuant to Section 401(a)(29) of the IRC. Neither CNS, its Subsidiaries,
nor any ERISA Affiliate has contributed to any "multiemployer plan," as defined
in Section 3(37) of ERISA, on or after September 26, 1980. Each CNS Employee
Plan that is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to be qualified under Section 401(a) of the IRC (a
"CNS QUALIFIED PLAN") has received a favorable determination letter from the
Internal Revenue Service ("IRS"), and CNS and its Subsidiaries are not aware of
any circumstances likely to result
14
18
in revocation of any such favorable determination letter. There is no pending or
threatened litigation, administrative action or proceeding relating to any CNS
Employee Plan. There has been no announcement or commitment by CNS or any of its
Subsidiaries to create an additional CNS Employee Plan, or to amend any CNS
Employee Plan, except for amendments required by applicable law which do not
materially increase the cost of such CNS Employee Plan; and, except as
specifically identified in CNS's Disclosure Letter, CNS and its Subsidiaries do
not have any obligations for post-retirement or post-employment benefits under
any CNS Employee Plan that cannot be amended or terminated upon 60 days' notice
or less without incurring any liability thereunder, except for coverage required
by Part 6 of Title I of ERISA or Section 4980B of the IRC, or similar state
laws, the cost of which is borne by the insured individuals. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not result in any payment or series of payments by CNS or any of its
Subsidiaries to any person which is an "excess parachute payment" (as defined in
Section 280G of the IRC), increase or secure (by way of a trust or other
vehicle) any benefits payable under any CNS Employee Plan or accelerate the time
of payment or vesting of any such benefit. With respect to each CNS Employee
Plan, CNS has supplied to ENB a true and correct copy of (A) the annual report
on the applicable form of the Form 5500 series filed with the IRS for the three
most recent plan years, if required to be filed, (B) such CNS Employee Plan,
including amendments thereto, (C) each trust agreement, insurance contract or
other funding arrangement relating to such CNS Employee Plan, including
amendments thereto, (D) the most recent summary plan description and summary of
material modifications thereto for such CNS Employee Plan, if the CNS Employee
Plan is subject to Title I of ERISA, (E) the most recent actuarial report or
valuation if such CNS Employee Plan is a CNS pension plan and any subsequent
changes to the actuarial assumptions contained therein, and (F) the most recent
determination letter issued by the IRS if such CNS Employee Plan is a CNS
Qualified Plan.
(n) Title to Assets. CNS's Disclosure Letter contains a complete and
---------------
accurate list of all real property owned or leased by CNS or any of its
Subsidiaries, including all properties of CNS or any of its Subsidiaries
classified as "Real Estate Owned" or words of similar import (the "REAL
PROPERTY"). To the knowledge of CNS, none of the buildings, structures or other
improvements located on the Real Property encroaches upon or over any adjoining
parcel or real estate or any easement or right-of-way. CNS and each of its
Subsidiaries have good and marketable title to their respective properties and
assets (including any intellectual property asset such as any trademark, service
▇▇▇▇, trade name or copyright) and property acquired in a judicial foreclosure
proceeding or by way of a deed in lieu of foreclosure or similar transfer
whether real or personal, tangible or intangible, reflected on the consolidated
financial statements of CNS as of December 31, 1998, or acquired after such
date, other than such items of personal property as have been disposed of in the
ordinary course of business since December 31, 1998, in each case free and clear
of any liens, security interests, encumbrances, mortgages, pledges,
restrictions, charges or rights or interests of others, except pledges to secure
deposits and other liens incurred in the ordinary course of business. Each lease
pursuant to which CNS or any of its Subsidiaries is lessee or lessor is valid
and in full force and effect and neither CNS nor any of its Subsidiaries, nor
any other party to any such lease is in default or in violation of any
provisions of any such lease. All material tangible properties of CNS and each
of its Subsidiaries are in a good state of maintenance and repair, conform with
all applicable ordinances, regulations
15
19
and zoning laws and are considered by CNS to be adequate for the current
business of CNS and its Subsidiaries.
(o) Compliance with Laws. CNS and each of its Subsidiaries has all
--------------------
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, all federal, state, local
and foreign governmental or regulatory bodies (each, a "GOVERNMENTAL ENTITY")
that are required in order to permit it to carry on its business as it is
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the best knowledge of
CNS, no suspension or cancellation of any of them is threatened. Since the date
of its incorporation, the corporate affairs of CNS have not been conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
approval of any Governmental Entity. Neither CNS nor any of its Subsidiaries are
in material violation of, is, to the knowledge of CNS, under investigation with
respect to any material violation of, or has been given notice or been charged
with any material violation of, any law, ordinance, regulation, order, writ,
rule, decree or condition to approval of any Governmental Entity.
(p) Fees. Other than financial advisory services performed for CNS
----
by R.P. Financial, LC., neither CNS nor any of its Subsidiaries, nor any of
their respective officers, directors, employees or agents, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for CNS or any of its Subsidiaries in connection with
this Agreement or the transactions contemplated hereby. CNS has provided ENB
with a true and correct copy of the contract between CNS and R.P. Financial, LC.
(q) Environmental Matters. There is no suit, claim, action, demand,
---------------------
executive or administrative order, directive, investigation or proceeding
pending or, to the knowledge of CNS, threatened before any court, governmental
agency or board or other forum against CNS or any of its Subsidiaries for
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law (as defined below) or relating to the presence of or
release into the environment of any Hazardous Material (as defined below),
whether or not occurring at or on a site owned, leased or operated by it or any
of its Subsidiaries. To CNS's knowledge, the properties currently owned or
operated by CNS or any of its Subsidiaries (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) are not contaminated with and do not otherwise contain any
Hazardous Material other than as permitted under applicable Environmental Law.
Neither CNS nor any of its Subsidiaries has received any notice, demand letter,
executive or administrative order, directive, request or other communication
(written or oral) for information from any federal, state, local or foreign
governmental entity or any third party indicating that it may be in violation
of, or liable under, any Environmental Law. To CNS's knowledge, there are no
underground storage tanks on, in or under any properties owned or operated by
CNS or any of its Subsidiaries and no underground storage tanks have been closed
or removed from any properties owned or operated by CNS or any of its
Subsidiaries. To CNS's knowledge, during the period of CNS's or any of its
Subsidiaries' ownership or operation of any of their respective current
properties, there has been no contamination by or release of Hazardous Materials
in, on, under or
16
20
affecting such properties. To CNS's knowledge, prior to the period of CNS's or
any of its Subsidiaries' ownership or operation of any of their respective
current properties, there was no contamination by or release of Hazardous
Material in, on, under or affecting such properties.
"ENVIRONMENTAL LAW" means (i) any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, directive, executive or administrative
order, judgment, decree, injunction, legal requirement or agreement with any
governmental entity relating to (A) the protection, preservation or restoration
of the environment (which includes, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, structures, soil, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety as it relates to Hazardous Materials, or (B) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of, Hazardous Materials, in each case as amended and as now in effect. The term
Environmental Law includes all federal, state and local laws, rules, regulations
or requirements relating to the protection of the environment or health and
safety, including, without limitation, (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control
Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including, but not limited to,
the Hazardous and Solid Waste Amendments thereto and Subtitle I relating to
underground storage tanks), the Federal Solid Waste Disposal and the Federal
Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide
Act, the Federal Occupational Safety and Health Act of 1970 as it relates to
Hazardous Materials, the Federal Hazardous Substances Transportation Act, the
Emergency Planning and Community Right-To-Know Act, the Safe Drinking Water Act,
the Endangered Species Act, the National Environmental Policy Act, the Rivers
and Harbors Appropriation Act or any so-called "Superfund" or "Superlien" law,
each as amended and as now or hereafter in effect, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of or exposure to any Hazardous Material.
"HAZARDOUS MATERIAL" means any substance (whether solid, liquid or
gas) which is or could be detrimental to human health or safety or to the
environment, currently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental Law, whether by type or by quantity, including any substance
containing any such substance as a component. Hazardous Material includes,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum, or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea formaldehyde
foam insulation, lead and polychlorinated biphenyl.
(r) Loan Portfolio; Allowance; Asset Quality.
----------------------------------------
17
21
(i) With respect to each loan owned by CNS or its Subsidiaries
in whole or in part, to CNS's knowledge (A) the note and the related security
documents are each legal, valid and binding obligations of the maker or obligor
thereof, enforceable against such maker or obligor in accordance with their
terms, (B) the note and the related security documents, copies of which are
included in the loan files, are true and correct copies of the documents they
purport to be and have not been suspended, amended, modified, canceled or
otherwise changed except as otherwise disclosed by documents in the applicable
loan file and (C) CNS or one of its Subsidiaries is the sole holder of legal and
beneficial title to each loan reflected in the consolidated financial statements
of CNS except as otherwise disclosed in the applicable loan file or on the books
and records of CNS and its Subsidiaries.
(ii) The allowance for loan losses reflected in CNS's
statement of financial condition at December 31, 1998 was, and the allowance for
loan losses shown on the balance sheets in CNS's Reports for periods ending
after December 31, 1998 will be, in the opinion of management, adequate to
provide for losses inherent in CNS's loan portfolio.
