United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 13, 1998
Financial Services Corporation of the Midwest
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-8673 36-2301786
- ---------------------------- ------------ -------------------
(State or other jurisdiction Commission (IRS Employer
of incorporation) File Number) Identification No.)
224 - 18th Street, Suite 202, Rock Island, Illinois 61201-8737
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(309) 794-1120
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events
On April 13, 1998, Mercantile Bancorporation Inc., a Missouri corporation
("Mercantile"), and Financial Services Corporation of the Midwest, a Delaware
corporation ("FSCM"), each of which is registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended, entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which FSCM
will be merged with and into Ameribanc, Inc., a Missouri corporation and
wholly-owned subsidiary of Mercantile (the "Merger"). The Executive Committee of
the Board of Directors of Mercantile and FSCM's Board of Directors approved the
Merger at their meetings held on April 1, 1998 and April 10, 1998, respectively.
In accordance with the terms of the Merger Agreement, each share of FSCM common
stock, $0.50 par value (the "FSCM Common Stock"), outstanding immediately prior
to the effective time of the Merger (the "Effective Time") will be converted
into the right to receive 6.8573 shares of Mercantile common stock, $0.01 par
value (the "Common Stock"), and the associated preferred share purchase rights
under Mercantile's Rights Agreement dated May 23, 1988 between Mercantile and
Mercantile Bank National Association, as rights agent (together with the Common
Stock, the "Mercantile Common Stock").
In addition, at the Effective Time, each stock option that is outstanding at the
Effective Time to acquire one share of FSCM Common Stock, whether or not then
exercisable, shall be converted into and shall become an option to acquire
6.8573 shares of Mercantile Common Stock.
The Merger is intended to constitute a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and to be accounted for as a pooling
of interests.
Consummation of the Merger is subject to various conditions, including, without
limitation: (i) the approval of the Merger Agreement and the Merger by FSCM's
shareholders; (ii) the receipt of the requisite regulatory approvals from the
Board of Governors of the Federal Reserve System and any other necessary federal
and state regulatory authorities; (iii) the registration pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), of the issuance in
the Merger of the shares of Mercantile Common Stock; (iv) the receipt by each of
Mercantile and FSCM of an opinion of counsel in reasonably satisfactory form as
to the tax treatment of certain aspects of the Merger; (v) the receipt of a
letter from KPMG Peat Marwick LLP, Mercantile's independent public accountants,
to the effect that the Merger will qualify for pooling-of-interests accounting
treatments; and (vi) the satisfaction of certain other conditions.
The Merger Agreement and the Merger will be submitted for approval at a meeting
of the shareholders of FSCM. Before such meeting, Mercantile will file a
registration statement with the Securities and Exchange Commission registering
under the Securities Act the issuance of the shares of Mercantile Common Stock
in the Merger. Such shares of Mercantile Common Stock will be offered to the
FSCM shareholders pursuant to a prospectus that will also serve as a proxy
statement for the meeting of FSCM's shareholders.
In connection with Merger Agreement, four directors/executive officers of FSCM,
who in the aggregate have voting power over approximately 52.6% of the
outstanding shares of FSCM Common Stock, based upon 260,424 shares of FSCM
Common Stock outstanding as of March 31, 1998, have each agreed with Mercantile
pursuant to a separate Voting Agreement ("Voting Agreement") to vote all shares
of FSCM Common Stock over which such person has voting power in favor of the
Merger Agreement and the Merger.
Each of the preceding descriptions of the Merger Agreement and Voting Agreement
is qualified in its entirety by reference to the copies of the Merger Agreement
and form of Voting Agreement included herein as Exhibits 2.1 and 2.2,
respectively, and which are incorporated herein by reference.
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits.
Exhibit No. Description of Exhibit
2.1 Agreement and Plan of Merger dated April 13,
1998 by and among Mercantile Bancorporation,
Inc., Ameribanc, Inc. and Financial Services
Corporation of the Midwest.
2.2 Form of Voting Agreement dated April 13, 1998 by
and between Mercantile Bancorporation Inc. and
four executive officers/directors of Financial
Services Corporation of the Midwest.
99.1 Text of Press Release dated April 13, 1998
issued by Mercantile Bancorporation Inc. and
Financial Services Corporation of the Midwest.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FINANCIAL SERVICES CORPORATION OF THE MIDWEST
Date: April 24, 1998 By: /s/ Douglas M. Kratz
--------------------------------------------
Douglas M. Kratz
Chairman, CEO, and CFO
By: /s/ Jean M. Hanson
--------------------------------------------
Jean M. Hanson
VP, Controller, and Chief Accounting Officer
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
among
MERCANTILE BANCORPORATION INC.,
a Missouri corporation
and
AMERIBANC, INC.,
a Missouri corporation
and
FINANCIAL SERVICES CORPORATION
OF THE MIDWEST
a Delaware corporation
-------------------------------------------------
April 13, 1998
<PAGE>
TABLE OF CONTENTS
Page
Recitals.......................................................
ARTICLE I
THE MERGER
1.01 The Merger
1.02 Closing
1.03 Effective Time
1.04 Additional Actions
1.05 Articles of Incorporation and By-Laws
1.06 Board of Directors and Officers
1.07 Conversion of Securities
1.08 Exchange Procedures.
1.09 No Fractional Shares
1.10 Dissenting Shares.
1.11 Closing of Stock Transfer Books.
1.12 Anti-Dilution
1.13 Reservation of Right to Revise Transaction
1.14 Material Adverse Effect
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization and Authority
2.02 Subsidiaries.
2.03 Capitalization
2.04 Authorization.
2.05 Seller Financial Statements.
2.06 Seller Reports
2.07 Title to and Condition of Assets.
2.08 Real Property.
2.09 Taxes
2.10 Material Adverse Effect
2.11 Loans, Commitments and Contracts.
2.12 Absence of Defaults
2.13 Litigation and Other Proceedings
2.14 Directors' and Officers' Insurance
2.15 Compliance with Laws
2.16 Labor
2.17 Material Interests of Certain Persons
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets;
Financial Assets.
2.19 Employee Benefit Plans.
2.20 Conduct of Seller to Date
2.21 Absence of Undisclosed Liabilities.
2.22 Proxy Statement, Etc.
2.23 Registration Obligations
2.24 Tax, Regulatory and Accounting Matters
2.25 Brokers and Finders
2.26 Interest Rate Risk Management Instruments
2.27 Accuracy of Information
2.28 Year 2000 Compliant
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
3.01 Organization and Authority
3.02 Capitalization of Mercantile
3.03 Authorization.
3.04 Mercantile Financial Statements
3.05 Mercantile Reports
3.06 Material Adverse Effect.
3.07 Registration Statement, Etc.
3.08 Brokers and Finders.
3.09 Accuracy of Information.
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time.
4.02 Forbearances of Seller
4.03 Forbearances of the Buyers
<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence
5.02 Registration Statement; Regulatory Matters.
5.03 Stockholder Approval
5.04 Current Information
5.05 Conforming Entries.
5.06 Environmental Reports
5.07 Agreements of Affiliates
5.08 Expenses
5.09 Miscellaneous Agreements and Consents.
5.10 Employee Agreements and Benefits.
5.11 Press Releases
5.12 State Takeover Statutes
5.13 Directors' and Officers' Indemnification
5.14 Tax Opinion Certificates
5.15 Employee Stock Options.
5.16 Best Efforts to Insure Pooling
ARTICLE VI
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger
6.02 Conditions to Obligations of Seller
6.03 Conditions to Obligations of the Buyers
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination
7.02 Effect of Termination
7.03 Amendment
7.04 Waiver
ARTICLE VIII
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements
8.02 Indemnification
8.03 No Assignment; Successors and Assigns
8.04 Severability
8.05 No Implied Waiver
8.06 Headings
8.07 Entire Agreement
8.08 Counterparts
8.09 Notices
8.10 Governing Law
8.11 Knowledge
<PAGE>
LIST OF EXHIBITS
Exhibit A - Affiliate Letter
Exhibit B - Director/Officer Certificate
Exhibit C - Buyers' Opinion
Exhibit D - Seller's Opinion
LIST OF SCHEDULES
Schedule 2.01 Articles/Bylaws
Schedule 2.02 Subsidiaries/Equity Securities
Schedule 2.03 Seller Stock Plans
Schedule 2.04(b) Authorizations
Schedule 2.05(a) Seller Financial Statements
Schedule 2.07(a) Exceptions to Title
Schedule 2.07(b) Transferred Properties and Assets
Schedule 2.07(c) Condition of Property
Schedule 2.08(a) Owned Real Property/Leased Real Property
Schedule 2.08(c) Interests in Real Property
Schedule 2.09 Taxes
Schedule 2.11(a) Deposits/Commitments
Schedule 2.11(b) Contracts
Schedule 2.11(c) Insurance
Schedule 2.11(f) Loans
Schedule 2.13 Litigation
Schedule 2.15(c) Compliance with Laws
Schedule 2.17 Material Interests of Affiliates
Schedule 2.18(c) Real Estate Acquired through Foreclosure and Repossession
Schedule 2.18(f) Investment Securities
Schedule 2.19(a) Employee Benefit Plans
Schedule 2.19(d) Post-Retirement Health and Medical Benefits
Schedule 2.19(f) Change in Control Payments
Schedule 2.20 Conduct of Seller
Schedule 2.21(a) Undisclosed Liabilities
Schedule 2.26(a) Derivative Securities
Schedule 2.28 Material Computer Software, Firmware and Hardware
Schedule 4.02 Forbearances of Seller
Schedule 5.07 Affiliates
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered into as
of April 13, 1998 by and among Mercantile Bancorporation Inc., a Missouri
corporation ("Mercantile"), Ameribanc, Inc., a Missouri corporation ("Merger
Sub" and, collectively, with Mercantile, the "Buyers"), and Financial Services
Corporation of the Midwest ("FSCM"), a Delaware corporation ("Seller").
WHEREAS, Merger Sub is a wholly owned subsidiary of Mercantile, and each of
Mercantile and Merger Sub is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA"); and
WHEREAS, Seller is registered as a bank holding company under the BHCA; and
WHEREAS, the respective Boards of Directors of Seller and Merger Sub and the
Executive Committee of the Board of Directors of Mercantile have approved the
merger (the "Merger") of Seller with and into Merger Sub pursuant to the terms
and subject to the conditions contained in this Agreement; and
WHEREAS, the parties desire to provide certain undertakings, conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger . Subject to the terms and conditions of this Agreement,
Seller shall be merged with and into Merger Sub in accordance with
Chapter 351 of the Missouri Revised Statutes (the "Missouri Statute")
and Section 252 of the Delaware General Corporation Law (the "DGCL"),
and the separate corporate existence of Seller shall cease. Merger Sub
shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Missouri.
1.02 Closing . The closing (the "Closing") of the Merger, unless the parties
hereto shall otherwise mutually agree, shall take place at the offices
of Mercantile in St. Louis, Missouri, at 10:00 am, local time, on the
date that the Effective Time (as defined in Section 1.03) occurs (the
"Closing Date").
1.03 Effective Time . The Merger shall become effective (the "Effective
Time") upon the later of (i) the issuance of a Certificate of Merger by
the Office of the Secretary of State of the State of Missouri and (ii)
the filing of a Certificate of Merger with the Office of the Secretary
of State of Delaware. Unless otherwise mutually agreed in writing by
Buyers and Seller, subject to the terms and conditions of this
Agreement, the Effective Time shall occur on such date as Buyers shall
notify Seller in writing (such notice to be at least five business days
in advance of the Effective Time) but (A) not earlier than the
satisfaction of all conditions set forth in Section 6.01(a) and 6.01(b)
(the "Approval Date") and (B) not later than the first business day of
the first full calendar month commencing at least five business days
after the Approval Date. On the Closing Date, the parties hereto will
cause the Merger to be consummated by delivering to the Secretary of
State of the State of Missouri and the Secretary of State of the State
of Delaware, for filing, Articles and a Certificate of Merger,
respectively, in such form as required by, and executed and
acknowledged in accordance with, the relevant provisions of the
Missouri Statute and the DGCL.
1.04 Additional Actions . If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary
or desirable to (a) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of Seller or Merger Sub,
or (b) otherwise carry out the purposes of this Agreement, Seller and
its officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, assignments or assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement,
and the officers and directors of the Surviving Corporation are
authorized in the name of Seller or otherwise to take any and all such
action.
<PAGE>
1.05 Articles of Incorporation and By-Laws . The Articles of Incorporation
and By-Laws of Merger Sub in effect immediately prior to the Effective
Time shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation following the Merger, unless otherwise repealed
or amended.
1.06 Board of Directors and Officers . At the Effective Time, the directors
and officers of Merger Sub immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving
Corporation following the Merger, and such directors and officers shall
hold office in accordance with the Surviving Corporation's By-Laws and
applicable law.
1.07 Conversion of Securities . At the Effective Time, by virtue of the
Merger and without any action on the part of the Buyers, Seller or the
holder of any of the following securities:
(a) Each share of the common stock, $1.00 par value, of Merger Sub that
is issued and outstanding immediately prior to the Effective Time
shall remain outstanding and shall be unchanged after the Merger
and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation; and
(b) Subject to Sections 1.09, 1.10 and 1.11 hereof, each share of
common stock, $0.50 par value, of Seller ("Seller Common Stock")
issued and outstanding immediately prior to the Effective Time,
other than Dissenting Shares (as defined in Section 1.10 hereof),
shall cease to be outstanding and shall be converted into and
become the right to receive 6.8573 shares (the "Exchange Ratio") of
common stock, $0.01 par value, and the associated "Rights" under
the "Rights Agreement," as those terms are defined in Section 3.02
hereof, of Mercantile (collectively, "Mercantile Common Stock");
provided, however, that any Seller Common Stock held by Seller,
Mercantile or any of their respective Subsidiaries (as defined in
Section 2.02 hereof), in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be
canceled and shall not be exchanged for shares of Mercantile Common
Stock. The Exchange Ratio was computed by (i) aggregating (A)
260,424 shares of Seller Common Stock, constituting the total
number of shares of Seller Common Stock that was issued and
outstanding as of March 31, 1998 (as set forth in Section 2.03
hereof) plus (B) 800 shares of Seller Common Stock, constituting
the total number of shares of Seller Common Stock that is reserved
for issuance pursuant to options or other rights relating to Seller
Common Stock and outstanding as of March 31, 1998 (as set forth in
Section 2.03 hereof) plus (C) 41,666 shares of Seller Common Stock,
constituting the total number of shares of Seller Common Stock that
will be received upon the conversion of the 5,000 shares of Class A
preferred stock, no par value, of Seller ("Seller Preferred Stock")
and dividing such number of shares of Seller Common Stock (computed
by aggregating (A) through (C) hereof (the "Fully Diluted Shares"))
into (ii) 2,077,000, the aggregate number of shares of Mercantile
Common Stock to be issued in the Merger.
1.08 Exchange Procedures.
(a) As soon as practicable following the Effective Time, Mercantile
shall mail or cause to be mailed to holders of record of
certificates formerly representing Seller Common Stock (the
"Certificates"), as identified on the Seller Stockholder List (as
provided pursuant to Section 1.11(b) hereof), letters advising them
of the effectiveness of the Merger and instructing them to tender
such Certificates to Mercantile's duly appointed exchange agent
(the "Exchange Agent"), or in lieu thereof, such evidence of lost,
stolen or mutilated Certificates and such surety bond or other
security as the Exchange Agent may reasonably require (the
"Required Documentation").
