<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1994
Registration No. 33------
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------
MERCANTILE BANCORPORATION INC.
(Exact name of registrant as specified in its charter)
MISSOURI 6712 43-0951744
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification
incorporation or Code Number) Number)
organization)
P.O. Box 524
St. Louis, Missouri 63166-0524
(314) 425-2525
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
RALPH W. BABB, JR.
Vice Chairman
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
(314) 425-2525
(Name, address, including ZIP code, and telephone number, including area
code, of agent for service)
------------------------------
Copy to:
JON W. BILSTROM, ROBERT M. LaROSE, RONALD C. MOTTAZ,
ESQ. ESQ. ESQ.
General Counsel Thompson & Mitchell Thomas, Mottaz,
and Secretary One Mercantile Center Eastman & Sherwood
Mercantile St. Louis, Missouri 307 Henry Street
Bancorporation Inc. 63101 P.O. Box 398
P.O. Box 524 (314) 231-7676 Alton, Illinois 62002
St. Louis, Missouri (618) 462-9201
63166-0524
(314) 425-2525
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
------------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per unit aggregate offering price<F2> registration fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $5.00 par value<F1> 970,000 shares N/A $19,121,000 $6,593.45
==================================================================================================================================
<FN>
<F1> Includes one attached Preferred Share Purchase Right per share.
<F2> Estimated solely for purposes of computing the Registration Fee
pursuant to the provisions of Rule 457(f)(2), and based upon the
$19,121,000 aggregate book value of the 144,320 shares of Common
Stock, $10.00 par value, of Wedge Bank issued and outstanding as
of June 30, 1994.
</TABLE>
------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
===============================================================================
<PAGE> 2
<TABLE>
MERCANTILE BANCORPORATION INC.
CROSS REFERENCE SHEET FURNISHED PURSUANT TO ITEM 501(b)
OF REGULATION S-K SHOWING HEADING OR LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-4
-----------------------------------------------------------
<CAPTION>
Form S-4 Item Number and Caption Heading or Location in Prospectus
-------------------------------- ---------------------------------
<S> <C>
A. Information about the Transaction
1. Forepart of Registration Statement Facing Page; Cross Reference Sheet;
and Outside Front Cover Page Outside Front Cover Page of Prospectus
of Prospectus
2. Inside Front and Outside Back Available Information; Incorporation of
Cover Pages of Prospectus Certain Information by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings Summary Information; Pro Forma Financial
to Fixed Charges and Other Information
Information
4. Terms of the Transaction Summary Information; Incorporation of
Certain Information by Reference; Terms of
the Proposed Acquisition; Certain Federal
Income Tax Consequences of the
Acquisition; Information Regarding MBI
Common Stock
5. Pro Forma Financial Pro Forma Financial Information
Information
6. Material Contacts with the Summary Information; Terms of the
Company Being Acquired Proposed Acquisition
7. Additional Information Required Not Applicable
for Reoffering by Persons and
Parties Deemed to be
Underwriters
8. Interests of Named Experts and Legal Matters
Counsel
9. Disclosure of Commission Not Applicable
Position on Indemnification for
Securities Act Liabilities
-i-
<PAGE> 3
<CAPTION>
Form S-4 Item Number and Caption Heading or Location in Prospectus
-------------------------------- ---------------------------------
<S> <C>
B. Information About the Registrant
10. Information with Respect to S-3 Incorporation of Certain Information by
Registrants Reference; Summary Information;
Information Regarding MBI Common Stock
11. Incorporation of Certain Incorporation of Certain Information by
Information by Reference Reference
12. Information with Respect to S-2 Not Applicable
or S-3 Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
14. Information with Respect to Not Applicable
Registrants Other Than S-2 or
S-3 Registrants
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Not Applicable
Companies
16. Information with Respect to S-2 Not Applicable
or S-3 Companies
17. Information with Respect to Summary Information; Information
Companies Other Than S-2 or Regarding Wedge Holding and Wedge Bank
S-3 Companies
D. Voting and Management Information
18. Information if Proxies, Consents Information Regarding Special Meetings;
or Authorizations are to be Incorporation of Certain Information by
Solicited Reference; Dissenters' Rights of
Stockholders of Wedge Bank; Information
Regarding Wedge Holding and Wedge Bank
19. Information if Proxies, Consents Not Applicable
or Authorizations are not to be
Solicited in an Exchange Offer
</TABLE>
-ii-
<PAGE> 4
[WEDGE HOLDING LETTERHEAD]
---------------, 1994
Dear Stockholder:
The Board of Directors cordially invites you to attend a
Special Meeting of Stockholders of The Wedge Holding Company ("Wedge
Holding") to be held at ----------, Central Time, on ---------------,
1994, at -------------------------------------------------- ("Special
Meeting"). At this important meeting, you will be asked to consider and
vote upon the Agreement and Plan of Reorganization dated as of July 6,
1994, and the related Plan of Merger dated as of August 31, 1994
(collectively, the "Merger Agreement"), pursuant to which Mercantile
Bancorporation Incorporated of Illinois ("Mercantile Illinois"), a wholly
owned subsidiary of Mercantile Bancorporation Inc. ("MBI") will acquire
all of the outstanding capital stock of Wedge Bank, an Illinois state bank
("Wedge Bank") through the consummation of two concurrent and
interdependent transactions: (i) the exchange (the "Exchange") of all
shares of common stock of Wedge Bank owned beneficially and of record by
Wedge Holding for shares of MBI Common Stock, and (ii) the merger (the
"Merger") of a to-be-formed Illinois state bank, which will be a wholly
owned subsidiary of Mercantile Illinois, with and into Wedge Bank.
I have enclosed the following items relating to the
Special Meeting and the Exchange and the Merger:
1. Joint Proxy Statement/Prospectus;
2. Proxy card; and
3. A pre-addressed return envelope to Wedge Holding for
the proxy card.
The Joint Proxy Statement/Prospectus and related proxy materials set
forth, or incorporate by reference, financial data and other important
information relating to Wedge Holding, Wedge Bank and MBI, and describe
the terms and conditions of the proposed Exchange and Merger. The Board
of Directors requests that you carefully review these materials before
completing the enclosed proxy card or attending the Special Meeting.
THE BOARD OF DIRECTORS OF WEDGE HOLDING CAREFULLY CONSIDERED
AND APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING IN THE BEST
INTEREST OF WEDGE HOLDING AND ITS STOCKHOLDERS. THE WEDGE HOLDING BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT. ---
APPROVAL OF THE MERGER AGREEMENT IS A CONDITION TO THE
CONSUMMATION OF THE EXCHANGE AND THE MERGER. Accordingly, it is
important that your shares be represented at the Special Meeting,
whether or not you plan to attend the Special Meeting in person. Please
complete, sign and date the enclosed proxy card and return it to Wedge
Holding in the enclosed pre-addressed envelope which requires no postage
if mailed within the United States. If you later decide to attend the
Special Meeting and vote in person, or if you wish to revoke your proxy
for any reason prior to the vote at the Special Meeting, you may do so
and your proxy will have no further effect. You may revoke your proxy
by delivering to the Secretary of Wedge Holding a written notice of
revocation or another proxy relating to the same shares bearing a later
date than the proxy being revoked or by attending the Special Meeting
and voting in person. Attendance at the Special Meeting will not in
itself constitute a revocation of an earlier dated proxy.
If you need assistance in completing your proxy card or if
you have any questions about the Joint Proxy Statement/Prospectus, please
feel free to contact -------------------- at (-----) ----------.
Sincerely,
Melvin G. Hall
Chairman and Chief Executive Officer
Robert Lynn Hall
President
-iii-
<PAGE> 5
[WEDGE BANK LETTERHEAD]
---------------, 1994
Dear Stockholder:
The Board of Directors cordially invites you to attend a
Special Meeting of Stockholders of Wedge Bank to be held at ----------,
Central Time, on ----------, 1994, at
- -------------------------------------------------- ("Special Meeting").
At this important meeting, you will be asked to consider and vote upon
the Agreement and Plan of Reorganization dated as of July 6, 1994, and
the related Plan of Merger dated as of August 31, 1994 (collectively, the
"Merger Agreement"), pursuant to which Mercantile Bancorporation
Incorporated of Illinois ("Mercantile Illinois"), a wholly owned
subsidiary of Mercantile Bancorporation Inc. ("MBI") will acquire all of
the outstanding capital stock of Wedge Bank through the consummation of
two concurrent and interdependent transactions: (i) the exchange (the
"Exchange") of all shares of common stock of Wedge Bank owned beneficially
and of record by The Wedge Holding Company for shares of MBI Common Stock,
and (ii) the merger (the "Merger") of a to-be-formed Illinois state bank,
which will be a wholly owned subsidiary of Mercantile Illinois, with and
into Wedge Bank.
I have enclosed the following items relating to the Special
Meeting and the Exchange and the Merger:
1. Joint Proxy Statement/Prospectus;
2. Proxy card; and
3. A pre-addressed return envelope to Wedge Bank for
the proxy card.
The Joint Proxy Statement/Prospectus and related proxy materials set
forth, or incorporate by reference, financial data and other important
information relating to Wedge Bank, Wedge Holding and MBI, and describe
the terms and conditions of the proposed Exchange and Merger. The Board
of Directors requests that you carefully review these materials before
completing the enclosed proxy card or attending the Special Meeting.
THE BOARD OF DIRECTORS OF WEDGE BANK CAREFULLY CONSIDERED AND
APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING IN THE BEST INTEREST
OF WEDGE BANK AND ITS STOCKHOLDERS. THE WEDGE BANK BOARD RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
---
APPROVAL OF THE MERGER AGREEMENT IS A CONDITION TO THE
CONSUMMATION OF THE EXCHANGE AND THE MERGER. Accordingly, it is
important that your shares be represented at the Special Meeting,
whether or not you plan to attend the Special Meeting in person. Please
complete, sign and date the enclosed proxy card and return it to Wedge
Bank in the enclosed pre-addressed envelope which requires no postage if
mailed within the United States. If you later decide to attend the
Special Meeting and vote in person, or if you wish to revoke your proxy
for any reason prior to the vote at the Special Meeting, you may do so
and your proxy will have no further effect. You may revoke your proxy
by delivering to the Secretary of Wedge Bank a written notice of
revocation or another proxy relating to the same shares bearing a later
date than the proxy being revoked or by attending the Special Meeting
and voting in person. Attendance at the Special Meeting will not in
itself constitute a revocation of an earlier dated proxy.
If you need assistance in completing your proxy card or if
you have any questions about the Joint Proxy Statement/Prospectus, please
feel free to contact -------------------- at (-----) ----------.
Sincerely,
Melvin G. Hall
Chairman and Chief Executive Officer
Robert Lynn Hall
President
-iv-
<PAGE> 6
THE WEDGE HOLDING COMPANY
620 E. Broadway
Alton, Illinois 62002-9007
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held
---------------, 1994
TO THE STOCKHOLDERS OF WEDGE HOLDING:
Notice is hereby given that a Special Meeting of Stockholders of THE
WEDGE HOLDING COMPANY, a Delaware corporation ("Wedge Holding"), will be held
at ----------------------------- --------------------- , on ---------------,
1994, at ---------- Central Time, for the following purposes:
(1) To consider and vote upon the adoption and approval of the
Agreement and Plan of Reorganization dated as of July 6, 1994 and the related
Plan of Merger dated as of August 31, 1994, pursuant to which (i) Wedge
Holding and Mercantile Bancorporation Incorporated of Illinois ("Mercantile
Illinois"), a wholly owned subsidiary of Mercantile Bancorporation Inc.
("MBI"), will effect an exchange (the "Exchange") of all shares of the Common
Stock of Wedge Bank owned by Wedge Holding for shares of MBI Common Stock,
(ii) a wholly owned subsidiary of Mercantile Illinois will be merged with and
into Wedge Bank (the "Merger") in a transaction which would result in the
business and operations of Wedge Bank being continued through such wholly
owned subsidiary, and whereby, upon the consummation of the Merger, each share
of Wedge Bank (other than shares held by Mercantile Illinois or Wedge Holding)
will be converted into the right to receive shares of MBI Common Stock, and
(iii) Wedge Holding will be entitled to receive in the Exchange, and the
stockholders of Wedge Bank (other than Mercantile Illinois or Wedge Holding)
will be entitled to receive in the Merger, the number of shares of MBI Common
Stock determined by multiplying such stockholders' respective percentage
ownership interest in Wedge Bank by 970,000, the total number of shares of
MBI Common Stock to be issued in the Exchange and the Merger.
(2) To transact such other business as may properly come before
the Special Meeting or any adjournment thereof.
The record date for determining the stockholders entitled to receive
notice of, and to vote at, the Special Meeting or any adjournment thereof has
been fixed as of the close of business on ---------------, 1994.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE
VOTE AT THE SPECIAL MEETING BY FOLLOWING THE PROCEDURES SET FORTH IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
Melvin G. Hall
Chairman and Chief Executive Officer
Robert Lynn Hall
President
Alton, Illinois
- ---------------, 1994
<PAGE> 7
WEDGE BANK
620 E. Broadway
Alton, Illinois 62002-9007
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held
---------------, 1994
TO THE STOCKHOLDERS OF WEDGE BANK:
Notice is hereby given that a Special Meeting of Stockholders of
WEDGE BANK, an Illinois state bank ("Wedge Bank"), will be held at
- --------------------------------------------------, on ---------------,
1994, at ---------- Central Time, for the following purposes:
(1) To consider and vote upon the adoption and approval of the
Agreement and Plan of Reorganization dated as of July 6, 1994 and the
related Plan of Merger dated as of August 31, 1994, pursuant to which (i)
The Wedge Holding Company ("Wedge Holding") and Mercantile Bancorporation
Incorporated of Illinois ("Mercantile Illinois"), a wholly owned
subsidiary of Mercantile Bancorporation Inc., will effect an exchange
(the "Exchange") of all shares of the Common Stock of Wedge Bank owned by
Wedge Holding for shares of MBI Common Stock, (ii) a wholly owned
subsidiary of Mercantile Illinois will be merged with and into Wedge Bank
(the "Merger") in a transaction which would result in the business and
operations of Wedge Bank being continued through such wholly owned
subsidiary, and (iii) Wedge Holding will be entitled to receive in the
Exchange, and the stockholders of Wedge Bank (other than Mercantile
Illinois or Wedge Holding) will be entitled to receive in the Merger, the
number of shares of MBI Common Stock determined by multiplying such
stockholders' respective percentage ownership interest in Wedge Bank by
970,000, the total number of shares of MBI Common Stock to be issued in
the Exchange and the Merger.
(2) To transact such other business as may properly come before
the Special Meeting or any adjournment thereof.
The record date for determining the stockholders entitled to
receive notice of, and to vote at, the Special Meeting or any
adjournment thereof has been fixed as of the close of business on
- ---------------, 1994.
Any stockholder of Wedge Bank who (1) files with Wedge Bank prior
to the Special Meeting a written objection to the Merger, (2) does not
vote in favor of the Merger, and (3) within 20 days after receiving
written notice of the date the Merger became effective files a written
demand with Wedge Bank for payment of the fair value of such
stockholder's shares as of the day prior to the date on which the vote
was taken approving the Merger, shall be entitled to fair value of the
stockholder's shares of Wedge Bank Common Stock, under the applicable
provisions of the Illinois Banking Act, as set forth in Annex A to the
-------
attached Joint Proxy Statement/Prospectus.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE
VOTE AT THE SPECIAL MEETING BY FOLLOWING THE PROCEDURES SET FORTH IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
Melvin G. Hall
Chairman and Chief Executive Officer
Robert Lynn Hall
President
Alton, Illinois
- ---------------, 1994
<PAGE> 8
SUBJECT TO COMPLETION, DATED OCTOBER 5, 1994
MERCANTILE BANCORPORATION INC.
PROSPECTUS
--------------------
THE WEDGE HOLDING COMPANY
WEDGE BANK
JOINT PROXY STATEMENT
SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON ---------------, 1994
This Prospectus of Mercantile Bancorporation Inc. ("MBI") relates
to up to 970,000 shares of Common Stock, $5.00 par value, and attached
Preferred Share Purchase Rights (the "Rights"), of MBI (the Common Stock
and Rights are collectively referred to herein as the "MBI Common
Stock"), to be issued upon the acquisition by Mercantile Bancorporation
Incorporated of Illinois, a Missouri corporation and a wholly owned
subsidiary of MBI ("Mercantile Illinois"), of all of the outstanding
capital stock of Wedge Bank, an Illinois state bank ("Wedge Bank"). The
acquisition will be accomplished through the consummation of two
concurrent and interdependent transactions: (i) the exchange (the
"Exchange") of all shares of common stock of Wedge Bank owned
beneficially and of record by The Wedge Holding Company, a Delaware
corporation ("Wedge Holding"), for shares of MBI Common Stock, and (ii)
the merger (the "Merger" and together with the Exchange, the
"Acquisition") of a to-be-formed Illinois state bank which will be a
wholly owned subsidiary of Mercantile Illinois (the "Acquisition Bank")
with and into Wedge Bank. The Acquisition will be consummated in
accordance with the terms and conditions, including regulatory and
stockholder approvals, as set forth in the Agreement and Plan of
Reorganization dated July 6, 1994 by and among MBI, Mercantile Illinois,
Wedge Holding and Wedge Bank, and the related Plan of Merger dated as of
August 31, 1994 (collectively, the "Merger Agreement"). This Prospectus
also serves as the Proxy Statement of each of Wedge Holding and Wedge
Bank for use in connection with the Special Meeting of Stockholders of
Wedge Holding (the "Wedge Holding Special Meeting") and the Special
Meeting of Stockholders of Wedge Bank (the "Wedge Bank Special Meeting"
and, collectively with the Wedge Holding Special Meeting, the "Special
Meetings"), both of which will be held on -------------, 1994 at the
time and place and for the purposes stated in the Notices of Special
Meeting of Stockholders accompanying this Joint Proxy
Statement/Prospectus.
Pursuant to the Acquisition, MBI will issue up to an aggregate of
970,000 shares of MBI Common Stock (the "Acquisition Consideration").
Upon the consummation of the Exchange, Wedge Holding will be entitled to
receive the number of shares of MBI Common Stock representing Wedge
Holding's percentage ownership interest in Wedge Bank multiplied by the
Acquisition Consideration. Pursuant to the Merger Agreement, Wedge
Holding shall liquidate and dissolve within six months after the
Exchange (the "Liquidation") and effect a liquidating distribution to
the holders of the capital stock of Wedge Holding of all shares of MBI
Common Stock then owned beneficially and of record by Wedge Holding.
Upon consummation of the Merger, the business and operations of Wedge
Bank will be continued through Wedge Bank as a wholly owned subsidiary
of Mercantile Illinois, and each issued and outstanding share of the
common stock of Wedge Bank, $10 par value (the "Wedge Bank Common
Stock"), held by a stockholder of Wedge Bank (other than any shares owned
by Mercantile Illinois or Wedge Holding or shares owned by stockholders
of Wedge Bank who exercise their dissenters' rights under the Illinois
Banking Act) shall cease to be outstanding and will be converted into
the right to receive the number of shares of MBI Common Stock as is
determined by multiplying his or her percentage ownership interest in
Wedge Bank by the Acquisition Consideration. The fair market value of
MBI Common Stock to be issued as the Acquisition Consideration may
fluctuate and at the consummation of the Acquisition may be more or less
than the current fair market value of such shares. See "TERMS OF THE
PROPOSED ACQUISITION - General Description of the Acquisition." No
fractional shares of MBI Common Stock will be issued in the Acquisition, but
cash will be paid in lieu of such fractional shares. See "TERMS OF THE
PROPOSED ACQUISITION - Fractional Shares."
(cover page continued on next page)
<PAGE> 9
The transaction is intended to qualify as a tax-deferred
reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"). The Acquisition generally is intended to achieve certain tax-
deferral benefits for federal income tax purposes for stockholders of
Wedge Bank who do not exercise their dissenters' rights under the
Illinois Banking Act. See "SUMMARY INFORMATION - Federal Income Tax
Consequences in General" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE ACQUISITION."
MBI Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "MTL." On October 4, 1994, the closing sale
price for MBI Common Stock as reported on the NYSE Composite Tape was
$35.375. This Joint Proxy Statement/Prospectus, the Notices of Special
Meetings and the forms of proxy were first mailed to the stockholders of
Wedge Holding and Wedge Bank on or about ---------------, 1994.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is ---------------, 1994.
(end of cover page)
-2-
<PAGE> 10
AVAILABLE INFORMATION
---------------------
MBI is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by MBI with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Suite 1300, Seven World Trade
Center, New York, New York 10048 and Room 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60661. MBI Common Stock is
listed on the NYSE, and such reports, proxy statements and other information
concerning MBI are available for inspection and copying at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 and exhibits
thereto (the "Registration Statement") covering the securities offered hereby
which has been filed by MBI with the Commission. As permitted by the rules
and regulations of the Commission, this Joint Proxy Statement/Prospectus
omits certain information contained or incorporated by reference in the
Registration Statement. Statements contained in this Joint Proxy Statement/
Prospectus provide a summary of the contents of any contract or other
document referenced herein but are not necessarily complete and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement. For such further
information, reference is made to the Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS
RELATING TO MBI, EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN,
ARE AVAILABLE, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO JON W.
BILSTROM, GENERAL COUNSEL AND SECRETARY, MERCANTILE BANCORPORATION INC., P.O.
BOX 524, ST. LOUIS, MISSOURI 63166-0524, TELEPHONE (314) 425-2525. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
- -----------------, 1994.
The following documents filed with the Commission by MBI under the
Exchange Act are incorporated herein by reference:
(a) MBI's Report on Form 10-K for the year ended December 31,
1993.
(b) MBI's Reports on Form 10-Q for the quarters ended March 31
and June 30, 1994.
(c) MBI's Current Reports on Form 8-K dated February 11, 1994,
June 17, 1994 and September 21, 1994.
(d) The description of MBI's Common Stock set forth in Item 1 of
MBI's Registration Statement on Form 8-A, dated March 5,
1993, and any amendment or report filed for the purpose of
updating such description.
-3-
<PAGE> 11
(e) The description of MBI's Preferred Share Purchase Rights set
forth in Item 1 of MBI's Registration Statement on Form 8-A,
dated March 5, 1993, and any amendment or report filed for
the purpose of updating such description.
All documents filed by MBI pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and until the date
of the Special Meetings shall be deemed to be incorporated by reference
herein and made a part hereof from the date any such document is filed.
The information relating to MBI contained in this Joint Proxy
Statement/Prospectus does not purport to be complete and should be read
together with the information in the documents incorporated by reference
herein. Any statement contained herein or in a document incorporated
herein by reference shall be deemed to be modified or superseded for
purposes hereof to the extent that a subsequent statement contained
herein or in any other subsequently filed document incorporated by
reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part hereof.
Any statements contained in this Joint Proxy Statement/Prospectus
involving matters of opinion, whether or not expressly so stated, are
intended as such and not as representations of fact.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MBI,
WEDGE HOLDING OR WEDGE BANK. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SHARES OF MBI COMMON STOCK TO WHICH IT RELATES
OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES PURSUANT HERETO SHALL
IMPLY OR CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF MBI OR ITS SUBSIDIARIES, WEDGE HOLDING OR WEDGE BANK OR IN
THE INFORMATION SET FORTH HEREIN SUBSEQUENT TO THE DATE HEREOF.
-4-
<PAGE> 12
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SUMMARY INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Business of MBI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Business of Wedge Holding and Wedge Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Proposed Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Special Meetings of Stockholders of Wedge Holding and Wedge
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Federal Income Tax Consequences in General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenters' Rights of Stockholders of Wedge Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Markets and Market Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Comparative Unaudited Per Share Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Summary Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
INFORMATION REGARDING SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Date, Time and Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Record Date; Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Voting and Revocation of Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
TERMS OF THE PROPOSED ACQUISITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
General Description of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Background of and Reasons for the Merger; Board
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Conditions of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Termination of the Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Surrender of Wedge Bank Stock Certificates and Receipt of MBI
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Certain Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Business Pending the Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Interests of Certain Persons in the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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DISSENTERS' RIGHTS OF STOCKHOLDERS OF WEDGE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PRO FORMA FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Comparative Unaudited Per Share Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Pro Forma Combined Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INFORMATION REGARDING WEDGE HOLDING AND WEDGE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Management's Discussion and Analysis of Financial Condition and
Results of Operations of Wedge Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
INFORMATION REGARDING MBI STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Description of MBI Common Stock and Attached Preferred Share
Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Restrictions on Resale of MBI Stock by Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Comparison of the Rights of Stockholders of MBI, Wedge Holding
and Wedge Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Certain Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Payment of Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Support of Subsidiary Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
FIRREA and FDICIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Depositor Preference Statute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
INDEX TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ANNEX
Annex A - Dissenters' Rights Provisions of the Illinois Banking Act . . . . . . . . . . . . . . . . . . . . A-1
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SUMMARY INFORMATION
The following is a summary of the important terms of the proposed
Acquisition and related information discussed elsewhere in this Joint
Proxy Statement/Prospectus but does not purport to be complete and is
qualified in its entirety by reference to the more detailed information
which appears elsewhere in this Joint Proxy Statement/Prospectus and the
documents incorporated by reference herein, including the annex attached
to this Joint Proxy Statement/Prospectus. Stockholders of Wedge Holding
and Wedge Bank are urged to read this Joint Proxy Statement/Prospectus
and the annex hereto in their entirety.
BUSINESS OF MBI
MBI, a Missouri corporation, was organized in 1970 and is a
registered bank holding company under the federal Bank Holding Company
Act of 1956, as amended (the "BHCA"). At August 30, 1994, MBI owned,
directly or indirectly, all of the capital stock of Mercantile Bank of
St. Louis National Association ("Mercantile Bank") and 40 other
commercial banks which operate from 244 banking offices and 249
Fingertip Banking automated teller machines, including 25 off-premises
machines, located throughout Missouri, southern Illinois, eastern Kansas
and Iowa. MBI's services concentrate in four major lines of business --
consumer, corporate, investment banking and trust services. MBI also
operates non-banking subsidiaries which provide related financial
services, including investment management, brokerage services and asset-
based lending. As of June 30, 1994, MBI had 43,146,531 shares of its
Common Stock issued and outstanding. As of June 30, 1994, MBI reported,
on a consolidated basis, total assets of $11.9 billion, total deposits
of $9.1 billion, total loans of $7.6 billion and shareholders' equity of
$1.0 billion.
In the first quarter of 1994, MBI completed the acquisition of
United Postal Bancorp, Inc. ("UPB"), a Missouri-based holding company
for United Postal Savings Association, which as of December 31, 1993
reported total assets of $1.3 billion and total deposits of $1.0
billion. Also during the first quarter of 1994, MBI acquired Metro
Bancorporation, an Iowa-based holding company for The Waterloo Savings
Bank, which as of December 31, 1993 reported total assets of $370 million
and total deposits of $333 million. The acquisition of these entities
was accounted for under the pooling-of-interests method of accounting
and, accordingly, MBI has restated its consolidated financial statements
for all periods reported herein. MBI has filed supplemental financial
statements as of and for the years ended December 31, 1993, 1992 and
1991 in a Current Report on Form 8-K, dated June 17, 1994, which has
been incorporated by reference into this Joint Proxy
Statement/Prospectus.
On July 13, 1994, MBI announced that it had entered into a
definitive Agreement and Plan of Reorganization whereby MBI will acquire
UNSL Financial Corp ("UNSL"), a Missouri-based holding company for
United Savings Bank. As of June 30, 1994, UNSL reported, on a
consolidated basis, total assets of $464 million, total deposits of $376
million, total loans of $417 million and shareholders' equity of $39
million. The acquisition will be accounted for under the pooling-of-
interests method of accounting and is anticipated to be completed in the
first quarter of 1995.
On September 21, 1994, MBI entered into an agreement to acquire
Central Mortgage Bancshares, Inc., a Missouri corporation ("CMB") and a
multi-bank holding company based in Kansas City, Missouri. CMB owns all
of the outstanding capital stock of four Missouri state banks with 17
offices in western Missouri and a mortgage banking unit based in
Springfield, Missouri. At June 30, 1994, CMB reported total assets of
$629 million, total deposits of $542 million, total loans of $377 million
and shareholders' equity of $51.2 million.
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MBI's principal executive offices are located at One Mercantile
Center, St. Louis, Missouri 63101, and its telephone number is (314)
425-2525.
BUSINESS OF WEDGE HOLDING AND WEDGE BANK
Wedge Holding, a Delaware corporation, commenced operations in 1977
and is a registered bank holding company under the BHCA. Wedge Holding
currently owns 82.15% of the issued and outstanding shares of the
capital stock of Wedge Bank, an Illinois state bank founded in 1902
which operates from six locations in Alton, East Alton, Bethalto,
Brighton and Godfrey, Illinois. As of June 30, 1994, Wedge Holding had
63,734 shares of its preferred stock, $50 par value ("Wedge Holding
Preferred Stock"), and 15,318 shares of its common stock, $100 par value
("Wedge Holding Common Stock"), issued and outstanding, and Wedge Bank
had 144,320 shares of its Common Stock issued and outstanding. As of
June 30, 1994, Wedge Holding reported, on a consolidated basis, total
assets of $210.6 million, total deposits of $162.2 million, total loans
of $113.2 million and stockholders' equity of $16.7 million.
The principal executive offices of Wedge Holding and Wedge Bank are
located at 620 E. Broadway, Alton, Illinois 62002-9007.
THE PROPOSED ACQUISITION
Pursuant to the Merger Agreement, Mercantile Illinois will acquire
all of the outstanding capital stock of Wedge Bank through the
consummation of two concurrent and interdependent transactions: (i) the
Exchange of all shares of Wedge Bank Common Stock owned beneficially and
of record by Wedge Holding for shares of MBI Common Stock, and (ii) the
Merger of Acquisition Bank with and into Wedge Bank. Upon consummation
of the Exchange and the Merger, the separate corporate existence of
Acquisition Bank will terminate, and the business and operations of
Wedge Bank will be continued through Wedge Bank as a wholly owned
subsidiary of Mercantile Illinois. Following the Closing Date, MBI
intends to cause Mercantile Bank of Illinois National Association, a
national banking association and wholly owned subsidiary of Mercantile
Illinois, to merge with and into Wedge Bank, with the surviving entity
being an Illinois state bank which shall thereafter change its name to
"Mercantile Bank of Illinois."
Pursuant to the Acquisition, MBI will issue up to an aggregate of
970,000 shares of MBI Common Stock as the Acquisition Consideration.
Upon the consummation of the Exchange, Wedge Holding will be entitled to
receive the number of shares of MBI Common Stock representing Wedge
Holding's percentage ownership interest in Wedge Bank multiplied by the
Acquisition Consideration. Pursuant to the Merger Agreement, within six
months of the Exchange Wedge Holding shall effect the Liquidation and a
liquidating distribution to the holders of Wedge Holding Preferred Stock
and Wedge Holding Common Stock of all shares of MBI Common Stock that
are then owned beneficially and of record by Wedge Holding.
Upon the consummation of the Merger, each issued and outstanding
share of Wedge Bank Common Stock (other than any shares held by
Mercantile Illinois or Wedge Holding or shares owned by stockholders of
Wedge Bank who exercise dissenters' rights under the Illinois Banking
Act) shall cease to be outstanding and will be converted into the rights
to receive the number of shares of MBI Common Stock as is determined by
multiplying his or her percentage ownership interest in Wedge Bank by
the Acquisition Consideration. The fair market value of MBI Common
Stock to be issued as the Acquisition Consideration may fluctuate and at
the consummation of the Acquisition may be more or less than the current
fair market value of such shares.
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The Merger Agreement provides that the consummation of the Merger
is subject to certain terms and conditions, including the approval of
the Merger Agreement by the affirmative vote of the holders of a
majority of the outstanding shares of Wedge Holding Preferred Stock and
Wedge Holding Common Stock, voting as a single class, and Wedge Bank
Common Stock, and receipt of the requisite regulatory approvals and an
opinion of counsel regarding certain federal income tax aspects of the
transaction. For a discussion of each of the conditions to the Merger,
see "TERMS OF THE PROPOSED ACQUISITION - Conditions of the Acquisition."
The Acquisition will be consummated and become effective on the date and
at the time (the "Effective Time") that the certificate of merger is
issued by the Illinois Commissioner of Banks and Trust Companies (the
"Illinois Commissioner").
Unless the parties otherwise agree, the date of the closing of the
Acquisition (the "Closing Date"), shall be on the first business day of
the month immediately following the month in which the last of the
following events occurs (i) the approval of the Merger Agreement by the
stockholders of Wedge Holding and Wedge Bank, (ii) the thirtieth day
after the approval of the Merger by the Federal Deposit Insurance
Corporation (the "FDIC"), and (iii) the approval by the Illinois
Commissioner and any other bank regulatory agency that may be necessary
or appropriate. The Merger Agreement may be terminated at any time
prior to the Closing Date by the mutual consent of the parties or,
unilaterally, by either party upon the occurrence of certain events or
if the Acquisition is not consummated by March 31, 1995. See "TERMS OF
THE PROPOSED ACQUISITION - Conditions of the Acquisition" and
"- Termination of the Merger Agreement."
OTHER AGREEMENTS
Voting Agreements. In addition to and contemporaneously with the
Merger Agreement, MBI executed separate Voting Agreements (the "Voting
Agreements") with each of Melvin G. Hall and Robert Lynn Hall. Pursuant
to the Voting Agreements, each of Melvin G. Hall and Robert Lynn Hall
agreed that he will vote all of the shares of Wedge Holding Common Stock
and/or Wedge Bank that he then owned or subsequently acquired in favor
of the approval of the Merger Agreement at the Special Meetings and to
take any and all actions necessary to cause all shares of Wedge Bank
Common Stock owned by Wedge Holding or subsequently acquired in favor of
the Merger Agreement at the Wedge Bank Special Meeting. In addition,
until the earliest to occur of the Closing Date of the Acquisition, the
termination of the Merger Agreement or the abandonment of the
Acquisition, each further agreed that he will not vote any such shares
in favor of the approval of any other competing acquisition proposal
involving Wedge Holding or Wedge Bank and a third party. Each of Melvin
G. Hall and Robert Lynn Hall also agreed that he will not transfer
shares of Wedge Holding or Wedge Bank Common Stock owned by him and will
not take any action to cause Wedge Holding to transfer any shares of
Wedge Bank Common Stock owned by Wedge Holding.
Employment Agreements. Each of Melvin G. Hall, Chairman and Chief
Executive Officer of Wedge Holding and Wedge Bank, and Robert Lynn Hall,
President of Wedge Holding and Wedge Bank, have entered into an
employment agreement providing for his employment by Wedge Bank and
election to Wedge Bank's Board of Directors following the Closing Date.
See "TERMS OF THE PROPOSED ACQUISITION - Interests of Certain Persons in
the Acquisition."
SPECIAL MEETINGS OF STOCKHOLDERS OF WEDGE HOLDING AND WEDGE BANK
The Special Meetings will be held on --------------, 1994, at -----
P.M. Central Time, at
- ---------------------------------------------------------------------.
Approval by the stockholders of Wedge Holding and Wedge Bank of the
Merger Agreement requires the affirmative vote of the holders of a
majority of the outstanding shares of Wedge Holding Preferred Stock and
Wedge Holding Common Stock, voting as a single class, and Wedge Bank
Common Stock.
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Only holders of record of Wedge Holding and Wedge Bank Common Stock at
the close of business on -----------, 1994 (the "Record Date") will be
entitled to notice of, and to vote at, the Special Meetings. At such
date, there were 63,734 shares of Wedge Holding Preferred Stock
outstanding, 15,318 shares of Wedge Holding Common Stock outstanding and
144,320 shares of Wedge Bank Common Stock outstanding.
As of the Record Date, directors and officers of Wedge Holding and
their affiliates owned beneficially an aggregate of 59,933 shares of Wedge
Holding Preferred Stock and 14,409 shares of Wedge Holding Common Stock, or
approximately 94% of the shares of Wedge Holding Preferred Stock and Wedge
Holding Common Stock entitled to vote at the Wedge Holding Special Meeting.
All of Wedge Holding's directors and officers and their affiliates have
indicated their intention to vote their shares for the approval of the Merger
Agreement.
As of the Record Date, directors and officers of Wedge Bank and
their affiliates owned beneficially an aggregate of 132,807 shares of Wedge
Bank Common Stock, or approximately 92% of the shares entitled to vote
at the Wedge Bank Special Meeting. All of Wedge Bank's directors and
officers and their affiliates have indicated their intention to vote
their shares for the approval of the Merger Agreement.
THE BOARD OF DIRECTORS OF WEDGE HOLDING CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE ACQUISITION AS BEING IN THE BEST
INTEREST OF WEDGE HOLDING AND ITS STOCKHOLDERS. THE WEDGE HOLDING BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
---
AGREEMENT.
THE BOARD OF DIRECTORS OF WEDGE BANK CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE ACQUISITION AS BEING IN THE BEST
INTEREST OF WEDGE BANK AND ITS STOCKHOLDERS. THE WEDGE BANK BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
---
AGREEMENT.
REASONS FOR THE ACQUISITION
The respective Boards of Directors of Wedge Holding and Wedge Bank
believe that the Acquisition will result in a combined entity that is
(i) committed to serving the banking and other financial needs of Wedge
Bank's depositors, employees, customers and communities, (ii) capable of
competing more effectively with larger financial institutions that have
exerted increased competitive pressure on Wedge Bank, and (iii) well
capitalized and capable of enjoying significant market penetration
throughout the southern Illinois bank market. The respective Boards of
Directors of Wedge Holding and Wedge Bank also believe that the
Acquisition will provide the holders of Wedge Holding Common Stock and
Wedge Bank Common Stock with an opportunity to receive a premium over
the book value of their shares, and will enable such stockholders to
participate as MBI shareholders, on a tax deferred basis, in the
expanded opportunities for growth and profitability made possible by the
Acquisition. See "TERMS OF THE PROPOSED ACQUISITION - Background of and
Reasons for the Acquisition; Board Recommendations."
MBI's Board of Directors believes that the Acquisition will enable
MBI to (i) take advantage of an opportunity for MBI to increase its
presence in the regional banking market in southern Illinois through the
acquisition of an established banking organization, and (ii) enhance
MBI's ability to compete in the increasingly competitive banking and
financial services industry. See "TERMS OF THE PROPOSED ACQUISITION -
Background of and Reasons for the Acquisition; Board Recommendations."
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FRACTIONAL SHARES
No fractional shares of MBI Common Stock will be issued to Wedge
Holding or the former stockholders of Wedge Bank in connection with the
Acquisition. Wedge Holding and each former holder of Wedge Bank Common
Stock who otherwise would have been entitled to receive a fraction of a
share of MBI Common Stock shall receive in lieu thereof cash, without
interest, in an amount equal to the holder's fractional share interest
in Wedge Bank multiplied by the closing stock price of MBI Common Stock
on the NYSE Composite Tape as reported in The Wall Street Journal on the
-----------------------
Closing Date of the Merger. Cash received by Wedge Bank stockholders in
lieu of fractional shares may give rise to taxable income. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION."
WAIVER AND AMENDMENT
Any provision of the Merger Agreement, including, without
limitation, the conditions to the consummation of the Acquisition and
the restrictions described under the caption "TERMS OF THE PROPOSED
ACQUISITION - Business Pending the Acquisition," may be (i) waived in
writing at any time by the party that is, or whose stockholders are,
entitled to the benefits thereof or (ii) amended at any time by written
agreement of the parties approved by or on behalf of their respective
Boards of Directors, whether before or after the Special Meetings,
provided, however, that after approval of the Merger Agreement by the
- -------- -------
stockholders of Wedge Holding and Wedge Bank at the Special Meetings no
such modification may alter or change any of the terms of the Merger
Agreement if such alteration or change would adversely affect the
stockholders of Wedge Holding or Wedge Bank (which, in all cases, would
include an alteration or change (a) in the amount or form of the
consideration to be received by Wedge Holding and the stockholders
of Wedge Bank in the Acquisition and (b) that would result in materially
different income tax consequences than those described in "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE ACQUISITION" in this Joint Proxy Statement/
Prospectus). If any amendment to the Merger Agreement adversely affects
the rights of the stockholders of Wedge Holding and Wedge Bank
thereunder, Wedge Holding and Wedge Bank will resolicit proxies from the
stockholders of Wedge Holding and Wedge Bank by means of a revised Joint
Proxy Statement/Prospectus and related proxy materials prior to the
consummation of the Acquisition.
FEDERAL INCOME TAX CONSEQUENCES IN GENERAL
A condition of the Exchange and the Merger is that Thompson &
Mitchell, MBI's legal counsel, deliver its opinion to the effect that,
assuming the Exchange and the Merger occur in accordance with the Merger
Agreement and conditioned on the accuracy of certain representations
made by MBI, Mercantile Illinois, Wedge Holding, Wedge Bank, and certain
stockholders of Wedge Holding, each of the Exchange and the Merger will
constitute a "reorganization" for federal income tax purposes and that,
accordingly, no gain or loss will be recognized by stockholders of Wedge
Holding or stockholders of Wedge Bank who exchange their shares of stock
solely for shares in MBI Common Stock in the Exchange, the Merger or the
Liquidation. However, cash received in lieu of fractional shares may
give rise to taxable income. EACH STOCKHOLDER OF WEDGE HOLDING AND
WEDGE BANK IS URGED TO CONSULT HIS OWN TAX ADVISOR TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES OF THE EXCHANGE AND THE MERGER TO HIM,
INCLUDING THE APPLICABILITY OF VARIOUS STATE, LOCAL, AND FOREIGN TAX
LAWS. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION."
-11-
<PAGE> 19
REGULATORY APPROVALS
Applications regarding the Acquisition have been filed with the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") the FDIC and the Illinois Commissioner. The Acquisition cannot
be consummated until receipt of such approvals and the lapse of the 30-
day waiting period after the approval of the applications. In
reviewing the Acquisition, the FDIC will consider various factors,
including possible anticompetitive effects of the Acquisition and will
examine the financial and managerial resources and future prospects of
the combined organization. The United States Department of Justice has
the right to initiate litigation challenging the Merger upon antitrust
grounds during the 30-day waiting period. There can be no assurance
that the necessary regulatory approvals will be received or as to the
timing of such approvals. See "TERMS OF THE PROPOSED ACQUISITION -
Certain Regulatory Approvals" and "SUPERVISION AND REGULATION."
DISSENTERS' RIGHTS OF STOCKHOLDERS OF WEDGE BANK
Under the Illinois Banking Act, a holder of shares of Wedge Bank
Common Stock may, in lieu of the consideration such stockholder would
otherwise receive in the Merger, seek payment of the fair value of such
shares and receive payment of such fair value in cash if the Merger is
consummated by following certain procedures set forth in Section 29 of
the Illinois Banking Act, the text of which is attached hereto as Annex
-----
A. Failure to follow such procedures may result in a loss of such
- -
stockholder's dissenters' rights. Any Wedge Bank stockholder returning
a blank executed proxy card will be deemed to have approved the Merger
Agreement, thereby waiving any such dissenters' rights. Stockholders of
Wedge Holding do not have dissenters' rights with respect to the
Exchange. See "DISSENTERS' RIGHTS OF STOCKHOLDERS OF WEDGE BANK."
ACCOUNTING TREATMENT
It is intended that the Acquisition will be accounted for under the
pooling-of-interests method of accounting. See "TERMS OF THE PROPOSED
ACQUISITION - Accounting Treatment."
MARKETS AND MARKET PRICES
MBI Common Stock is currently traded on the NYSE under the symbol
"MTL." Prior to March 25, 1993, MBI Common Stock was quoted on the
National Market System of the National Association of Securities Dealers
Automated Quotations System ("NMS/NASDAQ") under the symbol "MTRC." The
last sale price reported for MBI Common Stock on July 5, 1994, the last
trading date preceding the public announcement of the Acquisition, was
$35.25. To the knowledge of management of Wedge Holding, there have not been
any transactions in Wedge Holding Preferred Stock or Wedge Holding Common Stock
during the past three fiscal years. Although Wedge Bank Common Stock is not
traded in an established trading market, management of Wedge Bank is aware of
certain transactions in Wedge Bank Common Stock. Management of Wedge Bank does
not have knowledge of the prices paid in all transactions involving its shares
and have not necessarily verified the prices indicated in the table with
both parties to the relevant transaction. Because of the lack of an
established public market for shares of Wedge Bank Common Stock, the
prices indicated may not reflect the prices which would be paid for such
shares in an active market. The last sale price for Wedge Bank Common
Stock known to management prior to the public announcement of the
Acquisition on July 5, 1994, was $58.00.
-12-
<PAGE> 20
</TABLE>
<TABLE>
<CAPTION>
MBI<F1> Wedge Bank <F2>
--------------------------------------- --------------------------------
Cash Cash
Sales Price Dividend Sales Price Dividend
--------------- --------------
High Low Declared High Low Declared
---- --- -------- ---- --- --------
<S>
1992 <C> <C> <C> <C> <C> <C>
- ----
First Quarter $27.375 $23.125 $ .2325 $58.00 $58.00 --
Second Quarter 29.500 25.625 .2325 58.00 58.00 .75
Third Quarter 29.375 25.375 .2325 -- -- 2.00
Fourth Quarter 32.125 25.875 .2325 -- -- 2.50
1993
- ----
First Quarter $35.625 $30.625 $ .2475 -- -- --
Second Quarter 37.625 29.375 .2475 -- -- 1.50
Third Quarter 34.375 31.625 .2475 -- -- --
Fourth Quarter 34.625 29.125 .2475 -- -- 2.50
1994
- ----
First Quarter $34.125 $29.875 $ .28 -- -- --
Second Quarter 38.125 31.125 .28 -- -- 3.00
Third Quarter 39.25 34.875 .28 -- -- 4.48
Fourth Quarter (through 36.875 35.25
October 4, 1994)<F1>
<FN>
- -----------------------------
<F1> For a recent sale price of MBI Common Stock, see the cover of this
Joint Proxy Statement/Prospectus.
<F2> The last transaction in Wedge Bank Common Stock for which a price is
known to management of Wedge Bank occurred in the second quarter of
1992.
</TABLE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated selected
historical per share data of MBI and Wedge Bank and the corresponding pro
forma and pro forma equivalent per share amounts giving effect to the
proposed Acquisition, individually and in conjunction with the completed
merger of Ameribanc, Inc. ("ABNK"), which was completed on April 30, 1992 and
accounted for as a purchase, and the proposed mergers of UNSL and CMB. The
data presented is based upon the consolidated financial statements and related
notes of MBI, Wedge Bank, UNSL and CMB included in this Joint Proxy Statement/
Prospectus or in documents incorporated herein by reference, and the pro
forma combined consolidated balance sheet and income statements, including
the notes thereto, appearing elsewhere herein. This information should be
read in conjunction with such historical and pro forma financial statements
and related notes thereto. The assumptions used in the preparation of this
table appear in the notes on page 42 of this Joint Proxy Statement/Prospectus.
See "PRO FORMA FINANCIAL INFORMATION." This data is not necessarily
indicative of the results of the future operations of the combined
organization or the actual results that would have occurred if the Acquisition,
the completed merger of ABNK or the proposed mergers of UNSL and CMB had been
consummated prior to the periods indicated.
-13-
<PAGE> 21
<TABLE>
<CAPTION>
MBI/ MBI/
Wedge Bank All Entities
MBI Wedge Bank Pro Forma Pro Forma
Reported Reported Combined <F1> Combined<F2>
-------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Book Value per Share:
June 30, 1994 $ 23.49 $132.78 23.41 23.23
December 31, 1993 22.40 131.11 22.33 22.16
Cash Dividends Declared per Share:
Six months ended June 30, 1994 .56 3.01 .56 .56
Year ended December 31, 1993 .99 4.01 .99 .99
Year ended December 31, 1992 .93 5.16 .93 .93
Year ended December 31, 1991 .93 1.74 .93 .93
Earnings per Share:
Six months ended June 30, 1994 1.84 9.33 1.83 1.79
Year ended December 31, 1993 2.80 24.19 2.82 2.79
Year ended December 31, 1992 2.36 16.76 2.33 2.37
Year ended December 31, 1991 2.37 9.68 2.23 2.21
Market Price per Share:
At July 5, 1994<F3> 35.25 -- -- --
At October 4, 1994 <F3> 35.375 -- -- --
<FN>
- ----------------------------------------
<F1> Includes the effect of pro forma adjustments for ABNK and Wedge
Bank as appropriate. See "PRO FORMA FINANCIAL INFORMATION."
<F2> Includes the effect of pro forma adjustments for ABNK, Wedge Bank,
UNSL and CMB as appropriate. See "PRO FORMA FINANCIAL INFORMATION."
<F3> The market value of MBI Common Stock was determined as of the last
trading day preceding the public announcement of the proposed
acquisition and as of the latest available date prior to the filing
of the Joint Proxy Statement/Prospectus, based on the last sale
price as reported on the NYSE Composite Tape. The market value of
Wedge Bank Common Stock was determined as of the second quarter of
1992, the date of the last transaction known to management of Wedge
Bank prior to the public announcement of the proposed acquisition.
</TABLE>
SUMMARY FINANCIAL DATA
The following table sets forth for the periods indicated certain
summary historical consolidated financial information for MBI, Wedge
Holding and certain summary historical financial information for Wedge
Bank. The balance sheet data and income statement data included in the
summary financial data for the five years ended December 31, 1993 are taken
from audited consolidated financial statements of MBI as of and for such
years, from the audited consolidated financial statements of Wedge Holding
as of and for the years ended December 31, 1993 and 1992, and from the
audited financial statements of Wedge Bank as of and for the years ended
December 31, 1993 and 1992 and the unaudited financial statements of Wedge
Bank as of and for the three years ended December 31, 1991. The balance
sheet data and income statement data included in the summary financial data
as of and for the six months ended June 30, 1994 and 1993 are taken from
the unaudited consolidated financial statements of MBI and Wedge Holding
as of, and for the six months ended, June 30, 1994 and 1993 and the
unaudited financial statements of Wedge Bank as of, and for the six months
ended June 30, 1994 and 1993. These data include all adjustments which
are, in the opinion of the respective managements of MBI, Wedge Holding and
Wedge Bank, necessary to present a fair statement of these periods and are
of a normal recurring nature. Results for the six months ended June 30,
1994 are not necessarily indicative of results for the entire year. The
following information should be read in conjunction with the consolidated
financial statements of MBI and Wedge Holding and the financial statements
of Wedge Bank, and the related notes thereto, included herein or in
documents incorporated herein by reference, and in conjunction with the
unaudited pro forma combined consolidated financial information, including
the notes thereto, appearing elsewhere in this Joint Proxy Statement/
Prospectus. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and
"PRO FORMA FINANCIAL INFORMATION."
-14-
<PAGE> 22
<TABLE>
MERCANTILE BANCORPORATION INC.
SUMMARY FINANCIAL DATA
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
---------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income <F1> . . . . . . . . . $ 1.84 $ 1.58 $ 2.80 $ 2.36 $ 2.37 $ 2.18 $ 0.29
Dividends declared. . . . . . . . 0.56 0.49 0.99 0.93 0.93 0.93 0.93
Book value at period end. . . . . 23.49 21.50 22.40 20.25 18.86 17.14 15.86
Average common shares outstanding
(thousands). . . . . . . . . . . 42,948 42,243 42,439 39,492 31,791 30,144 29,092
EARNINGS (THOUSANDS)
Interest income . . . . . . . . . $402,464 $421,512 $829,930 $873,447 $879,471 $882,148 $836,446
Interest expense. . . . . . . . . 150,346 171,140 328,734 417,358 506,916 552,231 528,008
-------- -------- -------- -------- -------- -------- --------
Net interest income . . . . . . . 252,118 250,372 501,196 456,089 372,555 329,917 308,438
Provision for possible loan
losses . . . . . . . . . . . . . 16,398 28,534 61,013 74,579 58,076 50,886 104,708
Other income. . . . . . . . . . . 95,938 99,872 199,158 183,944 155,696 137,356 150,038
Other expense . . . . . . . . . . 206,487 215,376 444,909 418,068 383,348 318,887 335,266
Income taxes (benefit). . . . . . 46,113 39,422 75,568 52,346 18,673 27,658 (1,804)
-------- -------- -------- -------- -------- -------- --------
Net income . . . . . . . . . . . $ 79,058 $ 66,912 $118,864 $ 95,040 $ 68,154 $ 69,842 $ 20,306
======== ======== ======== ======== ======== ======== ========
ENDING BALANCE SHEET (MILLIONS)
Total assets. . . . . . . . . . . $ 11,934 $ 11,778 $ 12,141 $ 12,273 $ 10,765 $ 10,137 $ 9,536
Earning assets. . . . . . . . . . 11,045 10,823 11,114 11,186 9,827 9,016 8,477
Investment securities . . . . . . 3,302 3,320 3,401 3,401 2,475 1,886 1,904
Loans and leases,
net of unearned income . . . . . 7,619 7,469 7,382 7,499 6,946 6,884 6,358
Deposits. . . . . . . . . . . . . 9,141 9,321 9,602 9,928 8,776 8,278 7,601
Long-term debt. . . . . . . . . . 290 274 273 299 203 233 308
Shareholders' equity. . . . . . . 1,013 913 959 851 690 581 536
Reserve for possible loan losses. 172 152 169 166 146 149 149
SELECTED RATIOS
Return on average assets. . . . . 1.30% 1.09% 0.97% 0.80% 0.67% 0.73% 0.23%
Return on average equity. . . . . 15.99 15.14 13.00 11.95 10.52 12.51 3.81
Net interest rate margin. . . . . 4.64 4.57 4.59 4.33 4.12 3.97 4.09
Equity to assets. . . . . . . . . 8.49 7.75 7.90 6.94 6.41 5.73 5.62
Reserve for possible loan losses to
Outstanding loans. . . . . . . . 2.26 2.03 2.28 2.21 2.10 2.16 2.35
Non-performing loans . . . . . . 495.20 238.41 293.39 156.85 113.14 119.68 121.55
<FN>
<F1> Based on weighted average common shares outstanding.
</TABLE>
-15-
<PAGE> 23
<TABLE>
THE WEDGE HOLDING COMPANY
SUMMARY FINANCIAL DATA
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
---------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income. . . . . . . . . . . . $ 64.48 $ 76.63 $ 172.70 $ 129.80 $ 67.81 $ 48.31 $ 14.74
Dividends declared. . . . . . . . -- -- -- -- -- -- --
Book value at period end. . . . . 1,114.64 997.17 1,091.41 1,145.68 1,023.27 973.38 930.63
Average common shares outstanding
(thousands). . . . . . . . . . . 14,968 14,498 14,615 14,230 13,965 13,600 13,090
EARNINGS (THOUSANDS)
Interest income . . . . . . . . . $ 6,969 $ 6,721 $ 15,258 $ 15,931 $ 16,461 $ 16,053 $ 15,006
Interest expense. . . . . . . . . 2,689 2,578 5,526 6,981 8,934 9,227 8,670
-------- -------- -------- -------- -------- -------- --------
Net interest income . . . . . . . 4,280 4,143 9,732 8,950 7,527 6,826 6,336
Provision for possible loan
losses . . . . . . . . . . . . . 76 164 240 191 1,132 380 80
Other income. . . . . . . . . . . 1,058 1,612 2,912 2,732 2,679 1,983 1,967
Other expense . . . . . . . . . . 3,666 3,772 8,113 8,158 7,268 7,215 7,658
Income taxes. . . . . . . . . . . 385 484 1,036 996 662 415 189
Minority interests. . . . . . . . 216 224 731 490 197 142 183
-------- -------- -------- -------- -------- -------- --------
Net income. . . . . . . . . . . . $ 995 $ 1,111 $ 2,524 $ 1,847 $ 947 $ 657 $ 193
======== ======== ======== ======== ======== ======== ========
ENDING BALANCE SHEET (THOUSANDS)
Total assets. . . . . . . . . . . $210,619 $209,980 $210,837 $206,497 $198,272 $181,619 $179,026
Earning assets. . . . . . . . . . 196,296 199,236 196,699 193,499 181,770 163,518 161,727
Investment securities . . . . . . 82,992 77,787 80,334 70,535 62,526 56,869 64,681
Loans and leases. . . . . . . . . 113,247 117,104 112,071 119,689 112,504 97,749 92,518
Deposits. . . . . . . . . . . . . 162,203 179,070 169,749 174,387 170,475 161,223 158,675
Long-term debt . . . . . . . . . -- -- -- -- 688 917 1,302
Shareholders' equity. . . . . . . 16,684 14,457 15,951 16,303 14,290 13,238 12,182
Reserve for possible loan losses. 1,399 1,729 1,452 1,637 1,503 962 1,249
SELECTED RATIOS
Return on average assets. . . . . 0.96% 1.12% 1.30% 0.94% 0.48% 0.36% 0.12%
Return on average equity. . . . . 8.73 10.58 12.39 9.00 5.20 3.81 1.16
Net interest margin . . . . . . . 4.33 4.73 5.25 4.83 4.34 4.32 4.31
Equity to assets. . . . . . . . . 7.92 6.88 7.57 7.90 7.21 7.29 6.80
Reserve for possible loan losses to:
Outstanding loans. . . . . . . . 1.24 1.48 1.30 1.37 1.34 0.98 1.35
Non-performing loans . . . . . . 211.97 102.13 80.49 65.38 49.28 44.01 47.69
</TABLE>
-16-
<PAGE> 24
<TABLE>
WEDGE BANK
SUMMARY FINANCIAL DATA
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
---------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income . . . . . . . . . . . $ 9.33 $ 11.86 $ 24.19 $ 16.76 $ 9.68 $ 10.29 $ 11.70
Dividends declared. . . . . . . . 3.01 1.50 4.00 5.16 2.02 3.00 1.50
Book value at period end. . . . . 132.78 118.32 131.11 128.87 130.06 146.87 137.46
Average common shares outstanding
(thousands). . . . . . . . . . . 144,000 144,000 144,000 144,000 124,000 103,000 103,000
EARNINGS (THOUSANDS)
Interest income . . . . . . . . . $ 6,969 $ 6,721 $ 15,258 $ 15,931 $ 16,461 $ 16,053 $ 15,006
Interest expense. . . . . . . . . 2,685 2,568 5,505 6,875 8,882 9,138 8,537
-------- -------- -------- -------- -------- -------- --------
Net interest income . . . . . . . 4,284 4,153 9,753 9,056 7,579 6,915 6,469
Provision for possible loan
losses . . . . . . . . . . . . . 76 164 240 191 1,132 380 80
Other income. . . . . . . . . . . 1,058 1,622 2,852 2,685 2,379 1,977 1,967
Other expense . . . . . . . . . . 3,537 3,265 7,918 8,112 6,947 6,986 6,624
Income taxes. . . . . . . . . . . 385 638 964 1,025 679 466 527
-------- -------- -------- -------- -------- -------- --------
Net income. . . . . . . . . . . . $ 1,344 $ 1,708 $ 3,483 $ 2,413 $ 1,200 $ 1,060 $ 1,205
======== ======== ======== ======== ======== ======== ========
ENDING BALANCE SHEET (THOUSANDS)
Total assets. . . . . . . . . . . $209,951 $209,379 $209,994 $205,611 $197,660 $180,858 $177,950
Earning assets. . . . . . . . . . 196,296 199,236 196,699 193,499 181,770 163,518 161,727
Investment securities . . . . . . 82,955 77,787 80,334 70,535 62,526 58,869 64,681
Loans and leases. . . . . . . . . 113,247 117,104 112,071 119,689 112,504 97,749 92,518
Deposits. . . . . . . . . . . . . 162,391 179,091 169,811 174,544 170,718 161,559 158,965
Shareholders' equity. . . . . . . 19,121 17,038 18,880 18,557 16,127 15,128 14,158
Reserve for possible loan losses. 1,399 1,729 1,452 1,637 1,503 962 1,249
SELECTED RATIOS
Return on average assets. . . . . 1.28% 1.76% 1.78% 1.22% 0.64% 0.62% 0.75%
Return on average equity. . . . . 13.85 19.70 20.23 13.38 7.43 7.02 8.43
Net interest margin . . . . . . . 4.33 4.74 5.26 4.88 4.37 4.38 4.40
Equity to assets. . . . . . . . . 9.11 8.14 8.99 9.03 8.16 8.36 7.96
Reserve for possible loan losses to:
Outstanding loans. . . . . . . . 1.24 1.48 1.30 1.37 1.34 0.98 1.35
Non-performing loans . . . . . . 211.97 102.13 80.49 65.38 49.28 44.01 47.69
-17-
<PAGE> 25
INFORMATION REGARDING SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to
holders of Wedge Holding Preferred Stock, Wedge Holding Common
Stock and Wedge Bank Common Stock in connection with the
solicitation of proxies by the respective Boards of Directors of
Wedge Holding and Wedge Bank for use at the Special Meetings and
any adjournments thereof at which the stockholders of Wedge Holding
and Wedge Bank will consider and vote upon a proposal to approve
the Merger Agreement and consider and vote upon any other business
which may properly be brought before the Special Meetings or any
adjournments thereof. Each copy of this Joint Proxy
Statement/Prospectus is accompanied by the Notices of Special
Meetings of Stockholders of Wedge Holding and Wedge Bank,
respectively, a proxy card and related instructions and a self-
addressed return envelope for the proxy card.