(iii) CNS's Disclosure Letter sets forth a true and complete
listing, as of September 30, 1999, of (A) all loans, leases, advances, credit
enhancements, guarantees, other extensions of credit, commitments and
interest-bearing assets of CNS and its Subsidiaries (collectively, "LOANS") that
have been classified (whether regulatory or internal) as "Special Mention,"
"Substandard," "Doubtful," "Loss" or words of similar import listed by category,
including the amounts thereof; (B) Loans (1) that are contractually past due 90
days or more in the payment of principal and/or interest, (2) that are on a
non-accrual status, (3) where the interest rate terms have been reduced and/or
the maturity dates have been extended subsequent to the agreement under which
the Loan was originally created due to concerns regarding the borrower's ability
to pay in accordance with such initial terms, or (4) where a specific reserve
allocation exists in connection therewith, listed by category, including the
amounts thereof; and (C) Loans with any director, executive officer or five
percent or greater stockholder of CNS or any of its Subsidiaries or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing, including the amounts thereof. To the knowledge of
CNS, neither CNS nor any of its Subsidiaries is a party to any Loan that is in
violation of any law, regulation or rule of any Governmental entity. Any asset
of CNS or any of its Subsidiaries that is classified as "Real Estate Owned" or
words of similar import that is included in any non-performing assets of CNS or
any of its Subsidiaries is listed in CNS's Disclosure Letter and is carried net
of reserves at the lower of cost or fair value, less estimated selling costs,
based on current independent appraisals or evaluations or current management
appraisals or evaluations; PROVIDED, HOWEVER, that "current" shall mean within
the past 12 months.
(s) Deposits. None of the deposits of CNS or any of its Subsidiaries
--------
is a "brokered" deposit.
(t) Anti-takeover Provisions Inapplicable. CNS and its Subsidiaries
-------------------------------------
have taken all actions required to exempt CNS, ENB, Acquisition Sub, ENB Bank,
the Agreement, the Plan of Bank Merger, the Merger and the Bank Merger from any
provisions of an antitakeover nature contained in their organizational
documents, and the provisions of any federal or state
18
22
"anti-takeover," "fair price," "moratorium," "control share acquisition" or
similar laws or regulations.
(u) Material Interests of Certain Persons. No officer or director of
-------------------------------------
CNS, or any "associate" (as such term is defined in Rule 12b-2 under the
Exchange Act of any such officer or director, has any material interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of CNS or any of its Subsidiaries.
(v) Insurance. In the opinion of management, CNS and its
---------
Subsidiaries are presently insured, and since December 31, 1998 have been
insured, for amounts deemed reasonable by management against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by CNS and its Subsidiaries are in full force and effect, CNS and its
Subsidiaries are not in default thereunder and all material claims thereunder
have been filed in due and timely fashion.
(w) Investment Securities; Derivatives.
----------------------------------
(i) Except for investments in Federal Home Loan Bank ("FHLB")
Stock, pledges to secure FHLB borrowings, and reverse repurchase agreements
entered into in arms-length transactions pursuant to normal commercial terms and
conditions and entered into in the ordinary course of business and restrictions
that exist for securities to be classified as "held to maturity," none of the
investments reflected in the consolidated balance sheet of CNS at December 31,
1998, and none of the investment securities held by it or any of its
Subsidiaries since December 31, 1998, is subject to any restriction (contractual
or statutory) that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time.
(ii) Except for adjustable-rate mortgage loans and
adjustable-rate advances, neither CNS nor any of its Subsidiaries is a party to
or has agreed to enter into an exchange-traded or over-the-counter equity,
interest rate, foreign exchange or other swap, forward, future, option, cap,
floor or collar or any other contract that is a derivative contract (including
various combinations thereof) or owns securities that (a) are referred to
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes" or "capped floating rate mortgage derivatives" or (b) are
likely to have changes in value as a result of interest or exchange rate changes
that significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(x) Indemnification. Except as provided in the certificate of
---------------
incorporation or bylaws of CNS and the similar governing documents of its
Subsidiaries, neither CNS nor any Subsidiary is a party to any indemnification
agreement with any of its present or former directors, officers, employees,
agents or other persons who serve or served in any other capacity with any other
enterprise at the request of CNS and, to the best knowledge of CNS, there are no
claims for which any such person would be entitled to indemnification under the
organization
19
23
certificate of incorporation or bylaws of CNS or the similar governing
documents of any of its Subsidiaries, under any applicable law or regulation or
under any indemnification agreement.
(y) Books and Records. The books and records of CNS and its
-----------------
Subsidiaries on a consolidated basis have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect in all
material respects the substance of events and transactions that should be
included therein.
(z) Corporate Documents. Complete and correct copies of the
-------------------
certificate of incorporation, bylaws and similar governing documents of CNS and
each of CNS's Subsidiaries, as in effect as of the date of this Agreement, have
previously been delivered to ENB. The minute books of CNS and CNS Bank
constitute a complete and correct record of all actions taken by their
respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of CNS's other Subsidiaries constitutes a
complete and correct record of all actions taken by their respective boards of
directors (and each committee thereof) and the stockholders of each such
Subsidiary.
(aa) Year 2000 Matters. CNS and its Subsidiaries have completed a
-----------------
review of their computer systems to identify systems that could be affected by
the "Year 2000" issue and reasonably believe they have identified all such Year
2000 problems. CNS's management has developed and commenced implementation of a
plan which is designed to complete any required initial changes to the computer
systems of CNS and its Subsidiaries and to complete testing of those changes by
December 31, 1999 (the "YEAR 2000 PLAN"), a true and complete copy of which has
been provided to ENB. Between the date of this Agreement and the Effective Time,
CNS shall use commercially practicable efforts to implement and/or continue to
undertake its Year 2000 Plan. Year 2000 issues have not had, and are not
reasonably expected to have, a Material Adverse Effect on CNS and its
Subsidiaries, taken as a whole.
(bb) Registration Statement. The information regarding CNS and its
----------------------
Subsidiaries to be supplied by CNS for inclusion in the Registration Statement
on Form S-4 to be filed by ENB with the SEC under the Securities Act of 1933, as
amended ("SECURITIES ACT") for the purpose of registering the shares of ENB
Common Stock to be issued to CNS's shareholders in the Merger (including the
proxy statement and prospectus constituting a part thereof) (as amended or
supplemented from time to time, the "REGISTRATION STATEMENT"), will not, at the
time the Registration Statement becomes effective, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(cc) Community Reinvestment Act Compliance. CNS Bank is in material
-------------------------------------
compliance with the applicable provisions of the Community Reinvestment Act
("CRA") and the regulations promulgated thereunder, and CNS Bank currently has a
CRA rating of satisfactory or better. To CNS's knowledge, there is no fact or
circumstance or set of facts or circumstances that would cause CNS Bank to fail
to comply with such provisions or cause the CRA rating of CNS Bank to fall below
satisfactory.
20
24
(dd) Undisclosed Liabilities. As of the date hereof, CNS and its
-----------------------
Subsidiaries have not incurred any debt, liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due
or to become due) except for (i) liabilities reflected on or reserved against in
the consolidated financial statements of CNS as of June 30, 1999, (ii)
liabilities incurred since June 30, 1999 in the ordinary course of business
consistent with past practice that, either alone or when combined with all
similar liabilities, have not had, and would not reasonably be expected to have,
a Material Adverse Effect on CNS and its Subsidiaries, taken as a whole, and
(iii) liabilities incurred for legal, accounting, financial advising fees and
out-of-pocket expenses in connection with a proposed sale or merger of CNS.
Section 2.4. Representations and Warranties of ENB. Subject to
-------------------------------------
Sections 2.1 and 2.2, ENB represents and warrants to CNS that:
(a) Organization.
------------
(i) ENB is a corporation duly organized, validly existing and
in good standing under the laws of the State of Missouri and is registered as a
bank holding company under the Bank Holding Company Act, as amended ("BCHA").
ENB Bank is a bank duly organized, validly existing and in good standing under
the laws of the United States of America and is a Subsidiary of ENB. Each
Subsidiary of ENB other than ENB Bank is a corporation, limited liability
company or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization. Each of ENB
and its Subsidiaries has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
(ii) Acquisition Sub is a corporation, duly organized, validly
existing and in good standing under the laws of Missouri, all of the outstanding
capital stock of which is, or will be prior to the Effective Time, owned
directly or indirectly by ENB free and clear of any lien, charge or other
encumbrance. From and after its incorporation, Acquisition Sub has not and will
not engage in any activities other than in connection with or as contemplated by
this Agreement. Acquisition Sub has, or will have prior to the Effective Time,
all corporate power and authority to consummate the transactions contemplated
hereunder and carry out all of its obligations with respect to such
transactions. The consummation of the transactions contemplated hereby has been,
or will have been prior to the Closing, duly and validly authorized by all
necessary corporate action in respect thereof on the part of Acquisition Sub.
(iii) ENB and each of its Subsidiaries has the requisite
corporate power and authority and is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
(iv) All of the shares of capital stock of ENB Bank and Union
State Bank and Trust of Clinton are fully paid, nonassessable and not subject to
any preemptive rights and (except for directors' qualifying shares) are owned,
directly or indirectly, by ENB free and clear of any claims, liens, encumbrances
or restrictions (other than those imposed by applicable
21
25
federal and state securities laws) and there are no agreements or understandings
with respect to the voting or disposition of any such shares.
(v) The deposits of ENB Bank and Union State Bank and Trust of
Clinton are insured by the Bank Insurance Fund of the FDIC to the extent
provided in the FDIA.
(b) Capital Structure.
-----------------
(i) The authorized capital stock of ENB consists of 1,500,000
shares of ENB Common Stock. As of the date of this Agreement (A) 1,077,723
shares of ENB Common Stock were issued and outstanding, (B) no shares of ENB
Common Stock were reserved for issuance, and (C) no shares of ENB Common Stock
were held by ENB in its treasury or by its Subsidiaries. All outstanding shares
of ENB Common Stock are duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights.
(ii) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which stockholders may vote of ENB are
issued or outstanding.
(iii) As of the date of this Agreement, neither ENB nor any of
its Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, rights, convertible securities, commitments or agreements of
any character obligating ENB or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any additional shares of capital
stock of ENB or of any of its Subsidiaries (other than subscriptions to purchase
ENB stock for $60 per share) or obligating ENB or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, right, convertible
security, commitment or agreement. As of the date hereof, there are no
outstanding contractual obligations of ENB or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of ENB or
any of its Subsidiaries.
(c) Authority.
---------
(i) ENB has all requisite corporate power and authority to
enter into this Agreement and, subject to receipt of all required regulatory or
governmental approvals, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of ENB. This Agreement has been duly and validly executed and
delivered by ENB and constitutes a valid and binding obligation of ENB,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, whether
applied in a court of law or a court of equity.