(b) Subject to Sections 1.09, 1.10 and 1.12 hereof, after the Effective
Time, each previous holder of a Certificate that surrenders such
Certificate or in lieu thereof, the Required Documentation, to the
Exchange Agent, with a properly completed and executed letter of
transmittal with respect to such Certificate, will be entitled to a
certificate or certificates representing the number of full shares
of Mercantile Common Stock into which the Certificate so
surrendered shall have been converted pursuant to this Agreement,
and any distribution theretofore declared and not yet paid with
respect to such shares of Mercantile Common Stock and any amount
due with respect to fractional shares, without interest
(collectively, the "Merger Consideration"). Such shares of
Mercantile Common Stock, any amount due with respect to fractional
shares and any distribution shall be delivered by the Exchange
Agent to each such holder as promptly as practicable after such
surrender.
<PAGE>
(c) Each outstanding Certificate, until duly surrendered to the
Exchange Agent, shall be deemed to evidence ownership of the Merger
Consideration into which the stock previously represented by such
Certificate shall have been converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates shall cease to
have rights with respect to the stock previously represented by
such Certificates, and their sole rights shall be to exchange such
Certificates for the Merger Consideration to which the shareholder
may be entitled pursuant to the provisions of Section 1.07 hereof.
After the closing of the transfer books as described in Section
1.11 hereof, there shall be no further transfer on the records of
Seller of Certificates, and if such Certificates are presented to
Seller for transfer, they shall be canceled against delivery of the
Merger Consideration. Neither Buyers nor the Exchange Agent shall
be obligated to deliver the Merger Consideration until such holder
surrenders the Certificates or furnishes the Required Documentation
as provided herein. No dividends or distributions declared after
the Effective Time (including any redemption by Mercantile of the
Rights associated therewith) on the Mercantile Common Stock will be
remitted to any person entitled to receive Mercantile Common Stock
under this Agreement until such person surrenders the Certificate
representing the right to receive such Mercantile Common Stock or
furnishes the Required Documentation, at which time such dividends
or distributions shall be remitted to such person, without interest
and less any taxes that may have been imposed thereon. Certificates
surrendered for exchange by an "affiliate" of the Seller for
purposes of Rule 145 under the Securities Act shall not be
exchanged until Buyers have received a written agreement from such
affiliate as required pursuant to Section 5.07 hereof. Neither the
Exchange Agent nor any party to this Agreement nor any affiliate
thereof shall be liable to any holder of stock represented by any
Certificate for any Merger Consideration issuable or payable in the
Merger that is paid to a public official pursuant to applicable
abandoned property, escheat or similar laws.
1.09 No Fractional Shares . Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for fractional shares of
Mercantile Common Stock shall be issued in the Merger. Each holder of
Seller Common Stock who otherwise would have been entitled to a
fraction of a share of Mercantile Common Stock shall receive (by check
from the Exchange Agent, mailed to the stockholder with the
certificate(s) for Mercantile Common Stock which such holder is to
receive pursuant to the Merger) in lieu thereof, cash (without
interest) in an amount determined by multiplying the fractional share
interest to which such holder would otherwise be entitled by the
closing stock price of Mercantile Common Stock on the New York Stock
Exchange (the "NYSE") Composite Tape as reported in The Wall Street
Journal on the Closing Date. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any
fractional share.
1.10 Dissenting Shares.
(a) "Dissenting Shares" means any shares of Seller Common Stock or
Seller Preferred Stock held by any holder who becomes entitled to
payment of the fair value of such shares under Section 262 of the
DGCL. Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in accordance
with the provisions of the DGCL; provided, however, that if, in
accordance with the DGCL, any holder of Dissenting Shares shall
forfeit such right to payment of the fair value of such Dissenting
Shares, such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration.
(b) Seller shall give to Mercantile (i) prompt notice of any written
objections to the Merger and/or any written demands for the payment
of the fair value of any shares of Seller Common Stock or Seller
Preferred Stock, withdrawals of such demands, and any other
instruments served pursuant to Section 262 of the DGCL received by
Seller, and (ii) the opportunity to participate in all negotiations
and proceedings with respect to such demands under the DGCL. Seller
shall not voluntarily make any payment with respect to demands for
payment of fair value and shall not, except with the prior consent
of Mercantile, settle or offer to settle any such demands.
<PAGE>
1.11 Closing of Stock Transfer Books.
(a) The stock transfer books of Seller shall be closed at the end of
business on the business day immediately preceding the Closing
Date. In the event of a transfer of ownership of Seller Common
Stock that is not registered in the transfer records prior to the
closing of such record books, the Merger Consideration issuable or
payable with respect to such stock may be delivered to the
transferee, if the Certificate or Certificates representing such
stock is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and all
applicable stock transfer taxes are paid.
(b) At the Effective Time, Seller shall provide Buyers with a complete
and verified list of registered holders of Seller Common Stock
based upon its stock transfer books or corporate records as of the
closing of said transfer books, including the names, addresses,
certificate numbers and taxpayer identification numbers of such
holders (the "Seller Stockholder List"). Buyers shall be entitled
to rely upon the Seller Stockholder List to establish the identity
of those persons entitled to receive the Merger Consideration,
which list shall be conclusive with respect thereto. In the event
of a dispute with respect to ownership of stock represented by any
Certificate, Buyers 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.
1.12 Anti-Dilution . If between the date of this Agreement and the Effective
Time a share of Mercantile Common Stock shall be changed into a
different number of shares of Mercantile Common Stock or a different
class of shares by reason of reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or if a
stock dividend thereon shall be declared with a record date within such
period, then appropriate and proportionate adjustment or adjustments
will be made to the Exchange Ratio such that each holder of Seller
Common Stock shall be entitled to receive such number of shares of
Mercantile Common Stock or other securities as such stockholder would
have received pursuant to such reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment or as a
result of such stock dividend had the record date therefor been
immediately following the Effective Time.
1.13 Reservation of Right to Revise Transaction . Buyers may at any time
change the method of effecting the acquisition of Seller by Buyers
(including, without limitation, the provisions of this Article I) if
and to the extent Buyers deem such change to be desirable, including,
without limitation, to provide for (i) a merger of Merger Sub with and
into Seller, in which Seller is the surviving corporation, or (ii) a
merger of Seller directly into Mercantile, in which Mercantile is the
surviving corporation; provided, however, that no such change shall (A)
alter or change the amount or kind of the Merger Consideration to be
received by the holders of Seller Common Stock, (B) adversely affect
the tax treatment to Seller stockholders, as generally described in
Section 6.01(e) hereof, (C) materially impede or delay receipt of any
approvals referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement, or (D) prevent or impede
the transactions contemplated hereby from qualifying for
pooling-of-interests accounting treatment unless Buyers first waive
Seller's covenants set forth in Sections 5.02(b) and 5.16 hereof and
the condition to Buyers' obligation to consummate the Merger set forth
in Section 6.03(f) hereof.
1.14 Material Adverse Effect . As used in this Agreement, the term "Material
Adverse Effect" with respect to an entity means any condition, event,
change or occurrence that has or may reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
properties, business or results of operations, of such entity and its
Subsidiaries (as defined in Section 2.02(a)), taken as a whole as
reflected in the Seller Financial Statements (as defined in Section
2.05(b)) or the Mercantile Financial Statements (as defined in Section
3.04), as the case may be; it being understood that a Material Adverse
Effect shall not include: (i) a change with respect to, or effect on,
such entity and its Subsidiaries resulting from a change in law, rule,
regulation, generally accepted accounting principles or regulatory
accounting principles; (ii) a change with respect to, or effect on,
such entity and its Subsidiaries resulting from any other matter
affecting depository institutions generally including, without
limitation, changes in general economic conditions and changes in
prevailing interest and deposit rates; (iii) a change disclosed in the
Seller Financial Statements or the Mercantile Financial Statements, as
the case may be; (iv) any charges taken by Mercantile in connection
with pending or completed acquisitions or the disposition of certain
businesses or lines of business; or (v) in the case of Seller, any
financial change resulting from adjustments made pursuant to Section
5.05 or 5.09(b) hereof.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Buyers as follows:
2.01 Organization and Authority . Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing in
all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified, except where
the failure of Seller to so qualify would not have a Material Adverse
Effect on Seller and the Seller Subsidiaries (as defined in Section
2.02(a)), taken as a whole, and has the corporate power and authority
to own its properties and assets and to carry on its business as it is
now being conducted. Seller is registered as a bank holding company
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") under the BHCA. True and complete copies of the
Certificate of Incorporation and By-Laws of Seller and the Articles of
Association and By-Laws of THE Rock Island Bank, National Association
("TRIB"), a national banking association, each as in effect on the date
of this Agreement, are attached hereto as Schedule 2.01.
2.02 Subsidiaries.
(a) Schedule 2.02 sets forth a complete and correct list of all of
Seller's "Subsidiaries" (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC");
each a "Seller Subsidiary" and, collectively, the "Seller
Subsidiaries"), and all outstanding Equity Securities (as defined
in Section 2.03) of each Seller Subsidiary, all of which are owned
directly or indirectly by Seller. Except as disclosed in Schedule
2.02, all of the outstanding shares of capital stock of the Seller
Subsidiaries owned directly or indirectly by Seller are validly
issued, fully paid and nonassessable and are owned free and clear
of any lien, claim, charge, option, encumbrance, agreement,
mortgage, pledge, security interest or restriction (a "Lien") with
respect thereto. Each of the Seller Subsidiaries is a corporation,
bank or savings bank duly incorporated or organized and validly
existing under the laws of its jurisdiction of incorporation or
organization, and has corporate power and authority to own or lease
its properties and assets and to carry on its business as it is now
being conducted. Each of the Seller Subsidiaries is duly qualified
to do business in each jurisdiction where its ownership or leasing
of property or the conduct of its business requires it so to be
qualified, except where the failure to so qualify would not have a
Material Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole. Except as set forth in Schedule 2.02, neither
Seller nor any Seller Subsidiary owns beneficially, directly or
indirectly, any shares of any class of Equity Securities (as
defined in Section 2.03) or similar interests of any corporation,
bank, business trust, association or organization, or any interest
in a partnership or joint venture of any kind, other than those
identified as Seller Subsidiaries in Schedule 2.02 hereof.
(b) TRIB is a national banking association duly organized and validly
existing under the laws of the United States of America.
<PAGE>
2.03 Capitalization. The authorized capital stock of Seller consists of: (i)
600,000 shares of Seller Common Stock, of which, as of March 31, 1998,
340,662 shares were issued and 260,424 shares were outstanding and (ii)
100,000 shares of Seller Preferred Stock, of which, as of March 31,
1998, 5,000 shares were issued and outstanding and were convertible
into 41,666 shares of Seller Common Stock. As of March 31, 1998, Seller
had reserved 20,000 shares of Seller Common Stock for issuance under
Seller's stock option and incentive plans (including grants reflected
in the Board minutes), a list of which is set forth on Schedule 2.03
(the "Seller Stock Plans"), pursuant to which options ("Seller Employee
Stock Options") covering 800 shares of Seller Common Stock were
outstanding as of March 31, 1998. As of March 31, 1998, $ 10,000,000
aggregate principal amount of the Seller Notes was issued and
outstanding. Since March 31, 1998, no Equity Securities of Seller have
been issued, other than shares of Seller Common Stock which may have
been issued upon the exercise of Seller Stock Options. "Equity
Securities" of an issuer means capital stock or other equity securities
of such issuer, options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities
or rights convertible into, shares of any capital stock or other equity
securities of such issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to issue
additional shares of its capital stock or other equity securities of
such issuer, or options, warrants, scrip or rights to purchase,
acquire, subscribe to, calls on or commitments for any shares of its
capital stock or other equity securities. Except as set forth above,
there are no other Equity Securities of Seller outstanding. All of the
issued and outstanding shares of Seller Common Stock and Seller
Preferred Stock are validly issued, fully paid and nonassessable and
have not been issued in violation of any preemptive right of any
stockholder of Seller. Neither Seller nor any Seller Subsidiary has
taken or agreed to take any action or has any knowledge of any fact or
circumstance and neither Seller nor any Seller Subsidiary will take any
action that would prevent the Merger from qualifying for
pooling-of-interests accounting treatment.
2.04 Authorization.
(a) Seller has the corporate power and authority to enter into this
Agreement and, subject to the approval of this Agreement by the
stockholders of Seller and the Regulatory Authorities (as defined
in Section 2.06), to carry out its obligations hereunder. The only
stockholder vote required for Seller to approve this Agreement is
the affirmative vote of the holders of a majority of the
outstanding shares of Seller Common Stock entitled to vote at a
meeting called for such purpose. The execution, delivery and
performance of this Agreement by Seller and the consummation by
Seller of the transactions contemplated hereby in accordance with
and subject to the terms of this Agreement have been duly
authorized by the Board of Directors of Seller. Subject to the
approval of Seller's stockholders and subject to the receipt of
such approvals of the Regulatory Authorities as may be required by
statute or regulation, this Agreement is a valid and binding
obligation of Seller enforceable against Seller in accordance with
its terms.
(b) Except as disclosed on Schedule 2.04(b), neither the execution nor
delivery nor performance by Seller of this Agreement, nor the
consummation by Seller of the transactions contemplated hereby, nor
compliance by Seller with any of the provisions hereof, will (i)
violate, conflict with, or result in a breach of any provisions of,
or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in
the creation of, any Lien upon any of the properties or assets of
Seller or any of the Seller Subsidiaries under any of the terms,
conditions or provisions of (x) its Certificate or Articles of
Incorporation, charter or By-Laws or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Seller or any of the Seller
Subsidiaries is a party or by which it may be bound, or to which
Seller or any of the Seller Subsidiaries or any of the properties
or assets of Seller or any of the Seller Subsidiaries may be
subject, other than those as to which any such violation, conflict,
breach, event, termination, acceleration or creation would not have
a Material Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole, or (ii) subject to compliance with the statutes
and regulations referred to in subsection (c) of this Section 2.04,
violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Seller or any of the
Seller Subsidiaries or any of their respective properties or
assets; other than violations, conflicts, breaches, defaults,
terminations, accelerations or liens which would not have a
Material Adverse Effect on Seller and Seller Subsidiaries, taken as
a whole.
<PAGE>
(c) Other than in connection or in compliance with the provisions of
the Missouri Statute, the DGCL, the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively,
the "Securities Act"), the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange
Act"), the securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA, or any required approvals of the Federal
Reserve Board, the FDIC or other governmental agencies or governing
boards having regulatory authority over Seller or any Seller
Subsidiary, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority
is necessary for the consummation by Seller of the transactions
contemplated by this Agreement.
2.05 Seller Financial Statements.
(a) Attached hereto as Schedule 2.05(a) are copies of the following
documents: (i) Seller's Annual Report on Form 10-K for the year
ended March 31, 1997; and (ii) Seller's Quarterly Reports on Form
10-Q for the quarters ended June 30, 1997, September 30, 1997 and
December 31, 1997.
(b) The financial statements contained in the documents referenced in
Schedule 2.05(a) are referred to collectively as the "Seller
Financial Statements." The Seller Financial Statements have been
prepared in accordance with generally accepted accounting
principles ("GAAP") during the periods involved, and present fairly
the consolidated financial position of Seller and the Seller
Subsidiaries at the dates thereof and the consolidated results of
operations, changes in stockholders' equity and cash flows, as
applicable, of Seller and the Seller Subsidiaries for the periods
stated therein.
(c) Seller and the Seller Subsidiaries have each prepared, kept and
maintained through the date hereof true, correct and complete
financial books and records which fairly reflect their respective
financial conditions, results of operations, changes in
stockholders' equity and cash flows.