This Joint Proxy Statement/Prospectus is also furnished by MBI
to each holder of Wedge Holding Preferred Stock, Wedge Holding
Common Stock and Wedge Bank Common Stock as a prospectus in
connection with the issuance by MBI of shares of MBI Common Stock
upon the consummation of the Acquisition. This Joint Proxy
Statement/Prospectus and the Notices of Special Meetings, proxy
card and related materials are being first mailed to stockholders
of Wedge Holding and Wedge Bank on ---------, 1994.
DATE, TIME AND PLACE
The Special Meetings will be held at
- ------------------------------------------, on -------------, 1994,
at ----- P.M. Central Time.
RECORD DATE; VOTE REQUIRED
On the Record Date, there were 63,734 shares of Wedge Holding
Preferred Stock and 15,318 shares of Wedge Holding Common Stock
outstanding and entitled to vote at the Wedge Holding Special
Meeting. Each such share is entitled to one vote on each matter
properly brought before the Wedge Holding Special Meeting. The
affirmative vote of the holders of a majority of the outstanding
shares of Wedge Holding Preferred Stock and Wedge Holding Common
Stock, voting as a single class, is required to approve the Merger
Agreement.
On the Record Date, there were 144,320 shares of Wedge Bank
Common Stock outstanding and entitled to vote at the Wedge Bank
Special Meeting. Each such share is entitled to one vote on each
matter properly brought before the Wedge Bank Special Meeting. The
affirmative vote of the holders of a majority of the outstanding
shares of Wedge Bank Common Stock is required to approve the Merger
Agreement.
As of the Record Date, directors and officers of Wedge Holding
and their affiliates owned beneficially an aggregate of 59,933
shares of Wedge Holding Preferred Stock and 14,409 shares of Wedge
Holding Common Stock, or approximately 94% of the outstanding
shares of Wedge Holding Preferred Stock and Wedge Holding Common
Stock entitled to vote at the Wedge Holding Special Meeting. All
directors and officers of Wedge Holding and their affiliates have
indicated their intention to vote their shares for the approval of
the Merger Agreement at the Wedge Holding Special Meeting.
As of the Record Date, directors and officers of Wedge Bank
and their affiliates owned beneficially an aggregate of 132,807
shares of Wedge Bank Common Stock, or approximately 92%
-18-
<PAGE> 26
of the outstanding shares of Wedge Bank Common Stock entitled to vote at
the Wedge Bank Special Meeting. All directors and officers of
Wedge Bank and their affiliates have indicated their intention to
vote their shares for the approval of the Merger Agreement at the
Wedge Bank Special Meeting.
VOTING AND REVOCATION OF PROXIES
Shares of Wedge Holding Common Stock and Wedge Bank Common
Stock which are represented by a properly executed proxy received
prior to the vote at the Special Meetings will be voted at such
Special Meetings in the manner directed on the proxy card, unless
such proxy is revoked in the manner set forth herein in advance of
such vote. ANY WEDGE HOLDING OR WEDGE BANK STOCKHOLDER RETURNING
A BLANK EXECUTED PROXY CARD WILL BE DEEMED TO HAVE APPROVED THE
MERGER AGREEMENT. Failure to return a properly executed proxy card
or to vote in person at the Special Meetings will have the
practical effect of a vote against the Merger Agreement.
Shares subject to abstentions will be treated as shares that
are present at the Special Meetings for purposes of determining the
presence of a quorum and as voted for the purposes of determining
the base number of shares voting on the proposal. Shares subject
to abstentions will, therefore, have the effect of a vote against
the approval of the Merger Agreement. If a broker or other nominee
holder indicates on the proxy card that it does not have
discretionary authority to vote the shares it holds of record on
the proposal, those shares will not be treated as shares that are
present at the Special Meetings for purposes of determining the
presence of a quorum and will not be considered as voted for
purposes of determining the approval of stockholders on the
proposal.
Any stockholder of Wedge Holding or Wedge Bank giving a proxy
may revoke it at any time prior to the vote at the Special
Meetings. Stockholders of Wedge Holding or Wedge Bank wishing to
revoke a proxy prior to the vote may do so by delivering to the
Secretary of Wedge Holding or Wedge Bank, as the case may be, at
602 E. Broadway, Alton, Illinois 62002-9007, a written notice of
revocation bearing a later date than the proxy or a later dated
proxy relating to the same shares, or by attending the Wedge
Holding Special Meeting or Wedge Bank Special Meeting, as the case
may be, and voting such shares in person. Attendance at the
Special Meetings will not in itself constitute the revocation of a
proxy.
The respective Boards of Directors of Wedge Holding and Wedge
Bank are not currently aware of any business to be brought before
the Special Meetings other than that described herein. If,
however, other matters are properly brought before such Special
Meetings, or any adjournments thereof, the persons appointed as
proxies will have discretionary authority to vote the shares
represented by duly executed proxies in accordance with their
discretion and judgment as to the best interest of Wedge Holding
and Wedge Bank.
SOLICITATION OF PROXIES
Each of Wedge Holding and Wedge Bank will bear its own costs
of soliciting proxies, except that MBI will pay printing and
mailing expenses and registration fees incurred in connection with
preparing this Joint Proxy Statement/Prospectus. Proxies will
initially be solicited by mail, but directors, officers and
selected other employees of Wedge Holding and Wedge Bank may also
solicit proxies in person or by telephone. Directors, executive
officers and any other employees of Wedge Holding and Wedge Bank
who solicit proxies will not be specially compensated for such
services. Brokerage houses, nominees, fiduciaries, and other
custodians will be requested to forward proxy materials to
beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial owners.
-19-
<PAGE> 27
HOLDERS OF WEDGE HOLDING COMMON STOCK AND WEDGE BANK COMMON
STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN THE APPROPRIATE
ACCOMPANYING PROXY CARD(S) AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
TERMS OF THE PROPOSED ACQUISITION
---------------------------------
The following is a summary of the material terms and
conditions of the Merger Agreement, which document is incorporated
by reference herein. This summary is qualified in its entirety by
the full text of the Merger Agreement. MBI, upon written request,
will furnish a copy of the Merger Agreement, without charge, to any
person who receives a copy of this Joint Proxy
Statement/Prospectus. Such requests should be directed to Jon W.
Bilstrom, General Counsel and Secretary, Mercantile Bancorporation
Inc., P.O. Box 524, St. Louis, Missouri 63166-0524.
GENERAL DESCRIPTION OF THE ACQUISITION
Pursuant to the Merger Agreement, Mercantile Illinois will
acquire all of the outstanding capital stock of Wedge Bank through
the consummation of two concurrent and interdependent transactions:
(i) the Exchange of all shares of Wedge Bank Common Stock owned
beneficially and of record by Wedge Holding for shares of MBI
Common Stock, and (ii) the Merger of Acquisition Bank with and into
Wedge Bank. Upon consummation of the Exchange and the Merger, the
separate corporate existence of Acquisition Bank will terminate,
and the business and operations of Wedge Bank will be continued
through Wedge Bank as a wholly owned subsidiary of Mercantile
Illinois. Following the Closing Date, MBI intends to cause
Mercantile Bank of Illinois National Association, a national
banking association and wholly owned subsidiary of Mercantile
Illinois, to merge with and into Wedge Bank, with the surviving
entity being an Illinois state bank which shall thereafter change
its name to "Mercantile Bank of Illinois."
Pursuant to the Acquisition, MBI will issue up to an aggregate
of 970,000 shares of MBI Common Stock as the Acquisition
Consideration. Upon the consummation of the Exchange, Wedge
Holding will be entitled to receive the number of shares of MBI
Common Stock representing Wedge Holding's percentage ownership
interest in Wedge Bank multiplied by the Acquisition Consideration.
Pursuant to the Merger Agreement, within six months after the
Exchange Wedge Holding shall effect the Liquidation and a
liquidating distribution to the holders of Wedge Holding Preferred
Stock and Wedge Holding Common Stock of all shares of MBI Common
Stock that are then owned beneficially and of record by Wedge
Holding.
Upon the consummation of the Merger, each issued and
outstanding share of Wedge Bank Common Stock (other than any shares
held by Mercantile Illinois or Wedge Holding or shares owned by
stockholders of Wedge Bank who exercise dissenters' rights under
the Illinois Banking Act) shall cease to be outstanding and will be
converted into the rights to receive the number of shares of MBI
Common Stock as is determined by multiplying his or her percentage
ownership interest in Wedge Bank by the Acquisition Consideration.
The fair market value of MBI Common Stock to be issued as the
Acquisition Consideration may fluctuate and at the consummation of
the Acquisition may be more or less than the current fair market
value of such shares.
The amount and nature of the Acquisition Consideration was
established through arm's-length negotiations between MBI, Wedge
Holding and Wedge Bank, and reflects the balancing of a number of
countervailing factors. The total amount of the consideration
reflects a price both parties concluded was appropriate. See "-
Background of and Reasons for the Acquisition; Board
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<PAGE> 28
Recommendations." The fact that the consideration is payable in
shares of MBI Common Stock reflects the desire to have the
favorable tax attributes of a "reorganization" for federal income
tax purposes (see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
ACQUISITION"), and the potential for change in the value of the MBI
Common Stock.
NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET VALUE
OF MBI COMMON STOCK WILL BE EQUIVALENT TO THE FAIR MARKET VALUE OF
MBI COMMON STOCK ON THE DATE SUCH STOCK IS RECEIVED BY A WEDGE
HOLDING OR WEDGE BANK STOCKHOLDER OR AT ANY OTHER TIME. THE FAIR
MARKET VALUE OF MBI COMMON STOCK RECEIVED BY A WEDGE HOLDING OR A
WEDGE BANK STOCKHOLDER MAY BE GREATER OR LESS THAN THE CURRENT FAIR
MARKET VALUE OF MBI COMMON STOCK DUE TO NUMEROUS MARKET FACTORS.
Following the Closing Date, each stockholder of Wedge Bank
will be required to submit to Society National Bank, Cleveland,
Ohio, which has been appointed as exchange agent in the Acquisition
(the "Exchange Agent"), a properly executed letter of transmittal
and surrender to the Exchange Agent the stock certificate(s)
formerly representing the shares of Wedge Bank Common Stock prior
to the issuance of the stock certificate evidencing the shares of
MBI Common Stock to which such stockholder is entitled. No
dividends or other distributions will be paid to a former Wedge
Bank stockholder with respect to shares of MBI Common Stock until
such stockholder's letter of transmittal and stock certificates
formerly representing Wedge Bank Common Stock, or documentation
acceptable to the Exchange Agent in lieu of lost or destroyed
certificates, is delivered to the Exchange Agent. See "TERMS OF
THE PROPOSED ACQUISITION - Surrender of Wedge Bank Stock
Certificates and Receipt of MBI Common Stock." No fractional
shares of MBI Common Stock will be issued in the Acquisition, but
cash will be paid in lieu of such fractional shares, such cash
being calculated by multiplying the holder's fractional share
interest by the closing stock price of MBI Common Stock on the NYSE
Composite Tape as reported in The Wall Street Journal on the
-----------------------
Closing Date of the Acquisition. See "TERMS OF THE PROPOSED
ACQUISITION - Fractional Shares." The shares of MBI Common Stock
to be issued pursuant to the Acquisition will be freely
transferable except by certain stockholders of Wedge Holding and
Wedge Bank who are deemed to be "affiliates" of Wedge Holding
and/or Wedge Bank. The shares of MBI Common Stock issued to such
affiliates will be restricted in their transferability in
accordance with the rules and regulations promulgated by the
Commission. See "INFORMATION REGARDING MBI STOCK - Restrictions on
Resale of MBI Stock by Affiliates."
OTHER AGREEMENTS
In addition to and contemporaneously with the Merger
Agreement, MBI executed separate Voting Agreements with each of
Melvin G. Hall and Robert Lynn Hall. Pursuant to the Voting
Agreements, each of Melvin G. Hall and Robert Lynn Hall agreed that
he will vote all of the shares of Wedge Holding Common Stock and/or
Wedge Bank that he then owned or subsequently acquired in favor of
the approval of the Merger Agreement at the Special Meetings and to
take any and all actions necessary to cause all shares of Wedge
Bank Common Stock owned by Wedge Holding or subsequently acquired
in favor of the Merger Agreement at the Wedge Bank Special Meeting.
In addition, until the earliest to occur of the Closing Date of the
Acquisition, the termination of the Merger Agreement or the
abandonment of the Acquisition, each further agreed that he will
not vote any such shares in favor of the approval of any other
competing acquisition proposal involving Wedge Holding or Wedge
Bank and a third party. Each of Melvin G. Hall and Robert Lynn
Hall also agreed that he will not transfer shares of Wedge Holding
or Wedge Bank Common Stock owned by him and will not take any
action to cause Wedge Holding to transfer any shares of Wedge Bank
Common Stock owned by Wedge Holding.
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BACKGROUND OF AND REASONS FOR THE MERGER; BOARD RECOMMENDATIONS
Wedge Holding's and Wedge Bank's Reasons and Board
Recommendations. Beginning in 1993, the respective Boards of
Directors of Wedge Holding and Wedge Bank began reviewing the
desirability of a business combination with a larger financial
institution in light of increased economic and competitive
pressures on community banks and the current trends in acquisitions
and consolidations of banking organizations within Wedge Bank's
service area. In response to this review, management contacted
several larger bank holding companies, including MBI, to explore
interest in a potential business combination with Wedge Bank.
Several institutions expressed preliminary interest in pursuing a
business combination, and active negotiations were held with one
large regional bank holding company which did not result in the
execution of a definitive agreement. Thereafter, representatives
of Wedge Holding and Wedge Bank met informally with representatives
of MBI to ascertain whether there was any interest in a business
combination between MBI and Wedge Bank. During the first quarter
of 1994, preliminary negotiations were held with MBI relating to a
business combination. During June and July, 1994, representatives
of MBI, Wedge Holding and Wedge Bank and their respective counsel
negotiated the form of the Merger Agreement and on July 6, 1994,
the Boards of Directors of Wedge Holding and Wedge Bank met to
consider the Merger Agreement. Based on a variety of factors
described below, the respective Board of Directors of Wedge Holding
and Wedge Bank approved the Merger Agreement at such meetings. The
Merger Agreement was executed on July 6, 1994 by representatives of
MBI, Wedge Holding and Wedge Bank, and MBI publicly announced the
execution of the Merger Agreement.
The Boards of Directors of Wedge Holding and Wedge Bank, after
careful study and evaluation of economic, financial, legal and
market factors, believes that the Merger Agreement is in the best
interest of Wedge Holding, Wedge Bank and their respective
stockholders.
The Boards believe that the MBI Common Stock to be received by
stockholders of Wedge Holding and Wedge Bank in the Acquisition
represents an opportunity for the stockholders of Wedge Holding and
Wedge Bank to exchange their shares in Wedge Holding and/or Wedge
Bank at a favorable exchange ratio for a security with a greater
market liquidity. Among the other factors considered by the Boards
of Directors of Wedge Holding and Wedge Bank in deciding to approve
and recommend the execution of the Merger Agreement were MBI's
respective businesses, the results of operations and financial
condition (including the assets, quality and capital levels),
growth prospects, products available to customers, historical
dividend and market performance, and the fact that MBI Common Stock
is traded on the NYSE. The Boards also considered the management
strength and depth of MBI, and the significant market penetration
that the combined organization would have within the regional
banking market served by Wedge Bank. Additionally, the Boards
considered MBI's commitment to serving the banking and other needs
of Wedge Banks depositors, employees, customers and community, as
well as MBI's policy emphasizing the local character of community
banks. Upon careful review and analysis of all of the factors
described above, no single factor being substantially more
important in the review process than any other, each of the Boards
unanimously approved the Merger Agreement as being in the best
interest of Wedge Holding, Wedge Bank and their respective
stockholders.
The respective Boards of Directors of Wedge Holding and Wedge
Bank recommends approval of the Merger Agreement. Such Boards
believe that the terms of the Merger Agreement are fair and that
the Exchange and the Merger are in the best interest of Wedge
Holding, Wedge Bank and their respective stockholders. The
directors of each of Wedge Holding and Wedge Bank have unanimously
indicated that they intend to vote their shares of Wedge Holding
and/or Wedge Bank that they hold in favor of the Merger Agreement.
See "INFORMATION CONCERNING THE SPECIAL MEETINGS -- Record Date;
Vote Required."
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<PAGE> 30
MBI's Reasons and Board Recommendations. The Executive
Committee of the Board of Directors of MBI considered a number of
factors, including, among other things, the financial condition of
Wedge Holding and Wedge Bank and projected synergies which are
anticipated to result from the Acquisition. The Executive
Committee concluded that the Acquisition presents an unique
opportunity for MBI to increase its presence in the regional
banking market in southern Illinois through the acquisition of an
established banking organization. MBI believes that the most
effective and least costly means to achieve this entry was the
acquisition of a banking organization having significant operations
in the targeted area. MBI's decision to pursue discussions with
Wedge Holding and Wedge Bank was primarily a result of MBI's
assessment of the value of Wedge Bank's banking franchise, its
substantial asset base within that area and the compatibility of
the businesses of the two banking organizations.
CONDITIONS OF THE ACQUISITION
The respective obligations of MBI, Mercantile Illinois, Wedge
Holding and Wedge Bank to consummate the Acquisition are subject to the
satisfaction of certain mutual conditions, including the following:
(1) The Merger Agreement shall be approved by the
holders of a majority of the outstanding shares of Wedge
Holding Common Stock and Wedge Bank Common Stock at the
Special Meetings.
(2) The Merger Agreement and the transactions
contemplated therein shall have been approved by the FDIC,
Federal Reserve Board, the Illinois Commissioner and any other
federal and/or state regulatory agency whose approval is
required for the consummation of the transactions contemplated
therein.
(3) The Registration Statement of which this Joint Proxy
Statement/Prospectus is a part, registering shares of MBI
Common Stock to be issued in the Acquisition, shall have been
declared effective and not be subject to a stop order or any
threatened stop order.
(4) Neither MBI, Mercantile Illinois, Wedge Holding or
Wedge Bank 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 Acquisition.
(5) MBI, Mercantile Illinois and Wedge Holding shall
have taken all actions as are necessary to effect the Exchange
simultaneously with the Merger.
The obligation of MBI and Mercantile Illinois to consummate
the Acquisition is subject to the satisfaction, unless waived, of
certain other conditions, including the following:
(1) The representations and warranties of Wedge Holding
and Wedge Bank made in the Merger Agreement shall be true and
correct in all material respects as of the Closing Date
(except such as are not of a magnitude as to be materially
adverse to the business, financial condition, results of
operations or prospects of Wedge Bank on a consolidated basis
taken as a whole) and all obligations required to be performed
by Wedge Holding and Wedge Bank prior to the Closing Date
shall have been performed in all material respects, and MBI
shall have received an officers' certificate from each of
Wedge Holding and Wedge Bank to that effect.
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<PAGE> 31
(2) Wedge Holding and Wedge Bank shall have obtained any
and all material consents or waivers from other parties to
loan agreements, leases or other contracts material to Wedge
Bank's businesses required for the consummation of the
Acquisition, and Wedge Holding and Wedge Bank shall have
obtained any and all material permits, authorizations,
consents, waivers and approvals required for the lawful
consummation of the Acquisition.
(3) Since the date of the Merger Agreement, there shall
have been no material adverse change in the business,
financial condition, results of operations or prospects of
Wedge Bank.
(4) The combined number of shares of Wedge Holding
Common Stock and Wedge Bank Common Stock as to which written
demand for the fair value of their shares pursuant to
applicable law has been delivered to Wedge Holding or Wedge
Bank, as the case may be, by the holders thereof prior to the
Special Meetings shall not exceed 8% of the total direct or
indirect equity interests of Wedge Bank Common Stock
outstanding at the time when such votes are taken.
(5) MBI and Mercantile Illinois shall be satisfied that
the Acquisition, in form and substance, will qualify for
pooling-of-interests accounting treatment.
(6) Thomas, Mottaz, Eastman & Sherwood, counsel to Wedge
Holding and Wedge Bank, shall have delivered to MBI an opinion
regarding certain legal matters.
(7) Wedge Holding shall have delivered to the Exchange
Agent the certificates evidencing shares of Wedge Bank Common
Stock owned beneficially or of record by Wedge Holding, and
such other documentation as shall be reasonably required by
MBI or the Exchange Agent to effect the Exchange.
The obligation of Wedge Holding and Wedge Bank to consummate
the Acquisition is subject to the satisfaction, unless waived, of
certain other conditions, including the following:
(1) The representations and warranties of MBI and
Mercantile Illinois made in the Merger Agreement shall be true
and correct in all material respects as of the Closing Date
(except such as are not of a magnitude as to be materially
adverse to the business, financial condition, results of
operations or prospects of MBI on a consolidated basis taken
as a whole) and all obligations required to be performed by
MBI and Mercantile Illinois prior to the Effective Time shall
have been performed in all material respects, and Wedge
Holding and Wedge Bank shall have received an officers'
certificate from MBI and Mercantile Illinois to that effect.
(2) MBI and Mercantile Illinois shall have obtained any
and all material permits, authorizations, consents, waivers
and approvals required of MBI or Mercantile Illinois for the
lawful consummation of the Acquisition.
(3) Since the date of the Merger Agreement, there shall
have been no material adverse change in the business,
financial condition, results of operations or prospects of MBI
on a consolidated basis taken as a whole.
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<PAGE> 32
(4) Thompson & Mitchell, counsel to MBI, shall have
delivered to Wedge Holding and Wedge Bank an opinion regarding
certain legal matters.
(5) Thompson & Mitchell, counsel to MBI, shall have
delivered to Wedge Holding and Wedge Bank an opinion regarding
certain federal income tax matters.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to
the Closing Date, whether before or after approval by the
stockholders of Wedge Holding and Wedge Bank, by mutual consent of
the Executive Committee of the Board of Directors of MBI and the
Boards of Directors of Mercantile Illinois, Wedge Holding and Wedge
Bank, or unilaterally by the Executive Committee of the Board of
Directors of MBI or the Boards of Directors of Mercantile Illinois,
Wedge Holding or Wedge Bank: (i) at any time after March 31, 1995
if the Acquisition has not been consummated by such date; or
(ii) if the Federal Reserve Board, the FDIC, the Illinois
Commissioner or any other federal and/or state regulatory authority
whose approval is required for consummation of the Acquisition has
denied approval of the Acquisition. The Merger Agreement may also
be terminated by the Board of Directors of Wedge Holding or Wedge
Bank or the Executive Committee of the Board of Directors of MBI in
the event of a breach of the Merger Agreement by the other party,
which breach is of such a magnitude as to be materially adverse to
the business, financial condition, results of operations or
prospects of the breaching party on a consolidated basis taken as
a whole and is not cured after 45 days following written notice of
such breach given by the other party. No assurance can be given
that the Acquisition will be consummated on or before March 31,
1995 or that MBI, Mercantile Illinois, Wedge Holding or Wedge Bank
will not elect to terminate the Merger Agreement if the Acquisition
has not been consummated on or before such date.
INDEMNIFICATION
MBI, Mercantile Illinois, Wedge Holding and Wedge Bank have
agreed to indemnify each other against any claims or liabilities to
which such party may become subject under federal or state
securities laws or regulations, to the extent that such claim or
liability arises out of information furnished to the party subject
to such liability by the other party, or out of an omission by such
other party to state a necessary or material fact in the
Registration Statement of which this Joint Proxy Statement/
Prospectus is a part.
CLOSING DATE
The Merger will be consummated and become effective on the
Closing Date upon issuance of a certificate of merger by the
Illinois Commissioner. Under the Merger Agreement, unless the
parties otherwise agree, the Closing Date shall be the first
business day of the month immediately succeeding the month in which
the last of the following events occurs: (i) the receipt of the
requisite approval of the Merger Agreement by stockholders of Wedge
Holding and Wedge Bank, (ii) the thirtieth day after the approval
of the Acquisition by the FDIC, and (iii) the approval by the
Illinois Commissioner and any other federal and/or state bank
regulatory agency that may be necessary or appropriate.
SURRENDER OF WEDGE BANK STOCK CERTIFICATES AND RECEIPT OF MBI
COMMON STOCK
Except for the shares of Wedge Bank Common Stock subject to
the exercise of dissenters' rights, at the Effective Time of the
Merger each outstanding share of Wedge Bank Common Stock will be
converted into the right to receive shares of MBI Common Stock as
set forth in the Merger
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Agreement. See "TERMS OF THE PROPOSED ACQUISITION - General Description of the
Acquisition." Each holder of Wedge Bank Common Stock, upon submission to the
Exchange Agent of a properly executed letter of transmittal and surrender to
the Exchange Agent of the stock certificate(s) formerly representing
shares of Wedge Bank Common Stock, will be entitled to receive a
stock certificate evidencing the shares of MBI Common Stock to
which such stockholder is entitled.
Within five business days after the Effective Time of the
Acquisition, the Exchange Agent will mail to each former Wedge Bank
stockholder of record as of the Effective Time notification of the
consummation of the Acquisition. The Exchange Agent will also
provide a letter of transmittal and instructions as to the
procedure for the surrender of the stock certificates evidencing
the Wedge Bank Common Stock and the receipt of shares of MBI Common
Stock pursuant to the Acquisition.
Following the Effective Time of the Acquisition, it will be
the responsibility of each former holder of Wedge Bank Common Stock
shares to submit all certificates evidencing that former holder's
shares of Wedge Bank Common Stock to the Exchange Agent. No
dividends or other distribution will be paid to a former Wedge Bank
stockholder with respect to shares of MBI Common Stock until such
stockholder's properly completed letter of transmittal and stock
certificates formerly representing Wedge Bank Common Stock, or
documentation acceptable to the Exchange Agent in lieu of a lost or
destroyed certificate, is delivered to the Exchange Agent. The
Exchange Agent may also require the stockholder of a lost or
destroyed certificate to post an insurance bond acceptable to the
Exchange Agent. All dividends or other distributions on the MBI
Common Stock declared between the Closing Date of the Acquisition
and the date of the surrender of a Wedge Bank stock certificate
will be held for the benefit of the stockholder and will be paid to
the stockholder, without interest thereon, upon the surrender of
such stock certificate or documentation and/or insurance bond in
lieu thereof.
FRACTIONAL SHARES
No fractional shares of MBI Common Stock will be issued to
Wedge Holding or the former stockholders of Wedge Bank in
connection with the Acquisition. Each former holder of Wedge Bank
Common Stock who otherwise would have been entitled to receive a
fraction of a share of MBI Common Stock shall receive in lieu
thereof cash, without interest, in an amount equal to the holder's
fractional share interest multiplied by the closing stock price of
MBI Common Stock on the NYSE Composite Tape as reported in The Wall
--------
Street Journal on the Closing Date of the Merger. Cash received by
- --------------
Wedge Bank stockholders in lieu of fractional shares may give rise
to taxable income. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE ACQUISITION."
CERTAIN REGULATORY APPROVALS
In addition to the approval of the Merger Agreement by the
stockholders of Wedge Holding and Wedge Bank, the obligations of
the parties to effect the Acquisition are subject to prior approval
of the Federal Reserve Board, the FDIC and the Illinois
Commissioner. As bank holding companies, MBI, Mercantile Illinois
and Wedge Holding are subject to regulation under the BHCA. The
Acquisition is subject to approval by the Federal Reserve Board
under Section 3 of the BHCA. Under the BHCA, the Federal Reserve
Board may withhold approval of the Acquisition if, among other
things, it determines that the effect of the Acquisition would be
to substantially lessen competition in the relevant market. In
addition, the Federal Reserve Board must consider whether the
combined organization meets the requirements of the Community
Reinvestment Act of 1977, as amended, by assessing the involved
entities' respective records of meeting the credit needs of the
local communities in which they are chartered, consistent with the
safe and sound operation of such institutions. In its review, the
Federal Reserve Board must also examine the financial and
managerial resources and future prospects of the
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combined organization and analyze the capital structure and soundness of the
resulting entity. The Federal Reserve Board has the authority to
deny an application if it concludes that the combined organization
would have inadequate capital.
The BHCA also prohibits the acquisition by a bank holding
company of shares of a bank located outside the state in which the
operations of its banking subsidiaries are principally conducted,
unless such an acquisition is specifically authorized by statute of
the state in which the bank to be acquired is located. Missouri
and Illinois have enacted legislation that satisfies this BHCA
requirement with respect to the Acquisition.
As a state bank insured by the FDIC under the Federal Deposit
Insurance Act of 1950, as amended (the "FDI Act"), Wedge Bank is
subject to regulation under the FDI Act. Under Section 18(c) of
the FDI Act, Wedge Bank is required to obtain the prior
approval of the FDIC for the Merger. Under the FDI Act, the FDIC
may withhold approval of the Merger if, among other things, it
determines that the effect of the Merger would be to lessen
competition substantially in the relevant market. In addition, the
FDIC must consider whether the resulting organization will meet the
requirements of the Community Reinvestment Act of 1977, as amended,
by assessing the involved entities' respective records of meeting
credit needs of the local communities in which they are chartered,
consistent with safe and sound operation of such institutions. In
its review, the FDIC must also examine the financial and managerial
resources and future prospects of the resulting organization and
analyze the capital structure and soundness of the resulting
entity.
The Acquisition is also subject to the approval of the
Illinois Commissioner, who must approve the organization of
Acquisition Bank and the merger of Acquisition Bank with and into
Wedge Bank. In processing MBI's application to acquire Wedge Bank,
the Illinois Commissioner must consider, among other matters, the
privileges granted to Illinois bank holding companies to acquire
Missouri banks, the capital adequacy of Wedge Bank following the
Merger, MBI's record in providing service to communities it
presently serves and MBI's plans with respect to the services to be
provided to Wedge Bank's service area following the Acquisition.
Applications have been filed with the Federal Reserve Board,
the FDIC and the Illinois Commissioner. The Acquisition cannot be
consummated until the receipt of such approvals and the lapse of
the 30-day waiting period after the approval of the applications.
During this 30-day waiting period, the United States Department of
Justice has the right to initiate litigation challenging the Merger
upon antitrust grounds. There can be no assurance that the Federal
Reserve Board, the FDIC and the Illinois Commissioner will approve the
applications filed with regard to the Acquisition or that the United
States Department of Justice will not challenge the Acquisition during
the 30-day waiting period. See "SUPERVISION AND REGULATION."
BUSINESS PENDING THE ACQUISITION
The Merger Agreement provides that, during the period from the
date of the Merger Agreement to the Effective Time, Wedge Holding
and Wedge Bank will conduct their respective businesses according
to the ordinary and usual course consistent with past and current
practices and use their best efforts to maintain and preserve their
respective business organization, employees and advantageous
business relationships and retain the services of its officers and
key employees.
Furthermore, from the date of the Merger Agreement to the
Closing Date, except as provided in the Merger Agreement, Wedge
Holding and Wedge Bank will not, without the prior written consent
of MBI and Mercantile Illinois:
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(1) declare and/or pay any dividends on its outstanding
shares of capital stock, except that from the date of the
Merger Agreement through the Closing Date, the Board of
Directors of Wedge Bank shall be entitled to declare a
dividend for each quarter in which the MBI Board of Directors
shall declare a dividend on shares of MBI Common Stock that in
the aggregate is not in excess of the aggregate quarterly
dividend that would have been paid by MBI on the shares of MBI
Common Stock issuable as the Acquisition Consideration if the
transactions contemplated by the Merger Agreement had been
consummated on or before the date of the Merger Agreement, and
except that the Board of Directors of Wedge Bank shall be
entitled to declare a single dividend equal to $375,000 which
Wedge Holding shall use for the repayment of indebtedness;
(2) enter into or amend any employment, severance or
similar agreements or arrangements with any director or
officer of Wedge Bank, or amend, modify or terminate any
employee plans or policies of Wedge Bank;
(3) propose or adopt any amendments to the Articles of
Incorporation of Wedge Holding, the charter of Wedge Bank or
their respective By-Laws;
(4) issue any shares of its capital stock or effect any
stock split or otherwise change the capitalization of Wedge
Bank as it existed on July 6, 1994;
(5) grant, confer or award any options, warrants,
conversion rights or other rights not existing as of July 6,
1994, to acquire any shares of the capital stock of Wedge
Bank;
(6) purchase or redeem any shares of the capital stock
of Wedge Holding or Wedge Bank;
(7) enter into or increase any loan or credit commitment
(including standby letters of credit) to, or invest or agree
to invest in any person or entity in an amount in excess of
$100,000 without first consulting with MBI, and, in the case
of persons or entities to which it has outstanding aggregate
credit commitments and loans exceeding $100,000, increase or
agree to invest in, such person or entity by more than 25% of
such amount or in an amount in excess of $250,000, without
first consulting with MBI;
(8) enter into, increase or renew any loan or credit
commitment (including standby letters of credit) to any
executive officer or director of Wedge Holding or Wedge Bank,
any shareholder of Wedge Holding, or any entity controlled,
directly or indirectly, by any of the foregoing or to engage
in any transaction with any of the foregoing of which is the
type or nature sought to be regulated in 12 U.S.C. 371c and 12
U.S.C. 371c-1, without first obtaining the prior written
consent of MBI or Mercantile Illinois, which consent shall not
be unreasonably withheld; or
(9) agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any
transaction or take or omit to take any other action which would
make any of representations and warranties of Wedge Holding or
Wedge Bank in the Merger 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;
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<PAGE> 36
(10) take any action that would:
(i) adversely affect or delay the ability of MBI to
obtain regulatory approval for the Merger or to perform
its covenants and agreements under the Merger Agreement,
(ii) prevent the Acquisition from qualifying for
pooling-of-interests accounting treatment or as a
reorganization under the Code, or
(iii) not be in the ordinary course of business
consistent with past practices; or
(11) directly or indirectly (including through its
officers, directors, employees or other representatives)
initiate, solicit or encourage any discussions, inquiries or
proposals with any third party relating to the disposition of
any significant portion of the business or assets of Wedge
Holding or Wedge Bank, or the acquisition of the capital stock
(or rights or options exercisable for, or securities
convertible or exchangeable into, capital stock) of Wedge
Holding or Wedge Bank, or the merger of Wedge Holding or Wedge
Bank with any person other than MBI or Mercantile Illinois, or
provide any such person with information or assistance or
negotiate with any person with respect thereto, and Wedge Holding
and Wedge Bank shall promptly notify MBI and Mercantile Illinois
orally of all the relevant details relating to all inquiries,
indications of interest and proposals which they may receive
with respect thereto.
WAIVER AND AMENDMENT
Any provision of the Merger Agreement, including, without
limitation, the conditions to the consummation of the Acquisition
and the restrictions described under the caption "TERMS OF THE
PROPOSED ACQUISITION - Business Pending the Acquisition," may be
(i) waived in writing at any time by the party that is, or whose
stockholders are, entitled to the benefits thereof or (ii) amended
at any time by written agreement of the parties approved by or on
behalf of their respective Boards of Directors, whether before or
after the Special Meetings, provided, however, that after approval
-----------------
of the Merger Agreement by the stockholders of Wedge Holding and
Wedge Bank at the Special Meetings no such modification may alter
or change any of the terms of the Merger Agreement if such
alteration or change would adversely affect the stockholders of
Wedge Holding or Wedge Bank (which, in all cases, would include an
alteration or change (a) in the amount or form of the consideration
to be received by Wedge Holding and the stockholders of Wedge
Bank in the Acquisition and (b) that would result in materially
different income tax consequences than those described in "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION" in this Joint
Proxy Statement/Prospectus). If any amendment to the Merger
Agreement adversely affects the rights of the stockholders of Wedge
Holding and Wedge Bank thereunder, Wedge Holding and Wedge Bank
will resolicit proxies from the stockholders of Wedge Holding and
Wedge Bank by means of a revised Joint Proxy Statement/Prospectus
and related proxy materials prior to the consummation of the
Acquisition.
ACCOUNTING TREATMENT
The Acquisition will be accounted for under the pooling-of-
interests method of accounting. Following the Effective Time, data
regarding the financial condition and results of operations of
Wedge Bank will be included in MBI's consolidated financial
statements as if the Acquisition had occurred on the first day of
the earliest period presented.
-29-
<PAGE> 37
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION
Melvin G. Hall, Chairman and Chief Executive Officer of Wedge
Holding and Wedge Bank, has entered into an employment agreement
with MBI dated July 6, 1994. Pursuant to such agreement, Melvin G.
Hall shall be employed as Senior Chairman and as a director of
Wedge Bank for a period ending on the later to occur of (i) six
months after the Closing Date, or (ii) June 30, 1995. Mr. Hall
shall be compensated at the same rate as is currently payable to
other non-employee directors of Wedge Bank. Additionally, to the
extent that Mr. Hall shall not have previously received a 1994
incentive bonus from Wedge Holding or Wedge Bank of $243,500, MBI
shall make a cash payment of the unpaid portion of such amount on
the Closing Date. Mr. Hall shall also receive use of an office,
secretarial services, use of an automobile and payment of club dues
and reimbursement of business-related club expenses. Mr. Hall has
agreed that for a period of three years following his employment he
will not engage in any active solicitation of new business that is
of a type or nature which is permitted to commercial banking or
thrift institutions under state and/or federal law in Madison
County, Illinois (the "Territory"), or enter the employ of, or have
any direct or indirect interest in any other person, firm,
corporation or other entity engaged in any such activity in the
Territory, whether such other person, firm, corporation or entity
maintains an office or facility in the Territory or otherwise. Mr.
Hall's employment agreement with MBI is intended to replace Mr.
Hall's other employment agreements with Wedge Holding or Wedge
Bank.
Robert Lynn Hall, President of Wedge Holding and Wedge Bank,
has entered into an employment agreement with MBI dated July 6,
1994. Pursuant to such agreement, Robert Lynn Hall shall be
employed as the President and as a director of Wedge Bank for a
period of one year or until December 31, 1995, whichever shall be
the last to occur. Additionally, to the extent that Mr. Hall shall
not have previously received a 1994 incentive bonus from Wedge
Holding or Wedge Bank of $212,000, MBI shall make a cash payment of
the unpaid portion of such amount on the Closing Date. During Mr.
Hall's employment, he shall receive a base salary of $217,500 per
year and will be paid an incentive bonus of $212,000 for 1995. Mr.
Hall will also receive employee benefits and customary perquisites
equivalent to those provided by MBI to similarly situated officers.
Mr. Hall has agreed that for a period of three years following his
employment he will not engage in any active solicitation of new
business that is of a type or nature which is permitted to
commercial banking or thrift institutions under state and/or
federal law in Madison County, Illinois (the "Territory"), or enter
the employ of, or have any direct or indirect interest in any other
person, firm, corporation or other entity engaged in any such
activity in the Territory, whether such other person, firm,
corporation or entity maintains an office or facility in the
Territory or otherwise. Mr. Hall's employment agreement with MBI
is intended to replace Mr. Hall's other employment agreements with
Wedge Holding or Wedge Bank.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION
----------------------------------------------------------
The following is a discussion of the material federal income
tax consequences of the Exchange, the Merger and the Liquidation to
certain stockholders of Wedge Holding and Wedge Bank. The
discussion does not purport to be a complete analysis or listing of
all potential tax considerations or consequences relevant to a
decision whether to vote for the approval of the Exchange or the
Merger. The discussion does not address all aspects of federal
income taxation that may be applicable to stockholders of Wedge
Holding and Wedge Bank subject to special federal income tax
treatment including (without limitation) foreign persons, insurance
companies, tax-exempt entities, retirement plans, dealers in
securities, persons who acquired their Wedge Holding Common Stock,
Wedge Holding Preferred Stock or Wedge Bank Common Stock pursuant
to the exercise of employee stock options or otherwise as
compensation, or persons who acquired their Wedge Holding Preferred
Stock or Wedge Holding Common Stock after July 6, 1994, if any.
The discussion addresses neither the effect of any applicable
state, local, or foreign tax laws, nor the effect of any federal
tax laws other than those pertaining to the federal income tax. IN
VIEW OF THE INDIVIDUAL NATURE OF FEDERAL INCOME TAX CONSEQUENCES, EACH
-30-
<PAGE> 38
STOCKHOLDER OF WEDGE HOLDING AND WEDGE BANK IS URGED TO
CONSULT HIS OWN TAX ADVISOR TO DETERMINE THE SPECIFIC TAX
CONSEQUENCES OF THE EXCHANGE, THE MERGER AND THE LIQUIDATION TO
HIM.
The discussion is based on the Code, regulations and rulings
now in effect or proposed thereunder, current administrative
rulings and practice, and judicial precedent, all of which are
subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences discussed herein.
The discussion is also based on certain assumptions regarding the
factual circumstances that will exist at the Effective Time,
including certain representations of MBI, Mercantile Illinois,
Wedge Holding, Wedge Bank, and certain stockholders of Wedge
Holding and Wedge Bank. If any of these factual assumptions is
inaccurate, the tax consequences of the Exchange, the Merger or the
Liquidation could differ from those described herein. The
discussion assumes that shares of Wedge Holding Common Stock, Wedge
Holding Preferred Stock and Wedge Bank Common Stock are held as
capital assets (within the meaning of Section 1221 of the Code).
Assuming the Exchange and the Merger occur in accordance with
the Merger Agreement, each of the Exchange and the Merger will
constitute a "reorganization" for federal income tax purposes under
Section 368(a)(1) of the Code with the following federal income tax
consequences:
1. No gain or loss will be recognized by Wedge Holding on
its transfer of Wedge Bank Common Stock solely in exchange for MBI
Common Stock in the Exchange.
2. No gain or loss will be recognized by Wedge Holding on
its distribution of MBI Common Stock to its stockholders in the
Liquidation.
3. Each stockholder of Wedge Holding who exchanges, in the
Liquidation, his or its shares of Wedge Holding Common Stock solely
for shares of MBI Common Stock:
a) will recognize no gain or loss;
b) will have an aggregate adjusted basis for the shares of
MBI Common Stock received equal to the aggregate basis of the
shares of Wedge Holding Common Stock surrendered; and
c) will have a holding period for the share of MBI Common
Stock received which includes the period during which the
shares of Wedge Holding Common Stock surrendered were held.
4. Each stockholder of Wedge Holding who exchanges, in the
Liquidation, his or its shares of Wedge Holding Preferred Stock
solely for shares of MBI Common Stock:
a) will recognize no gain or loss;
b) will have an aggregate adjusted basis for the shares of
MBI Common Stock received equal to the aggregate basis of the
shares of Wedge Holding Preferred Stock surrendered; and
c) will have a holding period for the shares of MBI Common
Stock received which includes the period during which the
shares of Wedge Holding Preferred Stock surrendered were held.
5. Each stockholder of Wedge Bank who exchanges, in the
Merger, his or its shares of Wedge Bank Common Stock solely for
shares of MBI Common Stock:
-31-
<PAGE> 39
a) will recognize no gain or loss, except with regard to
cash received in lieu of a fractional share, as discussed;
b) will have an aggregate adjusted basis for the shares of
MBI Common Stock received (including any fractional share of
MBI Common Stock deemed to be received, as described in
paragraph 6, below) equal to the aggregate basis of the shares
of Wedge Bank Common Stock surrendered; and
c) will have a holding period for the shares of MBI Common
Stock received (including any fractional share of MBI Common
Stock deemed to be received, as described in paragraph 6,
below) which includes the period during which the shares of
Wedge Bank Common Stock surrendered were held.
6. Each stockholder of Wedge Bank who receives cash in lieu
of a fractional share of MBI Common Stock will be treated as if the
fractional share had been received and then redeemed by MBI. The
receipt of such cash will cause the recipient to recognize capital
gain or loss, equal to the difference between the amount of cash
received and the portion of such holder's adjusted tax basis in the
shares of MBI Common Stock allocable to the fractional share
interest.
The obligations of Wedge Holding and Wedge Bank to consummate
the Exchange and the Merger are subject to the condition that each
shall have received from Thompson & Mitchell, counsel for MBI, an
opinion to the effect that each of the Exchange and the Merger will
constitute a "reorganization" for federal income tax purposes under
Section 368(a)(1) of the Code and that the other federal income tax
consequences of the Exchange, the Merger and the Liquidation will
in all material respects be as described in this section. Such
opinion will be subject to the conditions and assumptions stated
therein and will also rely on various representations made by MBI,
Mercantile Illinois, Wedge Holding, Wedge Bank, and certain
stockholders of Wedge Holding. Copies of the opinion will be
available, without charge, upon written request to MBI. An opinion
of counsel, unlike a private letter ruling from the Internal
Revenue Service (the "Service"), has no binding effect on the
Service. The Service could take a position contrary to counsel's
opinion and, if the matter is litigated, a court may reach a
decision contrary to the opinion. The Service is not expected to
issue a ruling on the tax consequences of the Exchange, the Merger
or the Liquidation, and no such ruling has been requested.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE EXCHANGE, THE MERGER AND THE
LIQUIDATION TO CERTAIN STOCKHOLDERS AND IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO
ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH
STOCKHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT, THE FEDERAL
INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY
NOT APPLY TO EACH STOCKHOLDER. IN VIEW OF THE INDIVIDUAL NATURE OF
INCOME TAX CONSEQUENCES, EACH STOCKHOLDER SHOULD CONSULT HIS OWN
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE
EXCHANGE, THE MERGER, OR THE LIQUIDATION TO HIM, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
DISSENTERS' RIGHTS OF STOCKHOLDERS OF WEDGE BANK
------------------------------------------------
Each stockholder of Wedge Bank has the right to dissent from
the Merger and receive the fair value of his or her shares of Wedge
Bank Common Stock in cash if the stockholder follows the procedures
set forth under Section 5/29 of the Illinois Banking Act, set forth
as Annex A hereto and the material provisions of which are
-------
summarized below. Stockholders of Wedge Holding do not have
dissenters' rights in connection with the Exchange.
-32-
<PAGE> 40
Under the Illinois Banking Act, a stockholder of Wedge Bank
who (i) files with Wedge Bank prior to the Wedge Bank Special
Meeting a written objection to the Merger, (ii) does not vote in
favor of the approval of the Merger Agreement, and (iii) within 20
day of receiving notice of the date the Merger became effective,
delivers to Wedge Bank a written demand for payment of the fair
value of his or her shares as of the day prior to the date of the
Wedge Bank Special Meeting, shall be entitled to receive from Wedge
Bank in cash the fair value of his or her shares upon the surrender
of the stock certificate or certificates representing his or her
shares. A VOTE AGAINST THE EXCHANGE WILL NOT, BY ITSELF, BE
REGARDED AS A WRITTEN OBJECTION FOR PURPOSES OF ASSERTING APPRAISAL
RIGHTS.
If within 30 days after the date on which the Merger is
consummated Wedge Bank and a dissenting stockholder shall agree
upon the fair value of the shares of such dissenting stockholder,
Wedge Bank shall pay such agreed value within 90 days after the
consummation of the Merger, upon the surrender of the certificate
or certificates representing such shares. If within such 30-day
period Wedge Bank and a dissenting stockholder do not agree on the
fair value of such shares, the dissenting stockholder may, within
60 days after the expiration of the 30-day period after the
consummation of the Merger, file a complaint in circuit court of
Illinois asking for a finding and determination of the fair value
of his or her shares. Such dissenting shareholder shall be
entitled to judgment for the amount of the fair value as
determined by the court with interest thereon to the date of such
judgment.
THE PRECEDING DISCUSSION IS A FAIR SUMMARY OF THE PROVISIONS
REGARDING DISSENTERS' RIGHTS UNDER THE ILLINOIS BANKING ACT AND IS
QUALIFIED IN ITS ENTIRETY BY THE TEXT OF SECTION 29 OF THE ILLINOIS
BANKING ACT WHICH IS ATTACHED HERETO AS ANNEX A. WEDGE BANK
-------
STOCKHOLDERS WHO ARE INTERESTED IN PERFECTING DISSENTERS' RIGHTS
PURSUANT TO THE ILLINOIS BANKING ACT IN CONNECTION WITH THE MERGER
MAY WISH TO CONSULT WITH THEIR COUNSEL FOR ADVICE AS TO THE
PROCEDURES REQUIRED TO BE FOLLOWED.
PRO FORMA FINANCIAL INFORMATION
-------------------------------
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated
selected historical per share data of MBI and Wedge Bank and the
corresponding pro forma and pro forma equivalent per share amounts
giving effect to the proposed Acquisition, individually and in
conjunction with the completed merger of Ameribanc, Inc. ("ABNK"),
which was completed on April 30, 1992 and accounted for as a
purchase, and the proposed mergers of UNSL and CMB. The data presented
is based upon the consolidated financial statements and related notes
of MBI, Wedge Bank, UNSL and CMB included in this Joint Proxy Statement/
Prospectus or in documents incorporated herein by reference, and
the pro forma combined consolidated balance sheet and income
statements, including the notes thereto, appearing elsewhere
herein. This information should be read in conjunction with such
historical and pro forma financial statements and related notes
thereto. The assumptions used in the preparation of this table
appear in the notes on page 42 of this Joint Proxy Statement/
Prospectus. This data is not necessarily indicative of the results
of the future operations of the combined organization or the actual
results that would have occurred if the Acquisition, the completed
merger of ABNK or the proposed mergers of UNSL and CMB had been
consummated prior to the periods indicated.
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<PAGE> 41
</TABLE>
<TABLE>
<CAPTION>
MBI/ MBI/
Wedge Bank All Entities
MBI Wedge Bank Pro Forma Pro Forma
Reported Reported Combined <F1> Combined<F2>
-------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Book Value per Share:
June 30, 1994 $ 23.49 $132.78 $ 23.41 $ 23.23
December 31, 1993 22.40 131.11 22.33 22.16
Cash Dividends Declared per Share:
Six months ended June, 1994 .56 3.01 .56 .56
Year ended December 31, 1993 .99 4.01 .99 .99
Year ended December 31, 1992 .93 5.16 .93 .93
Year ended December 31, 1991 .93 1.74 .93 .93
Earnings per Share:
Six months ended June 30, 1994 1.84 9.33 1.83 1.79
Year ended December 31, 1993 2.80 24.19 2.82 2.79
Year ended December 31, 1992 2.36 16.76 2.33 2.37
Year ended December 31, 1991 2.37 9.68 2.23 2.21
Market Price per Share:
At July 5, 1994 <F3> 35.25 -- -- --
At October 4, 1994<F3> 35.375 -- -- --
<FN>
- ------------------------------------
<F1> Includes the effect of pro forma adjustments for ABNK
and Wedge Bank as appropriate. See "PRO FORMA
FINANCIAL INFORMATION."
<F2> Includes the effect of pro forma adjustments for ABNK,
Wedge Bank, UNSL and CMB as appropriate. See "PRO FORMA
FINANCIAL INFORMATION."
<F3> The market value of MBI Common Stock was determined as
of the last trading day preceding the public
announcement of the proposed acquisition and as of the
latest available date prior to the filing of the Joint
Proxy Statement/Prospectus, based on the last sale
price as reported on the NYSE Composite Tape. The
market value of Wedge Bank Common Stock was determined
as of the second quarter of 1992, the date of the last
transaction known to management of Wedge Bank prior to
the public announcement of the proposed acquisition.
</TABLE>
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma combined consolidated balance
sheet gives effect to the Acquisition and the proposed mergers of
UNSL and CMB, as if each of the mergers were consummated on June 30, 1994.
MBI acquired ABNK on April 30, 1992, which acquisition was
accounted for under the purchase method of accounting.
Accordingly, the historical results of operations of MBI include
the results of operations of ABNK from May 1, 1992 forward. The
following pro forma combined consolidated income statements include
the results of operations of ABNK from January 1, 1991 through the
date of acquisition.
The following pro forma combined consolidated income statements
for the six months ended June 30, 1994 and 1993 and for the years
ended December 31, 1993, 1992 and 1991 set forth the results of
operations of MBI combined with the results of operations of Wedge
Bank, UNSL and CMB as if the Acquisition and the proposed mergers
of UNSL and CMB had occurred as of the first day of the period
presented. As stated above, the pro forma combined consolidated
income statements for the years ended December 31, 1992 and 1991
include the results of operations of ABNK from January 1, 1991
through the date of acquisition.
The unaudited pro forma combined consolidated financial
statements should be read in conjunction with the accompanying
Notes to the Pro Forma Combined Consolidated Financial Statements
and with the historical Financial Statements of MBI, Wedge Holding,
Wedge Bank, UNSL and ABNK. The
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<PAGE> 42
historical interim financial information for the six months ended
June 30, 1994 and 1993, used as a basis for the pro-forma combined
consolidated financial statements, include all necessary
adjustments which, in management's opinion, are necessary to
present the data fairly. These pro forma combined consolidated
financial statements may not be indicative of the results of
operations that actually would have occurred if the completed and
proposed mergers had been consummated on the dates assumed above or
of the results of operations that may be achieved in the future.
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<PAGE> 43
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
JUNE 30, 1994
(THOUSANDS)
(UNAUDITED)
<CAPTION>
All Entities
Pro Forma Pro Forma
Wedge Bank Combined CMB & UNSL Combined
MBI Wedge Bank Adjustments<F1> Consolidated UNSL CMB Adjustments<F1> Consolidated
----------- ---------- ----------- ------------ -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 556,843 $ 7,825 $ $ 564,668 $ 3,038 $ 22,787 $ $ 590,493
Due from banks -
interest bearing . . . 10,992 94 11,086 18,854 0 29,940
Federal funds sold and
repurchase agreements. 113,939 0 113,939 0 11,025 124,964
Investments in debt and
equity securities
Trading. . . . . . . 6,020 0 6,020 0 0 6,020
Available-for-sale . 315,152 59,005 374,157 0 48,359 422,516
Held-to-maturity . . 2,980,348 23,950 3,004,298 16,026 146,919 3,167,243
----------- -------- -------- ----------- -------- -------- -------- -----------
Total . . . . . . 3,301,520 82,955 0 3,384,475 16,026 195,278 0 3,595,779
Loans and leases. . . . 7,619,002 113,165 7,732,167 420,274 376,542 8,528,983
Reserve for possible
loan losses. . . . . . (172,493) (1,399) (173,892) (3,631) (6,430) (183,953)
----------- -------- -------- ----------- -------- -------- -------- -----------
Net Loans and Leases 7,446,509 111,766 0 7,558,275 416,643 370,112 0 8,345,030
Bank premises and
equipment. . . . . . . 203,040 3,858 206,898 5,923 11,660 224,481
Due from customers on
acceptances. . . . . . 12,174 0 12,174 0 0 12,174
Goodwill. . . . . . . . 54,678 0 54,678 70 5,835 60,583
Other intangibles . . . 14,070 0 14,070 103 0 14,173
Other assets. . . . . . 220,136 3,453 19,121 <F2> 223,589 3,267 12,358 38,577 <F4> 239,214
(19,121)<F3> (38,577)<F5>
51,224 <F12>
(51,224)<F13>
----------- -------- -------- ----------- -------- -------- -------- -----------
Total Assets. . . . . $11,933,901 $209,951 $ 0 $12,143,852 $463,924 $629,055 $ 0 $13,236,831
=========== ======== ======== =========== ======== ======== ======== ===========
LIABILITIES
Deposits
Non-interest bearing. . $ 1,473,103 $ 23,651 $ $ 1,496,754 $ 10,218 $ 74,197 $ $ 1,581,169
Interest bearing. . . . 7,551,827 138,740 7,690,567 365,365 467,908 8,523,840
Foreign . . . . . . . . 115,576 0 115,576 0 0 115,576
----------- -------- -------- ----------- -------- -------- -------- -----------
Total Deposits . . . 9,140,506 162,391 0 9,302,897 375,583 542,105 0 10,220,585
Federal funds purchased
and repurchase
agreements . . . . . . 673,345 26,380 699,725 0 22,309 722,034
Other short-term
borrowings . . . . . . 628,374 0 628,374 45,000 1,100 674,474
Long-term debt. . . . . 290,162 0 290,162 0 5,619 295,781
Bank acceptances
outstanding. . . . . . 12,174 0 12,174 0 0 12,174
Other liabilities . . . 175,897 2,059 177,956 4,764 6,698 189,418
----------- -------- -------- ----------- -------- -------- -------- -----------
Total Liabilities. . 10,920,458 190,830 0 11,111,288 425,347 577,831 0 12,114,466
SHAREHOLDERS' EQUITY
Preferred stock . . . . - - 430 (430)<F13> 0
Common stock. . . . . . 215,734 1,443 4,850 <F2> 220,584 1,744 3,735 7,892 <F4> 241,604
(1,443)<F3> (1,744)<F5>
13,128 <F12>
(3,735)<F13>
Capital surplus . . . . 168,140 5,145 1,738 <F2> 169,878 7,180 24,376 (2,581)<F4> 182,710
(5,145)<F3> (7,180)<F5>
15,413 <F12>
(24,376)<F13>
Retained earnings . . . 629,569 12,533 12,533 <F2> 642,102 33,266 22,683 33,266 <F4> 698,051
(12,533)<F3> (33,266)<F5>
22,683 <F12>
(22,683)<F13>
Treasury Stock. . . . . 0 (3,613) 0 3,613 <F5> 0
----------- -------- -------- ----------- -------- -------- -------- -----------
Total Shareholders'
Equity. . . . . . . 1,013,443 19,121 0 1,032,564 38,577 51,224 0 1,122,365
----------- -------- -------- ----------- -------- -------- -------- -----------
Total Liabilities
and Shareholders'
Equity. . . . . . . $11,933,901 $209,951 $ 0 $12,143,852 $463,924 $629,055 $ 0 $13,236,831
=========== ======== ======== =========== ======== ======== ======== ===========
See notes to pro forma combined consolidated financial statements.