(ii) ENB Bank has all requisite corporate power and authority
to enter into the Plan of Bank Merger and, subject to approval of the Plan of
Bank Merger by the stockholders of ENB Bank and the receipt of all required
regulatory or governmental approvals, to consummate the transactions
contemplated thereby. The execution and delivery of the Plan of
22
26
Bank Merger and, subject to the approval of the stockholders of ENB Bank, the
consummation of the transactions contemplated thereby, have been duly authorized
by the Board of Directors of ENB Bank. The Plan of Bank Merger, upon execution
and delivery by ENB Bank, will be duly and validly executed and delivered by ENB
Bank and will constitute a valid and binding obligation of ENB Bank, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, whether applied in a court
of law or a court of equity.
(d) Stockholder Approval. No approval of this Agreement by the
--------------------
stockholders of ENB is required for the consummation of the Merger and the
related transactions contemplated hereby.
(e) No Violations; Consents. The execution, delivery and performance
-----------------------
of this Agreement by ENB do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all Requisite
Regulatory Approvals, a breach or violation of, or a default under, any law,
rule or regulation or any judgment, decree, order, governmental permit or
license to which ENB or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) a breach or violation of, or a default under, the
articles of incorporation or bylaws of ENB or the similar organizational
documents of any of its Subsidiaries or (iii) a breach or violation of, or a
default under (or an event which, with due notice or lapse of time or both,
would constitute a default under), or result in the termination of, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of ENB or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which ENB or any of its Subsidiaries is a
party, or to which any of their respective properties or assets may be subject.
The consummation by ENB and ENB Bank of the transactions (including the Bank
Merger) contemplated hereby (exclusive of the effect of any changes effected
pursuant to Section 1.7) will not require any approval, consent or waiver under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any such
agreement, or instrument, other than (w) the approval of ENB as the sole
shareholder of Acquisition Sub, (x) the approval of the shareholders of ENB
Bank, (y) the approval of the Board of Governors of the Federal Reserve System
("FRB") under the BHCA, the approval of the Comptroller of the Currency of the
Bank Merger and of the payment by ENB Bank of a dividend sufficient to fund the
payment of the Cash Consideration (collectively, the "REQUISITE REGULATORY
APPROVALS"), and (z) such approvals, consents or waivers as are required under
the federal and state securities or "blue sky" laws in connection with the
transactions contemplated by this Agreement. As of the date hereof, the
executive officers of ENB know of no reason pertaining to ENB why any of the
approvals referred to in this Section 2.4(d) should not be obtained without the
imposition of any material condition or restriction described in the last
sentence of Section 5.1(b).
(f) Reports and Financial Statements.
--------------------------------
23
27
(i) ENB and each of its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1996 with (a) the FDIC, (b) the FRB, (c) the Missouri Division of
Finance, (d) the Comptroller of the Currency, (e) the NASD, and (f) the SEC
(collectively, "ENB'S REPORTS") and, to ENB's knowledge, have paid all fees and
assessments due and payable in connection therewith. As of their respective
dates, none of ENB's Reports contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. All of ENB's Reports filed with the SEC complied
in all material respects with the applicable requirements of the Exchange Act
and the rules and regulations of the SEC promulgated thereunder.
(ii) Each of the financial statements of ENB included in ENB's
Reports complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto and have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited financial statements, as permitted by the SEC). Each of
the consolidated statements of condition contained or incorporated by reference
in ENB's Reports (including in each case any related notes and schedules) and
each of the consolidated statements of operations, consolidated statements of
cash flows and consolidated statements of changes in stockholders' equity,
contained or incorporated by reference in ENB's Reports (including in each case
any related notes and schedules) fairly presented (a) the financial position of
the entity or entities to which it relates as of its date and (b) the results of
operations, stockholders' equity and cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end
adjustments that are not material in amount or effect), in each case in
accordance with GAAP, except as may be noted therein.
(g) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
ENB's Reports filed on or prior to the date of this Agreement, since December
31, 1998, no event has occurred or circumstances arisen which has had or might
reasonably be expected to have a Material Adverse Effect with respect to ENB and
its Subsidiaries, taken as a whole.
(h) Absence of Claims. No litigation, proceeding, controversy,
-----------------
claim, action or suit or other legal, administrative or arbitration proceeding
before any court, governmental agency or arbitrator is pending or has been
threatened against ENB or any of its Subsidiaries that would reasonably be
expected to prevent or adversely affect or which seeks to prohibit the
consummation of the transactions contemplated by this Agreement or which would
have a Material Adverse Effect with respect to ENB and its Subsidiaries taken as
a whole.
(i) Absence of Regulatory Actions. Neither ENB nor any of its
-----------------------------
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or any commitment letter or similar written
undertaking to, or is subject to any action, proceeding, order or directive by,
or is a recipient of any extraordinary supervisory letter from any
24
28
Government Regulator, or has adopted any board resolutions at the request of any
Government Regulator, nor has it been advised by any Governmental Regulator that
it is contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar written undertaking.
(j) Taxes. All federal, state, local and foreign tax returns
-----
required to be filed by or on behalf of ENB or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
such returns, all taxes required to be shown on returns for which extensions
have been granted and all other taxes required to be paid by ENB or any of its
Subsidiaries have been paid in full or adequate provision has been made for any
such taxes on ENB's balance sheet (in accordance with GAAP). As of the date of
this Agreement, there is no audit examination, deficiency assessment, tax
investigation or refund litigation with respect to any taxes of ENB or any of
its Subsidiaries, and no claim has been made by any authority in a jurisdiction
where ENB or any of its Subsidiaries do not file tax returns that ENB or any
such Subsidiary is subject to taxation in that jurisdiction. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to ENB or any of its Subsidiaries
have been paid in full or adequate provision has been made for any such taxes on
ENB's balance sheet (in accordance with GAAP). ENB and its Subsidiaries have not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any material tax due that is currently in effect. ENB and each
of its Subsidiaries has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and ENB and
each of its Subsidiaries has timely complied with all applicable information
reporting requirements under Part III, Subchapter A of Chapter 61 of the IRC and
similar applicable state and local information reporting requirements. Neither
ENB nor any of its Subsidiaries (i) has made an election under Section 341(f) of
the IRC, or (ii) has issued or assumed any obligation under Section 279 of the
IRC, any high yield discount obligation as described in Section 163(i) of the
IRC or any registration-required obligation within the meaning of Section
163(f)(2) of the IRC that is not in registered form.
(k) Agreements. (i) Except for arrangements made in the ordinary
----------
course of business, ENB and its Subsidiaries are not bound by any material
contract (as defined in Item 601(b)(10) of Regulation S-B) to be performed after
the date hereof that has not been filed with or incorporated by reference in
ENB's Reports.
(ii) Neither ENB nor any of its Subsidiaries is in default
under (and no event has occurred which, with due notice or lapse of time or
both, would constitute a default under) or is in violation of any provision of
any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject and, to the knowledge of ENB,
no other party to any such agreement (excluding any loan or extension of credit
made by ENB or any of its Subsidiaries) is in default in any respect thereunder.
25
28
(iii) ENB and each of its Subsidiaries owns or possesses valid
and binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, service marks and trademarks used in its
businesses, and neither ENB nor any of its Subsidiaries has received any notice
of conflict with respect thereto that asserts the right of others. Each of ENB
and its Subsidiaries has performed all the obligations required to be performed
by it and are not in default under any contact, agreement, arrangement or
commitment relating to any of the foregoing.
(l) ENB Common Stock. The shares of ENB Common Stock to be issued
----------------
pursuant to this Agreement, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and subject to no preemptive rights.
(m) Labor Matters. ENB and its Subsidiaries are in material
-------------
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice. Neither ENB nor any of its Subsidiaries is
or has ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization with respect to its employees, nor is ENB or any of
its Subsidiaries the subject of any proceeding asserting that it has committed
an unfair labor practice or seeking to compel it or any such Subsidiary to
bargain with any labor organization as to wages and conditions of employment nor
has any such proceeding been threatened, nor is there any strike, other labor
dispute or organizational effort involving ENB or any of its Subsidiaries
pending or threatened.
(n) Compliance with Laws. ENB and each of its Subsidiaries has all
--------------------
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, all Governmental Entities
that are required in order to permit it to carry on its business as it is
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the best knowledge of
ENB, no suspension or cancellation of any of them is threatened. Since the date
of its incorporation, the corporate affairs of ENB have not been conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
approval of any Governmental Entity. Neither ENB nor any of its Subsidiaries are
in material violation of, is, to the knowledge of ENB, under investigation with
respect to any material violation of, or has been given notice or been charged
with any material violation of, any law, ordinance, regulation, order, writ,
rule, decree or condition to approval of any Governmental Entity.
(o) Environmental Matters. There is no suit, claim, action, demand,
---------------------
executive or administrative order, directive, investigation or proceeding
pending or, to the knowledge of ENB, threatened before any court, governmental
agency or board or other forum against ENB or any of its Subsidiaries for
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by it or any of its Subsidiaries. To ENB's knowledge,
the properties currently owned or operated by ENB or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water
26
29
on, under or adjacent to the properties, and buildings thereon) are not
contaminated with and do not otherwise contain any Hazardous Material other than
as permitted under applicable Environmental Law. Neither ENB nor any of its
Subsidiaries has received any notice, demand letter, executive or administrative
order, directive, request or other communication (written or oral) for
information from any federal, state, local or foreign governmental entity or any
third party indicating that it may be in violation of, or liable under, any
Environmental Law. To ENB's knowledge, there are no underground storage tanks
on, in or under any properties owned or operated by ENB or any of its
Subsidiaries and no underground storage tanks have been closed or removed from
any properties owned or operated by ENB or any of its Subsidiaries. To ENB's
knowledge, during the period of ENB's or any of its Subsidiaries ownership or
operation of any of their respective current properties, there has been no
contamination by or release of Hazardous Materials in, on, under or affecting
such properties. To ENB's knowledge, prior to the period of ENB's or any of its
Subsidiaries ownership or operation of any of their respective current
properties, there was no contamination by or release of Hazardous Material in,
on, under or affecting such properties.