2.06 Seller Reports. Since January 1, 1995, each of Seller and the Seller
Subsidiaries has timely filed any and all material reports,
registrations and statements, together with any required amendments
thereto, that it was required to file with (i) the SEC, including, but
not limited to, Forms 10-K, Forms 10-Q and Forms 8-K, (ii) the Federal
Reserve Board, (iii) the FDIC and (iv) any federal, state, municipal or
local government, securities, banking, savings and loan, environmental,
insurance and other governmental or regulatory authority, and the
agencies and staffs thereof (the entities in the foregoing clauses (i)
through (iv) being referred to herein collectively as the "Regulatory
Authorities" and individually as a "Regulatory Authority"), having
jurisdiction over the affairs of it. All such material reports and
statements filed with any such Regulatory Authority are collectively
referred to herein as the "Seller Reports." As of each of their
respective dates, the Seller Reports complied in all material respects
with all the rules and regulations promulgated by the applicable
Regulatory Authority. With respect to Seller Reports filed with the
Regulatory Authorities, there is no material unresolved violation,
criticism or exception by any Regulatory Authority with respect to any
report or statement filed by, or any examinations of, Seller or any of
the Seller Subsidiaries.
2.07 Title to and Condition of Assets.
(a) Except as set forth in Schedule 2.07(a), and except as may be
reflected in the Seller Financial Statements and with the exception
of all "Real Property" (which is the subject of Section 2.08
hereof), Seller and the Seller Subsidiaries have, and at the
Closing Date will have, good and marketable title to their owned
properties and assets, including, without limitation, those
reflected in the Seller Financial Statements (except those disposed
of in the ordinary course of business since the date thereof), free
and clear of any Lien, except for Liens for (i) taxes, assessments
or other governmental charges not yet delinquent, (ii) as set forth
or described in the Seller Financial Statements or any subsequent
Seller Financial Statements delivered to Buyers prior to the
Effective Time, and (iii) pledges to secure deposits and other
Liens incurred in the ordinary course of business.
(b) Except as set forth in Schedule 2.07(b), no material properties or
assets that are reflected as owned by Seller or any of the Seller
Subsidiaries in the Seller Financial Statements as of December 31,
1997, have been sold, leased, transferred, assigned or otherwise
disposed of since such date, except in the ordinary course of
business.
<PAGE>
(c) Except as set forth in Schedule 2.07(c), all furniture, fixtures,
vehicles, machinery and equipment and computer software owned or
used by Seller or the Seller Subsidiaries, including any such items
leased as a lessee (taken as a whole as to each of the foregoing
with no single item deemed to be of material importance) are in
good working order and free of known defects, subject only to
normal wear and tear. The operation by Seller or the Seller
Subsidiaries of such properties and assets is in compliance in all
material respects with all applicable laws, ordinances and rules
and regulations of any governmental authority having jurisdiction
over such use.
2.08 Real Property.
(a) A list of each parcel of real property owned by Seller or any of
the Seller Subsidiaries as of March 31, 1998 (other than real
property acquired in foreclosure or in lieu of foreclosure in the
course of the collection of loans and being held by Seller or a
Seller Subsidiary for disposition as required by law is set forth
in Schedule 2.08(a) under the heading "Owned Real Property" (such
real property being herein referred to as the "Owned Real
Property"). A list of each parcel of real property leased by Seller
or any of the Seller Subsidiaries as of March 31, 1998 is also set
forth in Schedule 2.08(a) under the heading "Leased Real Property"
(such real property being herein referred to as the "Leased Real
Property"). Seller shall update Schedule 2.08(a) within ten (10)
days of acquiring any Owned Real Property or leasing any Leased
Real Property after the date hereof. Collectively, the Owned Real
Property and the Leased Real Property are herein referred to as the
"Real Property."
(b) There is no pending action involving Seller or any of the Seller
Subsidiaries as to the title of or the right to use any of the Real
Property.
(c) Except as disclosed on Schedule 2.08(c), as of March 31, 1998,
neither Seller nor any of the Seller Subsidiaries has any interest
in any real property other than as described above in Section
2.08(a) except interests as a mortgagee, any real property acquired
in foreclosure or in lieu of foreclosure and being held for
disposition as required by law and property held by any Seller
Subsidiary in its capacity as trustee.
(d) To the best knowledge of Seller, none of the buildings, structures
or other improvements located on the Real Property encroaches upon
or over any adjoining parcel of real estate or any easement or
right-of-way or "setback" line and all such buildings, structures
and improvements are located and constructed in conformity with all
applicable zoning ordinances and building codes.
(e) None of the buildings, structures or improvements located on the
Owned Real Property are the subject of any official complaint or
notice by any governmental authority of violation of any applicable
zoning ordinance or building code, and there is no zoning
ordinance, building code, use or occupancy restriction or
condemnation action or proceeding pending, or, to the best
knowledge of Seller, threatened, with respect to any such building,
structure or improvement. The Owned Real Property is in generally
good condition for its intended purpose, ordinary wear and tear
excepted, and has been maintained in accordance with reasonable and
prudent business practices applicable to like facilities.
(f) Except as may be reflected in the Seller Financial Statements or
with respect to such easements, Liens, defects or encumbrances as
do not individually or in the aggregate materially adversely affect
the use or value of the parcel of Owned Real Property, Seller and
the Seller Subsidiaries have, and at the Closing Date will have,
good and marketable title to their respective Owned Real
Properties.
(g) Neither Seller nor any of the Seller Subsidiaries has caused or
allowed the generation, treatment, storage, disposal or release at
any Real Property of any Toxic Substance, except in accordance in
all material respects with all applicable federal, state and local
laws and regulations. "Toxic Substance" means any hazardous, toxic
or dangerous substance, pollutant, waste, gas or material,
including, without limitation, petroleum and petroleum products,
metals liquids, semi-solids or solids, that are regulated under any
federal, state or local statute, ordinance, rule, regulation or
other law pertaining to environmental protection, contamination,
quality, waste management or cleanup. There are no underground
storage tanks located on, in or under any Owned Real Property or
Leased Real Property.
<PAGE>
2.09 Taxes. Seller and each Seller Subsidiary have timely filed or will
timely file (including extensions) all material tax returns required to
be filed at or prior to the Closing Date ("Seller Returns"). Each of
Seller and the Seller Subsidiaries has paid, or set up adequate
reserves on the Seller Financial Statements for the payment of, all
taxes required to be paid in respect of the periods covered by such
Seller Returns and has set up adequate reserves on the most recent
Seller Financial Statements for the payment of all taxes anticipated to
be payable in respect of all periods up to and including the latest
period covered by such Seller Financial Statements. Neither Seller nor
any Seller Subsidiary has any material liability for any such taxes in
excess of the amounts so paid or reserves so established, and no
material deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed in writing (tentatively or
definitely) against Seller or any of the Seller Subsidiaries which have
not been settled or would not be covered by existing reserves. Except
as set forth in Schedule 2.09, neither Seller nor any of the Seller
Subsidiaries is delinquent in the payment of any material tax,
assessment or governmental charge, nor has it requested any extension
of time within which to file any tax returns in respect of any fiscal
year which have not since been filed and no requests for waivers of the
time to assess any tax are pending. Except as set forth on Schedule
2.09, no federal or state income tax return of Seller or any Seller
Subsidiaries has been audited by the Internal Revenue Service (the
"IRS") or any state tax authority for the seven most recent full fiscal
years of Seller. Except as set forth on Schedule 2.09, there is no
deficiency or refund litigation or, to the best knowledge of Seller,
matter in controversy with respect to Seller Returns. Except as set
forth on Schedule 2.09 hereof, neither Seller nor any of the Seller
Subsidiaries has extended or waived any statute of limitations on the
assessment of any tax due that is currently in effect.
2.10 Material Adverse Effect. Since December 31, 1997, there has been no
Material Adverse Effect on Seller and the Seller Subsidiaries, taken as
a whole.
2.11 Loans, Commitments and Contracts.
(a) Schedule 2.11(a) contains a complete and accurate listing, as of
March 31, 1998, of all contracts entered into with respect to
deposits and repurchase agreements of $1,000,000 or more, by
account, and, as of February 28, 1998, all loan agreements, notes,
security agreements, bankers' acceptances, outstanding letters of
credit, participation agreements, and other documents relating to
or involving extensions of credit by Seller or any of the Seller
Subsidiaries and, as of February 28, 1998, all loan commitments and
commitments to issue letters of credit and other commitments to
extend credit with respect to any one entity or related group of
entities in excess of $1,000,000 to which Seller or any of the
Seller Subsidiaries is a party or by which it is bound, by account.
(b) Except for the contracts and agreements required to be listed on
Schedule 2.11(a) and the loans required to be listed on Schedule
2.11(f), and except as otherwise listed on Schedule 2.11(b), as of
February 28, 1998, neither Seller nor any of the Seller
Subsidiaries is a party to or is bound by any:
(i) agreement, contract, arrangement, understanding or
commitment with any labor union;
(ii) material franchise or license agreement, excluding software
license agreements entered into in the ordinary course of
business;
(iii) written employment, severance, termination pay, agency,
consulting or similar agreement or commitment in respect of
personal services;
(iv) material agreement, arrangement or commitment (A) not made
in the ordinary course of business, and (B) pursuant to
which Seller or any of the Seller Subsidiaries is or may
become obligated to invest in or contribute to any Seller
Subsidiary other than pursuant to Seller Employee Plans (as
that term is defined in Section 2.19 hereof) or agreements
relating to joint ventures or partnerships set forth in
Schedule 2.02, true and complete copies of which have been
furnished to Buyers;
<PAGE>
(v) agreement, indenture or other instrument not disclosed in
the Seller Financial Statements relating to the borrowing of
money by Seller or any of the Seller Subsidiaries or the
guarantee by Seller or any of the Seller Subsidiaries of any
such obligation (other than trade payables or instruments
related to transactions entered into in the ordinary course
of business by Seller or any of the Seller Subsidiaries,
such as deposits, Federal Home Loan Bank ("FHLB") and
Federal Funds borrowings and repurchase and reverse
repurchase agreements), other than such agreements,
indentures or instruments providing for annual payments of
less than $200,000;
(vi) contract containing covenants which limit the ability of
Seller or any of the Seller Subsidiaries to compete in any
line of business or with any person or which involves any
restrictions on the geographical area in which, or method by
which, Seller or any of the Seller Subsidiaries may carry on
their respective businesses (other that as may be required
by law or any applicable Regulatory Authority);
(vii) contract or agreement which is a "material contract" within
the meaning of Item 601(b)(10) of Regulation S-K as
promulgated by the SEC to be performed after the date of
this Agreement that has not been filed or incorporated by
reference in the Seller Reports;
(viii) lease with annual rental payments aggregating $100,000 or
more;
(ix) loans or other obligations payable or owing to any officer,
director or employee except (A) salaries, wages and
directors' fees or other compensation incurred and accrued
in the ordinary course of business and (B) obligations due
in respect of any depository accounts maintained by any of
the foregoing with Seller or any of the Seller Subsidiaries
in the ordinary course of business; or
(x) other agreement, contract, arrangement, understanding or
commitment involving an obligation by Seller or any of the
Seller Subsidiaries of more than $250,000 and extending
beyond six months from the date hereof that cannot be
canceled without cost or penalty upon notice of 30 days or
less, other than contracts entered into in respect of
deposits, loan agreements and commitments, notes, security
agreements, repurchase and reverse repurchase agreements,
Treasury, tax and loan notes, bankers' acceptances,
outstanding letters of credit and commitments to issue
letters of credit, participation agreements and other
documents relating to transactions entered into by Seller or
any of the Seller Subsidiaries in the ordinary course of
business and not involving extensions of credit with respect
to any one entity or related group of entities in excess of
$1,000,000.
(c) Seller and/or the Seller Subsidiaries carry property, liability,
director and officer errors and omissions, products liability and
other insurance coverage as set forth in Schedule 2.11(c) under the
heading "Insurance."
(d) True, correct and complete copies of the agreements, contracts,
leases and other documents referred to in Section 2.11(b) have been
included with Schedule 2.11(b) hereto. True, correct and complete
copies of the agreements, contracts, leases, insurance policies and
other documents referred to in Schedules 2.11(a) and (c) have been
or shall be furnished or made available to Buyers.
(e) To the best knowledge of Seller, each of the agreements, contracts,
leases, insurance policies and other documents referred to in
Schedules 2.11 (a), (b) and (c) is a valid, binding and enforceable
obligation of the parties sought to be bound thereby, except as the
enforceability thereof against the parties thereto (other than
Seller or any of the Seller Subsidiaries) may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws
now or hereafter in effect relating to the enforcement of
creditors' rights generally, and except that equitable principles
may limit the right to obtain specific performance or other
equitable remedies.
<PAGE>
(f) Schedule 2.11(f) under the heading "Loans" contains a true, correct
and complete listing, as of February 28, 1998, by account, of (i)
all loans in excess of $500,000 of Seller or any of the Seller
Subsidiaries that have been accelerated during the past twelve
months; (ii) all loan commitments or lines of credit of Seller or
any of the Seller Subsidiaries in excess of $500,000 which have
been terminated by Seller or any of the Seller Subsidiaries during
the past twelve months by reason of default or adverse developments
in the condition of the borrower or other events or circumstances
affecting the credit of the borrower; (iii) all loans, lines of
credit and loan commitments in excess of $500,000, as to which
Seller or any of the Seller Subsidiaries has given written notice
of its intent to terminate during the past twelve months; (iv) with
respect to all loans in excess of $500,000 all notification letters
and other written communications from Seller or any of the Seller
Subsidiaries to any of their respective borrowers, customers or
other parties during the past twelve months wherein Seller or any
of the Seller Subsidiaries has requested or demanded that actions
be taken to correct existing defaults or facts or circumstances
which may become defaults; (v) each borrower, customer or other
party which has notified Seller or any of the Seller Subsidiaries
during the past twelve months of, or has asserted against Seller or
any of the Seller Subsidiaries, in each case in writing, any
"lender liability" or similar claim, and, to the best knowledge of
Seller, each borrower, customer or other party which has given
Seller or any of the Seller Subsidiaries any oral notification of,
or orally asserted to or against Seller or any of the Seller
Subsidiaries, any such claim; or (vi) all loans in excess of
$250,000 (A) that are contractually past due 90 days or more in the
payment of principal and/or interest, (B) that are on non-accrual
status, (C) that have been classified "doubtful," "loss" or the
equivalent thereof by any Regulatory Authority, (D) where a
reasonable doubt exists as to the timely future collectibility of
principal and/or interest, whether or not interest is still
accruing or the loan is less than 90 days past due, (E) 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 (F) where
a specific reserve allocation exists in connection therewith.
2.12 Absence of Defaults . Neither Seller nor any of the Seller Subsidiaries
is in violation of its charter documents or By-Laws or in default under
any material agreement, commitment, arrangement, lease, insurance
policy or other instrument, whether entered into in the ordinary course
of business or otherwise and whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or
both, would constitute such a default, except in all cases where such
default would not have a Material Adverse Effect on Seller and its
Subsidiaries, taken as a whole.
2.13 Litigation and Other Proceedings . As of March 31, 1998, except as set
forth on Schedule 2.13 or otherwise disclosed in the Seller Financial
Statements, neither Seller nor any of the Seller Subsidiaries is a
party to any pending or, to the best knowledge of Seller, threatened
claim, action, suit, investigation or proceeding, or is subject to any
order, judgment or decree, except for matters which, in the aggregate,
will not have, or reasonably could not be expected to have, a Material
Adverse Effect on Seller and the Seller Subsidiaries, taken as a whole.