</TABLE>
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<PAGE> 44
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Wedge Bank All Entities
Pro Forma Pro Forma
Combined Combined
MBI Wedge Bank Consolidated UNSL CMB Consolidated
---------- ---------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income . . . . . . . . . . . . $402,464 $ 6,969 $409,433 $14,185 $21,195 $444,813
Interest Expense. . . . . . . . . . . . 150,346 2,685 153,031 7,342 8,861 169,234
-------- ------- -------- ------- ------- --------
Net Interest Income . . . . . . . . . 252,118 4,284 256,402 6,843 12,334 275,579
Provision for Possible Loan Losses. . . 16,398 76 16,474 60 545 17,079
-------- ------- -------- ------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses. . . . . . 235,720 4,208 239,928 6,783 11,789 258,500
Other Income
Trust . . . . . . . . . . . . . . . . 31,574 212 31,786 0 0 31,786
Investment banking. . . . . . . . . . 4,632 0 4,632 0 0 4,632
Service charges . . . . . . . . . . . 28,941 579 29,520 472 1,528 31,520
Credit card fees. . . . . . . . . . . 11,598 0 11,598 0 0 11,598
Securities gains. . . . . . . . . . . 433 184 617 20 0 637
Other . . . . . . . . . . . . . . . . 18,760 83 18,843 1,146 2,210 22,199
-------- ------- -------- ------- ------- --------
Total Other Income. . . . . . . . 95,938 1,058 96,996 1,638 3,738 102,372
Other Expense
Salaries and employee benefits. . . . 110,964 2,131 113,095 2,526 5,465 121,086
Net occupancy and equipment . . . . . 29,685 473 30,158 542 1,307 32,007
Other . . . . . . . . . . . . . . . . 65,838 933 66,771 2,128 3,889 72,788
-------- ------- -------- ------- ------- --------
Total Other Expense . . . . . . . 206,487 3,537 210,024 5,196 10,661 225,881
-------- ------- -------- ------- ------- --------
Income Before Income Taxes. . . . 125,171 1,729 126,900 3,225 4,866 134,991
Income Taxes. . . . . . . . . . . . . . 46,113 385 46,498 1,182 1,457 49,137
-------- ------- -------- ------- ------- --------
Net Income. . . . . . . . . . . . $ 79,058 $ 1,344 $ 80,402 $ 2,043 $ 3,409 $ 85,854
======== ======= ======== ======= ======= ========
Per Share Data
Average Common Shares Outstanding . . 42,947,890 43,917,890 48,053,728
Net Income. . . . . . . . . . . . . . $1.84 $1.83 $1.79
See notes to pro forma combined consolidated financial statements.
</TABLE>
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<PAGE> 45
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1993
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Wedge Bank All Entities
Pro Forma Pro Forma
Combined Combined
MBI Wedge Bank Consolidated UNSL CMB Consolidated
---------- ---------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income. . . . . . . . . . . . . $421,512 $6,721 $428,233 $13,996 $15,008 $457,237
Interest Expense . . . . . . . . . . . . 171,140 2,568 173,708 7,055 6,483 187,246
-------- ------ -------- ------- ------- --------
Net Interest Income. . . . . . . . . . 250,372 4,153 254,525 6,941 8,525 269,991
Provision for Possible Loan Losses . . . 28,534 164 28,698 260 466 29,424
-------- ------ -------- ------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses . . . . . . 221,838 3,989 225,827 6,681 8,059 240,567
Other Income
Trust. . . . . . . . . . . . . . . . . 30,619 197 30,816 0 0 30,816
Investment banking . . . . . . . . . . 4,775 0 4,775 0 0 4,775
Service charges. . . . . . . . . . . . 28,619 584 29,203 422 814 30,439
Credit card fees . . . . . . . . . . . 11,850 0 11,850 0 0 11,850
Securities gains . . . . . . . . . . . 2,679 10 2,689 0 0 2,689
Other. . . . . . . . . . . . . . . . . 21,330 831 22,161 997 1,656 24,814
-------- ------ -------- ------- ------- --------
Total Other Income . . . . . . . . 99,872 1,622 101,494 1,419 2,470 105,383
Other Expense
Salaries and employee benefits . . . . 105,640 2,000 107,640 2,470 3,994 114,104
Net occupancy and equipment. . . . . . 29,567 364 29,931 487 776 31,194
Other. . . . . . . . . . . . . . . . . 80,169 901 81,070 1,484 2,535 85,089
-------- ------ -------- ------- ------- --------
Total Other Expense. . . . . . . . 215,376 3,265 218,641 4,441 7,305 230,387
-------- ------ -------- ------- ------- --------
Income Before Income Taxes . . . . 106,334 2,346 108,680 3,659 3,224 115,563
Income Taxes . . . . . . . . . . . . . . 39,422 638 40,060 1,352 891 42,303
-------- ------ -------- ------- ------- --------
Net Income Before Change in
Accounting Principle . . . . . . . $ 66,912 $1,708 $ 68,620 $ 2,307 $ 2,333 $ 73,260
======== ====== ======== ======= ======= ========
Per Share Data
Average Common Shares Outstanding. . . 42,243,319 43,213,319 46,842,085
Net Income Before Change in Accounting
Principle. . . . . . . . . . . . . . $1.58 $1.59 $1.56
See notes to pro forma combined consolidated financial statements.
</TABLE>
-38-
<PAGE> 46
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Wedge Bank All Entities
Pro Forma Pro Forma
Combined Combined
MBI Wedge Bank Consolidated UNSL CMB Consolidated
---------- ---------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income. . . . . . . . . . . . . $829,930 $15,258 $845,188 $27,834 $34,452 $907,474
Interest Expense . . . . . . . . . . . . 328,734 5,505 334,239 14,071 14,194 362,504
-------- ------- -------- ------- ------- --------
Net Interest Income. . . . . . . . . . 501,196 9,753 510,949 13,763 20,258 544,970
Provision for Possible Loan Losses . . . 61,013 240 61,253 320 956 62,529
-------- ------- -------- ------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses . . . . . . 440,183 9,513 449,696 13,443 19,302 482,441
Other Income
Trust. . . . . . . . . . . . . . . . . 61,138 409 61,547 0 0 61,547
Investment banking . . . . . . . . . . 8,486 0 8,486 0 0 8,486
Service charges. . . . . . . . . . . . 58,511 1,300 59,811 908 2,254 62,973
Credit card fees . . . . . . . . . . . 24,060 0 24,060 0 0 24,060
Securities gains . . . . . . . . . . . 3,742 195 3,937 0 0 3,937
Other. . . . . . . . . . . . . . . . . 43,221 948 44,169 2,261 3,615 50,045
-------- ------- -------- ------- ------- --------
Total Other Income . . . . . . . . 199,158 2,852 202,010 3,169 5,869 211,048
Other Expense
Salaries and employee benefits . . . . 215,333 5,286 220,619 4,995 9,161 234,775
Net occupancy and equipment. . . . . . 62,638 822 63,460 1,037 2,162 66,659
Other. . . . . . . . . . . . . . . . . 166,938 1,810 168,748 3,714 6,805 179,267
-------- ------- -------- ------- ------- --------
Total Other Expense. . . . . . . . 444,909 7,918 452,827 9,746 18,128 480,701
-------- ------- -------- ------- ------- --------
Income Before Income Taxes . . . . 194,432 4,447 198,879 6,866 7,043 212,788
Income Taxes . . . . . . . . . . . . . . 75,568 964 76,532 2,549 1,913 80,994
-------- ------- -------- ------- ------- --------
Net Income Before Change in
Accounting Principle . . . . . . . $118,864 $ 3,483 $122,347 $ 4,317 $ 5,130 $131,794
======== ======= ======== ======= ======= ========
Per Share Data
Average Common Shares Outstanding. . . 42,439,298 43,409,298 47,248,436
Net Income Before Change in Accounting
Principle. . . . . . . . . . . . . . $2.80 $2.82 $2.79
See notes to pro forma combined consolidated financial statements.
</TABLE>
-39-
<PAGE> 47
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
(THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<CAPTION>
ABNK Wedge Bank All Entities
ABNK Pro Forma Pro Forma Pro Forma
1/1/92- ABNK Combined Combined Combined
MBI 4/30/92<F6> Adjustments<F6> Consolidated Wedge Bank Consolidated UNSL CMB Consolidated
---------- ------- ----------- ------------ ---------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income. . . . . . $873,447 $30,729 $(1,692)<F7> $902,395 $15,931 $918,326 $32,332 $28,577 $979,235
(89)<F8>
Interest Expense . . . . . 417,358 16,549 433,907 6,875 440,782 18,517 13,616 472,915
-------- ------- ------- -------- ------- -------- ------- ------- --------
Net Interest Income. . . 456,089 14,180 (1,781) 468,488 9,056 477,544 13,815 14,961 506,320
Provision for Possible
Loan Losses . . . . . . . 74,579 1,913 76,492 191 76,683 296 913 77,892
-------- ------- ------- -------- ------- -------- ------- ------- --------
Net Interest Income
after Provision for
Possible Loan Losses. . 381,510 12,267 (1,781) 391,996 8,865 400,861 13,519 14,048 428,428
Other Income
Trust. . . . . . . . . . 57,501 613 58,114 444 58,558 0 0 58,558
Investment banking . . . 8,918 136 9,054 0 9,054 0 0 9,054
Service charges. . . . . 55,399 2,143 57,542 1,228 58,770 908 1,559 61,237
Credit card fees . . . . 21,487 87 21,574 0 21,574 0 0 21,574
Securities gains . . . . 5,518 0 5,518 439 5,957 0 0 5,957
Other. . . . . . . . . . 35,121 1,130 36,251 574 36,825 2,221 3,233 42,279
-------- ------- ------- -------- ------- -------- ------- ------- --------
Total Other Income . . 183,944 4,109 0 188,053 2,685 190,738 3,129 4,792 198,659
Other Expense
Salaries and employee
benefits. . . . . . . . 192,015 7,199 199,214 5,123 204,337 4,521 7,617 216,475
Net occupancy and
equipment . . . . . . . 55,588 2,027 (31)<F9> 57,584 771 58,355 944 1,630 60,929
Other. . . . . . . . . . 170,465 5,339 (93)<F10> 175,711 2,218 177,929 3,415 4,607 185,951
-------- ------- ------- -------- ------- -------- ------- ------- --------
Total Other Expense. . 418,068 14,565 (124) 432,509 8,112 440,621 8,880 13,854 463,355
-------- ------- ------- -------- ------- -------- ------- ------- --------
Income Before Income
Taxes . . . . . . . . 147,386 1,811 (1,657) 147,540 3,438 150,978 7,768 4,986 163,732
Income Taxes . . . . . . . 52,346 513 (595)<F11> 52,264 1,025 53,289 2,540 1,245 57,074
-------- ------- ------- -------- ------- -------- ------- ------- --------
Net Income . . . . . . $ 95,040 $ 1,298 $(1,062) $ 95,276 $ 2,413 $ 97,689 $ 5,228 $ 3,741 $106,658
======== ======= ======= ======== ======= ======== ======= ======= ========
Per Share Data
Average Common Shares
Outstanding . . . . . . 39,492,237 40,188,849 41,158,849 44,255,654
Net Income . . . . . . . $2.36 $2.32 $2.33 $2.37
See notes to pro forma combined consolidated financial statements.
</TABLE>
-40-
<PAGE> 48
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
(THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<CAPTION>
ABNK Wedge Bank All Entities
Pro Forma Pro Forma Pro Forma
ABNK Combined Combined Combined
MBI ABNK Adjustments<F6> Consolidated Wedge Bank Consolidated UNSL CMB Consolidated
---------- -------- ----------- ------------ ---------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income. . . . . . $879,471 $103,630 $(5,075)<F7> $977,760 $16,461 $994,221 $39,191 $25,706 $1,059,118
(266)<F8>
Interest Expense . . . . . 506,916 63,042 569,958 8,882 578,840 26,417 13,260 618,517
-------- -------- ------- -------- ------- -------- ------- ------- ----------
Net Interest Income. . . 372,555 40,588 (5,341) 407,802 7,579 415,381 12,774 12,446 440,601
Provision for Possible
Loan Losses . . . . . . . 58,076 2,477 60,553 1,132 61,685 1,263 870 63,818
-------- -------- ------- -------- ------- -------- ------- ------- ----------
Net Interest Income
after Provision for
Possible Loan Losses. . 314,479 38,111 (5,341) 347,249 6,447 353,696 11,511 11,576 376,783
Other Income
Trust. . . . . . . . . . 49,400 1,860 51,260 442 51,702 0 0 51,702
Investment banking . . . 7,463 0 7,463 0 7,463 0 0 7,463
Service charges. . . . . 47,504 6,008 53,512 1,051 54,563 952 1,458 56,973
Credit card fees . . . . 20,636 0 20,636 0 20,636 0 0 20,636
Securities gains . . . . 4,334 4 4,338 493 4,831 244 0 5,075
Other. . . . . . . . . . 26,359 3,389 29,748 393 30,141 1,705 2,794 34,640
-------- -------- ------- -------- ------- -------- ------- ------- ----------
Total Other Income . . 155,696 11,261 0 166,957 2,379 169,336 2,901 4,252 176,489
Other Expense
Salaries and employee
benefits. . . . . . . . 172,155 21,245 193,400 3,846 197,246 3,895 6,494 207,635
Net occupancy and
equipment . . . . . . . 50,098 6,102 (92)<F9> 56,108 754 56,862 973 1,549 59,384
Other. . . . . . . . . . 161,095 16,150 (280)<F10> 176,965 2,347 179,312 5,263 3,896 188,471
-------- -------- ------- -------- ------- -------- ------- ------- ----------
Total Other Expense. . 383,348 43,497 (372) 426,473 6,947 433,420 10,131 11,939 455,490
-------- -------- ------- -------- ------- -------- ------- ------- ----------
Income Before Income
Taxes . . . . . . . . 86,827 5,875 (4,969) 87,733 1,879 89,612 4,281 3,889 97,782
Income Taxes . . . . . . . 18,673 1,466 (1,785)<F11> 18,354 679 19,033 1,767 924 21,724
-------- -------- ------- -------- ------- -------- ------- ------- ----------
Net Income . . . . . . $ 68,154 $ 4,409 $(3,184) $ 69,379 $ 1,200 $ 70,579 $ 2,514 $ 2,965 $ 76,058
======== ======== ======= ======== ======= ======== ======= ======= ==========
Per Share Data
Average Common Shares
Outstanding . . . . . . 31,790,914 33,867,754 34,837,754 37,748,653
Net Income . . . . . . . $2.37 $2.26 $2.23 $2.21
See notes to pro forma combined consolidated financial statements.
</TABLE>
-41-
<PAGE> 49
MERCANTILE BANCORPORATION INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<F1> The acquisitions of Wedge Bank, UNSL and CMB will be accounted
for as poolings-of-interests.
<F2> Acquisition of Wedge Bank with 970,000 shares of MBI Common
Stock.
<F3> Elimination of MBI's investment in Wedge Bank.
<F4> Acquisition of UNSL with 1,578,445 shares of MBI Common
Stock, based on the exchange ratio of 1.0604 of a share of
MBI Common Stock per share of UNSL Common Stock.
<F5> Elimination of MBI's investment in UNSL.
<F6> The acquisition of ABNK by MBI on April 30, 1992, was
accounted for as a purchase transaction. The MBI historical
financial data includes ABNK from the date of acquisition.
The results of operations of ABNK were included in the MBI
pro forma combined income statement from January 1, 1991.
<F7> Amortization of purchase price adjustment of $7,690,000 on
investment securities portfolio.
<F8> Interest income, at an estimated short-term interest rate of
3%, lost on cash of $8,851,000 paid to ABNK's shareholders.
<F9> Reduced depreciation and amortization of bank premises and
equipment as a result of the valuation adjustment of
$1,102,000.
<F10> Goodwill of $2,285,000 amortized under the straight line
method over a period of 15 years, net of the elimination of
ABNK's annual goodwill amortization of $432,000.
<F11> Tax effect of pro forma adjustments.
<F12> Acquisition of CMB with 2,625,533 shares of MBI Common Stock,
based on exchange ratio of .5970 of a share of MBI Common Stock
per share of CMB Common Stock. 43,000 shares of CMB Preferred
Stock were converted to 549,000 shares of CMB Common Stock prior
to said acquisition.
<F13> Elimination of MBI's Investment in CMB.
-42-
<PAGE> 50
INFORMATION REGARDING WEDGE HOLDING AND WEDGE BANK
--------------------------------------------------
BUSINESS
GENERAL. The Wedge Holding Company is a registered bank
holding company incorporated on October 3, 1977, under the laws of
the State of Delaware. As of the date hereof, Wedge Holding has
nine (9) shareholders. Wedge Holding's principal office is located
at 620 East Broadway, Alton, Illinois. Wedge Holding owns 82.15%
of the issued and outstanding Wedge Bank Common Stock. Wedge Bank,
located in Alton, Illinois, has branch facilities in East Alton,
Brighton, Bethalto and Godfrey, Illinois.
Wedge Bank is a community bank serving the needs of
Alton, Illinois since 1902. Its Board of Directors is composed of
individuals who reside in its service area. Wedge Bank's net
income consists primarily of net interest income and other income.
Wedge Bank's principal non-interest expenses are salaries and
employee benefits, occupancy expenses, equipment expenses,
provisions for loan losses, FDIC insurance expenses, professional
services and other operating expenses.
SUBSIDIARY BANK AND MARKET AREA. As of June 30, 1994,
Wedge Bank had total assets of $210 million and total deposits of
$162 million. Wedge Bank offers a full range of financial services
to commercial, industrial and individual customers, including
short-term and medium-term loans, revolving credit arrangements,
inventory and accounts receivable financing, equipment financing,
real estate lending, savings accounts, interest and non-interest
bearing checking accounts, and installment and other personal
loans. Other services include safe-deposit boxes, federal tax
depository and night depository services. The Wedge Edge(R)
Automatic Teller Machine (ATM) network provides 24 hour banking and
is affiliated with the regional BankMate(R) network and the
international CIRRUS(R) and Plus(R) networks. Wedge Bank also provides
trust and agency services, primarily to individuals and, to a
lesser extent, to partnerships, corporations and other entities.
Such services include providing investment, management,
administrative and advisory services for agency and trust accounts,
acting as trustee of living and testamentary trusts and employee
benefit plans, and serving as personal representative,
administrator and/or conservator of estates.
Wedge Bank is an Illinois bank, chartered by the Illinois
Commissioner of Banks and Trusts. It is insured by the FDIC to the
full extent provided by applicable laws and regulations.
LENDING ACTIVITIES. Wedge Bank has a diverse lending
portfolio consisting of commercial/consumer loans and residential
real estate loans. The primary lending area is the Greater Alton
Area located in Madison County, Illinois, with some loans being
made in Macoupin and Jersey counties. Few loans are made outside
of this area, although Wedge Bank does participate in loans made by
the Greene County National Bank in Carrollton, Illinois, and the
First Community Bank of Taney County in Branson, Missouri. As of
June 30, 1994, Wedge Bank had aggregate loans outstanding of
$113,247,000 representing 69.74% of total deposits and 53.94% of
total assets.
EMPLOYEES. As of June 30, 1994, Wedge Bank employed 164
people, 148 of whom work full-time. None of the employees are
subject to a collective bargaining agreement. Relationship with
the employees is considered to be good.
LITIGATION. Wedge Holding and Wedge Bank are, from time
to time, parties to various legal actions which arise in the normal
course of business. Management believes, after discussion with
legal counsel, that there is no proceeding, threatened or pending,
against Wedge Holding or Wedge Bank, which if determined adversely,
would have a material adverse affect on the business or financial
position of Wedge Holding or Wedge Bank.
-43-
<PAGE> 51
PROPERTIES. Wedge Holding's headquarters are situated at
620 East Broadway, Alton, Illinois. This building also serves as
the main facility for Wedge Bank. In addition to the main
facility, Wedge Bank operates three branch facilities in Alton,
Illinois, one in Godfrey, Illinois, one in Brighton, Illinois, two
in Bethalto, Illinois and one in East Alton, Illinois.
1. The main offices are located at 620 East Broadway,
Alton, Illinois. This facility consists of a three
story building with a basement. The total floor
area for the building is approximately 24,825
square feet.
2. A branch bank is located at 4365 North Alby Street,
Alton Square, Alton, Illinois. This is a one story
building with a basement and consists of
approximately 3,500 square feet. There are five
drive-up lanes, a lobby with three walk-up tellers,
customer service desks and two loan offices.
3. A drive-up facility is maintained at 620 East Front
Street, Alton, Illinois. There are five drive-up
lanes and an office building of approximately 3,900
square feet with three walk-up tellers. Co-located
with this facility is a 2,220 square foot
warehouse.
4. A drive-up facility is maintained at 2703 Godfrey
Road, Godfrey, Illinois. This building consists of
approximately 3,750 square feet of which 75% is
occupied by tenants. There are two drive-up lanes
and a lobby with one walk-up teller.
5. The main Godfrey branch is located at 5759 Godfrey
Road, Godfrey, Illinois. It is a one story
building consisting of approximately 5,000 square
feet. There are four drive-up lanes, a lobby with
four walk-up tellers, customer service desks, a
loan department, and safe deposit boxes.
6. A branch bank is located in Brighton, Illinois at
200 North Main Street, Brighton, Illinois. This
two story building consists of approximately 10,000
square feet. It has two drive-up lanes, a lobby
with four walk-up tellers, customer service desks,
loan area and safe deposit boxes. The second floor
is currently unoccupied.
7. A branch bank is located in Bethalto, Illinois at
101 South Prairie Street, Bethalto, Illinois. This
building consists of approximately 4,900 square
feet. It has five drive-up lanes, a lobby with
four walk-up tellers, customer service desks, a
loan area and safe deposit boxes.
8. A drive-up facility is maintained at #1 Terminal
Drive, East Alton, Illinois. This building
consists of approximately 1,920 square feet of
office space plus a full basement. It has five
drive-up lanes and a lobby with two walk-up
tellers.
Wedge Bank owns the real estate and buildings out of
which it operates including drive-up facilities and branch
locations, except for the 5759 Godfrey location, which is leased.
In addition, the bank has recently purchased a three
story office building at 620 East Third Street with approximately
24,600 square feet and a one story building at 622-624 East
Broadway with approximately 2,300 square feet of space. The
buildings are presently occupied by commercial tenants and will be
available for future expansion by June 30, 1995.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. The
following table sets forth the beneficial ownership of shares of
Wedge Holding Preferred Stock and Wedge Holding Common Stock
-44-
<PAGE> 52
as of June 30, 1994, held by: (i) each person who is known to
Wedge Holding to beneficially own more than 5% of the outstanding
shares of Wedge Holding Preferred Stock or Wedge Holding Common
Stock; (ii) each person who is a director of Wedge Holding; and
(iii) all directors and executive officers as a group. Unless
otherwise indicated, all shares are held with sole voting and
investment power.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owners: Beneficial Ownership <F1> Class <F2>
- ------------------------- ------------------------- ----------
<S> <C> <C>
Melvin G. Hall, Trustee Under the
Melvin G. Hall Revocable Trust
P.O. Box 2393
Alton, Illinois 62002-2393
Preferred 46,112 72.35%
Common 8,254 53.88%
Robert Lynn Hall
P.O. Box 2393
Alton, Illinois 62002-2393
Preferred 10,020 15.72%
Common 4,734 30.90%
M. Cheryl Hall
526 Middleton Ct.
St. Louis, Missouri 63122
Preferred 3,801 5.96%
Common 1,246 8.39%
M. Leon Hall
216 West Jackson
Webster Groves, Missouri 63119
Preferred 3,801 5.96%
Common 680 4.44%
Minnie L. Hall
Common 175 1.14%
All directors and executive officers
as a group (4 persons)
Preferred 59,933 94.04%
Common 14,409 94.07%
<FN>
- -------------------------------------
<F1> Beneficial ownership of shares as of June 30, 1994,
as determined in accordance with the applicable Securities and
Exchange Commission rules, includes all shares as to which a person
directly or indirectly has or shares voting and/or investment power
and all shares as to which the person has a right to acquire sole
or shared voting and/or investment power and all shares as to which
the person has a right to acquire sole or shared voting and/or
investment power within 60 days of the reporting date. The listed
owner is the sole record and beneficial owner of all shares listed
unless otherwise noted.
<F2> Based upon 63,734 shares of Wedge Holding Preferred
Stock and 15,318 shares of Wedge Holding Common Stock outstanding
as of June 30, 1994.
</TABLE>
-45-
<PAGE> 53
The following table sets forth the beneficial ownership
of shares of Wedge Bank Common Stock as of June 30, 1994, held by:
(i) each person who is known to Wedge Bank to beneficially own more
than 5% of the outstanding shares of Wedge Bank Common Stock;
(ii) each person who is a director of Wedge Bank; and (iii) all of
the directors and executive officers as a group. Unless otherwise
indicated, all shares are held with sole voting and investment
power.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owners: Beneficial Ownership <F1> Class <F2>
- -------------------------- ------------------------- ----------
<S> <C> <C>
Melvin G. Hall 128,921<F3> 89.32%
P.O. Box 2393
Alton, Illinois 62002-2393
The Wedge Holding Company 118,556 82.15%
P.O. Box 2393
Alton, Illinois 62002-2393
Robert Lynn Hall 2,354<F4> 1.63%
Casper J. Jacoby, III 678<F5> <F6>
Robert Watson 270 <F6>
Ronald C. Mottaz 200 <F6>
Homer E. Clark, Jr. 100 <F6>
Charles W. Earnshaw, Jr. -- <F6>
J. Richard Miller 100 <F6>
Harold J. Thomeczek 100 <F6>
Eugene F. Tutoky 100 <F6>
All directors and executive officers 132,807 92.02%
as a group (15 persons)
<FN>
- ------------------------------------
<F1> Beneficial ownership of shares as of June 30, 1994,
as determined in accordance with the applicable Securities and
Exchange Commission rules, includes all shares as to which a person
directly or indirectly has or shares voting and/or investment power
and all shares as to which the person has a right to acquire sole
or shared voting and/or investment power and all shares as to which
the person has a right to acquire sole or shared voting and/or
investment power within 60 days of the reporting date. The listed
owner is the sole record and beneficial owner of all shares listed
unless otherwise noted.
<F2> Based upon 144,320 shares of Wedge Bank Common Stock
outstanding as of June 30, 1994.
<F3>Total includes 6,702 shares held by a trust in which
Mr. Hall is trustee, 118,556 shares owned of record by Wedge
Holding and to which Mr. Hall may be deemed to have voting and
investment power as the controlling stockholder of Wedge Holding,
660 shares held of record by Branson Inn and to which Mr. Hall may
be deemed to have voting and investment power as the controlling
-46-
<PAGE> 54
stockholder, and 2,803 shares held of record by MCL Holding Company
and as to which Mr. Hall may be deemed to have voting and
investment power as the controlling stockholder.
<F4>Total includes 969 shares held of record jointly with
Mr. Hall's wife and 515 shares held of record by Mr. Hall's wife,
as to which shares Mr. Hall has shared voting and investment power.
<F5>Total includes 578 shares held by a trust in which
Mr. Jacoby is trustee.
<F6>Less than one percent.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF WEDGE BANK
The following management's discussion and analysis is
intended to provide a review of significant factors affecting the
financial conditions and results of operations of Wedge Bank as of
and for the six months ended June 30, 1994 and 1993, and the years
ended December 31, 1993, 1992 and 1991. All trends for the years
ended December 31, 1993, 1992 and 1991 are also reflective of the
operations, in all material respects, of Wedge Holding.
Comparison of Operating Results for the Six Months Ended June 30,
- -----------------------------------------------------------------
1994 and 1993
- -------------
General. Net income for the six months ended June 30,
1994 was $1.3 million, compared to net income of $1.7 million for
the six months ended June 30, 1993. The decrease of $400,000 was
primarily attributable to an increase in net interest income of
$131,000 offset by a decrease in other income of $564,000 and an
increase in other expenses of $272,000.
Interest Income. Interest income increased $248,000 or
3.7% for the six months ended June 30, 1994 compared to 1993. The
increase resulted primarily from increases in interest income on
investment securities of $433,000 partially offset by a decrease in
interest income on loans of $198,000.
The increase in interest income on investment securities
resulted from an increase in the average balance of investment
securities from $70.9 million in 1993 to $81.0 million in 1994 and
an increase in the average yield on investment securities from 5.7%
in 1993 to 6.0% in 1994. The increase in the average balance of
investment securities reflects the investment of increased public
fund deposits. The average yield increased due to the upward swing
in interest rates during the first two quarters of 1994.
The decrease in interest income on loans resulted from a
decrease in the average balance of loans outstanding from $117.4
million in 1993 to $112.5 million in 1994, with the average yield
on loans remaining constant at 7.9% in 1993 and 1994. the decrease
in the average balance of loans outstanding during 1994 reflects
the assumption of approximately $2.8 million of student loans by
SLMA. These loans are originated by Wedge Bank and held in the
portfolio until principal payments begin, at which time SLMA
assumes the loan from Wedge Bank. The remaining decrease is
primarily attributable to principal payments in excess of
originations.
Interest Expense. Interest expense increased $117,000,
or 4.6% for the six months ended June 30, 1994 compared to 1993.
The increase resulted primarily from increases in interest expenses
on short term borrowings of $235,000 partially offset by a decrease
in interest expense on deposits of $118,000.
The increase in interest expense on short term borrowings
securities resulted from an increase in the average balance of
short term borrowings outstanding from $10.4 million in 1993 to
$21.9 million in 1994 and an increase in the average rate paid on
such borrowings from 3.5% in 1993 to 3.8%
-47-
<PAGE> 55
in 1994. The increase in the average balance short term borrowings
outstanding was primarily attributable to the addition of
securities sold under agreements to repurchase with the State of
Illinois. The average rate paid on such borrowings increased due
to the upward swing in interest rates during the first two quarters
of 1994.
The decrease in interest expense on deposits resulted
from an increase in the average rate paid on such deposits
outstanding from 3.0% in 1993 to 3.2% in 1994 offset by a decrease
in the average balance of interest bearing deposits outstanding
from $159.8 million in 1993 to $141.2 million in 1994. The
decrease in the average balance of interest bearing deposits
resulted from certain state certificates of deposit which matured,
being converted to repurchase agreements and a change in structure
of certain deposit accounts from interest bearing to noninterest
bearing. The average rate paid for deposits increased due to the
upward swing in interest rates during the first two quarters of
1994.
Provision for Loan Losses. The provision for loan losses
was $76,000 for the six months ended June 30, 1994 compared to
$164,000 for the six months ended June 30, 1993. The provision for
loan losses is established based upon management's estimate of the
allowance for loan losses required to absorb losses inherent in
existing loans and commitments to extend credit.
Other Income. Other income decreased $564,000 for the
six months ended June 30, 1994 compared to 1993. The decrease is
primarily attributable to a decrease in gains on sale of real
estate acquired in settlement of loans of $764,000 partially offset
by an increase in net securities gains of $174,000.
Gains on sale of real estate acquired in settlement of
loans decreased due to the sale of one large commercial real estate
property located in Southwest Missouri during 1993. Net securities
gains increased due to the existence of conditions during 1994
which prompted management to sell investment securities prior to
maturity because of changes in prepayment risk, asset/liability
management strategy, interest rate outlook or other reasons.
Other Expenses. Other expenses increased $272,000 for
the six months ended June 30, 1994 compared to 1993. The increase
is primarily attributable to normal cost of living adjustments.
The increase in equipment costs is primarily attributable to
increased service fees for computer equipment.
Income Taxes. Income tax decreased $253,000 for the six
months ended June 30, 1994 compared to 1993. Income tax decreased
due to the decrease in taxable income before income taxes during
1994.
Comparison of Operating Results for the Years Ended December 31,
- ----------------------------------------------------------------
1993 and 1992
- -------------
General. Net income for the year ended December 31, 1993
was $3.5 million, compared to net income of $2.4 million for the
year ended December 31, 1992. The increase of $1.1 million was
primarily attributable to an increase in net interest income of
$697,000, an increase in other income of $167,000 and a decrease in
other expenses of $194,000.
Interest Income. Interest income decreased $673,000, or
4.2%, for the year ended December 31, 1993 compared to 1992. The
decrease resulted primarily from decreases in interest income on
loans of $567,000, and in interest income on taxable investment
securities of $632,000 partially offset by an increase in interest
income on tax-exempt investment securities of $452,000.
The decrease in interest income on loans resulted from a
decrease in the average balance of loans outstanding from $116.2
million in 1992 to $112.2 million in 1993 and a decrease in the
average yield on loans from 9.36% in 1992 to 9.18% in 1993. The
decrease in the average balance of loans outstanding during 1993
reflects the assumption of approximately $2.8 million of student
loans by the Student Loan Marketing Association ("SLMA").
-48-
<PAGE> 56
These loans are originated by Wedge Bank and held in
portfolio until principal payments begin, at which time SLMA
assumes the loan from Wedge Bank. The remaining decrease is
primarily attributable to principal payments in excess of
originations. The average yield decreased due to the overall
declining interest rate environment.
The decrease in interest income on taxable investment
securities resulted from a decrease in the average balance of
taxable investment securities outstanding from $57.4 million in
1992 to $51.6 million in 1993 and a decrease in the average yield
on taxable investment securities from 7.62% in 1992 to 7.25% in
1993. The decrease in the average balance of taxable investment
securities outstanding during 1993 reflects the shifting of funds
within the investment portfolio to tax-exempt securities. The
average yield decreased due to the overall declining interest rate
environment. The increase in tax-exempt interest income resulted
principally from an increase in the average balance of tax-exempt
investment securities outstanding from $9.4 million in 1992 to
$16.5 million in 1993.
Interest Expense. Interest expense decreased $1.4
million, or 20%, for the year ended December 31, 1993 compared to
1992. The decrease resulted primarily from a decrease in interest
expense on deposits of $1.4 million partially offset by an increase
in interest expense on short-term borrowings of $59,000. The
decrease in interest expense on deposits resulted from a decrease
in the average balance of interest-bearing deposits outstanding
from $157.7 million in 1992 to $146.8 million in 1993 and a
decrease in the average rate paid on such deposits from 4.10% in
1992 to 3.43% in 1993. The decrease in the average balance of
interest-bearing deposits resulted primarily from the absence of
State of Illinois deposits in 1993 compared to 1992. The average
rate paid on such deposits decreased due to the overall declining
interest rate environment.
The increase in interest expense on short-term borrowings
was primarily attributable to an increase in the average balance of
such borrowings from $8.4 million in 1992 to $13.2 million in 1993
partially offset by a decrease in the average rate paid on such
borrowings from 4.84% in 1992 to 3.51% in 1993. The increase in
the average balance of short-term borrowings outstanding was
primarily due to the addition of securities sold under agreements
to repurchase with the State of Illinois. The average rate paid on
short-term borrowings decreased due to the overall declining
interest rate environment.
Provision for Loan Losses. The provision for loan losses
was $240,000 for the year ended December 31, 1993 compared to
$191,000 for the year ended December 31, 1992.
The provision for loan losses is established based upon
management's estimate of the allowance for loan losses required to
absorb losses inherent in existing loans and commitments to extend
credit. In determining the adequacy of the allowance, management
takes into consideration such factors as changes in the nature and
volume of the portfolio, overall portfolio quality, prior loss
experience, loan concentration, specific problem loans and current
and anticipated economic conditions that may affect the borrowers'
ability to pay.
Other Income. Other income increased $167,000 for the
year ended December 31, 1993 compared to 1992. The increase is
primarily due to increases in service charge income of $72,000 and
gains on sale of real estate acquired in settlement of loans of
$401,000 partially offset by a decrease in net securities gains of
$244,000.
The increase in service charge income is the result of
increases in the average balance of noninterest-bearing deposits
from $12.2 million in 1992 to $16.1 million in 1993 and the
resultant increased number of accounts subject to minimum balance
charges. Gains on sale of real estate acquired in settlement of
loans increased due to the sale of one large commercial real estate
property located in Southwest Missouri. Net securities gains
decreased due to the absence of conditions which would prompt
management from time to time to sell investment securities prior to
maturity because of changes in prepayment risk, asset/liability
management strategy, interest rate outlook or other reasons.
-49-
<PAGE> 57
Other Expenses. Other expenses decreased $194,000 for
the year ended December 31, 1993 compared to 1992. The decrease is
primarily attributable to a decrease in employee benefits of
$251,000, a decrease in other expenses of $354,000, partially
offset by an increase in salaries of $414,000. The decrease in
employee benefits resulted from increased levels of compensation
expense recognized in 1992 related to Wedge Bank's deferred
compensation plan. The decrease in other expenses resulted
principally from decreased professional fees and numerous other
miscellaneous decreases. The increase in salaries is attributable
to bonuses paid to certain members of management due to the
successful sale of a commercial real estate property and normal
cost of living adjustments.
Income Taxes. Income tax expense decreased $61,000 for
the year ended December 31, 1993 compared to 1992. Income tax
expense remained relatively constant since the increased levels of
income before income taxes were primarily the result of increases
in tax-exempt investment income.
Comparison of Operating Results for the Years Ended December 31,
- ----------------------------------------------------------------
1992 and 1991
- -------------
General. Net income for the year ended December 31, 1992
was $2.4 million, compared to net income of $1.2 million for the
year ended December 31, 1991. The increase of $1.2 million was
primarily attributable to an increase in net interest income of
$1.5 million, a decrease in the provision for loan losses of
$941,000 partially offset by an increase in income tax expense of
$346,000, and increases in other income of $306,000 and other
expenses of $1.2 million.
Interest Income. Interest income decreased $530,000, or
3.2%, for the year ended December 31, 1992 compared to 1991. The
decrease resulted from decreases in interest income on loans of
$48,000, interest income on taxable investment securities of
$481,000, interest income on other interest-bearing deposits
(principally Fed funds) of $254,000 partially offset by increases
in interest income on tax-exempt investment securities of $253,000.
The decrease in interest income on loans resulted from a
decrease in the average yield on loans from 10.28% in 1991 to 9.36%
in 1992. This yield decrease was partially offset by an increase
in the average balance of loans from $106.1 million in 1991 to
$116.2 million in 1992. The average yield on loans decreased due
to a declining interest rate environment. The average balance of
loans increased due to an active residential real estate market.
The decrease in interest income on taxable investment
securities resulted from a decrease in the average yield on taxable
investment securities from 8.51% in 1991 to 7.62% in 1992 partially
offset by an increase in the average balance of taxable investment
securities outstanding from $57.1 million in 1991 to $57.4 million
in 1992. The average yield decreased due to the overall declining
interest rate environment. The average balance increased due to
the timing of purchases and maturities. Interest income from tax-
exempt securities increased primarily due to the increase in the
average balance of such securities from $5.3 million in 1991 to
$9.4 million in 1992. This increase follows management's intent to
invest available funds into tax-exempt securities.
The decrease in interest income on other interest-bearing
investments was primarily the result of a decrease in the average
balance of such investments from $4.9 million in 1991 to $2.5
million in 1992 and a decrease in the average yield from 7.18% in
1991 to 3.95% in 1992. The decrease in the average balance was
attributable to proceeds from maturities being used to fund loan
demand and the decrease in rate was attributable to a declining
interest rate environment.
Interest Expense. Interest expense decreased $2.0
million, or 22.5%, for the year ended December 31, 1992 compared to
1991. The decrease resulted primarily from a decrease in interest
expense on deposits of $2.3 million offset by an increase in
interest expense on short-term borrowings of $318,000. The
decrease in interest expense on deposits resulted from an increase
in the average
-50-
<PAGE> 58
balance of deposits from $153.4 million in 1991 to $157.7 million
in 1992 offset by a decrease in the average rate paid on deposits
from 5.73% in 1991 to 4.10% in 1992. The increase in the average
balance of deposits resulted primarily from the addition of State
of Illinois deposits in 1992 compared to 1991. The average rate
paid on deposits decreased due to the overall declining interest
rate environment.
The increase in interest expense on short-term borrowings
is primarily attributable to an increase in the average balance
from $1.6 million in 1991 to $8.4 million in 1992 partially offset
by a decrease in the average rate paid on short-term borrowings
from 5.29% in 1991 to 4.84% in 1992. The increase in the average
balance of short-term borrowings is primarily due to the net
increase in advances from the Federal Home Loan Bank in 1992 over
1991. These borrowings were used to fund loan originations. The
average rate paid on short-term borrowings decreased due to the
overall declining interest rate environment.
Provision for Loan Losses. The provision for loan losses
was $191,000 for the year ended December 31, 1992 compared to $1.1
million for the year ended December 31, 1991. The decrease in the
provision for loan losses in 1992 was due to the absence of a
significant provision for a loan in 1991 related to a commercial
real estate property located in Southwest Missouri.
Other Income. Other income increased $306,000 for the
year ended December 31, 1992 compared to 1991. The increase in
other income is primarily attributable to the increase in gains on
sale of real estate acquired in settlement of loans as a result of
a sale of a commercial real estate property in Southwest Missouri
in 1992.
Other Expenses. Other expenses increased $1.2 million
for the year ended December 31, 1992 compared to 1991. The
increase is primarily related to increases in salaries and employee
benefits resulting from normal cost of living adjustments,
additional staff and increased levels of compensation expense
recognized in 1992 related to Wedge Bank's deferred compensation
plan.
Income Taxes. Income tax expense increased $346,000 for
the year ended December 31, 1992 compared to 1991 primarily due to
increased levels of income before income taxes.
AVERAGE BALANCE SHEETS; NET INTEREST INCOME
The following tables set forth for the periods indicated,
certain information relating to Wedge Bank's average balance sheets
and its average yields on assets and average costs of liabilities.
Such yields and costs are calculated by dividing income or expense
by the applicable average balance of assets or liabilities. Daily
balances are used to calculate average balances. Nonaccruing loans
are not significant and have been included in the average loan
balances for purposes of this computation.
-51-
<PAGE> 59
<TABLE>
<CAPTION>
Year Ended December 31, 1993
--------------------------------------
(Dollars In Thousands)
Interest Average
Average Income/ Yield/
Assets Balance Expense Rate Paid
------- -------- ---------
<S> <C> <C> <C>
Loans (net of unearned income) $112,185 $10,301 9.18%
Investment securities:
Taxable 51,629 3,742 7.25
Tax-exempt 16,506 1,044 6.32
Federal funds sold 5,157 171 3.32
-------- -------
Total earning assets/interest income/yield 185,477 15,258 8.23
-------
Allowance for loan losses (1,481)
Cash and due from banks 5,586
Other assets 5,873
--------
Total assets $195,455
========
Liabilities and Stockholders' Equity
Interest-bearing deposit accounts $146,797 5,041 3.43%
Other borrowings 13,220 464 3.51
-------- -------
Total interest-bearing liabilities/interest
expense/rate 160,017 5,505 3.44
-------
Noninterest-bearing demand deposits 16,068
Other liabilities 2,154
--------
Total liabilities 178,239
Stockholders' equity 17,216
--------
Total liabilities and stockholders' equity $195,455
========
Net interest income/net yield on earning assets (net
interest income divided by total earning assets) $ 9,753 5.26%
=======
</TABLE>
-52-
<PAGE> 60
<TABLE>
<CAPTION>
Year Ended December 31, 1992
--------------------------------------
(Dollars In Thousands)
Interest Average
Average Income/ Yield/
Assets Balance Expense Rate Paid
------- -------- ---------
<S> <C> <C> <C>
Loans (net of unearned income) $116,163 $10,868 9.36%
Investment securities:
Taxable 57,438 4,374 7.62
Tax-exempt 9,356 592 6.33
Federal funds sold 2,458 97 3.95
-------- -------
Total earning assets/interest income/yield 185,415 15,931 8.59
-------
Allowance for loan losses (1,545)
Cash and due from banks 6,836
Other assets 7,602
--------
Total assets $198,308
========
Liabilities and Stockholders' Equity
Interest-bearing deposit accounts $157,695 6,470 4.10%
Other borrowings 8,373 405 4.84
-------- -------
Total interest-bearing liabilities/interest
expense/rate 166,068 6,875 4.14
-------
Noninterest-bearing demand deposits 12,234
Other liabilities 1,975
--------
Total liabilities 180,277
Stockholders' equity 18,031
--------
Total liabilities and stockholders' equity $198,308
========
Net interest income/net yield on earning assets (net
interest income divided by total earning assets) $ 9,056 4.88%
=======
</TABLE>
-53-
<PAGE> 61
<TABLE>
<CAPTION>
Year Ended December 31, 1991
--------------------------------------
(Dollars In Thousands)
Interest Average
Average Income/ Yield/
Assets Balance Expense Rate Paid
------- -------- ---------
<S> <C> <C> <C>
Loans (net of unearned income) $106,142 $10,916 10.28%
Investment securities:
Taxable 57,060 4,855 8.51
Tax-exempt 5,271 339 6.43
Federal funds sold 4,890 351 7.18
-------- -------
Total earning assets/interest income/yield 173,363 16,461 9.50
-------
Allowance for loan losses (947)
Cash and due from banks 7,370
Other assets 7,932
--------
Total assets $187,718
========
Liabilities and Stockholders' Equity
Interest-bearing deposit accounts $153,363 8,795 5.73%
Other borrowings 1,645 87 5.29
-------- -------
Total interest-bearing liabilities/interest
expense/rate 155,008 8,882 5.73
-------
Noninterest-bearing demand deposits 14,496
Other liabilities 2,063
--------
Total liabilities 171,567
Stockholders' equity 16,151
--------
Total liabilities and stockholders' equity $187,718
========
Net interest income/net yield on earning assets (net
interest income divided by total earning assets) $ 7,579 4.37%
=======
</TABLE>
CHANGES IN INTEREST INCOME AND EXPENSE -
1993 COMPARED TO 1992 AND 1991 COMPARED TO 1990
The following tables set forth for the years indicated,
a summary of the changes in interest income and interest expense
resulting from changes in volume and changes in rates. The rate
and volume differences have been included in the changes in rate.
-54-
<PAGE> 62
<TABLE>
<CAPTION>
1993 Compared to 1992
-----------------------------------------
(Dollars In Thousands)
Increase
Total (Decrease)
of Net attributable
Increase to change in
-----------------------
(Decrease) Volume Rate
---------- ------ ----
<S> <C> <C> <C>
Interest income:
Loans (net of unearned income) $ (567) $ (368) $ (199)
Investment securities:
Taxable (632) (428) (204)
Tax-exempt 452 452
Federal funds sold 74 92 (18)
--------- ------- -------
Total interest income (673) (252) (421)
--------- ------- -------
Interest expense:
Interest-bearing deposit accounts (1,429) (425) (1,004)
Other borrowings 59 191 (132)
--------- ------- -------
Total interest expense (1,370) (234) (1,136)
--------- ------- -------
Net interest income $ 697 $ (18) $ 715
========= ======= =======
<CAPTION>
1992 Compared to 1991
-----------------------------------------
(Dollars In Thousands)
Increase
Total (Decrease)
of Net attributable
Increase to change in
-----------------------
(Decrease) Volume Rate
---------- ------ ----
<S> <C> <C> <C>
Interest income:
Loans (net of unearned income) $ (48) $ 983 $(1,031)
Investment securities:
Taxable (481) 32 (513)
Tax-exempt 253 259 (6)
Federal funds sold (254) (133) (121)
--------- ------- -------
Total interest income (530) 1,141 (1,671)
--------- ------- -------
Interest expense:
Interest-bearing deposit accounts (2,325) 242 (2,567)
Other borrowings 318 326 (8)
--------- ------- -------
Total interest expense (2,007) 568 (2,575)
--------- ------- -------
Net interest income $ 1,477 $ 573 $ 904
========= ======= =======
</TABLE>
-55-
<PAGE> 63
LENDING ACTIVITIES
Wedge Bank's loan portfolio consists primarily of real
estate loans, commercial loans, and consumer loans. Wedge Bank has
no foreign loans. At June 30, 1994, Wedge Bank had total net loans
of $113.2 million, equaling 69.7% of total deposits and 53.9% of
total assets.
Wedge Bank's primary market focus has been on commercial,
installment, and mortgage lending to businesses and individuals in
its service area. Consequently, adverse changes in economic
conditions in this area would impair Wedge Bank's ability to
collect loans and would otherwise have a negative effect on the
financial condition of Wedge Holding. Few loans are made outside
of Wedge Bank's service area.
The following tables show the classification of loans by
major category for Wedge Bank as of June 30, 1994:
<TABLE>
<CAPTION>
Loan Distribution by Type
(in thousands)
Loan Type June 30, 1994
- ------------------------------------- -------------
<S> <C>
Agricultural $ 49
Commercial & industrial 14,940
Floor plan - automobiles 235
Residential real estate 87,892
Personal consumer loans 1,385
Home improvement - direct 204
Automobile - direct 978
Automobile - indirect 46
Recreational vehicles 98
Student loans 1,457
Revolving home equity 1,627
Revolving overdraft checking 26
Premiums on mortgage loans 132
FHA Title I property loans 4,178
--------
Gross loans 113,247
Less income collected not earned 82
--------
Loans net of unearned income 113,165
Less allowance for loan losses 1,399
--------
Loans net of unearned income and
allowance for loan losses $111,766
========
</TABLE>
-56-
<PAGE> 64
<TABLE>
<CAPTION>
Loan Portfolio Growth
(in thousands)
December 31,
June 30, ---------------------------------------------------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S>
Commercial, <C> <C> <C> <C> <C> <C>
agriculture & other $ 15,224 $ 8,444 $ 8,745 $ 10,324 $ 12,912 $ 16,822
Real estate/
mortgage 93,829 98,877 102,334 91,826 71,256 58,955
Installment 4,194 4,750 8,610 10,354 13,581 16,741
-------- -------- -------- -------- -------- --------
Total gross loans $113,247 $112,071 $119,689 $112,504 $ 97,749 $ 92,518
======== ======== ======== ======== ======== ========
</TABLE>
The following table shows the approximate maturities for fixed rate loans at
December 31, 1993:
<TABLE>
Approximate Maturities of Loans at December 31, 1993
(in thousands)
<CAPTION>
Under 1-5 Over Total
1 Year Years 5 Years Loans
------ ----- ------- -----
<S> <C> <C> <C> <C>
Commercial,
agricultural & other $ 2,009 $ 1,321 $ 5,114 $ 8,444
Real estate/
mortgage 1,454 4,547 92,876 98,877
Installment 1,018 3,121 611 4,750
-------- -------- -------- --------
Total (gross loans) $ 4,481 $ 8,989 $ 98,601 $112,071
======== ======== ======== ========
</TABLE>
Interest rates charged on loans are calculated on market and
credit risk, competitive factors, regulatory considerations and
profitability objectives. The following table shows the amount of loans
as of December 31, 1993, by maturity that have fixed interest rates and
that have variable interest rates:
<TABLE>
Distribution of Fixed and Variable Rate Loans at December 31, 1993
(in thousands)
<CAPTION>
Fixed Variable Total
Maturity Class Rate Rate Loans
- -------------- ----- -------- -----
<S> <C> <C> <C>
Due up to one year $ 1,521 $ 2,960 $ 4,481
Due over one year 40,512 67,078 107,590
-------- -------- --------
Total $ 42,033 $ 70,038 $112,071
======== ======== ========
</TABLE>
-57-
<PAGE> 65
Nonperforming loans consist of nonaccrual loans, loans
contractually past due 90 days or more, and restructured loans (as
defined by the FDIC). Although there is no assurance that Wedge Bank
has identified all loans within its portfolio that should be classified
as potential problem loans, Wedge Bank's management has initiated
proactive procedures to closely review new loan applications, monitor
the continued quality of the existing portfolio and liquidate problem
loans. The following table sets forth the amount of nonperforming
loans, as well as those identified by management as potential problem
loans, for the periods indicated:
<TABLE>
<CAPTION>
Nonperforming Loans
(in thousands)
December 31,
June 30, ---------------------------------------------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual Loans $489 $420 $695 $1,504 $867 $1,027
Interest income which would
have been recorded on such
loans if they had been
current throughout year 17 40 53 120 -- --
Interest income recorded
on such loans during year -- -- -- -- -- --
Loans contractually past
due 90 days or more as to
interest or principal
payments 70 1,068 969 683 858 1,052
Loans not included above
which are TDRs -- -- 234 240 -- --
Loans identified by management
as potential problem loans 101 316 606 623 461 540
</TABLE>
Wedge Bank has no individual borrower or borrowers engaged in the same
industry exceeding 10% of total loans. Wedge Bank has no other interest-
bearing assets, other than loans, that meet the nonaccrual, past due,
restructured or potential loss criteria.
The following table summarizes, for the periods indicated, certain
information regarding loan loss experience:
-58-
<PAGE> 66
<TABLE>
<CAPTION>
Loan Loss Experience
(in thousands)
December 31,
June 30, ------------------------------------------------------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Average loans
outstanding, net of
unearned income $112,456 $112,185 $116,163 $106,142 $ 93,089 $ 86,435
======== ======== ======== ======== ======== ========
Reserve at beginning
of year 1,452 1,637 1,503 962 1,249 1,087
Loans charged off:
Commercial/Agricultural/other 183 428 86 490 271 364
Real estate/mortgage 3 52 58 80 269 49
Installment 0 0 13 108 196 70
-------- -------- -------- -------- -------- --------
Total charge-offs 186 480 157 678 736 483
-------- -------- -------- -------- -------- --------
Recoveries:
Commercial/Agricultural/other 20 35 68 76 58 534
Real estate/mortgage 0 0 18 2 1 6
Installment 37 20 14 9 10 25
-------- -------- -------- -------- -------- --------
Total recoveries 57 55 100 87 69 565
-------- -------- -------- -------- -------- --------
Net loans charged off 129 425 57 591 667 (82)
-------- -------- -------- -------- -------- --------
Current year provision 76 240 191 1,132 380 80
-------- -------- -------- -------- -------- --------
Reserve at year end $ 1,399 $ 1,452 $ 1,637 $ 1,503 $ 962 $ 1,249
======== ======== ======== ======== ======== ========
Ratio of net charge-
offs during year to
average loans
outstanding 0.11% 0.38% 0.05% 0.56% 0.72% (0.09)%
======== ======== ======== ======== ======== ========
Ratio of allowance for
loan losses to average
loans 1.24% 1.29% 1.41% 1.42% 1.03% 1.45%
======== ======== ======== ======== ======== ========
</TABLE>
POLICY FOR ALLOWANCE
The allowance for loan losses is established through a provision
for loan losses charged to expense. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that management believes
will be adequate to absorb losses inherent in existing loans and commitments
to extend credit. In determining the adequacy of the allowance, management
takes into consideration such factors as changes in the nature and volume of
the portfolio, overall portfolio quality, prior loss experience, loan
concentration, specific problem loans and current and anticipated economic
conditions that may affect the borrowers' ability to
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<PAGE> 67
pay. The following table summarizes the allowance for loan losses by major
categories of loans and the percentage for loans in each category to total
loans for the periods indicated:
-60-
<PAGE> 68
<TABLE>
Allowance for Loan Losses by Major Loan Categories
(in thousands)
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------
June 30, 1994 1993 1992 1991 1990 1989
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
% of Loans % of Loans % of Loans % of Loans % of Loans % of Loans
in Each in Each in Each in Each in Each in Each
Category Category Category Category Category Category
to Total to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
agriculture & other 59 13% 281 8% 536 8% 582 9% 461 13% 159 19%
Real estate/mortgage 42 83% 35 88% 70 85% 41 82% 0 73% 381 63%
Installment 0 4% 0 4% 0 7% 0 9% 0 14% 0 18%
Unallocated surplus 1,298 -- 1,136 -- 1,031 -- 880 -- 501 -- 709 --
----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
Total 1,399 100% 1,452 100% 1,637 100% 1,503 100% 962 100% 1,249 100%
===== ==== ===== ==== ===== ==== ===== ==== ===== ==== ===== ====
</TABLE>
- 61 -
<PAGE> 69
<TABLE>
DEPOSITS
The following table sets forth the distribution of Wedge Bank's
deposit accounts at the dates indicated and the average interest rates
for each category of deposits:
Distribution of Deposits
(in thousands)
<CAPTION>
December 31,
----------------------------------------------------------------
June 30, 1994 1993 1992 1991
-------------------- -------------------- -------------------- --------------------
Average Average Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
transaction accounts $23,986 N/A $16,068 N/A $12,234 N/A $14,496 N/A
Interest-bearing
transaction accounts 34,182 2.15% 40,716 2.15% 43,682 2.48% 37,332 3.50%
Savings deposits 40,762 2.80% 38,133 3.08% 36,257 3.77% 26,799 5.03%
Time deposits 66,291 4.01% 67,948 4.40% 77,756 5.17% 89,232 6.73%
------- ------- ------- -------
Total Deposits $165,221 $162,865 $169,929 $167,859
======= ======= ======= =======
</TABLE>
Risks normally associated with large certificates of
deposit include the risk of reduced liquidity if Wedge Bank is
unable to retain such deposits. However, Wedge Bank believes these
risks are not significant because these certificates are held
primarily by customers in its service area who have been depositors
of Wedge Bank for extended periods of time. The following table
sets forth at December 31, 1993, the amount of certificates of
deposit in amounts of $100,000 or more by maturity periods:
<TABLE>
CD's in Amounts of $100,000 or More
(in thousands)
<CAPTION>
Maturity December 31, 1993
------------------------ -----------------
<S> <C>
3 Months or Less 6,643
Over 3 through 6 Months 582
Over 6 through 12 Months 4,718
Over 12 Months 1,790
------
Total 13,733
======
</TABLE>
SHORT TERM BORROWINGS
The following table sets forth information as of June 30, 1994
and the years ended December 31, 1993, 1992 and 1991 regarding each
category of Wedge Bank's short-term borrowings for which the
average balance outstanding during the period was more than 30% of
the stockholders' equity of Wedge Bank at the end of the period:
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<PAGE> 70
<TABLE>
Short-Term Borrowings For Which the Average Balance
Outstanding During the Year Was 30% or More of
Stockholders' Equity at Year End
(in thousands)
<CAPTION>
June 30, 1994 December 31, 1993
-------------------------------------------------------- ------------------------------------------------
Maximum Six Month Six Month Maximum YTD YTD
Year End Year End Month End End Average End Average Year End Year End Month End Average Average
Balance Rate Balance Balance Rate Balance Rate Balance Balance Rate
------- ---- ------- ------- ---- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advances from FHLB 14,000 5.85% 14,000 12,371 3.93% 10,500 3.24% 10,500 10,496 3.35%
Securities sold under
agreement to repurchase 9,580 3.51% 9,580 9,502 3.47% 8,230 3.50% 8,230 8,230 3.50%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992 December 31, 1991
-------------------------------------------------------- ------------------------------------------------
Maximum YTD YTD Maximum YTD YTD
Year End Year End Month End Average Average Year End Year End Month End Average Average
Balance Rate Balance Balance Rate Balance Rate Balance Balance Rate
------- ---- ------- ------- ---- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advances from FHLB 9,500 3.73% 9,500 8,367 3.80% 6,250 5.15% 6,250 1,623 5.24%
Securities sold under
agreement to repurchase 0 N/A N/A N/A N/A 0 N/A N/A N/A N/A
</TABLE>
INVESTMENT PORTFOLIO
Investment securities are stated at cost, adjusted for
premiums and discounts. Premiums and discounts are recognized as
adjustments to interest income using the level yield method. Gains
and losses on dispositions are recorded based on the net proceeds
and the adjusted carrying amount of the securities sold using the
specific identification method.
Wedge Bank monitors and manages liquidity by structuring
the maturity dates of its investments in accordance with its
policies and guidelines. A primary goal of such policies and
guidelines is to maintain an appropriate balance between rate-
sensitive assets and liabilities to continually maximize interest
rate spreads. Wedge Bank's permitted investments are in U.S.
Treasury securities, securities guaranteed by the U.S. Government
or agencies of the U.S. Government, and mortgage-backed securities,
municipal bonds, money market instruments and other securities
meeting Wedge Bank's standards.
The table below sets forth the book value and maturity
distribution of certain categories of investments in debt
securities by Wedge Bank at December 31, 1993, 1992, and 1991. Also
shown are the approximate yields by type and maturity distribution
of the securities at December 31, 1993.