(p) Year 2000 Matters. ENB has completed a review of its computer
-----------------
systems to identify systems that could be affected by the "Year 2000" issue and
reasonably believes it has identified all Year 2000 problems. ENB's management
has developed and commenced implementation of a plan which is designed to
complete any required initial changes to its computer systems and to complete
testing of those changes by December 31, 1999. Between the date of this
Agreement and the Effective Time, ENB shall use commercially practicable efforts
to implement and/or continue to undertake such plan. Year 2000 issues have not
had and are not reasonably expected to have a Material Adverse Effect on ENB and
its subsidiaries, taken as a whole, and are not reasonably expected to prevent
or adversely affect the ability of ENB to obtain the Requisite Regulatory
Approvals.
(q) Registration Statement. The information regarding ENB and its
----------------------
Subsidiaries to be supplied by ENB for inclusion in the Registration Statement
will not, at the time the Registration Statement becomes effective, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(r) Community Reinvestment Act Compliance. ENB's depository
-------------------------------------
institution Subsidiaries are each in material compliance with the applicable
provisions of the CRA and the regulations promulgated thereunder, and each
currently has a CRA rating of satisfactory or better. To ENB's knowledge, there
is no fact or circumstance or set of facts or circumstances that would cause any
of its depository institution Subsidiaries to fail to comply with such
provisions or cause the CRA rating of any such institution to fall below
satisfactory.
27
30
(s) Availability of Funds. Upon payment of a dividend or dividends
---------------------
prior to the Effective Time from one or more Subsidiaries of ENB aggregating an
amount equal to the Cash Consideration, ENB will have sufficient funds available
to carry out its obligations under this Agreement. Such Subsidiaries have
capital and access to funds sufficient to pay such dividends.
(t) Undisclosed Liabilities. As of the date hereof, ENB and its
-----------------------
Subsidiaries have not incurred any debt, liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due
or to become due) except for (i) liabilities reflected on or reserved against in
the consolidated financial statements of ENB as of June 30, 1999, (ii)
liabilities incurred since June 30, 1999 in the ordinary course of business
consistent with past practice that, either alone or when combined with all
similar liabilities, have not had. and would not reasonably be expected to have,
a Material Adverse Effect on ENB and its Subsidiaries, taken as a whole.
(u) Pending Subscription Offering. ENB will conduct its proposed
-----------------------------
subscription offering in compliance with all applicable federal and state
securities laws, including all registration or qualification requirements under
such laws, and the offering documents used in connection with the proposed
subscription offering will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of CNS's Business Prior to the Effective Time.
-----------------------------------------------------
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, CNS shall, and shall cause its
Subsidiaries to, use its best efforts to (i) conduct its business in the
regular, ordinary and usual course consistent with past practice, (ii) maintain
and preserve intact its business organization, properties, leases, employees and
advantageous business relationships and retain the services of its officers and
key employees, (iii) take no action which would adversely affect or delay the
ability of CNS or ENB to perform their respective covenants and agreements on a
timely basis under this Agreement, (iv) take no action which would adversely
affect or delay the ability of CNS, CNS Bank, ENB or ENB Bank to obtain any
necessary approvals, consents or waivers of any governmental authority required
for the transactions contemplated hereby or which would reasonably be expected
to result in any such approvals, consents or waivers containing any material
condition or restriction, (v) take no action that results in or is reasonably
likely to have a Material Adverse Effect on CNS or CNS Bank, (vi) continue to
implement its Year 2000 Plan in accordance with its terms, (vii) maintain
insurance in such amounts and against such risks and losses as are customary for
companies engaged in a similar business, (viii) confer on a regular and frequent
basis with one or more representatives of ENB to discuss, subject to applicable
law, material operational matters and the general status of the ongoing
operations of CNS and its Subsidiaries, (ix) promptly notify ENB
28
31
of any material change in its business, properties, assets, condition (financial
or otherwise) or results of operations, and (x) promptly provide ENB with copies
of all filings made by CNS or any of its Subsidiaries with any state or federal
court, administrative agency, commission or other Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
Section 3.2. Forbearance by CNS. Without limiting the covenants set
------------------
forth in Section 3.1 hereof, except as otherwise provided in this Agreement and
except to the extent required by law or regulation or any Governmental Entity,
during the period from the date of this Agreement to the Effective Time, CNS
shall not, and shall not permit any of its Subsidiaries to, without the prior
consent of ENB:
(a) unless required by applicable law or regulation or regulatory
directive, change any provisions of the certificate of incorporation or bylaws
of CNS or the similar governing documents of its Subsidiaries;
(b) issue, deliver or sell any shares of its capital stock or any
securities or obligations convertible or exercisable for any shares of its
capital stock or change the terms of any of its outstanding stock options or
warrants or issue, grant or sell any option, warrant, call, commitment, stock
appreciation right, right to purchase or agreement of any character relating to
the authorized or issued capital stock of CNS except pursuant to the exercise of
stock options or warrants outstanding as of the date of this Agreement, or
split, combine, reclassify or adjust any shares of its capital stock or
otherwise change its capitalization;
(c) make, declare or pay any cash or stock dividend or make any
other distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock, provided,
however, that CNS may pay normal quarterly cash dividends of not more than $0.09
per share of CNS Common Stock (except that CNS shall not declare or pay any cash
dividend with respect to any quarter in which the Effective Time is anticipated
to occur if the record date for ENB's normal cash dividend for such quarter is
scheduled to occur after the Effective Time). Subject to applicable regulatory
restrictions, if any, CNS Bank may pay a cash dividend that is, in the
aggregate, sufficient to fund any dividend by CNS permitted hereunder;
(d) other than in the ordinary course of business consistent with
past practice, (i) sell, transfer, assign, mortgage, encumber or otherwise
dispose of any of its material properties, leases, assets or other rights or
agreements to any individual, corporation or other entity other than a direct or
indirect wholly owned Subsidiary of CNS or (ii) cancel, release or assign any
indebtedness of any such individual, corporation or other entity;
(e) except to the extent required by law or as specifically provided
for elsewhere herein, increase in any manner the compensation or fringe benefits
of any of its employees or directors, other than general increases in
compensation for non-executive officer employees in the ordinary course of
business consistent with past practice; pay any pension or retirement allowance
not required by any existing plan or agreement to any employees or
29
32
directors, or become a party to, amend or commit itself to fund or otherwise
establish any trust or account related to any CNS Employee Plan (as defined in
Section 2.3(m)) with or for the benefit of any employee or director; voluntarily
accelerate the vesting of any stock options or other compensation or benefit;
grant or award any stock options; make any discretionary contribution to any CNS
Employee Plan; hire any employee with an annual total compensation payment in
excess of $30,000; or enter into any employment contract or other agreement or
arrangement with any director, officer or other employee;
(f) except as contemplated by Section 4.2, change its method of
accounting as in effect at September 30, 1999, except as required by changes in
GAAP as concurred in by CNS's independent auditors;
(g) settle any claim, action or proceeding involving any liability
of CNS or any of its Subsidiaries for money damages in excess of $25,000 or
impose material restrictions upon the operations of CNS or any of its
Subsidiaries;
(h) 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 other business organization or division thereof or
otherwise acquire or agree to acquire any assets, in each case which are
material, individually or in the aggregate, to CNS, except in satisfaction of
debts previously contracted;
(i) except pursuant to commitments existing at the date hereof which
have previously been disclosed to ENB, other than in the ordinary course
consistent with past practice, make any real estate loans secured by undeveloped
land or real estate located outside the State of Missouri (other than real
estate secured by one-to-four family homes) or make any construction loans
(other than construction loans secured by one-to-four family homes) outside the
State of Missouri;
(j) establish or commit to the establishment of any new branch or
other office facilities or file any application to relocate or terminate the
operation of any banking office;
(k) other than in the ordinary course of business consistent with
past practice in individual amounts not to exceed $25,000 and other than
investments for CNS's portfolio made in accordance with Section 3.2(l), make any
investment either by purchase of stock or securities, contributions to capital,
property transfers, or purchase of any property or assets of any other
individual, corporation or other entity;
(l) make any investment in any debt security, including
mortgage-backed and mortgage-related securities (other than U.S. government and
U.S. government agency securities with final maturities not greater than five
years, mortgage-backed or mortgage related securities which would not be
considered "high risk" securities pursuant to Thrift Bulletin Number 52 issued
by the OTS or securities of the FHLB, in each case that are purchased in the
ordinary
30
33
course of business consistent with past practice), or materially
restructure or change its investment securities portfolio, through purchases,
sales or otherwise;
(m) enter into, renew, amend or terminate any contract or agreement,
or make any change in any of its leases or contracts, other than with respect to
those involving aggregate payments of less than, or the provision of goods or
services with a market value of less than, $20,000 per annum and other than
contracts or agreements covered by Section 3.2(n);
(n) make, renegotiate, renew, increase, extend, modify or purchase
any loan, lease (credit equivalent), advance, credit enhancement or other
extension of credit, or make any commitment in respect of any of the foregoing,
except (A) in conformity with existing lending practices in amounts not to
exceed an aggregate of $300,000 with respect to any individual borrower or (B)
loans or advances as to which CNS has a binding obligation to make such loan or
advances as of the date hereof;
(o) incur any additional borrowings other than short-term (six
months or less) FHLB borrowings and reverse repurchase agreements consistent
with past practice, or pledge any of its assets to secure any borrowings other
than as required pursuant to the terms of borrowings of CNS or any Subsidiary in
effect at the date hereof or in connection with borrowings or reverse repurchase
agreements permitted hereunder;
(p) make any capital expenditures in excess of $15,000 per
expenditure other than pursuant to binding commitments existing on the date
hereof disclosed in the CNS Disclosure Schedule and other than expenditures
necessary to maintain existing assets in good repair or to make payment of
necessary taxes;
(q) organize, capitalize, lend to or otherwise invest in any
Subsidiary;
(r) elect to any senior executive office any person who is not a
member of the senior executive officer team of CNS as of the date of this
Agreement or elect to the Board of Directors of CNS any person who is not a
member of the Board of Directors of CNS as of the date of this Agreement;
(s) engage in any transaction that is not in the usual and ordinary
course of business and consistent with past practices;
(t) enter into any new line of business;
(u) take or omit to take any action that is intended or may
reasonably be expected to result in any of CNS's representations and warranties
set forth in this Agreement being or becoming untrue in any material respect, or
which would make any of such representations and warranties untrue or incorrect
in any material respect if made anew after taking such action;
31
34
(v) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructuring in the ordinary course of business consistent with
prudent banking practices;
(w) except for loans or extensions of credit made on terms generally
available to the public, make or increase any loan or other extension of credit,
or commit to make or increase any such loan or extension of credit, to any
director or officer of CNS or any of its Subsidiaries, or any entity controlled,
directly or indirectly, by any of the foregoing, other than renewals of existing
loans or commitments to loan; or
(x) agree or make any commitment to take any action that is
prohibited by this Section 3.2.