Without limiting the generality of the foregoing, there are no actions,
suits or proceedings pending or, to the best knowledge of Seller,
threatened against Seller or any of the Seller Subsidiaries or any of
their respective officers or directors by any stockholder of Seller or
any of the Seller Subsidiaries (or any former stockholder of Seller or
any of the Seller Subsidiaries) or involving claims under the Community
Reinvestment Act of 1977, as amended, the Bank Secrecy Act, the fair
lending laws or any other similar laws.
2.14 Directors' and Officers' Insurance. Each of Seller and the Seller
Subsidiaries has taken or will take all requisite action (including,
without limitation, the making of claims and the giving of notices)
pursuant to its directors' and officers' liability insurance policy or
policies in order to preserve all rights thereunder with respect to all
matters (other than matters arising in connection with this Agreement
and the transactions contemplated hereby) occurring prior to the
Effective Time that are known to Seller.
<PAGE>
2.15 Compliance with Laws
(a) To the best knowledge of Seller, Seller and each of the Seller
Subsidiaries have all permits, licenses, authorizations, orders and
approvals of, and have made all filings, applications and
registrations with, all Regulatory Authorities that are required in
order to permit them to own or lease their respective properties
and assets and to carry on their respective businesses as presently
conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best
knowledge of Seller, no suspension or cancellation of any of them
is threatened; and all such filings, applications and registrations
are current; in each case except for permits, licenses,
authorizations, orders, approvals, filings, applications and
registrations the failure to have (or have made) would not have a
Material Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole.
(b) (i) To the best knowledge of Seller, each of Seller and the Seller
Subsidiaries has complied with all laws, regulations and orders
(including, without limitation, zoning ordinances, building codes,
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and securities, tax, environmental, civil rights, and
occupational health and safety laws and regulations including,
without limitation, in the case of Seller or any Seller Subsidiary
that is a bank or savings association, banking organization,
banking corporation or trust company, all statutes, rules,
regulations and policy statements pertaining to the conduct of a
banking, deposit-taking, lending or related business, or to the
exercise of trust powers) and governing instruments applicable to
it and to the conduct of its business, and (ii) neither Seller nor
any of the Seller Subsidiaries is in default under, and no event
has occurred which, with the lapse of time or notice or both, could
result in the default under, the terms of any judgment, order,
writ, decree, permit, or license of any Regulatory Authority or
court, whether federal, state, municipal or local, and whether at
law or in equity, except in the case of subparts (i) and (ii) where
such failure to comply or default would not have a Material Adverse
Effect on Seller and the Seller Subsidiaries, taken as a whole.
(c) Except as set forth on Schedule 2.15(c), neither Seller nor any of
the Seller Subsidiaries is subject to or reasonably likely to incur
a liability as a result of its ownership, operation, or use of any
Property (as defined below) of Seller (whether directly or, to the
best knowledge of Seller, as a consequence of such Property being
acquired in foreclosure or in lieu of foreclosure or being part of
the investment portfolio of Seller or any of the Seller
Subsidiaries) (A) that is contaminated by or contains any Toxic
Substance (as defined in Section 2.08), including, without
limitation, petroleum and petroleum products, asbestos, PCBs,
pesticides, herbicides and any other substance or waste that is
hazardous to human health or the environment and regulated by
federal, state or local law, or (B) on which any Toxic Substance
has been stored, disposed of, placed or used at the Property or in
the construction of structures thereon; and which, in each case,
reasonably could be expected to have a Material Adverse Effect on
Seller and the Seller Subsidiaries, taken as a whole. "Property"
shall include all property (real or personal, tangible or
intangible) owned or controlled by Seller or any of the Seller
Subsidiaries, including, without limitation, property acquired
under foreclosure or in lieu of foreclosure, property in which any
venture capital or similar unit of Seller or any of the Seller
Subsidiaries has an interest and, to the best knowledge of Seller,
property held by Seller or any of the Seller Subsidiaries in its
capacity as a trustee. No claim, action, suit or proceeding is
pending or, to the best knowledge of Seller, threatened, and no
material claim has been asserted against Seller or any of the
Seller Subsidiaries relating to Property of Seller or any of the
Seller Subsidiaries before any court or other Regulatory Authority
or arbitration tribunal relating to Toxic Substances, pollution or
the environment, and there is no outstanding judgment, order, writ,
injunction, decree or award against or affecting Seller or any of
the Seller Subsidiaries with respect to the same.
<PAGE>
(d) Neither Seller nor any of the Seller Subsidiaries has received any
notification or communication that has not been finally resolved
from any Regulatory Authority (i) asserting that the Seller or any
of the Seller Subsidiaries or any Property is not in substantial
compliance with any of the statutes, regulations or ordinances that
such Regulatory Authority enforces, except with respect to matters
which reasonably could not be expected to have a Material Adverse
Effect on the Seller and the Seller Subsidiaries, taken as a whole,
(ii) threatening to revoke any license, franchise, permit or
governmental authorization that reasonably could be expected to
have a Material Adverse Effect on the Seller and the Seller
Subsidiaries, taken as a whole, including, without limitation, such
company's status as an insured depository institution under the FDI
Act, or (iii) requiring or threatening to require Seller or any of
the Seller Subsidiaries, or indicating that Seller or any of the
Seller Subsidiaries may be required, to enter into a cease and
desist order, agreement or memorandum of understanding or any other
agreement restricting or limiting or purporting to direct, restrict
or limit in any manner the operations of Seller or any of the
Seller Subsidiaries, including, without limitation, any restriction
on the payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is
currently in effect.
(e) Neither Seller nor any of the Seller Subsidiaries is required by
Section 32 of the FDI Act to give prior notice to any federal
banking agency of the proposed addition of an individual to its
board of directors or the employment of an individual as a senior
executive officer.
2.16 Labor. No work stoppage involving Seller or any of the Seller
Subsidiaries is pending or, to the best knowledge of Seller,
threatened. Except as set forth on Schedule 2.13, neither Seller nor
any of the Seller Subsidiaries is involved in, or, to the best
knowledge of Seller, threatened with or affected by, any labor dispute,
arbitration, lawsuit or administrative proceeding that reasonably could
be expected to have a Material Adverse Effect on the Seller and the
Seller Subsidiaries, taken as a whole. None of the employees of Seller
or the Seller Subsidiaries are represented by any labor union or any
collective bargaining organization.
2.17 Material Interests of Certain Persons . Except as set forth in Seller's
Annual Report on Form 10-K for the year ended March 31, 1997, and
except as set forth in Schedule 2.17, no officer or director of Seller
or any of the Seller Subsidiaries, or any "associate" (as such term is
defined in Rule 14a-1 under the Exchange Act) of any such officer or
director, has any interest in any contract or property (real or
personal, tangible or intangible), used in, or pertaining to the
business of, Seller or any of the Seller Subsidiaries, which in the
case of Seller and each of the Seller Subsidiaries would be required to
be disclosed by Item 404 of Regulation S-K promulgated by the SEC.
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets; Financial
Assets.
(a) All of the accounts, notes and other receivables that are reflected
in the Seller Financial Statements as of December 31, 1997 were
acquired in the ordinary course of business and were collectible in
full in the ordinary course of business, except for possible loan
and lease losses that are adequately provided for in the allowance
for loan and lease losses reflected in such Seller Financial
Statements, and the collection experience of Seller and the Seller
Subsidiaries since December 31, 1997 to the date hereof, has not
deviated in any material and adverse manner from the credit and
collection experience of Seller and the Seller Subsidiaries, taken
as a whole, for the six months ended December 31, 1997.
(b) The allowances for loan losses contained in the Seller Financial
Statements were established in accordance with the past practices
and experiences of Seller and the Seller Subsidiaries, and the
allowance for loan and lease losses shown on the consolidated
balance sheet of Seller and the Seller Subsidiaries as of December
31, 1997, were adequate in all material respects under the
requirements of GAAP, or regulatory accounting principles, as the
case may be, to provide for possible losses on loans and leases
(including, without limitation, accrued interest receivable) and
credit commitments (including, without limitation, stand-by letters
of credit) as of the date of such balance sheet.
(c) Schedule 2.18(c) sets forth as of the date of this Agreement all
assets classified by Seller as real estate acquired through
foreclosure or repossession, including foreclosed assets.
<PAGE>
(d) As of December 31, 1997, the aggregate amount of all Non-Performing
Assets (as defined below) on the books of Seller and the Seller
Subsidiaries did not exceed $3,900,000. "Non-Performing Assets"
shall mean (i) all loans (A) that are contractually past due 90
days or more in the payment of principal and/or interest, (B) that
are on nonaccrual status, (C) that have been classified "doubtful,"
"loss" or the equivalent thereof by any Regulatory Agency or (D)
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,
and (ii) all assets classified by Seller as real estate acquired
through foreclosure or in lieu of foreclosure, including
in-substance foreclosures, and all other assets acquired through
foreclosure or in lieu of foreclosure.
(e) All loans receivable (including discounts) and accrued interest
entered on the books of Seller and the Seller Subsidiaries, to the
extent unpaid on the Closing Date, arose out of bona fide
arm's-length transactions, were made for good and valuable
consideration in the ordinary course of Seller's or the appropriate
Seller Subsidiary's respective business, and the notes or other
evidences of indebtedness with respect to such loans or discounts
are true and genuine and are what they purport to be. The loans,
discounts and the accrued interest reflected on the books of Seller
and the Seller Subsidiaries are subject to no defenses, set-offs or
counterclaims (including, without limitation, those afforded by
usury or truth-in-lending laws), except as may be provided by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by general principles of equity. All such loans are
owned by Seller or the appropriate Seller Subsidiary free and clear
of any liens, restrictions or encumbrances.
(f) The notes and other evidences of indebtedness evidencing the loans
described in Section 2.18(e) above, and all pledges, mortgages,
deeds of trust and other collateral documents or security
instruments relating thereto are and will be, in all material
respects, valid, true, genuine and enforceable, and what they
purport to be. Seller and each of the Seller Subsidiaries has good
and valid title to the investment securities shown on the Seller
Financial Statements and all securities entered on the books of
Seller or the appropriate Seller Subsidiary subsequent to December
31, 1997, except for those sold or redeemed in the ordinary course
of business. A complete and accurate list of such investment
securities as of December 31, 1997 is attached as Schedule 2.18(f).
Such list shall be updated each month in writing until the Closing.
2.19 Employee Benefit Plans.
(a) Schedule 2.19(a) lists all pension, retirement, supplemental
retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation,
consulting, bonus, medical, disability, workers' compensation,
vacation, group insurance, severance and other employee benefit,
incentive and welfare policies, contracts, plans and arrangements,
and all trust agreements related thereto, maintained by or
contributed to by Seller or any of the Seller Subsidiaries as of
the date hereof in respect of any of the present or former
directors, officers, or other employees of and/or consultants to
Seller or any of the Seller Subsidiaries (collectively, "Seller
Employee Plans"). Seller has furnished Buyers with the following
documents with respect to each Seller Employee Plan: (i) a true and
complete copy of all written documents comprising such Seller
Employee Plan (including amendments and individual agreements
relating thereto) or, if there is no such written document, an
accurate and complete description of the Seller Employee Plan; (ii)
the most recently filed Form 5500 or Form 5500-C/R (including all
schedules thereto), if applicable; (iii) the most recent financial
statements and actuarial reports, if any; (iv) the summary plan
description currently in effect and all material modifications
thereof, if any; and (v) the most recent IRS determination letter,
if any.
(b) All Seller Employee Plans have been maintained and operated in all
material respects in accordance with their terms and the material
requirements of all applicable statutes, orders, rules and final
regulations, including, without limitation, to the extent
applicable, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"). All contributions required to be made to Seller
Employee Plans have been made or reserved.
<PAGE>
(c) With respect to each of the Seller Employee Plans which is a
pension plan (as defined in Section 3(2) of ERISA) (the "Pension
Plans"): (i) each Pension Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been
determined to be so qualified by the IRS and such determination
letter may still be relied upon, and each related trust is exempt
from taxation under Section 501(a) of the Code; (ii) the present
value of all benefits vested and all benefits accrued under each
Pension Plan which is subject to Title IV of ERISA did not, in each
case, as of the last applicable annual valuation date (as indicated
on Schedule 2.19(a)), exceed the value of the assets of the Pension
Plan allocable to such vested or accrued benefits; (iii) there has
been no "prohibited transaction," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, which could
subject any Pension Plan or associated trust, or Seller or any of
the Seller Subsidiaries, to any material tax or penalty; (iv) no
defined benefit Pension Plan or any trust created thereunder has
been terminated, nor has there been any "reportable events" with
respect to any Pension Plan, as that term is defined in Section
4043 of ERISA since January 1, 1990; and (v) no Pension Plan or any
trust created thereunder has incurred any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA
(whether or not waived). No Pension Plan is a "multiemployer plan,"
as that term is defined in Section 3(37) of ERISA.
(d) Except as disclosed in Schedule 2.19(d) or as reflected on the
Seller Financial Statements or the notes thereto, neither Seller
nor any of the Seller Subsidiaries has any liability for any
post-retirement health, medical or similar benefit of any kind
whatsoever, except as required by statute or regulation.
(e) Neither Seller nor any of the Seller Subsidiaries has any material
liability under ERISA or the Code as a result of its being a member
of a group described in Sections 414(b), (c), (m) or (o) of the
Code.
(f) Except as disclosed in Schedule 2.19(f), neither the execution nor
delivery of this Agreement, nor the consummation of any of the
transactions contemplated hereby, will (i) result in any payment
(including, without limitation, severance, unemployment
compensation or golden parachute payment) becoming due to any
director or employee of Seller or any of the Seller Subsidiaries
from any of such entities, (ii) increase any benefit otherwise
payable under any of the Seller Employee Plans or (iii) result in
the acceleration of the time of payment of any such benefit. Seller
shall use its best efforts to insure that no amounts paid or
payable by Seller, the Seller Subsidiaries or Buyers to or with
respect to any employee or former employee of Seller or any of the
Seller Subsidiaries will fail to be deductible for federal income
tax purposes by reason of Section 280G of the Code.