- 63 -
<PAGE> 71
<TABLE>
Investment Portfolio
(in thousands)
<CAPTION>
December 31,
----------------------------------------------------
1993 1992 1991
---- ---- ----
Book Book Book
Yield Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
U.S. Government & agency
obligations
within 1 year 8.08% $ 1,873 $ 0 $ 2,798
1-5 Years 6.00% 16,140 14,232 14,782
5-10 Years 6.87% 14,532 14,993 8,708
>10 Years 5.55% 7,319 2,493 2,212
-------- -------- --------
Total 39,864 31,718 28,500
-------- -------- --------
Obligations of states &
political subsidiaries
within 1 year 6.40% 530 762 273
1-5 Years 6.05% 2,458 4,254 4,624
5-10 Years 5.68% 4,704 4,169 1,088
> 10 Years 5.76% 14,353 2,540 1,295
-------- -------- --------
Total 22,045 11,725 7,280
-------- -------- --------
Mortgage-backed securities
within 1 year 9.14% 953 13 0
1-5 Years 9.45% 949 2,437 4,342
5-10 Years 8.62% 1,362 3,489 4,659
>10 Years 9.22% 14,107 18,017 17,135
-------- -------- --------
Total 17,371 23,956 26,136
-------- -------- --------
Other securities
Equity securities 1,054 3,136 610
-------- -------- --------
Total investments in debt and
equity securities $ 80,334 $ 70,535 $ 62,526
======== ======== ========
</TABLE>
As of December 31, 1993, there were no investment securities of any issuer,
other than securities of the U.S. Government and U.S. Government Agencies and
corporations, exceeding 10% of stockholders' equity.
RETURN ON EQUITY AND ASSETS
The following table sets forth the return on equity and assets and
other relevant information for the years ended December 31, 1993, 1992 and
1991:
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<PAGE> 72
<TABLE>
<CAPTION>
Return on Equity and Assets
June 30,
1994
(annualized) 1993 1992 1991
------------ ------ ------ ------
<S> <C>
Return on average assets <F1> 1.28% 1.78% 1.22% 0.64%
Return on average equity <F2> 13.85 20.23 13.38 7.43
Dividend payout ratio <F3> 32.30 16.56 30.79 20.83
Average equity to average
total assets <F4> 18.55 8.81 9.09 8.60
<FN>
- ----------------------------
<F1> Net income divided by average total assets.
<F2> Net income divided by average equity.
<F3> Dividends declared per weighted average shares outstanding divided by net
income per weighted average shares outstanding.
<F4> Average equity divided by average total assets.
</TABLE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
Wedge Bank seeks to maintain sufficient liquidity to meet its
depositors' needs as well as the credit needs of its customers. The
principal sources of funds which provide liquidity are customer deposits,
principal and interest payments on loans, maturities of investment securities
and earnings. Other sources of liquidity include federal funds purchased and
other short-term borrowings. A substantial portion of Wedge Bank's interest-
bearing and noninterest-bearing liabilities are stable core deposits
attributable to long-term customer relationships.
Maturities of interest-earning assets and interest-bearing
liabilities are monitored to plan for liquidity needs. The maintenance of
planned maturity schedules and an appropriate balance of interest sensitivity
between assets and liabilities is a fundamental aspect of Wedge Bank's
financial planning. Rate-sensitive assets and liabilities are those assets
and liabilities which can be repriced upward or downward within a specified
time period. The following table illustrates Wedge Bank's position (rate-
sensitive assets minus rate-sensitive liabilities) at December 31, 1993, for
various time periods as well as the cumulative gap position at December 31,
1993 and June 30, 1994.
- 65 -
<PAGE> 73
<TABLE>
<CAPTION>
Over Three Over Six Over One
Three Months Months Year
Months or Through Through Twelve Through Over Three
Less Six Months Months Three Years Years Total
--------- ---------- -------------- ----------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, gross $ 20,155 $ 7,018 $ 13,612 $ 10,491 $ 60,795 $112,071
Investment in debt securities 12,048 300 1,963 4,229 61,794 80,334
Interest-bearing deposits in other
depository institutions 94
Federal funds sold 4,200 4,200
-------- -------- -------- -------- -------- --------
Total interest-earning assets 36,403 7,318 15,669 14,720 122,589 196,699
-------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
Interest-bearing deposits 20,163 11,404 14,368 83,305 13,693 142,933
Other borrowings 11,300 8,230 19,530
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 31,463 11,404 22,598 83,305 13,693 162,463
-------- -------- -------- -------- -------- --------
Interest sensitivity gap
at December 31, 1993 $ 4,940 $ (4,086) $ (6,929) $(68,585) $108,896
======== ======== ======== ======== ========
Cumulative gap at
December 31, 1993 $ 4,940 $ 854 $ 6,075 $(74,660) $ 34,236
======== ======== ======== ======== ========
Cumulative gap at
June 30, 1994 $ (530) $ (4,131) $ 3,045 $(57,723) $ 31,176
======== ======== ======== ======== ========
</TABLE>
CAPITAL RESOURCES
Effective December 31, 1992, the fully phased-in
regulatory capital requirements for banks categorized as
"adequately capitalized" under the provisions of The Federal
Deposit Insurance Corporation Improvement Act of 1991, are (1) a
minimum leverage capital ratio of Tier 1 capital, as defined, to
total adjusted assets of 3% for the highest rated institutions or
4% to 5% for all other institutions, and (2) a minimum ratio of
total capital, as defined, to risk-weighted assets of 8% and the
Tier 1 capital included in total capital is at least equal to 4% of
risk-weighted assets.
The Bank's ratio of Tier 1 capital to total adjusted
assets was 8.93% and 8.95% at December 31, 1993 and 1992,
respectively. Its ratio of capital to risk-weighted assets was
21.27% and 23.52% of which Tier 1 capital comprised 20.02% and
22.03% of risk-weighted assets at December 31, 1993 and 1992,
respectively.
Bank dividends are the principal source of funds for
Wedge Holding. The payment of dividends by Wedge Bank, which is
state-chartered, is subject to regulation by the FDIC and the State
of Illinois. Wedge Bank is not restricted as to the amount of
dividends that can be paid, other than what prudent and sound
banking principles permit and what must be retained to meet minimum
legal capital requirements. Accordingly, $3,838,000 could be paid
at December 31, 1993, without reducing the capital of Wedge Bank
below minimum standards.
Wedge Bank believes that its current capital and earnings
will be adequate to meet its operating needs for the foreseeable
future.
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<PAGE> 74
PROSPECTIVE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In May 1993, FASB issued Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan ("SFAS 114"). The adoption of SFAS 114 is
required for fiscal years beginning after December 15, 1994. It
requires that impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's effective
interest rate or the loan's market price, or the fair value of the
collateral if the loan is collateral dependent. When adopted in
1995, SFAS 114 is not expected to have a material effect on Wedge
Bank's financial statements.
In November 1992, FASB issued Statement of Financial
Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits ("SFAS 112"). Adoption of SFAS 112 is
required for fiscal years beginning after December 15, 1993. In
December 1990, FASB issued Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions ("SFAS 106"). Adoption of SFAS 106 is
required for fiscal years beginning after December 15, 1994. As
Wedge Bank does not provide postemployment or postretirement
benefits, SFAS 112 and 106 do not and will not have any effect on
Wedge Bank's financial statements.
IMPACT OF INFLATION
The asset and liability structure of financial
institutions differs from that of other industries in that
virtually all assets and liabilities of a financial institution are
monetary in nature. Interest rates, although they do not
necessarily move in the same direction or in the same magnitude as
the prices of other goods and services, may have a significant
impact on a financial institution's performance. Inflation
directly affects salaries and benefits, insurance, data processing
and other noninterest costs. Wedge Bank continually strives to
offset the effects of inflation by controlling costs, developing
more efficient operating procedures, and managing the maturity
distribution and interest sensitivity of its assets and
liabilities.
INFORMATION REGARDING MBI STOCK
-------------------------------
DESCRIPTION OF MBI COMMON STOCK AND ATTACHED PREFERRED SHARE
PURCHASE RIGHTS
GENERAL. MBI has authorized 5,000,000 shares of MBI
Preferred Stock, no par value, and 100,000,000 shares of MBI Common
Stock, $5.00 par value. At June 30, 1994, MBI had no issued or
outstanding shares of MBI Preferred Stock and 43,146,531 shares of
MBI Common Stock issued and outstanding. Under Missouri law, MBI's
Board of Directors may generally approve the issuance of authorized
shares of Preferred Stock and Common Stock without shareholder
approval.
MBI's Board of Directors is also authorized to fix the
number of shares and determine the designation of any series of
Preferred Stock and to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any series
of MBI Preferred Stock. Except for the designation and reservation
of Series A Junior Participating Preferred Stock pursuant to MBI's
Preferred Share Purchase Rights Plan described below, MBI's Board
of Directors has not acted to designate or issue any shares of MBI
Preferred Stock.
The existence of a substantial number of unissued and
unreserved shares of MBI Common Stock and undesignated shares of
MBI Preferred Stock may enable the Board of Directors to issue
shares to such persons and in such manner as may be deemed to have
an anti-takeover effect.
DIVIDENDS. The holders of MBI Common Stock are entitled
to share ratably in dividends when, as and if declared by the Board
of Directors from funds legally available therefor, after full
- 67 -
<PAGE> 75
cumulative dividends have been paid or declared, and funds
sufficient for the payment thereof set apart, on all series of MBI
Preferred Stock ranking superior as to dividends to MBI Common
Stock.
The Board of Directors of MBI intends to maintain its
present policy of paying quarterly cash dividends on MBI Common
Stock, when justified by the financial condition of MBI and its
subsidiaries. The declaration and amount of future dividends will
depend on circumstances existing at the time, including MBI's
earnings, financial condition and capital requirements as well as
regulatory limitations, note and indenture provisions and such
other factors as the Board of Directors may deem relevant. The
payment of dividends to MBI by subsidiary banks is subject to
extensive regulation by various state and federal regulatory
agencies. See "SUPERVISION AND REGULATION."
VOTING RIGHTS. Each holder of MBI Common Stock has one
vote for each share held on matters presented for consideration by
the shareholders, except that, in the election of directors, such
shareholders have cumulative voting rights which entitle each such
shareholder to the number of votes which equals the number of
shares held by the shareholder multiplied by the number of
directors to be elected. All such cumulative votes may be cast for
one candidate for election as a director or may be distributed
among two or more candidates.
PREEMPTIVE RIGHTS. The holders of MBI Common Stock have
no preemptive right to acquire any additional unissued shares or
treasury shares of MBI.
LIQUIDATION RIGHTS. In the event of liquidation,
dissolution or winding up of MBI, whether voluntary or involuntary,
the holders of MBI Common Stock will be entitled to share ratably
in any of its assets or funds that are available for distribution
to its shareholders after the satisfaction of its liabilities (or
after adequate provision is made therefor) and after preferences on
any outstanding MBI Preferred Stock.
ASSESSMENT AND REDEMPTION. Shares of MBI Common Stock
are and will be, when issued, fully paid and nonassessable. Such
shares do not have any redemption provisions.
PREFERRED SHARE PURCHASE RIGHTS PLAN. One preferred
share purchase right (a "Right") is attached to each share of MBI
Common Stock. The Rights trade automatically with shares of MBI
Common Stock, and become exercisable and will trade separately from
the MBI Common Stock on the tenth day after public announcement
that a person or group has acquired, or has the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of
MBI Common Stock, or upon commencement or announcement of intent to
make a tender offer for 20% or more of the outstanding shares of
MBI Common Stock, in either case without prior written consent of
the Board. When exercisable, each Right will entitle the holder to
buy 1/100 of a share of MBI Series A Junior Participating Preferred
Stock at an exercise price of $100 per Right. In the event a
person or group acquires beneficial ownership of 20% or more of MBI
Common Stock, holders of Rights (other than the acquiring person or
group) may purchase MBI Common Stock having a market value of twice
the then current exercise price of each Right. If MBI is acquired
by any person or group after the Rights become exercisable, each
Right will entitle its holder to purchase stock of the acquiring
company having a market value of twice the current exercise price
of each Right. The Rights are designed to protect the interests of
MBI and its shareholders against coercive takeover tactics. The
purpose of the Rights is to encourage potential acquirors to
negotiate with MBI's Board of Directors prior to attempting a
takeover and to give the Board leverage in negotiating on behalf of
all shareholders the terms of any proposed takeover. The Rights
may deter certain takeover proposals. The Rights, which can be
redeemed by MBI's Board of Directors in certain circumstances,
expire by their terms on June 3, 1998.
CLASSIFICATION OF BOARD OF DIRECTORS. The Board of Directors
of MBI is divided into three classes, and the directors are elected
by classes to three-year terms, so that one of the three classes
- 68 -
<PAGE> 76
of the directors of MBI will be elected at each annual meeting of the
shareholders. While this provision promotes stability and continuity of
the Board of Directors, classification of the Board of Directors may also
have the effect of decreasing the number of directors that could otherwise
be elected at each annual meeting of shareholders by a person who obtains a
controlling interest in the MBI Common Stock and thereby could impede a
change in control of MBI. Because fewer directors will be elected at each
annual meeting, such classification also will reduce the effectiveness of
cumulative voting as a means of establishing or increasing minority
representation on the Board of Directors.
OTHER MATTERS. MBI's Articles of Incorporation and By-
Laws also contain provisions which: (i) require the affirmative
vote of holders of at least 75% of the voting power of all of the
outstanding shares of MBI entitled to vote in the election of
directors to remove a director or directors without cause; (ii)
require the affirmative vote of the holders of at least 75% of the
voting power of all shares of the outstanding capital stock of MBI
to approve certain "business combinations" with "interested
parties" unless at least two-thirds of the Board of Directors first
approves such business combinations; and (iii) require an
affirmative vote of at least 75% of the voting power of all shares
of the outstanding capital stock of MBI for the amendment,
alteration, change or repeal of any of the above provisions unless
at least two-thirds of the Board of Directors first approves such
an amendment, alteration, change or repeal. Such provisions may be
deemed to have an anti-takeover effect.
RESTRICTIONS ON RESALE OF MBI STOCK BY AFFILIATES
Under Rule 145 of the Securities Act of 1933 (the
"Securities Act"), certain persons who receive MBI Common Stock
pursuant to the Acquisition and who are deemed to be "affiliates"
of Wedge Holding and/or Wedge Bank will be limited in their right
to resell the stock so received. The term "affiliate" is defined
to include any person who, directly or indirectly, controls, or is
controlled by, or is under common control with Wedge Holding and/or
Wedge Bank at the time the Acquisition is submitted to a vote of
the stockholders of Wedge Holding and Wedge Bank. Each affiliate
of Wedge Holding and/or Wedge Bank (generally any director or
executive officer or stockholder of Wedge Holding and/or Wedge Bank
who beneficially owns a substantial number of outstanding shares of
Wedge Holding Common Stock and/or Wedge Bank Common Stock) who
desires to resell the MBI Common Stock received in the Acquisition
must sell such stock either pursuant to an effective Registration
Statement or in accordance with an applicable exemption, such as
the applicable provisions of Rule 145(d) under the Securities Act.
Rule 145(d) provides that persons deemed to be affiliates
may resell their stock received in the Acquisition pursuant to
certain of the requirements of Rule 144 under the Securities Act if
such stock is sold within the first two years after the receipt
thereof. After two years if such person is not an affiliate of MBI
and if MBI is current with respect to its required public filings,
a former affiliate of Wedge Holding or Wedge Bank may freely resell
the stock received in the Acquisition without limitation. After
three years from the issuance of the stock, if such person is not
an affiliate of MBI at the time of sale and for at least three
months prior to such sale, such person may freely resell such
stock, without limitation, regardless of the status of MBI's
required public filings. The shares of MBI stock to be received by
affiliates of Wedge Holding or Wedge Bank in the Acquisition will
be legended as to the restrictions imposed upon resale of such
stock.
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF MBI, WEDGE HOLDING AND
WEDGE BANK
MBI is incorporated under the laws of the State of Missouri.
Wedge Holding is organized under the laws of the State of Delaware.
Wedge Bank is organized under the Illinois Banking Act. The rights of
MBI's shareholders are governed by MBI's Restated Articles of
Incorporation and By-Laws and the General and Business Corporation Act
of the State of Missouri (the "Missouri Act"). The rights of Wedge
Holding stockholders are governed by Wedge Holding's Certificate of
Incorporation and By-Laws and by The General Corporation Law of the
State of Delaware (the "Delaware Corporation Law"). The
- 69 -
<PAGE> 77
rights of stockholders of Wedge Bank are governed by Wedge Bank's
Charter and By-Laws and by the Illinois Banking Act. The rights of
Wedge Holding stockholders who receive shares of MBI Common Stock
after the corporate liquidation of Wedge Holding following the
Acquisition, and the rights of Wedge Bank stockholders who receive
shares of MBI Common Stock in the Acquisition will thereafter be
governed by MBI's Restated Articles of Incorporation and By-Laws and
by the Missouri Act. The material rights of such stockholders, and,
where applicable, the differences between the rights of MBI
shareholders and Wedge Holding and Wedge Bank stockholders, are
summarized below.
PREFERRED SHARE PURCHASE RIGHTS PLAN. As described above
under "- Description of MBI Common Stock and Attach Preferred Share
Purchase Rights - Preferred Share Purchase Rights Plan," MBI Common
Stock has attached Rights, which may deter certain takeover
proposals. Neither Wedge Holding nor Wedge Bank has a rights plan.
SUPERMAJORITY PROVISIONS. MBI's Restated Articles of
Incorporation and MBI's By-Laws contain provisions requiring a
supermajority vote of the shareholders of MBI to approve certain
proposals. Under both MBI's Restated Articles and By-Laws, removal
by the shareholders of the entire Board of Directors or any
individual director from office without cause requires the
affirmative vote of not less than 75% of the total votes entitled
to be voted at a meeting of shareholders called for the election of
directors. Amendment by the shareholders of MBI's Restated
Articles or By-Laws relating to (i) the number or qualification of
directors; (ii) the classification of the Board of Directors; (iii)
the filling of vacancies on the Board of Directors; or (iv) the
removal of directors, requires the affirmative vote of not less
than 75% of the total votes of MBI's then outstanding capital stock
entitled to vote, voting together as a single class, unless such
amendment has previously been expressly approved by at least 66
2/3% of the Board of Directors. The Restated Articles of MBI
additionally provide that, in addition to any shareholder vote
required under the Missouri Act, the affirmative vote of the
holders of not less than 75% of the total votes to which all of the
then outstanding shares of capital stock of MBI are entitled,
voting together as a single class (the "Voting Stock"), shall be
required for the approval of any Business Combination. A "Business
Combination" is defined generally to include sales, exchanges,
leases, transfers or other dispositions of assets, mergers or
consolidations, issuances of securities, liquidations or
dissolutions of MBI, reclassifications of securities or
recapitalizations of MBI, involving MBI on the one hand, and an
Interested Shareholder or an affiliate of an Interested Shareholder
on the other hand. An "Interested Shareholder" is defined
generally to include any person, firm, corporation or other entity
which is the beneficial owner of 5% or more of the voting power of
the outstanding Voting Stock. If, however, at least 66 2/3% of the
Board of Directors of MBI approve the Business Combination, such
Business Combination shall require only the vote of shareholders as
provided by Missouri law or otherwise. The amendment of the
provisions of MBI's Restated Articles relating to the approval of
Business Combinations requires the affirmative vote of the holders
of at least 75% of the Voting Stock unless such amendment has
previously been approved by at least 66 2/3% of the Board of
Directors.
To the extent that a potential acquiror's strategy
depends on the passage of proposals which require a supermajority
vote of MBI's shareholders, such provisions requiring a
supermajority vote may have the effect of discouraging takeover
attempts that do not have Board approval by making passage of such
proposals more difficult. Wedge Holding's Certificate of
Incorporation and By-Laws and Wedge Bank's Charter and By-Laws do
not contain supermajority vote provisions.
VOTING FOR DIRECTORS. MBI's By-Laws provide for
cumulative voting in the election of directors. Cumulative voting
entitles each shareholder to cast an aggregate number of votes
equal to the number of voting shares held, multiplied by the number
of directors to be elected. Each shareholder may cast all such
votes for one nominee or distribute them among two or more
nominees, thus permitting holders of less than a majority of the
outstanding shares of voting stock to achieve board representation.
Wedge Holding's Certificate of Incorporation and By-Laws do not
provide for cumulative voting. The By-Laws of Wedge Bank provide
for cumulative voting in the election of directors.
- 70 -
<PAGE> 78
CLASSIFIED BOARD. As described under "- Description of
MBI Common Stock and Attached Preferred Share Purchase Rights -
Classification of Board of Directors," the Board of Directors of
MBI is divided into three classes of directors, with each class
being elected to a staggered three-year term. By reducing the
number of directors to be elected in any given year, the existence
of a classified Board diminishes the benefits of the cumulative
voting rights to minority shareholders. Neither Wedge Holding nor
Wedge Bank has a classified Board of Directors.
ANTI-TAKEOVER STATUTES. The Missouri Act contains
certain provisions applicable to Missouri corporations such as MBI
which may be deemed to have an anti-takeover effect. Such
provisions include Missouri's business combination and the control
share acquisition statute.
The Missouri business combination statute protects
domestic corporations from hostile takeovers by prohibiting certain
transactions once an acquiror has gained control. The statute
restricts certain "Business Combinations" between a corporation and
an "Interested Shareholder" or affiliates of the Interested
Shareholder for a period of five years unless certain conditions
are met. A "Business Combination" includes a merger or
consolidation, certain sales, leases exchanges, pledges and similar
dispositions of corporate assets or stock and certain
reclassifications and recapitalizations. An "Interested
Shareholder" includes any person or entity which beneficially owns
or controls 20% or more of the outstanding voting shares of the
corporation.
During the initial five-year restricted period, no
Business Combination may occur unless such Business Combination or
the transaction in which an Interested Shareholder becomes
"interested" is approved by the board of directors of the
corporation. Business Combinations may occur during such five-year
period if: (i) prior to the stock acquisition by the Interested
Shareholder, the board of directors approves the transaction in
which the Interested Shareholder became such or approves the
Business Combination in question; (ii) the holders of a majority of
the outstanding voting stock, other than stock owned by the
Interested Shareholder, approve the Business Combination; or
(iii) the Business Combination satisfies certain detailed fairness
and procedural requirements.
The Missouri Act exempts from its provisions:
(i) corporations not having a class of voting stock registered
under Section 12 of the Exchange Act; (ii) corporations which adopt
provisions in their articles of incorporation or bylaws expressly
electing not to be covered by the statute; and (iii) certain
circumstances in which a shareholder inadvertently becomes an
Interested Shareholder. MBI's Restated Articles of Incorporation
and By-Laws do not "opt out" of the Missouri Business Combination
Statute.
The Missouri Act also contains a "Control Share
Acquisition Statute" which provides that an "Acquiring Person" who
after any acquisition of shares of a publicly traded corporation
has the voting power, when added to all shares of the same
corporation previously owned or controlled by the Acquiring Person,
to exercise or direct the exercise of: (i) 20% but less than 33 1/3%,
(ii) 33 1/3% or more but less than a majority or (iii) a majority, of
the voting power of outstanding stock of such corporation must
obtain shareholder approval for the purchase of the "Control
Shares." If approval is not given, the Acquiring Person's shares
lose the right to vote. The statute prohibits an Acquiring Person
from voting its shares unless certain disclosure requirements are
met and the retention or restoration of voting rights is approved
by both: (i) a majority of the outstanding voting stock, and (ii) a
majority of the outstanding voting stock after exclusion of
"Interested Shares." Interested Shares are defined as shares owned
by the Acquiring Person, by directors who are also employees, and
by officers of the corporation. Shareholders are given dissenters'
rights with respect to the vote on Control Share Acquisitions and
may demand payment of the fair value of their shares.
A number of acquisitions of shares are deemed not to
constitute Control Share Acquisitions, including good faith gifts,
transfers pursuant to wills, purchases pursuant to an issuance
by the corporation, mergers involving the corporation which
satisfy the other requirements of the Missouri
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Act, transactions with a person who owned a majority of the voting
power of the corporation within the prior year, or purchases from a
person who has previously satisfied the provisions of the Control
Share Acquisition Statute so long as the transaction does not result
in the purchasing party having voting power after the purchase in a
percentage range (such ranges are as set forth in the immediately
preceding paragraph) beyond the range for which the selling party
previously satisfied the provisions of the statute. Additionally,
a corporation may exempt itself from application of the statute by
inserting a provision in its articles of incorporation or bylaws
expressly electing not to be covered by the statute. MBI's
Restated Articles of Incorporation and By-Laws do not "opt out" of
the Control Share Acquisition Statute.
The Delaware Corporation Law applicable to Wedge Holding
contains a business combination statute similar to that contained
in the Missouri Act. Like the Missouri business combination
statute, the Delaware business combination statute generally
prohibits a domestic corporation from engaging in mergers or other
business combinations with "Interested Persons" (as defined in the
Delaware Corporation Law) for a statutory time period. The
prohibition can be avoided if the business combination is approved
by the board of directors prior to the date on which the Interested
Person acquires the requisite percentage of stock. The Missouri
Act imposes a longer prohibition period on transactions with
Interested Persons (five years) than the Delaware Corporation Law
(three years), thereby potentially increasing the period during
which a hostile takeover may be frustrated. In addition, the
Delaware Corporation Law, unlike its Missouri counterpart, does not
apply if the Interested Person obtains at least 85% of the
corporation's voting stock upon consummation of the transactions
which resulted in the stockholder becoming an Interested Person.
Thus, a person acquiring at least 85% of the corporation's voting
stock could circumvent the defensive provisions of the Delaware
Corporation Law while being unable to do so under the Missouri Act.
The Delaware Corporation Law does not contain a control share
acquisition statute similar to that contained in the Missouri Act.
The Illinois Banking Act applicable to Wedge Bank has no
analogous statutes to the Missouri business combination statute or
the Missouri control share acquisition statute.
DISSENTERS' RIGHTS. Under the Missouri Act, a
shareholder of any corporation which is a party to a merger or
consolidation, or which sells all or substantially all of its
assets, has the right to dissent from such corporate action and to
demand payment of the fair value of such shares. Under the
Delaware Corporation Law and the Illinois Banking Act applicable to
the stockholders of Wedge Holding and Wedge Bank, respectively,
stockholders are entitled to dissenters' rights which are similar
but not identical to those under the Missouri Act. Specifically,
the Delaware Corporation Law and the Illinois Banking Act do not
provide for dissenters' rights with respect to the sale of all or
substantially all of the assets of a corporation, and the
procedures and filing deadlines applicable to dissenters' rights
under the Missouri Act differ from those applicable in dissenters'
rights proceedings under the Delaware Corporation Law and the
Illinois Banking Act. Additionally, unlike the Missouri Act, the
dissenters' rights provisions of the Delaware Corporation Law
contain an exception for circumstances in which the shareholder
seeking to exercise such rights owns shares in a widely held,
publicly traded corporation and is to receive, or continue to hold
after the transaction under which such shareholder is seeking to
exercise dissenters' rights, shares of a widely held, publicly
traded corporation.
STOCKHOLDERS' RIGHT TO INSPECT. Under the Delaware
Corporation Law, any stockholder may inspect the corporation's stock
ledger, stockholder list and other books and records for any proper
purpose. A "proper purpose" is defined as a purpose reasonably
related to such person's interest as a stockholder. The Delaware
Corporation Law specifically provides that a stockholder may appoint an
agent for the purpose of examining the stock ledger, list of stockholders
or other books and records of the corporation. A stockholder may apply
to the Delaware Court of Chancery to compel inspection in the event
the stockholder's request to examine the books and records is refused.
In general, the stockholder has the burden of proving a proper purpose
when seeking to inspect books and records other than the stock ledger
and stockholder list, and the corporation has the burden of proving
an improper purpose where a stockholder requests to examine the
stockholder ledger or stockholder list. The Illinois
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Banking Act provides that stockholders have the right to inspect a
list of stockholder names, addresses and number of shares held, but is
silent with respect to the right of a stockholder to inspect other
books and records. The right of stockholders to inspect under the
Missouri Act is generally similar to that of stockholders under the
Delaware Corporation Law and, accordingly, provides shareholders with
greater inspection rights than the Illinois Banking Act. Neither
the Missouri Act nor Missouri case law, however, provides any
specific guidance as to whether a shareholder may appoint an agent
for the purpose of examining books and records or the extent to
which a shareholder must have a "proper purpose." Accordingly, in
comparison with the Delaware Corporation Law, in a given situation
a Missouri shareholder may be provided with less guidance as to the
scope of his or her ability to inspect the books and records of the
corporation.
SIZE OF BOARD OF DIRECTORS. As permitted under the
Missouri Act, the number of directors on the Board of Directors of
MBI is set forth in MBI's By-Laws, which provide that the number of
directors may be fixed from time to time at not less than 12 nor
more than 24 by an amendment of the By-Laws or by a resolution of
the Board of Directors, in either case, adopted by the vote or
consent of at least 66 2/3% of the number of directors then
authorized under the By-Laws. Similar to the Missouri Act, the
Delaware Corporation Law provides that a corporation may fix the
number of directors in its articles of incorporation or bylaws.
Under the Illinois Banking Act, the number of directors, which must
be not fewer than 5 nor more than 25, may be fixed from time to
time by the affirmative vote of at least two thirds of the
outstanding stock entitled to vote. Wedge Holding's By-Laws
provide that the number of directors on the Board of Directors may
be fixed from time to time at not less than three nor more than
seven by a resolution of the Board of Directors or stockholders at
the annual meeting. Wedge Bank's By-Laws provide that the number
of directors on the Board of Directors shall be not less than five
nor more than twenty-four. The supermajority vote required for the
amendment of MBI's By-Laws regarding a change in the number of
directors may have the effect of making it more difficult to force
an immediate change in the composition of a majority of the Board
of Directors and may be deemed to have an anti-takeover effect.
SUPERVISION AND REGULATION
--------------------------
GENERAL
As a bank holding company, MBI is subject to regulation
under the BHCA and its examination and reporting requirements.
Under the BHCA, a bank holding company may not directly or
indirectly acquire the ownership or control of more than 5% of the
voting shares or substantially all of the assets of any company,
including a bank or savings and loan association, without the prior
approval of the Federal Reserve Board. In addition, bank holding
companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.
MBI and its subsidiaries are subject to supervision and
examination by applicable federal and state banking agencies. The
earnings of MBI's subsidiaries, and therefore the earnings of MBI,
are affected by general economic conditions, management policies
and the legislative and governmental actions of various regulatory
authorities, including the Federal Reserve Board and the
Comptroller of the Currency (the "Comptroller"). In addition,
there are numerous governmental requirements and regulations that
affect the activities of MBI and its subsidiaries.
CERTAIN TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to
which a bank holding company and certain of its nonbank subsidiaries
can borrow or otherwise obtain credit from its bank subsidiaries. In
general, these restrictions require that any such extensions of credit
must be on non-preferential terms and secured by designated amounts of
specified collateral and be limited, as to any one of the holding
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<PAGE> 81
company or such nonbank subsidiaries, to 10% of the lending bank's
capital stock and surplus, and as to the holding company and all such
nonbank subsidiaries in the aggregate, to 20% of such capital stock
and surplus.
PAYMENT OF DIVIDENDS
MBI is a legal entity separate and distinct from its
banking and other subsidiaries. The principal source of MBI's
revenues is dividends from its national and state banking
subsidiaries. Various federal and state statutory provisions limit
the amount of dividends the affiliate banks can pay to MBI without
regulatory approval. The approval of the appropriate bank
regulator is required for any dividend by a national bank or state
member bank if the total of all dividends declared by the bank in
any calendar year would exceed the total of its net profits, as
defined by regulatory agencies, for such year combined with its
retained net profits for the preceding two years. In addition, a
national bank or a state member bank may not pay a dividend in an
amount greater than its net profits then on hand. The payment of
dividends by any affiliate bank may also be affected by other
factors, such as the maintenance of adequate capital for such
affiliate bank.
CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for
measuring capital adequacy for bank holding companies. These
standards are designed to provide risk-responsive capital
guidelines and to incorporate a consistent framework for use by
financial institutions operating in major international financial
markets. The banking regulators have issued standards for banks
that are similar to, but not identical with, the standards for bank
holding companies.
In general, the risk-related standards require banks and
bank holding companies to maintain capital based on "risk-adjusted"
assets so that categories of assets with potentially higher credit
risk will require more capital backing than categories with lower
credit risk. In addition, banks and bank holding companies are
required to maintain capital to support off-balance sheet
activities such as loan commitments.
The standards classify total capital for this risk-based
measure into two tiers referred to as Tier 1 and Tier 2. Tier 1
capital consists of common shareholders' equity, certain non-
cumulative and cumulative perpetual preferred stock, and minority
interests in equity accounts of consolidated subsidiaries; Tier 2
capital consists of the allowance for loan and lease losses (within
certain limits), perpetual preferred stock not included in Tier 1,
hybrid capital instruments, term subordinated debt, and
intermediate-term preferred stock. By December 31, 1992, bank
holding companies were required to meet a minimum ratio of 8% of
qualifying total capital to risk-adjusted assets, and a minimum
ratio of 4% of qualifying Tier 1 capital to risk-adjusted assets.
Capital that qualifies as Tier 2 capital is limited in amount to
100% of Tier 1 capital in testing compliance with the total risk-
based capital minimum standards.
In addition, the Federal Reserve Board has established
minimum leverage ratio guidelines for bank holding companies.
These guidelines provide for a minimum ratio of Tier 1 capital to
adjusted average total assets (the "leverage ratio") of 3% for bank
holding companies that meet certain specified criteria, including
having the highest regulatory rating. Other bank holding companies
generally are required to maintain a leverage ratio of at least 3%
plus 100 to 200 basis points. The guidelines also provide that
bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above minimum supervisory levels, without significant
reliance on intangible assets. Furthermore, the Federal Reserve
Board has indicated that it may consider other indicia of capital
strength in evaluating proposals for expansion or new activities.
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<PAGE> 82
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve Board policy, MBI is expected to
act as a source of financial strength to each subsidiary bank and
to commit resources to support each of the subsidiaries in
circumstances where it might not choose to do so absent such a
policy. In addition, any capital loans by MBI to any of its
subsidiaries would also be subordinate in right of payment to
deposits and certain other indebtedness of such subsidiary. This
support may be required at times when MBI may not find itself able
to provide it.
Consistent with this policy regarding bank holding
companies serving as a source of financial strength for their
subsidiary banks, the Federal Reserve Board has stated that, as a
matter of prudent banking, a bank holding company generally should
not maintain a rate of cash dividends unless its net income
available to common stockholders has been sufficient to fully fund
the dividends, and the prospective rate of earnings retention
appears consistent with the bank holding company's capital needs,
asset quality and overall financial condition.
FIRREA AND FDICIA
The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA") contains a cross-guarantee
provision which could result in insured depository institutions
owned by MBI being assessed for losses incurred by the FDIC in
connection with assistance provided to, or the failure of, any
other insured depository institution owned by MBI. Under FIRREA,
failure to meet the capital guidelines could subject a banking
institution to a variety of enforcement remedies available to
federal regulatory authorities, including the termination of
deposit insurance by the FDIC.
The Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") made extensive changes to the federal banking
laws. FDICIA instituted certain changes to the supervisory
process, including provisions that mandate certain regulatory
agency actions against undercapitalized institutions within
specified time limits, and contain various provisions that may
affect the operations of banks and savings institutions.
The prompt corrective action provision of FDICIA requires
the federal banking regulators to assign each insured institution
to one of five capital categories ("well capitalized," "adequately
capitalized" or one of three "undercapitalized" categories) and to
take progressively more restrictive actions as specified below.
Under FDICIA, capital requirements would include a leverage limit,
a risk-based capital requirement and any other measure of capital
deemed appropriate by the federal banking regulators for measuring
the capital adequacy of an insured depository institution. All
institutions, regardless of their capital levels, are restricted
from taking any capital distribution or paying any management fees
that would cause the institution to fail to satisfy the minimum
levels for any relevant capital measure. An institution that fails
to meet the minimum level for any relevant capital measure (an
"undercapitalized institution") may be: (i) subject to increased
monitoring by the appropriate federal banking regulator;
(ii) required to submit an acceptable capital restoration plan
within 45 days; (iii) subject to asset growth limits; and
(iv) required to obtain prior regulatory approval for acquisitions,
branching and new lines of businesses. The capital restoration
plan must include a guarantee by the institution's holding company
(under which the holding company would be liable up to the lesser
of 5% of the institution's total assets or the amount necessary to
bring the institution into capital compliance as of the date it
failed to comply with its capital restoration plan) that the
institution will comply with the plan until it has been adequately
capitalized on average for four consecutive quarters.
The FDIC and the Federal Reserve Board adopted capital-
related regulations under FDICIA. Under those regulations, a bank
will be well capitalized if it: (i) had a risk-based capital ratio of
10% or greater; (ii) had a ratio of Tier 1 capital to risk-adjusted
assets of 6% or greater; (iii) had a ratio of Tier 1 capital to adjusted
total assets of 5% or greater; and (iv) was not subject to an order,
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<PAGE> 83
written agreement, capital directive, or prompt corrective action
directive to meet and maintain a specific capital level for any
capital measure. An association will be adequately capitalized if it
was not "well capitalized" and: (i) had a risk-based capital ratio of
8% or greater; (ii) had a ratio of Tier 1 capital to risk-adjusted
assets of 4% or greater; and (iii) had a ratio of Tier 1 capital to
adjusted total assets of 4% or greater (except that certain
associations rated "Composite 1" under the federal banking agencies'
CAMEL rating system may be adequately capitalized if their ratios of
core capital to adjusted total assets were 3% or greater).
Under FDICIA, a bank or savings institution that is
undercapitalized may not accept, renew or roll over deposits
obtained through a deposit broker, may not solicit deposits by
offering interest rates that are significantly higher than market
rates and cannot provide pass-through insurance on certain
collective deposits. Banks that are "adequately capitalized" but
are not "well capitalized" will be required to obtain a waiver from
the FDIC in order to accept, renew, or roll over brokered deposits,
and may not pay interest on deposits that significantly exceeds
market rates for deposits of similar maturity or provide pass-
through insurance.
FDICIA directs the FDIC to establish a risk-based
assessment system for deposit insurance by January 1, 1994. On
September 15, 1992, the Board of Directors of the FDIC approved a
transitional system of risk-based deposit insurance pursuant to
which the insurance assessments would vary depending upon the level
of capital of the institution and the degree to which it is the
subject of supervisory concern to the FDIC. Under the risk-based
insurance premium schedule approved by the FDIC's Board of
Directors, effective January 1, 1993, the assessment rate varies
from .23% of eligible deposits for "healthy" well-capitalized banks
to .31% of eligible deposits for less than adequately capitalized
banks that pose substantial supervisory concerns.
FDICIA also makes extensive changes in existing rules
regarding audits, examinations and accounting. It generally
requires annual on-site, full scope examinations by each bank's
primary federal regulator. It also imposes new responsibilities on
management, the independent audit committee and outside accountants
to develop or approve reports regarding the effectiveness of
internal controls, legal compliance and off-balance sheet
liabilities and assets.
DEPOSITOR PREFERENCE STATUTE
Legislation enacted in August 1993 provides a preference
for deposits and certain claims for administrative expenses and
employee compensation against an insured depository institution,
such as Wedge Bank and MBI's insured bank subsidiaries, in the
liquidation or other resolution of such an institution by any
receiver. Such obligations would be afforded priority over other
general unsecured claims against such an institution, including
federal funds and letters of credit, as well as any obligation to
shareholders of such an institution in their capacity as such.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
-----------------------------------------
KPMG Peat Marwick LLP served as MBI's independent
accountants for the year ended December 31, 1993 and continues to
serve in such capacity. Services provided in connection with the
audit function included examination of the annual consolidated
financial statements, review and consultation regarding filings
with the Securities and Exchange Commission and other regulatory
authorities and consultation on financial accounting and reporting
matters.
Deloitte & Touche LLP served as Wedge Holding's and Wedge
Bank's independent accountants for the year ended December 31, 1993
and continues to serve in such capacity. Services provided in
connection with the audit function included examination of the
annual consolidated financial statements and consultation on
financial accounting and reporting matters.
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<PAGE> 84
LEGAL MATTERS
-------------
Certain legal matters will be passed upon for MBI by
Thompson & Mitchell, St. Louis, Missouri and for Wedge Holding and
Wedge Bank by Thomas, Mottaz, Eastman & Sherwood, Alton, Illinois.
EXPERTS
-------
The consolidated financial statements of Mercantile
Bancorporation Inc. as of December 31, 1993, 1992 and 1991, and for
each of the years in the three-year period ended December 31, 1993,
incorporated by reference in MBI's Annual Report on Form 10-K, and
the supplemental consolidated financial statements of Mercantile
Bancorporation Inc. as of December 31, 1993, 1992 and 1991, and for
each of the years in the three-year period ended December 31, 1993,
contained in MBI's Current Report on Form 8-K dated June 17, 1994,
have been incorporated by reference herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP dated January 13, 1994, except as
to Note Q which is as of February 10, 1994, contains an explanatory
paragraph referring to the change in accounting for income taxes.
The consolidated financial statements of The Wedge
Holding Company and the financial statements of Wedge Bank as of
December 31, 1993 and 1992 and for the years then ended included in
this Proxy Statement/Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports
appearing herein and have been so included in reliance upon the
reports of such firm given upon their authority as experts in
accounting and auditing.
OTHER MATTERS
-------------
The respective Boards of Directors of Wedge Holding and
Wedge Bank, at the date hereof, are not aware of any business to be
presented at the Special Meetings other than that referred to in
the Notices of Special Meetings and discussed herein. If any other
matter should properly come before the Special Meetings, the
persons named as proxies will have discretionary authority to vote
the shares represented by proxies in accordance with their
discretion and judgment as to the best interests of Wedge Holding
and Wedge Bank.
SHAREHOLDER PROPOSALS
---------------------
If the Acquisition is approved, the other conditions to
the Acquisition are satisfied and the Acquisition is consummated,
stockholders of Wedge Bank will become shareholders of MBI at the
Effective Time. MBI shareholders may submit to MBI proposals for
formal consideration at the 1995 annual meeting of MBI's
shareholders and inclusion in MBI's proxy statement for such
meeting. All such proposals must be received in writing by the
Corporate Secretary at Mercantile Bancorporation Inc., P.O. Box
524, St. Louis, Missouri 63166-0524 by November 22, 1994 in order
to be considered for inclusion in MBI's Proxy Statement and proxy
for the 1995 annual meeting.
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<PAGE> 85
<TABLE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<CAPTION>
Page
----
<S> <C>
The Wedge Holding Company and Subsidiary:
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-1
Consolidated Balance Sheets, June 30, 1994
and December 31, 1993 and 1992. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-2
Consolidated Statements of Income, six months ended June 30, 1994 and 1993
and years ended December 31, 1993, 1992 and 1991. . . . . . . . . . . . . . . . . . . . .F-3
Consolidated Statements of Stockholders' Equity, six months ended June 30, 1994
and years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . .F-4
Consolidated Statements of Cash Flows, six months ended June 30, 1994 and 1993
and years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . F-5 to F-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . .F-7 to F-21
Wedge Bank:
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
Balance Sheets, June 30, 1994
and December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-23
Statements of Income, six months ended June 30, 1994 and 1993
and years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . F-24
Statements of Stockholders' Equity, six months ended June 30, 1994
and years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . F-25
Statements of Cash Flows, six months ended June 30, 1994 and 1993
and years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . F-26 to F-27
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-28 to F-39
</TABLE>
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<PAGE> 86
To the Board of Directors and Stockholders of
The Wedge Holding Company:
We have audited the accompanying consolidated balance sheets of The
Wedge Holding Company and subsidiary as of December 31, 1993 and
1992, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company and its subsidiary at December 31, 1993 and 1992, and the
results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
March 25, 1994
<PAGE> 87
THE WEDGE HOLDING COMPANY AND SUBSIDIARY
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
JUNE 30, DECEMBER 31,
------------ --------------------------
ASSETS 1994 1993 1992
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Cash and due from depository institutions (Note 3) $ 7,825 $ 8,110 $ 7,720
Federal funds sold 4,200 3,275
-------- -------- --------
Total cash and cash equivalents 7,825 12,310 10,995
Interest-bearing deposits in other depository institutions 94 94
Investment securities available for sale 59,042
Investments securities held to maturity (approximate market
values June 30, 1994 $23,827; December 31, 1993 $81,798;
December 31, 1992 $71,511) (Notes 4 and 7) 23,950 80,334 70,535
Loans (Note 5) 113,247 112,071 119,689
Less:
Unearned discounts 82 81 106
Allowance for loan losses 1,399 1,452 1,637
-------- -------- --------
Total 111,766 110,538 117,946
Premises and equipment - net (Note 6) 3,858 3,492 3,198
Accrued interest receivable 1,837 1,945 1,460
Real estate acquired in settlement of loans 694 762 990
Other assets (Note 8) 1,553 1,362 1,373
-------- -------- --------
TOTAL ASSETS $210,619 $210,837 $206,497
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing $ 23,651 $ 26,878 $ 13,526
Interest-bearing 138,552 142,871 160,861
-------- -------- --------
Total deposits 162,203 169,749 174,387
Short-term borrowings (Note 7) 26,380 19,830 10,725
Accrued interest payable 527 467 582
Advance payments by borrowers for taxes and insurance 685 625 695
Accrued expenses and other liabilities 877 1,091 1,310
-------- -------- --------
Total liabilities 190,672 191,762 187,699
MINORITY INTERESTS 3,263 3,124 2,495
STOCKHOLDERS' EQUITY:
Preferred stock, voting, $50 par value - authorized, 76,400 shares;
issued and outstanding, 63,734 shares 3,187 3,187 3,187
Common stock, voting, $100 par value - authorized, 16,250 shares;
issued and outstanding, 15,318 shares at June 30, 1994, 14,848 at
December 31, 1993 and 14,378 at December 31, 1992 1,532 1,485 1,438
Additional paid-in capital 1,227 867 596
Net unrealized losses on investment securities available for sale,
net of tax (669)
Retained earnings 11,407 10,412 11,082
-------- -------- --------
Total stockholders' equity (Note 9) 16,684 15,951 16,303
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $210,619 $210,837 $206,497
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
F-2
<PAGE> 88
THE WEDGE HOLDING COMPANY AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------------------
1994 1993 1993 1992 1991
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $4,430 $4,628 $10,301 $10,868 $10,916
Investment securities:
Taxable 1,836 1,624 3,742 4,374 4,855
Tax-exempt 625 404 1,044 592 339
Other 78 65 171 97 351
------ ------ ------- ------- -------
Total interest income 6,969 6,721 15,258 15,931 16,461
------ ------ ------- ------- -------
INTEREST EXPENSE:
Deposits 2,267 2,385 5,041 6,470 8,795
Short-term borrowings 422 193 485 405 87
Long-term debt 106 52
------ ------ ------- ------- -------
Total interest expense 2,689 2,578 5,526 6,981 8,934
------ ------ ------- ------- -------
NET INTEREST INCOME 4,280 4,143 9,732 8,950 7,527
PROVISION FOR LOAN LOSSES (Note 5) 76 164 240 191 1,132
------ ------ ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,204 3,979 9,492 8,759 6,395
------ ------ ------- ------- -------
OTHER INCOME:
Service charges 579 584 1,300 1,228 1,051
Securities gains - net 184 10 195 439 493
Gains on sale of real estate acquired in
settlement of loans 26 790 859 458 96
Trust fees 212 197 409 444 442
Other 57 31 149 163 597
------ ------ ------- ------- -------
Total other income 1,058 1,612 2,912 2,732 2,679
------ ------ ------- ------- -------
OTHER EXPENSES:
Salaries and employee benefits (Note 10) 2,255 2,508 5,286 5,123 3,846
Occupancy and equipment 473 364 822 771 754
Federal insurance premiums 189 166 380 387 394
Data processing 191 136 358 405 318
Other 558 598 1,267 1,472 1,956
------ ------ ------- ------- -------
Total other expenses 3,666 3,772 8,113 8,158 7,268
------ ------ ------- ------- -------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 1,596 1,819 4,291 3,333 1,806
INCOME TAX EXPENSE (Note 8) 385 484 1,036 996 662
------ ------ ------- ------- -------
INCOME BEFORE MINORITY
INTERESTS 1,211 1,335 3,255 2,337 1,144
MINORITY INTERESTS (216) (224) (731) (490) (197)
------ ------ ------- ------- -------
NET INCOME $ 995 $1,111 $ 2,524 $ 1,847 $ 947
====== ====== ======= ======= =======
EARNINGS PER SHARE $66.48 $76.63 $172.70 $129.80 $ 67.81
====== ====== ======= ======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 14,968 14,498 14,615 14,230 13,965
====== ====== ======= ======= =======
See notes to consolidated financial statements.
</TABLE>
F-3
<PAGE> 89
THE WEDGE HOLDING COMPANY AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NET UNREALIZED
LOSSES ON
INVESTMENT
SECURITIES
ADDITIONAL AVAILABLE
PREFERRED COMMON PAID-IN FOR SALE, RETAINED
STOCK STOCK CAPITAL NET OF TAX EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1990 (Unaudited):
As previously reported (unaudited) $3,187 $1,385 $ 378 $ - $ 5,042 $ 9,992
As restated for pooling of interest
(unaudited) 3,246 3,246
------ ------ ------ ------- ------- -------
Balance, as restated (unaudited) 3,187 1,385 378 8,288 13,238
Net income (unaudited) 947 947
Stock issuance (unaudited) 23 82 105
------ ------ ------ ------- ------- -------
BALANCE, DECEMBER 31, 1991 3,187 1,408 460 - 9,235 14,290
Net income 1,847 1,847
Stock issuance (Note 10) 30 136 166
------ ------ ------ ------- ------- -------
BALANCE, DECEMBER 31, 1992 3,187 1,438 596 - 11,082 16,303
Net income 2,524 2,524
Stock issuance (Note 10) 47 271 318
Distribution at date of merger (Note 2) (3,194) (3,194)
------ ------ ------ ------- ------- -------
BALANCE, DECEMBER 31, 1993 3,187 1,485 867 - 10,412 15,951
Net income (unaudited) 995 995
Stock issuance (unaudited) 47 360 407
Implementation of change in accounting
for marketable debt and equity
securities (unaudited) 478 478
Unrealized losses on investment
securities (unaudited) (1,147) (1,147)
------ ------ ------ ------- ------- -------
BALANCE, JUNE 30, 1994 (unaudited) $3,187 $1,532 $1,227 $ (669) $11,407 $16,684
====== ====== ====== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 90
THE WEDGE HOLDING COMPANY AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------------------
1994 1993 1993 1992 1991
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 995 $ 1,030 $ 2,524 $ 1,847 $ 947
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion - net 225 236 503 607 398
Provision for loan losses 76 164 240 191 1,132
Deferred tax expense (benefit) (346) 16 16 (263) (49)
Securities gains - net (184) (10) (195) (439) (493)
Gains on sales of real estate acquired in
settlement of loans (26) (790) (859) (458) (96)
(Increase) decrease in accrued interest receivable 108 (75) (485) 91 22
(Increase) decrease in other assets 155 (150) (27) (136) (804)
(Decrease) increase in other liabilities 313 (93) (494) 695 183
Other 407 407 318 124
-------- -------- -------- -------- --------
Net cash provided by operating activities 1,316 735 1,630 2,453 1,364
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in interest-bearing deposits
in other depository institutions - (94) (94) 840 -
Proceeds from maturities of investment securities
available for sale 3,926
Proceeds from sales of investment securities
available for sale 3,666
Proceeds from maturities of investment securities
held to maturity 860 6,992 18,036 14,296 7,730
Proceeds from sales of investment securities 7,276 17,075 25,500 17,395
Purchases of investment securities available
for sale (11,587)
Purchases of investment securities held to
maturity (22,024) (44,774) (47,431) (29,229)
Loan originations less than (in excess of)
repayments (1,541) 3,444 6,950 (6,697) (17,172)
Proceeds from sales of real estate acquired in
settlement of loans 319 87 1,262 1,071 1,200
Net additions to premises and equipment (587) (108) (672) (213) (110)
-------- -------- -------- -------- --------
Net cash used in investing activities (4,944) (4,427) (2,217) (12,634) (20,186)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (7,546) 4,533 (4,638) 3,786 9,161
Increase in short-term borrowings 6,550 1,000 9,105 3,675 6,250
Distribution at date of merger (3,194) (3,194)
Repayment of long-term debt (688) (229)
Net increase in minority interests 139 449 629 335 98
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities (857) 2,788 1,902 7,108 15,280
-------- -------- -------- -------- --------
(Continued)
F-5
<PAGE> 91
THE WEDGE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------------------
1994 1993 1993 1992 1991
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (4,485) $ (904) $ 1,315 $ (3,073) $ (3,542)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 12,310 10,995 10,995 14,068 17,610
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,825 $ 10,091 $ 12,310 $ 10,995 $ 14,068
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the period for:
Income taxes $ 50 $ 885 $ 1,435 $ 1,065 $ 564
Interest on deposits 2,230 2,362 5,156 6,908 8,733
Interest on short-term borrowings 422 193 485 405 228
Interest on long-term debt 106 52
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Real estate acquired in settlement of loans 16 16 315 1,020
Issuance of stock pursuant to bonus plan 407 318 318 166 105
Unrealized losses on investment securities 669
</TABLE>
See notes to consolidated financial statements. (Concluded)
F-6
<PAGE> 92
THE WEDGE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1992
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of The Wedge Holding
Company (the "Company") and subsidiary conform to generally
accepted accounting principles and prevailing practices within
the banking industry. A summary of the more significant
accounting policies follows:
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated
financial statements include the accounts of The Wedge Holding
Company and its approximately 80%-owned subsidiary, Wedge Bank
(the "Bank"). All significant intercompany accounts and
transactions have been eliminated.
CASH EQUIVALENTS - For purposes of reporting cash flows, cash
and cash equivalents include cash on-hand and due from
depository institutions and federal funds sold. Generally,
federal funds are sold for one day periods.
INVESTMENT SECURITIES - Investment securities are stated at
cost, adjusted for premiums and discounts. Premiums and
discounts are recognized as adjustments to interest income using
the level yield method. The Company has the ability to hold
these securities to maturity and the intent, at the time of the
purchase, to hold them on a long-term basis. Although it is
management's intent to hold these securities for investment
purposes, they will from time to time sell investment securities
prior to maturity because of changes in prepayment risk,
asset/liability management strategy, interest rate outlook or
other reasons. Gains and losses on dispositions are recorded
based on the net proceeds and the adjusted carrying amount of
the securities sold using the specific identification method.
LOANS - Loans are stated at the amount of unpaid principal,
reduced by unearned discounts and an allowance for loan losses.
Interest income on loans is generally accrued based on the
principal amounts of the loans outstanding. Loans on which the
accrual of interest has been discontinued are designated as
nonaccrual loans. Accrual of interest on loans is discontinued
when a reasonable doubt exists as to the full and timely
collection of interest or principal or generally when a loan
becomes contractually past-due by ninety days or more with
respect to principal or interest.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is
established through a provision for loan losses charged to
expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that
management believes will be adequate to absorb losses inherent
in existing loans and commitments to extend credit. In
determining the adequacy of the allowance, management takes into
consideration such factors as changes in the nature and volume
of the portfolio, overall portfolio quality, prior loss
experience, loan concentration, specific problem loans and
current and anticipated economic conditions that may affect the
borrowers' ability to pay.
F-7
<PAGE> 93
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS - Real estate
acquired in settlement of loans is included in other assets in
the consolidated balance sheets and consists of assets acquired
through foreclosure or deed in lieu of foreclosure. Real estate
owned is valued at the lower of cost or estimated fair market
value less estimated costs to dispose. Any loss incurred at the
time of acquisition or reclassification is charged to the
allowance for loan losses. Losses resulting from disposition or
periodic reevaluation of real estate owned are charged to
expense.
PREMISES AND EQUIPMENT - Premises and equipment are stated at
cost less accumulated depreciation. Deprecation charged to
operations is primarily computed using straight-line and
accelerated methods over the estimated useful lives of the
related assets. Estimated lives range from 20 to 50 years for
buildings and 5 to 7 years for furniture and fixtures.
INCOME TAXES - The Company and its subsidiary file a
consolidated income tax return with each entity computing its
taxes on a separate company basis. The difference between the
consolidated tax provision and the subsidiary's tax provision is
recorded by the parent company.
Deferred income taxes are provided when income and expenses are
recognized in different years for financial and income tax
reporting purposes. In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes ("SFAS 109"),
which requires an asset-liability approach to measuring the
impact of income taxes. The Company adopted SFAS 109 effective
January 1, 1993. The effect of applying the new standard was
not material to the consolidated financial statements of the
Company. Prior to 1993, income taxes were determined under the
deferred method in accordance with Accounting Principles Board
Opinion No. 11, Accounting for Income Taxes.
RECLASSIFICATIONS - Certain amounts included in the 1992 and
1991 consolidated financial statements have been reclassified to
conform to the 1993 presentation.
2. BUSINESS COMBINATIONS
On May 21, 1993, the Company consummated a merger whereby M&L
Holding Company ("M&L"), an affiliate bank holding company,
merged its wholly-owned subsidiary bank, Godfrey State Bank
("Godfrey") into the Company's subsidiary bank, Wedge Bank
("Wedge"). To affect this merger, Wedge exchanged one of its
shares of common stock for every 2.14 shares of common stock of
Godfrey. The merger has been accounted for similar to a pooling
of interests. Accordingly, the Company's consolidated financial
statements have been restated for all periods presented to
include the accounts and operations of Godfrey. Amounts
distributed to M&L in connection with the merger are shown as a
distribution in the Company's consolidated statement of
stockholders' equity for the year ended December 31, 1993.
F-8
<PAGE> 94
<TABLE>
Net interest income and net income of the Company and Godfrey
for the year prior to the merger were as follows (in thousands):
<CAPTION>
NET
INTEREST NET
1992 INCOME INCOME
<S> <C> <C>
The Wedge Holding Company $7,596 $1,566
Godfrey State Bank 1,354 281
------ ------
Total $8,950 $1,847
====== ======
</TABLE>
<TABLE>
On January 2, 1992, the Company merged two of its subsidiaries;
First National Bank of Brighton ("First National") and Bethalto
National Bank ("Bethalto") into Alton Banking and Trust Company.
Each shareholder at First National Bank and Bethalto received
one share of Alton Banking and Trust Company common stock, based
upon the following conversion factors:
<S> <C>
First National Bank of Brighton 27
Bethalto National Bank 1.12
</TABLE>
At the same time, Alton Banking and Trust Company changed its
name to The Wedge Bank.
3. RESERVE BALANCE REQUIREMENTS
The Bank is required to maintain certain cash and/or due from
bank reserve balances in accordance with Federal Reserve Board
requirements. The balances maintained under such requirements
as of December 31, 1993 and 1992, were $1,433,000 and
$1,277,000, respectively.