In the event that ENB does not respond in writing to CNS within five
business days of receipt by ENB of a written request for CNS to engage in any of
the actions for which ENB's prior written consent is required pursuant to this
Section 3.2, ENB shall be deemed to have consented to such action. Any request
by CNS or response thereto by ENB shall be made in accordance with the notice
provisions of Section 8.7, shall note that it is a request pursuant to this
Section 3.2 and shall state that a failure to respond within five business days
shall constitute consent.
Section 3.3.Conduct of ENB's Business Prior to the Effective Time.
------------------------------------------------------
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, ENB shall, and shall cause its
Subsidiaries to, use its best efforts to (i) conduct its business in the
regular, ordinary and usual course consistent with past practice; (ii) maintain
and preserve intact its business organization, properties. leases, employees
and advantageous business relationships; (iii) take no action which would
materially adversely affect or delay the ability of CNS or ENB to perform their
respective covenants and agreements on a timely basis under this Agreement and
(iv) take no action which would adversely affect or delay the ability of CNS,
ENB, CNS Bank or ENB Bank to obtain any necessary approvals, consents or waivers
of any governmental authority required for the transactions contemplated hereby
or which would reasonably be expected to result in any such approvals, consents
or waivers containing any material condition or restriction.
ARTICLE IV
COVENANTS
---------
Section 4.1.Acquisition Proposals. From and after the date hereof
----------------------
until the termination of this Agreement, neither CNS or CNS Bank, nor any of
their respective officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment banker, attorney or
accountant retained by CNS or any of its Subsidiaries), will, directly or
indirectly, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or facilitate knowingly, any
inquiries or the making of any
32
35
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, or authorize or permit any of its officers, directors or
employees or any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by any of its
Subsidiaries to take any such action; PROVIDED, HOWEVER, that nothing contained
in this Section 4.1 shall prohibit the Board of Directors of CNS from (i)
furnishing information to, or entering into discussions or negotiations with
any, person or entity that makes an unsolicited written, bona fide proposal to
acquire CNS pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction, if, and only
to the extent that, (A) the Board of Directors of CNS receives a written opinion
from its independent financial advisor that such proposal may be superior to the
Merger from a financial point-of-view to CNS's stockholders, (B) the Board of
Directors of CNS, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that such action is
necessary for the Board of Directors of CNS to comply with its fiduciary duties
to stockholders under applicable law (such proposal that satisfies (A) and (B)
being referred to herein as a "SUPERIOR PROPOSAL") and (C) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, CNS (x) provides reasonable notice to ENB to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person or entity and (y) receives from such person or entity an
executed confidentiality agreement in reasonably customary form; (ii) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer; or (iii) failing to make or withdrawing or modifying its
recommendation and entering into a Superior Proposal if there exists a Superior
Proposal and the Board of Directors of CNS, after consultation with independent
legal counsel, determines in good faith that such action is necessary for the
Board of Directors of CNS to comply with its fiduciary duties to stockholders
under applicable law. CNS shall notify ENB orally and in writing of any
Acquisition Proposal (including, without limitation, the terms and conditions of
any such Acquisition Proposal and the identity of the person making such
Acquisition Proposal) as promptly as practicable (but, in any event, no later
than 24 hours) after the receipt thereof and shall keep ENB informed of the
status and details of any such Acquisition Proposal. For purposes of this
Agreement, "ACQUISITION PROPOSAL" shall mean any of the following (other than
the transactions contemplated hereunder) involving CNS or any of its
Subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 25% or more of the assets of
CNS or CNS Bank, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 25% or more of the
outstanding shares of capital stock of CNS or the filing of a registration
statement under the Securities Act of 1933 in connection therewith; or (iv) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing.
33
36
Section 4.2.Certain Policies and Actions of CNS.
----------------------------------
(a) CNS shall cause CNS Bank to sell all mutual fund shares which it
owns as soon as practicable after the date of this Agreement.
(b) At the request of ENB, CNS shall cause CNS Bank to modify and
change its loan, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) and investment and
asset/liability management policies and practices after the date on which all
Requisite Regulatory Approvals and stockholder approvals are received, and after
receipt of written confirmation from ENB that it is not aware of any fact or
circumstance that would prevent completion of the Merger, and prior to the
Effective Time so as to be consistent on a mutually satisfactory basis with
those of ENB Bank; PROVIDED, HOWEVER, that CNS shall not be required to take
such action more than 30 days prior to the Effective Date; and PROVIDED,
FURTHER, that such policies and procedures are not prohibited by GAAP or any
applicable laws and regulations. Notwithstanding the foregoing except to the
extent provided in Section 1.2(b), CNS Bank shall not be required to increase
its levels of reserves pursuant to this Section 4.2(b) until after the Merger
Consideration has been calculated in accordance with Section 1.2.
(c) CNS's representations, warranties and covenants contained in
this Agreement shall not be deemed to be untrue or breached in any respect for
any purpose as a consequence of any modifications or changes undertaken solely
on account of Section 4.2(b). ENB agrees to hold harmless, indemnify and defend
CNS and its Subsidiaries, and their respective directors, officers and
employees, for any loss, claim, liability or other damage caused by or resulting
from compliance with Section 4.2(b).
Section 4.3.Access and Information. Upon reasonable notice, CNS
----------------------
shall (and shall cause its Subsidiaries to) afford ENB and its representatives
(including, without limitation, directors, officers and employees of ENB and
its affiliates and counsel, accountants and other professionals retained by
ENB) such reasonable access during normal business hours throughout the period
prior to the Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors), contracts,
properties, personnel and to such other information relating to CNS and its
Subsidiaries as ENB may reasonably request; PROVIDED, HOWEVER, that no
investigation pursuant to this Section 4.3 shall affect or be deemed to modify
any representation or warranty made herein. CNS shall provide ENB with true and
complete copies of all financial and other information relating to the business
or operations of CNS and its Subsidiaries that is provided to directors of CNS
and CNS Bank in connection with meetings of their Board of Directors of
committees thereof. In furtherance, and not in limitation of the foregoing, CNS
shall make available to ENB all information necessary or appropriate for the
preparation and filing of all real property and real estate transfer tax returns
and reports required by reason of the Merger or the Bank Merger. ENB will not,
and will cause its representatives not to, use any information obtained pursuant
to this Section 4.3 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. Subject to the requirements of
applicable law, ENB will keep confidential, and will cause its representatives
to keep confidential, all information and documents obtained pursuant to this
Section 4.3 unless such
34
37
information (i) was already known to ENB or an affiliate of ENB, other than
pursuant to a confidentiality agreement or other confidential relationship, (ii)
becomes available to ENB or an affiliate of ENB from other sources not known by
such party to be bound by a confidentiality agreement or other obligation of
secrecy, (iii) is disclosed with the prior written approval of CNS or (iv) is or
becomes readily ascertainable from published information or trade sources. In
the event that this Agreement is terminated or the transactions contemplated by
this Agreement shall otherwise fail to be consummated, each party shall promptly
cause all copies of documents or extracts thereof containing information and
data as to another party hereto (or an affiliate of any party hereto) to be
returned to the party that furnished the same.
Section 4.4.Certain Filings, Consents and Arrangements. ENB shall as
------------------------------------------
soon as practicable and in cooperation with CNS (and in any event within 45 days
after the date hereof) make, or cause to be made, any filings and applications
and provide any notices required to be filed or provided in order to obtain all
approvals, consents and waivers of Governmental Entities and third parties
necessary or appropriate for the consummation of the transactions contemplated
hereby, including approvals needed for the payment of any special dividends
required to fund the Cash Consideration. ENB and CNS each shall provide the
other and its counsel with an opportunity to review all filings, applications
and notices prior to their being submitted to any governmental authority and
shall provide the other with copies of all filings, applications and notices
submitted to any governmental authority.
Section 4.5. Antitakeover Provisions. CNS and its Subsidiaries shall
------------------------
take all steps required by any relevant federal or state law or regulation or
under any relevant agreement or other document to exempt or continue to exempt
ENB, Acquisition Sub, ENB Bank, the Agreement, the Plan of Bank Merger, the
Merger and the Bank Merger from any provisions of an antitakeover nature
contained in CNS's or its Subsidiaries' organization certificates and bylaws
and the provisions of any federal or state antitakeover laws.
Section 4.6. Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including the Merger
and the Bank Merger, as expeditiously as possible, including using efforts to
obtain all necessary actions or non-actions, extensions, waivers, consents and
approvals from all applicable Governmental Entities, effecting all necessary
registrations, applications and filings (including, without limitation, filings
under any applicable state securities laws) and obtaining any required
contractual consents and regulatory approvals.