<PAGE>
2.20 Conduct of Seller to Date . Except as set forth in Schedule 2.20, from
and after December 31, 1997 through the date of this Agreement, except
as set forth in the Seller Financial Statements and the Seller Reports:
(i) Seller and the Seller Subsidiaries have conducted their respective
businesses in the ordinary and usual course consistent with past
practices; (ii) except upon the exercise of Seller Stock Options,
neither Seller nor any of the Seller Subsidiaries has issued, sold,
granted, conferred or awarded any of its Equity Securities, or any
corporate debt securities which would be classified under GAAP as
long-term debt on the balance sheets of Seller or the Seller
Subsidiaries; (iii) Seller has not effected any stock split or
adjusted, combined, reclassified or otherwise changed its
capitalization; (iv) Seller has not declared, set aside or paid any
dividend (other than its regular quarterly dividends) or other
distribution in respect of its capital stock, or purchased, redeemed,
retired, repurchased or exchanged, or otherwise acquired or disposed
of, directly or indirectly, any of its Equity Securities, whether
pursuant to the terms of such Equity Securities or otherwise; (v)
neither Seller nor any of the Seller Subsidiaries has incurred any
obligation or liability (absolute or contingent), except liabilities
incurred in the ordinary course of business or in connection with the
transactions contemplated by this Agreement, or subjected to Lien any
of its assets or properties other than in the ordinary course of
business consistent with past practice; (vi) neither Seller nor any of
the Seller Subsidiaries has discharged or satisfied any Lien or paid
any obligation or liability (absolute or contingent), other than in the
ordinary course of business; (vii) neither Seller nor any of the Seller
Subsidiaries has sold, assigned, transferred, leased, exchanged, or
otherwise disposed of any of its properties or assets other than for a
fair consideration in the ordinary course of business; (viii) except as
required by contract or law, neither Seller nor any of the Seller
Subsidiaries has (A) increased the rate of compensation of, or paid any
bonus to, any of its directors, officers, or other employees, except in
accordance with existing policy, (B) entered into any new, or amended
or supplemented any existing, employment, management, consulting,
deferred compensation, severance, or other similar contract, (C)
entered into, terminated, or substantially modified any of the Seller
Employee Plans or (D) agreed to do any of the foregoing; (ix) neither
Seller nor any Seller Subsidiary has suffered any material damage,
destruction, or loss, whether as the result of fire, explosion,
earthquake, accident, casualty, labor trouble, requisition, or taking
of property by any Regulatory Authority, flood, windstorm, embargo,
riot, act of God or the enemy, or other casualty or event, and whether
or not covered by insurance; (x) neither Seller nor any of the Seller
Subsidiaries has canceled or compromised any debt, except for debts
charged off or compromised in accordance with the past practice of
Seller and the Seller Subsidiaries; and (xi) neither Seller nor any of
the Seller Subsidiaries has entered into any material transaction,
contract or commitment outside the ordinary course of its business,
except in connection with the transactions contemplated by this
Agreement.
2.21 Absence of Undisclosed Liabilities.
(a) Except as set forth on Schedule 2.21(a), as of the date hereof,
neither Seller nor any of the Seller Subsidiaries has any debts,
liabilities or obligations equal to or exceeding $50,000,
individually or $100,000 in the aggregate, whether accrued,
absolute, contingent or otherwise and whether due or to become due,
which would be required to be reflected in the Seller Financial
Statements or the notes thereto in accordance with GAAP except:
(i) debts, liabilities or obligations reflected on the Seller
Financial Statements and the notes thereto;
(ii) operating leases reflected on Schedule 2.11(b); and
(iii) debts, liabilities or obligations incurred in the ordinary
and usual course of their respective businesses, which are
not for breach of contract, breach of warranty, torts,
infringements or lawsuits and which do not have a Material
Adverse Effect on Seller and the Seller Subsidiaries, taken
as a whole.
(b) Neither Seller nor any of the Seller Subsidiaries was as of
December 31, 1997, or since such date to the date hereof, a party
to any contract or agreement, excluding deposits, loan agreements,
and commitments, notes, security agreements, repurchase and reverse
repurchase agreements, bankers' acceptances, outstanding letters of
credit and commitments to issue letters of credit, participation
agreements and other documents relating to transactions entered
into by Seller or any of the Seller Subsidiaries in the ordinary
course of business, that had, has or may be reasonably expected to
have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
<PAGE>
2.22 Proxy Statement, Etc. None of the information regarding Seller or any
of the Seller Subsidiaries to be supplied by Seller for inclusion or
included in (i) the Registration Statement on Form S-4 to be filed with
the SEC by Mercantile for the purpose of registering the shares of
Mercantile Common Stock to be exchanged for Seller Common Stock
pursuant to the provisions of this Agreement as such Registration
Statement on Form S-4 may be amended or supplemented (including without
limitation, any post-effective amendments and supplements thereof) (the
"Registration Statement"), (ii) the Proxy Statement to be mailed to
Seller's stockholders in connection with the meeting to be called to
consider this Agreement and the Merger, as such Proxy Statement may be
amended or supplemented (the "Proxy Statement"), or (iii) any other
documents to be filed with any Regulatory Authority in connection with
the transactions contemplated hereby will, at the respective times such
documents are filed with any Regulatory Authority and, in the case of
the Registration Statement, when it becomes effective and, with respect
to the Proxy Statement, when mailed, be false or misleading with
respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading or, in
the case of the Proxy Statement, at the time of the meeting of Seller's
stockholders referred to in Section 5.03, be false or misleading with
respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for such meeting. All
documents which Seller or any of the Seller Subsidiaries is responsible
for filing with any Regulatory Authority in connection with the Merger
will comply as to form in all material respects with the provisions of
applicable law.
2.23 Registration Obligations . Neither Seller nor any of the Seller
Subsidiaries is under any obligation, contingent or otherwise, which
will survive the Effective Time by reason of any agreement to register
any transaction involving any of its securities under the Securities
Act.
2.24 Tax, Regulatory and Accounting Matters . Neither Seller nor any of the
Seller Subsidiaries has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would (i) prevent the
transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code, (ii) materially impede
or delay receipt of any approval referred to in Section 6.01(b) or the
consummation of the transactions contemplated by this Agreement or
(iii) prevent or impede the transactions contemplated hereby from
qualifying for pooling-of-interests accounting treatment.
2.25 Brokers and Finders . Except for Howe Barnes Investments, Inc., neither
Seller nor any of the Seller Subsidiaries nor any of their respective
officers, directors or employees 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 Seller or any of the Seller Subsidiaries in
connection with this Agreement or the transactions contemplated hereby.
2.26 Interest Rate Risk Management Instruments
(a) Set forth on Schedule 2.26(a) is a list as of the date hereof of
all interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which Seller or
any of the Seller Subsidiaries is a party or by which any of their
properties or assets may be bound.
(b) All such interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which
Seller or any of the Seller Subsidiaries is a party or by which any
of their properties or assets may be bound were entered into in the
ordinary course of business and, to the best knowledge of Seller,
in accordance with prudent banking practice and applicable rules,
regulations and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the time
and are legal, valid and binding obligations of Seller or a Seller
Subsidiary and are in full force and effect. Seller and each of the
Seller Subsidiaries has duly performed in all material respects all
of its obligations thereunder to the extent that such obligations
to perform have accrued, and to the best knowledge of Seller, there
are no material breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
2.27 Accuracy of Information. The statements contained in this Agreement,
the Schedules and any other written document executed and delivered by
or on behalf of Seller pursuant to the terms of this Agreement are true
and correct as of the date hereof or as of the date delivered in all
material respects, and such statements and documents do not omit any
material fact necessary to make the statements contained therein not
misleading.
<PAGE>
2.28 Year 2000 Compliant . To the best knowledge of the Seller, both Seller
and the Seller Subsidiaries have complied with regulatory bulletins
issued through February 28, 1998 by the Federal Financial Institutions
Examination Council on the subject of Year 2000 Compliance. The Seller
and the Seller Subsidiaries have exercised ordinary care in assessing
Year 2000 Compliance status of all material computer software, firmware
and hardware used in the ordinary course of business as set forth on
Schedule 2.28, which is a Y2K Inventory & Risk Assessment Matrix. The
Seller and the Seller Subsidiaries shall continue to work through
Closing with its vendors to renovate or replace non-compliant computer
software, firmware and hardware in order to ensure that the testing of
renovated or replaced items is substantially underway by December 31,
1998.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
As an inducement to Seller to enter into and perform its obligations under this
Agreement, and notwithstanding any examinations, inspections, audits or other
investigations made by Seller, the Buyers hereby represent and warrant to Seller
as follows:
3.01 Organization and Authority. Mercantile and Merger Sub are each
corporations duly organized, validly existing and in good standing
under the laws of the State of Missouri, are each qualified to do
business and are each in good standing in all jurisdictions where its
ownership or leasing of property or the conduct of its business
requires it to be so qualified, except where the failure to be so
qualified would not have a Material Adverse Effect on Mercantile and
its Subsidiaries, taken as a whole, and has corporate power and
authority to own its properties and assets and to carry on its business
as it is now being conducted. Each of Mercantile and Merger Sub is
registered as a bank holding company with the Federal Reserve Board
under the BHCA.
3.02 Capitalization of Mercantile . The authorized capital stock of
Mercantile consists of (i) 200,000,000 shares of Mercantile Common
Stock, of which, as of March 31, 1998, 134,960,625 shares were issued
and 133,115,227 were outstanding and (ii) 5,000,000 shares of preferred
stock, no par value ("Mercantile Preferred Stock"), issuable in series,
of which as of the date hereof, no shares were issued and outstanding.
Mercantile has designated 4,000,000 shares of Mercantile Preferred
Stock as "Series A Junior Participating Preferred Stock" and has
reserved such shares under a Rights Agreement dated May 23, 1988
between Mercantile and Mercantile Bank National Association, as Rights
Agent (the "Rights Agreement" and, the rights to be issued pursuant
thereto, the "Rights"). As of March 31, 1997, Mercantile had reserved:
(i) 13,836,802 shares of Mercantile Common Stock for issuance under
Mercantile's Shareholder Investment Plan (the "Investment Plan") and
various employee and/or director stock option, incentive and/or benefit
plans (collectively, "Mercantile Employee/Director Stock Grants"); (ii)
5,400,000 shares of Mercantile Common Stock for issuance upon the
acquisition of CBT Corporation ("CBT") pursuant to the Agreement and
Plan of Merger, dated as of January 10, 1998, by and among Mercantile,
Merger Sub and CBT; and (iii) 13,800,000 shares of Mercantile Common
Stock for issuance upon the acquisition of Firstbank of Illinois
("Firstbank") pursuant to the Agreement and Plan of Merger, dated as of
January 30, 1998, by and among Mercantile, Merger Sub and Firstbank.
Mercantile has submitted to a vote of its shareholders at the Annual
Meeting of Shareholders to be held April 23, 1998 a proposal to amend
Mercantile's Restated Articles of Incorporation to increase the
authorized number of shares of Mercantile Common Stock from 200,000,000
to 400,000,000. From March 31, 1998 through the date of this Agreement,
no shares of Mercantile Common Stock have been issued, excluding any
such shares which may have been issued in connection with the
Investment Plan or Mercantile Employee/Director Stock Grants.
<PAGE>
Mercantile continually evaluates possible acquisitions and may prior to
the Effective Time enter into one or more agreements providing for, and
may consummate, the acquisition by it of another bank, association,
bank holding company, savings and loan holding company or other company
(or the assets thereof) for consideration that may include Equity
Securities. In addition, prior to the Effective Time, Mercantile may,
depending on market conditions and other factors, otherwise determine
to issue equity, equity-linked or other securities for financing
purposes or repurchase its outstanding Equity Securities.
Notwithstanding the foregoing, neither Mercantile nor any Mercantile
Subsidiary has taken or agreed to take any action or has any knowledge
of any fact or circumstance and neither Mercantile nor Merger Sub will
take any action that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code, (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement or (iii) prevent or impede
the Merger from qualifying for pooling-of-interests accounting
treatment. Except as set forth above, there are no other Equity
Securities of Mercantile outstanding. All of the issued and outstanding
shares of Mercantile Common Stock are validly issued, fully paid, and
nonassessable and have not been issued in violation of any preemptive
right of any shareholder of Mercantile. At the Effective Time, the
Mercantile Common Stock to be issued in the Merger will be duly
authorized, validly issued, fully paid and nonassessable, will not be
issued in violation of any preemptive right of any shareholder of
Mercantile.
3.03 Authorization.
(a) Mercantile and Merger Sub each has the corporate power and
authority to enter into this Agreement and to carry out their
respective obligations hereunder. The execution, delivery and
performance of this Agreement by Mercantile and Merger Sub and the
consummation by Mercantile and Merger Sub of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action of Mercantile and Merger Sub. Subject to the
receipt of such approvals of the Regulatory Authorities as may be
required by statute or regulation, this Agreement is a valid and
binding obligation of Mercantile and Merger Sub enforceable against
each in accordance with its terms.
(b) Neither the execution, delivery and performance by Mercantile and
Merger Sub of this Agreement, nor the consummation by Mercantile
and Merger Sub of the transactions contemplated hereby, nor
compliance by Mercantile and Merger Sub with any of the provisions
hereof, will (i) violate, conflict with or result in a breach of
any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or
result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration
of, or result in the creation of, any Lien upon any of the
properties or assets of Mercantile or Merger Sub under any of the
terms, conditions or provisions of (x) their respective Articles of
Incorporation or By-Laws, or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Mercantile or Merger Sub is a
party or by which they may be bound, or to which Mercantile or
Merger Sub or any of their respective properties or assets may be
subject, or (ii) subject to compliance with the statutes and
regulations referred to in subsection (c) of this Section 3.03,
violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Mercantile or Merger Sub
or any of their respective properties or assets; other than
violations, conflicts, breaches, defaults, terminations,
accelerations or Liens which would not have a Material Adverse
Effect on Mercantile and its Subsidiaries, taken as a whole.
(c) Other than in connection with or in compliance with the provisions
of the Missouri Statute, the DGCL, the Securities Act, the Exchange
Act, the securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA, the FDI Act or any required approvals of
any other Regulatory Authority, no notice to, filing with,
exemption or review by, or authorization, consent or approval of,
any public body or authority is necessary for the consummation by
Mercantile and Merger Sub of the transactions contemplated by this
Agreement.
<PAGE>
3.04 Mercantile Financial Statements. The consolidated balance sheets of
Mercantile and its Subsidiaries as of December 31, 1997, 1996 and 1995
and related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1997, together with the notes thereto, audited by KPMG
Peat Marwick LLP, as filed with the SEC on Form 10-K for the year ended
December 31, 1997 (collectively, the "Mercantile Financial
Statements"), have been prepared in accordance with GAAP, present
fairly the consolidated financial position of Mercantile and its
Subsidiaries at the dates thereof and the consolidated results of
operations, changes in shareholders' equity and cash flows of
Mercantile and its Subsidiaries for the periods stated therein and are
derived from the books and records of Mercantile and its Subsidiaries,
which are complete and accurate in all material respects and have been
maintained in accordance with good business practices. Neither
Mercantile nor any of its Subsidiaries has any material contingent
liabilities that are not described in the Mercantile Financial
Statements.
3.05 Mercantile Reports. Since January 1, 1995, each of Mercantile and its
Subsidiaries has filed any and all reports, registrations and
statements, together with any required amendments thereto, that it was
required to file with any Regulatory Authority. All such reports and
statements filed with any such Regulatory Authority are collectively
referred to herein as the "Mercantile Reports." As of its respective
date, each Mercantile Report complied in all material respects with all
the rules and regulations promulgated by the applicable Regulatory
Authority and did not contain any untrue statement of a material fact
or omit to state a 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.
3.06 Material Adverse Effect. Since December 31, 1997, there has been no
Material Adverse Effect on Mercantile and its Subsidiaries, taken as a
whole.
3.07 Registration Statement, Etc. None of the information regarding
Mercantile or any of its Subsidiaries to be supplied by Buyers for
inclusion or included in (i) the Registration Statement, (ii) the Proxy
Statement, or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will,
at the respective times such documents are filed with any Regulatory
Authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when
mailed, be false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy
Statement, at the time of the meeting of Seller's stockholders referred
to in Section 5.03, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation
of any proxy for such meeting. All documents which Mercantile or Merger
Sub are responsible for filing with any Regulatory Authority in
connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
3.08 Brokers and Finders. Neither Mercantile, Merger Sub nor any of their
respective officers, directors or employees 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 Mercantile or Merger Sub in
connection with this Agreement or the transactions contemplated hereby.
3.09 Accuracy of Information. The statements contained in this Agreement and
any other written document executed and delivered by or on behalf of
Buyers pursuant to the terms of this Agreement are true and correct as
of the date hereof in all material respects, and such statements and
documents do not omit any material fact necessary to make the
statements contained therein not misleading.