F-9
<PAGE> 95
4. INVESTMENT SECURITIES
<TABLE>
Investment securities at December 31 are summarized as follows:
<CAPTION>
1993
----------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and Agency obligations $39,864 $ 405 $ (23) $40,246
Obligations of states and political
subdivisions 22,045 884 (121) 22,808
Mortgage-backed securities 17,371 379 (60) 17,690
Other securities 1,054 1,054
------- ------ ----- -------
Total $80,334 $1,668 $(204) $81,798
======= ====== ===== =======
<CAPTION>
1992
----------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and Agency obligations $31,718 $ 337 $ (69) $31,986
Obligations of states and political
subdivisions 11,725 306 (41) 11,990
Mortgage-backed securities 23,956 556 (113) 24,399
Other securities 3,136 3,136
------- ------ ----- -------
Total $70,535 $1,199 $(223) $71,511
======= ====== ===== =======
</TABLE>
The amortized cost and approximate market value of investments
in debt securities at December 31, 1993, by contractual
maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED MARKET
TERM TO MATURITY COST VALUE
(IN THOUSANDS)
<S> <C> <C>
1 month - 1 year $ 2,403 $ 2,447
1 year - 5 years 18,598 18,914
5 years - 10 years 19,236 19,597
After 10 years 21,672 22,096
------- -------
Total 61,909 63,054
Mortgage-backed securities 17,371 17,690
------- -------
Total $79,280 $80,744
======= =======
</TABLE>
F-10
<PAGE> 96
Proceeds from sales of investments in debt securities during
1993, 1992 and 1991 were $14,948,000, $23,250,000 and
$17,395,000, respectively. Gross gains of $210,000, $463,000
and $504,000 and gross losses of $58,000, $37,000 and $13,000
were realized on such sales during 1993, 1992 and 1991,
respectively.
At December 31, 1993 and 1992, investment securities with
carrying values totaling approximately $25,656,000 and
$25,914,000 were pledged to secure public deposits and for other
purposes.
5. LOANS
<TABLE>
Loans at December 31 are summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Commercial and agricultural $ 8,444 $ 8,745
Residential real estate 98,877 102,334
Consumer 4,750 8,610
-------- --------
Total loans $112,071 $119,689
======== ========
</TABLE>
Substantially all of the Company's loans are with customers
located in the Illinois counties of Madison, Macoupin, Jersey
and Calhoun.
<TABLE>
Included in loans are loans to certain executive officers and
directors that have been made in the ordinary course of business
on substantially the same terms, including interest and
collateral, as those prevailing for comparable transactions with
others and do not involve more than the normal risk of
collectibility. The activity in such loans during 1993 is as
follows:
<S> <C>
Balance, December 31, 1992 $3,149,000
New loans 1,012,000
Repayments (493,000)
----------
Balance, December 31, 1993 $3,668,000
==========
</TABLE>
At December 31, 1993, 1992 and 1991, the aggregate principal
balances of loans on which interest was not being accrued (under
the accounting policies described in Note 1) were $420,000,
$695,000 and $1,504,000, respectively, and the aggregate
principal balances of loans on which the yield had been reduced
due to declining financial condition of the borrowers were $0,
$234,000 and $240,000, respectively. Interest income that would
have been accrued, had these loans been current and had the
terms of these loans not been modified because of troubled debt
restructurings, was approximately $40,000, $53,000 and $120,000
in 1993, 1992 and 1991, respectively. There was no interest
income recorded on these loans in 1993, 1992 or 1991. At
December 31, 1993, there were no commitments to lend additional
funds to borrowers whose loans are classified as nonaccrual or
renegotiated.
F-11
<PAGE> 97
<TABLE>
In the normal course of business, the Bank participates with
several banks affiliated through common ownership in the
origination of loans. These loans are purchased and/or sold
among the banks based upon the respective banks' legal lending
limits, liquidity needs and various other considerations. At
December 31, the Bank's loan participations with affiliated
banks are summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Loan participations purchased $1,027 $1,233
Loan participations sold 3,202 1,442
</TABLE>
<TABLE>
Activity in the allowance for loan losses for the years ended
December 31 is summarized as follows:
<CAPTION>
1991
1993 1992 (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year $1,637 $1,503 $ 962
Provision charged to expense 240 191 1,132
Charge-offs (480) (157) (678)
Recoveries 55 100 87
------ ------ ------
Balance, end of year $1,452 $1,637 $1,503
====== ====== ======
</TABLE>
6. PREMISES AND EQUIPMENT
<TABLE>
Premises and equipment at December 31 is summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Land $ 403 $ 389
Buildings 4,510 4,346
Furniture and fixtures 3,057 2,584
------ ------
Total 7,970 7,319
Less accumulated depreciation 4,478 4,121
------ ------
Total $3,492 $3,198
====== ======
</TABLE>
F-12
<PAGE> 98
<TABLE>
The Bank leases a branch facility and various automated teller
and computer equipment under noncancelable operating leases.
The following is a schedule by years of minimum future rentals
as of December 31, 1993:
<CAPTION>
YEAR ENDING DECEMBER 31 (IN THOUSANDS):
<S> <C>
1994 $242
1995 242
1996 167
1997 132
1998 32
----
Total $815
====
</TABLE>
7. SHORT-TERM BORROWINGS
<TABLE>
Short-term borrowings at December 31 are summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Advances from Federal Home Loan Bank of Chicago $10,500 $ 9,500
Securities sold under agreements to repurchase 8,230
Treasury tax and loan - note option accounts 800 800
Bank demand note 300 425
------- -------
Total short-term borrowings $19,830 $10,725
======= =======
</TABLE>
Advances from Federal Home Loan Bank of Chicago ("FHLB") are
renewed daily. Interest is assessed daily at quoted rates. The
interest rate at December 31, 1993, 1992 and 1991 was 3.24%,
3.73% and 5.15%, respectively. Investment securities with a
carrying value of $10,917,000 at December 31, 1992 were pledged
as collateral for the advances. At December 31, 1993, under a
blanket agreement with the FHLB, the Company can obtain advances
up to 60% of their qualifying first mortgage loans. These
advances are secured under the blanket agreement which assigns
all investments in FHLB stock as well as qualifying first
mortgage loans equal to 170% of the outstanding balance. At
December 31, 1993, the Company had approximately $48,800,000
additional borrowing capacity available to it under the above-
mentioned borrowing arrangement.
The Bank sells securities under agreements to repurchase the
same securities at a later date. The agreements are accounted
for as financing transactions and interest, which is paid at a
specific rate during the terms of the agreements, is included in
interest expense. Interest income on the securities involved in
the transactions is recorded by the Company during the terms of
the agreements. Repurchase dates for such agreements generally
are within one year.
F-13
<PAGE> 99
<TABLE>
As of December 31, 1993, all of the outstanding agreements were
fixed-coupon repurchase agreements and are summarized as
follows:
<CAPTION> 1993
(DOLLARS
IN THOUSANDS)
<S> <C>
Average balance during the year $8,230
Average interest rate during the year 3.50%
Maximum month-end balance during the year 8,230
Investment securities underlying the agreements at year-end:
Carrying value 8,415
Market value 8,696
</TABLE>
The Treasury Department (the "Department") allows the Bank to
maintain a treasury, tax and loan note option account up to
$800,000. Daily, the Department draws down funds in excess of
this level. The deposit is callable upon notification by the
Department. Interest payments at 2.70%, 2.65% and 4.00% at
December 31, 1993, 1992 and 1991, respectively, are due weekly.
Investment securities with a carrying value of $1,210,000 and
$1,558,000 at December 31, 1993 and 1992 were pledged as
collateral for the deposit.
During 1992, the Company entered into a demand note agreement
with a bank which was used to pay-off then existing long-term
debt. The note requires interest at the "prime rate" minus 1/2%
per annum. Interest is payable quarterly on the last day of
March, June, September and December, commencing June 30, 1992.
The note is collateralized by 81,885 shares of stock of the
Bank.
8. INCOME TAXES
<TABLE>
Income tax expense (benefit) consists of the following
components for the years ended December 31:
<CAPTION>
1991
1993 1992 (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Current $1,020 $1,259 $711
Deferred 16 (263) (49)
------ ------ ----
Total $1,036 $ 996 $662
====== ====== ====
</TABLE>
F-14
<PAGE> 100
<TABLE>
Income tax expense differs from the amount determined by
applying the statutory federal tax rate (34%) to income before
income taxes and minority interests as follows:
<CAPTION>
1993 1992 1991
(UNAUDITED)
<S> <C> <C> <C>
Computed tax at statutory rate $1,459 $1,134 $ 614
Increase (decrease) in income taxes resulting from:
Tax-exempt interest income (355) (201) (115)
Other - net (68) 63 163
------ ------ -----
Total $1,036 $ 996 $ 662
====== ====== =====
</TABLE>
<TABLE>
Significant timing differences used in the computation of the
deferred tax benefit for the years ended December 31, 1992 and
1991 are as follows (in thousands):
<CAPTION>
1992 1991
(UNAUDITED)
<S> <C> <C>
Shareholder bonus $(108) $ 75
Deferred compensation (106)
Provision for loan losses (65) (127)
Other 16 3
----- -----
Total $(263) $ (49)
===== =====
</TABLE>
<TABLE>
The tax effect of temporary differences that give rise to
deferred tax assets included in other assets in the accompanying
consolidated financial statements (there are no deferred tax
liabilities) at December 31, 1993, are presented below (in
thousands):
<S> <C>
Deferred tax assets:
Allowance for loan losses $183
Deferred compensation 125
Stock bonus plan 28
----
Deferred tax assets $336
====
</TABLE>
The Company had no valuation allowance for deferred tax assets
as of January 1, 1993; therefore there was no change in the
valuation allowance for deferred tax assets for the year ended
December 31, 1993.
9. REGULATORY CAPITAL REQUIREMENTS
Effective December 31, 1992, the fully phased-in regulatory
capital requirements for banks categorized as "adequately
capitalized" under the provisions of The Federal Deposit
Insurance Corporation Improvement Act of 1991, are (1) a minimum
leverage capital ratio of Tier 1 capital, as defined, to total
adjusted assets of 3% for the highest rated institutions or 4%
to 5% for all other institutions, and (2) a minimum ratio of
total capital, as defined, to risk-weighted assets of 8% and the
Tier 1 capital included in total capital is at least equal to 4%
of risk-weighted assets.
F-15
<PAGE> 101
The Company's minimum leverage capital ratio of Tier 1 capital
to total adjusted assets was 8.93% and 8.95% at December 31,
1993 and 1992, respectively. Its minimum ratio of capital to
risk-weighted assets was 21.27% and 23.52% of which Tier 1
capital comprised 20.02% and 22.03% of risk-weighted assets at
December 31, 1993 and 1992, respectively.
Bank dividends are the principal source of funds for the
Company. The payment of dividends by the Bank, which is state-
chartered, is subject to regulation by the Federal Deposit
Insurance Corporation and the State of Illinois. The Bank is
not restricted as to the amount of dividends that can be paid,
other than what prudent and sound banking principles permit and
what must be retained to meet minimum legal capital
requirements. Accordingly, $3,838,000 could be paid at December
31, 1993, without reducing the capital of the Bank below minimum
standards.
10. BENEFIT PLANS
The Company and its subsidiary sponsor a 401(k) savings plan.
Eligible employees may contribute up to 18% of their
compensation (as defined by the plan). The Company matches up
to 50% of each participant's contribution up to a maximum of 2%.
The Company and its subsidiary's contributions pursuant to this
plan were approximately $50,000, $47,000 and $45,000 in 1993,
1992 and 1991, respectively.
In conjunction with its stock bonus plan for an
officer/stockholder, the Company awarded 470 shares of common
stock for 1993 and 1992 performance. Shares awarded under the
plan are issued in the first quarter of the subsequent year.
Compensation expense of $400,000, $484,000 and $105,000 was
recognized during 1993, 1992 and 1991, respectively, as a result
of this bonus plan.
11. CONTINGENCIES
The Company and its subsidiary are involved in certain legal
actions arising from normal business activities. Management
believes that the ultimate liability, if any, resulting from
these actions will not materially affect the Company's
consolidated financial statements.
12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Bank offers a variety of
financial products to its customers to aid them in meeting their
requirements for liquidity and credit enhancement. Generally
accepted accounting principles recognize these transactions as
contingent liabilities and, accordingly, they are not reflected
in the accompanying consolidated financial statements.
Following is a discussion of these transactions.
STANDBY LETTERS OF CREDIT - These transactions are used by the
Bank's customers as a means of improving their credit standing
in transactions with unaffiliated third parties. Under these
agreements, the Bank agrees to honor certain financial
commitments in the event that its customers are unable to do so.
At December 31, 1993 and 1992, the Bank had issued standby
letters of credit amounting to $85,000 and $105,000,
respectively.
Management conducts regular reviews of these instruments on an
individual customer basis, and the results are considered in
assessing the adequacy of the Bank's allowance for loan losses.
Management does not anticipate any material losses as a result
of the letters of credit.
F-16
<PAGE> 102
LOAN COMMITMENTS - At December 31, 1993 and 1992, the Bank had
commitments outstanding to extend credit totaling approximately
$9,442,000 and $8,780,000, respectively. These commitments
generally require the customers to maintain certain credit
standards. The Bank evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained, if
deemed necessary, is based on management's credit evaluation of
the counterparty. Management does not anticipate any material
losses as a result of these commitments.
13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate that value.
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the
requirements of SFAS No. 107, Disclosures about Fair Value of
Financial Instruments. The estimated fair value amounts have
been determined by the Company, using available market
information and appropriate valuation methodologies. However,
considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a
current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
<TABLE>
The estimated fair values of the Company's financial instruments
are as follows:
<CAPTION>
1993 1992
------------------------ ------------------------
APPROXIMATE APPROXIMATE
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from depository
institutions, federal funds sold
and interest-bearing deposits in
other depository institutions $ 12,404 $ 12,404 $ 10,995 $ 10,995
Investment securities 80,334 81,798 70,535 71,511
Loans 112,071 115,858 119,689 123,735
Less: Allowance for loan losses 1,452 1,452 1,637 1,637
-------- -------- -------- --------
Loans - net of allowance 110,619 114,406 118,052 122,098
Financial liabilities:
Deposits 169,749 171,305 174,387 175,979
Short-term borrowings 19,830 19,830 10,725 10,725
</TABLE>
CASH AND DUE FROM DEPOSITORY INSTITUTIONS, FEDERAL FUNDS SOLD
AND INTEREST-BEARING DEPOSITS IN OTHER DEPOSITORY INSTITUTIONS -
For these instruments, the carrying amount is a reasonable
estimate of fair value.
INVESTMENT SECURITIES - Fair value equals quoted market price,
if available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar
securities.
F-17
<PAGE> 103
LOANS - The fair value of loans is estimated by discounting the
future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for
the same remaining maturities.
DEPOSITS -The fair value of demand deposits, savings accounts
and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.
SHORT-TERM BORROWINGS - The carrying amounts are a reasonable
estimate of fair value.
STANDBY LETTERS OF CREDIT AND LOAN COMMITMENTS - The Company
does not have unrecognized financial instruments, other than
those discussed in Note 12, which are subject to fair value
disclosure. The difference between the fair value and the face
value for the instruments disclosed in Note 12 are not
considered material.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and
1992. Although management is not aware of any factors that
would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes
of these financial statements since these dates, and current
estimates of fair value may differ significantly from the
amounts presented herein.
14. PROSPECTIVE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In May 1993, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities
("SFAS 115"). Adoption of SFAS 115 is required for fiscal years
beginning after December 15, 1993. The provisions of SFAS 115
require the classification of all debt securities and equity
securities that have readily determinable fair values into one
of the following three categories:
* Held-to-maturity - reported at amortized cost
* Available for sale - reported at fair value with unrealized
gains and losses reported as a separate component of
stockholders' equity
* Trading - reported at fair value with unrealized gains
and losses reported in income
Accordingly, when adopted effective January 1, 1994, the Company
will classify its debt securities into one of the three
categories based upon the Company's assessment of interest rate
and prepayment risks and its overall asset/liability management
strategy. At December 31, 1993, management tentatively plans on
classifying their investment securities in obligations of states
and political subdivisions as held for investment and their U.S.
Government and Agency obligations and mortgage-backed securities
as available-for-sale. Because available-for-sale securities
are recorded at fair value with unrealized holding gains and
losses, net of related income tax effect, excluded from income,
but reported as a separate component of stockholders' equity,
management expects the adoption of SFAS 115 to increase their
consolidated stockholders' equity by approximately $470,000.
F-18
<PAGE> 104
In May 1993, FASB issued Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a
Loan ("SFAS 114"). The adoption of SFAS 114 is required for
fiscal years beginning after December 15, 1994. It requires
that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective
interest rate or the loan's market price, or the fair value of
the collateral if the loan is collateral dependent. When
adopted in 1995, SFAS 114 is not expected to have a material
effect on the Company's consolidated financial statements.
In November 1992, FASB issued Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment
Benefits ("SFAS 112"). Adoption of SFAS 112 is required for
fiscal years beginning after December 15, 1993. In December
1990, FASB issued statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions ("SFAS 106"). Adoption of SFAS 106 is required
for fiscal years beginning after December 15, 1994. As the
Company does not provide postemployment or postretirement
benefits, SFAS 112 and 106 will not have any effect on the
Company's consolidated financial statements.
15. THE WEDGE HOLDING COMPANY (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31,
--------------------
ASSETS 1993 1992
(IN THOUSANDS)
<S> <C> <C>
Cash $ 61 $ 159
Income tax receivable 77 50
Investment in subsidiary 15,756 16,062
Other assets 767 835
------- -------
Total assets $16,661 $17,106
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Bank demand note $ 300 $ 425
Other liabilities 410 378
------- -------
Total liabilities 710 803
STOCKHOLDERS' EQUITY 15,951 16,303
------- -------
Total liabilities and stockholders' equity $16,661 $17,106
======= =======
</TABLE>
F-19
<PAGE> 105
<TABLE>
<CAPTION>
YEARS ENDED
CONDENSED STATEMENTS OF INCOME DECEMBER 31,
-------------------------------------
1991
1993 1992 (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Dividends from subsidiary $ 474 $ 622 $209
Other 48
------ ------ ----
Total revenue 474 670 209
------ ------ ----
EXPENSES:
Interest 70 106 52
Other 235 68 24
------ ------ ----
Total expenss 305 174 76
------ ------ ----
INCOME BEFORE INCOME TAX BENEFITS
AND EQUITY IN INCOME OF SUBSIDIARY
LESS DIVIDENDS RECEIVED 169 496 133
INCOME TAX BENEFITS 77 50 20
------ ------ ----
INCOME BEFORE EQUITY IN INCOME
OF SUBSIDIARY LESS DIVIDENDS RECEIVED 246 546 153
EQUITY IN INCOME OF SUBSIDIARY LESS
DIVIDENDS RECEIVED 2,278 1,301 794
------ ------ ----
NET INCOME $2,524 $1,847 $947
====== ====== ====
</TABLE>
F-20
<PAGE> 106
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED
DECEMBER 31,
-----------------------------------------------------
1991
1993 1992 (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,524 $ 1,847 $ 947
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiary (2,278) (1,301) (794)
Amortization expense 21 21 21
Increase in other assets 47 6 6
(Increase) decrease in income tax receivable (27) (30) 54
Increase (decrease) in other liabilities 351 210 25
------- ------- -----
Net cash provided by operating activities 638 753 259
------- ------- -----
CASH FLOWS FROM INVESTING ACTIVITIES --
Purchases of subsidiary stock from minority
shareholders - - (54)
------- ------- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution to subsidiary bank (611) (574) (69)
Proceeds from bank demand note 425
Repayment of bank demand note (125)
Repayment of long-term debt (688) (229)
------- ------- -----
Net cash used by financing activities (736) (837) (298)
------- ------- -----
NET DECREASE IN CASH (98) (84) (93)
CASH, BEGINNING OF YEAR 159 243 336
------- ------- -----
CASH, END OF YEAR $ 61 $ 159 $ 243
======= ======= =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Income taxes $ 1,435 $ 878 $ 564
Interest 21 106 52
Noncash financing activities - Issuance of
stock pursuant to bonus plan 318 166 105
* * * * * *
</TABLE>
F-21
<PAGE> 107
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
The Wedge Bank:
We have audited the accompanying balance sheets of The Wedge Bank
as of December 31, 1993 and 1992, and the related statements of
income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Bank at December
31, 1993 and 1992, and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
March 25, 1994
F-22
<PAGE> 108
THE WEDGE BANK
<TABLE>
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
JUNE 30, DECEMBER 31,
1994 ------------------------
ASSETS (UNAUDITED) 1993 1992
<S> <C> <C> <C>
ASSETS:
Cash and due from depository institutions (Note 3) $ 7,825 $ 8,110 $ 7,720
Federal funds sold 4,200 3,275
-------- -------- --------
Total cash and cash equivalents 7,825 12,310 10,995
Interest-bearing deposits in other depository institutions 94 94
Investment securities available for sale 59,005
Investment securities held to maturity (approximate market
values June 30, 1994 $23,827; December 31, 1993 $81,798;
December 31, 1992 $71,511) (Notes 4 and 7) 23,950 80,334 70,535
Loans (Note 5) 113,247 112,071 119,689
Less:
Unearned discounts 82 81 106
Allowance for loan losses 1,399 1,452 1,637
-------- -------- --------
Total 111,766 110,538 117,946
Premises and equipment - net (Note 6) 3,858 3,492 3,198
Accrued interest receivable 1,837 1,945 1,460
Real estate acquired in settlement of loans 694 762 990
Other assets (Note 8) 922 519 487
-------- -------- --------
TOTAL $209,951 $209,994 $205,611
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing $ 23,651 $ 26,878 $ 13,683
Interest-bearing 138,740 142,933 160,861
-------- -------- --------
Total deposits 162,391 169,811 174,544
Short-term borrowings (Note 7) 26,380 19,530 10,300
Accrued interest payable 527 467 523
Advance payments by borrowers for taxes and insurance 685 625 695
Accrued expenses and other liabilities 847 681 992
-------- -------- --------
Total liabilities 190,830 191,114 187,054
STOCKHOLDERS' EQUITY:
Common stock, voting, $10 par value - 144,320 shares
authorized, issued and outstanding 1,443 1,443 1,443
Additional paid-in capital
Net unrealized losses on investment securities available for sale, 5,145 5,145 3,673
net of tax (669)
Retained earnings 13,202 12,292 13,441
-------- -------- --------
Total stockholders' equity (Note 9) 19,121 18,880 18,557
-------- -------- --------
TOTAL $209,951 $209,994 $205,611
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
F-23
<PAGE> 109
<TABLE>
THE WEDGE BANK
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
---------------------- -------------------------------------------
1994 1993 1993 1992 1991
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $4,430 $4,628 $10,301 $10,868 $10,916
Investment securities:
Taxable 1,836 1,624 3,742 4,374 4,855
Tax-exempt 625 404 1,044 592 339
Other 78 65 171 97 351
------ ------ ------- ------- -------
Total interest income 6,969 6,721 15,258 15,931 16,461
------ ------ ------- ------- -------
INTEREST EXPENSE:
Deposits 2,267 2,385 5,041 6,470 8,795
Short-term borrowings 418 183 464 405 87
------ ------ ------- ------- -------
Total interest expense 2,685 2,568 5,505 6,875 8,882
------ ------ ------- ------- -------
NET INTEREST INCOME 4,284 4,153 9,753 9,056 7,579
PROVISION FOR LOAN LOSSES (Note 5) 76 164 240 191 1,132
------ ------ ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,208 3,989 9,513 8,865 6,447
------ ------ ------- ------- -------
OTHER INCOME:
Service charges 579 584 1,300 1,228 1,051
Securities gains - net 184 10 195 439 493
Gains on sale of real estate acquired
in settlement of loans 26 790 859 458 96
Trust fees 212 197 409 444 442
Other 57 41 89 116 297
------ ------ ------- ------- -------
Total other income 1,058 1,622 2,852 2,685 2,379
------ ------ ------- ------- -------
OTHER EXPENSES:
Salaries 1,661 1,618 3,552 3,138 2,965
Employee benefits (Note 10) 470 382 1,734 1,985 881
Occupancy 239 211 414 336 428
Equipment 234 153 408 435 326
Federal insurance premiums 189 166 380 387 394
Data processing 191 136 358 405 371
Other 553 599 1,072 1,426 1,582
------ ------ ------- ------- -------
Total other expenses 3,537 3,265 7,918 8,112 6,947
------ ------ ------- ------- -------
INCOME BEFORE INCOME TAXES 1,729 2,346 4,447 3,438 1,879
INCOME TAX EXPENSE (Note 8) 385 638 964 1,025 679
------ ------ ------- ------- -------
NET INCOME $1,344 $1,708 $ 3,483 $ 2,413 $ 1,200
====== ====== ======= ======= =======
EARNINGS PER SHARE $ 9.33 $11.86 $ 24.19 $ 16.76 $ 9.68
====== ====== ======= ======= =======
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 144 144 144 144 124
====== ====== ======= ======= =======
See notes to financial statements.
</TABLE>
F-24
<PAGE> 110
<TABLE>
THE WEDGE BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NET
UNREALIZED
LOSSES ON
INVESTMENT
ADDITIONAL SECURITIES
COMMON PAID-IN AVAILABLE FOR RETAINED
STOCK CAPITAL SALE, NET OF TAX EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1990
(Unaudited):
As previously reported (unaudited) $1,000 $2,399 $ - $ 6,984 $10,383
As restated for pooling of interest
(unaudited) 28 89 3,194 3,311
------ ------ ----- ------- -------
Balance, as restated (unaudited) 1,028 2,488 - 10,178 13,694
Stock issuance (unaudited) 415 1,185 1,600
Dividends paid (unaudited) (250) (250)
Contribution of capital (unaudited) 69 69
Net income (unaudited) 1,200 1,200
------ ------ ----- ------- -------
BALANCE, DECEMBER 31, 1991 1,443 3,673 - 11,197 16,313
Dividends paid (743) (743)
Contribution of capital 574 574
Net income 2,413 2,413
------ ------ ----- ------- -------
BALANCE, DECEMBER 31, 1992 1,443 3,673 - 13,441 18,557
Dividends paid (577) (577)
Contribution of capital 611 611
Net income 3,483 3,483
Transfer 1,472 (1,472)
Distribution at date of merger (Note 2) (3,194) (3,194)
------ ------ ----- ------- -------
BALANCE, DECEMBER 31, 1993 1,443 5,145 - 12,292 18,880
Unrealized losses on investment
securities (unaudited) - - (669) (669)
Dividends paid (unaudited) (434) (434)
Net income (unaudited) 1,344 1,344
------ ------ ----- ------- -------
BALANCE, DECEMBER 31, 1994
(Unaudited) $1,443 $5,145 $(669) $13,202 $19,121
====== ====== ===== ======= =======
See notes to financial statements.
</TABLE>
F-25
<PAGE> 111
<TABLE>
THE WEDGE BANK
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
------------------------ --------------------------------------------
1994 1993 1993 1992 1991
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,344 $ 1,708 $ 3,483 $ 2,413 $ 1,200
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and
accretion - net 214 144 437 704 312
Provision for loan losses 76 164 240 191 1,132
Deferred tax (benefit) expense (346) 16 16 (263) (49)
Securities gains - net (184) (10) (195) (439) (493)
Gains on sales of real estate acquired
in settlement of loans (26) (790) (859) (458) (96)
(Increase) decrease in accrued interest
receivable 108 (75) (485) 91 22
Increase in other assets (46) (88) (5) (125) (370)
(Decrease) increase in other liabilities 286 315 (437) 155 92
-------- -------- -------- -------- --------
Net cash provided by operating
activities 1,426 1,384 2,195 2,269 1,750
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in interest-bearing
deposits in other depository institutions - (94) (94) 840 -
Proceeds from maturities of investment
securities available for sale 3,963
Proceeds from sales of investment
securities available for sale 3,666
Proceeds from maturities of investment
securities held to maturity 860 6,992 18,036 14,296 7,730
Proceeds from sales of investment
securities 7,276 17,075 25,500 17,395
Purchases of investment securities
available for sale (11,587)
Purchases of investment securities
held to maturity (22,024) (44,774) (47,431) (29,229)
Loan originations less than (in excess
of) repayments (1,541) 3,444 6,950 (6,697) (17,172)
Proceeds from sales of real estate
acquired in settlement of loans 319 87 1,262 1,071 1,200
Net additions to premises and equipment (587) (108) (672) (213) (110)
-------- -------- -------- -------- --------
Net cash used in investing activities (4,907) (4,427) (2,217) (12,634) (20,186)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (7,420) 4,547 (4,733) 3,786 9,161
Increase in short-term borrowings 6,850 1,000 9,230 3,675 6,250
Dividends paid to stockholders (434) (214) (577) (743) (250)
Contribution of capital from holding
company 611 574 69
Distribution at date of merger (3,194) (3,194)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities (1,004) 2,139 1,337 7,292 15,230
-------- -------- -------- -------- --------
(Continued)
</TABLE>
F-26
<PAGE> 112
<TABLE>
THE WEDGE BANK
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
------------------------ --------------------------------------------
1994 1993 1993 1992 1991
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $(4,485) $ (904) $ 1,315 $(3,073) $(3,206)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 12,310 10,995 10,995 14,068 17,274
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,825 $10,091 $12,310 $10,995 $14,068
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the
period for:
Income taxes $ 50 $ 885 $ 1,235 $ 1,086 $ 699
Interest on deposits 2,230 2,362 5,156 6,908 8,733
Interest on short-term borrowings 418 183 464 405 228
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Real estate acquired in settlement
of loans - 16 16 315 1,020
Unrealized losses on investment securities 669
(Concluded)
See notes to financial statements.
</TABLE>
F-27
<PAGE> 113
THE WEDGE BANK
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of The Wedge Bank (the
"Bank") conform to generally accepted accounting principles and
prevailing practices within the banking industry. A summary of
the more significant accounting policies follows:
CASH EQUIVALENTS - For purposes of reporting cash flows, cash
and cash equivalents include cash on-hand and due from
depository institutions and federal funds sold. Generally,
federal funds are sold for one day periods.
INVESTMENT SECURITIES - Investment securities are stated at
cost, adjusted for premiums and discounts. Premiums and
discounts are recognized as adjustments to interest income using
the level yield method. The Bank has the ability to hold these
securities to maturity and the intent, at the time of the
purchase, to hold them on a long-term basis. Although it is
management's intent to hold these securities for investment
purposes, they will from time to time sell investment securities
prior to maturity because of changes in prepayment risk,
asset/liability management strategy, interest rate outlook or
other reasons. Gains and losses on dispositions are recorded
based on the net proceeds and the adjusted carrying amount of
the securities sold using the specific identification method.
LOANS - Loans are stated at the amount of unpaid principal,
reduced by unearned discounts and an allowance for loan losses.
Interest income on loans is generally accrued based on the
principal amounts of the loans outstanding. Loans on which the
accrual of interest has been discontinued are designated as
nonaccrual loans. Accrual of interest on loans is discontinued
when a reasonable doubt exists as to the full and timely
collection of interest or principal or generally when a loan
becomes contractually past-due by ninety days or more with
respect to principal or interest.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is
established through a provision for loan losses charged to
expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that
management believes will be adequate to absorb losses inherent
in existing loans and commitments to extend credit. In
determining the adequacy of the allowance, management takes into
consideration such factors as changes in the nature and volume
of the portfolio, overall portfolio quality, prior loss
experience, loan concentration, specific problem loans and
current and anticipated economic conditions that may affect the
borrowers' ability to pay.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS - Real estate
acquired in settlement of loans is included in other assets in
the consolidated balance sheets and consists of assets acquired
through foreclosure or deed in lieu of foreclosure. Real estate
owned is valued at the lower of cost or estimated fair market
value. Any loss incurred at the time of acquisition or
reclassification is charged to the allowance for loan losses.
Losses resulting from disposition or periodic reevaluation of
real estate owned are charged to expense.
F-28
<PAGE> 114
PREMISES AND EQUIPMENT - Premises and equipment are stated at
cost less accumulated depreciation. Deprecation charged to
operations is primarily computed using straight-line and
accelerated methods over the estimated useful lives of the
related assets. Estimated lives range from 20 to 50 years for
buildings and 5 to 7 years for furniture and fixtures.
INCOME TAXES - The Bank files a consolidated income tax return
with its Parent, the Wedge Holding Company, with each entity
computing its taxes on a separate company basis. The difference
between the consolidated tax provision and the Bank's tax
provision is recorded by the parent company.
Deferred income taxes are provided when income and expenses are
recognized in different years for financial and income tax
reporting purposes. In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes ("SFAS 109"),
which requires an asset-liability approach to measuring the
impact of income taxes. The Bank adopted SFAS 109 effective
January 1, 1993. The effect of applying the new standard was
not material to the financial statements of the Bank. Prior to
1993, income taxes were determined under the deferred method in
accordance with Accounting Principles Board Opinion No. 11,
Accounting for Income Taxes.
EARNINGS PER SHARE - Earnings per share is computed by dividing
net income by the weighted average number of shares outstanding
during each period.
RECLASSIFICATIONS - Certain amounts included in the 1992 and
1991 financial statements have been reclassified to conform to
the 1993 presentation.
2. BUSINESS COMBINATIONS
On May 21, 1993, the Bank consummated a merger whereby M&L
Holding Company ("M&L"), an affiliate bank holding company,
merged its wholly-owned subsidiary bank, Godfrey State Bank
("Godfrey") into the Bank. To affect this merger, the Bank
exchanged one of its shares of common stock for every 2.14
shares of common stock of Godfrey. The merger has been
accounted for similar to a pooling of interests. Accordingly,
the Bank's financial statements have been restated for all
periods presented to include the accounts and operations of
Godfrey. Amounts distributed to M&L in connection with the
merger are shown as a distribution in the Bank's statement of
stockholders' equity for the year ended December 31, 1993.
<TABLE>
Net interest income and net income of the Bank and Godfrey for
the year prior to the merger were as follows (in thousands):
<CAPTION>
NET
INTEREST NET
1992 INCOME INCOME
<S> <C> <C>
The Wedge Bank $7,702 $2,132
Godfrey State Bank 1,354 281
------ ------
Total $9,056 $2,413
====== ======
</TABLE>
F-29
<PAGE> 115
<TABLE>
On January 2, 1992, two affiliated entities; First National Bank
of Brighton ("First National") and Bethalto National Bank
("Bethalto") were merged into Alton Banking and Trust Company.
Each shareholder at First National and Bethalto received one
share of Alton Banking and Trust Company common stock, based
upon the following conversion factors:
<S> <C>
First National Bank of Brighton 27
Bethalto National Bank 1.12
</TABLE>
At the same time, Alton Banking and Trust Company changed its
name to The Wedge Bank.
3. RESERVE BALANCE REQUIREMENTS
The Bank is required to maintain certain cash and/or due from
bank reserve balances in accordance with Federal Reserve Board
requirements. The balances maintained under such requirements
as of December 31, 1993 and 1992, were $1,433,000 and
$1,277,000, respectively.
4. INVESTMENT SECURITIES
<TABLE>
Investment securities at December 31 are summarized as follows:
<CAPTION>
1993
----------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and Agency obligations $39,864 $ 405 $ (23) $40,246
Obligations of states and political
subdivisions 22,045 884 (121) 22,808
Mortgage-backed securities 17,371 379 (60) 17,690
Other securities 1,054 1,054
------- ------ ----- -------
Total $80,334 $1,668 $(204) $81,798
======= ====== ===== =======
<CAPTION>
1992
----------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and Agency obligations $31,718 $ 337 $ (69) $31,986
Obligations of states and political
subdivisions 11,725 306 (41) 11,990
Mortgage-backed securities 23,956 556 (113) 24,399
Other securities 3,136 3,136
------- ------ ----- -------
Total $70,535 $1,199 $(223) $71,511
======= ====== ===== =======
</TABLE>
The amortized cost and approximate market value of investments in
debt securities at December 31, 1993, by contractual maturity, are
shown below. Expected maturities may differ from contractual
F-30
<PAGE> 116
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED MARKET
TERM TO MATURITY COST VALUE
(IN THOUSANDS)
<S> <C> <C>
1 month - 1 year $ 2,403 $ 2,447
1 year - 5 years 18,598 18,914
5 years - 10 years 19,236 19,597
After 10 years 21,672 22,096
------- -------
Total 61,909 63,054
Mortgage-backed securities 17,371 17,690
------- -------
Total $79,280 $80,744
======= =======
</TABLE>
Proceeds from sales of investments in debt securities during
1993, 1992 and 1991 were $14,948,000, $23,250,000 and
$17,395,000, respectively. Gross gains of $210,000, $463,000
and $504,000 and gross losses of $58,000, $37,000 and $11,000
were realized on such sales during 1993, 1992 and 1991,
respectively.
At December 31, 1993 and 1992, investment securities with
carrying values totaling approximately $25,656,000 and
$25,914,000 were pledged to secure public deposits and for other
purposes.
5. LOANS
<TABLE>
Loans at December 31 are summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Commercial and agricultural $ 8,444 $ 8,745
Residential real estate 98,877 102,334
Consumer 4,750 8,610
-------- --------
Total loans $112,071 $119,689
======== ========
</TABLE>
Substantially all of the Bank's loans are with customers located
in the Illinois counties of Madison, Macoupin, Jersey and
Calhoun.
F-31
<PAGE> 117
<TABLE>
Included in loans are loans to certain executive officers and
directors that have been made in the ordinary course of business
on substantially the same terms, including interest and
collateral, as those prevailing for comparable transactions with
others and do not involve more than the normal risk of
collectibility. The activity in such loans during 1993 is as
follows:
<S> <C>
Balance, December 31, 1992 $3,149,000
New loans 1,012,000
Repayments (493,000)
----------
Balance, December 31, 1993 $3,668,000
==========
</TABLE>
At December 31, 1993, 1992 and 1991, the aggregate principal
balances of loans on which interest was not being accrued (under
the accounting policies described in Note 1) were $420,000,
$695,000 and $1,504,000, respectively, and the aggregate
principal balances of loans on which the yield had been reduced
due to declining financial condition of the borrowers were $0,
$234,000 and $240,000, respectively. Interest income that would
have been accrued, had these loans been current and had the
terms of these loans not been modified because of troubled debt
restructurings, was approximately $40,000, $53,000 and $120,000
in 1993, 1992 and 1991, respectively. There was no interest
income recorded on these loans in 1993, 1992 or 1991. At
December 31, 1993, there were no commitments to lend additional
funds to borrowers whose loans are classified as nonaccrual or
renegotiated.
<TABLE>
In the normal course of business, the Bank participates with
several banks affiliated through common ownership in the
origination of loans. These loans are purchased and/or sold
among the banks based upon the respective banks' legal lending
limits, liquidity needs and various other considerations. At
December 31, the Bank's loan participations with affiliated
banks are summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Loan participations purchased $1,027 $1,233
Loan participations sold 3,202 1,442
</TABLE>
<TABLE>
Activity in the allowance for loan losses for the years ended
December 31 is summarized as follows:
<CAPTION>
1991
1993 1992 (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year $1,637 $1,503 $ 962
Provision charged to expense 240 191 1,132
Charge-offs (480) (157) (678)
Recoveries 55 100 87
------ ------ ------
Balance, end of year $1,452 $1,637 $1,503
====== ====== ======
</TABLE>
F-32
<PAGE> 118
6. PREMISES AND EQUIPMENT
<TABLE>
Premises and equipment at December 31 is summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Land $ 403 $ 389
Buildings 4,510 4,346
Furniture and fixtures 3,057 2,584
------ ------
Total 7,970 7,319
Less accumulated depreciation 4,478 4,121
------ ------
Total $3,492 $3,198
====== ======
</TABLE>
<TABLE>
The Bank leases a branch facility and various automated teller
and computer equipment under noncancelable operating leases.
The following is a schedule by years of minimum future rentals
as of December 31, 1993:
<CAPTION>
YEAR ENDING DECEMBER 31 (IN THOUSANDS):
<S> <C>
1994 $242
1995 242
1996 167
1997 132
1998 32
----
Total $815
====
</TABLE>
7. SHORT-TERM BORROWINGS
<TABLE>
Short-term borrowings at December 31 are summarized as follows:
<CAPTION>
1993 1992
(IN THOUSANDS)
<S> <C> <C>
Advances from Federal Home Loan Bank of Chicago $10,500 $ 9,500
Securities sold under agreements to repurchase 8,230
Treasury tax and loan - note option accounts 800 800
------- -------
Total short-term borrowings $19,530 $10,300
======= =======
</TABLE>
Advances from Federal Home Loan Bank of Chicago ("FHLB") are
renewed daily. Interest is assessed daily at quoted rates. The
interest rate at December 31, 1993, 1992 and 1991 was 3.24%,
3.73% and 5.15%, respectively. Investment securities with a
carrying value of $10,917,000 at December 31, 1992 were pledged
as collateral for the advances. At December 31, 1993, under a
blanket agreement with the FHLB, the Bank can obtain advances up
to 60% of its qualifying first mortgage loans. These advances
are secured under the blanket agreement which assigns all
investments in FHLB stock as well
F-33
<PAGE> 119
as qualifying first mortgage loans equal to 170% of the outstanding
balance. At December 31, 1993, the Bank had approximately
$48,800,000 additional borrowing capacity available to it under the
above-mentioned borrowing arrangement.
The Bank sells securities under agreements to repurchase the
same securities at a later date. The agreements are accounted
for as financing transactions and interest, which is paid at a
specific rate during the terms of the agreements, is included in
interest expense. Interest income on the securities involved in
the transactions is recorded by the Bank during the terms of the
agreements. Repurchase dates for such agreements generally are
within one year.
<TABLE>
As of December 31, 1993, all of the outstanding agreements were
fixed-coupon repurchase agreements and are summarized as
follows:
<CAPTION> 1993
(DOLLARS
IN THOUSANDS)
<S> <C>
Average balance during the year $8,230
Average interest rate during the year 3.50%
Maximum month-end balance during the year 8,230
Investment securities underlying the agreements at year-end:
Carrying value 8,415
Market value 8,696
</TABLE>
The Treasury Department (the "Department") allows the Bank to
maintain a treasury, tax and loan note option account up to
$800,000. Daily, the Department draws down funds in excess of
this level. The deposit is callable upon notification by the
Department. Interest payments at 2.70%, 2.65% and 4.00% at
December 31, 1993, 1992 and 1991, respectively, are due weekly.
Investment securities with a carrying value of $1,210,000 and
$1,558,000 at December 31, 1993 and 1992 were pledged as
collateral for the deposit.
8. INCOME TAXES
<TABLE>
Income tax expense (benefit) consists of the following
components for the years ended December 31:
<CAPTION>
1991
1993 1992 (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Current $948 $1,288 $728
Deferred 16 (263) (49)
---- ------ ----
Total $964 $1,025 $679
==== ====== ====
</TABLE>
F-34
<PAGE> 120
<TABLE>
Income tax expense differs from the amount determined by
applying the statutory federal tax rate (34%) to income before
income taxes as follows:
<CAPTION>
1993 1992 1991
(UNAUDITED)
<S> <C> <C> <C>
Computed tax at statutory rate $1,512 $1,169 $ 639
Increase (decrease) in income taxes resulting from:
Tax-exempt interest income (355) (201) (115)
Other - net (193) 57 155
------ ------ -----
Total $ 964 $1,025 $ 679
====== ====== =====
</TABLE>
<TABLE>
Significant timing differences used in the computation of the
deferred tax benefit for the years ended December 31, 1992 and
1991 are as follows:
<CAPTION>
1992 1991
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Shareholder bonus $(108) $ 75
Deferred compensation (106) -
Provision for loan losses in excess of amounts deductible
for income tax purposes (65) (127)
Other 16 3
----- -----
Total $(263) $ (49)
===== =====
</TABLE>
<TABLE>
The tax effect of temporary differences that give rise to
deferred tax assets included in other assets in the accompanying
financial statements (there are no deferred tax liabilities) at
December 31, 1993, are presented below (in thousands):
<S> <C>
Deferred tax assets:
Allowance for loan losses $183
Deferred compensation 125
Stock bonus plan 28
----
Deferred tax assets $336
====
</TABLE>
The Bank had no valuation allowance for deferred tax assets as
of January 1, 1993; therefore there was no change in the
valuation allowance for deferred tax assets for the year ended
December 31, 1993.
9. REGULATORY CAPITAL REQUIREMENTS
Effective December 31, 1992, the fully phased-in regulatory
capital requirements for banks categorized as "adequately
capitalized" under the provisions of The Federal Deposit
Insurance Corporation Improvement Act of 1991, are (1) a minimum
leverage capital ratio of Tier 1 capital, as defined, to total
adjusted assets of 3% for the highest rated institutions or 4%
to 5% for all other institutions, and (2) a
F-35
<PAGE> 121
minimum ratio of total capital, as defined, to risk-weighted assets
of 8% and the Tier 1 capital included in total capital is at least
equal to 4% of risk-weighted assets.
The Bank's minimum leverage capital ratio of Tier 1 capital to
total adjusted assets was 8.93% and 8.95% at December 31, 1993
and 1992, respectively. Its minimum ratio of capital to risk-
weighted assets was 21.27% and 23.52% of which Tier 1 capital
comprised 20.02% and 22.03% of risk-weighted assets at December
31, 1993 and 1992, respectively.
The payment of dividends by the Bank, which is state-chartered,
is subject to regulation by the Federal Deposit Insurance
Corporation and the State of Illinois. The Bank is not
restricted as to the amount of dividends that can be paid, other
than what prudent and sound banking principles permit and what
must be retained to meet minimum legal capital requirements.
Accordingly, $3,838,000 could be paid at December 31, 1993,
without reducing the capital of the Bank below minimum
standards.
10. BENEFIT PLANS
The Bank sponsors a 401(k) savings plan. Eligible employees may
contribute up to 18% of their compensation (as defined by the
plan). The Bank matches up to 50% of each participant's
contribution up to a maximum of 2%. The Bank's contribution
pursuant to this plan was approximately $50,000, $47,000 and
$45,000 in 1993, 1992 and 1991, respectively.
An officer/stockholder of the Bank participates in a stock bonus
plan whereby he receives shares of The Wedge Holding Company
(the "Company") common stock based upon certain performance
criteria. Because the criteria are based upon the activities of
the Bank, the compensation expense is recorded by the Bank based
upon the book value of shares issued. The offsetting credit is
treated as a contribution of capital from the Company. In
conjunction with this stock bonus plan, the Company awarded 470
shares of common stock for 1993 and 1992 performance. Shares
awarded under the plan are issued in the first quarter of the
subsequent year. Compensation expense of $400,000, $484,000 and
$105,000 was recognized during 1993, 1992 and 1991,
respectively, as a result of this bonus plan.
11. CONTINGENCIES
The Bank is involved in certain legal actions arising from
normal business activities. Management believes that the
ultimate liability, if any, resulting from these actions will
not materially affect the Bank's financial statements.
12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Bank offers a variety of
financial products to its customers to aid them in meeting their
requirements for liquidity and credit enhancement. Generally
accepted accounting principles recognize these transactions as
contingent liabilities and, accordingly, they are not reflected
in the accompanying financial statements. Following is a
discussion of these transactions.
STANDBY LETTERS OF CREDIT - These transactions are used by the
Bank's customers as a means of improving their credit standing
in transactions with unaffiliated third parties. Under these
agreements, the Bank agrees to honor certain financial
commitments in the event that its customers are unable to do so.
At December 31, 1993 and 1992, the Bank had issued standby
letters of credit amounting to $85,000 and $105,000,
respectively.
F-36
<PAGE> 122
Management conducts regular reviews of these instruments on an
individual customer basis, and the results are considered in
assessing the adequacy of the Bank's allowance for loan losses.
Management does not anticipate any material losses as a result
of the letters of credit.
LOAN COMMITMENTS - At December 31, 1993 and 1992, the Bank had
commitments outstanding to extend credit totaling approximately
$9,442,000 and $8,780,000, respectively. These commitments
generally require the customers to maintain certain credit
standards. The Bank evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained, if
deemed necessary, is based on management's credit evaluation of
the counterparty. Management does not anticipate any material
losses as a result of these commitments.
13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate that value.
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the
requirements of SFAS No. 107, Disclosures about Fair Value of
Financial Instruments. The estimated fair value amounts have
been determined by the Bank, using available market information
and appropriate valuation methodologies. However, considerable
judgment is necessarily required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts
that the Bank could realize in a current market exchange. The
use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair
value amounts.
F-37
<PAGE> 123
<TABLE>
The estimated fair values of the Bank's financial instruments
are as follows:
<CAPTION>
1993 1992
------------------------ ------------------------
APPROXIMATE APPROXIMATE
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from depository
institutions, federal funds sold
and interest-bearing deposits in
other depository institutions $ 12,404 $ 12,404 $ 10,995 $ 10,995
Investment securities 80,334 81,798 70,535 71,511
Loans 112,071 115,858 119,689 123,735
Less: Allowance for loan losses 1,452 1,452 1,637 1,637
-------- -------- -------- --------
Loans - net of allowance 110,619 114,406 118,052 122,098
Financial liabilities:
Deposits 169,811 171,305 174,544 175,979
Short-term borrowings 19,530 19,530 10,300 10,300
</TABLE>
CASH AND DUE FROM DEPOSITORY INSTITUTIONS, FEDERAL FUNDS SOLD
AND INTEREST-BEARING DEPOSITS IN OTHER DEPOSITORY INSTITUTIONS -
For these instruments, the carrying amount is a reasonable
estimate of fair value.
INVESTMENT SECURITIES - Fair value equals quoted market price,
if available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar
securities.
LOANS - The fair value of loans is estimated by discounting the
future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for
the same remaining maturities.
DEPOSITS -The fair value of demand deposits, savings accounts
and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.
SHORT-TERM BORROWINGS - The carrying amounts are a reasonable
estimate of fair value.
STANDBY LETTERS OF CREDIT AND LOAN COMMITMENTS - The Bank does
not have unrecognized financial instruments, other than those
discussed in Note 12, which are subject to fair value
disclosure. The difference between the fair value and the face
value for the instruments disclosed in Note 12 are not
considered material.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and
1992. Although management is not aware of any factors that
would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes
of these financial statements since these dates, and current
estimates of fair value may differ significantly from the
amounts presented herein.
F-38
<PAGE> 124
14. PROSPECTIVE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In May 1993, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities
("SFAS 115"). Adoption of SFAS 115 is required for fiscal years
beginning after December 15, 1993. The provisions of SFAS 115
require the classification of all debt securities and equity
securities that have readily determinable fair values into one
of the following three categories:
* Held-to-maturity - reported at amortized cost
* Available for sale - reported at fair value with unrealized
gains and losses reported as a separate component of
stockholders' equity
* Trading - reported at fair value with unrealized gains
and losses reported in income
Accordingly, when adopted effective January 1, 1994, the Bank
will classify its debt securities into one of the three
categories based upon the Bank's assessment of interest rate and
prepayment risks and its overall asset/liability management
strategy. At December 31, 1993, management tentatively plans on
classifying their investment securities in obligations of states
and political subdivisions as held for investment and their U.S.
Government and Agency obligations and mortgage-backed securities
as available-for-sale. Because available-for-sale securities
are recorded at fair value with unrealized holding gains and
losses, net of related income tax effect, excluded from income,
but reported as a separate component of stockholders' equity,
management expects the adoption of SFAS 115 to increase their
stockholders' equity by approximately $470,000.
In May 1993, FASB issued Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a
Loan ("SFAS 114"). The adoption of SFAS 114 is required for
fiscal years beginning after December 15, 1994. It requires
that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective
interest rate or the loan's market price, or the fair value of
the collateral if the loan is collateral dependent. When
adopted in 1995, SFAS 114 is not expected to have a material
effect on the Bank's financial statements.
In November 1992, FASB issued Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment
Benefits ("SFAS 112"). Adoption of SFAS 112 is required for
fiscal years beginning after December 15, 1993. In December
1990, FASB issued statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions ("SFAS 106"). Adoption of SFAS 106 is required
for fiscal years beginning after December 15, 1994. As the Bank
does not provide postemployment or postretirement benefits, SFAS
112 and 106 will not have any effect on the Bank's financial
statements.
* * * * * *
F-39
<PAGE> 125
ANNEX A
-------
Following is the text of the statutory dissenters' rights as set
forth in Section 5/29 of the Illinois Banking Act.
Section 29. Dissenting stockholders. If a stockholder of a state
bank which is a party to a merger other than a merger which is to result
in a national bank, shall file with such bank prior to or at the meeting
of stockholders at which the plan of merger is submitted to a vote, a
written objection to such plan or merger, and shall not vote in favor
thereof, and such stockholder, within 20 days after receiving written
notice of the date the merger became effective, shall make written
demand on the continuing bank for payment of the fair value of his
shares as of the day prior to the date on which the vote was taken
approving the merger, the continuing bank shall pay to such stockholder,
upon surrender of his certificate or certificates representing said
stock, the fair value thereof. Such demand shall state the number of
the shares owned by such dissenting stockholder. The continuing bank
shall provide written notice of the effective date of the merger to all
shareholders who have filed written objections in order that such
dissenting shareholders may know when they must file written demand if
they choose to do so. Any stockholder failing to make demand within the
20-day period shall be conclusively presumed to have consented to the
merger and shall be bound by the terms thereof. If within 30 days after
the date on which such merger was effected the value of such shares is
agreed upon between the dissenting stockholders and the continuing bank,
payment therefor shall be made within 90 days after the date on which
such merger was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value
the dissenting stockholder shall cease to have any interest in such
shares or in the continuing bank. If within such period of 30 days the
stockholder and the continuing bank do not so agree, then the dissenting
stockholder may, within 60 days after the expiration of the 30-day
period, file a complaint in the circuit court asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against the continuing bank for the amount of such fair value
as of the day prior to the date on which such vote was taken approving
such merger with interest thereon to the date of such judgment. The
practice, procedure and judgment shall be governed by the Civil Practice
Law of this State. The judgment shall be payable only upon and
simultaneously with the surrender to the continuing bank of the
certificate or certificates representing said shares. Upon the payment
of the judgment, the dissenting stockholder shall cease to have any
interest in such shares or in the continuing bank. Such shares of stock
may be held and disposed of by the continuing bank. Unless the
dissenting stockholder shall file such complaint within the time herein
limited, such stockholder and all persons claiming under him shall be
conclusively presumed to have approved and ratified the merger, and
shall be bound by the terms thereof. The right of a dissenting
stockholder to be paid the fair value of his shares of stock as herein
provided shall cease if and when the continuing bank shall abandon the
merger.
- A-1 -
<PAGE> 126
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
------------------------------------------
Item 20. Indemnification of Officers and Directors
- ---------------------------------------------------
Sections 351.355(1) and (2) of The General and Business Corporation
Law of the State of Missouri provide that a corporation may indemnify
any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful, except that, in
the case of an action or suit by or in the right of the corporation, the
corporation may not indemnify such persons against judgments and fines
and no person shall be indemnified as to any claim, issue or matter as
to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation, unless and only to the extent that the court in which the
action or suit was brought determines upon application that such person
is fairly and reasonably entitled to indemnity for proper expenses.
Section 351.355(3) provides that, to the extent that a director,
officer, employee or agent of the corporation has been successful in the
defense of any such action, suit or proceeding or any claim, issue or
matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred in connection with
such action, suit or proceeding. Section 351.355(7) provides that a
corporation may provide additional indemnification to any person
indemnifiable under subsection (1) or (2), provided such additional
indemnification is authorized by the corporation's articles of
incorporation or an amendment thereto or by a shareholder-approved bylaw
or agreement, and provided further that no person shall thereby be
indemnified against conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct or
which involved an accounting for profits pursuant to Section 16(b) of
the Securities Exchange Act of 1934.
Article 12 of the Restated Articles of Incorporation of the
Registrant provides that the Registrant shall extend to its directors
and executive officers the indemnification specified in subsections (1)
and (2) and the additional indemnification authorized in subsection (7)
and that it may extend to other officers, employees and agents such
indemnification and additional indemnification.
Pursuant to directors' and officers' liability insurance policies,
with total annual limits of $30,000,000, the Registrant's directors and
officers are insured, subject to the limits, retention, exceptions and
other terms and conditions of such policy, against liability for any
actual or alleged error, misstatement, misleading statement, act or
omission, or neglect or breach of duty by the directors or officers of
the Registrant, individually or collectively, or any matter claimed
against them solely by reason of their being directors or officers of
the Registrant.
- II-1 -
<PAGE> 127
Item 21. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
A. Exhibits. See Exhibit Index.
---------
B. Financial Statement Schedules. Not Applicable.
------------------------------
Item 22. Undertakings
- ----------------------
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication
of such issue.
(2) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other Items of the applicable form.
(4) The Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (3) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415
(Section 230.415 of this chapter), will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offering therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(5) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in the documents filed subsequent to the
effective date of the Registration Statement through the date of
responding to the request.
(6) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was
not the subject of and included in the Registration Statement when it
became effective.
- II-2 -
<PAGE> 128
(7) The undersigned Registrant hereby undertakes:
(a) To file during any period in which offers and sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof), which individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such
information in the Registration Statement.
(b) That for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
- II-3 -
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of St. Louis, State of Missouri, on September 8, 1994.
MERCANTILE BANCORPORATION INC.
By/s/Thomas H. Jacobsen
----------------------------------------
Thomas H. Jacobsen
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Thomas H. Jacobsen Chairman of the Board, September 8, 1994
- ------------------------------ President, Chief Executive
Thomas H. Jacobsen Officer and Director
Principal Executive Officer
/s/W. Randolph Adams Executive Vice President and September 8, 1994
- ------------------------------ Chief Financial Officer
W. Randolph Adams
Principal Financial Officer
/s/Michael T. Normile Senior Vice President and September 8, 1994
- ------------------------------ Treasurer
Michael T. Normile
Principal Accounting Officer
* Director September 8, 1994
- ------------------------------
Richard P. Conerly
* Director September 8, 1994
- ------------------------------
Harry M. Cornell, Jr.
* Director September 8, 1994
- ------------------------------
Earl K. Dille
* Director September 8, 1994
- ------------------------------
J. Cliff Eason
- II-4 -
<PAGE> 130
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director September 8, 1994
- ------------------------------
Bernard A. Edison
* Director September 8, 1994
- ------------------------------
William A. Hall
* Director September 8, 1994
- ------------------------------
Thomas A. Hays
* Director September 8, 1994
- ------------------------------
William G. Heckman
* Director September 8, 1994
- ------------------------------
James B. Malloy
* Director September 8, 1994
- ------------------------------
Charles H. Price II
* Director September 8, 1994
- ------------------------------
Harvey Saligman
* Director September 8, 1994
- ------------------------------
Craig D. Schnuck
* Director September 8, 1994
- ------------------------------
Robert W. Staley
* Director September 8, 1994
- ------------------------------
Robert L. Stark
* Director September 8, 1994
- ------------------------------
Patrick T. Stokes
* Director September 8, 1994
- ------------------------------
Francis A. Stroble
* Director September 8, 1994
- ------------------------------
Joseph G. Werner
- II-5 -
<PAGE> 131
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director September 8, 1994
- ------------------------------
John A. Wright
</TABLE>
*By /s/Thomas H. Jacobsen
---------------------------------------
Thomas H. Jacobsen, Attorney-in-fact
Thomas H. Jacobsen, by signing his name hereto, does sign this document
on behalf of the persons named above, pursuant to a power of attorney
duly executed by such persons, filed herewith as Exhibit 25.
- II-6 -
<PAGE> 132
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
2.1 Agreement and Plan of Reorganization, dated July 6, 1994, by
and among MBI, Mercantile Illinois, Wedge Holding and Wedge
Bank.
2.2 Plan of Merger, dated as of August 31, 1994, by and between
Wedge Bank and Mercantile Bank of Alton.
2.3 Shareholders Agreement, dated July 6, 1994, by and between MBI
and Melvin G. Hall.
2.4 Shareholders Agreement, dated July 6, 1994, by and between MBI
and Robert Lynn Hall.
3.1 MBI's Restated Articles of Incorporation, as amended and
currently in effect (filed as Exhibit 3(i) to MBI's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994 and
incorporated herein by reference).
3.2 MBI's By-Laws, as amended and currently in effect (filed as
Exhibit 3(ii) to MBI's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 and incorporated herein by
reference).
4.1 Form of Indenture between MBI and Bankers Trust Company,
Trustee (filed January 17, 1974 as Exhibit 4-A to Registration
No. 2-49855 and incorporated herein by reference).
