AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1995
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 Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Classification Identification No.)
Code Number)
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)
--------------------
JON W. BILSTROM, ESQ.
General Counsel and Secretary
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)
--------------------
<TABLE>
<CAPTION>
With copies to:
<S> <C> <C>
JOHN Q. ARNOLD EDWARD D. HERLIHY, ESQ. JOHN S. ZEILINGER, ESQ.
Chief Financial Officer Wachtell, Lipton, Rosen & Katz Baird, Holm, McEachen,
Mercantile Bancorporation Inc. 51 West 52nd Street Pedersen, Hamann & Strasheim
P.O. Box 524 New York, New York 10019-6150 1500 Woodmen Tower
St. Louis, Missouri 63166-0524 (212) 403-1000 Omaha, Nebraska 68102-2068
(314) 425-2525 (402) 344-0500
</TABLE>
--------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the 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. [ ]
--------------------<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(2) OFFERING PRICE(2) FEE
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $5.00 7,996,952 $43.06 $344,313,200.56 $118,728.69
par value(1) shares
----------------------------------------------------------------------------------------
(1) Includes one attached Preferred Share Purchase Right per share.
(2) Pursuant to Rule 457(f)(1) and 457(c) promulgated under the Securities Act of 1933,
as amended, and estimated solely for purposes of calculating the registration fee,
the proposed maximum aggregate offering price is $344,313,200.56, which equals (x)
the average of the high and low prices of the common stock, without par value
("Hawkeye Common Stock"), of Hawkeye Bancorporation ("Hawkeye"), of $25.1875, as
reported on the Nasdaq National Market on October 17, 1995, multiplied by (y) the
total number of shares of Hawkeye Common Stock (including shares issuable pursuant
to the exercise of outstanding options to purchase Hawkeye Common Stock) to be
cancelled in the merger of Hawkeye with and into a subsidiary of Mercantile
Bancorporation Inc. (the "Merger"). The proposed maximum offering price per share
is equal to the proposed maximum aggregate offering price determined in the manner
described in the preceding sentence divided by the maximum number of shares of MBI
common stock, $5.00 par value, that could be issued in the Merger.
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
==========================================================================================================<PAGE>
</TABLE>
MERCANTILE BANCORPORATION INC.
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
FORM S-4 ITEM PROXY STATEMENT-PROSPECTUS HEADING
Information About the Transaction
<S> <C>
1. Forepart of Registration Statement and Outside Front Facing Page; Cross Reference Sheet; Outside Front Cover
Cover Page of Prospectus Page of Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Available Information; Incorporation of Certain
Information by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges, and Summary Information; Pro Forma Financial Information
Other Information
4. Terms of Transaction Summary Information; Terms of the Proposed Merger;
Certain Federal Income Tax Consequences of the Merger;
Dissenters' Rights of Shareholders of Hawkeye;
Information Regarding MBI Stock; Supervision and
Regulation
5. Pro Forma Financial Information Summary Information; Pro Forma Financial Information
6. Material Contacts with the Company Being Acquired Summary Information; Terms of the Proposed Merger
7. Additional Information Required for Reoffering by Persons Not Applicable
and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Matters
9. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities
Information About the Registrant
10. Information With Respect to S-3 Registrants Incorporation of Certain Information by Reference;
Summary Information
-2-<PAGE>
11. Incorporation of Certain Information by Reference Incorporation of Certain Information by Reference
12. Information With Respect to S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain Information by Reference Not Applicable
14. Information with Respect to Registrants Other Than S-2 Not Applicable
or S-3 Registrants
Information About the Company Being Acquired
15. Information With Respect to S-3 Companies Incorporation of Certain Information by Reference;
Summary Information
16. Information With Respect to S-2 or S-3 Companies Not Applicable
17. Information With Respect to Companies Other Than S-2 or Not Applicable
S-3 Companies
Voting and Management Information
18. Information if Proxies, Consents, or Authorizations Incorporation of Certain Information by Reference;
Are to be Solicited Summary Information; Information Regarding Special
Meeting; Terms of the Proposed Merger; Other Matters;
Stockholder Proposals
19. Information if Proxies, Consents, or Authorizations Are Not Applicable
Not to be Solicited, or in an Exchange Offer
</TABLE>
-3-<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[X] PRELIMINARY PROXY STATEMENT [ ] CONFIDENTIAL, FOR USE OF THE
[ ] DEFINITIVE PROXY STATEMENT COMMISSION ONLY
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
HAWKEYE BANCORPORATION
...........................................................................
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
...........................................................................
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] $125 PER EXCHANGE ACT RULES 0-11(C)(1)(II), 14A-6(I)(1), OR 14A-
6(I)(2) OR ITEM 22(A)(2) OF SCHEDULE 14A.
[ ] $500 PER EACH PARTY TO THE CONTROVERSY PURSUANT TO EXCHANGE
ACT RULE 14A-6(I)(3).
[X] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES
14A-6(I)(4) AND 0-11.
1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
Common Stock, without par value ("Hawkeye Common Stock")
2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
Up to 13,670,003 shares of Hawkeye Common Stock
-4-<PAGE>
3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11:
The amount on which the filing fee of $68,862.64 is calculated
was determined pursuant to Rule 0-11(a)(4) and (c) of the
Securities Exchange Act of 1934, as amended, by multiplying
1/50th of 1% by an amount equal to the product of (x) $25.1875,
the average of the high and the low sale prices on October 17,
1995, of Hawkeye Common Stock, and (y) 13,670,003, the maximum
number of shares of Hawkeye Common Stock expected to be cancelled
in the transaction.
4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
$344,313,200.56
5) TOTAL FEE PAID:
$68,862.64
[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[X] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT
RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE
WAS PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION
STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
1) AMOUNT PREVIOUSLY PAID:
$118,728.69
2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
Registration Statement on Form S-4
3) FILING PARTY:
Mercantile Bancorporation Inc. (Commission File No. 1-11792)
4) DATE FILED:
October 23, 1995
-5-<PAGE>
[HAWKEYE BANCORPORATION LETTERHEAD]
_________________, 1995
Dear Fellow Shareholders:
The Board of Directors cordially invites you to
attend a Special Meeting of Shareholders of Hawkeye
Bancorporation ("Hawkeye") to be held at ______ A.M., Central
Time, on _________________, 1995, at ____________________, Des
Moines, Iowa. At this important meeting, you will be asked to
consider and vote on a proposal to approve and adopt an
Agreement and Plan of Reorganization, dated August 4, 1995 (the
"Merger Agreement"), providing for the merger (the "Merger") of
Hawkeye with and into a wholly owned subsidiary of Mercantile
Bancorporation Inc. ("MBI").
I have enclosed the following items relating to the
Special Meeting and the Merger:
1. Proxy Statement/Prospectus;
2. Proxy card; and
3. A pre-addressed return envelope to Hawkeye for
the proxy card.
The Proxy Statement/Prospectus and related proxy materials set
forth, or incorporate by reference, financial data and other
important information relating to Hawkeye and MBI and describe
the terms and conditions of the proposed Merger. The Board of
Directors requests that you carefully review these materials
before completing the enclosed proxy card or attending the
Special Meeting.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY ARE IN THE BEST INTERESTS OF HAWKEYE AND ITS
SHAREHOLDERS. ACCORDINGLY, THE HAWKEYE BOARD OF DIRECTORS
RECOMMENDS THAT HAWKEYE SHAREHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
APPROVAL OF THE MERGER AGREEMENT IS A CONDITION TO
THE CONSUMMATION OF 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 Hawkeye 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,<PAGE>
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 Hawkeye a written notice of
revocation bearing a later date than the proxy, or any later
dated proxy relating to the same shares, or by attending the
Special Meeting and voting in person. Attendance at the
Special Meeting will not in itself constitute the revocation of
a proxy.
If you need assistance in completing your proxy card
or if you have any questions about the Proxy Statement/
Prospectus, please feel free to contact Pamela J. Larsen at
(515) 284-1930.
Sincerely,
Robert W. Murray
President and Chief Executive Officer
-2-<PAGE>
HAWKEYE BANCORPORATION
222 Equitable Building
604 Locust Street
Des Moines, Iowa 50309-3723
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held
___________________, 1995
TO THE SHAREHOLDERS OF HAWKEYE BANCORPORATION:
Notice is hereby given that a Special Meeting of
Shareholders of HAWKEYE BANCORPORATION, an Iowa corporation
("Hawkeye"), will be held at ____________________, Des Moines,
Iowa, on ________________, 1995, at ______ A.M., Central Time,
for the following purposes:
(1) To consider and vote on a proposal to approve
and adopt the Agreement and Plan of Reorganization, dated
August 4, 1995 (the "Merger Agreement"), by and between
Mercantile Bancorporation Inc., a Missouri corporation ("MBI"),
and Hawkeye, pursuant to which, among other things, (i) Hawkeye
will be merged (the "Merger") with and into Mercantile
Bancorporation Inc. of Iowa, an Iowa corporation and a wholly
owned subsidiary of MBI, with the result that the business and
operations of Hawkeye will be continued through such wholly
owned subsidiary, and (ii) upon consummation of the Merger,
each outstanding share of Hawkeye common stock, without par
value ("Hawkeye Common Stock"), other than shares held by
Hawkeye, MBI 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, all of which
will be cancelled in the Merger, and other than shares held by
shareholders of Hawkeye who exercise their dissenters' rights
under the Iowa Business Corporation Act, will be converted into
the right to receive .585 of a share of MBI common stock, par
value $5.00 per share ("MBI Common Stock"), with cash in lieu
of fractional shares, as set forth in detail in the attached
Proxy Statement/Prospectus.
(2) To transact such other business as may properly
come before the Special Meeting or any adjournment or
postponement thereof.
The record date for determining the holders of
Hawkeye Common Stock entitled to receive notice of, and to vote
at, the Special Meeting or any adjournment or postponement
thereof has been fixed as of the close of business on
_________, 1995. Approval by the Hawkeye shareholders of the
Merger Agreement<PAGE>
requires the affirmative vote of the holders of a majority of
the outstanding shares of Hawkeye Common Stock entitled to vote
at the meeting.
Any holder of Hawkeye Common Stock who (1) files with
Hawkeye prior to the Special Meeting a written notice of the
shareholder's intent to demand payment for the shareholder's
shares, (2) does not vote in favor of the Merger, and (3)
demands payment of the fair value of the shares, shall be
entitled to payment of the fair value of the shareholder's
shares of Hawkeye Common Stock, under the applicable provisions
of Division XIII of the Iowa Business Corporation Act, as set
forth in Annex A to the attached Proxy Statement/Prospectus.
Information regarding the Merger and related matters
is contained in the accompanying Proxy Statement/Prospectus and
the annexes thereto, which are incorporated by reference herein
and form a part of this Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED 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 PROXY
STATEMENT/PROSPECTUS.
THE BOARD OF DIRECTORS OF HAWKEYE HAS DETERMINED THAT
THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE IN THE BEST INTERESTS OF HAWKEYE AND
ITS SHAREHOLDERS. ACCORDINGLY, THE HAWKEYE BOARD OF DIRECTORS
RECOMMENDS THAT HAWKEYE SHAREHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
__________________________________
Secretary
Des Moines, Iowa
____________________, 1995
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME
-2-<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1995
MERCANTILE BANCORPORATION INC.
PROSPECTUS
____________________
HAWKEYE BANCORPORATION
PROXY STATEMENT
____________________
This Prospectus of Mercantile Bancorporation Inc., a
Missouri corporation ("MBI"), relates to up to 7,996,952 shares
of common stock, par value $5.00 per share, 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 to the shareholders of
Hawkeye Bancorporation, an Iowa corporation ("Hawkeye"), upon
consummation of the proposed merger (the "Merger") of Hawkeye
with and into Mercantile Bancorporation Inc. of Iowa, an Iowa
corporation ("Merger Sub") and a wholly owned subsidiary of
MBI. The Merger will be consummated pursuant to the Agreement
and Plan of Reorganization, dated August 4, 1995 (the "Merger
Agreement"), by and between MBI and Hawkeye, upon the terms and
subject to the conditions thereof. This Prospectus also serves
as the Proxy Statement of Hawkeye for use in connection with
the solicitation of proxies by the Board of Directors of
Hawkeye to be used at the Special Meeting of Shareholders of
Hawkeye (the "Special Meeting") to be held on _______, 1995, at
______ A.M., Central Time, at _______, Des Moines, Iowa, to
approve and adopt the Merger Agreement.
Upon consummation of the Merger, among other things,
each outstanding share of Hawkeye common stock, without par
value ("Hawkeye Common Stock"), other than shares held by
Hawkeye, MBI 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, all of which
will be cancelled in the Merger, and other than shares held by
shareholders of Hawkeye who exercise their dissenters' rights
under the Iowa Business Corporation Act (the "Iowa Act"), will
be converted into the right to receive .585 of a share of MBI
Common Stock, with cash in lieu of fractional shares. See
"TERMS OF THE PROPOSED MERGER" and "DISSENTERS' RIGHTS OF
SHAREHOLDERS OF HAWKEYE."<PAGE>
MBI Common Stock is quoted on the New York Stock
Exchange (the "NYSE") under the symbol "MTL." On ________,
1995, the last sale price of MBI Common Stock as reported on
the NYSE Composite Tape was $_____. Hawkeye Common Stock is
quoted on the Nasdaq National Market ("NASDAQ/NM") under the
symbol "HWKB." On ______, 1995 the last sale price for Hawkeye
Common Stock as reported on the NASDAQ/NM was $_____.