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time. During the period
from the date of this Agreement to the Effective Time, Seller and each
of the Seller Subsidiaries shall conduct their businesses according to
the ordinary and usual course consistent with past and current
practices and shall use their best efforts to maintain and preserve
their business organization, employees and advantageous business
relationships and retain the services of their officers and key
employees.
<PAGE>
4.02 Forbearances of Seller. Except as set forth in Schedule 4.02, and
except to the extent required by law, regulation or Regulatory
Authority, or with the prior written consent of Buyers (unless
otherwise specifically noted in this Section 4.02), during the period
from the date of this Agreement to the Effective Time, Seller shall not
and shall not permit any of the Seller Subsidiaries to:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from any of the Seller Subsidiaries to Seller or to
another of the Seller Subsidiaries), except that Seller may declare
and pay regular quarterly cash dividends of not more than (i)
$0.625 per share on the Seller Common Stock and (ii) accrued but
unpaid dividends on the Seller Preferred Stock; provided, however,
that Seller shall not declare or pay a quarterly dividend for any
quarter in which Seller stockholders will be entitled to receive a
regular quarterly dividend on the shares of Mercantile Common Stock
to be issued in the Merger;
(b) enter into or amend any employment, severance or similar agreement
or arrangement with any director, officer or employee, or
materially modify any of the Seller Employee Plans or grant any
salary or wage increase or materially increase any employee benefit
(including incentive or bonus payments), except (i) normal
individual increases in compensation to employees consistent with
past practice, (ii) as required by law or contract, (iii) such
increases of which Seller notifies Buyers in writing and which
Buyers do not disapprove within 10 days of the receipt of such
notice and (iv) pursuant to the provisions of Section 5.10 hereof;
(c) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of a material
amount of assets or securities, any disposition of a material
amount of assets or securities or any release or relinquishment of
any material contract rights;
(d) propose or adopt any amendments to its Certificate or Articles of
Incorporation or other charter document or By-Laws;
(e) issue, sell, grant, confer or award any of its Equity Securities,
except that the Seller may issue up to 800 shares of Seller Common
Stock upon exercise of the Seller Stock Options outstanding on the
date of this Agreement and up to 41,666 shares of Seller Common
Stock upon conversion of the Seller Preferred Stock as provided in
Section 6.03(g), or effect any stock split or adjust, combine,
reclassify or otherwise change its capitalization as it existed on
the date of this Agreement;
(f) except as provided in Section 6.03(g), purchase, redeem, retire,
repurchase or exchange, or otherwise acquire or dispose of,
directly or indirectly, any of its Equity Securities, whether
pursuant to the terms of such Equity Securities or otherwise;
(g) without first consulting with and obtaining the written consent of
Mercantile, cause or permit TRIB to enter into, renew or increase
any loan or credit commitment (including stand-by letters of
credit) to, or invest or agree to invest in any person or entity or
modify any of the material provisions or renew or otherwise extend
the maturity date of any existing loan or credit commitment
(collectively, "Lend to") in an amount equal to or in excess of
$1,000,000 or in any amount which, when aggregated with any and all
loans or credit commitments of Seller and the Seller Subsidiaries
to such person or entity, would be equal to or in excess of
1,000,000; provided, however, that Seller or any of the Seller
Subsidiaries may make any such loan or credit commitment in the
event (A) Seller or any Seller Subsidiary has delivered to Buyers
or their designated representative a notice of its intention to
make such loan and such information as Buyers or their designated
representative may reasonably require in respect thereof and (B)
Buyers or their designated representative shall not have reasonably
objected to such loan by giving written or facsimile notice of such
objection within two (2) business days following the delivery to
Buyers or their designated representative of the notice of
intention and information as aforesaid; provided further, however,
that nothing in this paragraph shall prohibit Seller or any Seller
Subsidiary from honoring any contractual obligation in existence on
the date of this Agreement. Notwithstanding this Section 4.02(g),
Seller shall be authorized without first consulting with Buyers or
obtaining Buyers' prior written consent to cause or permit TRIB to
increase the aggregate amount of any credit facilities theretofore
established in favor of any person or entity (each a "Pre-Existing
Facility"), provided that the aggregate amount of any and all such
increases shall not be in excess of the lesser of 10% of such
Pre-Existing Facilities or $250,000;
<PAGE>
(h) directly or indirectly (including through its officers, directors,
employees or other representatives) (i) initiate, solicit or
encourage any discussions, inquiries or proposals with any third
party (other than Buyers) relating to the disposition of any
significant portion of the business or assets of Seller or any of
the Seller Subsidiaries (other than in the ordinary course of
business) or the acquisition of Equity Securities of Seller or any
of the Seller Subsidiaries or the merger of Seller or any of the
Seller Subsidiaries with any person (other than Buyers) or any
similar transaction (each such transaction being referred to herein
as an "Acquisition Transaction"), (ii) provide any such person with
information or assistance or negotiate with any such person with
respect to an Acquisition Transaction, and Seller shall promptly
notify Buyers orally of all the relevant details relating to all
inquiries, indications of interest and proposals which it may
receive with respect to any Acquisition Transaction;
(i) take any action that would (i) prevent or impede the transactions
contemplated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code, (ii) materially impede or delay
the consummation of the transactions contemplated by this Agreement
or the ability of Buyers or Seller to obtain any approval of any
Regulatory Authority required for the transactions contemplated by
this Agreement or to perform its covenants and agreements under
this Agreement, or (iii) prevent or impede the Merger from
qualifying for pooling-of-interests accounting treatment;
(j) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity;
(k) materially restructure or change its investment securities
portfolio, through purchases, sales or otherwise, or the manner in
which the portfolio is classified or reported, or execute
individual investment transactions for its own account of greater
than $2,000,000 for U.S. Treasury or Federal Agency Securities and
$250,000 for all other investment instruments;
(l) agree in writing or otherwise to take any of the foregoing actions
or engage in any activity, enter into any transaction or
intentionally take or omit to take any other act which would make
any of the representations and warranties in Article II of this
Agreement untrue or incorrect in any material respect if made anew
after engaging in such activity, entering into such transaction, or
taking or omitting such other act; or
(m) enter into, increase or renew any loan or credit commitment
(including lines of credit) if the principal amount thereof is, or,
when aggregated with other loans or credit commitments, would be in
excess of $20,000 to any executive officer or director of Seller or
any of the Seller Subsidiaries (other than a non-employee
director), any holder of 10% or more of the outstanding shares of
Seller Common Stock, or any entity controlled, directly or
indirectly, by any of the foregoing or engage in any transaction
with any of the foregoing which is of the type or nature sought to
be regulated in 12 U.S.C. ss. 371c and 12 U.S.C. ss. 371c-1,
without first obtaining the prior written consent of Buyers, which
consent shall not be unreasonably withheld. For purposes of this
subsection (m), "control" shall have the meaning associated with
that term under 12 U.S.C. ss. 371c.
4.03 Forbearances of the Buyers . During the period from the date of this
Agreement to the Closing Date, the Buyers shall not, without the prior
consent of Seller, agree in writing or otherwise to engage in any
activity, enter into any transaction or take or omit to take any other
action:
(a) that would (i) prevent or impede the transactions contemplated
hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code, (ii) materially impede or delay the
consummation of the transactions contemplated by this Agreement or
the ability of Mercantile or Seller to obtain any necessary
approvals of any Regulatory Authority required for the transactions
contemplated by this Agreement or to perform its covenants and
agreements under this Agreement, or (iii) prevent or impede the
Merger from qualifying for pooling-of-interests accounting
treatment; or
(b) which would make any of the representations and warranties of
Article III of this Agreement untrue or incorrect in any material
respect if made anew after engaging in such activity, entering into
such transaction, or taking or omitting such other action.
<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence . Buyers and Seller shall each
afford to the other, and to the other's accountants, counsel and other
representatives, full access during normal business hours, during the
period prior to the Effective Time, to all their respective properties,
books, contracts, commitments and records and, during such period, each
shall furnish promptly to the other (i) a copy of each report, schedule
and other document filed or received by it during such period pursuant
to the requirements of federal and state securities laws and (ii) all
other information concerning its business, properties and personnel as
the other may reasonably request. Each party shall, and shall cause its
advisors and representatives to, (A) hold confidential all information
obtained in connection with any transaction contemplated hereby with
respect to the other party and its Subsidiaries which is not otherwise
public knowledge, (B) in the event of a termination of this Agreement,
return all documents (including copies thereof) obtained hereunder from
the other party or any of its Subsidiaries to such other party or its
Subsidiaries and (C) use its best efforts to cause all information
obtained pursuant to this Agreement or in connection with the
negotiation of this Agreement to be treated as confidential and not
use, or knowingly permit others to use, any such information unless
such information becomes generally available to the public.
5.02 Registration Statement; Regulatory Matters.
(a) Mercantile shall prepare and, subject to the review and consent of
Seller and Seller's legal counsel and accountants with respect to
matters relating to Seller, file with the SEC, within sixty (60)
days of the date of this Agreement, the Registration Statement (or
the equivalent in the form of preliminary proxy materials) with
respect to the shares of Mercantile Common Stock to be issued in
the Merger and the exercise of the Seller Stock Options after the
Effective Time. Mercantile shall promptly prepare and, subject to
the review and consent of Seller with respect to matters relating
to Seller file, within sixty (60) days of the date of this
Agreement, an application for approval of the Merger with the
Federal Reserve Board, and such additional regulatory authorities
as may require an application, and shall use its best efforts to
cause the Registration Statement to become effective. Mercantile
shall also take any action required to be taken under any
applicable state blue sky or securities laws in connection with the
issuance of such shares and the exercise of such options, and
Seller and the Seller Subsidiaries shall furnish Mercantile all
information concerning Seller and the Seller Subsidiaries and the
shareholders thereof as Mercantile may reasonably request in
connection with any such action.
(b) Seller and Buyers shall cooperate and use their respective best
efforts to prepare all documentation, to effect all filings and to
obtain all permits, consents, approvals and authorizations of all
third parties and Regulatory Authorities necessary to consummate
the transactions contemplated by this Agreement and, as and if
directed by Mercantile, to consummate such other transactions by
and among Mercantile's Subsidiaries and the Seller Subsidiaries
concurrently with or following the Effective Time, provided,
however, that such actions do not: (i) prevent or impede the
transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code; (ii)
materially impede or delay the receipt of any approval referred to
in Section 6.01(b); (iii) prevent or impede the transactions
contemplated hereby from qualifying for pooling-of-interests
accounting treatment unless Buyers first waive Seller's covenants
in Sections 5.02(b) and 5.16 hereof and the condition to Buyers'
obligation to consummate the Merger set forth in Section 6.03(f)
hereof; or (iv) materially impede or delay the consummation of the
transactions contemplated by this Agreement.
5.03 Stockholder Approval. Seller shall call a special meeting of its
stockholders to be held as soon as is reasonably possible for the
purpose of voting upon this Agreement and the Merger and related
matters. In connection with such meeting, Mercantile shall prepare,
subject to the review and consent of Seller, the Proxy Statement (which
shall be part of the Registration Statement to be filed with the SEC by
Mercantile) and mail the same to the stockholders of Seller. The Board
of Directors of Seller shall submit for approval of Seller's
stockholders the matters to be voted upon at such meeting. The Board of
Directors of Seller hereby does and, subject to the fiduciary duties of
the Seller's Board of Directors, as advised by outside legal counsel,
will recommend this Agreement and the transactions contemplated hereby
to the stockholders of Seller and use its reasonable best efforts to
obtain any vote of Seller's stockholders necessary for the approval of
this Agreement.
<PAGE>
5.04 Current Information. During the period from the date of this Agreement
to the Closing Date, (i) each party will promptly furnish the other
with copies of all monthly and other interim financial statements as
the same become available and shall cause one or more of its designated
representatives to confer on a regular and frequent basis with
representatives of the other party and (ii) Mercantile shall promptly
furnish to the Seller copies of all filings by Mercantile with each of
the Federal Reserve Board and the SEC. Each party shall promptly notify
the other party of the following events immediately upon learning of
the occurrence thereof, describing the same and, if applicable, the
steps being taken by the affected party with respect thereto: (a) the
occurrence of any event which could cause any representation or
warranty of such party or any schedule, statement, report, notice,
certificate or other writing furnished by such party to be untrue or
misleading in any material respect; (b) any Material Adverse Effect;
(c) the issuance or commencement of any governmental and/or regulatory
agency complaint, investigation or hearing or any communications
indicating that the same may be contemplated and, as to any such matter
which shall now or hereafter be in effect, any communications
pertaining thereto; or (d) the institution or the threat of any
material litigation involving such party.
5.05 Conforming Entries.
(a) Notwithstanding that Seller believes that Seller and Seller
Subsidiaries have established all reserves and taken all provisions
for possible loan losses required by GAAP and applicable laws,
rules and regulations, Seller recognizes that Buyers may have
adopted different loan, accrual and reserve policies (including
loan classifications and levels of reserves for possible loan
losses). From and after the date of this Agreement, Seller and
Buyers shall consult and cooperate with each other with respect to
conforming the loan, accrual and reserve policies of Seller and the
Seller Subsidiaries to those policies of Buyers, as specified in
each case in writing to Seller, based upon such consultation and as
hereinafter provided.
(b) In addition, from and after the date of this Agreement, Seller and
Buyers shall consult and cooperate with each other with respect to
determining appropriate Seller accruals, reserves and charges to
establish and take in respect of excess equipment write-off or
write-down of various assets and other appropriate charges and
accounting adjustments taking into account the parties' business
plans following the Merger, as specified in each case in writing to
Seller, based upon such consultation and as hereinafter provided.
(c) Seller and Buyers shall consult and cooperate with each other with
respect to determining the amount and the timing for recognizing
for financial accounting purposes Seller's expenses of the Merger
and the restructuring charges, if any, related to or to be incurred
in connection with the Merger.
(d) With respect to clauses (a) through (c) of this Section 5.05, it is
the objective of Mercantile and Seller that such reserves,
accruals, charges and divestitures, if any, to be taken shall be
consistent with GAAP.
<PAGE>
5.06 Environmental Reports . Buyers may perform, as soon as reasonably
practicable, but not later than ninety (90) days after the date hereof,
and pay for, a phase one environmental investigation and/or asbestos
survey by Environmental Operations, Inc. or any other firm designated
by Buyers, or any of them, on all real property owned, leased or
operated by Seller or any of the Seller Subsidiaries as of the date
hereof (but excluding space in retail and similar establishments leased
by Seller for automatic teller machines or leased bank branch
facilities where the space leased comprises less than 20% of the total
space leased to all tenants of such property) and within fifteen (15)
days after being notified by Sellers of the acquisition or lease of any
real property acquired or leased by Seller or any of the Seller
Subsidiaries after the date hereof (but excluding space in retail and
similar establishments leased by Seller for automatic teller machines
or leased bank facilities where the space leased comprises less than
20% of the total space leased to all tenants of such property). If the
results of the phase one investigation indicate, in Buyers' reasonable
opinion, that additional investigation is warranted, Buyers may
perform, at Buyers' expense, a phase two subsurface investigation or
investigations by Environmental Operations, Inc. on properties deemed
to warrant such additional study. Buyers shall perform any such phase
two investigation as soon as reasonably practicable after receipt of
the phase one report(s) for such properties and, in any event, shall
notify Seller and Environmental Operations, Inc. within fifteen (15)
days after receipt of the phase one report that Environmental
Operations, Inc. should promptly commence any such phase two
investigation. Should the cost of taking all remedial or other
corrective actions and measures (i) required by applicable law or (ii)
recommended by Environmental Operations, Inc. in such phase one or two
report or reports, in the aggregate, exceed the sum of $750,000, as
reasonably estimated by Environmental Operations, Inc., or if the cost
of such actions or measures cannot be so reasonably estimated by
Environmental Operations, Inc. to be such amounts or less with any
reasonable degree of certainty, Buyers shall have the right pursuant to
Section 7.01(e) hereof, for a period of fifteen (15) business days
following receipt from Environmental Operations, Inc. of such estimate
or indication that the cost of such actions and measures cannot be so
reasonably estimated, to terminate this Agreement.