4.2 Form of Indenture Regarding Subordinated Securities between MBI
and The First National Bank of Chicago, Trustee (filed as
Exhibit 4-1 to MBI's Report on Form 8-K dated September 24,
1992 and incorporated herein by reference).
4.3 Rights Agreement dated as of May 23, 1988 between MBI and
Mercantile Bank, as Rights Agent (including as exhibits there
to the form of Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock and the
form of Right Certificate)(filed on May 24, 1988 as Exhibits 1
and 2 to MBI's Registration Statement on Form 8-A, and
incorporated herein by reference).
4.4 Form of Indenture between Ameribanc, Inc. and First Trust
Company, Inc., Trustee (filed as Exhibit 4.4 to MBI's
Registration No. 33-63196 and incorporated herein by
reference).
4.5 First Supplemental Indenture by and among Mercantile
Bancorporation Inc., Mercantile Acquisition Corporation I and
First Trust National Association (filed as Exhibit 4.5 to MBI's
Registration No. 33-63196 and incorporated herein by
reference).
5.1 Opinion of Thompson & Mitchell as to the legality of the
securities being registered.
- II-7 -
<PAGE> 133
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
8.1 Form of Opinion of Thompson & Mitchell regarding certain tax
matters in the Acquisition.
10.1 The Mercantile Bancorporation Inc. 1994 Stock Incentive Plan,
filed on April 28, 1994 as Appendix B to the Definitive Proxy
Materials of MBI, is incorporated herein by reference.
10.2 The Mercantile Bancorporation Inc. 1994 Executive Incentive
Compensation Plan, filed on April 28, 1994 as Appendix C to the
Definitive Proxy Materials of MBI, is incorporated herein by
reference.
10.3 The Mercantile Bancorporation Inc. 1994 Voluntary Deferred
Compensation Plan, filed on April 28, 1994 as Appendix D to the
Definitive Proxy Materials of MBI, is incorporated herein by
reference.
10.4 The Mercantile Bancorporation Inc. 1994 Stock Incentive Plan
for Non-Employee Directors, filed on April 28, 1994 as Appendix
E to the Definitive Proxy Materials of MBI, is incorporated
herein by reference.
23.1 Consent of KPMG Peat Marwick LLP with regard to use of its
report on MBI's financial statements.
23.2 Consent of Deloitte & Touche LLP with regard to the use of its
report on Wedge Holding's and Wedge Bank's financial
statements.
23.4 Consent of Thompson & Mitchell (included in Exhibit 5.1 and
Exhibit 8.1).
24.1 Power of Attorney.
- II-8 -
</TABLE>
<PAGE> 1
- -----------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
MERCANTILE BANCORPORATION INC.,
A MISSOURI CORPORATION
AND
MERCANTILE BANCORPORATION OF ILLINOIS INC.
A MISSOURI CORPORATION
AND
WEDGE BANK,
AN ILLINOIS STATE BANK
AND
THE WEDGE HOLDING COMPANY,
AN ILLINOIS CORPORATION
- -----------------------------------------------------------------------------
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C>
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
---------
THE ACQUISITION TRANSACTIONS
<C> <S> <C>
1.01 The Acquisition Transactions. . . . . . . . . . 2
1.02 Closing . . . . . . . . . . . . . . . . . . . . 2
1.03 Method of Effecting Merger and
Effective Time. . . . . . . . . . . . . . . . . 3
1.04 Charter and By-Laws . . . . . . . . . . . . . . 3
1.05 Board of Directors and Officers . . . . . . . . 3
1.06 Additional Actions. . . . . . . . . . . . . . . 3
1.07 Conversion of Securities. . . . . . . . . . . . 4
1.08 Exchange Procedures . . . . . . . . . . . . . . 4
1.09 Dissenting Shares . . . . . . . . . . . . . . . 6
1.10 No Fractional Shares. . . . . . . . . . . . . . 7
1.11 Transfer Restrictions; Closing of
Stock Transfer Books. . . . . . . . . . . . . . 7
1.12 Anti-Dilution . . . . . . . . . . . . . . . . . 7
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SELLERS
2.01 Organization and Authority. . . . . . . . . . . 8
2.02 Corporate Authorization; Records. . . . . . . . 8
2.03 Subsidiaries. . . . . . . . . . . . . . . . . . 10
2.04 Capitalization of Wedge Bank. . . . . . . . . . 10
2.05 Financial Statements. . . . . . . . . . . . . . 10
2.06 Reports . . . . . . . . . . . . . . . . . . . . 11
2.07 Title to and Condition of Assets. . . . . . . . 12
2.08 Real Property . . . . . . . . . . . . . . . . . 12
2.09 Contracts . . . . . . . . . . . . . . . . . . . 13
2.10 Absence of Defaults . . . . . . . . . . . . . . 15
2.11 Absence of Undisclosed Liabilities. . . . . . . 16
2.12 Allowance for Loan and Lease Losses;
Non-performing Assets . . . . . . . . . . . . . 16
2.13 Taxes.. . . . . . . . . . . . . . . . . . . . . 17
2.14 Material Adverse Change . . . . . . . . . . . . 17
2.15 Litigation and Other Proceedings. . . . . . . . 17
2.16 Governmental Compliance . . . . . . . . . . . . 18
2.17 Labor . . . . . . . . . . . . . . . . . . . . . 19
2.18 Interests of Certain Persons. . . . . . . . . . 19
2.19 Employee Benefit Plans. . . . . . . . . . . . . 19
2.20 Conduct of Wedge Holding's and Wedge
Bank's Businesses to Date . . . . . . . . . . . 20
2.21 Registration Statement, etc.. . . . . . . . . . 21
- i -
<PAGE> 3
<CAPTION>
Page
----
<C> <S> <C>
2.22 Brokers and Finders; Other
Liabilities . . . . . . . . . . . . . . . . . . 21
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE MERCANTILE ENTITIES
3.01 Organization and Authority. . . . . . . . . . . 22
3.02 Authorization . . . . . . . . . . . . . . . . . 22
3.03 Capitalization of Mercantile. . . . . . . . . . 23
3.04 Mercantile Financial Statements . . . . . . . . 24
3.05 Reports . . . . . . . . . . . . . . . . . . . . 24
3.06 Material Adverse Change . . . . . . . . . . . . 25
3.07 Registration Statement, Proxy
Statement etc.. . . . . . . . . . . . . . . . . 25
3.08 Brokers and Finders . . . . . . . . . . . . . . 25
3.09 Legal Proceedings or Other Adverse
Facts . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the
Effective Time. . . . . . . . . . . . . . . . . 26
4.02 Forbearances of Wedge Holding and
Wedge Bank. . . . . . . . . . . . . . . . . . . 26
4.03 Forbearances of the Mercantile
Entities. . . . . . . . . . . . . . . . . . . . 28
ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due
Diligence . . . . . . . . . . . . . . . . . . . 28
5.02 Registration Statement; Regulatory
Matters . . . . . . . . . . . . . . . . . . . . 30
5.03 Shareholder Approvals . . . . . . . . . . . . . 30
5.04 Current Information . . . . . . . . . . . . . . 30
5.05 Agreements of Affiliates. . . . . . . . . . . . 31
5.06 Expenses. . . . . . . . . . . . . . . . . . . . 31
5.07 Miscellaneous Agreements and
Consents. . . . . . . . . . . . . . . . . . . . 31
5.08 Press Releases. . . . . . . . . . . . . . . . . 32
5.09 Indemnification of Wedge Bank's
Directors, Officers and Employees . . . . . . . 32
5.10 Employee Benefit Plans. . . . . . . . . . . . . 32
5.11 Taxes of Wedge Holding. . . . . . . . . . . . . 32
- ii -
<PAGE> 4
<CAPTION>
Page
----
ARTICLE VI
----------
CONDITIONS
<C> <S> <C>
6.01 Conditions to Each Party's
Obligation To Effect the
Acquisition . . . . . . . . . . . . . . . . . . 33
6.02 Conditions to Obligations of the
Sellers . . . . . . . . . . . . . . . . . . . . 33
6.03 Conditions to Obligations of the
Mercantile Entities . . . . . . . . . . . . . . 35
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination . . . . . . . . . . . . . . . . . . 36
7.02 Effect of Termination . . . . . . . . . . . . . 37
7.03 Amendment . . . . . . . . . . . . . . . . . . . 37
7.04 Waiver. . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
------------
GENERAL PROVISIONS
8.01 Non-Survival of Representations;
Warranties and Agreements . . . . . . . . . . . 38
8.02 Indemnification . . . . . . . . . . . . . . . . 38
8.03 No Assignment; Successors and
Assigns . . . . . . . . . . . . . . . . . . . . 38
8.04 Severability. . . . . . . . . . . . . . . . . . 39
8.05 No Implied Waiver . . . . . . . . . . . . . . . 39
8.06 Headings. . . . . . . . . . . . . . . . . . . . 39
8.07 Entire Agreement. . . . . . . . . . . . . . . . 39
8.08 Counterparts. . . . . . . . . . . . . . . . . . 39
8.09 Notices . . . . . . . . . . . . . . . . . . . . 40
8.10 Governing Law . . . . . . . . . . . . . . . . . 40
</TABLE>
- iii -
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement"), made and entered into as of July 6, 1994 by and among
MERCANTILE BANCORPORATION INC., a Missouri corporation
("Mercantile"), MERCANTILE BANCORPORATION OF ILLINOIS INC., a
Missouri corporation ("Mercantile Illinois" and, collectively with
Mercantile, the "Mercantile Entities"), WEDGE BANK, an Illinois
state bank ("Wedge Bank"), and THE WEDGE HOLDING COMPANY, an
Illinois corporation ("Wedge Holding" and, collectively with Wedge
Bank, the "Sellers"), has reference to the following facts and
circumstances:
A. Mercantile Illinois desires to acquire one hundred
percent (100%) ownership of the issued and outstanding shares of
common stock of Wedge Bank; and
B. Wedge Holding is the beneficial and record owner of
eighty-two and sixteen one-hundredths percent (82.16%) of the
issued and outstanding shares of the common stock of Wedge Bank;
and
C. Mercantile is the beneficial and record owner of one
hundred percent (100%) of the issued and outstanding shares of the
common stock of Mercantile Illinois which will be the beneficial
owner of one hundred percent of the issued and outstanding shares
of the common stock of Mercantile Acquisition Bank upon its
formation as an Illinois state-chartered bank ("Acquisition Bank");
and
D. Wedge Holding has agreed to exchange all shares of
Wedge Bank owned beneficially and of record by Wedge Holding to
Mercantile Illinois in consideration of the issuance of shares of
Mercantile Common Stock by Mercantile to Wedge Holding as described
in this Agreement; and
E. The Executive Committee of the Board of Directors of
Mercantile and the respective Boards of Directors of Mercantile
Illinois, Acquisition Bank and Wedge Bank will approve the
concurrent merger of Acquisition Bank with and into Wedge Bank
pursuant to the terms of this Agreement as a result of which
Mercantile Illinois will convert the seventeen and eighty-four one-
hundredths percent (17.84%) of the issued and outstanding shares of
Wedge Bank not owned by Wedge Holding; and
F. The Mercantile Entities and the Sellers desire to
provide for 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:
<PAGE> 6
ARTICLE I
---------
THE ACQUISITION TRANSACTIONS
1.01 The Acquisition Transactions. Subject to the
----------------------------
terms and conditions of this Agreement, Mercantile Illinois and
Wedge Holding will consummate an exchange of all shares of Wedge
Bank common stock, $10.00 par value (the "Wedge Bank Common
Stock"), owned beneficially and of record by Wedge Holding (the
"Exchange") for shares of common stock, $5.00 par value, of
Mercantile with associated "Rights" under the "Rights Agreement"
(as those terms are defined in Section 3.03 hereof) (collectively,
the "Mercantile Common Stock") as set forth in this Agreement.
Mercantile hereby undertakes to execute and deliver or cause to be
delivered all shares of Mercantile Common Stock required to be
delivered to Wedge Holding pursuant to this Agreement. Wedge
Holding shall liquidate within six months after the Exchange (the
"Liquidation") and effect a liquidating distribution to its
shareholders of all shares of Mercantile Common Stock that are then
owned beneficially and of record by Wedge Holding.
Simultaneously with the Exchange and subject to
the terms and conditions of this Agreement, Acquisition Bank will
merge with and into Wedge Bank (the "Merger" and together with the
Exchange will hereinafter be referred to as the "Acquisition")
under the terms set forth in the related Plan of Merger (the "Plan
of Merger") to be executed prior to the Closing Date by and between
Wedge Bank and Acquisition Bank in substantially the form set forth
in Appendix A to this Agreement, whereby the shareholders of Wedge
----------
Bank (other than Mercantile Illinois or Wedge Holding, as the case
may be) will receive shares of Mercantile Common Stock as set forth
in this Agreement. Mercantile hereby undertakes to execute and
deliver or cause to be delivered all shares of Mercantile Common
Stock required to be delivered to the shareholders of Wedge Bank
pursuant to this Agreement.
Wedge Holding will receive the number of shares of
Mercantile Common Stock in the Exchange, and the shareholders of
Wedge Bank (other than Mercantile Illinois or Wedge Holding, as the
case may be) will receive the number of shares of Mercantile Common
Stock in the Merger that will equal their respective percentage
ownership interests in the outstanding shares of Wedge Bank Common
Stock multiplied by the total number of shares of Mercantile Common
Stock issuable in the Acquisition as set forth in Section 1.07 of
this Agreement (the "Acquisition Consideration").
Upon consummation of the Merger, the separate
corporate existence of Acquisition Bank will cease and Wedge Bank
(sometimes hereinafter referred to as the "Surviving Bank") will be
the surviving bank. The Surviving Bank will continue to do
business under the Charter of Wedge Bank.
1.02 Closing. The closing (the "Closing") of the
-------
Acquisition, unless the parties hereto shall otherwise mutually
- 2 -
<PAGE> 7
agree, shall take place at the offices of Mercantile in St. Louis,
Missouri, at 10:00 a.m., local time, on the first Business Day (the
"Closing Date") of the month immediately succeeding the month in
which the last of the following events occurs: (a) the receipt of
the requisite approval of the Exchange and the Agreement by the
shareholders of Wedge Holding and the Merger, the Agreement and the
Plan of Merger by the shareholders of Wedge Bank as set forth in
Section 2.02 of this Agreement, (b) the thirtieth day after the
approval of the Acquisition by the Federal Deposit Insurance
Corporation (the "FDIC"), (c) the approval by the Illinois
Commissioner of Banks and Trust Companies (the "Illinois
Commissioner") and any other bank regulatory agency that may be
necessary or appropriate. For purposes of this Agreement,
"Business Day" shall mean any day that the offices of the Illinois
Commissioner is open for the receipt of official filings.
1.03 Method of Effecting Merger and Effective Time. On
---------------------------------------------
the Closing Date, the parties hereto will cause the Merger to be
consummated by delivering to the Illinois Commissioner, for filing,
copies of resolutions of the shareholders of Acquisition Bank and
Wedge Bank approving the Plan of Merger in such form as required
by, and executed and acknowledged in accordance with, the relevant
provisions of the Illinois Banking Act, as amended (the "Illinois
Banking Act"). The Merger shall be effective on the date and at
the time (the "Effective Time") that the Illinois Commissioner
issues a certificate of merger in accordance with the Illinois
Banking Act.
1.04 Charter and By-Laws. The Charter and By-Laws of
-------------------
Wedge Bank in effect immediately prior to the Effective Time shall
be the Charter and By-Laws of the Surviving Bank, in each case
until amended in accordance with their respective provisions and
applicable law.
1.05 Board of Directors and Officers.
-------------------------------
(a) At the Effective Time, the members of the
Board of Directors of the Surviving Bank and the terms of these
directors shall be as designated by Mercantile Illinois immediately
prior to the Effective Time.
(b) The officers of Surviving Bank shall be the
persons designated by Mercantile Illinois immediately prior to the
Effective Time and such persons will serve in their designated
offices, thereafter, until their respective successors are duly
elected and qualified.
1.06 Additional Actions. If, at any time after the
------------------
Effective Time, the Surviving Bank 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 Bank its right,
title, or interest in, to, or under any of the rights, properties,
or assets of Wedge Bank, or (b) otherwise carry out the purposes of
- 3 -
<PAGE> 8
this Agreement or the Plan of Merger, Wedge Bank and its officers
and directors shall be deemed to have granted to the Surviving Bank
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
Bank and otherwise to carry out the purposes of this Agreement or
the Plan of Merger, and the officers and directors of the Surviving
Bank are authorized in the name of Wedge Bank or otherwise to take
any and all such action.
1.07 Conversion of Securities.
------------------------
(a) At the Effective Time, Mercantile will issue
970,000 shares of Mercantile Common Stock as Acquisition
Consideration in the Exchange and the Merger. Wedge Holding and
each of the other shareholders of Wedge Bank at the Effective Time
(other than Mercantile and Wedge Holding, as the case may be) will
be entitled to receive the number of shares of Mercantile Common
Stock issuable as the Acquisition Consideration that is determined
by multiplying such Acquisition Consideration by such shareholders'
respective percentage ownership interests in Wedge Bank.
(b) At the Effective Time, Wedge Holding, by
virtue of the Exchange and without any other action on the part of
the Mercantile Entities or Wedge Holding, will be entitled to
receive its percentage interest of the Acquisition Consideration as
determined in Section 1.07(a) hereof, upon delivery at Closing of
the certificates evidencing its shares of Wedge Bank Common Stock.
Also, at the Effective Time, by virtue of the Merger and without
any action on the part of the Mercantile Entities, Wedge Bank or
any Wedge Bank shareholder, each share of Wedge Bank Common Stock
issued and outstanding at the Effective Time (other than any shares
held by Mercantile or Wedge Holding or any of their respective
wholly owned subsidiaries, (in each case other than in a fiduciary
capacity or as a result of debts previously contracted), which
shall be cancelled, and other than any "Dissenting Shares" (as
defined in Section 1.09 hereof)), shall cease to be outstanding and
shall be converted into and become the right to receive his or her
percentage interest of the Acquisition Consideration as determined
in Section 1.07(a) hereof.
1.08 Exchange Procedures.
-------------------
(a) Prior to the Closing Date, Mercantile shall
appoint Society National Bank, or such other bank or trust company
selected by Mercantile and reasonably acceptable to the Sellers as
the exchange agent (the "Exchange Agent") to effect the exchange of
certificates evidencing shares of Wedge Bank Common Stock for
shares of Mercantile Common Stock issuable as Acquisition
Consideration to each person entitled to receive such Acquisition
Consideration. At the Effective Time, Mercantile shall have
granted the Exchange Agent the requisite power and authority to
effect for and on behalf of Mercantile the issuance of the number
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<PAGE> 9
of shares of Mercantile Common Stock issuable as Acquisition
Consideration.
(b) The certificates evidencing shares of Wedge
Bank Common Stock owned beneficially and of record by Wedge Holding
on the Closing Date, and such other documentation as shall be
reasonably required by Mercantile to effect the Exchange, shall be
delivered by Wedge Holding at Closing to the Exchange Agent in
exchange for the number of full shares of Mercantile Common Stock
for which the shares of Wedge Bank Common Stock evidenced by the
certificate or certificates surrendered have been exchanged
pursuant to this Agreement. For all other shareholders of Wedge
Bank, the Exchange Agent shall mail, within five (5) Business Days
after the Effective Time, to each such holder of record of Wedge
Bank as of the Closing Date a notice of consummation of the Merger
and a form of letter of transmittal, pursuant to which each such
shareholder shall transmit the certificate or certificates formerly
representing shares of the Wedge Bank Common Stock. As soon as
practicable after surrender of such certificate to the Exchange
Agent with a properly completed letter of transmittal, the Exchange
Agent will promptly mail by first-class mail to such shareholder a
certificate or certificates representing the number of full shares
of Mercantile Common Stock into which the shares of Wedge Bank
Common Stock evidenced by the certificate or certificates
surrendered shall have been converted pursuant to this Agreement.
(c) The Exchange Agent shall accept such
certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly
exchange thereof in accordance with customary exchange practices.
Each outstanding certificate that, prior to the Effective Time,
represented Wedge Bank Common Stock shall, except as otherwise
provided in this Agreement, until duly surrendered to the Exchange
Agent be deemed to evidence ownership of the number of shares of
Mercantile Common Stock into which such Wedge Bank Common Stock
shall have been converted in the Merger. After the Effective Time,
there shall be no further transfer on the records of Wedge Bank of
certificates representing shares of capital stock of Wedge Bank,
and if such certificates are presented to Wedge Bank for transfer,
they shall be cancelled against delivery of the Acquisition
Consideration provided therefor in this Agreement. If the record
date for any dividend or other distribution in respect of
Mercantile Common Stock, including any redemption by Mercantile of
the Rights associated therewith, shall occur on or after the
Closing Date, the former holders of Wedge Bank Common Stock shall
be entitled thereto, but no dividends declared on or other
distributions in respect of Mercantile Common Stock issuable as
Acquisition Consideration will be remitted to any person entitled
to receive Mercantile Common Stock under this Agreement until such
person surrenders the certificate or certificates representing
Wedge Bank Common Stock, at which time such dividends or other
distributions shall be remitted to such person, without interest
and less any amounts in respect of taxes that may have been imposed
thereon and which are required to be withheld by the Exchange Agent
- 5 -
<PAGE> 10
or Mercantile. Neither the Exchange Agent, Mercantile nor Wedge
Bank shall be liable to any holder of Wedge Bank Common Stock for
any of the Acquisition Consideration paid to a public official
pursuant to applicable abandoned property, escheat or similar laws.
The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to shares of Mercantile Common
Stock held by it as Acquisition Consideration from time to time
hereunder.
(d) No transfer taxes shall be payable by Wedge
Holding or by any of the other shareholders of Wedge Bank in
respect of the issuance of certificates for Mercantile Common Stock
as Acquisition Consideration and no expenses shall be imposed on
Wedge Holding or on any of the other shareholders of Wedge Bank in
connection with the exchange or conversion at the Effective Time of
shares of Wedge Bank Common Stock into shares of Mercantile Common
Stock pursuant to the Acquisition as contemplated by this Agreement
and the delivery of such shares to the former holder of Wedge Bank
Common Stock entitled thereto, except that (i) if any certificate
for shares of Mercantile Common Stock is to be issued in a name
other than that in which a certificate or certificates for shares
of Wedge Bank Common Stock surrendered shall have been registered,
it shall be a condition to such issuance that the person requesting
such issuance shall pay to Mercantile any transfer taxes payable by
reason thereof or of any prior transfer of such surrendered
certificate or certificates or establish to the satisfaction of
Mercantile that such taxes have been paid or are not payable, and
(ii) nothing herein shall relieve Wedge Holding or any of the other
shareholders of Wedge Bank of any expenses associated with
surrendering such holder's certificates evidencing Wedge Bank
Common Stock to the Exchange Agent.
1.09 Dissenting Shares.
-----------------
(a) "Dissenting Shares" means any shares of Wedge
Holding Common Stock or of Wedge Bank Common Stock held by any
holder who becomes entitled to payment of the fair value of such
shares under Section 11.70 of the Illinois Business Corporation Act
or Section 29 of the Illinois Banking Act, respectively. 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 such law and Mercantile Illinois shall cause Wedge
Holding or the Surviving Bank to pay such consideration solely with
funds provided by Wedge Bank.
(b) Each party hereto shall give the other prompt
notice of any written objections of any shareholder of Wedge
Holding or Wedge Bank to the Exchange or the Merger and written
demands for the payment of the fair value of such shareholder's
shares, withdrawals of such objections or demands, and any other
instruments, served pursuant to Section 11.70 of the Illinois
Business Corporation Act or Section 29 of the Illinois Banking Act
received by such party and Wedge Holding and Wedge Bank shall give
Mercantile the opportunity to direct all negotiations and
- 6 -
<PAGE> 11
proceedings with respect to such objections or demands. Wedge
Holding and Wedge Bank shall not voluntarily make any payment with
respect to any demands for payment of fair value and shall not,
except with the prior written consent of Mercantile, settle or
offer to settle any such demands.
1.10 No Fractional Shares. Notwithstanding any other
--------------------
provision of this Agreement, neither certificates nor scrip for
fractional shares of Mercantile Common Stock shall be issued as
Acquisition Consideration. Each holder of shares of Wedge Bank
Common Stock who otherwise would have been entitled to a fraction
of a share of Mercantile Common Stock shall receive in lieu thereof
and, at the time such holder receives the shares of Mercantile
Common Stock to which the holder is entitled as Acquisition
Consideration, 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.
1.11 Transfer Restrictions; Closing of Stock Transfer
------------------------------------------------
Books. Wedge Holding agrees that from and after the date of this
- -----
Agreement, Wedge Holding will not sell, dispose of or otherwise
transfer any shares of Wedge Bank Common Stock owned beneficially
and of record by Wedge Holding. As to all other shares of Wedge
Bank Common Stock, the stock transfer books of Wedge Bank shall be
closed at the close of business on the Business Day immediately
preceding the Closing Date. In the event of a transfer of
ownership of Wedge Bank Common Stock which is not registered in the
transfer records prior to the closing of such records, the
Acquisition Consideration issuable in conversion of such stock
pursuant to this Agreement may be delivered to a transferee, if the
certificate representing such shares 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.
Mercantile and the Exchange Agent shall be entitled to rely upon
the stock transfer books of Wedge Bank to establish the identity of
those persons entitled to receive the Acquisition Consideration
specified in this Agreement for their shares of Wedge Bank Common
Stock, which books shall be conclusive with respect to the
ownership of such shares. In the event of a dispute with respect
to the ownership of any such shares, Mercantile and the Exchange
Agent shall be entitled to deposit any Acquisition Consideration
represented thereby in escrow with an independent party and
thereafter be relieved with respect to any claims to such
consideration.
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
- 7 -
<PAGE> 12
reclassification, recapitalization, split-up, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with
a record date within such period, then the number of shares of
Mercantile Common Stock issuable as Acquisition Consideration
pursuant to Section 1.07 of this Agreement will be appropriately
and proportionately adjusted so that the Acquisition Consideration
shall consist of that number of shares of Mercantile Common Stock
or other securities as such shares would have been converted or
changed into pursuant to such reclassification, recapitalization,
split-up, exchange of shares or readjustment or as a result of such
stock dividend had the record date therefor been immediately
following the Effective Time.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to the Mercantile Entities to enter into
and perform their respective obligations under this Agreement, and
notwithstanding any examinations, inspections, audits and other
investigations made by the Mercantile Entities, the Sellers hereby
jointly and severally represent and warrant to Mercantile Entities
as to the following matters:
2.01 Organization and Authority. Wedge Holding is a
--------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Illinois, 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 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. Wedge Holding is registered
as a bank holding company with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under the Bank
Holding Company Act of 1956, as amended (the "BHC Act").
Wedge Bank is a commercial bank duly organized,
validly existing in good standing under the laws of the State of
Illinois. The deposits of Wedge Bank are insured by the FDIC under
the Federal Deposit Insurance Act of 1950, as amended (the "FDI
Act"). Wedge Bank is 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 and has the corporate power and authority to own and
operate its properties and to carry out its business as and where
the same is now being conducted.
2.02 Corporate Authorization; Records. Wedge Holding
--------------------------------
has the corporate power and authority to enter into this Agreement
and Wedge Bank has the corporate power and authority to enter into
this Agreement and the Plan of Merger and, subject to the approval
of the Exchange and this Agreement by the shareholders of Wedge
Holding and to the approval of the Merger, this Agreement and the
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<PAGE> 13
Plan of Merger by the shareholders of Wedge Bank and such approvals
of governmental agencies and other governing boards having
regulatory authority over Wedge Holding and/or Wedge Bank as may be
required by applicable law, rule or regulation, to carry out their
respective obligations thereunder. The only shareholder vote of
Wedge Holding required to approve the Exchange and this Agreement
is the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Wedge Holding Common Stock. The only
shareholder vote of Wedge Bank required to approve the Merger, this
Agreement and the Plan of Merger is the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Wedge
Bank Common Stock. The execution, delivery and performance of this
Agreement by Wedge Holding and the consummation of the Exchange
have been duly authorized by the Board of Directors of Wedge
Holding. The execution, delivery and performance of this Agreement
and the Plan of Merger by Wedge Bank and the consummation of the
Merger have been duly authorized by the Board of Directors of Wedge
Bank. Subject to the approvals, as aforesaid, this Agreement is a
valid and binding obligation of Wedge Holding, and this Agreement
and the Plan of Merger are the valid and binding obligations of
Wedge Bank, enforceable against each in accordance with their
respective terms.
Neither the execution, delivery and performance by
Wedge Holding of this Agreement or by Wedge Bank of this Agreement
or the Plan of Merger, nor the consummation of the transactions
contemplated thereby, nor compliance by Wedge Holding or Wedge Bank
with any of the provisions thereof will (a) 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, security interest, charge or encumbrance upon any of the
properties or assets of Wedge Holding or Wedge Bank under any of
the terms, conditions or provisions of (i) their respective
Articles of Incorporation, Charter or By-laws, or (ii) any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which Wedge Holding or Wedge
Bank is a party or by which it may be bound, or to which Wedge
Holding or Wedge Bank or any of their respective properties or
assets may be subject, or (b) subject to compliance with the
statutes and regulations referred to in the next paragraph, violate
any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to Wedge Holding or Wedge Bank or any
of their respective properties or assets.
Other than in connection or in compliance with the
provisions of the Illinois Banking Act, the Securities Act of 1933
and the rules and regulations thereunder (the "Securities Act"),
the Securities Exchange Act of 1934 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 BHC Act, or any required
- 9 -
<PAGE> 14
approvals of the FDIC and the Illinois Commissioner, 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 Wedge Holding or Wedge Bank of the transactions
contemplated by this Agreement or the Plan of Merger.
The minute books and stock records of Wedge
Holding and Wedge Bank are complete and correct in all respects and
accurately reflect in all respects all meetings, consents and other
actions of the organizers, incorporators, shareholders, Board of
Directors and committees of the Board of Directors occurring since
the organization of each.
2.03 Subsidiaries. Other than its equity interest in
------------
Wedge Bank, Wedge Holding has no subsidiaries and does not control,
or have any equity ownership interest in, any other corporation,
partnership, joint venture or other business association. Wedge
Bank has no subsidiaries and does not control, or have any equity
ownership interest in, any other corporation, partnership, joint
venture or other business association, other than any interest
pledged to Wedge Bank in the ordinary course of its business as
security for the obligations of third parties to Wedge Bank or held
by Wedge Bank as a consequence of its exercise of rights and
remedies in respect of any interest pledged as security in respect
of such obligations.
2.04 Capitalization of Wedge Bank. The authorized
----------------------------
capital stock of Wedge Bank consists of 144,300 shares of Common
Stock, $10 par value, of which, as of March 31, 1994, 144,300
shares are issued and outstanding. Wedge Holding has and will have
as of the Effective Time good and marketable title to 118,556
shares, or 82.16% of the then issued and outstanding shares of
Wedge Bank Common Stock, free and clear of any liens, claims,
charges, encumbrances and assessments of any kind or nature
whatsoever. There are no other shares of capital stock or other
equity securities of Wedge Bank outstanding and no outstanding
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 of Wedge
Bank, or contracts, commitments, understandings or arrangements by
which Wedge Bank is or may become bound to issue additional shares
of capital stock or options, warrants or rights to purchase or
acquire any additional shares of capital stock of Wedge Bank. All
of the issued and outstanding shares of the Wedge Bank Common Stock
are validly issued, fully paid, and nonassessable.
2.05 Financial Statements.
--------------------
(a) Attached hereto as Schedule 2.05(a) are
----------------
copies of the following financial statements:
(i) Audited consolidated balance sheets
of Wedge Holding as of December 31, 1992 and
1993, related consolidated statements of income,
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<PAGE> 15
changes in shareholders' equity and cash flows
for the two (2) years ended December 31, 1993,
together with the notes thereto certified by
Deloitte & Touche, Wedge Holding's independent
auditors;
(ii) Unaudited consolidated balance sheets
of Wedge Holding as of March 31, 1994 and 1993
and related consolidated statements of income,
changes in shareholders' equity and cash flows
for the three-month periods ended March 31, 1994
and 1993;
(iii) Form F.R. Y-6 reports of Wedge
Holding as of December 31, 1991, 1992 and 1993,
and Form F.R. Y-9LP and Form F.R. Y-9C reports
filed during such periods, as furnished by Wedge
Holding to the Federal Reserve Board; and
(iv) The Consolidated Reports of Condition
and Income of Wedge Bank as of and for the years
ended December 31, 1991, 1992 and 1993, and as of
and for the three-month period ended March 31,
1994, as filed by Wedge Bank with the FDIC.
(b) The financial statements referenced above are
referred to collectively as the "Wedge Financial Statements." The
Wedge Financial Statements have been prepared in accordance with
the books and records of Wedge Holding and Wedge Bank in accordance
with generally accepted accounting principles or, as to the
financial statements referenced in subsection (a)(iii) and (a)(iv)
above, regulatory accounting principles, consistently applied, and
present fairly the consolidated financial positions of Wedge
Holding and Wedge Bank, respectively, at the dates thereof and the
consolidated results of their respective operations and cash flows.
(c) Wedge Holding and Wedge Bank have each
prepared, kept and maintained through the date hereof true, correct
and complete financial and other books and records of their affairs
which fairly reflect their respective financial conditions, results
of operations, businesses, assets, prospects or operations.
2.06 Reports. Since January 1, 1991, Wedge Holding and
-------
Wedge Bank have filed all reports, registrations and statements,
together with any required amendments thereto, that were required
to be filed with any federal and state regulatory body or authority
having jurisdiction over the affairs of each. All such reports and
statements filed with any such regulatory body or authority are
collectively referred to herein as the "Wedge Reports". As of
their respective dates, the Wedge Reports complied in all respects
with all the rules and regulations promulgated by the applicable
federal and/or state authorities, as the case may be, 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
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<PAGE> 16
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
2.07 Title to and Condition of Assets.
--------------------------------
(a) Except as may be reflected in the Wedge
Financial Statements or set forth on Schedule 2.07(a) and excepting
----------------
all real property (which is the subject of Section 2.08), Wedge
Bank has, and at the Closing Date, will have, good and marketable
title to its properties and assets, including, without limitation,
those reflected on the Wedge Financial Statements, free and clear
of any liens, charges, pledges, encumbrances, defects, claims or
rights of third parties, except for liens for taxes, assessments or
other governmental charges not yet delinquent.
(b) No assets reflected on the Wedge Financial
Statements in respect of Wedge Bank have been sold, leased,
transferred, assigned or otherwise disposed of since March 31,
1994, except in the ordinary course of business or as set forth in
Schedule 2.07(b) under the heading "Dispositions."
- ----------------
(c) All furniture, fixtures, vehicles, machinery
and equipment and computer software owned or used by Wedge Bank,
including any of such items leased as a lessee and all facilities
and improvements comprising part of any owned or leased real
property, taken as a whole, with no single such item being deemed
of importance, are fit for the purposes for which they were
intended, are in good order and repair, free of defects and in good
operating condition, subject only to normal wear and tear. The
operation by Wedge Bank of such assets is in compliance in all
respects with all applicable laws, ordinances and rules and
regulations of any governmental authorities having jurisdiction.
2.08 Real Property. Except as set forth in Schedule
------------- --------
2.08:
- ----
(a) The legal description of each parcel of real
property owned by Wedge Bank (other than real property acquired in
foreclosures or in lieu of foreclosure in the course of collection
of its loans and being held by Wedge Bank for disposition as
required by law) is set forth in Schedule 2.08(a) attached hereto
----------------
under the heading "Owned Real Property" (such real property being
herein referred to as the "Owned Real Property"). The legal
description of each parcel of real property leased by Wedge Bank as
lessee 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"). Collectively, the Owned Real
Property and the Leased Real Property is herein referred to as the
"Real Property."
(b) There is no pending dispute involving Wedge
Bank as to the title of or the right to use any of its Real
Properties.
- 12 -
<PAGE> 17
(c) Wedge Bank has no interest in any other real
property except interests as a mortgagee, and except for real
property acquired in foreclosures or in lieu of foreclosure and
being held for disposition as required by law.
(d) None of the buildings, structures or other
improvements located on the Real Property encroaches upon or over
any adjoining parcel or real estate or any easement or right-of-way
or "setback" line and, to the best knowledge of the Sellers, 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 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 the Sellers, threatened, with respect to any
such building, structure or improvement. The Real Property is in
generally good condition, reasonable 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 on the Wedge
Financial Statements or with respect to such easements, liens,
defects or encumbrances as do not individually or in the aggregate
adversely affect the use or value of the parcel of Real Property,
Wedge Bank has, and at the Closing Date will have, good and
marketable title to its Real Properties, free and clear of any
liens, charges, pledges, encumbrances, defects, claims or rights of
third parties.
2.09 Contracts.
---------
(a) Schedule 2.09(a) contains a complete and
----------------
accurate listing of all contracts entered into with respect to
deposits of $250,000 or more, by account or other identifying
number, and all loan agreements and commitments, notes, security
agreements, repurchase agreements, bankers' acceptances,
outstanding letters of credit and commitments to issue letters of
credit, participation agreements, and other documents relating to
or involving extensions of credit or other commitments to extend
credit by Wedge Bank with respect to any one entity or related
group of entities in excess of $250,000, to which any of the
foregoing is a party or by which it is bound, by account or other
identifying number, and, where applicable, such other information
as shall be necessary to identify any related group of entities.
(b) Except for the contracts and agreements
required to be listed on Schedule 2.09(a) and except as set forth
----------------
in Schedule 2.09(b) or any other Schedule hereto, Wedge Bank is not
----------------
a party to or bound by any:
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<PAGE> 18
(i) agreement, contract, arrangement,
understanding or commitment with any labor union;
(ii) franchise or license agreement;
(iii) written employment, severance or
termination pay, agency, consulting or similar
agreement, contract, arrangement, understanding
or commitment in respect of personal services;
(iv) loans or other obligations payable to
or owing to any officer, director or employee
thereof, except (A) salaries, wages and directors
fees incurred and accrued in the ordinary course
of business and/or (B) obligations due in respect
of any depository accounts maintained by any of
the foregoing at Wedge Bank in the ordinary
course of business;
(v) loans or debts payable by or owing by
any executive officer or director of Wedge
Holding or Wedge Bank or any other person or
entity deemed an "executive officer" or a
"related interest" of any of the foregoing, as
such terms are defined in Regulation O of the
Federal Reserve Board; or
(vi) other agreement, contract,
arrangement, understanding or commitment
involving an obligation by any of the foregoing
of more than $50,000 extending beyond six (6)
months from the date hereof that cannot be
cancelled without cost or penalty upon notice of
thirty (30) days or less, other than contracts
entered into in respect of deposits, loan
agreements and commitments, notes, security
agreements, 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 Wedge
Bank 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 $250,000.
(c) Wedge Bank carries property, casualty,
liability, products liability and other insurance coverages as set
forth in Schedule 2.09(c) under the heading "Insurance."
----------------
(d) True, correct and complete copies of the
agreements, contracts, leases, insurance policies and other
documents referred to in Schedule 2.09(c) shall be furnished or
----------------
made available to the Mercantile Entities.
- 14 -
<PAGE> 19
(e) To the best knowledge of the Sellers, each of
the agreements, contracts, leases, insurance policies and other
documents referred to in Schedule 2.09(a), Schedule 2.09(b) and
---------------- ----------------
Schedule 2.09(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
Wedge Bank) 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.
(f) Schedule 2.09(f) under the heading "Loans"
----------------
contains a true, correct and complete listing, as of the date of
this Agreement, by account or other identifying number, of (i) all
loans in excess of $100,000, of Wedge Bank which have been
accelerated during the past twelve months, (ii) all loan
commitments or lines of credit of Wedge Bank in excess of $100,000
which have been terminated by Wedge Bank 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 $100,000 as to which Wedge
Bank has given written notice to the borrower or customer of Wedge
Bank's intent to terminate during the past twelve months, (iv) with
respect to all loans in excess of $100,000, all notification
letters and other written communications from Wedge Bank to any of
its borrowers, customers or other parties during the past twelve
months wherein Wedge Bank 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 Wedge Bank during the past twelve months of, or
asserted against Wedge Bank, in writing, any "lender liability" or
similar claim, and, to the best of Wedge Bank's knowledge, each
borrower, customer or other party which has given Wedge Bank any
oral notification of, or asserted against Wedge Bank, any such
claim, and (vi) all loans in excess of $100,000 (1) that are
contractually past due 90 days or more in the payment of principal
and/or interest, (2) that are on non-accrual status, (3) where a
reasonable doubt exists as to the timely future collectibility of
future principal and interest, whether or not interest is still
accruing or the loan is less than 90 days past due, (4) 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 (5) where
a specific reserve allocation exists in connection therewith.
2.10 Absence of Defaults. Except as set forth in
-------------------
Schedule 2.10 attached hereto under the heading "Defaults," there
- -------------
are no pending disputes between Wedge Bank and the other parties to
the agreements, contracts, leases, insurance policies and other
documents referred to in Schedule 2.09, and to the best knowledge
-------------
of the Sellers, all such agreements, contracts, leases, insurance
- 15 -
<PAGE> 20
policies and other documents are in full force and effect and not
in default with respect to Wedge Bank or any other party thereto,
and will continue in full force and effect immediately after the
Closing Date.
2.11 Absence of Undisclosed Liabilities. Except as
----------------------------------
disclosed in Schedule 2.11 or in any other Schedule attached
-------------
hereto:
(a) As of the date hereof, Wedge Bank has no
debts, liabilities or obligations, equal to or exceeding $10,000,
individually, or $25,000, in the aggregate, whether accrued,
absolute, contingent or otherwise and whether due or to become due,
except
(i) liabilities reflected in the Wedge
Financial Statements, and
(ii) debts, liabilities or obligations
incurred since March 31, 1994, in the ordinary
and usual course of its businesses, none of which
are for breach of contract, breach of warranty,
torts, infringements or lawsuits, and none of
which adversely affect its financial positions or
results of operations, businesses, assets,
prospects or operations; and
(b) to the best knowledge of the Sellers, Wedge
Bank was not, as of March 31, 1994, and since such date has not
become a party to, any contract or agreement which affected,
affects, or may reasonably be expected to affect, materially and
adversely, its financial position, results of operations, business,
assets or operations.
2.12 Allowance for Loan and Lease Losses; Non-
-----------------------------------------
performing Assets.
- -----------------
(a) Except as set forth in Schedule 2.12 attached
-------------
hereto: (i) all of the accounts, notes and other receivables which
are reflected in the Wedge Financial Statements as of March 31,
1994 were acquired in the ordinary course of business and, to the
best knowledge of the Sellers, are collectible in full in the
ordinary course of business, except for possible loan and lease
losses which are adequately provided for in the allowance for loan
and lease losses in such Wedge Financial Statements and (ii) the
collection experience of Wedge Bank since March 31, 1994 to the
date hereof has not been materially adverse to the credit and
collection experience of Wedge Bank in the three months ended
March 31, 1994 and the year ended December 31, 1993.
(b) Schedule 2.12(b) attached hereto sets forth
----------------
as of the date of this Agreement all assets classified as real
estate acquired through foreclosure, including in-substance
foreclosed real estate ("Non-Performing Assets").
- 16 -
<PAGE> 21
(c) The aggregate amount of all loans described
by Section 2.09(f)(vi) and all Non-Performing Assets pursuant to
Section 2.12(b) shall not exceed one percent (1%) of (i) the gross
amounts of all loans and leases on the books of Wedge Bank, plus
(ii) the aggregate book value of all Non-Performing Assets.
2.13 Taxes. Wedge Bank has timely filed or will timely
-----
file all tax returns required to be filed at or prior to the
Closing Date. Wedge Bank has paid, or has set up adequate reserves
on the Wedge Financial Statements for the payment of, all taxes
required to be paid in respect of the periods covered by such
returns and has set up adequate reserves on the Wedge Financial
Statements for the payment of all taxes anticipated to be payable
in respect of the period subsequent to the last of said periods
(treating for this purpose the Closing Date as the last day of an
applicable period, whether or not it is in fact the last day of a
taxable period). Wedge Bank will not have any liability for any
such taxes in excess of the amounts so paid or reserves so
established and no deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed
(tentatively or definitely) against Wedge Bank which would not be
covered by existing reserves. Wedge Bank is not delinquent in the
payment of any 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. The federal, state and foreign income tax returns of
Wedge Bank have not been audited by the Internal Revenue Service
(the "IRS") or the state or foreign taxing authority since prior to
January 1, 1993. Neither Wedge Holding nor Wedge Bank has made any
election under Income Tax Regulation Sections 1.1502-33(d)(3) or
1.1552-1(c), each of which relates to the allocation of the
consolidated federal income tax liability, and neither Wedge
Holding nor Wedge Bank is a party to or bound by any tax indemnity,
tax sharing or tax allocation agreement, or any other contractual
obligation to pay or contribute to the tax obligations of any other
person.
2.14 Material Adverse Change. Except as otherwise
-----------------------
disclosed in any of the Schedules referenced herein, since
March 31, 1994, there has been no material adverse change in the
financial condition, results of operations, business, assets,
prospects or operations of Wedge Bank, other than changes in
banking laws or regulations, or interpretations thereof, or other
conditions that affect the banking industry generally, or changes
in the general level of interest rates.
2.15 Litigation and Other Proceedings. Except as set
--------------------------------
forth in Schedule 2.15, Wedge Bank is not a party to any pending
-------------
or, to the best knowledge of the Sellers, 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 cannot reasonably be expected to have,
an adverse effect on the business, financial condition, results of
- 17 -
<PAGE> 22
operations or prospects of Wedge Bank. Without limiting the
generality of the foregoing, except as set forth in Schedule 2.15,
-------------
there are no actions, suits, or proceedings pending or, to the best
knowledge of the Sellers, threatened against Wedge Holding or Wedge
Bank or any of their respective officers or directors by any
shareholder of Wedge Holding or Wedge Bank (or any former
shareholder) or involving claims under the Community Reinvestment
Act of 1977, Bank Secrecy Act or any other laws applicable to Wedge
Bank.
2.16 Governmental Compliance. Except as set forth in
-----------------------
Schedule 2.16:
- -------------
(a) To the best knowledge of the Sellers, Wedge
Bank is in compliance with all laws, ordinances, rules, regulations
and orders, licenses and permits that are applicable to it;
(b) To the best knowledge of the Sellers, Wedge
Holding and Wedge Bank hold all permits, business licenses,
certificates, franchises and other similar items, which, if not
held, would adversely affect the financial condition, results of
operations, business, prospects or operations and/or ownership
rights as to the assets and properties of any of the foregoing;
(c) There is no legal action or governmental
proceeding or investigation pending or, to the best knowledge of
the Sellers, threatened against Wedge Holding or Wedge Bank that
could prevent or adversely affect or seeks to prohibit the
consummation of the transactions contemplated hereby, nor is Wedge
Holding or Wedge Bank subject to any order of a court or
governmental authority having any such effect;
(d) Neither Wedge Holding nor Wedge Bank is
subject to any cease and desist order, memorandum of understanding
or any written agreement issued by, or entered into with, any
federal or state governmental or regulatory agency, authority,
entity or official having jurisdiction over the banking or other
related activities of Wedge Holding or Wedge Bank, including,
without limitation, the Federal Reserve Board, the Illinois
Commissioner and/or the FDIC; and
(e) Wedge Bank is not subject to or, to the best
knowledge of the Sellers, reasonably likely to incur a material
liability as a result of its ownership, operation, or use of any
property (whether directly or, to the best knowledge of the
Sellers, as a consequence of such property being part of its
investment portfolio, including, without limitation, properties
under foreclosure, property held by Wedge Bank in its capacity as
a trustee, but excluding property held by such as collateral for
the security of any loan due it) (the "Property") (i) that is
contaminated by or contains any hazardous waste, toxic substance or
related materials, including without limitation, asbestos, PCBs,
pesticides, herbicides, and any other substance or waste that is
hazardous to human health or the environment (collectively, a
- 18 -
<PAGE> 23
"Toxic Substance"), or (ii) on which any Toxic Substance has been
stored, disposed of, placed or used in the construction thereof.
No claim, action, suit or proceeding is pending against Wedge Bank
relating to any Property before any court or other governmental
authority or arbitration tribunal relating to hazardous substances,
pollution, or the environment, and there is no outstanding
judgment, order, writ, injunction, decree or award against or
affecting Wedge Bank with respect to the same. Except for
statutory or regulatory restrictions of general application, no
federal, state, municipal or other governmental authority has
placed any restriction on the business of Wedge Bank which
reasonably could be expected to have a material adverse effect on
the financial condition, results of operations, business, assets,
prospects or operations of Wedge Bank.
2.17 Labor. Except as set forth on Schedule 2.17, no
----- -------------
work stoppage involving Wedge Bank is pending or, to the best
knowledge of Sellers, threatened. Wedge Bank is not involved in,
or threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding which could adversely affect
the business of Wedge Bank. Employees of Wedge Bank are not
represented by any labor union nor are any collective bargaining
agreements otherwise in effect with respect to such employees.
2.18 Interests of Certain Persons. Except as set forth
----------------------------
on Schedule 2.18, to the best knowledge of the Sellers, no officer
-------------
or director of Wedge Holding or Wedge Bank has any interest in any
contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of Wedge Bank.
2.19 Employee Benefit Plans. Schedule 2.19 lists all
---------------------- -------------
written pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance,
severance and other employee benefit, incentive and welfare
policies, contracts, plans and arrangements, and all trust
agreements related thereto, covering the present or former
directors, officers or other employees of Wedge Bank (collectively,
"Employee Plans or Policies"). To the best knowledge of the
Sellers, all Employee Plans or Policies currently comply and have
at all relevant times complied in all respects with all applicable
laws, requirements and orders under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Internal Revenue
Code of 1986, as amended (the "Code"), and state law. With respect
to each Employee Plan or Policy which is a pension plan (as defined
in Section 3(2) of ERISA) (the "Pension Plans"), except as set
forth in Schedule 2.19: (a) no Pension Plan is a "multiemployer
-------------
plan" within the meaning of Section 3(37) of ERISA; (b) each
Pension Plan, to the extent necessary and applicable, is
"qualified" within the meaning of Section 401(a) of the Code, and
each related trust, if any, is exempt from taxation under Section
501(a) of the Code; (c) 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
- 19 -
<PAGE> 24
applicable annual valuation date (as indicated on Schedule 2.19),
-------------
exceed the value of the assets of the Pension Plans allocable to
such vested or accrued benefits; (d) no Pension Plan or any trust
created thereunder, nor, to the best knowledge of the Sellers, any
trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction," as such term is defined in Section 4975
of the Code, which could subject such plan or trust, or, to the
best knowledge of the Sellers, any trustee, fiduciary or
administrator thereof, or any party dealing with any such plan or
trust, to the tax or penalty on prohibited transactions imposed by
said Section 4975; (e) no Pension Plan or any trust created
thereunder has been terminated, nor have there been any "reportable
events" with respect to any Pension Plan, as that term is defined
in Section 4043 of ERISA; and (f) 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), since the effective date of ERISA. With
respect to each Employee Plan or Policy which provides for health
care, neither Wedge Bank nor any of Wedge Bank's other affiliates
has or will have any obligation or liability to pay any post-
retirement health care costs, except as set forth in Schedule 2.19.
-------------
2.20 Conduct of Wedge Holding's and Wedge Bank's
-------------------------------------------
Businesses to Date. Except for entering into this Agreement and
- ------------------
matters related thereto and as disclosed in Schedule 2.20 from and
-------------
after March 31, 1994: (a) Wedge Bank has carried on its business in
the ordinary and usual course consistent with past practices, (b)
neither Wedge Holding nor Wedge Bank has issued or sold any of its
capital stock or any corporate debt securities which would be
classified as long-term debt on its balance sheet, (c) neither
Wedge Holding nor Wedge Bank has granted any option for the
purchase of its capital stock, effected any stock split, or
otherwise changed its capitalization, (d) Wedge Bank has not
declared, set aside, or paid any dividend or other distribution in
respect of its capital stock, or, directly or indirectly, redeemed
or otherwise acquired any of its capital stock, (e) Wedge Bank has
not incurred any obligation or liability (absolute or contingent),
except normal trade or business obligations or liabilities incurred
in the ordinary course of business, or mortgaged, pledged, or
subjected to lien, claim, security interest, charge, encumbrance,
or restriction any of its assets or properties, (f) Wedge Bank has
not discharged or satisfied any lien, mortgage, pledge, claim,
security interest, charge, encumbrance, or restriction or paid any
obligation or liability (absolute or contingent), other than in the
ordinary course of business, (g) Wedge Bank has not 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, (h) Wedge Bank has not increased the
rate of compensation of, or paid any bonus to, any of its
directors, officers, or other employees, except merit or promotion
increases in accordance with existing policy, entered into any new,
or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar
contract, entered into, terminated, or substantially modified any
- 20 -
<PAGE> 25
Employee Plan or Policy in respect of any of its present or former
directors, officers, or other employees, or agreed to do any of the
foregoing, (i) Wedge Bank has not suffered any damage, destruction
or loss, whether as the result of fire, explosion, earthquake,
accident, casualty, labor trouble, requisition or taking of
property by any government or any agency of any government, flood,
windstorm, embargo, riot, act of God or the enemy or other similar
or dissimilar casualty or event or otherwise, and whether or not
covered by insurance, and (j) Wedge Bank has not entered into any
transaction, contract, or commitment outside the ordinary course of
its business.
2.21 Registration Statement, etc. None of the
----------------------------
information regarding Wedge Holding and/or Wedge Bank supplied or
to be supplied by either of them for inclusion or included in (a)
a 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 issuable as Acquisition Consideration pursuant
to the provisions of this Agreement (the "Registration Statement"),
(b) the Proxy Statement to be mailed to shareholders of Wedge
Holding and to shareholders of Wedge Bank in connection with the
meetings to be called to consider the approval of the Exchange, the
Merger, this Agreement and the Plan of Merger (the "Proxy
Statement") and (c) any other documents to be filed with the SEC or
any regulatory authority in connection with the transactions
contemplated hereby will, at the respective times such documents
are filed with the SEC or 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 or any amendment
thereof or supplement thereto, at the time of the special meetings
of Wedge Holding's shareholders and of Wedge Bank's shareholders
referred to in Section 5.03, be false or misleading with respect to
any 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
Wedge Holding and/or Wedge Bank is responsible for filing with any
regulatory authority in connection with the Acquisition will comply
as to form with the provisions of applicable law.
2.22 Brokers and Finders; Other Liabilities. Except as
--------------------------------------
set forth on Schedule 2.22, neither Wedge Holding nor Wedge Bank
-------------
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
Wedge Holding and/or Wedge Bank in connection with this Agreement
or the Plan of Merger or the transactions contemplated hereby and
thereby. Wedge Bank shall be liable in respect of all reasonable
fees and expenses of counsel and accountants for Wedge Bank.
- 21 -
<PAGE> 26
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE MERCANTILE ENTITIES
As an inducement to the Sellers to enter into and perform
their respective obligations under this Agreement, and
notwithstanding any examinations, inspections, audits or other
investigations made by the Sellers, the Mercantile Entities hereby
jointly and severally represent and warrant to the Sellers as to
the following matters:
3.01 Organization and Authority. Mercantile and
--------------------------
Mercantile Illinois are each corporations duly organized, validly
existing and in good standing under the laws of the State of
Missouri, each is duly qualified to do business and each 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 and each has the corporate power and authority to own its
properties and assets and to carry on its business as it is now
being conducted. Mercantile and Mercantile Illinois are each
registered as a bank holding company with the Federal Reserve Board
under the BHC Act. Acquisition Bank will, prior to the Closing
date, be chartered as an Illinois state bank by the Illinois
Commissioner, will be duly organized, validly existing and in good
standing under the laws of the State of Illinois, will be duly
qualified to do business and will be 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 and will
have the corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted.
Acquisition Bank will be a bank insured by the FDIC under the FDI
Act.
3.02 Authorization. Mercantile and Mercantile Illinois
-------------
each have the corporate power and authority to enter into this
Agreement and to carry out their respective obligations thereunder.
The execution, delivery and performance of this Agreement by
Mercantile and Mercantile Illinois and the consummation of the
transactions contemplated thereby have been duly authorized by the
Executive Committee of the Board of Directors of Mercantile and the
Board of Directors of Mercantile Illinois, and no other approval of
the respective Boards or shareholders or any committees thereof is
required. Subject to such approvals of governmental agencies and
other governing boards having regulatory authority over Mercantile
and Mercantile Illinois as may be required by statute or
regulation, this Agreement is valid and binding obligations of
Mercantile and Mercantile Illinois, enforceable against each in
accordance with their respective terms.
Neither the execution, delivery and performance by
Mercantile or Mercantile Illinois of this Agreement, nor the
consummation of the transactions contemplated hereby, nor
compliance by Mercantile or Mercantile Illinois with any of the
provisions hereof, will (a) violate, conflict with, or result in a
- 22 -
<PAGE> 27
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, security
interest, charge or encumbrance upon any of the properties or
assets of Mercantile or Mercantile Illinois under any of the terms,
conditions or provisions of (i) their respective Articles of
Incorporation or By-laws or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Mercantile or Mercantile Illinois
is a party or by which it may be bound, or to which Mercantile or
Mercantile Illinois or any of its properties or assets may be
subject, or (b) subject to compliance with the statutes and
regulations referred to in the next paragraph, to the best
knowledge of the Mercantile Entities, violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation
applicable to Mercantile or Mercantile Illinois or any of its
properties or assets.
Other than in connection with or in compliance
with the provisions of the Illinois Banking Act, 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 BHC Act, or any required
approvals of the FDIC or the Illinois Commissioner, 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, Mercantile Illinois and Acquisition
Bank of the transactions contemplated by this Agreement and the
Plan of Merger.
3.03 Capitalization of Mercantile. The authorized
----------------------------
capital stock of Mercantile consists of (a) 100,000,000 shares of
Mercantile Common Stock, of which, as of May 31, 1994, 43,066,486
shares were issued and outstanding and (b) 5,000,000 shares of
preferred stock, no par value, issuable in series, none of which
were issued and outstanding. A series of 1,000,000 shares of
preferred stock have been designated as Series A Junior
Participating Preferred Stock and are reserved for issuance upon
exercise of Mercantile's preferred share purchase rights (the
"Rights") issued pursuant to a Rights Agreement, dated May 23, 1988
(the "Rights Agreement"), between Mercantile and Mercantile Bank of
St. Louis National Association, as Rights Agent. As of May 31,
1994, Mercantile had reserved (i) 4,611,470 shares of Mercantile
Common Stock for issuance under various employee stock option and
incentive plans ("Mercantile Employee Stock Options") and (ii)
460,172 shares of Mercantile Common Stock for issuance upon
conversion of the 8% Subordinated Capital Convertible Notes due
1995, of Mercantile (the "Convertible Notes"). From May 31, 1994
through the date of this Agreement, no shares of Mercantile Common
Stock have been issued excluding any such shares which may have
been issued upon exercise of the Mercantile Employee Stock Options
or the Convertible Notes.
- 23 -
<PAGE> 28
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 Mercantile of another bank, bank holding company or other
company (or the assets and/or liabilities 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. Except
in connection with any such acquisition transaction and except as
set forth in this Section 3.03 or in Schedule 3.03 attached hereto,
-------------
and except pursuant to the Rights Agreement, there are no other
shares of capital stock or other equity securities of Mercantile
outstanding and no other outstanding 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 of Mercantile, or contracts,
commitments, understandings or arrangements by which Mercantile is
or may become bound to issue additional shares of its capital stock
or options, warrants or rights to purchase or acquire any
additional shares of its capital stock. 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 issued pursuant to this
Agreement will be duly authorized, validly issued and in compliance
with all applicable federal and state securities laws, fully paid
and nonassessable and not subject to preemptive rights.