This Proxy Statement/Prospectus, the Letter to
Hawkeye shareholders, the Notice of Special Meeting and the
form of proxy are first being mailed to the shareholders of
Hawkeye on or about , 1995.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/
PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR
ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE SHARES OF MBI COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY
OTHER GOVERNMENTAL AGENCY.
____________________
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS ____________,
1995.<PAGE>
AVAILABLE INFORMATION
Each of MBI and Hawkeye is subject to the
informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy
statements and other information concerning either MBI or
Hawkeye can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's Regional Offices in New York (Suite 1300,
Seven World Trade Center, New York, New York 10048) and Chicago
(Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661). Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. 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. Hawkeye
Common Stock is quoted on the NASDAQ/NM, and such reports,
proxy statements and other information concerning Hawkeye are
available for inspection and copying at the Public Reference
section of the NASDAQ/NM at 1737 K Street, N.W., Washington,
D.C. 20006.
This Proxy Statement/Prospectus does not contain all
of the information set forth in the Registration Statement on
Form S-4 and exhibits thereto (together with any amendments
thereto, the "Registration Statement") covering the securities
offered hereby which has been filed by MBI with the Commission
under the Securities Act of 1933, as amended (the "Securities
Act"). As permitted by the rules and regulations of the
Commission, this Proxy Statement/Prospectus omits certain
information contained or incorporated by reference in the
Registration Statement. Reference is hereby made to the
Registration Statement for further information with respect to
MBI and the securities offered hereby. Such additional
information may be obtained from the Commission's principal
office in Washington, D.C. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by
reference in this Proxy Statement/Prospectus provide a fair
summary of the contents of any contract or other document
referenced herein or therein 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 or such other document, each such
statement being qualified in all respects by such reference.
-i-<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES
DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING
EXHIBITS UNLESS SPECIFICALLY INCORPORATED BY REFERENCE HEREIN
OR IN SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY
PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED
UPON WRITTEN OR ORAL REQUEST TO THE FOLLOWING:
MBI DOCUMENTS HAWKEYE DOCUMENTS
JON W. BILSTROM R. DOUGLAS FISHER
GENERAL COUNSEL EXECUTIVE VICE PRESIDENT
AND SECRETARY AND SECRETARY
MERCANTILE BANCORPORATION INC. HAWKEYE BANCORPORATION
P.O. BOX 524 222 EQUITABLE BUILDING
ST. LOUIS, MISSOURI 63166-0524 604 LOCUST STREET
(314) 425-2525 DES MOINES, IOWA 50309-3723
(515) 284-1930
IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST
MUST BE RECEIVED NO LATER THAN ________, 1995 [DATE THAT IS
FIVE BUSINESS DAYS PRIOR TO THE DATE OF THE SPECIAL MEETING].
The following documents filed with the Commission by
MBI under the Exchange Act are incorporated herein by
reference:
(a) MBI's Annual Report on Form 10-K (Commission
File No. 1-11792) for the year ended December
31, 1994, as amended by Form 10K/A (Amendment
No. 1) dated June 29, 1995 (as amended, the
"1994 MBI Form 10-K").
(b) MBI's Quarterly Reports on Form 10-Q (Commission
File No. 1-11792) for the quarters ended March
31 and June 30, 1995.
(c) The information contained in MBI's Proxy
Statement dated March 24, 1995 for its Annual
Meeting of Shareholders held on April 27, 1995
that has been incorporated by reference in the
1994 MBI Form 10-K.
(d) MBI's Current Reports on Form 8-K (Commission
File No. 1-11792) dated May 1, May 31 and August
4, 1995.
-ii-<PAGE>
(e) The description of MBI Common Stock set forth in
Item 1 of MBI's Registration Statement on Form
8-A (Commission File No. 1-11792), dated March
5, 1993, and any amendment or report filed for
the purpose of updating such description.
(f) The description of the Rights set forth in Item
1 of MBI's Registration Statement on Form 8-A
(Commission File No. 1-11792), dated March 5,
1993, and any amendment or report filed for the
purpose of updating such description.
The following documents filed with the Commission by
Hawkeye under the Exchange Act are incorporated herein by
reference:
(a) Hawkeye's Annual Report on Form 10-K (Commission
File No. 0-4742) for the year ended December 31,
1994 (the "1994 Hawkeye Form 10-K").
(b) Hawkeye's Quarterly Reports on Form 10-Q
(Commission File No. 0-4742) for the quarters
ended March 31 and June 30, 1995.
(c) The information contained in Hawkeye's Proxy
Statement dated March 20, 1995 for its Annual
Meeting of Shareholders held on April 18, 1995
that has been incorporated by reference in the
1994 Hawkeye Form 10-K.
(d) Hawkeye's Current Reports on Form 8-K
(Commission File No. 0-4742) dated July 18 and
August 4, 1995.
All documents filed with the Commission by MBI or
Hawkeye pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Proxy Statement/Prospectus
and prior to the date of the Special Meeting 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 and Hawkeye contained in this 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 or deemed to be incorporated herein by reference
shall be deemed to be modified or superseded for all purposes
to the extent that a statement contained herein or in any other
subsequently filed document incorporated or deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
-iii-<PAGE>
not be deemed, except as so modified or superseded, to
constitute a part hereof.
Any statements contained in this 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 PROXY
STATEMENT/PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY MBI OR HAWKEYE. THIS PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION IN WHICH, OR FROM ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY
SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/
PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH IT
RELATES SHALL IMPLY OR CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF MBI OR HAWKEYE OR ANY OF THEIR
RESPECTIVE SUBSIDIARIES OR IN THE INFORMATION SET FORTH OR
INCORPORATED BY REFERENCE HEREIN SUBSEQUENT TO THE DATE HEREOF.
-iv-<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION.................................... i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........ ii
SUMMARY INFORMATION...................................... 1
Business of MBI........................................ 1
Business of Merger Sub................................. 2
Business of Hawkeye.................................... 2
Special Meeting of Hawkeye Shareholders................ 3
The Proposed Merger.................................... 4
Stock Option Agreement................................. 5
Support Agreements..................................... 5
Reasons for the Merger; Hawkeye Board Recommendation... 6
Opinion of Hawkeye's Financial Advisor................. 6
Interests of Certain Persons in the Merger............. 7
Fractional Shares...................................... 8
Regulatory Approval.................................... 8
Waiver and Amendment................................... 9
Accounting Treatment................................... 9
Employee Stock Options and Stock Appreciation Rights... 9
Federal Income Tax Consequences in General............. 10
Dissenters' Rights..................................... 10
Market and Market Prices............................... 11
Comparative Unaudited Per Share Data................... 13
Summary Financial Data................................. 15
INFORMATION REGARDING SPECIAL MEETING.................... 18
General................................................ 18
Date, Time and Place................................... 18
Record Date; Vote Required............................. 18
Voting and Revocation of Proxies....................... 19
Solicitation of Proxies................................ 20
TERMS OF THE PROPOSED MERGER............................. 21
General Description of the Merger...................... 21
Stock Option Agreement................................. 22
Support Agreements..................................... 25
Background and Reasons for the Merger; Hawkeye Board
Recommendation....................................... 26
Opinion of Hawkeye's Financial Advisor ................ 30
Interests of Certain Persons in the Merger............. 38
Conditions of the Merger............................... 40
Termination of the Merger Agreement.................... 42
Closing and Effective Time............................. 42
Surrender of Hawkeye Stock Certificates and Receipt
-v-<PAGE>
of MBI Capital Stock................................. 43
Fractional Shares...................................... 45
Regulatory Approval.................................... 45
Business Pending the Merger............................ 46
Bank Minority Shares................................... 50
Waiver and Amendment................................... 50
Accounting Treatment................................... 50
Management and Operations After the Merger............. 51
Employee Benefits...................................... 51
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.... 53
DISSENTERS' RIGHTS OF SHAREHOLDERS OF HAWKEYE............ 56
PRO FORMA FINANCIAL INFORMATION.......................... 59
Comparative Unaudited Per Share Data................... 59
Pro Forma Combined Consolidated Financial
Statements (Unaudited)............................... 62
INFORMATION REGARDING MBI STOCK.......................... 71
Description of MBI Common Stock and Attached
Preferred Share Purchase Rights...................... 71
Restrictions on Resale of MBI Capital Stock
by Affiliates; Affiliate Agreements.................. 74
Comparison of the Rights of Shareholders of
MBI and Hawkeye...................................... 74
SUPERVISION AND REGULATION............................... 79
General................................................ 79
Certain Transactions with Affiliates................... 80
Payment of Dividends................................... 80
Capital Adequacy....................................... 81
Support of Subsidiary Banks............................ 82
Recent Legislation..................................... 82
LEGAL MATTERS............................................ 88
EXPERTS.................................................. 88
OTHER MATTERS............................................ 88
STOCKHOLDER PROPOSALS.................................... 88
ANNEXES
Annex A - Dissenters' Rights Provisions Under the Iowa
Business Corporation Act..................... A-1
Annex B - Opinion of Donaldson, Lufkin & Jenrette
Securities Corporation,
dated _______, 1995.......................... B-1
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SUMMARY INFORMATION
THE FOLLOWING IS A SUMMARY OF CERTAIN TERMS OF THE
MERGER AND RELATED INFORMATION DISCUSSED ELSEWHERE IN THIS
PROXY STATEMENT/PROSPECTUS, IS NOT INTENDED TO BE COMPLETE AND
IS QUALIFIED IN ALL RESPECTS BY THE MORE DETAILED INFORMATION
INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS AND THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. AS USED IN THIS PROXY
STATEMENT/PROSPECTUS, THE TERMS "MBI" AND "HAWKEYE" REFER TO
SUCH CORPORATIONS, RESPECTIVELY, AND WHERE THE CONTEXT
REQUIRES, SUCH CORPORATIONS AND THEIR RESPECTIVE SUBSIDIARIES
ON A CONSOLIDATED BASIS. SHAREHOLDERS OF HAWKEYE ARE URGED TO
READ AND CONSIDER CAREFULLY ALL OF THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS
AND THE ANNEXES HERETO. ALL INFORMATION CONCERNING MBI
INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN FURNISHED
BY MBI AND ALL INFORMATION CONCERNING HAWKEYE INCLUDED IN THIS
PROXY STATEMENT/PROSPECTUS HAS BEEN FURNISHED BY HAWKEYE.
NEITHER MBI NOR HAWKEYE WARRANTS THE ACCURACY OR COMPLETENESS
OF INFORMATION RELATING TO THE OTHER.
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"). As of
September 30, 1995, MBI owned, directly or indirectly, all of
the capital stock (except for a small minority interest in one
bank) of Mercantile Bank of St. Louis National Association, 51
other commercial banks and one federally chartered thrift that
operated from 322 banking offices and 316 Fingertip Banking
automated teller machines, including 37 off-premises machines,
located throughout Missouri, southern Illinois, northern Iowa,
northern Arkansas and eastern Kansas. MBI's services
concentrate in three major lines of business -- consumer,
corporate, and trust and investment advisory services. MBI
also operates non-banking subsidiaries that provide related
financial services, including investment management, brokerage
services and asset-based lending. As of September 30, 1995,
MBI reported, on a consolidated basis, total assets of $16.0
billion, total deposits of $11.8 billion, total loans of $10.6
billion and shareholders' equity of $1.4 billion. As of
September 30, 1995, MBI had 55,333,878 shares of MBI Common
Stock issued and outstanding and 14,806 shares of MBI preferred
stock, without par value ("MBI Preferred Stock"), issued and
outstanding.
MBI's principal executive offices are located at One
Mercantile Center, St. Louis, Missouri 63101 and its telephone
number is (314) 425-2525.<PAGE>
For additional information, see "TERMS OF THE
PROPOSED MERGER," "SUPERVISION AND REGULATION," "PRO FORMA
FINANCIAL INFORMATION" and "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
BUSINESS OF MERGER SUB
Merger Sub, an Iowa corporation, was organized in
1993 as a wholly owned subsidiary of MBI. Merger Sub is a
registered bank holding company under the BHCA which currently
owns all of the stock of one bank and one savings association.
Merger Sub will be the surviving corporation upon consummation
of the Merger.
The principal executive offices of Merger Sub are
located at One Mercantile Center, St. Louis, Missouri 63101 and
its telephone number is (314) 425-2525.
BUSINESS OF HAWKEYE
Hawkeye, an Iowa corporation, was organized in 1966
and is a registered bank holding company under the BHCA. As of
September 30, 1995, Hawkeye owned controlling interests in 23
commercial bank subsidiaries and three non-bank subsidiaries
that operated from 65 locations throughout Iowa. Hawkeye's
bank subsidiaries are located primarily in county seat or local
trade center communities where agriculture is the primary
industry and provide a broad range of commercial bank financial
services to business customers and a variety of consumer
banking services to individual customers. Certain of the bank
subsidiaries also provide trust services. Hawkeye's non-bank
subsidiaries provide related financial services, including
centralized proof and accounting services for Hawkeye bank
subsidiaries, equipment leasing and funding and servicing of
government guaranteed FMHA loans.