5.07 Agreements of Affiliates . Set forth as Schedule 5.07 is a list (which
includes all individual and beneficial ownership and also identifies
how all such beneficially owned shares are registered on the stock
record book of Seller) of all persons whom Seller believes to be
"affiliates" of Seller for purposes of Rule 145 under the Securities
Act and for pooling-of-interests accounting treatment. Seller shall use
its best efforts to cause each person who is identified as an
"affiliate" to deliver to Mercantile, as of the date hereof, or as soon
as practicable hereafter, a written agreement in substantially the form
set forth as Exhibit A to this Agreement providing that each such
person will agree not to sell, pledge, transfer or otherwise dispose of
the shares of Mercantile Common Stock to be received by such person in
the Merger during the period designated in such letter and thereafter
in compliance with the applicable provisions of the Securities Act.
Prior to the Closing Date, and via letter, Seller shall amend and
supplement Schedule 5.07 and use its best efforts to cause each
additional person who is identified as an "affiliate" to execute a
written agreement as provided in this Section 5.07.
5.08 Expenses . Each party hereto shall bear its own expenses incident to
preparing, entering into and carrying out this Agreement and to
consummating the Merger; provided, however, that any and all fees
(excluding reasonable out-of-pocket expenses) paid by Seller to its
legal counsel, Winthrop & Weinstine, P.A., related to the preparation
of this Agreement and all other agreements and documentation in
connection with the consummation of the transactions contemplated
herein, shall not exceed $125,000; provided further, however, that
Buyers shall pay all printing expenses and filing fees incurred in
connection with this Agreement, the Registration Statement and the
Proxy Statement.
5.09 Miscellaneous Agreements and Consents.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its respective best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible,
including, without limitation, using its respective best efforts to
lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the
transactions contemplated hereby. Each party shall, and shall cause
each of its respective Subsidiaries to, use its best efforts to
obtain consents of all third parties and Regulatory Authorities
necessary or, in the opinion of Buyers, desirable for the
consummation of the transactions contemplated by this Agreement.
<PAGE>
(b) Seller, prior to the Effective Time, shall (i) consult and
cooperate with Buyers regarding the implementation of those
policies and procedures established by Buyers for its governance
and that of its Subsidiaries and not otherwise referenced in
Section 5.05 hereof, including, without limitation, policies and
procedures pertaining to the accounting, asset/liability
management, audit, credit, human resources, treasury and legal
functions, and (ii) at the reasonable request of Buyers, conform
Seller's existing policies and procedures in respect of such
matters to Buyers' policies and procedures or, in the absence of
any existing Seller policy or procedure regarding any such
function, introduce Buyers' policies or procedures in respect
thereof, unless to do so would cause Seller or any of the Seller
Subsidiaries to be in violation of any law, rule or regulation or
requirement of any Regulatory Authority having jurisdiction over
Seller and/or the Seller Subsidiary affected thereby.
5.10 Employee Agreements and Benefits.
(a) Following the Effective Time, Buyers shall cause the Surviving
Corporation to honor in accordance with their terms all employment,
severance and other compensation contracts set forth on Schedule
2.11(b) between Seller, any of the Seller Subsidiaries, and any
current or former director, officer, employee or agent thereof, and
all provisions for vested benefits or other vested amounts earned
or accrued through the Effective Time under the Seller Employee
Plans; provided, however, that Seller Employee Plans that cover
Employee Stock Options shall be governed by Section 5.15.
(b) Subject to Section 5.15, the provisions of the Seller Stock Plans
and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the Equity
Securities of Seller or any of the Seller Subsidiaries shall be
deleted and terminated as of the Effective Time.
(c) Except as set forth in Section 5.10(b) hereof, the Seller Employee
Plans shall not be terminated by reason of the Merger but shall
continue thereafter as plans of the Surviving Corporation until
such time as the employees of Seller and the Seller Subsidiaries
are integrated into Mercantile's employee benefit plans that are
available to other employees of Mercantile and its Subsidiaries,
subject to the terms and conditions specified in such plans and to
such changes therein as may be necessary to reflect the
consummation of the Merger. Mercantile shall take such steps as are
necessary or required to integrate the employees of Seller and the
Seller Subsidiaries into Mercantile's employee benefit plans
available to other employees of Mercantile and its Subsidiaries as
soon as practicable after the Effective Time, with (i) full credit
for prior service with Seller or any of the Seller Subsidiaries for
purposes of vesting and eligibility for participation and benefit
allocation (but not benefit accruals under any defined benefit
plan), and co-payments and deductibles, (ii) waiver of all waiting
periods, evidence of insurability and pre-existing condition
exclusions or penalties, and (iii) full credit for claims arising
prior to the Effective Time for purposes of deductibles,
out-of-pocket maximums, benefit maximums and all other similar
limitations for the applicable plan year in which the Merger is
consummated.
5.11 Press Releases. Seller and the Buyers shall consult with each other as
to the form, substance and timing of any proposed press release or
other proposed public disclosure of matters related to this Agreement
or any of the transactions contemplated hereby.
5.12 State Takeover Statutes. Seller will take all steps necessary to exempt
the transactions contemplated by this Agreement and any agreement
contemplated hereby from, and if necessary challenge the validity of,
any applicable state takeover law.
<PAGE>
5.13 Directors' and Officers' Indemnification. Mercantile agrees that the
Merger shall not affect or diminish any of the duties and obligations
of indemnification of Seller existing as of the Effective Time in favor
of employees, agents, directors or officers of Seller arising by virtue
of its Articles of Incorporation or By-Laws in the form in effect at
the date of this Agreement or arising by operation of law or arising by
virtue of any contract, resolution or other agreement or document
existing at the date of this Agreement, and Mercantile shall continue
such duties and obligations in full force and effect for so long as
they would (but for the Merger) otherwise survive and continue in full
force and effect. With respect to directors, officers, employees or
agents of TRIB, Mercantile agrees to provide indemnification to such
persons to the full extent permitted under Article Tenth of the
Articles of Association of TRIB as if such indemnification was
mandatory under such Article, subject only to the restrictions and
limitations set forth in such Article. To the extent that Seller's
existing directors' and officers' liability insurance policy would
provide coverage for any action or omission occurring prior to the
Effective Time, Seller agrees to give proper notice to the insurance
carrier and to Mercantile of any potential claim thereunder so as to
preserve Seller's rights to such insurance coverage. Mercantile
represents that the directors' and officers' liability insurance policy
maintained by it provides for coverage of "prior acts" for directors
and officers of entities acquired by Mercantile including Seller and
the Seller Subsidiaries on and after the Effective Time. After the
Effective Time, Mercantile will provide, or cause to be provided, such
coverage to the officers and directors of Seller to the same extent as
provided to officer and directors of Mercantile's other Subsidiaries.
5.14 Tax Opinion Certificates. Seller shall cause such of its executive
officers and directors as may be reasonably requested by Thompson
Coburn to timely execute and deliver to Thompson Coburn a certificate
substantially in the form of Exhibit B hereto.
5.15 Employee Stock Options.
(a) At the Effective Time, all rights with respect to Seller Common
Stock pursuant to Seller Stock Options that are outstanding at the
Effective Time, whether or not then exercisable, shall be converted
into and become rights with respect to Mercantile Common Stock, and
Mercantile shall assume all Seller Stock Options in accordance with
the terms of the Seller Stock Plan under which it was issued and
the Seller Stock Option Agreement by which it is evidenced. From
and after the Effective Time, (i) each Seller Stock Option assumed
by Mercantile shall be exercised solely for shares of Mercantile
Common Stock, (ii) the number of shares of Mercantile Common Stock
subject to each Seller Stock Option shall be equal to the number of
shares of Seller Common Stock subject to such Seller Stock Option
immediately prior to the Effective Time multiplied by the Exchange
Ratio and (iii) the per share exercise price under each Seller
Stock Option shall be adjusted by dividing the per share exercise
price under such Seller Stock Option by the Exchange Ratio and
rounding down to the nearest cent; provided, however, that the
terms of each Seller Stock Option shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect
any stock split, stock dividend, recapitalization or other similar
transaction subsequent to the Effective Time. It is intended that
the foregoing assumption shall be undertaken in a manner that will
not constitute a "modification" as defined in the Code, as to any
Seller Stock Option that is an "incentive stock option" as defined
under the Code.
(b) The shares of Mercantile Common Stock covered by the Seller Stock
Options shall be covered by an effective registration statement
filed on Form S-8 with the SEC and shall be duly authorized,
validly issued and in compliance with all applicable federal and
state securities laws, fully paid and nonassessable and not subject
to or in violation of any preemptive rights. Mercantile shall
maintain the effectiveness of such registration statement and any
successor registration statement (and maintain current status of
the prospectus contained therein or any successor prospectus) for
as long as such options remain outstanding. Mercantile shall at and
after the Effective Time have reserved sufficient shares of
Mercantile Common Stock for issuance with respect to such options.
Mercantile shall also take any action required to be taken under
any applicable state blue sky or securities laws in connection with
the issuance of such shares.
5.16 Best Efforts to Insure Pooling. Each of Mercantile and Seller
undertakes and agrees to use its best efforts to cause the Merger to
qualify for pooling-of-interests accounting treatment.
<PAGE>
ARTICLE VI
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger . The
respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
(a) Stockholder Approval. The approval of this Agreement and the Merger
shall have received the requisite vote of stockholders of Seller at
the special meeting of stockholders called pursuant to Section 5.03
hereof.
(b) Regulatory Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the Federal Reserve
Board and any other federal and/or state regulatory agencies whose
approval is required for consummation of the transactions
contemplated hereby, and all requisite waiting periods imposed by
the foregoing shall have expired.
(c) Effectiveness of Registration Statement. The Registration Statement
shall have been declared effective and shall not be subject to a
stop order or any threatened stop order.
(d) No Judicial Prohibition. Neither Seller, Mercantile nor Merger Sub
shall be subject to any order, decree or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(e) Tax Opinion. Each of Buyers and Seller shall have received from
Thompson Coburn an opinion (which opinion shall not have been
withdrawn at or prior to the Effective Time) reasonably
satisfactory in form and substance to it to the effect that (i) the
Merger will constitute a reorganization within the meaning of
Section 368 of the Code, (ii) each of the Buyers and Seller will
constitute a "party to the reorganization" within the meaning of
Section 368(b) of the Code, and (iii) consequently, Code Sections
361, 362 and 1032 will apply to the parties to the reorganization
as appropriate, subject to any applicable statutory, regulatory or
judicial limitations, and, to the effect that, as a result of the
Merger, except with respect to fractional share interests and
assuming that such Seller Common Stock is a capital asset in the
hands of the holder thereof at the Effective Time, (A) holders of
Seller Common Stock who receive Mercantile Common Stock in the
Merger will not recognize gain or loss for federal income tax
purposes on the receipt of such stock, (B) the basis of such
Mercantile Common Stock will equal the basis of the Seller Common
Stock for which it is exchanged, and (C) and the holding period of
such Mercantile Common Stock will include the holding period of the
Seller Common Stock for which it is exchanged.
6.02 Conditions to Obligations of Seller. The obligations of Seller to
effect the Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of Buyers set forth in Article III of this Agreement shall be true
and correct in all material respects as of the date of this
Agreement and as of the Effective Time (as though made on and as of
the Effective Time, except (i) to the extent such representations
and warranties are by their express provisions made as of a
specified date or period, (ii) where the facts which caused the
failure of any representation or warranty to be so true and correct
have not resulted, and are not likely to result, in a Material
Adverse Effect on Mercantile and its Subsidiaries, taken as a
whole, and (iii) for the effect of transactions contemplated by
this Agreement), and Seller shall have received a certificate of
any Executive Vice President of Mercantile, signing solely in his
capacity as an officer of Mercantile, to such effect.
(b) Performance of Obligations. Buyers shall have performed in all
material respects all obligations required to be performed by it
under this Agreement prior to the Effective Time, and Seller shall
have received a certificate of any Executive Vice President of
Mercantile, signing solely in his capacity as an officer of
Mercantile, to that effect.
(c) Permits, Authorizations, etc. Buyers shall have obtained any and
all material permits, authorizations, consents, waivers and
approvals required for the lawful consummation of the Merger.
<PAGE>
(d) No Material Adverse Effect. Since the date of this Agreement, there
shall have been no Material Adverse Effect on Mercantile and its
Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Mercantile shall have delivered to Seller an
opinion of Mercantile's counsel dated as of the Closing Date or a
mutually agreeable earlier date in substantially the form set forth
as Exhibit C to this Agreement.
6.03 Conditions to Obligations of the Buyers. The obligations of the Buyers
to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of Seller set forth in Article II of this Agreement shall be true
and correct in all material respects as of the date of this
Agreement and as of the Effective Time (as though made on and as of
the Effective Time, except (i) to the extent such representations
and warranties are by their express provisions made as of a
specific date or period, (ii) where the facts which caused the
failure of any representation or warranty to be so true and correct
have not resulted, and are not likely to result, in a Material
Adverse Effect on Seller and its Subsidiaries, taken as a whole,
and (iii) for the effect of transactions contemplated by this
Agreement) and Buyers shall have received a certificate of the
Chief Executive Officer and Chief Accounting Officer of Seller,
signing solely in their capacities as officers of Seller, to such
effect.
(b) Performance of Obligations. Seller shall have performed in all
material respects all obligations required to be performed by it
under this Agreement prior to the Effective Time, and Buyers shall
have received a certificate of the Chief Executive Officer and
Chief Accounting Officer, signing solely in their capacities as
officers of Seller, to that effect.
(c) Permits, Authorizations, etc. Seller shall have obtained any and
all material permits, authorizations, consents, waivers and
approvals required for the lawful consummation by it of the Merger.
(d) No Material Adverse Effect. Since the date of this Agreement, there
shall have been no Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Seller shall have delivered to Buyers an
opinion of Seller's counsel dated as of the Closing Date or a
mutually agreeable earlier date in substantially the form set forth
as Exhibit D to this Agreement.
(f) Pooling Letter. The Buyers shall have received as soon as
practicable after the date of this Agreement a letter of KPMG Peat
Marwick LLP, reasonably satisfactory in form and substance to the
Buyers, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment, which letter shall have
not been withdrawn.