3.04 Mercantile Financial Statements. The supplemental
-------------------------------
audited consolidated balance sheets of Mercantile and its
subsidiaries (hereinafter sometimes referred to collectively as
"Mercantile Subsidiaries") as of December 31, 1993, 1992 and 1991
and related supplemental audited consolidated statements of income,
changes in shareholders' equity and cash flows for the three years
ended December 31, 1993, together with the notes thereto, certified
by KPMG Peat Marwick and incorporated by reference in Mercantile's
Annual Report on Form 10-K for the year ended December 31, 1993 and
the unaudited consolidated balance sheets of Mercantile and the
Mercantile Subsidiaries as of March 31, 1994 and 1993 and related
unaudited consolidated statements of income, cash flows and
shareholders' equity for the three months ended March 31, 1994 and
1993 included in Mercantile's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, both as filed with the SEC
(collectively, the "Mercantile Financial Statements"), have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis, and present fairly the
consolidated financial position of Mercantile and the Mercantile
Subsidiaries at the dates and the consolidated results of
operations and cash flows of Mercantile and the Mercantile
Subsidiaries for the periods stated therein.
3.05 Reports. Since January 1, 1991, Mercantile and
-------
each of the Mercantile Subsidiaries have filed all reports,
- 24 -
<PAGE> 29
registrations and statements, together with any required amendments
thereto, that they were required to file with (i) the SEC,
including, but not limited to, Annual Report on Form 10-K, Forms
10-Q, Forms 8-K and proxy statements, (ii) the Federal Reserve
Board, (iii) the FDIC, (iv) the Office of the Comptroller of the
Currency (the "OCC"), and (v) any applicable state securities or
banking authorities. All such reports and statements filed with
any such regulatory body or authority are collectively referred to
herein as the "Mercantile Reports." As of their respective dates,
the Mercantile Reports complied with all the rules and regulations
promulgated by the SEC, the Federal Reserve Board, the FDIC, the
OCC and any applicable state securities or banking authorities, as
the case may be, 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 Change. Except as set forth in
-----------------------
Schedule 3.06, since March 31, 1994, there has been no material
- -------------
adverse change in the financial condition, results of operations or
prospects of Mercantile and the Mercantile Subsidiaries taken as a
whole, other than changes in banking laws or regulations, or
interpretations thereof, or other conditions that affect the
banking industry generally, or changes in the general level of
interest rates.
3.07 Registration Statement, Proxy Statement etc. None
--------------------------------------------
of the information regarding Mercantile and the Mercantile
Subsidiaries supplied or to be supplied by Mercantile for inclusion
or included in (a) the Registration Statement, (b) the Proxy
Statement, or (c) any other documents to be filed with the SEC or
any regulatory authority in connection with the transactions
contemplated hereby will, at the respective times such documents
are filed with the SEC or any regulatory authority and, in the case
of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed, to the best knowledge
of the Mercantile Entities be false or misleading with respect to
any 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 or any amendment thereof or supplement thereto, at
the time of the special meetings of shareholders of Wedge Holding
and Wedge Bank 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
either such meeting. All documents which the Mercantile Entities
are responsible for filing with the SEC and any regulatory
authority in connection with the Acquisition will comply as to form
in all respects with the provisions of applicable law.
3.08 Brokers and Finders. Neither Mercantile,
-------------------
Mercantile Illinois nor any of their respective officers, directors
or employees has employed any broker or finder or incurred any
- 25 -
<PAGE> 30
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 Mercantile Illinois in
connection with this Agreement or the transactions contemplated
hereby and thereby.
3.09 Legal Proceedings or Other Adverse Facts. There
----------------------------------------
is no legal action or governmental proceeding or investigation
pending or to the best knowledge of the Mercantile Entities,
threatened against Mercantile or Mercantile Illinois that could
prevent or adversely affect or seeks to prohibit the consummation
of the transactions contemplated hereby, nor is Mercantile or
Mercantile Illinois subject to any order of a court or governmental
authority having any such effect. Neither Mercantile nor
Mercantile Illinois have knowledge of any other fact that could
prevent or adversely affect the consummation of the transactions
contemplated hereby.
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, Wedge Holding and Wedge Bank shall conduct their respective
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 respective business organization,
employees and advantageous business relationships and retain the
services of its officers and key employees.
4.02 Forbearances of Wedge Holding and Wedge Bank.
--------------------------------------------
During the period from the date of this Agreement to the Closing
Date, Wedge Holding or Wedge Bank shall not, without the prior
written consent of the Mercantile Entities:
(a) declare and/or pay any dividends on its
outstanding shares of capital stock, except that from the date of
this Agreement through the Closing Date, the Board of Directors of
Wedge Bank shall be entitled to declare a dividend for each quarter
in which the Mercantile Board of Directors shall declare a dividend
on shares of Mercantile Common Stock that in the aggregate is not
in excess of the aggregate quarterly dividend that would have been
paid by Mercantile on the shares of Mercantile Common Stock
issuable as Acquisition Consideration under this Agreement if the
transactions contemplated in this Agreement had been consummated on
or before the date of this Agreement, and except that the Board of
Directors of Wedge Bank shall be entitled to declare a single
dividend equal to $375,000 which Wedge Holding shall use for the
repayment of indebtedness;
(b) enter into or amend any employment, severance
or similar agreements or arrangements with any director or officer
- 26 -
<PAGE> 31
of Wedge Bank, or amend, modify or terminate any Employee Plans or
Policies of Wedge Bank;
(c) propose or adopt any amendments to the
Articles of Incorporation of Wedge Holding, the Charter of Wedge
Bank or their respective By-laws;
(d) issue any shares of capital stock or effect
any stock split or otherwise change the capitalization of Wedge
Bank as it existed as of the date hereof;
(e) grant, confer or award any options, warrants,
conversion rights or other rights not existing on the date hereof
to acquire any shares of capital stock of Wedge Bank;
(f) purchase or redeem any shares of the capital
stock of either Wedge Holding or Wedge Bank;
(g) enter into or increase any loan or credit
commitment (including standby letters of credit) to, or invest or
agree to invest in any person or entity (i) in an amount in excess
of $100,000, without first consulting with the Mercantile Entities,
and, in the case of persons or entities to which it has outstanding
aggregate credit commitments and loans exceeding $100,000, subject
to subparagraph (ii) below, increase or agree to increase the loan
or credit commitment to, or invest or agree to invest in, such
person or entity by more than twenty-five percent (25%) of such
amount, without first consulting with the Mercantile Entities, and
(ii) in an amount in excess of $250,000 without first obtaining the
prior written consent of a Mercantile Entity, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing,
nothing in this paragraph shall prohibit Wedge Bank from honoring
any contractual and legally binding obligation in existence on the
date of this Agreement;
(h) enter into, increase or renew any loan or
credit commitment (including standby letters of credit) to any
executive officer or director of Wedge Holding or Wedge Bank, any
shareholder of Wedge Holding, or any entity controlled, directly or
indirectly, by any of the foregoing or engage in any transaction
with any of the foregoing of which is the type or nature sought to
be regulated in 12 U.S.C. 371c and 12 U.S.C. 371c-1, without first
obtaining the prior written consent of a Mercantile Entity, which
consent shall not be unreasonably withheld. For purposes of this
subsection (h), "control shall have the meaning associated with
that term under 12 U.S.C. 371c;
(i) agree in writing or otherwise to take any of
the foregoing actions or engage in any activity, enter into any
transaction or take or omit to take any other action which would
make any of the representations and warranties in Article II of
this Agreement untrue or incorrect in any respect if made anew
after engaging in such activity, entering into such transaction, or
taking or omitting such other act;
- 27 -
<PAGE> 32
(j) take any action (i) that would (1) adversely
affect or delay the ability 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 (2) prevent or impede the transactions
contemplated hereby from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of
Section 368 of the Code, or (ii) that is not in the ordinary course
of business consistent with past practice; or
(k) directly or indirectly, including through its
officers, directors, employees or other representatives (i)
initiate, solicit or encourage any discussions, inquiries or
proposals with any party (other than the Mercantile Entities)
relating to the disposition of any significant portion of the
business or assets of Wedge Bank, or the acquisition of the capital
stock (or rights or options exercisable for, or securities
convertible or exchangeable into, capital stock) of Wedge Holding
or Wedge Bank, or the merger of Wedge Holding or Wedge Bank with
any person (each such transaction being referred to herein as an
"Acquisition Transaction") which, in any such event, is not
expressly subject to this Agreement, or (ii) authorize, recommend,
propose or announce an intention to authorize, recommend, propose,
or enter into an agreement or an agreement in principle with
respect to any Acquisition Transaction. Wedge Holding or Wedge
Bank shall promptly notify the Mercantile Entities orally of all
the relevant details relating to all inquiries, indications of
interest and proposals which Wedge Holding or Wedge Bank may
receive with respect to any Acquisition Transaction.
4.03 Forbearances of the Mercantile Entities. During
---------------------------------------
the period from the date of this Agreement to the Closing Date, the
Mercantile Entities shall not, without the prior consent of the
Sellers, agree in writing or otherwise to engage in any activity,
enter into any transaction or take or omit to take any other action
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.
ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence.
-------------------------------------
(a) Wedge Holding and Wedge Bank shall afford to
Mercantile Entities, and to the Mercantile Entities' accountants,
counsel and other representatives, full access during normal
business hours, during the period prior to the Closing Date, to all
its properties, books, contracts, commitments and records and,
during such period, shall furnish promptly to the Mercantile
Entities (i) a copy of each report, schedule and other document
- 28 -
<PAGE> 33
filed or received by it during such period pursuant to the
requirements of federal and state securities or banking laws and
(ii) all other information concerning its business, properties and
personnel as the Mercantile Entities may reasonably request. In
the event of the termination of this Agreement the Mercantile
Entities shall, and shall cause its advisors and representatives
to, (1) hold confidential all information obtained in connection
with any transaction contemplated hereby with respect to the other
party which is not otherwise public knowledge, (2) return to Wedge
Holding and Wedge Bank all documents (including copies thereof)
obtained hereunder from Wedge Holding and Wedge Bank and (3) use
its best efforts to cause all information obtained pursuant to this
Agreement or in connection with the negotiation hereof 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.
(b) Mercantile, promptly following the date of
this Agreement, shall commence its review of Wedge Holding and
Wedge Bank and its operations, business affairs, prospects and
financial conditions, including, without limitation, those matters
which are the subject of Wedge Holding's and Wedge Bank's
representations and warranties (the "Mercantile Due Diligence
Review"). Mercantile shall conclude such review by not later than
twenty-five (25) business days after the date of this Agreement
(the "Mercantile Due Diligence Period"), but the pendency of such
Mercantile Due Diligence Review shall not delay Mercantile's
obligation pursuant to Section 5.02 of this Agreement to file a
Registration Statement with the SEC and all other necessary
applications and filings with the appropriate federal and state
regulatory agencies. Mercantile shall advise Wedge Holding and
Wedge Bank of any situation, event, circumstance or other matter
which first came to the attention of Mercantile during the
Mercantile Due Diligence Review which could result in the
termination of this Agreement by Mercantile pursuant to Section
7.01(d) hereof, or, if applicable, of the absence of any situation,
event, circumstance or other matter, it being the intention of
Mercantile to provide notice to Wedge Holding and Wedge Bank, as
promptly as possible, of any perceived impediment to the
consummation of the Merger. Notwithstanding anything hereinabove
contained or implied to the contrary, the Mercantile Due Diligence
Review shall not limit, restrict or preclude, or be construed to
limit, restrict or preclude, Mercantile, at any time or from time
to time thereafter, from conducting further such reviews or from
exercising any rights available to it hereunder as a result of the
existence or occurrence prior to the Mercantile Due Diligence
Period of any event or condition which was not detected in the
Mercantile Due Diligence Review by Mercantile and which would
constitute a breach of any representation, warranty or agreement of
Wedge Holding or Wedge Bank under this Agreement.
- 29 -
<PAGE> 34
5.02 Registration Statement; Regulatory Matters.
------------------------------------------
(a) Mercantile shall prepare and file with the
SEC as soon as is reasonably practicable after the date of this
Agreement, but in any event within sixty (60) days after the date
of this Agreement, the Registration Statement with respect to the
shares of Mercantile Common Stock issuable as Acquisition
Consideration 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 Wedge Holding and Wedge Bank shall furnish Mercantile
all information concerning Wedge Holding and Wedge Bank as
Mercantile may reasonably request in connection with any such
action.
(b) Each of the parties hereto 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 governmental
bodies necessary to consummate the transactions contemplated by
this Agreement as soon as is reasonably practicable after the date
of this Agreement, including, without limitation, in any event,
Mercantile filing the necessary applications with the Federal
Reserve Board, the FDIC and the Illinois Commissioner within sixty
(60) days after the date of this Agreement.
5.03 Shareholder Approvals. Wedge Holding shall call
---------------------
a special meeting of its shareholders to be held as soon as is
reasonably possible for the purpose of voting upon the Exchange and
this Agreement and related matters. Wedge Bank shall call a
special meeting of its shareholders to be held as soon as is
reasonably possible for the purpose of voting upon the Merger, this
Agreement and the Plan of Merger and related matters. In
connection with such meetings, Wedge Holding and Wedge Bank shall
aid Mercantile in the preparation and filing of the Proxy Statement
(which shall be a part of the Registration Statement to be filed
with the SEC by Mercantile) and mail it to their respective
shareholders. The respective Boards of Directors of Wedge Holding
and of Wedge Bank shall submit and recommend for approval of their
respective shareholders the matters to be voted upon at such
meetings. The Boards of Directors of Wedge Holding and Wedge Bank
will use their respective best efforts to obtain the votes and
approvals of their respective shareholders necessary for the
approval and adoption of the matter contemplated hereby. Wedge
Holding agrees to vote all shares of Wedge Bank Common Stock that
it owns beneficially and of record for the approval of the Merger,
this Agreement and the Plan of Merger at the special meeting of
shareholders of Wedge Bank.
5.04 Current Information. During the period from the
-------------------
date of this Agreement to the Closing Date, each party will
promptly furnish all other parties with copies of all monthly and
other interim financial statements as the same become available and
- 30 -
<PAGE> 35
shall cause one or more of its designated representatives to confer
on a regular and frequent basis with representatives of the other
party. Each party shall promptly notify the other parties 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 respect; (b) any change in its business,
financial condition, results of operations or prospects; (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 litigation involving such party.
5.05 Agreements of Affiliates. The Sellers shall
------------------------
deliver to Mercantile a letter identifying all persons whom the
Sellers believe to be, at the time of the special meetings of the
shareholders of the Sellers' "affiliates" of the Sellers for
purposes of Rule 145 under the Securities Act and for pooling-of-
interests accounting treatment. The Sellers shall use their best
efforts to cause each person who is identified as an "affiliate" in
the letter referred to above to deliver to Mercantile prior to the
Effective Time a written agreement in substantially the form set
forth as Appendix B 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 Acquisition during the period designated in such
letter and thereafter in compliance with the applicable provisions
of the Securities Act. Prior to the Closing Date, the Sellers
shall amend and supplement such letter 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 5.05.
5.06 Expenses. Each party hereto shall bear its own
--------
expenses incident to preparing, entering into and carrying out this
Agreement and the Plan of Merger and consummating the Acquisition,
except that Mercantile Illinois shall pay all printing expenses and
filing fees incurred in connection with this Agreement, the
Registration Statement and the Proxy Statement.
5.07 Miscellaneous Agreements and Consents. Subject to
-------------------------------------
the terms and conditions herein provided, each of the parties
hereto agrees to use their respective best efforts to take, or
cause to be taken, all action, 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 and the Plan of Merger as
expeditiously as possible, including, without limitation, using
their respective best efforts to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of
- 31 -
<PAGE> 36
the parties to consummate the transactions contemplated thereby.
The Sellers and the Mercantile Entities shall use their best
efforts to obtain consents of all third parties and governmental
bodies necessary or, in the opinion of any of the foregoing,
desirable for the consummation of the transactions contemplated by
this Agreement and the Plan of Merger.
5.08 Press Releases. The Sellers and the Mercantile
--------------
Entities shall consult with each other as to the form and substance
of any proposed press release or other proposed public disclosure
of matters related to this Agreement or any of the transactions
contemplated hereby.
5.09 Indemnification of Wedge Bank's Directors,
------------------------------------------
Officers and Employees. Mercantile agrees that the Merger shall
- ----------------------
not affect or diminish any of Wedge Bank's duties and obligations
of indemnification existing at the Effective Time of Merger in
favor of employees, agents, directors or officers of Wedge Bank
arising by virtue of its Charter or By-laws in the form in effect
at the date hereof or arising by operation of law or arising by
virtue of any contract, resolution, or other agreement or document
existing at the date hereof, and such duties and obligations shall
continue in full force and effect for so long as they would
otherwise survive and continue in full force and effect.
Mercantile represents that the directors and officers liability
insurance policy maintained by it does provide for "prior acts"
coverage for directors and officers of entities acquired by it.
5.10 Employee Benefit Plans. The Employee Benefit
----------------------
Plans of Wedge Bank shall not be terminated by reason of the
Acquisition but shall continue thereafter as plans of the entity
surviving by reason of the Acquisition until such time as such
employees are integrated into the Mercantile employee benefit plans
available to other employees of the Mercantile Subsidiaries,
subject to the terms and conditions specified in such plans and to
such changes therein as may be necessary to reflect the
Acquisition. Mercantile shall take such steps as are necessary or
required to integrate employees of Wedge Bank in the Mercantile
employee benefit plans available to other employees of Mercantile
Subsidiaries, as soon as practicable after the Acquisition.
5.11 Taxes of Wedge Holding. Any liability in respect
----------------------
of any consolidated, combined or unitary tax imposed upon Sellers
(including any federal income tax liability shown to be due on the
final return of Wedge Holding) (i) with respect to a taxable period
ending on or before the Closing Date or (ii) with respect to a
taxable period beginning on or before the Closing Date and ending
after the Closing Date, but only with respect to the portion of
such period up to and including the Closing Date, shall be
allocated between Wedge Holding and Wedge Bank pursuant to (or in
accordance with the principles of) Income Tax Regulation
Section 1.1552-1(a)(1); any such liability (i) with respect to a taxable
period beginning after the Closing Date or (ii) with respect to a
period that begins on or before the Closing Date and ends
- 32 -
<PAGE> 37
thereafter, but only with respect to the portion of such period
after the Closing Date, shall be allocated to Wedge Holding. Any
refund in respect of any taxable period beginning on or before the
Closing Date shall be allocated between Wedge Bank and Wedge
Holding proportionately in accordance with the allocation of the
tax liability for such period under the preceding sentence. Wedge
Holding, with the assistance and review of the Mercantile Entities,
shall prepare and timely file all tax declarations, information
returns, returns, and statements required to be filed by it after
the Closing Date.
ARTICLE VI
----------
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect
-----------------------------------------------
the Acquisition. The respective obligations of each party to effect
- ---------------
the Acquisition shall be subject to the fulfillment or waiver at or
prior to the Closing Date of the following conditions:
(a) The approval of the Exchange and this
Agreement shall have received the requisite vote of shareholders of
Wedge Holding at the special meeting of shareholders called
pursuant to Section 5.03 hereof.
(b) The approval of the Merger, this Agreement
and the Plan of Merger shall have received the requisite vote of
shareholders of Wedge Bank at the special meeting of shareholders
called pursuant to Section 5.03 hereof.
(c) This Agreement and the Plan of Merger and the
transactions contemplated thereby shall have been approved by the
FDIC, the Illinois Commissioner and any other federal and/or state
regulatory agencies whose approval is required for consummation of
the transactions contemplated hereby.
(d) The Registration Statement shall have been
declared effective and shall not be subject to a stop order or any
threatened stop order.
(e) Neither Wedge Holding, Wedge Bank,
Mercantile, Mercantile Illinois nor Acquisition Bank 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 Acquisition.
(f) The Mercantile Entitles and Wedge Holding
shall have taken all such actions as are necessary to effect the
Exchange simultaneously with the Merger.
6.02 Conditions to Obligations of the Sellers. The
----------------------------------------
obligations of the Sellers to effect the Acquisition shall be
- 33 -
<PAGE> 38
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 the Mercantile Entities set forth
in Article III hereof shall be true and correct in all material
respects, except such as are not of a magnitude as to be materially
adverse to the business, financial condition, results of operations
or prospects of Mercantile and its subsidiaries, taken as a whole,
as of the date of this Agreement and as of the Closing Date, (as
though made on and as of the Closing Date except (i) to the extent
such representations and warranties are by its express provisions
made as of a specified date, and (ii) for the effect of
transactions contemplated by this Agreement) and the Sellers shall
have received a signed certificate which is to the best knowledge
of the Vice Chairman of Mercantile, signing on behalf of the
Mercantile Entities, and is to that effect.
(b) Performance of Obligations. The Mercantile
--------------------------
Entities shall have performed in all material respects all
obligations required to be performed by each under this Agreement
prior to the Effective Time, and the Sellers shall have received a
signed certificate which is to the knowledge of the Vice Chairman
of Mercantile and is to that effect.
(c) Permits, Authorizations, etc. The Mercantile
-----------------------------
Entities shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required for the
lawful consummation by it of the Acquisition.
(d) No Material Adverse Change. Since the date
--------------------------
of this Agreement, there shall have been no material adverse change
in the business, financial condition, results of operations or
prospects of Mercantile and its subsidiaries, taken as a whole.
(e) Opinion of Counsel. Mercantile shall have
------------------
delivered to the Sellers an opinion of counsel to Mercantile dated
as of the Closing Date or a mutually agreeable earlier date in
substantially the form set forth as Appendix C to this Agreement.
----------
(f) Tax Opinion. The Sellers shall have
-----------
delivered to Mercantile an opinion of counsel to the Sellers dated
as of the Closing Date or a mutually agreeable earlier date
reasonably satisfactory in form and substance to the Sellers to the
effect that the Acquisition will constitute a reorganization within
the meaning of Section 368 of the Code and that no gain or loss
will be recognized by Wedge Holding or the shareholders of Wedge
Holding or Wedge Bank to the extent that each received shares of
Mercantile Common Stock solely in exchange for shares of Wedge Bank
Common Stock in the Acquisition or Wedge Holding Common Stock in
the Liquidation based upon the certificates set forth as Appendix
--------
D to this Agreement.
- -
- 34 -
<PAGE> 39
6.03 Conditions to Obligations of the Mercantile
-------------------------------------------
Entities. The obligations of the Mercantile Entities to effect the
- --------
Acquisition 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 the Sellers set forth in Article
II hereof shall be true and correct in all material respects,
except such as are not of a magnitude as to be materially adverse
to the business, financial condition, results of operations or
prospects of Wedge Bank, as of the date of this Agreement and as of
the Closing Date (as though made on and as of the Closing Date
except (i) to the extent such representations and warranties are by
their express provisions made as of a specific date and (ii) for
the effect of transactions contemplated by this Agreement) and
Mercantile shall have received a signed certificate which is to the
best knowledge of the and the Chairman and Chief Executive Officer
and President of each of Wedge Holding and Wedge Bank, signing on
behalf of Wedge Holding and Wedge Bank, and is to that effect.
(b) Performance of Obligations. The Sellers
--------------------------
shall have performed in all material respects all obligations
required to be performed by them under this Agreement prior to the
Closing Date, and Mercantile shall have received a signed
certificate which is to the knowledge of the Chairman and the Chief
Executive Officer and President of each of Wedge Holding and Wedge
Bank, signing on behalf of Wedge Holding and Wedge Bank, and is to
that effect.
(c) Permits, Authorizations, etc. The Sellers
-----------------------------
shall have obtained any and all material consents or waivers from
other parties to loan agreements, leases or other contracts
material to the Wedge Bank's businesses required for the
consummation of the Acquisition, and the Sellers shall have
obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation by it of
the Acquisition.
(d) No Material Adverse Change. Since the date
--------------------------
of this Agreement, there shall have been no material adverse change
in the business, financial condition, results of operations or
prospects of Wedge Bank.
(e) Election of Dissenting Shareholders. Unless
-----------------------------------
otherwise waived by the Mercantile Entities in their sole
discretion, the combined number of shares of Wedge Holding Common
Stock and Wedge Bank Common Stock as to which written demand for
the fair value of their shares pursuant applicable law has been
delivered to Wedge Holding or Wedge Bank, as the case may be, by
the holders thereof prior to the taking of the votes on the
Acquisition shall not exceed eight percent (8%) of the total direct
or indirect equity interests of Wedge Bank Common Stock outstanding
at the time when such votes are taken.
- 35 -
<PAGE> 40
(f) Accounting Treatment. The Mercantile
--------------------
Entities shall be satisfied that the Acquisition, in form and
substance, will qualify for pooling-of-interests accounting
treatment.
(g) Opinion of Counsel. The Sellers shall have
------------------
delivered to Mercantile an opinion of counsel to the Sellers dated
as of the Closing Date or a mutually agreeable earlier date in
substantially the form set forth as Appendix E to this Agreement.
----------
(h) Delivery of Certificates. Wedge Holding
------------------------
shall have delivered to the Exchange Agent the certificates
evidencing shares of Wedge Bank Common Stock owned beneficially or
of record by Wedge Holding, and such other documentation as shall
be reasonably required by Mercantile or the Exchange Agent to
effect the Exchange.
(i) Delivery of Terms of Engagement Letters.
---------------------------------------
Each of Melvin G. Hall and Robert Lynn Hall shall have delivered to
Mercantile letters as to the terms of their respective engagements
by Mercantile in substantially the form set forth as Appendix F and
----------
Appendix G to this Agreement, respectively.
- ----------
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 Wedge Holding and Wedge Bank:
(a) by mutual consent by the Executive Committee
of the Board of Directors of Mercantile and the Board of Directors
of each other party hereto; or
(b) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of each other
party hereto at any time after March 31, 1995 if the Acquisition
shall not theretofore have been consummated; or
(c) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of each other
party hereto if the Federal Reserve Board, the FDIC, the Illinois
Commissioner or any other federal and/or state regulatory agency
whose approval is required for the consummation of the Acquisition
shall have denied approval of such transaction; or
(d) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of Mercantile
Illinois, at any time prior to the completion of the Mercantile Due
Diligence Period, in the event any situation, event, circumstance
or other matter shall come to the attention of Mercantile during
the course of the Mercantile Due Diligence Review conducted
- 36 -
<PAGE> 41
pursuant to Section 5.01(b) hereof which Mercantile shall, in a
good faith exercise of its reasonable discretion, determine to be
of type or nature which is of such a magnitude as to be materially
adverse to the business, financial condition, results of operations
or prospects of Wedge Bank and is not capable of being
expeditiously or effectively resolved or remedied in a manner
acceptable to Mercantile; or
(e) by the Executive Committee of the Board of
Directors of Mercantile or the Boards of Directors of Mercantile
Illinois, on the one hand or by the Boards of Directors of Wedge
Holding and Wedge Bank, on the other hand, in the event of a breach
by the other of any representation, warranty or agreement contained
in this Agreement, which breach is of such a magnitude as to be
materially adverse to the business, financial condition, results of
operations or prospects of the breaching party and its subsidiaries
taken as a whole and is not cured after 45 days' written notice
thereof is given to the party committing such breach or waived by
such other party(ies).
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 without further
effect and there shall be no liability on the part of any party
hereto or the respective officers and directors of each, except as
set forth in the second sentence of Section 5.01 and in Sections
5.06 and 8.02, and, except that no termination of this Agreement
pursuant to subsection (e) of Section 7.01 shall relieve the non-
performing party of any liability to any other party hereto arising
from the intentional, deliberate and willful non-performance of any
covenant herein, after the giving of notice and the opportunity to
cure.
7.03 Amendment. This Agreement and the Appendices and
---------
Schedules hereto may be amended by the parties hereto, by action
taken by or on behalf of the respective Executive Committees of the
Board of Directors or the respective Boards of Directors, at any
time before or after approval of this Agreement by the shareholders
of Wedge Holding and Wedge Bank; provided, however, that after any
such approval no such modification shall alter the amount or change
the form of the Acquisition Consideration contemplated by this
Agreement to be received by Wedge Holding or the other shareholders
of Wedge Bank or alter or change any of the terms of this Agreement
if such alteration or change would adversely affect the
shareholders of Wedge Bank. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the
parties hereto.
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 are, entitled to the benefits thereof.
- 37 -
<PAGE> 42
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 the Mercantile Entities, the
Sellers or in any instrument delivered by the Mercantile Entities
or the Sellers pursuant to this Agreement shall expire at the
Effective Time or upon termination of this Agreement in accordance
with its terms. In the event of termination of this Agreement in
accordance with its terms, the agreements contained in Sections
5.01 (second sentence), 5.06, 7.02 and 8.02 shall survive such
termination.
8.02 Indemnification. The Sellers and the Mercantile
---------------
Entities (hereinafter, in such capacity being referred to
individually and/or collectively, 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 Indemnifying Party may
become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) (a) arise out of any information
furnished to the Indemnified Party by the Indemnifying Party or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally
filed or in any amendment thereof, or in the Proxy Statement, or in
any amendment thereof or supplement thereto, and provided for
inclusion thereof by the Indemnifying Party, or (b) arise out of or
are based upon the omission or alleged omission by the Indemnifying
Party to state therein a material fact required to be stated
therein or necessary to make the statements 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. The obligations of the Indemnifying
Party under this Section 8.02 shall survive any termination of this
Agreement.
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 and assigns, but
neither this Agreement nor any right or obligation set forth in any
provision hereof may be transferred or assigned 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
- 38 -
<PAGE> 43
shall be void and of no effect. There shall not be any third party
beneficiaries of any provisions hereof except for Sections 1.08,
5.09, 5.10 and 8.02 which may be enforced against obligated party
by the parties therein identified.
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 either 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
or meaning of any provision hereof.
8.07 Entire Agreement. This Agreement and the
----------------
Appendices and Schedules hereto constitutes the entire agreement
between the parties with respect to the subject matter hereof,
supersedes 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.
The parties hereto acknowledge that the Schedules
referenced in Article II are not included with this Agreement as of
the date of this Agreement. The Sellers shall provide such
Schedules to the Mercantile Entities by not later than ten (10)
business days from the date of this Agreement for review and
consideration. The obligations on the part of the Mercantile
Entities under this Agreement are expressly conditioned upon, and
subject to, acceptance by the Mercantile Entities not later than
the end of the fifth business day after the date of the actual
delivery of the Schedules to Mercantile of the form and substance
of the Schedules, in each case in the reasonable discretion of the
Mercantile Entities.
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
- 39 -
<PAGE> 44
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.
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 or telex 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 Mercantile Entities:
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Attention: Ralph W. Babb, Jr.
Vice Chairman
Copy to: Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
(ii) if to the Sellers:
Wedge Bank
620 E. Broadway
Box 2393
Alton, Illinois 62002-9007
Attention: Melvin G. Hall
Chairman and Chief Executive
Officer
and
Robert Lynn Hall
President
Copy to: Ronald C. Mottaz, Esq.
Thomas, Mottaz, Eastman &
Sherwood
307 Henry Street
P.O. Box 398
Alton, Illinois 62002
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 Illinois applicable to contracts made in that state.
- 40 -
<PAGE> 45
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.
"MERCANTILE ENTITIES"
MERCANTILE BANCORPORATION INC.
By: /s/ Ralph W. Babb, Jr.
---------------------------------------
Ralph W. Babb, Jr.
Vice Chairman
MERCANTILE BANCORPORATION OF ILLINOIS
INC.
By: /s/ Ralph W. Babb, Jr.
---------------------------------------
Ralph W. Babb, Jr.
Chairman
"SELLERS"
THE WEDGE HOLDING COMPANY
By: /s/ Melvin G. Hall
---------------------------------------
Melvin G. Hall
Chairman and Chief Executive
Officer
By: /s/ Robert Lynn Hall
---------------------------------------
Robert Lynn Hall
President
- 41 -
<PAGE> 46
WEDGE BANK
By: /s/ Melvin G. Hall
---------------------------------------
Melvin G. Hall
Chairman and Chief Executive
Officer
By: /s/ Robert Lynn Hall
---------------------------------------
Robert Lynn Hall
President ao
941460039/16
- 42 -
<PAGE> 1
PLAN OF MERGER
--------------
This Plan of Merger (the "Plan") dated as of August 31, 1994 by and
between WEDGE BANK, an Illinois state bank having its principal place of
business at 620 East Broadway, P.O. Box 2393, Alton, Illinois 62002-9057
("Wedge Bank") and MERCANTILE BANK OF ALTON, an Illinois state bank having its
principal place of business at 620 East Broadway, P.O. Box 2393, Alton,
Illinois 62002-9057 ("Acquisition Bank"), such banks being hereinafter
collectively referred to as the "Constituent Banks."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Wedge Bank is chartered as an Illinois state bank by the
Illinois Commissioner of Banks and Trust Companies, is duly authorized,
validly existing and in good standing under the laws of the State of Illinois,
having an authorized capital of 144,300 shares of common stock, $10.00 par
value (the "Wedge Bank Common Stock"), of which 144,300 shares will be issued
and outstanding as of the Effective Time, as herein defined; and
WHEREAS, Acquisition Bank is chartered as an Illinois state bank by the
Illinois Commissioner of Banks and Trust Companies, is duly authorized,
validly existing and in good standing under the laws of the State of Illinois,
having authorized capital of 3,500 shares of common stock, $10.00 par value
(the "Acquisition Bank Common Stock"), of which 3,500 shares are issued and
outstanding on the date hereof and which are owned beneficially and of record
by Mercantile Bancorporation of Illinois Inc., a Missouri corporation
("Mercantile Illinois"); and
WHEREAS, the respective Boards of Directors of Wedge Bank and
Acquisition Bank each will have duly approved this Plan providing for the
merger of Bank with and into Wedge Bank as the surviving bank as authorized by
the statutes of the State of Illinois (the "Merger"), which approvals shall be
in the form of the resolutions attached hereto as Addendum I; and
WHEREAS, Wedge Bank, Wedge Holding Company, an Illinois corporation and
holder of 82.1690% of the Wedge Bank Common Stock ("Wedge Holding"),
Mercantile Illinois and Mercantile Bancorporation Inc., a Missouri corporation
and holder of all of the issued and outstanding stock of Mercantile Illinois
("Mercantile"), have entered into an Agreement and Plan of Reorganization (the
"Agreement"), pursuant to which Mercantile Illinois and Wedge Holding will
consummate an exchange of all shares of Wedge Bank Common Stock owned
beneficially and of record by Wedge Holding (the "Exchange") for shares of the
common stock, $5.00 par value, of Mercantile ("Mercantile Common Stock"), and,
simultaneously with the Exchange, Acquisition Bank will merge with and into
Wedge Bank (the "Merger" and together with the Exchange, the "Acquisition"),
and the shareholders of Wedge Bank (other than Mercantile Illinois and Wedge
Holding) will receive shares of Mercantile Common Stock in conversion of their
shares of Wedge Common Stock; and
<PAGE> 2
WHEREAS, Mercantile Illinois owns all the outstanding shares of
Acquisition Bank;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and for the purpose of setting forth the
terms and conditions of the Merger, the manner and the basis of causing the
shares of Wedge Bank Common Stock (other than shares owned by Mercantile
Illinois or Wedge Holding) to be converted into Mercantile Common Stock, as
herein provided, and such other details and provisions as are deemed necessary
or proper, the parties hereto have agreed, subject to the approval and
adoption of this Plan by the requisite vote of the shareholders of each
Constituent Bank, and subject to the conditions hereinafter set forth, as
follows:
ARTICLE I
Merger and Name of Surviving Bank
---------------------------------
At the Effective Time (as defined herein), Acquisition Bank shall be
merged with and into Wedge Bank, which is hereby designated as the "Surviving
Bank", the name of which upon and after the Effective Time shall be Wedge Bank
and the principal place of business of which upon and after the Effective Time
shall be 620 East Broadway, P.O. Box 2393, Alton, Illinois, 62002-9007.
ARTICLE II
Terms and Conditions of Merger
------------------------------
The terms and conditions of the Merger are (in addition to those set
forth elsewhere in this Plan) as follows:
Section 1. At the Effective Time:
(a) Acquisition Bank shall be merged with and into Wedge Bank, and Wedge
Bank shall be, and is designated herein as, the Surviving Bank.
(b) The separate existence of Acquisition Bank shall cease.
(c) The Surviving Bank shall thereupon and thereafter possess all the
rights, privileges, immunities, and franchises, of a public as well as of a
private nature, of each of the Constituent Banks; and all property, real,
personal, and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choices in action, and all and every
other interest, of or belonging to or due to each of the Constituent Banks,
shall be taken and deemed to be transferred to and vested in the Surviving
Bank without further act or deed; and the title
- 2 -
<PAGE> 3
to any real estate, or any interest therein, vested in either Constituent Bank
shall not revert or be in any way impaired by reason of the Merger; the
Surviving Bank shall thenceforth be responsible and liable for all the
liabilities and obligations of each of the Constituent Banks; and any claim
existing or action or proceeding pending by or against either of such
Constituent Banks may be prosecuted to judgment as if the Merger had not taken
place, or such Surviving Bank may be substituted in its place. Neither the
rights of creditors nor any liens upon the property of either of the
Constituent Banks shall be impaired by the Merger.
Section 2. At the Effective Time, the Charter and Bylaws of the
Surviving Bank shall be the Charter and Bylaws of Wedge Bank, respectively,
until amended in accordance with their provisions and applicable law.
Surviving Bank's capital account and surplus account shall equal the combined
capital accounts and surplus accounts of Wedge Bank and Acquisition Bank.
Section 3. At the Effective Time, the members of the Board of
Directors and the terms of those directors of Surviving Bank shall be as
designated by Mercantile Illinois immediately prior to the Effective Time.
Section 4. At the Effective Time, the officers of Surviving Bank
shall be the persons designated by Mercantile Illinois immediately prior to
the Effective Time and such persons will serve in their designated offices,
thereafter, until their respective successors are duly elected and qualified.
Section 5. At the Effective Time, the Community Reinvestment Act
statement, the market area, and the plan of operation of the Surviving Bank
shall be those of Wedge Bank. A copy of the Community Reinvestment Act
Statement is attached hereto as Addendum II. Copies of the maps of the market
areas of Wedge Bank are attached hereto as Addendum III.
Section 6. A detailed pro forma combined consolidated balance sheet
of Surviving Bank and a pro forma statement of income and expenses of
Surviving Bank as of one year from the Effective Date are attached hereto as
Addenda IV and V, respectively.
ARTICLE III
Manner and Basis of Converting Shares
-------------------------------------
The manner and basis of converting the shares of Wedge Bank into the
right to receive Mercantile Common Stock and the mode of carrying the Merger
into effect are as follows:
- 3 -
<PAGE> 4
Section 1. Conversion of Bank Common Stock
-------------------------------
At the Effective Time, the 3,500 shares of Acquisition Bank Common Stock
outstanding shall be converted into shares of Surviving Bank common stock.
Section 2. Conversion of Wedge Bank Common Stock
-------------------------------------
(a) At the Effective Time, Mercantile will issue 970,000 shares of
Mercantile Common Stock in the Exchange and the Merger (hereinafter such
shares shall be referred to in the aggregate as the "Acquisition
Consideration"). Wedge Holding and each of the other shareholders of Wedge
Bank (other than Mercantile Illinois and Wedge Holding, as the case may be)
will be entitled to receive the number of shares of Mercantile Common Stock
issuable as the Acquisition Consideration that is determined by multiplying
such Acquisition Consideration by such shareholders' respective percentage
ownership interests in Wedge Bank. A list of the shareholders of Wedge Bank
is attached hereto as Addendum VI.
(b) At the Effective Time, Wedge Holding, by virtue of the Exchange and
without any other action on the part of the Mercantile Entities or Wedge
Holding, will be entitled to receive its percentage interest of the
Acquisition Consideration as determined in Section 2(a) hereof, upon delivery
at the closing of the Acquisition of the certificates evidencing its shares of
Wedge Bank Common Stock. Also, at the Effective Time, by virtue of the Merger
and without any action on the part of the Mercantile, Mercantile Illinois,
Acquisition Bank, Wedge Bank or any Wedge Bank shareholder, each share of
Wedge Bank Common Stock issued and outstanding at the Effective Time (other
than any shares held by Mercantile Illinois or Wedge Holding or any of their
respective wholly owned subsidiaries, (in each case other than in a fiduciary
capacity or as a result of debts previously contracted)), which shall be
cancelled, and other than any shares held by any holder who becomes entitled
to payment of the fair value of such shares under Section 29 of the Illinois
Banking Act, shall cease to be outstanding and shall be converted into and
become the right to receive his or her percentage interest of the Acquisition
Consideration as determined in Section 2(a) hereof.
(c) Neither certificates nor scrip for fractional shares of Mercantile
Common Stock shall be issued as Acquisition Consideration. Each holder of
shares of Wedge Bank Common Stock who otherwise would have been entitled to a
fraction of a share of Mercantile Common Stock shall receive in lieu thereof
and, at the time such holder receives the shares of Mercantile Common Stock to
which the holder is entitled as Acquisition Consideration, 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 Composite
- 4 -
<PAGE> 5
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.
Section 3. Dissenting Wedge Bank Shareholders
----------------------------------
Any shareholder of Wedge Bank may (1) vote against the Merger at the
shareholder meeting of Wedge Bank called to vote upon the Merger, or (2) give
notice in writing at or prior to the meeting of his dissent from the Merger.
Such shareholder is then entitled to receive the value of the shares held by
him, valued as of the date on which the meeting was held, if and when the
Merger is approved by the FDIC, if a request is made before thirty days after
consummation of the Merger.
Section 4. Wedge Bank Common Stock Certificates
------------------------------------
After the Effective Time, each holder of an outstanding certificate
which prior thereto represented shares of Wedge Bank Common Stock shall be
entitled, upon surrender thereof to Mercantile or its designee, to receive in
exchange therefor the number of shares of Mercantile Common Stock into which
it has been converted. Until so surrendered, each such outstanding
certificate which, prior to the Effective Time, represented shares of Wedge
Bank Common Stock shall for all purposes evidence the right to receive the
Mercantile Common Stock into which such shares shall have been so converted;
provided that dividends or other distributions which are payable in respect of
shares of Mercantile Common Stock into which shares of Wedge Bank Common Stock
shall have been so converted shall be set aside by Mercantile and shall not be
paid to holders of certificates representing such shares of Wedge Bank Common
Stock until such certificates shall have been so surrendered in exchange for
certificates representing such Mercantile Common Stock. Upon such surrender
the holders of such shares shall be entitled to receive such dividends without
interest.
The Mercantile Common Stock into which shares of the Wedge Bank Common
Stock shall have been converted pursuant to this Article III shall be issued
in full satisfaction of all rights pertaining to such converted shares.
ARTICLE IV
Other Provisions with Respect to Merger
---------------------------------------
Section 1. This Plan shall be submitted to the shareholders of each
Constituent Bank as provided by the Illinois Banking Act, as amended (the
"Illinois Banking Act"). After the approval or adoption thereof by the
shareholders of each Constituent Bank in accordance with the requirements of
the laws of the Illinois Banking Act, all required documents, including the
Articles of Merger, shall be executed, filed and recorded and all required
- 5 -
<PAGE> 6
acts shall be done in order to accomplish the Merger pursuant to the Illinois
Banking Act subject to the terms and conditions of the Agreement.
Section 2. Termination
-----------
If the Agreement is terminated, then this Plan shall simultaneously
terminate without further action by the Constituent Banks. In the event of
such termination, the Board of Directors of each of the Constituent Banks
shall direct its officers not to file this Plan as provided above
notwithstanding favorable action on this Plan by the shareholders of Wedge
Bank or Bank.
Section 3. Approval of Commissioner
------------------------
The parties agree to submit this Plan to the Illinois Commissioner of
Banks and Trust Companies (the "Illinois Commissioner") for approval, together
with certified copies of the authorizing resolutions of the Boards of
Directors of Acquisition Bank and Wedge Bank showing approval by a majority of
the entire Board of each. Whether approved or disapproved by the Illinois
Commissioner, Acquisition Bank and Wedge Bank shall pay all expenses incurred
by the Commissioner in connection with the examination of this Plan.
Section 4. Retention of Branches
---------------------
Pursuant to the Illinois Banking Act and with the approval of the
Illinois Commissioner, immediately following the Effective Time (as
hereinafter defined) the Surviving Bank shall maintain and operate branches at
each of the locations set forth in Exhibit A attached hereto and made a part
hereof. This section shall not limit the Surviving Bank's right to future
branching opportunities as set forth in the Illinois Banking Act.
ARTICLE V
Approval and Effective Time of Merger; Miscellaneous Matters
------------------------------------------------------------
Section 1. The Merger shall become effective when all the following
actions have been taken: (i) this Plan shall be (a) authorized, adopted and
approved on behalf of each Constituent Bank in accordance with the Illinois
Statute, and (b) filed with the Illinois Commissioner and the Illinois
Commissioner shall have granted his approval of the Merger; (ii) the approval
necessary under the Federal Deposit Insurance Act shall have been received and
all applicable waiting periods shall have expired; and (iii) copies of
resolutions of the shareholders of each merging bank approving it, certified
by the Acquisition Bank's president or vice-president or the cashier, shall be
filed with the Illinois Commissioner. The time at which such actions are
completed and the Commissioner issues a
- 6 -
<PAGE> 7
certificate of merger is herein referred to as the "Effective Time".
Section 2. If at any time the Surviving Bank shall deem or be advised
that any further grants, assignments, confirmations or assurances are
necessary or desirable to vest, perfect or confirm, of record or otherwise, in
the Surviving Bank the title to any property of Wedge Bank acquired or to be
acquired by or as a result of the Merger, the officers or any of them and
directors of the Surviving Bank shall be and they hereby are severally and
fully authorized to execute and deliver any and all such deeds, assignments,
confirmations and assurances and to do all things necessary or proper so as to
best prove, confirm and ratify title to such property in the Surviving Bank
and otherwise carry out the purposes of the Merger and the terms of this Plan.
Section 3. For the convenience of the parties and to facilitate the
filing and recording of this Plan, any number of counterparts hereof may be
executed, and each such counterpart shall be deemed to be an original
instrument and all such counterparts together shall be considered one
instrument.
Section 4. This Plan cannot be altered or amended except pursuant to
an instrument in writing signed on behalf of the parties hereto.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, each Constituent Bank has caused this Plan to be
executed, all as of the date first above written.
WEDGE BANK
[SEAL]
By:------------------------------------
ATTEST:
Title:---------------------------------
- -----------------------------
MERCANTILE BANK OF ALTON
[SEAL]
By:------------------------------------
ATTEST:
Title:---------------------------------
- -----------------------------
4076L.AP
- 8 -
<PAGE> 9
LIST OF ADDENDA
Addendum I Resolutions of Board of Directors of Wedge
Bank; Resolutions of Board of Directors of
Mercantile Bank of Alton
Addendum II Community Reinvestment Act Statement of
Wedge Bank
Addendum III Map of Market Areas of Wedge Bank
Addendum IV Pro Forma Combined Consolidated Balance
Sheet of Wedge Bank, as Surviving Bank
Addendum V Pro Forma Statement of Income and Expenses
of Wedge Bank, as Surviving Bank, as of
One Year from Effective Date
Addendum VI List of Shareholder of Wedge Bank
- 9 -
<PAGE> 1
SHAREHOLDER AGREEMENT
This SHAREHOLDER AGREEMENT dated as of July 6, 1994, is
entered into between MERCANTILE BANCORPORATION INC. ("Mercantile"),
and MELVIN G. HALL ("Shareholder").
WHEREAS, Shareholder is the beneficial and record owner of
four and seventy-one one-hundredths percent (4.71%) of the issued
and outstanding shares of the common stock of Wedge Bank, an
Illinois state bank ("Wedge Bank"), and serves as the Chairman and
Chief Executive Officer of Wedge Bank; and
WHEREAS, Shareholder is the beneficial and record owner of
seventy-two and thirty-five one-hundredths percent (72.35%) of the
issued and outstanding shares of the preferred stock and fifty-
three and eighty-eight one-hundredths percent (53.88%) of the
issued and outstanding shares of the common stock of The Wedge
Holding Company, an Illinois corporation ("Wedge Holding"), which
is the beneficial and record owner of eighty-two and sixteen one-
hundredths percent (82.16%) of the issued and outstanding shares of
the common stock of Wedge Bank, and serves as Chairman and Chief
Executive Officer of Wedge Holding; and
WHEREAS, Wedge Holding, Wedge Bank, Mercantile and its wholly
owned subsidiary, Mercantile Bancorporation of Illinois Inc.
("Mercantile Illinois"), have proposed to enter into an Agreement
and Plan of Reorganization (the "Agreement"), dated as of today,
which contemplates the acquisition by Mercantile of 100% of the
common stock of Wedge Bank by means of (i) an exchange of all
shares of common stock of Wedge Bank owned beneficially and of
record by Wedge Holding for shares of Mercantile Common Stock (the
"Exchange"); and (ii) simultaneously with the Exchange, the merger
of a to-be-formed bank that will be wholly owned by Mercantile
Illinois with and into Wedge Bank (the "Merger") whereby the
holders of shares of Wedge Bank Common Stock (except Mercantile
Illinois or Wedge Holding) will receive shares of Mercantile Common
Stock as set forth in the Agreement; and
WHEREAS, Mercantile is willing to expend the substantial time,
effort and expense necessary to implement the Exchange and the
Merger, only if Shareholder enters into this Shareholder Agreement;
and
WHEREAS, Shareholder believes that the Exchange and the Merger
are in his best interest and the best interests of Wedge Holding
and Wedge Bank.
NOW, THEREFORE, in consideration of these premises,
Shareholder hereby agrees as follows:
1. Voting Agreement. Shareholder will vote all of the
----------------
shares of Wedge Holding Common Stock he now owns or hereafter
acquires in favor of the Exchange at the meeting of shareholders of
Wedge Holding to be called for the purpose of approving the
Exchange and all of the shares of Wedge Bank Common Stock he now
<PAGE> 2
owns or hereafter acquires in favor of the Merger at the meeting of
shareholders of Wedge Bank to be called for the purpose of
approving the Merger (the "Wedge Bank Meeting" and, collectively,
the "Meetings"), and will take any and all actions necessary and
appropriate to cause all shares of Wedge Bank Common Stock now
owned by Wedge Holding or hereafter acquired by Wedge Holding to be
voted in favor of the Merger at the Wedge Bank Meeting.
2. No Competing Transaction. Shareholder will not, directly
------------------------
or indirectly, cause the initiation, solicitation or encouragement,
or voting any of the shares of Wedge Holding Common Stock or by
Wedge Bank Common Stock now or hereafter acquired by Shareholder or
by Wedge Holding in favor of any other merger or sale of all or
substantially all the assets of Wedge Holding or Wedge Bank to any
person other than Mercantile or its affiliates until the earlier to
occur of: (i) the closing of the Exchange and the Merger, (ii) the
termination of the Agreement or (iii) the abandonment of the
Exchange and the Merger by the mutual agreement of Wedge Holding,
Wedge Bank and Mercantile.
3. Transfers Restricted. From and after the date of this
--------------------
Shareholder Agreement, Shareholder will not sell, dispose of or
otherwise transfer any shares of Wedge Holding Common Stock or
Wedge Bank Common Stock owned beneficially or of record by him and
further agrees that Shareholder will not take any action to cause
Wedge Holding, from and after the date of this Shareholder
Agreement, to dispose of or otherwise transfer any shares of Wedge
Bank Common Stock owned by Wedge Holding.
4. Meeting. At Mercantile's request, Shareholder shall use
-------
his best efforts to cause the Meetings to be held as soon as
practicable.
5. Representations and Warranties True and Correct.
-----------------------------------------------
Shareholder acknowledges that he has reviewed the representations
and warranties of Wedge Holding and of Wedge Bank set forth in
Article II of the Agreement and certifies that, to the best
knowledge of Shareholder, such representations and warranties are
true and correct in all material aspect.
6. No Ownership Interest. Nothing contained in this
---------------------
Shareholder 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 Wedge Holding Common Stock or Wedge Bank
Common Stock. All rights, ownership and economic benefits of and
relating to the shares of Wedge Holding Common Stock and Wedge Bank
Common Stock owned by Shareholder shall remain and belong to
Shareholder and Mercantile shall have no authority to manage,
direct, superintend, restrict, regulate, govern or administer any
of the policies or operations of Wedge Holding or Wedge Bank or
exercise any power or authority to direct Shareholder in the voting
of any of his shares of Wedge Holding Common Stock or Wedge Bank
Common Stock, except as otherwise expressly provided herein, or the
- 2 -
<PAGE> 3
performance of his duties or responsibilities as a shareholder of
Wedge Holding or Wedge Bank.
7. Evaluation of Investment. Shareholder, by reason of his
------------------------
knowledge and experience in financial and business matters and in
his capacity as a director and executive officer of Wedge Holding
and Wedge Bank, believes himself capable of evaluating the merits
and risks of the potential investment in Mercantile Common Stock
contemplated by the Agreement.
8. Documents Delivered. Shareholder acknowledges having
-------------------
reviewed the Agreement and its attachments and the related Plan of
Merger and that reports, proxy statements and other information
with respect to Mercantile filed with the Securities and Exchange
Commission were, prior to his execution of this Shareholder
Agreement, available for inspection and copying at the offices of
Mercantile and that Mercantile delivered the following such
documents to Wedge Holding and Wedge Bank:
(a) Mercantile's Annual Report on Form 10-K for the
year ended December 31, 1993;
(b) Mercantile's Annual Report to Shareholders for the
year ended December 31, 1993; and
(c) Mercantile's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994.
9. Amendment and Modification. This Shareholder Agreement
--------------------------
may be amended, modified or supplemented at any time by the written
approval of such amendment, modification or supplement by
Shareholder and Mercantile.
10. Entire Agreement. This Shareholder 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.
This Shareholder Agreement supersedes any agreements among Wedge
Holding and/or Wedge Bank and Shareholder concerning the Exchange,
the Merger, or the disposition or control of the capital stock of
Wedge Holding or Wedge Bank.
11. Severability. The parties agree that if any provision of
------------
this Shareholder Agreement shall under any circumstances be deemed
invalid or inoperative, this Shareholder 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.
12. Counterparts. This Shareholder Agreement may be executed
------------
in counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
- 3 -
<PAGE> 4
13. Governing Law. The validity, construction, enforcement
-------------
and effect of this Shareholder Agreement shall be governed by the
internal laws of the State of Illinois.
14. Headings. The headings for the paragraphs of this
--------
Shareholder Agreement are inserted for convenience only and shall
not constitute a part hereof or affect the meaning or
interpretation of this Shareholder Agreement.
15. Successors. This Shareholder Agreement shall be binding
----------
upon and inure to the benefit of Mercantile and its successors, and
Shareholder and Shareholder's spouse and their respective
executors, personal representatives, administrators, heirs,
legatees, guardians and other legal representatives. This
Shareholder Agreement shall survive the death or incapacity of
Shareholder. This agreement may be assigned by Mercantile only to
an affiliate of Mercantile.
IN WITNESS WHEREOF, the parties have caused this Shareholder
Agreement to be executed as of the date first above written.
MERCANTILE BANCORPORATION INC.
/s/ Ralph W. Babb, Jr.
By:------------------------------------
Ralph W. Babb, Jr.
Vice Chairman
SHAREHOLDER
/s/ Melvin G. Hall
---------------------------------------
Melvin G. Hall
941510020/6ao
- 4 -
<PAGE> 1
SHAREHOLDER AGREEMENT
This SHAREHOLDER AGREEMENT dated as of July 6, 1994, is
entered into between MERCANTILE BANCORPORATION INC. ("Mercantile"),
and ROBERT LYNN HALL ("Shareholder").
WHEREAS, Shareholder is the beneficial and record owner of one
and sixty-three one-hundredths percent (1.63%) of the issued and
outstanding shares of the common stock of Wedge Bank, an Illinois
state bank ("Wedge Bank"), and serves as President of Wedge Bank;
and
WHEREAS, Shareholder is the beneficial and record owner of
fifteen and seventy-two one-hundredths percent (15.72%) of the
issued and outstanding shares of the preferred stock and thirty and
ninety one-hundredths percent (30.90%) of the issued and
outstanding shares of the common stock of The Wedge Holding
Company, an Illinois corporation ("Wedge Holding"), which is the
beneficial and record owner of eighty-two and sixteen one-
hundredths percent (82.16%) of the issued and outstanding shares of
the common stock of Wedge Bank, and serves as President of Wedge
Holding; and
WHEREAS, Wedge Holding, Wedge Bank, Mercantile and its wholly
owned subsidiary, Mercantile Bancorporation of Illinois Inc.
("Mercantile Illinois"), have proposed to enter into an Agreement
and Plan of Reorganization (the "Agreement"), dated as of today,
which contemplates the acquisition by Mercantile of 100% of the
common stock of Wedge Bank by means of (i) an exchange of all
shares of common stock of Wedge Bank owned beneficially and of
record by Wedge Holding for shares of Mercantile Common Stock (the
"Exchange"); and (ii) simultaneously with the Exchange, the merger
of a to-be-formed bank that will be wholly owned by Mercantile
Illinois with and into Wedge Bank (the "Merger") whereby the
holders of shares of Wedge Bank Common Stock (except Mercantile
Illinois or Wedge Holding) will receive shares of Mercantile Common
Stock as set forth in the Agreement; and
WHEREAS, Mercantile is willing to expend the substantial time,
effort and expense necessary to implement the Exchange and the
Merger, only if Shareholder enters into this Shareholder Agreement;
and
WHEREAS, Shareholder believes that the Exchange and the Merger
are in his best interest and the best interests of Wedge Holding
and Wedge Bank.
NOW, THEREFORE, in consideration of these premises,
Shareholder hereby agrees as follows:
1. Voting Agreement. Shareholder will vote all of the
----------------
shares of Wedge Holding Common Stock he now owns or hereafter
acquires in favor of the Exchange at the meeting of shareholders of
Wedge Holding to be called for the purpose of approving the
Exchange and all of the shares of Wedge Bank Common Stock he now
<PAGE> 2
owns or hereafter acquires in favor of the Merger at the meeting of
shareholders of Wedge Bank to be called for the purpose of
approving the Merger (the "Wedge Bank Meeting" and, collectively,
the "Meetings"), and will take any and all actions necessary and
appropriate to cause all shares of Wedge Bank Common Stock now
owned by Wedge Holding or hereafter acquired by Wedge Holding to be
voted in favor of the Merger at the Wedge Bank Meeting.
2. No Competing Transaction. Shareholder will not, directly
------------------------
or indirectly, cause the initiation, solicitation or encouragement,
or voting any of the shares of Wedge Holding Common Stock or by
Wedge Bank Common Stock now or hereafter acquired by Shareholder or
by Wedge Holding in favor of any other merger or sale of all or
substantially all the assets of Wedge Holding or Wedge Bank to any
person other than Mercantile or its affiliates until the earlier to
occur of: (i) the closing of the Exchange and the Merger, (ii) the
termination of the Agreement or (iii) the abandonment of the
Exchange and the Merger by the mutual agreement of Wedge Holding,
Wedge Bank and Mercantile.
3. Transfers Restricted. From and after the date of this
--------------------
Shareholder Agreement, Shareholder will not sell, dispose of or
otherwise transfer any shares of Wedge Holding Common Stock or
Wedge Bank Common Stock owned beneficially or of record by him and
further agrees that Shareholder will not take any action to cause
Wedge Holding, from and after the date of this Shareholder
Agreement, to dispose of or otherwise transfer any shares of Wedge
Bank Common Stock owned by Wedge Holding.