Section 4.7.Publicity. CNS and ENB shall consult with each other in
---------
issuing any press releases or otherwise making public statements with respect
to the Merger and any other transaction contemplated hereby and in making any
filings with any governmental entity or with any national securities exchange
with respect thereto.
35
38
Section 4.8.Stockholders Meeting. CNS shall take all action
--------------------
necessary, in accordance with applicable law and its Certificate of
Incorporation and Bylaws, to convene a meeting of its stockholders ("STOCKHOLDER
MEETING") as promptly as practicable for the purpose of considering and voting
on approval and adoption of this Agreement, the Merger and the other
transactions provided for in this Agreement. Except to the extent legally
required for the discharge by the Board of Directors of its fiduciary duties as
advised by such Board's counsel, the Board of Directors of CNS shall (a)
recommend at its Stockholder Meeting that the stockholders vote in favor of and
approve the transactions provided for in this Agreement and (b) use its best
reasonable efforts to solicit such approvals. CNS may employ professional proxy
solicitors to assist in contacting stockholders in connection with soliciting
favorable votes on the Merger.
Section 4.9. Proxy Statement; Prospectus.
---------------------------
(a) For the purposes (i) of registering the shares of ENB Common Stock to
be offered to holders of CNS Common Stock in connection with the Merger with the
SEC under the Securities Act and applicable state securities laws and (ii) of
holding the CNS Stockholders Meeting, ENB and CNS shall jointly prepare a
combined proxy statement and prospectus satisfying all applicable requirements
of the Securities Act and the Exchange Act, and the rules and regulations
thereunder (such proxy statement/prospectus in the form mailed by CNS to the CNS
stockholders, together with any and all amendments or supplements thereto, being
herein referred to as the "PROXY STATEMENT-PROSPECTUS"). ENB shall prepare and
file the Registration Statement, in which the Proxy Statement-Prospectus will be
included, with the SEC. Each of ENB and CNS shall use their best efforts to have
the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing, and CNS shall thereafter promptly
mail the Proxy Statement-Prospectus to its stockholders. ENB shall also use its
best efforts to obtain all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement, and CNS shall furnish all information concerning CNS and the holders
of CNS Common Stock as may be reasonably requested in connection with any such
action.
(b) ENB shall notify CNS promptly of the receipt of any comments of
the SEC with respect to the Proxy Statement-Prospectus and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to CNS promptly copies of all correspondence between ENB or
any representative of ENB and the SEC. ENB shall give CNS and its counsel the
opportunity to review and comment on all amendments and supplements to the Proxy
Statement-Prospectus and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC.
Each of ENB and CNS agrees to use all reasonable efforts, after consultation
with the other party hereto, to respond promptly to all such comments of and
requests by the SEC and to cause the Proxy Statement-Prospectus and all required
amendments and supplements thereto to be mailed to the holders of CNS Common
Stock entitled to vote at the CNS Stockholders Meeting referred to in Section
4.8 hereof at the earliest practicable time.
36
39
(c) CNS and ENB shall promptly notify the other party if at any time
it becomes aware that the Proxy Statement-Prospectus or the Registration
Statement contains any untrue statement of a material fact or omits 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 were made, not
misleading. In such event, CNS shall cooperate with ENB in the preparation of a
supplement or amendment to such Proxy Statement-Prospectus which corrects such
misstatement or omission, and ENB shall file an amended Registration Statement
with the SEC, and CNS shall mail an amended Proxy Statement-Prospectus to CNS's
stockholders.
Section 4.10 Notification of Certain Matters. Each party shall give
-------------------------------
prompt notice to the other of: (a) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by it or any of its Subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of each party and its Subsidiaries taken as a whole to
which each party or any Subsidiary is a party or is subject; and (b) any event,
condition, change or occurrence which individually or in the aggregate has, or
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Effect with respect to such
party and its Subsidiaries taken as a whole. Each of CNS and ENB shall give
prompt notice to the other party of any (i) notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with any of the transactions contemplated by this
Agreement and (ii) the occurrence or non-occurrence of any fact or event which
would be reasonably likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any respect at any time from the
date hereof to the Effective Time or to cause any covenant, condition or
agreement under this Agreement not to be complied with or satisfied in all
material respects.
Section 4.11 Employees, Directors and Officers.
---------------------------------
(a) All persons who are employees of CNS Bank immediately prior to
the Effective Time and whose employment is not specifically terminated at or
prior to the Effective Time (a "CONTINUING EMPLOYEE") shall, at the Effective
Time, become employees of ENB Bank; PROVIDED, HOWEVER, that in no event shall
any of CNS's employees be officers of ENB Bank, or have or exercise any power or
duty conferred upon such an officer, unless and until duly elected or appointed
to such position in accordance with the bylaws of ENB Bank. All of the
Continuing Employees shall be employed at the will of ENB Bank and no
contractual right to employment shall inure to such employees because of this
Agreement. ENB will use its best efforts to retain all of the employees of CNS
Bank, subject to the qualifications of such employees and the needs of ENB Bank.
(b) Except as otherwise provided in paragraph (d) of this Section
4.11, appropriate steps shall be taken to terminate all CNS Employee Plans as of
the Effective Time or as promptly as practical thereafter. Immediately following
the Effective Time, each Continuing Employee shall be eligible to participate in
ENB's benefit plans on the same basis as a new employee of ENB or ENB Bank (it
being understood that inclusion of Continuing Employees in
37
40
ENB's benefit plans may occur at different times with respect to different
plans). Service with CNS or CNS Bank shall be treated as service with ENB Bank
for purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition limitation with
respect to any ENB or ENB Bank "welfare benefit plan", as defined in Section
3(1) of ERISA, but not with respect to any pension, profit sharing or any other
employee benefit plan unless the Continuing Employee remains in the service of
ENB for at least one year immediately following the Effective Time. Each
Continuing Employee shall receive credit for service with CNS or CNS Bank for
purposes of computing vacation pay benefits.
(c) ENB agrees to honor the existing employment agreement with CNS's
chief executive officer, including the change in control provisions of such
agreement, CNS's Executive Deferred Compensation Plan, and CNS's Management
Recognition and Development Plan. Payments under such agreement and plans may be
made by CNS immediately prior to the Effective Time if so agreed to by ENB, or
on such other schedule as may be mutually agreed upon by the individual employee
and ENB. ENB also agrees to honor the deferred fee arrangement with Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
(d) At or immediately prior to the Effective Time, the CNS Employee
Stock Ownership Plan ("ESOP") shall be terminated on such terms and conditions
as CNS shall determine. As soon as administratively practicable after the
Effective Time, any loan between CNS and the ESOP shall be repaid in full from
the Cash Consideration received for unallocated shares of CNS Common Stock held
by the ESOP (or, if such amount is insufficient to repay the loan, through the
sale of a sufficient number of shares of ENB Common Stock) upon the conversion
pursuant to the Merger of such shares of CNS Common Stock held by the ESOP. Any
remaining Cash Consideration or ENB Common Stock received for such unallocated
shares after such repayment shall be allocated as investment earnings of the
ESOP to the ESOP accounts of those CNS or CNS Bank employees who are ESOP
participants and beneficiaries (the "ESOP PARTICIPANTS") in accordance with the
terms of the ESOP as amended with respect to such termination and as in effect
on the Effective Time. All ESOP Participants shall fully vest and have a
nonforfeitable interest in their accounts under the ESOP determined as of the
Effective Time. As soon as practicable after the receipt of a favorable
determination letter from the IRS as to the tax qualified status of the ESOP
upon its termination under Section 401(a) and 4975(e) of the IRC, distributions
of the benefits under the ESOP shall be made to the ESOP Participants in
accordance with the provisions of the ESOP. To the extent that ENB Common Stock
is not "readily tradeable on an established securities market" within the
meaning of Section 409(h) of the IRC, ENB shall honor the provisions of the ESOP
relating to the put option provided by Section 409(h) and will comply with the
independent appraisal requirements of Section 401(a)(28)(C) of the IRC.
(e) CNS shall use its best efforts to obtain from each holder of an
CNS Option and to deliver to ENB at or before the Closing (as defined in Section
7.1) an agreement to the cancellation of such holder's CNS Options in exchange
for a cash payment as described in Section 1.5.
38
41
(f) Any employee of CNS or any CNS Subsidiary (i) whose employment
with ENB or any ENB Subsidiary is terminated by ENB or (ii) who voluntarily
terminates employment in circumstances where, without the employee's consent,
there has occurred (x) a material reduction in the employee's level of
compensation and benefits as in effect immediately prior to the Effective Time,
(y) a material change in the employee's functions, duties or responsibilities
which would cause the employee's position to be one of lesser responsibility,
importance or scope than immediately prior to the Effective Time or (z) a change
in location of the location of the employee's job or office immediately prior to
the Effective Time by more than 25 miles, at the Effective Time and for a one
(1) year period thereafter and shall be entitled to receive (a) a lump-sum
severance benefit in an amount equal to one weeks' pay for each year of
employment with CNS or any CNS Subsidiary, (with partial years of service
included in the calculation on a pro-rated basis), up to a maximum of eight
weeks' pay, and (b) continuation of health benefits, on the same terms and
conditions applicable to ENB's active employees, for the same number of weeks
factored into the calculation of severance payments, up to a maximum of eight
weeks, and thereafter COBRA benefits for an additional period of time determined
as though the employee terminated employment upon expiration of the period
covered by said continued health benefits.
Section 4.12 Indemnification.
---------------
(a) From and after the Effective Time through the sixth anniversary
of the Effective Date, ENB (and any successor) agrees to indemnify and hold
harmless each present and former director and officer of CNS and its
Subsidiaries and each officer or employee of CNS and its Subsidiaries that is
serving or has served as a director or trustee of another entity expressly at
CNS's request or direction (each, an "INDEMNIFIED PARTY"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, amounts paid
in settlement, losses, claims, damages or liabilities (collectively, "COSTS")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement), whether asserted or
claimed prior to, at or after the Effective Time, and to advance any such Costs
to each Indemnified Party as they are from time to time incurred, in each case
to the fullest extent such Indemnified Party would have been permitted to be
indemnified as a director, officer or employee of CNS and its Subsidiaries and
under the DGCL (as in effect on the Effective Date).