As of September 30, 1995, Hawkeye reported, on a
consolidated basis, total assets of $2.0 billion, total
deposits of $1.7 billion, total loans of $1.3 billion and
shareholders' equity of $192.8 million. As of September 30,
1995, Hawkeye had 13,461,373 shares of Hawkeye Common Stock
issued and outstanding and no shares of Hawkeye preferred stock
issued and outstanding.
Hawkeye's principal executive offices are located at 222
Equitable Building, 604 Locust Street, Des Moines, Iowa 50309
and its telephone number is (515) 284-1930.
-2-<PAGE>
For additional information, see "TERMS OF THE
PROPOSED MERGER," "SUPERVISION AND REGULATION," "PRO FORMA
FINANCIAL INFORMATION" and "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
SPECIAL MEETING OF HAWKEYE SHAREHOLDERS
The Special Meeting will be held at _____________,
Des Moines, Iowa, on ______________, 1995, at ______ A.M.,
Central Time, at which the shareholders of Hawkeye will
consider and vote on a proposal to approve and adopt the Merger
Agreement and will transact such other business as may properly
come before the Special Meeting or any adjournment or
postponement thereof. Approval by the Hawkeye shareholders of
the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Hawkeye
Common Stock entitled to vote at the meeting (the "Shareholder
Approval"). Only holders of record of Hawkeye Common Stock at
the close of business on __________, 1995 (the "Record Date"),
will be entitled to notice of, and to vote at, the Special
Meeting. At such date, there were __________ shares of
Hawkeye Common Stock outstanding held by approximately ____
holders of record. See "INFORMATION REGARDING SPECIAL
MEETING."
As of the Record Date, directors and executive
officers of Hawkeye and certain of their affiliates owned
beneficially an aggregate of __________ shares of Hawkeye
Common Stock, or approximately ______% of the shares entitled
to vote at the Special Meeting. All of Hawkeye's directors and
executive officers and certain of their affiliates have
indicated their intention to vote their shares of Hawkeye
Common Stock for the approval of the Merger Agreement. In
addition, all of the directors of Hawkeye, who as of the Record
Date beneficially owned in the aggregate approximately ___% of
the outstanding shares of Hawkeye Common Stock, have each
agreed pursuant to a Support Agreement to vote all shares of
Hawkeye Common Stock beneficially owned by such person, or over
which such person has voting power or control, to approve the
Merger Agreement. See "INFORMATION REGARDING SPECIAL MEETING"
and "TERMS OF THE PROPOSED MERGER -- Support Agreements."
Any shareholder of Hawkeye giving a proxy may revoke
it at any time prior to the vote at the Special Meeting.
Shareholders of Hawkeye wishing to revoke a proxy prior to the
vote may do so by delivering to the Secretary of Hawkeye at 222
Equitable Building, 604 Locust Street, Des Moines, Iowa 50309-
3723 a written notice of revocation bearing a later date than
the proxy or any later dated proxy relating to the same shares,
-3-<PAGE>
or by attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not in itself constitute
the revocation of a proxy.
THE BOARD OF DIRECTORS OF HAWKEYE HAS DETERMINED THAT
THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE IN THE BEST INTERESTS OF HAWKEYE AND
ITS SHAREHOLDERS. ACCORDINGLY, THE HAWKEYE BOARD OF DIRECTORS
RECOMMENDS THAT HAWKEYE SHAREHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
THE PROPOSED MERGER
Subject to the satisfaction of the terms and
conditions set forth in the Merger Agreement described below,
Hawkeye will merge with and into Merger Sub. Upon consummation
of the Merger, Hawkeye's corporate existence will terminate,
with Merger Sub continuing as the surviving corporation, and
each outstanding share of Hawkeye Common Stock, other than
shares held by Hawkeye, MBI 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, all of
which will be cancelled in the Merger, and other than shares
held by shareholders of Hawkeye who exercise their dissenters'
rights under the Iowa Act, will be converted into the right to
receive .585 (the "Exchange Ratio") of a share of MBI Common Stock,
with cash in lieu of fractional shares (together, the "Merger
Consideration"). See "TERMS OF THE PROPOSED MERGER" and
DISSENTERS' RIGHTS OF SHAREHOLDERS OF HAWKEYE."
Consummation of the Merger is subject to certain
terms and conditions, including, among other things, the
approval of the Merger Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Hawkeye
Common Stock entitled to vote at the Special Meeting and
receipt of all requisite regulatory approvals. See "TERMS OF
THE PROPOSED MERGER -- Conditions of the Merger" and "--
Regulatory Approval." The Merger will be consummated and
become effective on the date and at the time (the "Effective
Time") that the articles of merger are filed with the Iowa
Secretary of State.
Unless the parties otherwise agree, the closing (the
"Closing") of the Merger shall take place at 10:00 A.M., local
time, on the date (the "Closing Date") on which the Effective
Time of the Merger occurs, which shall be such date as MBI
shall notify Hawkeye in writing but (i) not earlier than the
approval by Hawkeye shareholders of the Merger Agreement and
the receipt of all requisite regulatory approvals (the
"Approval Date"), and (ii) not later than the first business
day
-4-<PAGE>
of the first full calendar month commencing at least five
business days after the Approval Date. See "TERMS OF THE
PROPOSED MERGER -- Effective Time."
The Merger Agreement may be terminated at any time
prior to the Effective Time by the mutual consent of the
parties or by either party upon the occurrence of certain
events or if the Merger is not consummated by August 4, 1996.
See "TERMS OF THE PROPOSED MERGER -- Termination of the Merger
Agreement."
STOCK OPTION AGREEMENT
In connection with the execution of the Merger
Agreement, MBI and Hawkeye entered into the Stock Option
Agreement, dated August 4, 1995 (the "Stock Option Agreement"),
pursuant to which Hawkeye has issued MBI an option (the
"Option") to purchase up to 2,678,000 shares of Hawkeye Common
Stock (or ______% of the outstanding shares of Hawkeye Common
Stock as of the Record Date, without including any shares
subject to or issued pursuant to the Option) at an exercise
price of $22 per share. The Option is exercisable upon the
occurrence of certain events and provides MBI the right, under
certain circumstances, to require Hawkeye to purchase for cash
the unexercised portion of the Option and all shares of Hawkeye
Common Stock purchased by MBI pursuant thereto. The Option,
which MBI required that Hawkeye grant as a condition to MBI's
entering into the Merger Agreement, may increase the likelihood
of consummation of the Merger. See "TERMS OF THE PROPOSED
MERGER -- Stock Option Agreement."
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger
Agreement, all of the directors of Hawkeye, who as of the
Record Date beneficially owned in the aggregate approximately
__% of the outstanding shares of Hawkeye Common Stock (each, a
"Supporting Stockholder" and together, the "Supporting
Stockholders"), executed separate Support Agreements with MBI
pursuant to which each Supporting Stockholder agreed, among
other things, to vote all shares of Hawkeye Common Stock
beneficially owned by the Supporting Stockholder, or over which
the Supporting Stockholder has voting power or control,
directly or indirectly, to approve the Merger Agreement. Each
Supporting Stockholder also thereby agreed, among other things,
to not, and to not permit any company, trust or other entity
controlled by such Supporting Stockholder to, (i) contract to
sell, sell or otherwise transfer or dispose of any shares of
Hawkeye Common Stock owned by the Supporting Stockholder, other
than pursuant to the Merger or with MBI's prior written
consent, or
-5-<PAGE>
(ii) 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 Hawkeye
or the acquisition of any capital stock or other securities of
Hawkeye or the business combination, merger or consolidation of
Hawkeye with any person or any similar transaction (each such
transaction, an "Acquisition Transaction"), or provide any such
person with information or assistance or negotiate with any
such person with respect to an Acquisition Transaction or agree
to or otherwise assist in the effectuation of any Acquisition
Transaction. Each Support Agreement may be terminated at the
option of any party thereto at any time after the earlier of
(i) the termination of the Merger Agreement and (ii) the day
following the Closing Date. See "TERMS OF THE PROPOSED MERGER
-- Support Agreements."
REASONS FOR THE MERGER; HAWKEYE BOARD RECOMMENDATION
The Board of Directors of Hawkeye has determined that
the terms of the Merger Agreement and the transactions
contemplated thereby are in the best interests of Hawkeye and
its shareholders. Accordingly, the Hawkeye Board of Directors
recommends that Hawkeye shareholders vote FOR the approval and
adoption of the Merger Agreement.
The recommendation of Hawkeye's Board of Directors is
based upon a number of factors, including the Exchange Ratio
and other financial terms of the Merger, information concerning
the business, financial condition, results of operations and
prospects of MBI and Hawkeye, the value anticipated to be
received by Hawkeye shareholders in the Merger in relation to
the historical trading prices of Hawkeye Common Stock,
similarities between the community banking philosophies of
Hawkeye and MBI, and the financial advice and opinion rendered
by Hawkeye's financial advisor, Donaldson, Lufkin & Jenrette.
See "TERMS OF THE PROPOSED MERGER -- Background and
Reasons for the Merger; Hawkeye Board Recommendation."
OPINION OF HAWKEYE'S FINANCIAL ADVISOR
Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Hawkeye's financial advisor, has delivered its written
opinion, dated the date of this Proxy Statement/Prospectus, to
the Board of Directors of Hawkeye stating that, as of the date
of this Proxy Statement/Prospectus and based on the matters set
forth in such opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of Hawkeye Common
Stock. The full text of the written opinion of DLJ, which sets
forth
-6-<PAGE>
the assumptions made, the procedures followed, the matters
considered and the limits on the review undertaken by DLJ, is
attached as Annex B to this Proxy Statement/Prospectus and
holders of Hawkeye Common Stock are urged to read carefully the
opinion in its entirety. See "TERMS OF THE PROPOSED MERGER --
Opinion of Hawkeye's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Hawkeye
Board with respect to the Merger Agreement, Hawkeye
shareholders should be aware that certain executive officers
and directors of Hawkeye (or their affiliates) have interests
in the Merger that are different from and in addition to the
interests of Hawkeye shareholders generally. The Board of
Directors of Hawkeye was aware of these interests and took
these interests into account in adopting the Merger Agreement.
EMPLOYMENT AGREEMENT. On August 4, 1995, Robert W.
Murray, President and Chief Executive Officer of Hawkeye,
entered into an employment agreement (the "Employment
Agreement") with MBI. The Employment Agreement is effective
only upon the consummation of the Merger. It provides for the
employment of Mr. Murray as Chairman of Hawkeye Bank, Des
Moines, and any successor thereto ("Hawkeye Bank"), for a term
of four years from the Effective Time (the "Employment
Period"). In addition, Mr. Murray will be proposed for
election to the Board of Directors of MBI for a term expiring
on the third anniversary of the MBI annual meeting date for the
year in which the Merger is consummated. Hawkeye Bank will pay
Mr. Murray for each consecutive year of the Employment Period a
base salary (inclusive in each case of all fees which would
otherwise be payable to him as a director of Hawkeye Bank) of
$250,000, $150,000, $100,000 and $100,000, respectively. Mr.
Murray will also be entitled during the Employment Period,
unless terminated for "cause" (as defined in the Employment
Agreement), to employee benefits and customary prerequisites
equivalent to those provided by MBI to similarly situated
officers, including, pension benefits, health and welfare
benefits, disability insurance benefits, life insurance
benefits, vacation benefits and other fringe benefits.
If Mr. Murray's employment is terminated by reason of
death or "disability" (as defined in the Employment Agreement)
or is involuntarily terminated other than for "cause," in each
case prior to the expiration of the Employment Period, Mr.
Murray, or his estate, will be entitled to continue to be paid
his salary under the Employment Agreement to the same extent as
if Mr. Murray had completed his employment obligations
thereunder.
-7-<PAGE>
INDEMNIFICATION. In the Merger Agreement, MBI agreed
that the Merger will not affect or diminish any of Hawkeye's
duties and obligations of indemnification existing as of the
Effective Time in favor of employees, agents, directors or
officers of Hawkeye or its subsidiaries arising by virtue of
their respective articles of incorporation or bylaws in the
form in effect on August 4, 1995, or arising by operation of
law or by virtue of any contract, resolution or other agreement
or document existing on August 4, 1995, and such duties and
obligations will continue in full force and effect for so long
as they would (but for the Merger) otherwise survive.
OTHER INTERESTS. Certain executive officers,
including certain directors, of Hawkeye currently hold Hawkeye
employee stock options and/or Hawkeye stock appreciation rights
which will be converted at the Effective Time into rights with
respect to MBI Common Stock. See "TERMS OF THE PROPOSED MERGER
-- Employee Benefits." In addition, Robert W. Murray and R.
Douglas Fisher will be entitled to receive in connection with
the Merger up to $900,000 and $525,000, respectively, pursuant to
certain change of control agreements between each of them and
Hawkeye. In connection with the anticipated retirement of
Donald R. Runger, Hawkeye and Mr. Runger entered into a
deferred compensation agreement on July 25 1995, pursuant to
which Mr. Runger will be paid in the aggregate $775,000. The
deferred compensation agreement superseded and replaced the
change of control agreement between Hawkeye and Mr. Runger.
See "TERMS OF THE PROPOSED MERGER -- Interests of
Certain Persons in the Merger" and "-- Employee Benefits."