(g) Conversion of Securities. Prior to the Effective Time, Seller and
each of the holders of Seller Preferred Stock shall have agreed to
convert such securities to Seller Common Stock, all actions
required to effect such conversion shall have been taken and the
conversion, itself, shall have been concluded.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval by the shareholders of
Seller:
(a) by mutual consent by the Executive Committee of the Board of
Directors of Mercantile and by the Board of Directors of Seller;
(b) by the Executive Committee of the Board of Directors of Mercantile
or the Board of Directors of Seller at any time after February 1,
1999 if the Merger shall not theretofore have been consummated
(provided that the terminating party is not then in material breach
of any representation, warranty, covenant or other agreement
contained herein);
<PAGE>
(c) by the Executive Committee of the Board of Directors of Mercantile
or the Board of Directors of Seller if (i) the Federal Reserve
Board or any other federal and/or state regulatory agency whose
approval is required for the consummation of the transactions
contemplated hereby has denied approval of the Merger and such
denial has become final and nonappealable or (ii) the stockholders
of Seller shall not have approved this Agreement at the meeting
referred to in Section 5.03;
(d) by the Executive Committee of the Board of Directors of Mercantile,
on the one hand, or by the Board of Directors of Seller, on the
other hand, in the event of a material volitional breach by the
other party to this Agreement of any representation, warranty,
covenant or agreement contained herein, which breach is not cured
within 30 days after written notice thereof is given to the
breaching party by the non-breaching party or is not waived by the
non-breaching party during such period; or
(e) by the Executive Committee of the Board of Directors of Mercantile
pursuant to and in accordance with the provisions of Section 5.06
hereof.
7.02 Effect of Termination. In the event of termination of this Agreement as
provided in Section 7.01 above, this Agreement shall forthwith become
void and there shall be no liability on the part of Buyers or Seller or
their respective officers or directors except as set forth in the
second sentence of Section 5.01 and in Sections 5.08 and 8.02, and
except that no termination of this Agreement pursuant to Section
7.01(d) shall relieve the breaching party of any liability to the
non-breaching party hereto arising from the intentional, deliberate or
willful breach of any representation, warranty, covenant or agreement
contained herein, after giving notice to such breaching party and an
opportunity to cure as set forth in Section 7.01(d).
7.03 Amendment . This Agreement, the Exhibits and the Schedules hereto may
be amended by the parties hereto, by action taken by or on behalf of
the Executive Committee of the Board of Directors of Mercantile and the
respective Boards of Directors of Merger Sub or Seller, at any time
before or after approval of this Agreement by the stockholders of
Seller; provided, however, that after any such approval by the
stockholders of Seller no such modification shall (A) alter or change
the amount or kind of Merger Consideration to be received by holders of
Seller Common Stock as provided in this Agreement or (B) adversely
affect the tax treatment to holders of Seller Common Stock as a result
of the receipt of the Merger Consideration. This Agreement, the
Exhibits and the Schedules hereto may not be amended except by an
instrument in writing signed on behalf of each of Buyers and Seller.
7.04 Waiver. Any term, condition or provision of this Agreement may be
waived in writing at any time by the party which is, or whose
shareholders or stockholders, as the case may be, are, entitled to the
benefits thereof.
ARTICLE VIII
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements. No
investigation by the parties hereto made heretofore or hereafter shall
affect the representations and warranties of the parties which are
contained herein and each such representation and warranty shall
survive such investigation. Except as set forth below in this Section
8.01, all representations, warranties and agreements in this Agreement
of Buyers and Seller or in any instrument delivered by Buyers or Seller
pursuant to or in connection with this Agreement shall expire at the
Effective Time or upon termination of this Agreement in accordance with
its terms. In the event of consummation of the Merger, the agreements
contained in or referred to in Sections 1.05-1.11, 5.02(b), 5.08, 5.10,
5.13 and 5.15 shall survive the Effective Time. In the event of
termination of this Agreement in accordance with its terms, the
agreements contained in or referred to in the second sentence of
Section 5.01 and Sections 5.08, 7.02 and 8.02 shall survive such
termination.
<PAGE>
8.02 Indemnification. Buyers and Seller (hereinafter, in such capacity being
referred to as the "Indemnifying Party") agree to indemnify and hold
harmless each other and their officers, directors and controlling
persons (each such other party being hereinafter referred to,
individually and/or collectively, as the "Indemnified Party") against
any and all losses, claims, damages or liabilities, joint or several,
to which the Indemnified Party may become subject under the Securities
Act, the Exchange Act or other federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof): (a) arise primarily out of
any information furnished to the Indemnified Party by the Indemnifying
Party and included in the Registration Statement as originally filed or
in any amendment therefor or supplement thereof, or in the Proxy
Statement, or in any amendment therefor or supplement thereof, or are
based primarily upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement as
originally filed or in any amendment therefor or supplement thereof, or
in the Proxy Statement, or in any amendment therefor or supplement
thereof, and provided for inclusion thereof by the Indemnifying Party
or (b) arise primarily out of or are based primarily upon the omission
or alleged omission by the Indemnifying Party to state in the
Registration Statement as originally filed or in any amendment therefor
or supplement thereof, or in the Proxy Statement, or in any amendment
therefor or supplement thereof, a material fact required to be stated
therein or necessary to make the statements made therein not
misleading, and agrees to reimburse each such Indemnified Party, as
incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim,
damage, liability or action.
8.03 No Assignment; Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors (including any corporation deemed to be a
successor corporation of any of the parties by operation of law) and
assigns, but neither this Agreement nor any right or obligation set
forth in any provision hereof may be transferred or assigned (except by
operation of law) by any party hereto without the prior written consent
of all other parties, and any purported transfer or assignment in
violation of this Section 8.03 shall be void and of no effect. There
shall not be any third party beneficiaries of any provisions hereof
except for Sections 1.09, 1.10, 1.11, 5.10, 5.13, 5.15 and 8.02 which
may be enforced against Mercantile or Seller, as the case may be, by
the parties therein identified or described.
8.04 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part of any party hereto
to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall
any single or partial exercise of any right, power or privilege
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
8.06 Headings. Article, section, subsection and paragraph titles, captions
and headings herein are inserted only as a matter of convenience and
for reference, and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
8.07 Entire Agreement. This Agreement and the Schedules and Exhibits hereto
constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede all prior negotiations,
representations, warranties, commitments, offers, letters of interest
or intent, proposal letters, contracts, writings or other agreements or
understandings with respect thereto. No waiver, and no modification or
amendment, of any provision of this Agreement, shall be effective
unless specifically made in writing and duly signed by all parties
thereto.
8.08 Counterparts. This Agreement may be executed in one or more
counterparts, and any party to this Agreement may execute and deliver
this Agreement by executing and delivering any of such counterparts,
each of which when executed and delivered shall be deemed to be an
original and all of which taken together shall constitute one and the
same instrument.
<PAGE>
8.09 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to be duly received (a) on the date given
if delivered personally or by cable, telegram, telex or facsimile or
(b) on the date received if mailed by registered or certified mail
(return receipt requested), to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
(i) if to the Buyers:
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Attention: John W. Rowe
Executive Vice President
Facsimile: (314) 425-2752
Copy to:
Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Facsimile: (314) 425-1386
and
Robert M. LaRose, Esq.
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Facsimile: (314) 552-7000
(ii) if to Seller:
Financial Services Corporation of the Midwest
224 18th Street, Suite 202
Rock Island, IL 61201
Attention: Douglas M. Kratz
Chairman and Chief Executive Officer
Perry B. Hansen
President
Facsimile: (309) 794-1895
Copy to:
Richard A. Hoel, Esq.
Winthrop & Weinstine, P.A.
3000 Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402
Facsimile: (612) 347-0600
8.10 Governing Law. This Agreement shall be governed by and controlled as to
validity, enforcement, interpretation, effect and in all other respects
by the internal laws of the State of Missouri applicable to contracts
made in that state.
8.11 Knowledge. "Knowledge" or "best knowledge" when used with respect to a
person shall mean those facts that are known or reasonably should be
known by the executive officers of such person.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their respective
corporate seals to be affixed hereto, all as of the date first written above.
Attest: MERCANTILE BANCORPORATION INC.
/s/ David W. Grant By: /S/ John W. Rowe
- ------------------------------- -----------------------------------------
David W. Grant John W. Rowe
Executive Vice President, Mercantile Bank
National Association, Authorized Officer
Attest: AMERIBANC, INC.
/s/ David W. Grant By: /s/ John W. Rowe
- ------------------------------- -----------------------------------------
David W. Grant John W. Rowe
Vice President
Attest: FINANCIAL SERVICES CORPORATION OF THE MIDWEST
/s/ Perry B. Hansen By: /s/ Douglas M. Kratz
- ------------------------------- -----------------------------------------
Perry B. Hansen, President Douglas M. Kratz
Chairman and Chief Executive Officer
Exhibit 2.2
VOTING AGREEMENT
This Voting Agreement dated as of April 13, 1998, is entered into by and between
Mercantile Bancorporation Inc. ("Mercantile"), and the undersigned director and
stockholder ("Stockholder") of Financial Services Corporation of the Midwest, a
Delaware corporation ("FSCM").
WHEREAS, FSCM, Mercantile and Ameribanc, Inc., a wholly owned subsidiary of
Mercantile ("Ameribanc"), have proposed to enter into an Agreement and Plan of
Merger (the "Agreement"), dated as of today, which contemplates the acquisition
by Mercantile of 100% of the capital stock of FSCM (collectively, the "FSCM
Stock") by means of a merger between FSCM and Ameribanc; and
WHEREAS, Mercantile is willing to expend the substantial time, effort and
expense necessary to implement the Merger only if Stockholder enters into this
Voting Agreement; and
WHEREAS, the undersigned stockholder of FSCM believes that the Merger is in his
best interest and the best interest of FSCM.
NOW, THEREFORE, in consideration of the premises, Stockholder hereby agrees as
follows:
1. Voting Agreement. Stockholder shall vote all of the shares of FSCM Stock
he now owns of record or has voting control with respect to or hereafter
acquires, in favor of the Merger at the meeting of stockholders of FSCM to
be called for the purpose of approving the Merger (the "Meeting").
2. No Competing Transaction. Stockholder shall not vote any of his shares of
FSCM Stock in favor of any other merger or sale of all or substantially
all the assets of FSCM to any person other than Mercantile or its
affiliates until the effective time of the Merger, termination of the
Agreement or abandonment of the Merger by the mutual agreement of FSCM and
Mercantile, whichever comes first.
3. Transfers Subject to Agreement. Stockholder shall not transfer his shares
of FSCM Stock unless the transferee, prior to such transfer, executes a
voting agreement with respect to the transferred shares substantially to
the effect of this Voting Agreement and satisfactory to Mercantile.
4. No Ownership Interest. Nothing contained in this Voting Agreement shall be
deemed to vest in Mercantile any direct or indirect ownership or incidence
of ownership of or with respect to any shares of FSCM Stock. All rights,
ownership and economic benefits of and relating to the shares of FSCM
Stock shall remain and belong to Stockholder, and Mercantile shall have no
authority to manage, direct, superintend, restrict, regulate, govern or
administer any of the policies or operations of FSCM or exercise any power
or authority to direct Stockholder in the voting of any of his shares of
FSCM Stock, except as otherwise expressly provided herein, or the
performance of his duties or responsibilities as a director of FSCM.
5. Evaluation of Investment. Stockholder, by reason of his knowledge and
experience in financial and business matters and in his capacity as a
director of a financial institution, believes himself capable of
evaluating the merits and risks of the potential investment in common
stock of Mercantile, $0.01 par value ("Mercantile Common Stock"),
contemplated by the Agreement.
6. Documents Delivered. Stockholder acknowledges having reviewed the
Agreement and its attachments and that reports, proxy statements and other
information with respect to Mercantile filed with the Securities and
Exchange Commission (the "Commission") were, prior to his execution of
this Voting Agreement, available for inspection and copying at the Offices
of the Commission and that Mercantile delivered the following such
documents to FSCM:
(a) Mercantile's Annual Report on Form 10-K for the year ended December
31, 1997; and
(b) Mercantile's Current Reports on Form 8-K dated January 10, 1998 and
January 30, 1998.
7. Amendment and Modification. This Voting Agreement may be amended, modified
or supplemented at any time by the written approval of such amendment,
modification or supplement by Stockholder and Mercantile.
8. Entire Agreement. This Voting Agreement evidences the entire agreement
among the parties hereto with respect to the matters provided for herein,
and there are no agreements, representations or warranties with respect to
the matters provided for herein other than those set forth herein and in
the Agreement.
<PAGE>
9. Severability. The parties agree that if any provision of this Voting
Agreement shall under any circumstances be deemed invalid or inoperative,
this Voting Agreement shall be construed with the invalid or inoperative
provisions deleted and the rights and obligations of the parties shall be
construed and enforced accordingly.
10. Counterparts. This Voting Agreement may be executed in two counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11. Governing Law. The validity, construction, enforcement and effect of this
Voting Agreement shall be governed by the internal laws of the State of
Missouri, without regard to its conflict of laws principles.
12. Headings. The headings for the paragraphs of this Voting Agreement are
inserted for convenience only and shall not constitute a part hereof or
affect the meaning or interpretation of this Voting Agreement.
13. Termination. This Voting Agreement shall terminate upon the consummation
of the Merger or upon termination of the Agreement, whichever comes first.
14. Successors. This Voting Agreement shall be binding upon and inure to the
benefit of Mercantile and its successors, and Stockholder and
Stockholder's spouse and their respective executors, personal
representatives, administrators, heirs, legatees, guardians and other
legal representatives. This Voting Agreement shall survive the death or
incapacity of Stockholder. This Agreement may be assigned by Mercantile
only to an affiliate of Mercantile.
MERCANTILE BANCORPORATION INC.
By: /s/ John W. Rowe
----------------------------------------
John W. Rowe, Executive Vice President
Mercantile Bank National Association
Authorized Officer
STOCKHOLDER
--------------------------------------------
Exhibit 99.1
St. Louis--Mercantile Bancorporation, Inc. (NYSE: MTL), the St. Louis-based $31
billion bank holding company, today announced plans to merge with Financial
Services Corporation of the Midwest, a $500 million one-bank holding company
headquartered in Rock Island, Illinois. The company's subsidiary bank, THE Rock
Island Bank, National Association, has the number one market share position in
Rock Island County, which forms the eastern half of the Quad-Cities metropolitan
area.
The merger with Financial Services Corporation will significantly strengthen
Mercantile's presence in the Quad-Cities, the largest metropolitan area between
Chicago and Des Moines, Iowa, catapulting the bank from the fourth to the number
two market share position. The acquisition will also provide Mercantile with a
strong commercial presence to complement its successful existing retail
franchise, and create a local financial institution with total assets in excess
of $800 million. In addition to improving Mercantile's market position in the
Quad-Cities, the merger will enhance Mercantile's number one position in
"outstate Illinois," which excludes the nine counties that comprise the Chicago
market.
"With the Financial Services Corporation merger, Mercantile is combining forces
with a strong commercial lending resource, which greatly strengthens our
Quad-Cities franchise," said William E. Stangler, President and Chief Executive
Officer of Mercantile Bank-Davenport. "We are particularly pleased to have THE
Rock Island Bank's highly experienced and highly regarded commercial lending
staff, led by Richard J. Carlson, President and Chief Operating Officer, and
Donald P. Ackerman, Executive Vice President and Senior Lending Officer, join
the Mercantile team."
"The opportunity to affiliate with Mercantile offers our customers a strong
financial partner with a continued commitment to the local community," said
Perry B. Hansen, Chairman and Chief Executive Officer of THE Rock Island Bank.
"This partnership complements our strong commercial lending business with
Mercantile's residential lending business, one of the largest in the
Quad-Cities."
Based upon Mercantile's closing stock price of $56.8125 on April 13, 1998, the
transaction is valued at approximately $118 million. Financial Services
Corporation shareholders will receive 6.8573 shares of Mercantile Common Stock
for each share or share equivalent of Financial Services Corporation Common
Stock. The merger is structured as a tax-free exchange, will be accounted for as
a pooling of interests, and is expected to close in the third quarter of 1998.
In addition, Mercantile may repurchase up to 10 percent of the shares issued in
the transaction. The merger is subject to the approval of Financial Services
Corporation shareholders and various regulatory authorities.