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.12(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify ENB thereof, but the failure to so notify
shall not relieve ENB of any liability it may have hereunder to such Indemnified
Party if such failure does not materially and substantially prejudice ENB. In
the event of any such claim, action, suit, proceeding or investigation: (i) ENB
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Party and ENB shall not be liable to such
Indemnified Party for any legal expenses of other counsel subsequently incurred
by such Indemnified Party in connection with the defense thereof, except that if
ENB does not elect to assume such defense within a reasonable time or counsel
for the Indemnified Party at any time advises that there are issues which raise
conflicts of
39
42
interest between ENB and the Indemnified Party (and counsel for ENB does not
disagree), the Indemnified Party may retain counsel satisfactory to such
Indemnified Party, and ENB shall remain responsible for the reasonable fees
and expenses of such counsel as set forth above, to be paid promptly as
statements therefor are received; PROVIDED, HOWEVER, that ENB shall be obligated
pursuant to this paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any one jurisdiction with respect to any given claim,
action, suit, proceeding or investigation unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest; (ii)
the Indemnified Party will reasonably cooperate in the defense of any such
matter; and (iii) ENB shall not be liable for any settlement effected by an
Indemnified Party without its prior written consent, which consent may not be
withheld unless such settlement is unreasonable in light of such claims,
actions, suits, proceedings or investigations against, or defenses available to,
such Indemnified Party.
(c) ENB shall pay all reasonable Costs, including attorneys' fees,
that may be incurred by any Indemnified Party in successfully enforcing the
indemnity and other obligations provided for in this Section 4.12 to the fullest
extent permitted by law. The rights of each Indemnified Party hereunder shall be
in addition to any other rights such Indemnified Party may have under applicable
law.
(d) ENB shall maintain CNS's existing directors and officers'
insurance policy (or provide a policy providing comparable coverage and amounts
on terms no less favorable to the persons currently covered by CNS's existing
policy, including ENB's existing policy if its meets the foregoing standard)
covering persons who are currently covered by such insurance for a period of
three years after the Effective Date.
(e) In the event ENB or any of its successors or assigns (i)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person or entity, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of ENB assume
the obligations set forth in this Section 4.12.
(f) The provisions of this Section 4.12 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
representatives.
Section 4.13 Year 2000. From the date hereof until the Effective
---------
Time, with respect to all computer systems of CNS and its Subsidiaries, CNS
hereby covenants and agrees (a) to use its best efforts to comply with all
Federal Financial Institution Examination Council Year 2000 regulations and
guidelines and (b) that CNS and CNS Bank will each take all actions necessary
to receive a rating of "Satisfactory" or better on any Year 2000 compliance
examination conducted by their respective examining agencies.
Section 4.14 Stock Listing. ENB shall file an application for
-------------
listing the ENB Common Stock on the Nasdaq Stock Market and shall use its
best efforts to cause the ENB Common Stock to be listed on the Nasdaq Stock
Market as of the Effective Time of the Merger,
40
43
provided, that if such listing would require action to be taken at a
shareholders meeting of ENB, ENB shall use its best efforts to cause the ENB
Common Stock to be listed on the Nasdaq Stock Market within 20 days after ENB's
2000 annual meeting of shareholders, which will be held not later than May 15,
2000.
Section 4.15 Affiliate Letters. CNS has delivered to ENB a letter
-----------------
identifying all persons who, to the knowledge of CNS, may be deemed to be
"affiliates" of CNS under Rule 145 of the Securities Act of 1933, including,
without limitation, all directors and executive officers of CNS. Prior to or
concurrently herewith, CNS has delivered executed letter agreements, each
substantially in the form attached hereto as EXHIBIT B, executed by each
director of CNS agreeing (a) to comply with Rule 145 and, in the case of persons
who are directors of CNS, (b) to be present in person or by proxy and vote in
favor of the Merger at any meeting of CNS's stockholders called for the purpose
of considering and approving the Merger and this Agreement, to the extent that
such person is entitled to vote thereat. CNS agrees to obtain letter agreements
to the same effect from all other persons identified as affiliates of CNS within
three weeks after the date hereof.
Section 4.16 Tax-Free Reorganization Treatment. Prior to the
---------------------------------
Effective Time, neither ENB nor CNS shall intentionally take, fail to take, or
cause to be taken or not taken, or cause or permit any of their respective
Subsidiaries to take, fail to take, or cause to be taken or not taken, any
action within its control that would disqualify the Merger as a reorganization
within the meaning of Section 368(a) of the IRC. Subsequent to the Effective
Time, ENB shall not take any action within its control that would disqualify the
Merger as a reorganization under the IRC.
Section 4.17 Acquisition Sub. Prior to the Effective Time, ENB will
---------------
take any and all necessary action to cause (i) Acquisition Sub to become a
direct wholly-owned subsidiary of ENB and (ii) the directors and stockholder or
stockholders of Acquisition Sub to approve the transactions contemplated by this
Agreement.
Section 4.18 Subscription Offering. CNS shall cooperate with ENB in
---------------------
providing information and public documents respecting CNS reasonably requested
by ENB for inclusion in ENB's offering circular in connection with its
subscription offering, which information and documents shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE V
CONDITIONS TO CONSUMMATION
--------------------------
Section 5.1. Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of each party to effect the Merger, the Bank Merger and any other
transactions contemplated by this Agreement shall be subject to the satisfaction
of the following conditions:
41
44
(a) This Agreement shall have been approved by the requisite vote of
CNS's stockholders in accordance with applicable laws and regulations.
(b) The Requisite Regulatory Approvals, the consent of the OTS and
any other required waivers with respect to this Agreement and the transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect, and all statutory waiting periods shall have expired; and all other
consents, waivers and approvals of any third parties which are necessary to
permit the consummation of the Merger and the other transactions contemplated
hereby shall have been obtained or made except for those the failure to obtain
would not have a Material Adverse Effect (i) on CNS and its Subsidiaries taken
as a whole or (ii) on ENB and its Subsidiaries taken as a whole. No such
approval or consent shall have imposed any condition or requirement that would
so materially and adversely impact the economic or business benefits to ENB or
CNS of the transactions contemplated hereby that, had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into this Agreement.
(c) No party hereto shall be subject to any order, decree, ruling or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger, the Bank Merger or any other
transactions contemplated by this Agreement and no Governmental Entity shall
have instituted any proceeding for the purpose of enjoining or prohibiting the
consummation of the Merger, the Bank Merger or any transactions contemplated by
this Agreement.
(d) No statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the Merger, the Bank
Merger or any other transactions contemplated by this Agreement.
(e) The Registration Statement shall have been declared effective by
the SEC and no proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; all required approvals by state
securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement shall have been obtained.
(f) ENB shall have received the letter agreement referred to in
Section 4.15 from each affiliate of CNS.
(g) No litigation, claim, action, suit or other legal administrative
proceeding challenging the Merger or the Bank Merger shall be pending against
any party hereto or any of its Subsidiaries, directors or officers, which in the
opinion of counsel for ENB is likely to result in the incurring of damages and
defense costs not covered by insurance by ENB or any of its Subsidiaries or by
any person or persons whom ENB would be required to indemnify in an aggregate
amount exceeding $350,000.
(h) ENB and CNS each shall have received an opinion of ▇▇▇▇▇▇▇, Mag
& Fizzell, P.C., counsel to ENB, dated as of the Effective Date, in form and
substance customary in
42
45
transactions of the type contemplated hereby, and reasonably satisfactory to
ENB and CNS, respectively, substantially to the effect that on the basis of the
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, 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 accordingly:
(i) No gain or loss will be recognized by ENB, ENB Bank, CNS or CNS
Bank as a result of the Merger;
(ii) Except to the extent of any Cash Consideration, no gain or loss
will be recognized by the stockholders of CNS who exchange their CNS Common
Stock for ENB Common Stock pursuant to the Merger;
(iii) The tax basis of ENB Common Stock received by stockholders who
exchange their CNS Common Stock for ENB Common Stock in the Merger will be the
same as the tax basis of CNS Common Stock surrendered pursuant to the Merger
reduced by the Cash Consideration and any amount allocable to a fractional share
interest for which cash is received and increased by any gain recognized on the
exchange; and
(iv) The holding period of ENB Common Stock received by each
stockholder in the Merger will include the holding period of CNS Common Stock
exchanged therefor, provided that such stockholder held such CNS Common Stock as
a capital asset on the Effective Date.
Such opinion may be based on, in addition to the review of such
matters of fact and law as ▇▇▇▇▇▇▇, Mag & Fizzell, P.C. considers appropriate,
(x) representations made at the request of ▇▇▇▇▇▇▇, Mag & Fizzell, P.C. by ENB,
ENB Bank, CNS, CNS Bank, or any combination of such persons and (y) certificates
provided at the request of ▇▇▇▇▇▇▇, Mag & Fizzell, P.C. by officers of ENB, ENB
Bank, CNS, CNS Bank and other appropriate persons.
Section 5.2. Conditions to the Obligations of ENB and ENB Bank. The
-------------------------------------------------
obligations of ENB and ENB Bank to effect the Merger, the Bank Merger and any
other transactions contemplated by this Agreement shall be further subject to
the satisfaction of the following additional conditions:
(a) Each of the obligations of CNS and CNS Bank, respectively,
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with in all
material respects and the representations and warranties of CNS and CNS Bank
contained in this Agreement shall be true and correct, subject to Sections 2.1
and 2.2, as of the date of this Agreement and as of the Effective Time as though
made at and as of the Effective Time (except as to any representation or
warranty which specifically relates to an earlier date), and ENB shall have
received a certificate to the foregoing effect signed by the chief executive
officer and the chief financial or principal accounting officer of CNS.