FRACTIONAL SHARES
No fractional shares of MBI Common Stock will be
issued to Hawkeye shareholders in connection with the Merger.
Upon consummation of the Merger, each former holder of Hawkeye
Common Stock who otherwise would have been entitled to receive
a fraction of a share of MBI Common Stock shall be entitled to
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 last
business day preceding the Effective Time. Cash received by
Hawkeye shareholders in lieu of fractional shares may give rise
to taxable income. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER."
REGULATORY APPROVAL
The Merger is subject to the prior approval of the
Board of Governors of the Federal Reserve System (the "Federal
-8-<PAGE>
Reserve Board") under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). Application for such approval has been
or will be filed. There can be no assurance that any necessary
regulatory approval or action will be received or taken or as
to the timing of such approval or action. See "TERMS OF THE
PROPOSED MERGER -- Regulatory Approval."
WAIVER AND AMENDMENT
Any term, condition or provision of the Merger
Agreement may be waived in writing at any time by the party
which is, or whose shareholders are, entitled to the benefits
thereof. The Merger Agreement and the schedules thereto may be
amended by or on behalf of the Boards of Directors of MBI and
Hawkeye at any time before or after approval of the Merger
Agreement by the shareholders of Hawkeye, by an instrument in
writing signed on behalf of each party; PROVIDED that after any
such approval by the shareholders of Hawkeye no such
modification may alter or change the amount or kind of
consideration to be received by holders of Hawkeye Common Stock
in the Merger.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for
under the pooling-of-interests method of accounting. See
"TERMS OF THE PROPOSED MERGER -- Accounting Treatment."
EMPLOYEE STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
At the Effective Time, all rights with respect to
Hawkeye Common Stock pursuant to Hawkeye employee stock options
that are outstanding at the Effective Time, whether or not then
exercisable, will be converted into and become rights with
respect to MBI Common Stock, and MBI will assume each Hawkeye
employee stock option in accordance with the terms of the stock
option plan under which it was issued and the stock option
agreement by which it is evidenced. From and after the
Effective Time, (i) each Hawkeye employee stock option assumed
by MBI will be exercisable solely for shares of MBI Common
Stock, (ii) the number of shares of MBI Common Stock subject to
each Hawkeye employee stock option will be equal to the number
of shares of Hawkeye Common Stock subject to such Hawkeye
employee stock option immediately prior to the Effective Time
multiplied by the Exchange Ratio and (iii) the per share
exercise price under each Hawkeye employee stock option will be
adjusted by dividing the per share exercise price under such
Hawkeye employee stock option by the Exchange Ratio and
rounding down to the nearest cent; provided, however, that the
terms of each Hawkeye employee stock option will, in accordance
with its
-9-<PAGE>
terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or
other similar transaction subsequent to the Effective Time. It
is intended that the foregoing assumption will be undertaken in
a manner that will not constitute a "modification" as defined
in the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), as to any Hawkeye employee stock option that is
an "incentive stock option."
At the Effective Time, all stock appreciation rights
with respect to Hawkeye Common Stock that are outstanding at
the Effective Time, whether or not then exercisable, will be
converted into and become stock appreciation rights with
respect to MBI Common Stock with the same terms
and conditions as were applicable to such Hawkeye stock
appreciation rights immediately prior to the Effective Time.
Certain executive officers, including certain executive
officers who are directors, of Hawkeye currently hold Hawkeye
employee stock options and/or Hawkeye stock appreciation rights
which will be converted into rights with respect to MBI Common Stock as
described above.
FEDERAL INCOME TAX CONSEQUENCES IN GENERAL
Wachtell, Lipton, Rosen & Katz, special counsel to
MBI, and Baird, Holm, McEachen, Pedersen, Hamann & Strasheim,
counsel to Hawkeye, have delivered their opinions to the effect
that, assuming the Merger occurs in accordance with the Merger
Agreement, and conditioned on the accuracy of certain
representations made by MBI and Hawkeye, no gain or loss will
be recognized by Hawkeye or MBI as a result of the Merger and
Hawkeye shareholders will recognize no gain or loss as a result
of the exchange of their Hawkeye Common Stock solely for shares
of MBI Common Stock pursuant to the Merger, except with respect
to cash received in lieu of fractional shares, if any. EACH
HAWKEYE SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER TO SUCH SHAREHOLDER. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER."
DISSENTERS' RIGHTS
Under the Iowa Act, a holder of shares of Hawkeye
Common Stock may, in lieu of the consideration such shareholder
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 Division XIII of the Iowa Act, the text
-10-<PAGE>
of which is attached hereto as Annex A to this Proxy Statement/
Prospectus.
Failure to follow such procedures may result in a
loss of such shareholder's dissenters' rights. Any Hawkeye
shareholder returning a blank executed proxy card will be
deemed to have approved the Merger Agreement, thereby waiving
any such dissenters' rights. See "DISSENTERS' RIGHTS OF
SHAREHOLDERS OF HAWKEYE."
MARKET AND MARKET PRICES
MBI Common Stock is currently quoted on the NYSE
under the symbol "MTL." Prior to March 25, 1993, MBI's Common
Stock was quoted on the NASDAQ/NM, under the symbol "MTRC." On
August 3, 1995, the last full trading day preceding public
announcement of the Merger, the last sale price of MBI Common
Stock was $43.88 per share as reported on the NYSE Composite
Tape. The last sale price of MBI Common Stock on _______,
1995, the most recent practicable date prior to the mailing of
this Proxy Statement/Prospectus, was $_____ per share as
reported on the NYSE Composite Tape.
Hawkeye Common Stock is currently quoted on the
NASDAQ/NM, under the symbol "HWKB." On August 3, 1995, the
last sale price of Hawkeye Common Stock was $22.75 per share as
reported on the NASDAQ/NM. The value of Hawkeye Common Stock
at August 3, 1995, on an equivalent per share basis, was $25.67
(based upon the Exchange Ratio of .585). The last sale price
of Hawkeye Common Stock on ______, 1995, was $_____ per share
as reported on the NASDAQ/NM.
Shareholders are advised to obtain current market
quotations for MBI Common Stock and Hawkeye Common Stock.
There can be no assurance as to the market price of MBI Common
Stock or Hawkeye Common Stock before, at, or, in the case of
MBI Common Stock, after, the Effective Time. The following
table sets forth for the periods indicated the high and low
last sale prices (as reported on the NYSE Composite Tape and on
the NASDAQ/NM, respectively) and per share cash dividend
declared with respect to MBI Common Stock and Hawkeye Common
Stock.
-11-<PAGE>
<TABLE>
<CAPTION>
MBI Cash Hawkeye Cash
Common Stock Dividend Common Stock Dividend
------------ ------------
High Low Declared High Low Declared
---- --- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1993
----
First Quarter $35.625 $30.625 $.2475 $19.375 $15.625 $.10
Second Quarter 37.625 29.375 .2475 18.750 16.125 .10
Third Quarter 34.375 31.625 .2475 20.500 16.250 .11
Fourth Quarter 34.625 29.125 .2475 20.375 18.625 .11
1994
----
First Quarter $34.125 $29.875 $.28 $20.250 $17.875 $.12
Second Quarter 38.125 31.125 .28 21.375 17.500 .12
Third Quarter 39.250 34.875 .28 21.250 19.375 .13
Fourth Quarter 36.875 29.500 .28 21.125 15.500 .13
1995
----
First Quarter $37.250 $31.250 $.33 $21.875 $18.625 $.15
Second Quarter 44.875 36.000 .33 23.750 20.250 .15
Third Quarter 47.000 41.625 .33 26.000 20.500 .17
Fourth Quarter
(through ____,
1995) [ ] [ ] [ ] [ ]
</TABLE>
MBI has applied for the listing on the NYSE of the
shares of MBI Common Stock to be issued in the Merger.
MBI's Board of Directors has heretofore declared a
dividend on shares of MBI Common Stock of $.33 per share,
payable on January 2, 1996 to holders of record on December 11,
1995. The Board of Directors of MBI intends to maintain its
present policy of paying quarterly cash dividends on the 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. See "INFORMATION REGARDING MBI
STOCK -- Dividends."
Pursuant to the Merger Agreement, Hawkeye has agreed
that, during the period from the date of the Merger Agreement
to the Effective Time, Hawkeye will not declare, set aside or
pay any dividends or other distributions on the Hawkeye Common
Stock, except that Hawkeye may declare and pay (x) for
dividends payable in 1995, regular quarterly cash dividends of
not more than $.17 per share on the Hawkeye Common Stock, and
(y) for dividends payable in 1996, quarterly cash dividends of
not
-12-<PAGE>
more than $.19 per share; PROVIDED, that Hawkeye may not
declare or pay any dividends on Hawkeye Common Stock for any
period in which its shareholders will be entitled to receive
any regular quarterly dividend on the shares of MBI Common
Stock to be issued in the Merger.
The Board of Directors of Hawkeye has heretofore
declared (i) a regular quarterly cash dividend of $.17 per
share on the Hawkeye Common Stock, payable on November 15, 1995
to holders of record on November 1, 1995 and (ii) with the
consent of MBI, a quarterly cash dividend of $.19 per share on
the Hawkeye Common Stock, payable on January 2, 1996 to holders
of record on December 12, 1995.
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated
selected historical per share data of MBI and Hawkeye and the
corresponding pro forma and pro forma equivalent per share
amounts giving effect to the proposed Merger, and the proposed
acquisitions of First Sterling Bancorp, Inc. ("Sterling"),
Security Bank of Conway, FSB ("Security Bank") and Metro
Savings Banks, FSB ("Metro") and the acquisition of Ameribanc,
Inc. ("ABNK"), which was completed on April 30, 1992. The data
presented is based upon the supplemental consolidated financial
statements and related notes of MBI and the consolidated
financial statements and related notes of Hawkeye, Sterling,
Security Bank and Metro included in this 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 to the pro
forma financial information appearing elsewhere in this Proxy
Statement/Prospectus. See "PRO FORMA FINANCIAL INFORMATION."
These data are not necessarily indicative of the results of the
future operations of the combined organization or the actual
results that would have occurred if the Merger, the completed
merger of ABNK, or the proposed mergers of Sterling, Security
Bank and Metro had been consummated prior to the periods
indicated.
-13-<PAGE>
<TABLE>
<CAPTION>
MBI/HAWKEYE
MBI HAWKEYE Pro Forma
Reported Reported Combined(1)
-------- -------- -----------
<S> <C> <C> <C>
Book Value per Common Share:
September 30, 1995..................... $ 25.43 $14.32 $25.09
December 31, 1994...................... 23.47 13.06 23.03
Cash Dividends Declared Per Common Share:
Nine months ended September 30, 1995... $ .99 $ .47 $ .99
Year ended December 31, 1994 .......... 1.12 .50 1.12
Year ended December 31, 1993 .......... .99 .42 .99
Year ended December 31, 1992 .......... .93 .33 .93
Earnings per Common Share Before Change
in Accounting Principle:
Nine months ended September 30, 1995... $ 2.95 $ 1.28 $ 2.89
Year ended December 31, 1994 .......... 3.22 1.78 3.21
Year ended December 31, 1993 .......... 2.79 1.64 2.80
Year ended December 31, 1992 .......... 2.42 1.38 2.42
Market Price per Common Share:
August 3, 1995(4)...................... $43.88 $22.75 --
________, 1995(4)...................... -- -- --
-14-<PAGE>
MBI/HAWKEYE MBI/All Entities MBI/All Entities
Pro Forma Pro Forma Pro Forma
Equivalent(2) Combined(3) Equivalent(2)
------------- ----------- -------------
<C> <C> <C>
$14.68 $25.16 $14.72
13.47 23.09 13.51
$ .58 $ .99 $ .58
.66 1.12 .66
.58 .99 .58
.54 .93 .54
$ 1.69 $ 2.88 $ 1.68
1.88 3.22 1.88
1.64 2.80 1.64
1.42 2.44 1.43
-- -- --
-- -- --
------------------
<FN>
(1) Includes the effect of pro forma adjustments for ABNK and
Hawkeye as appropriate. See "PRO FORMA FINANCIAL
INFORMATION."
(2) Based upon the pro forma combined per share amounts multiplied
by .585, the Exchange Ratio applicable to one share of Hawkeye
Common Stock. See "PRO FORMA FINANCIAL INFORMATION."
(3) Includes the effect of pro forma adjustments for ABNK,
Hawkeye, Security Bank, Sterling and Metro as appropriate.
See "PRO FORMA FINANCIAL INFORMATION."
(4) The market values of MBI Common Stock and Hawkeye Common Stock
were determined as of the last trading day preceding the
public announcement of the Merger and as of the most recent
practicable date prior to the mailing of this Proxy Statement/
Prospectus based on the last sales price as reported on the
NYSE and NASDAQ/NM, respectively.
</FN>
/TABLE
<PAGE>
SUMMARY FINANCIAL DATA
The following tables set forth for the periods
indicated certain summary historical consolidated financial
information for MBI and Hawkeye.