4. Meeting. At Mercantile's request, Shareholder shall use
-------
his best efforts to cause the Meetings to be held as soon as
practicable.
5. Representations and Warranties True and Correct.
-----------------------------------------------
Shareholder acknowledges that he has reviewed the representations
and warranties of Wedge Holding and Wedge Bank set forth in Article
II of the Agreement and certifies that to the best knowledge of
Shareholder, such representations and warranties are true and
correct in all material respects.
6. No Ownership Interest. Nothing contained in this
---------------------
Shareholder 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 Wedge Holding Common Stock or Wedge Bank
Common Stock. All rights, ownership and economic benefits of and
relating to the shares of Wedge Holding Common Stock and Wedge Bank
Common Stock owned by Shareholder shall remain and belong to
Shareholder and Mercantile shall have no authority to manage,
direct, superintend, restrict, regulate, govern or administer any
of the policies or operations of Wedge Holding or Wedge Bank or
exercise any power or authority to direct Shareholder in the voting
of any of his shares of Wedge Holding Common Stock or Wedge Bank
Common Stock, except as otherwise expressly provided herein, or the
- 2 -
<PAGE> 3
performance of his duties or responsibilities as a shareholder of
Wedge Holding or Wedge Bank.
7. Evaluation of Investment. Shareholder, by reason of his
------------------------
knowledge and experience in financial and business matters and in
his capacity as a director and executive officer of Wedge Holding
and Wedge Bank, believes himself capable of evaluating the merits
and risks of the potential investment in Mercantile Common Stock
contemplated by the Agreement.
8. Documents Delivered. Shareholder acknowledges having
-------------------
reviewed the Agreement and its attachments and the related Plan of
Merger and that reports, proxy statements and other information
with respect to Mercantile filed with the Securities and Exchange
Commission were, prior to his execution of this Shareholder
Agreement, available for inspection and copying at the offices of
Mercantile and that Mercantile delivered the following such
documents to Wedge Holding and Wedge Bank:
(a) Mercantile's Annual Report on Form 10-K for the
year ended December 31, 1993;
(b) Mercantile's Annual Report to Shareholders for the
year ended December 31, 1993; and
(c) Mercantile's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994.
9. Amendment and Modification. This Shareholder Agreement
--------------------------
may be amended, modified or supplemented at any time by the written
approval of such amendment, modification or supplement by
Shareholder and Mercantile.
10. Entire Agreement. This Shareholder 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.
This Shareholder Agreement supersedes any agreements among Wedge
Holding and/or Wedge Bank and Shareholder concerning the Exchange,
the Merger, or the disposition or control of the capital stock of
Wedge Holding or Wedge Bank.
11. Severability. The parties agree that if any provision of
------------
this Shareholder Agreement shall under any circumstances be deemed
invalid or inoperative, this Shareholder 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.
12. Counterparts. This Shareholder Agreement may be executed
------------
in counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
- 3 -
<PAGE> 4
13. Governing Law. The validity, construction, enforcement
-------------
and effect of this Shareholder Agreement shall be governed by the
internal laws of the State of Illinois.
14. Headings. The headings for the paragraphs of this
--------
Shareholder Agreement are inserted for convenience only and shall
not constitute a part hereof or affect the meaning or
interpretation of this Shareholder Agreement.
15. Successors. This Shareholder Agreement shall be binding
----------
upon and inure to the benefit of Mercantile and its successors, and
Shareholder and Shareholder's spouse and their respective
executors, personal representatives, administrators, heirs,
legatees, guardians and other legal representatives. This
Shareholder Agreement shall survive the death or incapacity of
Shareholder. This agreement may be assigned by Mercantile only to
an affiliate of Mercantile.
IN WITNESS WHEREOF, the parties have caused this Shareholder
Agreement to be executed as of the date first above written.
MERCANTILE BANCORPORATION INC.
/s/ Ralph W. Babb, Jr.
By:------------------------------------
Ralph W. Babb, Jr.
Vice Chairman
SHAREHOLDER
/s/ Robert Lynn Hall
---------------------------------------
Robert Lynn Hall
941460023/7ao
- 4 -
<PAGE> 1
October 5, 1994
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
Re: Registration Statement on Form S-4
Gentlemen:
We refer you to the Registration Statement on Form S-4
filed by Mercantile Bancorporation Inc. (the "Company"), on
October 5, 1994 (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended, pertaining to the proposed
issuance by the Company of up to 970,000 shares of the Company's
common stock, $5.00 par value (the "Shares"), in connection with
the acquisition by the Company of substantially all of the assets
of The Wedge Holding Company and the acquisition by merger by the
Company of Wedge Bank, pursuant to the Agreement and Plan of
Reorganization dated as of July 6, 1994 (the "Merger Agreement"),
by and among the Company, Mercantile Bancorporation Incorporated
of Illinois, The Wedge Holding Company and Wedge Bank, all as
provided in the Registration Statement. In rendering the
opinions set forth herein, we have examined such corporate
records of the Company, such laws and such other information as
we have deemed relevant, including the Company's Restated
Articles of Incorporation and Bylaws, as amended and currently in
effect, the resolutions adopted by the Executive Committee of the
Company's Board of Directors relating to the merger transaction,
certificates received from state officials and statements we have
received from officers and representatives of the Company. In
delivering this opinion, the undersigned assume the genuineness
of all signatures; the authenticity of all documents submitted to
us as originals; the conformity to the originals of all documents
submitted to us as certified, photostatic or conformed copies;
the authenticity of the originals of all such latter documents;
and the correctness of statements submitted to us by officers and
representatives of the Company.
Based solely on the foregoing, the undersigned is of
the opinion that:
1. The Company has been duly incorporated and is
validly existing under the laws of the State of Missouri; and
<PAGE> 2
Mercantile Bancorporation Inc.
October 5, 1994
Page 2
2. The Shares to be sold by the Company, when issued
as provided in the Merger Agreement, will be duly authorized,
duly and validly issued and fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm
in the section of the Proxy Statement/Prospectus entitled "Legal
Matters."
Very truly yours,
/s/ Thompson & Mitchell
<PAGE> 1
October 5, 1994
Board of Directors
The Wedge Holding Company
620 East Broadway
Alton, Illinois 62002
Board of Directors
Wedge Bank
620 East Broadway
Alton, Illinois 62002
Gentlemen:
You have requested our opinion with regard to certain
federal income tax consequences of the proposed acquisition of
all of the issued and outstanding stock of Wedge Bank, an
Illinois state bank ("Bank"), by Mercantile Bancorporation
Incorporated of Illinois, a Missouri corporation ("Mercantile
Illinois"). Mercantile Illinois is a wholly owned subsidiary of
Mercantile Bancorporation Inc., a Missouri corporation ("MBI").
The proposed acquisition will be accomplished in two simultaneous
steps consisting of (i) an exchange by Mercantile Illinois of
solely MBI common stock, par value $5.00 per share ("MBI Common
Stock"), in return for all Bank common stock, par value $10.00
per share ("Bank Common Stock") owned by The Wedge Holding
Company, a Delaware corporation ("Holding"), (the "Exchange"),
and (ii) the merger of Mercantile Bank of Alton, a wholly owned
subsidiary of Mercantile Illinois ("Acquisition Bank") with and
into Bank (the "Merger") pursuant to which the stockholders of
Bank (other than Mercantile Illinois) who do not dissent from the
Merger will receive solely MBI Common Stock in exchange for their
Bank Common Stock. In connection with the Exchange, Holding will
distribute the MBI Common Stock received and all of its remaining
properties in complete liquidation (the "Liquidation") and will
dissolve in connection with the Liquidation.
In connection with the preparation of our opinion, we
have examined and have relied upon the following:
(i) The Agreement and Plan of Reorganization by and
among MBI, Mercantile Illinois, Bank and Holding, dated
July 6, 1994, including the exhibits and schedules
thereto, and the Plan of Merger by and between Bank and
Acquisition Bank, dated as of August 31, 1994
(collectively, the "Plan");
<PAGE> 2
The Wedge Holding Company
Wedge Bank
October 5, 1994
Page 2
(ii) MBI's Registration Statement on Form S-4,
including the Proxy Statement/Prospectus contained
therein, filed with the Securities and Exchange
Commission on October 5, 1994;
(iii) The representations and undertakings of MBI and
Mercantile Illinois substantially in the form of
Exhibit A hereto;
(iv) The representations and undertakings of Holding,
Bank, certain holders of Holding common stock, par
value $100.00 per share ("Holding Common Stock"),
certain holders of Holding preferred stock, par value
$50 per share ("Holding Preferred Stock"),
substantially in the form of Exhibits B, C, D and E
hereto; and
(v) The Rights Plan between MBI and Mercantile Bank
National Association, dated May 23, 1988.
Our opinion is based solely upon applicable law and the
factual information and undertakings contained in the above-
mentioned documents. In rendering our opinion, we have assumed
the accuracy of all information and the performance of all
undertakings contained in each of such documents, with the
exception of (i) the second sentence of Section 2.04 of the Plan
(which erroneously describes the assets of Wedge Holding as
unencumbered at the time the time the Plan was executed) and (ii)
all references in the Plan that describe Wedge Holding as an
Illinois corporation. We now assume that the Plan will be
enforced in all respects as if Wedge Holding were correctly
described therein as a Delaware corporation. We also have
assumed the authenticity of all original documents, the
conformity of all copies to the original documents, and the
genuineness of all signatures. We have not attempted to verify
independently the accuracy of any information in any such
document, and we have assumed that such documents accurately and
completely set forth all material facts relevant to this opinion.
All of our assumptions were made with your consent. If any fact
or assumption described herein or below is incorrect, any or all
of the opinions expressed herein may be inapplicable.
OPINIONS
Subject to the foregoing, to the conditions and
limitations expressed elsewhere herein, and assuming that the
Exchange and the Merger are consummated in accordance with the
Plan, we are of the opinion that for federal income tax purposes:
1. Each of the Exchange and the Merger will
constitute a reorganization within the meaning of section
368(a)(1) of the Internal Revenue Code of 1986, as amended to the
date hereof (the "Code").
<PAGE> 3
The Wedge Holding Company
Wedge Bank
October 5, 1994
Page 3
2. No gain or loss will be recognized by Holding on
its transfer of Bank Common Stock solely in exchange for MBI
Common Stock in the Exchange (Code sections 354(a)(1) and
361(a));
3. No gain or loss will be recognized by Holding on
its distribution of MBI Common Stock to its stockholders in the
Liquidation (Code section 361(c));
4. Each stockholder of Holding who exchanges, in the
Liquidation, his or its shares of Holding Common Stock solely for
shares of MBI Common Stock:
a) will recognize no gain or loss (Code section
354(a)(1));
b) will have an aggregate adjusted basis for the
shares of MBI Common Stock received equal to the
aggregate basis of the shares of Holding Common Stock
surrendered (Code section 358(a)(1)); and
c) will have a holding period for the shares of MBI
Common Stock received which includes the period during
which the shares of Holding Common Stock surrendered
were held, provided that the shares of Holding Common
Stock surrendered were capital assets in the hands of
such stockholder (Code section 1223(1)).
5. Each stockholder of Holding who exchanges, in the
Liquidation, his or its shares of Holding Preferred Stock solely
for shares of MBI Common Stock:
a) will recognize no gain or loss (Code section
354(a)(1));
b) will have an aggregate adjusted basis for the
shares of MBI Common Stock received equal to the
aggregate basis of the shares of Holding Preferred
Stock surrendered (Code section 358(a)(1)); and
c) will have a holding period for the shares of MBI
Common Stock received which includes the period during
which the shares of Holding Preferred Stock surrendered
were held, provided that the shares of Holding
Preferred Stock surrendered were capital assets in the
hands of such stockholder (Code section 1223(1)).
6. Each stockholder of Bank who exchanges, in the
Merger, his or its shares of Bank Common Stock solely for shares
of MBI Common Stock:
<PAGE> 4
The Wedge Holding Company
Wedge Bank
October 5, 1994
Page 4
a) will recognize no gain or loss, except with regard
to cash received in lieu of a fractional share, as
discussed below (Code section 354(a)(1));
b) will have an aggregate adjusted basis for the
shares of MBI Common Stock received (including any
fractional share of MBI Common Stock deemed to be
received, as described in paragraph 7, below) equal to
the aggregate basis of the shares of Bank Common Stock
surrendered (Code section 358(a)(1)); and
c) will have a holding period for the shares of MBI
Common Stock received (including any fractional share
of MBI Common Stock deemed to be received, as described
in paragraph 7, below) which includes the period during
which the shares of Bank Common Stock surrendered were
held, provided that the shares of Bank Common Stock
surrendered were capital assets in the hands of such
holder (Code section 1223(1)).
7. Each stockholder of Bank who receives cash in lieu
of a fractional share of MBI Common Stock will be treated as if
the fractional share had been received and then redeemed by MBI
in return for the cash. Provided that the shares of Bank Common
Stock surrendered were capital assets in the hands of such
holder, the receipt of such cash will cause the recipient to
recognize capital gain or loss, equal to the difference between
the amount of cash received and the portion of such holder's
adjusted tax basis in the shares of MBI Common Stock allocable to
the fractional share interest (Code sections 1001 and 1222; Rev.
Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41, 1977-2 C.B. 574).
* * * * * * * * * * * *
We express no opinion with regard to (1) the federal
income tax consequences of the Exchange or the Merger not
addressed expressly by the above opinions, including without
limitation, (i) the tax consequences, if any, to those
stockholders of Bank who acquired their shares of Bank Common
Stock pursuant to the exercise of employee stock options or
otherwise as compensation, (ii) the tax consequences, if any, to
those stockholders of Holding who acquired their shares of
Holding Common Stock or Holding Preferred Stock pursuant to the
exercise of employee stock options or otherwise as compensation,
(iii) the tax consequences, if any, to stockholders of Holding
with respect to shares of Holding Common Stock or Holding
Preferred Stock acquired after July 6, 1994, and (iv) the tax
consequences to special classes of Bank stockholders or Holding
stockholders, if any, including without limitation, foreign
persons, insurance companies, tax-exempt entities, retirement
plans, and dealers in securities; and (2) federal, state, local,
or foreign taxes (or any other federal, state, local, or foreign
laws) not specifically referred to and discussed herein.
Further, our opinions are based upon the Code, Treasury
Regulations proposed or promulgated thereunder, administrative
interpretations and judicial precedents relating to the Code or
Treasury Regulations as of the date hereof, all of which are
subject to change at any time, possibly with retroactive effect,
and we assume
<PAGE> 5
The Wedge Holding Company
Wedge Bank
October 5, 1994
Page 5
no obligation to advise you of any subsequent change thereto. If
there is any change in the applicable law or regulations, or if
there is any new administrative or judicial interpretation of the
applicable law or regulations, any or all of the opinions
expressed herein may become inapplicable.
The foregoing opinions reflect our legal judgment
solely on the issues presented and discussed herein. These
opinions have no official status or binding effect of any kind.
Accordingly, we cannot assure you that the Internal Revenue
Service will agree with the opinions expressed herein, nor can we
assure you that any court of competent jurisdiction will agree
with such opinions.
We hereby consent to the filing of this letter as an
exhibit to MBI's Registration Statement filed October 5, 1994 in
connection with the proposed Merger and to all references made to
this letter in such Registration Statement.
Very truly yours,
/s/ Thompson & Mitchell
<PAGE> 6
Exhibit A
CERTIFICATE
-----------
The undersigned Mercantile Bancorporation Inc., a
Missouri corporation ("MBI"), through Ralph W. Babb, Jr., its
Vice Chairman, and the undersigned Mercantile Bancorporation
Incorporated of Illinois, a Missouri corporation ("Mercantile
Illinois"), through Ralph W. Babb, Jr., its Chairman, EACH HEREBY
CERTIFIES that (a) it is familiar with the terms and conditions
of the Agreement and Plan of Reorganization by and among MBI,
Mercantile Illinois, Wedge Bank, an Illinois state bank ("Bank"),
and The Wedge Holding Company, a Delaware corporation
("Holding"), dated July 6, 1994, and the Plan of Merger by and
between Bank and Mercantile Bank of Alton, a wholly owned
subsidiary of Mercantile Illinois ("Acquisition Bank"), dated as
of August 31, 1994 (collectively, the "Agreement"), and (b) it is
aware that, pursuant to the Agreement, Mercantile Illinois will
acquire all outstanding Bank common stock, par value $10.00 per
share ("Bank Common Stock"), solely in exchange for MBI common
stock, par value $5.00 per share ("MBI Common Stock"), in two
simultaneous transactions consisting of (i) an exchange by
Holding of its Bank Common Stock solely in return for MBI Common
Stock to be issued on behalf of Mercantile Illinois (the
"Exchange"), and (ii) the merger of Acquisition Bank with and
into Bank (the "Merger") pursuant to which the stockholders of
Bank (other than Mercantile Illinois) who do not dissent from the
Merger will receive solely MBI Common Stock; and (c) it is aware
that (i) this Certificate will be relied on by Thompson &
Mitchell, counsel for MBI, in rendering its opinion to Bank that
the Exchange and the Merger will each constitute a reorganization
within the meaning of section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) the representations and
undertaking recited herein will survive the Exchange and the
Merger.
Each of the undersigned HEREBY FURTHER CERTIFIES that:
(1) Before the effective time of the Exchange and the
Merger (the "Effective Time"), Mercantile Illinois will own all
of the issued and outstanding stock of Acquisition Bank.
(2) Before the Effective Time, Acquisition Bank will
have no assets or liabilities other than assets, if any, received
from Mercantile Illinois to satisfy Acquisition Bank's
capitalization requirements (the "Minimum Assets"). Mercantile
Illinois will cause Bank to return the Minimum
<PAGE> 7
Assets to Mercantile Illinois within thirty (30) days after the Effective
Time by means of a dividend distribution or other payment.
(3) Neither MBI nor any other member of the MBI's
"affiliated group" (as the quoted term is defined in Code section
1504) (the "MBI Affiliated Group") has owned, directly or
indirectly, any stock of Holding or any stock of Bank within the
last five years.
(4) No indebtedness between Holding or Bank, on the
one hand, and MBI or any other member of the MBI Affiliated
Group, on the other hand, exists or will exist prior to the
Effective Time that (a) was issued or acquired at a discount, or
(b) will be settled, as a result of the Exchange or the Merger,
at a discount. No "installment obligation" (as the quoted term
is defined for purposes of Code section 453B), between Bank on
the one hand, and Mercantile Bank of Illinois National
Association or Acquisition Bank, on the other hand, exists or
will exist prior to the Effective Time that will be extinguished
as a result of the Merger or as a result of the proposed merger
of Mercantile Bank of Illinois National Association with and into
Bank.
(5) With regard to each of the Exchange and the
Merger, the fair market value of the MBI Common Stock (including
cash in lieu of a fractional share of MBI Common Stock, if any)
to be received by each Bank stockholder will be approximately
equal to the fair market value of the Bank Common Stock
surrendered by each such stockholder.
(6) The payment of cash in lieu of fractional shares
of MBI Common Stock in each of the Exchange and the Merger will
be solely for the purpose of avoiding the expense and
inconvenience to MBI of issuing fractional shares and will not
represent separately bargained-for consideration.
(7) MBI, Mercantile Illinois, Acquisition Bank,
Holding, the stockholders of Holding, Bank, and the stockholders
of Bank will each pay their respective expenses, if any, incurred
in connection with the Exchange or the Merger; provided, however,
that Mercantile Illinois (but not MBI) may pay and assume those
types of expenses of Bank that are solely and directly related to
the Exchange or the Merger in accordance with the guidelines
established in Rev. Rul. 73-54, 1973-1 C.B. 187, including those
printing and filing fees described in Section 5.06 of the
Agreement.
<PAGE> 8
(8) Except with regard to MBI Common Stock (including
cash in lieu of fractional shares of MBI Common Stock, if any)
and those expenses payable or assumable by Mercantile Illinois in
accordance with representation 7 above, neither Mercantile
Illinois nor any other member of the MBI Affiliated Group will
pay (or lend) any amount or incur any liability to or for the
benefit of, or assume any liability of, Holding, any stockholder
of Holding, Bank, or any stockholder of Bank in connection with
the Exchange or the Merger, and no liability to which Bank Common
Stock is subject will be extinguished as a result of the Exchange
or the Merger.
For purposes of this representation, any payment (or
loan) to or for the benefit of a stockholder of Holding or a
stockholder of Bank (including without limitation, any payment
from Holding or Bank in the form of a dividend, distribution, or
redemption, or any payment to a dissenter) with cash or other
property furnished, directly or indirectly, by Mercantile
Illinois or any other member of the MBI Affiliated Group will be
treated as a payment by Mercantile Illinois to or for the benefit
of that stockholder.
For purposes of this representation, the term
"liability" shall include any contingent or other undertaking to
pay or to cause the reduction, release, or extinguishment of, any
obligation, without regard to whether any such obligation or
undertaking is legally enforceable (for example, and without
limitation, the term "liability" includes an unenforceable
agreement to cause the repayment of an obligation guaranteed by a
Holding stockholder (or by a Bank stockholder) and an
unenforceable agreement to cause the release of such guaranty).
(9) All payments made to Bank stockholders who dissent
from the Merger will be funded with Bank assets from an escrow to
be established and funded before the Effective Time by Bank for
that purpose.
(10) Neither MBI nor any other member of the MBI
Affiliated Group has any plan or intention to redeem or otherwise
reacquire any of the MBI Common Stock issued to the stockholders
of Bank in the Exchange or the Merger.
(11) After the Effective Time, (a) Bank will not issue
additional shares of its stock that would result in Mercantile
Illinois losing control of Bank within the meaning of section
368(c) of the Code, and (b) Bank will not have outstanding any
warrants, options, convertible securities, or any other type of
right (including any preemptive right) pursuant to which any
person other than Mercantile Illinois could acquire stock in
Bank.
<PAGE> 9
(12) Neither MBI nor any other member of the MBI
Affiliated Group has any plan or intention (a) to liquidate Bank,
(b) to merge Bank with and into another corporation, (c) except
for transfers to controlled corporations (as described in section
368(a)(2)(C) of the Code), to sell or otherwise dispose (whether
by dividend distribution or otherwise) of the stock of Bank, or
(d) except for dispositions made in the ordinary course of
business or dispositions approved by counsel for MBI, to cause,
suffer, or permit Bank to sell or otherwise dispose (whether by
dividend distribution or otherwise) of any assets held by Bank
immediately after the Effective Time (excluding the Acquisition
Bank's Minimum Assets acquired by Bank as a result of the Merger
and any funds deposited in escrow that are paid to dissenters).
The proposed merger of Mercantile Bank of Illinois
National Association with and into Bank (the "MBINA Merger")
after the Effective Time is not a plan or intention described in
this representation 12. There will be no dissenters to the MBINA
Merger, Bank will not dispose of any of its assets in connection
with the MBINA Merger, and Bank (and its Illinois banking
charter, as may be amended in connection with the MBINA Merger)
will survive the MBINA Merger.
(13) After the Effective Time, Bank will continue its
historic businesses or will use a significant portion of its
historic business assets in a business.
(14) None of the compensation to be paid or accrued
after the Effective Time to or for the benefit of any
stockholder-employee of Holding or Bank will be separate
consideration for, or allocable to, any of their shares of
Holding stock or Bank Common Stock; none of the shares of MBI
Common Stock received in either the Exchange or the Merger by any
stockholder-employee of Bank or Holding will be separate
consideration for, or allocable to, any employment agreement; and
all compensation to be paid or accrued after the Effective Time
to or for the benefit of any stockholder-employee of Holding or
Bank will be for services actually rendered in the ordinary
course of his or her employment and will be commensurate with
amounts paid to third parties bargaining at arm's length for
similar services.
(15) With regard to the Rights Plan between MBI and
Mercantile Bank National Association, dated May 23, 1988, (the
"Rights Agreement"), no "Distribution Date" (as the quoted term
is defined in the Rights Agreement) has occurred, and the Merger
will not cause the occurrence of a Distribution Date.
<PAGE> 10
The undersigned HEREBY AGREES to immediately
communicate in writing to Thompson & Mitchell at One Mercantile
Center, St. Louis, Missouri 63101, to the attention of Charles H.
Binger, any information that could indicate (i) any of the
foregoing representations was inaccurate when made, or (ii) any
of the foregoing representations would be inaccurate if it were
made immediately before the Effective Time.
IN WITNESS WHEREOF, I have hereunto signed my name and
affixed the seal of MBI this 5th day of October, 1994.
MERCANTILE BANCORPORATION INC.
---------------------------------
Ralph W. Babb, Jr., Vice Chairman
MERCANTILE BANCORPORATION INCORPORATED
OF ILLINOIS
------------------------------
Ralph W. Babb, Jr., Chairman
<PAGE> 11
Exhibit B
CERTIFICATE
-----------
The undersigned, Melvin G. Hall, Chairman and Chief
Executive Officer of The Wedge Holding Company, a Delaware corporation
("Holding"), HEREBY CERTIFIES that (a) I am familiar with the terms
and conditions of the Agreement and Plan of Reorganization by and
among Mercantile Bancorporation Inc., a Missouri corporation ("MBI"),
Mercantile Bancorporation Incorporated of Illinois, a Missouri
corporation ("Mercantile Illinois"), Wedge Bank, an Illinois state
bank ("Bank"), and Holding dated July 6, 1994, and the Plan of Merger
by and between Bank and Mercantile Bank of Alton, a wholly owned
subsidiary of Mercantile Illinois ("Acquisition Bank"), dated as of
August 31, 1994 (collectively, the "Agreement"), and (b) I am aware
that, pursuant to the Agreement, Mercantile Illinois will acquire all
outstanding Bank common stock, par value $10.00 per share ("Bank
Common Stock"), solely in exchange for MBI common stock, par value
$5.00 per share ("MBI Common Stock"), in two simultaneous transactions
consisting of (i) an exchange by Holding of its Bank Common Stock
solely in return for MBI Common Stock to be issued on behalf of
Mercantile Illinois (the "Exchange"), and (ii) the merger of
Acquisition Bank with and into Bank (the "Merger") pursuant to which
the stockholders of Bank (other than Mercantile Illinois) who do not
dissent from the Merger will receive solely MBI Common Stock; and (c)
I am aware that (i) this Certificate will be relied on by Thompson &
Mitchell, counsel for MBI, in rendering its opinion to Bank that the
Exchange and the Merger will each constitute a reorganization within
the meaning of section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) the representations and undertaking
recited herein will survive the Exchange and the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF HOLDING,
that:
(1) No indebtedness between Holding or any other member of
the Holding's "affiliated group" (as the quoted term is defined in
Code section 1504) (the "Holding Affiliated Group"), on the one hand,
and MBI or any other member of MBI's "affiliated group" (as the quoted
term is defined in Code section 1504) (the "MBI Affiliated Group"), on
the other hand, exists or will exist prior to the effective time of
the Exchange and the Merger (the "Effective Time") that (a) was issued
or acquired at a discount, (b) will be settled, in connection with the
Exchange or the Merger, at a discount, or (c) will be extinguished as
a result of the Exchange or the Merger. With regard to the
indebtedness between Holding and Mercantile Bank of St. Louis National
Association (the
<PAGE> 12
"Loan"), all principal and accrued interest thereon will be paid in full on
or before November 1, 1994, and the terms of such indebtedness have not
been (and will not be) modified or waived.
(2) At the Effective Time, the fair market value of the
assets of Holding will exceed the sum of the amount of liabilities of
Holding, plus the amount of liabilities, if any, to which Holding's
assets are then subject. No liabilities of Holding will be assumed by
MBI or any other member of the MBI Affiliated Group, and the Bank
Common Stock to be acquired by Mercantile Illinois will not be subject
to any liabilities at the Effective Time.
(3) At the Effective Time, the Bank Common Stock acquired
by Mercantile Illinois will represent at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair
market value of the gross assets, in each case, that were held by
Holding immediately prior to the Effective Time. For purposes of this
representation, assets used by Holding to pay dissenters or to pay
stockholders who receive cash, and assets used by Holding to pay
expenses of the Exchange or the Merger or to fund any redemption or
distribution within 24 months before the Effective Time (except for
regular, normal dividends) shall be included as assets of Holding held
immediately prior to the Effective Time. For purposes of this
representation, any asset of Holding or any other member of the
Holding Affiliated Group that is disposed of within 24 months before
the Effective Time other than in the ordinary course of business also
shall be included as an asset of Holding held immediately prior to the
Effective Time (including, for example and without limitation, any
dividends described in Section 4.02(a) of the Agreement).
(4) At the Effective Time and except with regard to
Miscellaneous Amounts (as defined below), each liability of Holding or
each liability to which an asset of Holding is subject will have been
incurred by Holding in the ordinary course of business and no such
liability will have been incurred in anticipation of the Merger. In
addition, at the Effective Time and except with regard to
Miscellaneous Amounts, Holding will not have paid (or loaned) any
amount or incurred any liability, directly or indirectly, to or for
the benefit of any Holding stockholder to induce such stockholder's
assistance or acquiescence in, or vote in favor of, the Exchange or
the Merger. For purposes of this representation, (a) the term
"Holding" shall be deemed also to refer to each other member of
Holding's "affiliated group" (as the quoted term is defined in Code
section 1504) (the "Holding Affiliated Group"), (b) the term
"liability" shall include any contingent obligation or any other
undertaking to pay or to cause the reduction, release, or
extinguishment of, any obligation, without regard to whether any such
obligation or undertaking is legally enforceable (for example, and
without
<PAGE> 13
limitation, the term "liability" includes an unenforceable agreement to
cause the repayment of an obligation guaranteed by a Holding stockholder
(or by a Bank stockholder) and an unenforceable agreement to cause the
release of such guaranty), and (c) the term "Miscellaneous Amounts" shall
mean amounts paid or liabilities incurred in connection with the Exchange
(i) for legal, accounting, and investment banking and/or advisor services
rendered to Holding, if any, (ii) and (iii) in repayment of the Loan with
Holding's portion of the $375,000 dividend described in Section 4.02(a) of
the Agreement.
(5) None of the compensation paid or accrued to or for the
benefit of any Holding stockholder-employee will be separate
consideration for, or allocable to, any of their shares of Holding
Common Stock or Holding Preferred Stock; none of the shares of MBI
Common Stock received in the Exchange or the Merger by any Holding
stockholder-employee will be separate consideration for, or allocable
to, any employment agreement; and all compensation paid or accrued to
or for the benefit of any Holding stockholder-employee will be for
services actually rendered in the ordinary course of his or her
employment and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services. With regard to the
employment agreement between MBI and Melvin G. Hall dated July 6, 1994
(the "Employment Contract"), Holding or Bank shall have paid to Melvin
G. Hall prior to the Effective Time a 1994 incentive bonus of at least
$234,500.00, and as a result MBI shall have no liability to Melvin G.
Hall under the third paragraph of the Employment Contract.
(6) The fair market value of the MBI Common Stock to be
received by each Holding stockholder in connection with the Exchange
(pursuant to the subsequent liquidation of Holding) will be
approximately equal to the fair market value of the Holding Common
Stock and Holding Preferred Stock surrendered in connection with the
Exchange (pursuant to the subsequent liquidation of Holding) by each
such stockholder.
(7) The payment of cash in lieu of fractional shares of MBI
Common Stock will be solely for the purpose of avoiding the expense
and inconvenience to MBI of issuing fractional shares and will not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the Exchange to Holding in lieu of
fractional shares of MBI Common Stock will not exceed the value of one
full share of MBI Common Stock.
<PAGE> 14
(8) Expenses, if any, that are incurred in connection with
the Exchange or the Merger and are properly attributable to Holding's
stockholders will be paid by those stockholders and not by Holding.
Holding will pay its own expenses that are incurred in connection with
the Exchange or the Merger.
(9) Holding will distribute all of its assets (including
all of the MBI Common Stock received in the Exchange) and liabilities
(if any) to its stockholders no later than six months after the
Exchange and will at that time be dissolved. With the exception of
470 shares of Holding Common Stock issued to Robert Lynn Hall in March
1994, no stock of Holding has been issued during 1994 and none will be
issued prior to the dissolution of Holding. Holding will distribute
all such assets (and liabilities, if any) to its stockholders pro rata
in accordance with the percentage of the fair market value of the
shares of Holding Common Stock and Holding Preferred Stock held by
each. For purposes of this representation, Holding Preferred Stock
shall be treated as having a fair market value of $50.00 per share.
(10) There are no dividend arrearages on any series of
Holding Preferred Stock; no redemption premium will be paid to holders
of Holding Preferred Stock; and no share of Holding Preferred Stock
constitutes "section 306 stock" (within the meaning of section 306(c)
of the Code).
The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson & Mitchell at One Mercantile Center, St. Louis,
Missouri 63101, to the attention of Charles H. Binger, any information
that could indicate (i) any of the foregoing representations was
inaccurate when made, or (ii) any of the foregoing representations
would be inaccurate if it were made immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and
affixed the seal of Holding this 5th day of October, 1994.
--------------------------------------
Melvin G. Hall
Chairman and Chief Executive Officer
<PAGE> 15
Exhibit C
CERTIFICATE
-----------
The undersigned, Robert Lynn Hall, President of Wedge Bank,
an Illinois state Bank ("Bank"), HEREBY CERTIFIES that (a) I am
familiar with the terms and conditions of the Agreement and Plan of
Reorganization by and among Mercantile Bancorporation Inc., a Missouri
corporation ("MBI"), Mercantile Bancorporation Incorporated of
Illinois, a Missouri corporation ("Mercantile Illinois"), Bank, and
The Wedge Holding Company, a Delaware corporation ("Holding"), dated
July 6, 1994, and the Plan of Merger by and between Bank and
Mercantile Bank of Alton, a wholly owned subsidiary of Mercantile
Illinois ("Acquisition Bank"), dated as of August 31, 1994
(collectively, the "Agreement"), and (b) I am aware that, pursuant to
the Agreement, Mercantile Illinois will acquire all outstanding Bank
common stock, par value $10.00 per share ("Bank Common Stock"), solely
in exchange for MBI common stock, par value $5.00 per share ("MBI
Common Stock"), in two simultaneous transactions consisting of (i) an
exchange by Holding of its Bank Common Stock solely in return for MBI
Common Stock to be issued on behalf of Mercantile Illinois (the
"Exchange"), and (ii) the merger of Acquisition Bank with and into
Bank (the "Merger") pursuant to which the stockholders of Bank (other
than Mercantile Illinois) who do not dissent from the Merger will
receive solely MBI Common Stock; and (c) I am aware that (i) this
Certificate will be relied on by Thompson & Mitchell, counsel for MBI,
in rendering its opinion to Bank that the Exchange and the Merger will
each constitute a reorganization within the meaning of section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and (ii)
the representations and undertaking recited herein will survive the
Exchange and the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF BANK,
that:
(1) To the best knowledge of the undersigned, neither MBI
nor any other member of the MBI's "affiliated group" (as the quoted
term is defined in Code section 1504) (the "MBI Affiliated Group") has
owned, directly or indirectly, any stock of Bank within the last five
years.
(2) No indebtedness between Bank or any other member of
Bank's "affiliated group" (defined as above) (the "Bank Affiliated
Group"), on the one hand, and MBI or any other member of the MBI
Affiliated Group, on the other hand, exists or will exist prior to the
effective time of the Exchange and the Merger (the "Effective Time")
that (a) was issued or acquired at a discount, or (b) will be settled,
as a result of the Merger, at a discount. No "installment obligation"
(as the
<PAGE> 16
quoted term is defined for purposes of Code section 453B), between Bank, on
the one hand, and MBI or Acquisition Bank on the other hand, exists or will
exist prior to the Effective Time that will be extinguished as a result of
the Merger.
(3) At the Effective Time and except with regard to
Miscellaneous Amounts (as defined below), each liability of Bank or
each liability to which an asset of Bank is subject will have been
incurred by Bank in the ordinary course of business and no such
liability will have been incurred in anticipation of the Merger. In
addition, at the Effective Time and except with regard to
Miscellaneous Amounts, Bank will not have paid (or loaned) any amount
or incurred any liability, directly or indirectly, to or for the
benefit of any Bank stockholder to induce such stockholder's
assistance or acquiescence in, or vote in favor of, the Merger. For
purposes of this representation, (a) the term "Bank" shall be deemed
also to refer to each other member of Holding's "affiliated group" (as
the quoted term is defined in Code section 1504) (the "Bank Affiliated
Group"), (b) the term "liability" shall include any contingent
obligation or any other undertaking to pay or to cause the reduction,
release, or extinguishment of, any obligation, without regard to
whether any such obligation or undertaking is legally enforceable (for
example, and without limitation, the term "liability" includes an
unenforceable agreement to cause the repayment of an obligation
guaranteed by a Holding stockholder (or by a Bank stockholder) and an
unenforceable agreement to cause the release of such guaranty), and
(c) the term "Miscellaneous Amounts" shall mean amounts paid or
liabilities incurred in connection with the Merger (i) to dissenters,
if any, (ii) for legal, accounting, and investment banking and/or
advisor services rendered to Bank, if any, (iii) as compensation to
any Bank employee for services rendered in the ordinary course of his
or her employment, and (iv) for the $375,000 dividend described in
Section 4.02(a) of the Agreement (the "Dividend").
(4) At the Effective Time, Bank will not have outstanding
any warrants, options, convertible securities, or any other type of
right (including any preemptive right) pursuant to which any person
could acquire stock in Bank that, if exercised or converted after the
Effective Time would affect MBI's acquisition or retention of control
of Bank (within the meaning of section 368(c) of the Code).
(5) None of the compensation paid or accrued before the
Effective Time to or for the benefit of any Bank stockholder-employee
will be separate consideration for, or allocable to, any of their
shares of Bank Common Stock; none of the shares of MBI Common Stock
received in the Merger by any Bank stockholder-employee will be
separate consideration for, or allocable to, any
<PAGE> 17
employment agreement; and all compensation paid or accrued before the
Effective Time to or for the benefit of any Bank stockholder-employee will
be for services actually rendered in the ordinary course of his or her
employment and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services. With regard to the
employment agreement between MBI and Melvin G. Hall dated July 6, 1994 (the
"Employment Contract"), Holding or Bank shall have paid to Melvin G.
Hall prior to the Effective Time a 1994 incentive bonus of at least
$234,500.00, and as a result MBI shall have no liability to Melvin G.
Hall under the third paragraph of the Employment Contract.
(6) The fair market value of the MBI Common Stock to be
received by each Bank stockholder in the Merger (including cash to be
received in lieu of fractional shares of MBI Common Stock, if any)
will be approximately equal to the fair market value of the Bank
Common Stock surrendered in the Merger by each such stockholder.
(7) There is no plan, intention or other arrangement
(including any option or pledge) on the part of the holders of 1% or
more of the Bank Common Stock and, to the best knowledge of the
undersigned, there is no plan, intention or other arrangement
(including any option or pledge) on the part of the other holders of
Bank Common Stock to sell, exchange or otherwise dispose of a number
of shares of MBI Common Stock received by such holders in the Merger
that would reduce such holders' ownership of MBI Common Stock to a
number of shares having a value, as of the Effective Time, of less
than 50 percent of the value of all of the formerly outstanding Bank
Common Stock as of the Effective Time. For purposes of this
representation, shares of Bank Common Stock exchanged for cash or
other property, surrendered by dissenters, or exchanged for cash in
lieu of fractional shares of MBI Common Stock will be treated as
outstanding on the Effective Time. Moreover, all shares of Bank
Common Stock and/or shares of MBI Common Stock held by Bank
stockholders and otherwise sold, redeemed, or disposed of before or
after the Effective Time will be taken into account in making this
representation.
As with the other representations contained herein, the
undersigned will undertake any and all actions necessary to ensure the
accuracy of the foregoing representation.
(8) The payment of cash in lieu of fractional shares of MBI
Common Stock will be solely for the purpose of avoiding the expense
and inconvenience to MBI of issuing fractional shares and will not
represent separately bargained-for consideration. The total cash
consideration that
<PAGE> 18
will be paid in the Merger to the Bank stockholders in lieu of fractional
shares of MBI Common Stock will not exceed one percent of the total
consideration that will be issued in the transaction to the Bank
stockholders in exchange for their shares of Bank Common Stock. The
fractional share interests of each Bank stockholder will be aggregated, and
no Bank stockholder will receive cash in lieu of fractional share interests
in an amount equal to or greater than the value of one full share of MBI
Common Stock.
(9) Expenses, if any, that are incurred in connection with
the Merger and are properly attributable to Bank's stockholders will
be paid by those stockholders and not by Bank. Bank will pay its own
expenses that are incurred in connection with the Merger.
(10) All payments made to dissenters and all other payments
made to holders of Bank Common Stock in connection with the Merger
(including the Dividend, but excluding cash to be paid in lieu of
fractional shares) will be funded by Bank. Bank has sufficient liquid
assets to fund any such payments. All payments made to dissenters, if
any, will be funded with Bank assets from an escrow to be established
before the Effective Time by Bank for that purpose.
(11) Immediately after the Effective Time, Bank will hold
assets representing at least 90 percent of the fair market value of
the net assets and at least 70 percent of the fair market value of the
gross assets, in each case, that were held by Bank immediately prior
to the Effective Time. For purposes of this representation, Bank
assets used to pay dissenters or to pay stockholders who receive cash,
and Bank assets used to pay expenses of the Merger or to fund any
redemption or distribution within 24 months before the Effective Time
(except for regular, normal dividends) shall be included as assets of
Bank held immediately prior to the Effective Time. For purposes of
this representation, any asset of Bank that is disposed of within 24
months before the Merger other than in the ordinary course of business
also shall be included as an asset of Bank held immediately prior to
the Merger (including, for example and without limitation, the
Dividend).
(12) Immediately after the Effective Time and determined
without regard to any assets to be received from MBI or any other
member of the MBI Affiliated Group (including those assets to be
received as a result of the merger of Mercantile Bank of Illinois
National Association with and into Bank), the assets held by Bank will
be sufficient to enable Bank to continue its business and investment
activities at historical levels and in accordance with past practice,
without resort to additional capital or borrowed funds.
<PAGE> 19
The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson & Mitchell at One Mercantile Center, St. Louis,
Missouri 63101, to the attention of Charles H. Binger, any information
that could indicate (i) any of the foregoing representations was
inaccurate when made, or (ii) any of the foregoing representations
would be inaccurate if it were made immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and
affixed the seal of Bank this 5th day of October, 1994.
------------------------------
Robert Lynn Hall, President
<PAGE> 20
Exhibit C
CERTIFICATE
-----------
The undersigned, Melvin G. Hall, Chairman and Chief
Executive Officer of Wedge Bank, an Illinois state Bank ("Bank"),
HEREBY CERTIFIES that (a) I am familiar with the terms and conditions
of the Agreement and Plan of Reorganization by and among Mercantile
Bancorporation Inc., a Missouri corporation ("MBI"), Mercantile
Bancorporation Incorporated of Illinois, a Missouri corporation
("Mercantile Illinois"), Bank, and The Wedge Holding Company, a
Delaware corporation ("Holding"), dated July 6, 1994, and the Plan of
Merger by and between Bank and Mercantile Bank of Alton, a wholly
owned subsidiary of Mercantile Illinois ("Acquisition Bank"), dated as
of August 31, 1994 (collectively, the "Agreement"), and (b) I am aware
that, pursuant to the Agreement, Mercantile Illinois will acquire all
outstanding Bank common stock, par value $10.00 per share ("Bank
Common Stock"), solely in exchange for MBI common stock, par value
$5.00 per share ("MBI Common Stock"), in two simultaneous transactions
consisting of (i) an exchange by Holding of its Bank Common Stock
solely in return for MBI Common Stock to be issued on behalf of
Mercantile Illinois (the "Exchange"), and (ii) the merger of
Acquisition Bank with and into Bank (the "Merger") pursuant to which
the stockholders of Bank (other than Mercantile Illinois) who do not
dissent from the Merger will receive solely MBI Common Stock; and (c)
I am aware that (i) this Certificate will be relied on by Thompson &
Mitchell, counsel for MBI, in rendering its opinion to Bank that the
Exchange and the Merger will each constitute a reorganization within
the meaning of section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) the representations and undertaking
recited herein will survive the Exchange and the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF BANK,
that:
(1) To the best knowledge of the undersigned, neither MBI
nor any other member of the MBI's "affiliated group" (as the quoted
term is defined in Code section 1504) (the "MBI Affiliated Group") has
owned, directly or indirectly, any stock of Bank within the last five
years.
(2) No indebtedness between Bank or any other member of
Bank's "affiliated group" (defined as above) (the "Bank Affiliated
Group"), on the one hand, and MBI or any other member of the MBI
Affiliated Group, on the other hand, exists or will exist prior to the
effective time of the Exchange and the Merger (the "Effective Time")
that (a) was issued or acquired at a discount, or (b) will be settled,
as a result of the Merger, at a discount. No "installment obligation"
(as the
<PAGE> 21
quoted term is defined for purposes of Code section 453B), between Bank, on
the one hand, and MBI or Acquisition Bank on the other hand, exists or will
exist prior to the Effective Time that will be extinguished as a result of
the Merger.
(3) At the Effective Time and except with regard to
Miscellaneous Amounts (as defined below), each liability of Bank or
each liability to which an asset of Bank is subject will have been
incurred by Bank in the ordinary course of business and no such
liability will have been incurred in anticipation of the Merger. In
addition, at the Effective Time and except with regard to
Miscellaneous Amounts, Bank will not have paid (or loaned) any amount
or incurred any liability, directly or indirectly, to or for the
benefit of any Bank stockholder to induce such stockholder's
assistance or acquiescence in, or vote in favor of, the Merger. For
purposes of this representation, (a) the term "Bank" shall be deemed
also to refer to each other member of Holding's "affiliated group" (as
the quoted term is defined in Code section 1504) (the "Bank Affiliated
Group"), (b) the term "liability" shall include any contingent
obligation or any other undertaking to pay or to cause the reduction,
release, or extinguishment of, any obligation, without regard to
whether any such obligation or undertaking is legally enforceable (for
example, and without limitation, the term "liability" includes an
unenforceable agreement to cause the repayment of an obligation
guaranteed by a Holding stockholder (or by a Bank stockholder) and an
unenforceable agreement to cause the release of such guaranty), and
(c) the term "Miscellaneous Amounts" shall mean amounts paid or
liabilities incurred in connection with the Merger (i) to dissenters,
if any, (ii) for legal, accounting, and investment banking and/or
advisor services rendered to Bank, if any, (iii) as compensation to
any Bank employee for services rendered in the ordinary course of his
or her employment, and (iv) for the $375,000 dividend described in
Section 4.02(a) of the Agreement (the "Dividend").
(4) At the Effective Time, Bank will not have outstanding
any warrants, options, convertible securities, or any other type of
right (including any preemptive right) pursuant to which any person
could acquire stock in Bank that, if exercised or converted after the
Effective Time would affect MBI's acquisition or retention of control
of Bank (within the meaning of section 368(c) of the Code).
(5) None of the compensation paid or accrued before the
Effective Time to or for the benefit of any Bank stockholder-employee
will be separate consideration for, or allocable to, any of their
shares of Bank Common Stock; none of the shares of MBI Common Stock
received in the Merger by any Bank stockholder-employee will be
separate consideration for, or allocable to, any
<PAGE> 22
employment agreement; and all compensation paid or accrued before the
Effective Time to or for the benefit of any Bank stockholder-employee will
be for services actually rendered in the ordinary course of his or her
employment and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services. With regard to the
employment agreement between MBI and Melvin G. Hall dated July 6, 1994 (the
"Employment Contract"), Holding or Bank shall have paid to Melvin G.
Hall prior to the Effective Time a 1994 incentive bonus of at least
$234,500.00, and as a result MBI shall have no liability to Melvin G.
Hall under the third paragraph of the Employment Contract.
(6) The fair market value of the MBI Common Stock to be
received by each Bank stockholder in the Merger (including cash to be
received in lieu of fractional shares of MBI Common Stock, if any)
will be approximately equal to the fair market value of the Bank
Common Stock surrendered in the Merger by each such stockholder.
(7) There is no plan, intention or other arrangement
(including any option or pledge) on the part of the holders of 1% or
more of the Bank Common Stock and, to the best knowledge of the
undersigned, there is no plan, intention or other arrangement
(including any option or pledge) on the part of the other holders of
Bank Common Stock to sell, exchange or otherwise dispose of a number
of shares of MBI Common Stock received by such holders in the Merger
that would reduce such holders' ownership of MBI Common Stock to a
number of shares having a value, as of the Effective Time, of less
than 50 percent of the value of all of the formerly outstanding Bank
Common Stock as of the Effective Time. For purposes of this
representation, shares of Bank Common Stock exchanged for cash or
other property, surrendered by dissenters, or exchanged for cash in
lieu of fractional shares of MBI Common Stock will be treated as
outstanding on the Effective Time. Moreover, all shares of Bank
Common Stock and/or shares of MBI Common Stock held by Bank
stockholders and otherwise sold, redeemed, or disposed of before or
after the Effective Time will be taken into account in making this
representation.
As with the other representations contained herein, the
undersigned will undertake any and all actions necessary to ensure the
accuracy of the foregoing representation.
(8) The payment of cash in lieu of fractional shares of MBI
Common Stock will be solely for the purpose of avoiding the expense
and inconvenience to MBI of issuing fractional shares and will not
represent separately bargained-for consideration. The total cash
consideration that
<PAGE> 23
will be paid in the Merger to the Bank stockholders in lieu of fractional
shares of MBI Common Stock will not exceed one percent of the total
consideration that will be issued in the transaction to the Bank
stockholders in exchange for their shares of Bank Common Stock. The
fractional share interests of each Bank stockholder will be aggregated, and
no Bank stockholder will receive cash in lieu of fractional share interests
in an amount equal to or greater than the value of one full share of MBI
Common Stock.
(9) Expenses, if any, that are incurred in connection with
the Merger and are properly attributable to Bank's stockholders will
be paid by those stockholders and not by Bank. Bank will pay its own
expenses that are incurred in connection with the Merger.
(10) All payments made to dissenters and all other payments
made to holders of Bank Common Stock in connection with the Merger
(including the Dividend, but excluding cash to be paid in lieu of
fractional shares) will be funded by Bank. Bank has sufficient liquid
assets to fund any such payments. All payments made to dissenters, if
any, will be funded with Bank assets from an escrow to be established
before the Effective Time by Bank for that purpose.
(11) Immediately after the Effective Time, Bank will hold
assets representing at least 90 percent of the fair market value of
the net assets and at least 70 percent of the fair market value of the
gross assets, in each case, that were held by Bank immediately prior
to the Effective Time. For purposes of this representation, Bank
assets used to pay dissenters or to pay stockholders who receive cash,
and Bank assets used to pay expenses of the Merger or to fund any
redemption or distribution within 24 months before the Effective Time
(except for regular, normal dividends) shall be included as assets of
Bank held immediately prior to the Effective Time. For purposes of
this representation, any asset of Bank that is disposed of within 24
months before the Merger other than in the ordinary course of business
also shall be included as an asset of Bank held immediately prior to
the Merger (including, for example and without limitation, the
Dividend).
(12) Immediately after the Effective Time and determined
without regard to any assets to be received from MBI or any other
member of the MBI Affiliated Group (including those assets to be
received as a result of the merger of Mercantile Bank of Illinois
National Association with and into Bank), the assets held by Bank will
be sufficient to enable Bank to continue its business and investment
activities at historical levels and in accordance with past practice,
without resort to additional capital or borrowed funds.
<PAGE> 24
The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson & Mitchell at One Mercantile Center, St. Louis,
Missouri 63101, to the attention of Charles H. Binger, any information
that could indicate (i) any of the foregoing representations was
inaccurate when made, or (ii) any of the foregoing representations
would be inaccurate if it were made immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and
affixed the seal of Bank this 5th day of October, 1994.
-------------------------------------
Melvin G. Hall
Chairman and Chief Executive Officer
<PAGE> 25
Exhibit D
CERTIFICATE
-----------
Robert Lynn Hall, a stockholder of The Wedge Holding
Company, a Delaware corporation ("Holding"), who holds 4,734 shares
(30.90%) of Holding common stock, par value $100.00 per share
("Holding Common Stock"), and 10,020 shares (15.72%) of Holding
preferred stock, par value $50.00 per share ("Holding Preferred
Stock"), HEREBY CERTIFIES that (a) I am familiar with the terms and
conditions of the Agreement and Plan of Reorganization by and among
Mercantile Bancorporation Inc., a Missouri corporation ("MBI"),
Mercantile Bancorporation Incorporated of Illinois, a Missouri
corporation ("Mercantile Illinois"), Wedge Bank, an Illinois state
bank, and Holding, dated July 6, 1994 (the "Agreement"), and (b) I am
aware that (i) this Certificate will be relied on by Thompson &
Mitchell, counsel for MBI, in rendering its opinion to Holding that
the acquisition by Mercantile Illinois of all Bank common stock, par
value $10.00 per share ("Bank Common Stock"), held by Holding solely
in exchange for MBI common stock, par value $5.00 per share ("MBI
Common Stock"), will constitute a reorganization within the meaning of
section 368 of the Internal Revenue Code of 1986, as amended, and (ii)
the representations and undertaking recited herein will survive the
Acquisition.
The undersigned HEREBY FURTHER CERTIFIES that (a) the
undersigned will not sell, exchange or otherwise dispose of any of
Holding Common Stock or Holding Preferred Stock, except in connection
with the liquidation and dissolution of Holding, and (b) the
undersigned has no plan, intention or arrangement (including any
option or pledge) to sell, exchange or otherwise dispose of any of the
MBI Common Stock to be received from Holding.
The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson & Mitchell at One Mercantile Center, St. Louis,
Missouri 63101, to the attention of Charles H. Binger, any information
that could indicate (i) any of the foregoing representations was
inaccurate when made, or (ii) any of the foregoing representations
would be inaccurate if it were made immediately before the
Acquisition.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate, or caused this Certificate to be executed by its duly
authorized representative, this 5th day of October, 1994.
------------------------------
Robert Lynn Hall
<PAGE> 26
Exhibit E
CERTIFICATE
-----------
Melvin G. Hall, a stockholder of The Wedge Holding Company,
a Delaware corporation ("Holding"), who holds 8,254 shares (53.88%) of
Holding common stock, par value $100.00 per share ("Holding Common
Stock"), and 46,112 shares (72.35%) of Holding preferred stock, par
value $50.00 per share ("Holding Preferred Stock"), HEREBY CERTIFIES
that (a) I am familiar with the terms and conditions of the Agreement
and Plan of Reorganization by and among Mercantile Bancorporation
Inc., a Missouri corporation ("MBI"), Mercantile Bancorporation
Incorporated of Illinois, a Missouri corporation ("Mercantile
Illinois"), Wedge Bank, an Illinois state bank, and Holding, dated
July 6, 1994 (the "Agreement"), and (b) I am aware that (i) this
Certificate will be relied on by Thompson & Mitchell, counsel for MBI,
in rendering its opinion to Holding that the acquisition by Mercantile
Illinois of all Bank common stock, par value $10.00 per share ("Bank
Common Stock"), held by Holding solely in exchange for MBI common
stock, par value $5.00 per share ("MBI Common Stock"), will constitute
a reorganization within the meaning of section 368 of the Internal
Revenue Code of 1986, as amended, and (ii) the representations and
undertaking recited herein will survive the Acquisition.
The undersigned HEREBY FURTHER CERTIFIES that (a) the
undersigned will not sell, exchange or otherwise dispose of any of
Holding Common Stock or Holding Preferred Stock, except in connection
with the liquidation and dissolution of Holding, and (b) the
undersigned has no plan, intention or arrangement (including any
option or pledge) to sell, exchange or otherwise dispose of any of the
MBI Common Stock to be received from Holding.
The undersigned HEREBY AGREES to immediately communicate in
writing to Thompson & Mitchell at One Mercantile Center, St. Louis,
Missouri 63101, to the attention of Charles H. Binger, any information
that could indicate (i) any of the foregoing representations was
inaccurate when made, or (ii) any of the foregoing representations
would be inaccurate if it were made immediately before the
Acquisition.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate, or caused this Certificate to be executed by its duly
authorized representative, this 5th day of October, 1994.
------------------------------
Melvin G. Hall,
Individually and as Trustee
UI dated 02/04/85, Melvin G. Hall,
grantor
<PAGE> 1
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Mercantile Bancorporation Inc.:
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the prospectus.
Our reports dated January 13, 1994, except as to Note Q, which is as of
February 10, 1994, contains an explanatory paragraph referring to the
change in accounting for income taxes.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
St. Louis, Missouri
October 5, 1994
- 1 -
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Mercantile
Bancorporation Inc. on Form S-4 of our reports for The Wedge Holding
Company and Subsidiary and The Wedge Bank dated March 25, 1994,
appearing in the Prospectus, which is part of this Registration
Statement.
We also consent to the reference to us under the heading "Experts"
in such Prospectus.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
St. Louis, Missouri
October 5, 1994
<PAGE> 1
POWER OF ATTORNEY
Each of the undersigned does hereby appoint Thomas H. Jacobsen
and Ralph W. Babb, Jr., and each of them, as his true and lawful attorney
in fact, with full power and authority separately to execute in the name
of the undersigned, and to file with the United States Securities and
Exchange Commission, a registration statement on Form S-4, and any
amendments or supplements thereto, registering the issuance by Mercantile
Bancorporation Inc. of shares of its common stock, and the preferred share
purchase rights which trade therewith, in connection with the acquisition
of Wedge Bank, as well as such other filings as the above-named attorneys
deem necessary or advisable to enable Mercantile Bancorporation Inc. to
comply with the Securities Act of 1933, the Securities Exchange Act of
1934, and any rules, regulations and requirements of the Securities and
Exchange Commission in connection with said acquisition, and does hereby
ratify and confirm all acts that such attorneys in fact, or any of them
separately, may lawfully do or cause to be done by virtue hereof.
Name Signature Date
- ------------------------- ------------------------- ---------------
Richard P. Conerly /s/ RICHARD P. CONERLY 8/22/94
------------------------- ---------------
Harry M. Cornell, Jr. /s/ HARRY M. CORNELL, JR. 8/22/94
------------------------- ---------------
Earl K. Dille /s/ EARL K. DILLE 8/20/94
------------------------- ---------------
J. Cliff Eason /s/ J. CLIFF EASON 8/23/94
------------------------- ---------------
Bernard A. Edison /s/ BERNARD A. EDISON 8/22/94
------------------------- ---------------
William A. Hall /s/ WILLIAM A. HALL 9/29/94
------------------------- ---------------
Thomas A. Hays /s/ THOMAS A. HAYS 8/22/94
------------------------- ---------------
William G. Heckman /s/ WILLIAM G. HECKMAN 8/25/94
------------------------- ---------------
Thomas H. Jacobsen
------------------------- ---------------
James B. Malloy /s/ JAMES B. MALLOY 8/22/94
------------------------- ---------------
Charles H. Price II /s/ CHARLES H. PRICE II 8/22/94
------------------------- ---------------
Harvey Saligman /s/ HARVEY SALIGMAN 8/24/94
------------------------- ---------------
Craig D. Schnuck /s/ CRAIG D. SCHNUCK 8/22/94
------------------------- ---------------
Robert W. Staley /s/ ROBERT W. STALEY 8/24/94
------------------------- ---------------
Robert L. Stark /s/ ROBERT L. STARK 8/27/94
------------------------- ---------------
Patrick T. Stokes /s/ PATRICK T. STOKES 8/22/94
------------------------- ---------------
Francis A. Stroble /s/ FRANCIS A. STROBLE 8/19/94
------------------------- ---------------
Joseph G. Werner /s/ JOSEPH G. WERNER 8/25/94
------------------------- ---------------
John A. Wright /s/ JOHN A. WRIGHT 8/22/94
------------------------- ---------------