43
46
(b) On the Closing Date, Dissenters' Shares shall not constitute
more than 10% of the outstanding shares of CNS Common Stock.
(c) ENB shall have received the opinion of counsel to CNS and CNS
Bank with respect to those matters set forth on EXHIBIT C hereto in form and
------- -
substance reasonably satisfactory to ENB.
Section 5.3. Conditions to the Obligations of CNS and CNS Bank. The
-------------------------------------------------
obligations of CNS and CNS Bank to effect the Merger, the Bank Merger and any
other transactions contemplated by this Agreement shall be further subject to
the satisfaction of the following additional conditions:
(a) Each of the obligations of ENB and ENB Bank, respectively,
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with in all
material respects and the representations and warranties of ENB and ENB Bank
contained in this Agreement shall be true and correct, subject to Sections 2.1
and 2.2, as of the date of this Agreement and as of the Effective Time as though
made at and as of the Effective Time (except as to any representation or
warranty which specifically relates to an earlier date), and CNS shall have
received a certificate to the foregoing effect signed by the chief executive
officer and the chief financial or principal accounting officer of ENB.
(b) ENB shall have provided to the Exchange Agent sufficient cash
and shares of ENB Common Stock to issue and pay the aggregate Merger
Consideration and CNS shall have received a certificate from the Exchange Agent
to such effect.
(c) CNS shall have received the opinion of counsel to ENB and ENB
Bank with respect to those matters set forth on EXHIBIT D hereto in form and
------- -
substance reasonably satisfactory to CNS.
ARTICLE VI
TERMINATION
-----------
Section 6.1. Termination. This Agreement may be terminated, and the
-----------
Merger abandoned, at or prior to the Effective Date, either before or after any
requisite stockholder approval:
(a) by the mutual consent of ENB and CNS in a written instrument, if
the Board of Directors of each so determines by vote of a majority of the
members of its entire Board; or
(b) by ENB or CNS, if its Board of Directors so determines by vote
of a majority of the members of its entire Board, in the event of the failure of
the stockholders of CNS to approve the Agreement at the Stockholder Meeting;
PROVIDED, HOWEVER, that CNS shall
44
47
only be entitled to terminate the Agreement pursuant to this clause if it has
complied in all material respects with its obligations under Section 4.8; or
(c) by ENB or CNS, by written notice to the other party, if either
(i) any approval, consent or waiver of a governmental agency required to permit
consummation of the transactions contemplated hereby shall have been denied or
(ii) any governmental authority of competent jurisdiction shall have issued a
final, unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Agreement; or
(d) by ENB or CNS, if its Board of Directors so determines by vote
of a majority of the members of its entire Board, in the event that the Merger
is not consummated by August 31, 2000, unless the failure to so consummate by
such time is due to the breach of any representation, warranty or covenant
contained in this Agreement by the party seeking to terminate; or
(e) by ENB or CNS (provided that the party seeking termination is
not then in material breach of any representation, warranty, covenant or other
agreement contained herein), in the event of (i) a failure to perform or comply
by the other party with any covenant or agreement of such other party contained
in this Agreement, which failure or non-compliance is material in the context of
the transactions contemplated by this Agreement, or (ii) subject to Section
2.2(a), any inaccuracies, omissions or breach in the representations,
warranties, covenants or agreements of the other party contained in this
Agreement the circumstances as to which either individually or in the aggregate
have, or reasonably could be expected to have, a Material Adverse Effect on such
other party; in either case which has not been or cannot be cured within 30
calendar days after written notice thereof is given by the party seeking to
terminate to such other party; or
(f) by CNS, if the Board of Directors of CNS reasonably determines
by vote of a majority of the members of its entire Board that a proposal made by
a third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of CNS Common Stock then outstanding or all
or substantially all of the assets of CNS constitutes a Superior Proposal and
that such proposal must be accepted in order to comply with the Board of
Directors' fiduciary duties to stockholders under applicable law; provided,
however, that prior to any such termination, CNS shall use its reasonable
efforts to negotiate in good faith with ENB to make such adjustments in the
terms and conditions of this Agreement a would enable CNS to proceed with the
transactions contemplated herein.
Section 6.2. Termination Fee.
---------------
(a) In the event that (a) CNS terminates this Agreement pursuant to
Section 6.1(f) or (b) ENB or CNS terminates this Agreement pursuant to Section
6.1(b) after it has been publicly announced prior to the Stockholders Meeting
that a person (other than ENB) has made or disclosed an intention to make a
proposal to engage in a merger, consolidation, share
45
48
exchange or other similar transaction with CNS or CNS Bank and within 12 months
after the termination of this Agreement CNS or CNS Bank enters into an agreement
with any person to effect a merger, consolidation, share exchange or other
similar transaction, then CNS shall, within 10 business days following written
demand by ENB, pay to ENB an amount equal to $1,000,000.
(b) In the event that the Merger is not consummated as a result of
the failure of ENB to satisfy the conditions set forth in Section 5.1(b) due to
concerns expressed by governmental authorities with respect to ENB's financial
condition, management, compliance with applicable law and regulations or pending
acquisition transactions with parties other than CNS and its Subsidiaries (and
this Agreement is not otherwise terminable by ENB or CNS upon grounds not
directly related to such failure), or the failure by any ENB subsidiary to
obtain approval for the payment of any dividend required to fund the Cash
Consideration, then ENB shall, within 10 business days following written demand
by CNS pay to CNS an amount equal to $250,000.
Section 6.3. Effect of Termination. In the event of termination of
---------------------
this Agreement by either ENB or CNS prior to the consummation of the Merger as
provided in Section 6.1, this Agreement shall forthwith become void and have no
effect except (i) the obligations of the parties under Sections 4.3 (with
respect to confidentiality and the return of information), 6.2 and 8.6 shall
survive any termination of this Agreement and (ii) that notwithstanding anything
to the contrary contained in this Agreement, no party shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
ARTICLE VII
Closing, Effective Date and Effective Time
------------------------------------------
Section 7.1. Effective Date and Effective Time. The closing of the
---------------------------------
transactions contemplated hereby ("CLOSING") shall take place at the offices of
▇▇▇▇▇▇▇, Mag & Fizzell, P.C., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, unless another place is agreed to by ENB and CNS, on a date designated
by ENB ("CLOSING DATE") that is no later than 14 days following the date on
which the expiration of the last applicable waiting period in connection with
notices to and approvals of governmental authorities shall occur and all
conditions to the consummation of this Agreement are satisfied or waived, or on
such other date as may be agreed to by the parties. Prior to the Closing Date,
Acquisition Sub and CNS shall execute a Certificate of Merger in accordance with
all appropriate legal requirements, which shall be filed as required by law on
the Closing Date, and the Merger provided for therein shall become effective
upon such filing or on such date as may be specified in such Certificate of
Merger. The date of such filing or such later effective date as specified in the
Certificate of Merger is herein referred to as the "EFFECTIVE DATE." The
"EFFECTIVE TIME" of the Merger shall be as set forth in the Certificate of
Merger.
46
49
Section 7.2. Deliveries at the Closing. Subject to the provisions of
-------------------------
Articles V and VI, on the Closing Date there shall be delivered to ENB and CNS
the documents and instruments required to be delivered under Article V.
ARTICLE VIII
CERTAIN OTHER MATTERS
---------------------
Section 8.1. Certain Definitions; Interpretation. As used in this
-----------------------------------
Agreement, the following terms shall have the meanings indicated:
"MATERIAL" means material to ENB or CNS (as the case may be) and its
respective Subsidiaries, taken as a whole.
"PERSON" includes an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of, Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular. Any
reference to gender in this Agreement shall be deemed to include any other
gender.
Section 8.2. Survival. Only those agreements and covenants of the
--------
parties that are by their terms applicable in whole or in part after the
Effective Time, including Sections 4.3, 4.11 and 4.12 of this Agreement, shall
survive the Effective Time. All other representations, warranties, agreements
and covenants shall be deemed to be conditions of the Agreement and shall not
survive the Effective Time.
Section 8.3. Waiver; Amendment. Prior to the Effective Time, any
-----------------
provision of this Agreement may be (i) waived in writing by the party benefitted
by the provision or (ii) amended or modified at any time (including the
structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the stockholders of CNS, no amendment or
modification may be made that would reduce the amount or alter or change the
kind of consideration to be received by holders of CNS Common Stock or
contravene any provision of the DGCL, the MGBCL or the federal banking laws,
rules and regulations.
Section 8.4.Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
47
50
Section 8.5. Governing Law. This Agreement shall be governed by, and
-------------
interpreted in accordance with, the laws of the State of Missouri, without
regard to conflicts of laws principles.
Section 8.6. Expenses. Each party hereto will bear all expenses
--------
incurred by it in connection with this Agreement and the transactions
contemplated hereby, it being understood that the cost of printing the Proxy
Statement-Prospectus included in ENB's registration statement shall be solely
that of ENB.
Section 8.7. Notices. All notices, requests, acknowledgments and
-------
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing) to such party at its address or
facsimile number set forth below or such other address or facsimile transmission
as such party may specify by notice (in accordance with this provision) to the
other party hereto.
48
51
If to CNS, to:
CNS Bancorp, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
With copies to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to ENB, to:
Exchange National Bancshares, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman
With copies to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, Mag & Fizzell, P.C.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.8.Entire Agreement; etc. This Agreement, together with the
---------------------
Plan of Bank Merger and the Disclosure Letters, represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except for Sections 4.11 and 4.12, which confer rights
on the parties described therein, nothing in this Agreement is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 8.9. Successors and Assigns; Assignment. This Agreement
----------------------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and
49
52
assigns; provided, however, that this Agreement may not be assigned by either
party hereto without the written consent of the other party.
IN WITNESS WHEREOf, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the date first above
written.
EXCHANGE NATIONAL BANCSHARES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman of the Board
CNS Bancorp, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
ENB Holdings, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
50