The historical balance sheet data and income
statement data included in the summary financial data for the
periods indicated are derived from financial statements of MBI
and Hawkeye as of and for such periods. These data include all
adjustments which are, in the opinion of the respective
managements of MBI and Hawkeye, necessary to present a fair
statement of the results of these periods and all such
adjustments are of a normal recurring nature. Results for
interim periods 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 Hawkeye, and the related notes thereto, included in
documents incorporated herein by reference and in conjunction
with the unaudited pro forma combined consolidated financial
information, including notes thereto, appearing elsewhere in
this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE" and "PRO FORMA FINANCIAL
INFORMATION."
-15-<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
SUMMARY FINANCIAL DATA
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
--------------------- ---------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(Unaudited) (Audited)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income(1).................. $ 2.95 $ 2.68 $ 3.22 $ 2.79 $ 2.42 $ 2.25 $ 1.99
Dividends declared............. .99 .84 1.12 .99 .93 .93 .93
Book value at period end....... 25.43 23.26 23.47 21.92 19.76 19.48 18.04
Average common shares out-
standing (thousands)......... 53,630 51,900 51,957 50,965 47,276 39,391 37,847
EARNINGS (THOUSANDS)
Interest income................ $854,404 $730,270 $994,896 $971,482 $1,011,544 $1,018,688 $1,022,441
Interest expense............... 410,097 284,939 399,349 390,911 485,253 588,993 642,365
-------- -------- -------- -------- ---------- ---------- ----------
Net interest income............ 444,307 445,331 595,547 580,571 526,291 429,695 380,076
Provision for possible
loan losses.................. 28,928 26,374 43,201 63,513 77,874 62,360 56,196
Other income................... 181,480 159,425 209,758 219,703 201,965 170,770 150,508
Other expense.................. 356,944 360,140 492,070 508,043 471,903 431,155 361,992
Income taxes................... 81,156 78,033 101,705 85,467 61,072 24,029 31,759
-------- -------- -------- -------- ---------- ---------- ----------
Net income..................... $158,759 $140,209 $168,329 $143,251 $ 117,407 $ 82,921 $ 80,637
======== ======== ======== ======== ========== ========== ==========
ENDING BALANCE SHEET (MILLIONS)
Total assets................... $16,019 $14,723 $14,806 $14,423 $ 14,190 $ 12,377 $ 11,674
Earning assets................. 14,773 13,571 13,671 13,259 12,989 11,331 10,447
Investment securities.......... 3,847 3,956 3,844 4,180 4,106 2,949 2,286
Loans and leases,
net of unearned income....... 10,648 9,360 9,670 8,702 8,525 7,881 7,827
Deposits....................... 11,835 11,025 11,189 11,599 11,629 10,211 9,660
Long-term debt................. 304 300 299 288 310 216 247
Shareholders' equity........... 1,419 1,224 1,234 1,133 996 805 683
Reserve for possible
loan losses.................. 188 190 195 185 179 158 159
SELECTED RATIOS
Return on average assets....... 1.37% 1.29% 1.16% 1.00% .86% .70% .73%
Return on average equity....... 16.01 15.80 14.07 13.37 12.71 10.96 12.30
Net interest rate margin....... 4.26 4.57 4.55 4.55 4.34 4.12 3.95
Equity to assets (average)..... 8.86 8.31 8.34 7.85 7.02 6.50 5.85
Reserve for possible loan
losses to:
Outstanding loans.......... 1.76 2.03 2.01 2.12 2.10 2.00 2.04
Non-performing loans....... 352.34 469.36 579.62 278.62 147.60 105.33 108.49
<FN>
(1) Based on weighted average common shares outstanding.
</FN>
</TABLE>
-16-<PAGE>
<TABLE>
<CAPTION>
HAWKEYE BANCORPORATION
SUMMARY FINANCIAL DATA
NINE MONTHS ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
--------------------- ---------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income(1).................. $ 1.28 $ 1.31 $ 1.78 $ 1.64 $ 1.73 $ 1.63 $ 1.64
Dividends declared............. .47 .37 .50 .42 .33 .15 0
Book value at period end....... 14.32 12.88 13.06 12.15 10.84 9.38 7.87
Average common shares out-
standing (thousands)......... 13,512 13,327 13,334 13,309 13,289 13,279 13,272
EARNINGS (THOUSANDS)
Interest income................ $105,900 $90,495 $123,173 $123,129 $128,261 $138,133 $138,114
Interest expense............... 49,337 37,414 51,601 53,662 64,389 79,585 81,314
-------- -------- ------- -------- -------- -------- --------
Net interest income............ 56,563 53,081 71,572 69,467 63,872 58,548 56,800
Provision for possible loan
losses....................... 249 48 64 789 1,677 1,668 281
Other income................... 20,195 20,092 26,803 25,886 22,491 18,360 16,994
Other expenses................. 50,178 47,259 63,106 62,139 57,740 53,836 49,308
Income taxes................... 9,004 8,420 11,460 10,607 8,609 4,866 2,472
-------- -------- ------- -------- -------- -------- --------
Net income before change
in accounting principle... $17,327 $17,446 $23,745 $21,818 $18,337 $16,538 $21,733
======= ======= ======= ======= ======= ======= =======
ENDING BALANCE SHEET (MILLIONS)
Total assets................... $ 1,993 $ 1,891 $ 1,927 $ 1,827 $ 1,849 $ 1,674 $ 1,614
Earning assets................. 1,816 1,729 1,756 1,721 1,689 1,522 1,453
Investment securities.......... 415 426 437 490 526 463 435
Loan and leases, net of
unearned income.............. 1,299 1,223 1,234 1,106 1,045 928 900
Deposits....................... 1,717 1,651 1,676 1,645 1,631 1,473 1,398
Shareholders' equity........... 193 172 174 163 147 129 119
Reserve for possible
loan losses.................. 22 22 21 21 20 18 19
SELECTED RATIOS
Return on average assets....... 1.18% 1.26% 1.27% 1.19% 1.07% 1.03% 1.40%
Return on average equity....... 12.52 13.90 14.04 14.14 13.10 13.30 20.13
Net interest rate margin....... 4.39 4.34 4.35 4.34 4.27 4.11 4.00
Equity to assets (average)..... 9.46 9.04 9.05 8.45 8.18 7.72 6.97
Reserve for possible loan
losses to:
Outstanding loans.......... 1.66 1.77 1.73 1.91 1.91 1.98 2.07
Non-performing loans....... 457.70 334.37 485.64 418.60 239.83 161.74 151.63
<FN>
(1) Based on weighted average common shares outstanding.
</FN>
</TABLE>
-17-<PAGE>
INFORMATION REGARDING SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to
holders of Hawkeye Common Stock in connection with the
solicitation of proxies by the Board of Directors of Hawkeye
for use at the Special Meeting and any adjournment or
postponement thereof at which the shareholders of Hawkeye will
consider and vote on a proposal to approve and adopt the Merger
Agreement and will transact such other business as may properly
come before the Special Meeting or any adjournment or
postponement thereof. Each copy of this Proxy Statement/
Prospectus is accompanied by a Letter to Hawkeye shareholders,
the Notice of Special Meeting of Shareholders of Hawkeye, a
proxy card and a self-addressed return envelope to Hawkeye for
the proxy card.
This Proxy Statement/Prospectus is also furnished by
MBI to each holder of Hawkeye Common Stock as a prospectus in
connection with the issuance by MBI of shares of MBI Common
Stock to Hawkeye shareholders upon the consummation of the
Merger. This Proxy Statement/Prospectus, the Letter to Hawkeye
shareholders, the Notice of Special Meeting and the form of
proxy are first being mailed to shareholders of Hawkeye on or
about _______________, 1995.
DATE, TIME AND PLACE
The Special Meeting will be held at ________________,
Des Moines, Iowa, on __________________, 1995, at _____ A.M.,
Central Time.
RECORD DATE; VOTE REQUIRED
The Board of Directors of Hawkeye has fixed _______,
1995, as the Record Date for determination of shareholders of
Hawkeye entitled to notice of and to vote at the Special
Meeting. Accordingly, only holders of record of Hawkeye Common
Stock at the close of business on ______, 1995 will be entitled
to notice of, and to vote at, the Special Meeting. At the
Record Date, there were ________ shares of Hawkeye Common Stock
outstanding and entitled to vote which were held by
approximately _____ holders of record. Each such share is
entitled to one vote on each matter properly brought before the
Special Meeting. The affirmative vote of the holders of a
majority of the outstanding shares of Hawkeye Common Stock
entitled to vote at the meeting is required to approve the
Merger Agreement.
-18-<PAGE>
As of the Record Date, directors and executive
officers of Hawkeye and certain of their affiliates owned
beneficially an aggregate of _________ shares of Hawkeye Common
Stock, or approximately ____% of the shares entitled to vote at
the Special Meeting. All of Hawkeye's directors and executive
officers and certain of their affiliates have indicated their
intention to vote their shares of Hawkeye Common Stock for the
approval of the Merger Agreement. In addition, the Supporting
Stockholders, who as of the Record Date beneficially owned in
the aggregate approximately __% of the outstanding shares of
Hawkeye Common Stock, have each agreed pursuant to a Support
Agreement to vote all shares of Hawkeye Common Stock
beneficially owned by such person, or over which such person
has voting power or control, to approve the Merger Agreement.
VOTING AND REVOCATION OF PROXIES
Shares of Hawkeye Common Stock entitled to vote and
which are represented at the Special Meeting by a properly
executed proxy received prior to the vote at the Special
Meeting will be voted at such Special Meeting 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 HAWKEYE
SHAREHOLDER RETURNING A BLANK EXECUTED PROXY CARD WILL BE
DEEMED TO HAVE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. Failure to return a properly executed proxy card or
to vote in person at the Special Meeting 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 Meeting 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. 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 Meeting for purposes of determining the presence of a
quorum and will not be considered as voted for purposes of
determining the approval of shareholders on the proposal.
Since the approval of the Merger Agreement requires the
affirmative vote of the holders of a majority of the
outstanding shares of Hawkeye Common Stock, abstentions and
broker non-votes will have the same effect as a vote against
the approval of the Merger Agreement.
Any shareholder of Hawkeye giving a proxy may revoke
it at any time prior to the vote at the Special Meeting.
Shareholders of Hawkeye wishing to revoke a proxy prior to the
vote may do so by delivering to the Secretary of Hawkeye at 222
-19-<PAGE>
Equitable Building, 604 Locust Street, Des Moines, Iowa 50309-
3723 a written notice of revocation bearing a later date than
the proxy or any later dated proxy relating to the same shares,
or by attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not in itself constitute
the revocation of a proxy.
The Board of Directors of Hawkeye is not currently
aware of any business to be brought before the Special Meeting
other than that described herein. If, however, other matters
are properly brought before such Special Meeting, or any
adjournment or postponement 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 Hawkeye.
SOLICITATION OF PROXIES
Hawkeye 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 Proxy Statement/Prospectus. Proxies will initially be
solicited by mail, but directors, officers and selected other
employees of Hawkeye may also solicit proxies in person or by
telephone, telegram or other means of communication.
Directors, officers and any other employees of Hawkeye who
solicit proxies will not be specially compensated for such
services, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. 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
connection therewith.
HOLDERS OF HAWKEYE COMMON STOCK ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
-20-<PAGE>
TERMS OF THE PROPOSED MERGER
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS
OF THE MERGER AGREEMENT, A COPY OF WHICH IS FILED AS AN EXHIBIT
TO THIS REGISTRATION STATEMENT. SEE "AVAILABLE INFORMATION."
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MERGER AGREEMENT WHICH IS HEREBY INCORPORATED BY REFERENCE
HEREIN.
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that Hawkeye will merge
at the Effective Time with and into Merger Sub, subject to the
Shareholder Approval and the satisfaction or waiver of the
other conditions to the Merger. Upon consummation of the
Merger, Hawkeye's corporate existence will terminate, with
Merger Sub continuing as the surviving corporation, and each
share of Hawkeye Common Stock will be converted into the right
to receive .585 of a share of MBI Common Stock, with cash in lieu
of fractional shares. The value of MBI Common Stock to be
issued pursuant to the Merger may fluctuate prior to and
following the Effective Time. It is currently anticipated that
the Effective Time will occur shortly after the date of the
Special Meeting assuming the Merger Agreement is approved at
such meeting.
The amount and nature of the Merger Consideration was
established through arm's-length negotiations between MBI and
Hawkeye, and reflects the balancing of a number of
countervailing factors. The total amount of the Merger
Consideration reflects a price both parties concluded was
appropriate. See "-- Background and Reasons for the Merger;
Hawkeye Board Recommendation." The fact that the consideration
is payable in shares of MBI Common Stock reflects the potential
for change in the value of the MBI Common Stock and the desire
to have the favorable tax attributes of a "reorganization" for
federal income tax purposes. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER."
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 HAWKEYE SHAREHOLDER OR AT ANY OTHER TIME. THE
FAIR MARKET VALUE OF MBI COMMON STOCK RECEIVED BY A HAWKEYE
SHAREHOLDER MAY BE GREATER OR LESS THAN THE CURRENT FAIR MARKET
VALUE OF MBI COMMON STOCK DUE TO NUMEROUS MARKET FACTORS.
Following the Effective Time, each shareholder of
Hawkeye will be required to submit to KeyCorp Shareholder
Services Inc., which has been appointed as exchange agent in
-21-<PAGE>
the Merger (the "Exchange Agent"), a properly executed letter
of transmittal and surrender to the Exchange Agent the stock
certificate(s) formerly representing the shares of Hawkeye
Common Stock in order to obtain issuance of a new stock
certificate evidencing the shares of MBI Common Stock to which
such shareholder is entitled. No dividends or other
distributions will be paid to a former Hawkeye shareholder with
respect to shares of MBI Common Stock until such person
surrenders the certificates formerly representing shares of
Hawkeye Common Stock, or documentation acceptable to the
Exchange Agent in lieu of lost or destroyed certificates, at
which time such dividends will be remitted to such person,
without interest and less any taxes that may have been imposed
thereon. See "-- Surrender of Hawkeye Stock Certificates and
Receipt of MBI Common Stock." No fractional shares of MBI
Common Stock will be issued in the Merger, but cash will be
paid in lieu of such fractional shares, such cash amount being
determined 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 (or
in the absence thereof, by any other authoritative source) on
the last business day preceding the Effective Time. See "--
Fractional Shares." The shares of MBI Common Stock to be
issued pursuant to the Merger will be freely transferable
except by certain shareholders of Hawkeye who are deemed to be
"affiliates" (as such term is defined under the Securities Act)
of Hawkeye. 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 and pursuant to agreements entered into thereby and
delivered to MBI. See "INFORMATION REGARDING MBI STOCK --
Restrictions on Resale of MBI Stock by Affiliates."
STOCK OPTION AGREEMENT
In connection with the execution of the Merger
Agreement, MBI and Hawkeye entered into the Stock Option
Agreement pursuant to which Hawkeye has issued MBI an Option to
purchase up to 2,678,000 shares of Hawkeye Common Stock (or
____% of the outstanding shares of Hawkeye Common Stock as of
the Record Date, without including any shares subject to or
issued pursuant to the Option) at an exercise price of $22 per
share. The Option is exercisable (after receipt of the
required regulatory approvals) upon the occurrence of one of
the following events: (i) Hawkeye or any of its subsidiaries,
without having received prior written consent from MBI, shall
have entered into, authorized, recommended, proposed or
publicly announced its intention to enter into, authorize,
recommend, or propose, an agreement, arrangement or
understanding with any person (other than MBI or any of its
subsidiaries) to (1) effect a merger or
-22-<PAGE>
consolidation or similar transaction involving Hawkeye or any
of its subsidiaries, (2) purchase, lease or otherwise acquire
15% or more of the assets of Hawkeye or any of its subsidiaries
or (3) purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or similar transaction)
Beneficial Ownership (as defined in Rule 13d-3 under the
Exchange Act) of securities representing 10% or more of the
voting power of Hawkeye or any of its subsidiaries; (ii) any
person (other than MBI or any subsidiary of MBI, or Hawkeye or
any subsidiary of Hawkeye in a fiduciary capacity) shall have
acquired Beneficial Ownership or the right to acquire
Beneficial Ownership of 10% or more of the voting power of
Hawkeye; (iii) Hawkeye's Board of Directors shall have
withdrawn or modified in a manner adverse to MBI the
recommendation of Hawkeye's Board of Directors with respect to
the Merger Agreement, in each case after an Extension Event (as
defined below); or (iv) the holders of Hawkeye Common Stock
shall not have approved the Merger Agreement at the Special
Meeting, or such Special Meeting shall not have been held or
shall have been cancelled prior to termination of the Merger
Agreement in accordance with its terms, in each case after an
Extension Event (each of the above-described events is referred
to herein as a "Triggering Event"). No Triggering Event has
occurred as of the date of this Proxy Statement/Prospectus.
The Option terminates (i) on the earlier of (x) the
Effective Time of the Merger and (y) the termination of the
Merger Agreement (1) by mutual consent of MBI and Hawkeye, (2)
after August 4, 1996 by a party not then in material breach of
the Merger Agreement or (3) by either party if (A) the Federal
Reserve Board has denied approval of the Merger and such denial
has become final and nonappealable or (B) shareholders of
Hawkeye shall not have approved the Merger Agreement at the
Special Meeting following a favorable recommendation of
Hawkeye's Board of Directors, provided that if such termination
follows an Extension Event (as defined below), the Option will
not terminate until 12 months following such termination or
(ii) if the Option cannot be exercised on such day because of
any injunction, order or similar restraint issued by a court of
competent jurisdiction, on the 30th business day after such
injunction, order or restraint shall have been dissolved or
when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may be.
An "Extension Event" is defined in the Stock Option Agreement
as any of: (i) a Triggering Event of the type specified in
clauses (i) and (ii) in the preceding paragraph; (ii) any
person (other than MBI or any of its subsidiaries) shall have
"commenced" (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or
exchange offer to purchase
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shares of Hawkeye Common Stock such that, upon consummation of
such offer, such person would have Beneficial Ownership or the
right to acquire Beneficial Ownership of 10% or more of the
voting power of Hawkeye; or (iii) any person (other than MBI or
any subsidiary of MBI, or Hawkeye or any subsidiary of Hawkeye
in a fiduciary capacity) shall have publicly announced its
willingness, or shall have publicly announced a proposal, or
publicly disclosed an intention to make a proposal, (x) to make
an offer described in clause (ii) of this sentence or (y) to
engage in a transaction described in clause (i) of this
sentence.
The Stock Option Agreement further provides that, to
the extent not terminated pursuant to its terms, from and after
the date of a Triggering Event until 13 months immediately
thereafter (the "Repurchase Period"), MBI will be entitled to
require Hawkeye to repurchase for cash the Option from MBI
together with all (but not less than all) shares of Hawkeye
Common Stock purchased by MBI pursuant thereto, at a price
equal to the sum of: (i) the exercise price paid by MBI for
any shares of Hawkeye Common Stock acquired pursuant to the
Option; (ii) the difference between (1) the "Market/Tender
Offer Price" for shares of Hawkeye Common Stock (defined as the
higher of (x) the highest price per share at which a tender or
exchange offer has been made for shares of Hawkeye Common Stock
or (y) the highest closing mean of the "bid" and the "ask"
price per share of Hawkeye Common Stock reported by the NASDAQ/
NM for any day within that portion of the Repurchase Period
which precedes the date MBI gives notice of the required
repurchase) and (2) the exercise price, multiplied by the
number of shares of Hawkeye Common Stock with respect to which
the Option has not been exercised, but only if the Market/
Tender Offer Price is greater than such exercise price; (iii)
the difference between the Market/Tender Offer Price and the
exercise price paid by MBI for any shares of Hawkeye Common
Stock purchased pursuant to the exercise of the Option,
multiplied by the number of shares so purchased, but only if
the Market/Tender Offer Price is greater than such exercise
price; and (iv) MBI's reasonable out-of-pocket expenses
incurred in connection with the transactions contemplated by
the Merger Agreement, including, without limitation, legal,
accounting and investment banking fees.
The Option, which MBI required that Hawkeye grant as
a condition to MBI's entering into the Merger Agreement, may
increase the likelihood of consummation of the Merger.
The foregoing is a summary of the material provisions
of the Stock Option Agreement, a copy of which is filed as an
-24-<PAGE>
exhibit to this Registration Statement. See "AVAILABLE
INFORMATION." This summary is qualified in its entirety by
reference to the Stock Option Agreement which is incorporated
herein by this reference.
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger
Agreement, the Supporting Stockholders (as previously defined),
who as of the Record Date beneficially owned in the aggregate
approximately ______% of the outstanding shares of Hawkeye
Common Stock, executed separate Support Agreements with MBI
pursuant to which each Supporting Stockholder agreed, among
other things, that: (i) Supporting Stockholder will not, and
will not permit any company, trust or other entity controlled
by Supporting Stockholder to, contract to sell, sell or
otherwise transfer or dispose of any shares of Hawkeye Common
Stock owned by the Supporting Stockholder, other than (a)
pursuant to the Merger or (b) with MBI's prior written consent;
(ii) all of the shares of Hawkeye Common Stock beneficially
owned by Supporting Stockholder, or over which Supporting
Stockholder has voting power or control, directly or
indirectly, in each case at the record date for any meeting of
shareholders of Hawkeye called to consider and vote to approve
the Merger Agreement and/or the transactions contemplated
thereby will be voted by the Supporting Stockholder to approve
the Merger Agreement; (iii) Supporting Stockholder will, and
will cause any company, trust or other entity controlled by
Supporting Stockholder to, cooperate with MBI in connection
with the Merger Agreement and the transactions contemplated
thereby; and (iv) Supporting Stockholder will not, and will not
permit any such company, trust or other entity, directly or
indirectly (including through its officers, directors,
employees or other representatives) to initiate, solicit or
encourage any discussions, inquiries or proposals with any
third party relating to an Acquisition Transaction, or provide
any such person with information or assistance or negotiate
with any such person with respect to an Acquisition Transaction
or agree to or otherwise assist in the effectuation of any
Acquisition Transaction. Each Support Agreement may be
terminated at the option of any party thereto at any time after
the earlier of (i) the termination of the Merger Agreement and
(ii) the day following the Closing Date.
Each Supporting Stockholder and the number of shares
of Hawkeye Common Stock beneficially owned by it over which it
has voting power or control are as follows: Charles A.
Armstrong (2,429 shares); Michael P. Donohue (5,000 shares);
Paul D. Dunlap (279,054 shares); R. Douglas Fisher (66,389
shares); Kelly J. Housby (2,350 shares); Kyle J. Krause (6,020
shares); William A. Krause (357,551 shares); William J. Lillis
(17,015
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shares); J. Bruce Meriwether (49,893 shares); Terrence J.
Montgomery (1,400 shares); Robert W. Murray (159,793 shares);
Donald R. Runger (105,552 shares); Jack Schroeder (5,508
shares); and Robert H. Wahlert (9,388 shares).
The foregoing is a summary of the material provisions
of the Support Agreements, a form of which is filed as an
exhibit to this Registration Statement. See "AVAILABLE
INFORMATION." This summary is qualified in its entirety by
reference to the Support Agreement which is incorporated herein
by this reference.
BACKGROUND AND REASONS FOR THE MERGER; HAWKEYE BOARD
RECOMMENDATION
BACKGROUND OF THE MERGER. Over the past several
years Hawkeye has pursued its strategy as an independent bank
holding company. From time to time during this period,
representatives of DLJ made presentations to Hawkeye's
management and the Hawkeye Board of Directors (the "Hawkeye
Board") regarding banking industry trends, market outlook, the
Midwest banking environment, Hawkeye's position and its
strategic alternatives, including maintaining independence or
exploring a business combination with a larger bank holding
company.
On January 24, 1995, DLJ representatives made a
presentation to the Hawkeye Board on Hawkeye's present position
in the banking industry, the current merger and acquisition
environment, and an analysis of strategic alternatives
available to Hawkeye, including remaining independent or
pursuing a business combination at that time or in the future.
At that meeting, the Hawkeye Board approved an agreement
between Hawkeye and DLJ, which was entered into February 1,
1995, engaging DLJ as Hawkeye's exclusive financial advisor to
pursue the process of exploring potential strategic business
combinations for Hawkeye. See "-- Opinion of Hawkeye's
Financial Advisor."
Commencing in early March 1995, DLJ delivered
confidential materials regarding Hawkeye to MBI and nine other
bank holding companies identified by Hawkeye as potential
strategic merger partners. Each bank holding company was asked
to submit its indication of interest regarding a potential
strategic merger with Hawkeye by March 31, 1995. Three of
these bank holding companies, including MBI, submitted
preliminary, nonbinding indications of interest to acquire
Hawkeye. A fourth bank holding company, to whom DLJ did not
deliver confidential materials, initiated contact with DLJ and
indicated its interest in acquiring Hawkeye.
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At a meeting of the Hawkeye Board on April 18, 1995,
DLJ reported on the status of the indications of interest
received. The Hawkeye Board discussed at this meeting its
strategy in response to the indications of interest and
authorized DLJ to proceed in an effort to increase the values
of the indications of interest. Following the board meeting,
DLJ representatives pursued discussions with three of the
companies, including MBI. These discussions led to meetings
between representatives of these three companies, including
MBI, and Hawkeye senior management during the week of April 24,
1995. No firm offers resulted from these meetings.
At the time of the late April meetings between
representatives of MBI and Hawkeye, MBI Common Stock was
trading around $36.00 per share. By late June 1995, the price
per share of MBI Common Stock had increased to $43.88, while
the price of Hawkeye Common Stock had not changed
significantly. This development led to a meeting in late June
1995, initiated by DLJ, between representatives of DLJ and MBI,
to discuss the feasibility of a merger at a premium to
Hawkeye's market price that would be attractive to Hawkeye and
acceptable to MBI.
In mid-July 1995, representatives of Hawkeye, MBI and
DLJ met to discuss nonfinancial issues of a possible merger,
which included similarities between MBI's and Hawkeye's
approaches to community banking. Ensuing negotiations of
financial terms of a merger were conducted by telephone between
representatives of MBI and, on behalf of Hawkeye, of DLJ. This
was followed by the preparation of a proposed merger agreement
by MBI and its advisors.
On August 1, 1995, the Hawkeye Board met, with its
financial and legal advisors present, to consider the proposed
merger agreement. All members of the Hawkeye Board were
present in person, except Robert H. Wahlert, who participated
in the meeting by telephone. Representatives of DLJ presented
the background of the proposal, reported on the history of
discussions with all interested parties, and presented a
preliminary analysis of a combination of the businesses of
Hawkeye and MBI from a financial point of view and of the
financial terms of the proposed merger agreement, including the
Exchange Ratio. See "-- Opinion of Hawkeye's Financial
Advisor". In addition, the Hawkeye Board reviewed and
discussed with Hawkeye's legal counsel the terms and conditions
of the proposed merger agreement and of the proposed stock
option agreement and support agreements (the execution of each
of which MBI had indicated would be a condition to its entering
into a definitive agreement to effect a combination with
Hawkeye). Members of management of Hawkeye expressed their
views supporting the proposed merger with MBI. Following
discussion, the Hawkeye Board voted
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unanimously to proceed with negotiation of a definitive
agreement with MBI.
During the week of July 31, 1995, officers and
representatives of Hawkeye conducted due diligence of MBI's
business and operations. On August 2 and 3, 1995, officers and
representatives of Hawkeye and MBI met and negotiated the terms
and conditions of the definitive Merger Agreement, the Stock
Option Agreement and the Support Agreements.
On August 4, 1995, the Hawkeye Board again met with
its financial and legal advisors. All board members except Mr.
Wahlert were present in person or participated in the meeting
by telephone. Members of management of Hawkeye reviewed with
the board the results of Hawkeye's due diligence review of MBI,
and Hawkeye's legal counsel reviewed therewith the final terms
of the Merger Agreement, Stock Option Agreement and Support
Agreements. DLJ reviewed with the board the financial terms of
the Merger Agreement and rendered to the Hawkeye Board its oral
opinion that, as of August 4, 1995, the Exchange Ratio is fair
from, a financial point of view, to Hawkeye shareholders.
Following discussion, the Hawkeye Board concluded that the
Merger Agreement was in the best interests of Hawkeye and its
shareholders, and, by unanimous vote of the directors
participating in the meeting, the Hawkeye Board adopted the
Merger Agreement and Stock Option Agreement and directed that
the Merger Agreement be submitted to a vote of the shareholders
of Hawkeye with the favorable recommendation of the board.
See"-- Opinion of Hawkeye's Financial Advisor."
On August 4, 1995, following the meeting of the
Hawkeye Board, Hawkeye and MBI executed the Merger Agreement
and the Stock Option Agreement and the Supporting Stockholders
executed and delivered the Support Agreements. On August 4,
1995, the parties issued a press release announcing the Merger.
HAWKEYE'S REASONS FOR THE MERGER; HAWKEYE BOARD
RECOMMENDATION. In reaching its conclusion that the Merger is
in the best interests of Hawkeye and its shareholders, the
Hawkeye Board carefully considered a variety of factors. Among
the factors considered were those described above and the
following:
-- The Exchange Ratio and other financial terms of the
Merger, including the expectation that the Merger will be
tax-free to Hawkeye shareholders, who will receive MBI
Common Stock in the Merger which is traded on the NYSE,
and accounted for under the pooling-of-interests method of
accounting;
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-- A comparison of the terms of the Merger with comparable
transactions in Iowa and nationwide;
-- Information concerning the business, financial condition,
results of operations and prospects of MBI and Hawkeye;
-- The value anticipated to be received by Hawkeye
shareholders in the Merger in relation to the historical
trading prices of Hawkeye Common Stock;
-- The review by the Hawkeye Board with its legal and
financial advisors of the provisions of the Merger
Agreement, the Stock Option Agreement and the Support
Agreements;
-- The financial advice rendered by DLJ to the Hawkeye Board
and the oral opinion rendered by DLJ that the Exchange
Ratio is fair from a financial point of view to Hawkeye
shareholders;
-- Similarities between the community banking philosophies of
Hawkeye and MBI, including MBI's policy to emphasize the
local character of community banks and to continue the
involvement of members of the Hawkeye bank boards, as well
as members of management of such banks; and
-- The likelihood that the proposed transaction would be
consummated.
While each member of the Hawkeye Board individually
considered the foregoing and other factors, the Hawkeye Board
did not collectively assign any specific or relative weights to
the factors considered and did not make any determination with
respect to any individual factor. The Hawkeye Board
collectively made its determination with respect to the Merger
based on the conclusion reached by its members, in light of the
factors that each of them individually considered as
appropriate, that the Merger is in the best interests of
Hawkeye and its shareholders.
MBI'S REASONS FOR THE MERGER. MBI has considered a
number of factors, including, among other things, the financial
condition of Hawkeye, the projected synergies between MBI and
Hawkeye which are anticipated to result from the Merger, and
the opportunity for MBI to expand into a new market area with
the potential for increased revenues from marketing its
existing products and services. MBI has concluded that the
Merger presents a unique opportunity for MBI to expand its
position in the banking market in the state of Iowa through the
acquisition of an established banking organization with
expertise and a major market presence in the state. MBI's
decision to pursue
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discussions with Hawkeye was primarily a result of MBI's
assessment of the value of Hawkeye's franchise within the
targeted market, its substantial asset base within that area
and the compatibility of the businesses of the two
organizations.
OPINION OF HAWKEYE'S FINANCIAL ADVISOR
In February of 1995, the Board of Directors of
Hawkeye retained DLJ to act as its exclusive financial advisor
with respect to the sale, merger, consolidation, or any other
business combination involving Hawkeye. As part of its
services, DLJ analyzed Hawkeye and its operations, historical
performance and future prospects; identified and contacted a
limited number of bank holding companies acceptable to the
Hawkeye Board to solicit indications of interest in a possible
business combination with Hawkeye; participated in certain
negotiations concerning the financial aspects of the Merger
Agreement under the guidance of the Hawkeye Board; and provided
an opinion as to the fairness, from a financial point of view,
of the Exchange Ratio to the holders of Hawkeye Common Stock.
At the meeting of the Hawkeye Board on August 4,
1995, at which the terms of the proposed Merger were discussed
and considered, DLJ rendered an oral opinion to the Hawkeye
Board that, as of the date of such opinion, the Exchange Ratio
was fair, from a financial point of view, to the holders of
Hawkeye Common Stock. DLJ has confirmed its August 4, 1995
opinion by delivery of a written opinion to the Hawkeye Board
dated the date of this Proxy Statement/Prospectus stating that,
as of the date of this Proxy Statement/Prospectus and based on
the matters set forth in such opinion, the Exchange Ratio is
fair, from a financial point of view, to the holders of Hawkeye
Common Stock.
THE FULL TEXT OF DLJ'S OPINION DATED THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS
MADE, THE PROCEDURES FOLLOWED, THE MATTERS CONSIDERED AND THE
LIMITS ON THE REVIEW UNDERTAKEN BY DLJ, IS ATTACHED AS APPENDIX
B HERETO AND IS INCORPORATED HEREIN BY THIS REFERENCE. THE
DESCRIPTION OF THE DLJ OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION. HAWKEYE STOCKHOLDERS ARE
URGED TO READ THE DLJ OPINION IN ITS ENTIRETY.
DLJ's opinion is limited to the fairness, from a
financial point of view, of the Exchange Ratio to the holders
of Hawkeye Common Stock and does not address Hawkeye's
underlying business decision to proceed with the Merger, nor
does it express an opinion as to the prices at which shares of
MBI Common
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Stock issued in the Merger may trade if and when they are
issued or at any future time. The opinion is directed only to
the Exchange Ratio in the Merger and does not constitute a
recommendation to any holder of Hawkeye Common Stock as to how
such holder should vote with respect to the Merger Agreement at
any meeting of holders of Hawkeye Common Stock.
DLJ is a nationally recognized investment banking
firm regularly engaged, with respect to bank holding companies
and other corporations, in the valuation of businesses and
their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements, and valuations for corporate and other purposes.
The Hawkeye Board selected DLJ on the basis of its familiarity
with the financial services industry, its qualifications,
ability and previous experience, and its reputation with
respect to mergers and acquisitions.
For purposes of its opinion dated the date of this
Proxy Statement/Prospectus and in connection with its review of
the proposed transaction with MBI, DLJ, among other things:
(i) participated in discussions and negotiations among
representatives of Hawkeye and MBI and their respective legal
advisors that resulted in the Merger Agreement; (ii) reviewed
the terms of the Merger Agreement and Stock Option Agreement;
(iii) reviewed this Proxy Statement/Prospectus; (iv) reviewed
certain publicly available financial statements, both audited
and unaudited, of Hawkeye and MBI, including those included in
their respective Annual Reports on Form 10-K for the five years
ended December 31, 1994 and the respective Quarterly Reports on
Form 10-Q for the periods ended March 31, 1995 and June 30,
1995; (v) reviewed certain financial statements and other
financial and operating data concerning Hawkeye and MBI
prepared by their respective managements; (vi) reviewed certain
financial forecasts of Hawkeye prepared by its management and
made inquiries of representatives of MBI management as to the
expected future financial performance of MBI on a stand-alone
basis and giving effect to the Merger; (vii) discussed certain
aspects of the past and current business operations, financial
condition and future prospects of Hawkeye and MBI with certain
members of their respective managements; (viii) reviewed
reported market prices and historical trading activity of
Hawkeye Common Stock and MBI Common Stock; (ix) reviewed
certain aspects of the financial performance of Hawkeye and MBI
and compared such financial performance of Hawkeye and MBI,
together with stock market data relating to Hawkeye Common
Stock and MBI Common Stock, with similar data available for
certain other financial institutions and certain of their
publicly traded securities; (x) reviewed certain of the
-31-<PAGE>
financial terms, to the extent publicly available, of certain
recent business combinations involving other financial
institutions; and (xi) conducted such other studies, analyses,
and examinations as DLJ deemed appropriate.
In conducting its review and rendering its opinion
dated the date hereof, DLJ relied upon and assumed without
independent verification the accuracy and completeness of all
of the financial and other information provided to DLJ by
Hawkeye, MBI and their respective representatives and of the
publicly available information reviewed by DLJ. With Hawkeye's
permission, DLJ also relied upon the managements of both
Hawkeye and MBI as to the reasonableness and achievability of
the financial and operating forecasts provided to DLJ (and the
assumptions and bases therefor). In that regard, DLJ assumed
with Hawkeye's permission that such forecasts, including
without limitation projected cost savings and operating
synergies resulting from the Merger, reflect the best currently
available estimates and judgments of such managements and that
such forecasts will be realized in the amounts and in the time
periods estimated by the managements of Hawkeye and MBI. DLJ
did not independently verify and relied on and assumed that the
aggregate allowances for loan losses set forth in the balance
sheets of each of Hawkeye and MBI at June 30, 1995 are adequate
to cover such losses and complied fully with applicable law,
regulatory policy and sound banking practice as of the date of
such financial statements. DLJ was not retained to and DLJ did
not conduct a physical inspection of any of the properties or
facilities of Hawkeye and MBI, did not make any independent
evaluation or appraisal of the assets, liabilities or prospects
of Hawkeye and MBI, was not furnished with any such evaluation
or appraisal, and did not review any individual credit files.
In rendering its opinion, DLJ was advised by Hawkeye and MBI
and assumed with Hawkeye's permission that there were no other
factors that would delay or subject to adverse conditions any
necessary regulatory or governmental approval for the Merger,
and further assumed that all conditions to the Merger will be
satisfied and not waived and that the Merger will be accounted
for as a pooling of interests.
Set forth below is a brief summary of the analyses
performed by DLJ in reaching its August 4, 1995 opinion.
STOCK TRADING HISTORY. DLJ examined the history of
trading prices and volume for Hawkeye Common Stock and MBI
Common Stock and the relationship between the movements of such
trading prices to movements of the Standard & Poor's Regional
Bank Index and of the trading prices of the common stocks of
the companies in the Hawkeye Peer Group (as defined below) and
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the MBI Peer Group (consisting of AmSouth Bancorporation,
Bancorp Hawaii, Inc., Bank South Corporation, BayBanks, Inc.,
Central Fidelity Banks, Inc., Commerce Bancshares, Inc.,
Compass Bancshares, Inc., Crestar Financial Corporation, Fifth
Third Bancorp, First American Corporation, First Citizens
Bancshares, Inc., First Commerce Corporation, First Empire
State Corporation, First Hawaiian, Inc., First Security
Corporation, First Tennessee National Corporation, First
Virginia Banks, Inc., Firstar Corporation, Fourth Financial
Corporation, Hibernia Corporation, Huntington Bancshares
Incorporated, Integra Financial Corporation, Marshall & Ilsley
Corporation, Mercantile Bankshares Corporation, Meridian
Bancorp, Inc., Midlantic Corporation, Northern Trust
Corporation, Old Kent Financial Corporation, ONBANCorp, Inc.,
Regions Financial Corporation, Signet Banking Corporation,
Southern National Corporation, SouthTrust Corporation, Star
Banc Corporation, State Street Boston Corporation, Synovus
Financial Corp., UJB Financial Corp., UMB Financial
Corporation, Union Planters Corporation and West One Bancorp,
all of which are publicly-traded U.S. bank holding companies
with total assets in the approximate range of $5 billion to $25
billion).
COMPARISON WITH SELECTED COMPANIES. DLJ compared
selected financial ratios (at or for the twelve months ended
June 30, 1995) and trading multiples (as of July 28, 1995) for
Hawkeye to the corresponding ratios and multiples of the
Hawkeye Peer Group (consisting of AMCORE Financial, Inc.,
Associated Banc-Corp, Brenton Banks, Inc., Chemical Financial
Corporation, CNB Bancshares, Inc., Community First Bankshares,
Inc., First Commerce Bancshares, Inc., First Financial
Bancorp., First Michigan Bank Corporation, 1st Source
Corporation, Firstbank of Illinois Co., FirsTier Financial,
Inc., Fort Wayne National Corporation, Magna Group, Inc., Mark
Twain Bancshares, Inc., Mid Am, Inc., Park National Corporation
and River Forest Bancorp, Inc., all of which are publicly-
traded commercial bank holding companies headquartered in the
Midwest with total assets in the approximate range of $1
billion to $5 billion). DLJ also calculated implied values for
Hawkeye Common Stock based on the mean trading multiples for
the Hawkeye Peer Group. The trading multiples used in
calculating such implied values were market price as a multiple
of: (i) book value (which was 1.52x for Hawkeye as compared to
a mean of 1.77x for the Hawkeye Peer Group); (ii) tangible book
value (which was 1.72x for Hawkeye as compared to an mean of
1.86x for the Hawkeye Peer Group) (iii) earnings per share
("EPS") for the twelve months ended June 30, 1995 (which was
12.2x for Hawkeye as compared to a mean of 13.5x for the
Hawkeye Peer Group); (iv) 1995 estimated EPS (which was 11.9x
for Hawkeye as compared to a mean of 13.2x for the Hawkeye Peer
Group); and (v) 1996 estimated EPS (which was 11.3x for Hawkeye
as compared to a mean of 11.4x for
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the Hawkeye Peer Group). DLJ used Hawkeye management's
projected earnings estimates for Hawkeye and earnings estimates
as published by the Institutional Brokers Estimate System
("IBES") for the companies comprising the Hawkeye Peer Group.
IBES is a data service which monitors and publishes a
compilation of earnings estimates produced by selected research
analysts on companies of interest to investors. The implied
values derived from this analysis ranged from $19.69 to $24.92
per share of Hawkeye Common Stock.
DLJ also compared selected financial ratios (at or
for the twelve months ended June 30, 1995) and trading
multiples (as of July 28, 1995) for MBI to the corresponding
ratios and multiples of the MBI Peer Group. The trading
multiples used in comparing MBI to the MBI Peer Group were
market price as a multiple of: (i) book value (which was 1.83x
for MBI as compared to a mean of 1.70x for the MBI Peer Group);
(ii) EPS for the twelve months ended June 30, 1995 (which was
11.7x for MBI as compared to a mean of 11.2x for the MBI Peer
Group); (iii) 1995 estimated EPS (which was 11.2x for MBI as
compared to a mean of 11.5x for the MBI Peer Group); and (iv)
1996 estimated EPS (which was 10.3x for MBI as compared to a
mean of 10.5x for the MBI Peer Group). DLJ used earnings
estimates as published by IBES for MBI and the companies
comprising the MBI Peer Group.
ANALYSIS OF SELECTED MERGERS. As part of its
analyses, DLJ reviewed two sets of mergers: (i) eleven mergers
and acquisitions involving Iowa-based depository institutions
announced from January 1, 1990 to July 28, 1995 in which the
total assets of the acquired company were greater than $200
million (the "Iowa Transactions"), and (ii) eight mergers and
acquisitions involving banks and bank holding companies
headquartered anywhere in the United States announced from
August 1, 1994 to July 28, 1995 (the "National Transactions").
The Iowa Transactions involved the following pairs of
institutions (acquiror/acquiree): Firstar Corporation/Harvest
Financial Corp., First Midwest Bancorp/CF Bancorp Inc.,
Mercantile Bancorporation Inc./Plains Spirit Financial Corp.,
Community First Bankshares, Inc./Minowa Bancshares, Inc.,
FirsTier Financial Inc./Cornerstone Bank Group, Mercantile
Bancorporation Inc./Metro Bancorporation, Inc., Iowa National
Bankshares Corp./MidAmerica Financial Corp., Hawkeye
Bancorporation/First Dubuque Corporation, Boatmen's Bancshares,
Inc./First Interstate of Iowa, Inc., Norwest Corporation/
Davenport Bank and Trust Company, and Firstar Corporation/Banks
of Iowa, Inc. The National Transactions involved the following
pairs of institutions (acquiror/acquiree): NationsBank
Corporation/Intercontinental Bank, Meridian Bancorp, Inc./
United Counties Bancorp., Comerica Incorporated/Metrobank,
Mercantile
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Bancorporation/TC Bankshares Inc., Synovus Financial
Corporation/NBSC Corporation, Meridian Bancorp, Inc./United
Counties Bancorp., Norwest Corporation/Independent of Arizona
and Boatmen's Bancshares, Inc./Worthen Banking Corporation.
For each transaction for which data was available, DLJ
calculated the multiple of the offer value to the acquired
company's: (i) EPS for the twelve months preceding ("LTM"),
fiscal year containing ("FY Est.") and fiscal year following
("FY+1 Est.") the announcement date of the transaction; (ii)
book value per share; (iii) tangible book value per share; and
(iv) market price per share.
The calculations for the Iowa Transactions yielded a
range of multiples of offer value to LTM EPS of 10.1x to 17.3x,
with a mean of 13.1x and a median of 12.4x; a range of
multiples of offer value to book value of 1.12x to 2.08x, with
a mean of 1.51x and a median of 1.49x; a range of multiples of
offer value to tangible book value of 1.12x to 2.68x, with a
mean of 1.64x and a median of 1.59x; a range of multiples of
offer value to market price of 1.10x to 1.38x, with a mean of
1.25x and a median of 1.24x.
The calculations for the National Transactions
yielded a range of multiples of offer value to LTM EPS of 10.3x
to 21.6x, with a mean of 15.2x and a median of 14.9x; a range
of multiples of offer value to FY Est. EPS of 14.1x to 19.8x,
with a mean of 16.3x and a median of 15.0x; a range of
multiples of offer value to FY+1 Est. EPS of 12.4x to 16.4x,
with a mean of 14.2x and a median of 13.8x; a range of
multiples of offer value to book value of 1.12x to 2.18x, with
a mean of 1.85x and a median of 1.94x; a range of multiples of
offer value to tangible book value of 1.27x to 2.71x, with a
mean of 2.03x and a median of 2.01x.
DLJ compared these multiples with the corresponding
multiples for the Merger, valuing the Exchange Ratio at $26.325
(the "Exchange Value"). In calculating the multiples for the
Merger, DLJ used Hawkeye's EPS for the twelve months ended June
30, 1995, estimated EPS for the year ending December 31, 1995,
estimated EPS for the year ending December 31, 1996, book value
per share and tangible book value per share as of June 30,
1995, and the closing price per share of Hawkeye Common Stock
on July 28, 1995. DLJ calculated that the Exchange Value
represented multiples of 15.0x Hawkeye's LTM EPS, 14.7x its
1995 estimated EPS, 13.9x its 1996 estimated EPS, 1.87x its
book value per share, 2.11x its tangible book value per share
and 1.23x its market price per share.
No company or transaction used in the above analyses
as a comparison is identical to Hawkeye, MBI, or the Merger.
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Accordingly, an analysis of the results of the foregoing is not
mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies and other facts that could
affect the public trading value of the companies to which they
are being compared.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash
flow analysis, DLJ estimated the future dividend streams that
Hawkeye could produce over the period from June 30, 1995
through December 31, 1999, assuming a minimum required tangible
equity level of 7.0% of tangible total assets, if Hawkeye
performed in accordance with forecasts provided by management
of Hawkeye. DLJ also estimated the terminal value of Hawkeye's
common equity as of December 31, 1999 by applying multiples of
10.0x to 12.0x to Hawkeye's projected 1999 earnings. DLJ
selected the range of terminal multiples on the basis of past
and current trading multiples for Hawkeye and other commercial
banks. The dividend streams and terminal value were discounted
to present values as of June 30, 1995 using discount rates
ranging from 12.0% to 13.0%, which reflect different
assumptions regarding the required rates of return of holders
and prospective buyers of Hawkeye Common Stock. The range of
present values per fully diluted share of Hawkeye Common Stock
resulting from this analysis was $18.17 to $21.29.
PRO FORMA MERGER ANALYSIS. In the course of
discussions preceding execution of the Merger Agreement,
management of MBI informed DLJ that, with various cost savings
and revenue enhancements that it believed could be obtained as
a result of the Merger, management of MBI expected the
transaction to be slightly dilutive to MBI's EPS in the first
year following the Effective Time and slightly accretive in the
second. Management of MBI also informed DLJ that it
anticipated the transaction would initially be slightly
dilutive to MBI's book value and tangible book value per share.
DLJ performed certain calculations to confirm MBI's statements
regarding the anticipated effect of the Merger on MBI's EPS,
book value per share and tangible book value per share.
DLJ also analyzed certain additional pro forma
effects of the Merger. DLJ's analysis showed that holders of
Hawkeye Common Stock would experience an increase in dividend
income of 13.6%, based on Hawkeye's and MBI's current dividend
payments as of August 1, 1995, and that the shares of MBI
Common Stock issued in the Merger would represent 12.4% of the
pro forma total number of outstanding shares of MBI Common
Stock.
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In connection with its written opinion dated as of
the date of this Proxy Statement/Prospectus, DLJ performed
procedures to update certain of its analyses and reviewed the
assumptions on which such analyses were based and the factors
considered in connection therewith. In updating its opinion,
DLJ did not utilize any methods of analysis in addition to
those described.
The summary set forth above describes the material
analyses performed by DLJ and presented to the Hawkeye Board
and does not purport to be a complete description of such
analyses. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis
or summary description. DLJ believes that its analyses must be
considered as a whole and that selecting portions of its
analyses, without considering all factors and analyses, would
create an incomplete view of the process underlying the
analyses by which DLJ reached its opinions. The ranges of
valuations resulting from any particular analysis described
above should not be taken to be DLJ's view of the actual value
of Hawkeye, the combined company or the trading price for MBI
Common Stock.
In performing its analyses, DLJ made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Hawkeye and MBI. The analyses
performed by DLJ are not necessarily indicative of actual
values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of DLJ's analysis of the
fairness of the Exchange Ratio, from a financial point of view,
to the holders of Hawkeye Common Stock. The analyses do not
purport to be appraisals or to reflect the prices at which a
company or its securities may actually be bought or sold. DLJ
used in its analyses various projections prepared by Hawkeye's
management and relied on statements of MBI's management as to
the expected future financial performance of MBI. Neither
Hawkeye nor MBI publicly discloses internal management
projections of the type provided to DLJ in connection with its
review. Such projections were not prepared for, or with a view
toward, public disclosure. In addition, such projections were
based on numerous variables and assumptions that are inherently
uncertain, including, without limitation, factors related to
general economic and competitive conditions, many of which are
beyond the control of the managements of MBI and Hawkeye.
Accordingly, actual results could vary significantly from those
set forth in such projections.
Pursuant to the terms of a letter agreement dated
February 1, 1995 (the "Engagement Letter"), for DLJ's services
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in connection with the Merger, including the rendering of its
opinions, Hawkeye (i) has paid DLJ $475,000, with an additional
$75,000 payable on December 14, 1995, and (ii) has agreed to
pay DLJ an amount equal to 0.70% of the aggregate amount of
consideration received by the Company and/or its shareholders
(treating any shares issuable upon exercise of options,
warrants or other rights of conversion as outstanding), less
the amount paid by the Company pursuant to clause (i) above.
Because the major portion of the aggregate consideration to be
received by the holders of Hawkeye Common Stock is to be paid
in the form of securities, the Engagement Letter provides that
the value of such securities, for purposes of calculating the
fee payable to DLJ, will be determined by the last sale price
for such securities on the last trading day thereof prior to
consummation of the Merger. Such fee shall be payable in cash
upon consummation of the Merger. Hawkeye has also agreed under
the Engagement Letter to reimburse DLJ for all reasonable out-
of-pocket expenses, including reasonable fees and expenses of
legal counsel, and has agreed to indemnify DLJ against certain
expenses and liabilities incurred in connection with its
engagement, including liabilities under Federal securities law.
DLJ was initially retained by Hawkeye to provide
certain ongoing financial advisory services, including the
review and analysis of financial and structural alternatives
available to Hawkeye with a view to meeting its long term,
strategic objectives. This initial engagement was governed by
a letter agreement dated June 14, 1993 pursuant to which
Hawkeye paid DLJ a fee of $75,000 for a one-year engagement.
Hawkeye renewed DLJ's engagement for an additional year in a
letter agreement dated June 14, 1994, pursuant to which Hawkeye
paid DLJ a fee of $150,000. Both letter agreements also
provided for the reimbursement of DLJ's reasonable out-of-
pocket expenses and the indemnification of DLJ against certain
expenses and liabilities incurred in connection with its
engagement, including liabilities under Federal securities law.
DLJ may, in the ordinary course of its business,
actively trade securities of Hawkeye and MBI for its own
account or for the accounts of customers and thus may hold long
or short positions in such securities at any time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Hawkeye
Board with respect to the Merger Agreement, Hawkeye
shareholders should be aware that certain executive officers
and directors of Hawkeye (or their affiliates) have interests
in the Merger that are different from and in addition to the
interests of Hawkeye shareholders generally. The Board of
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Directors of Hawkeye was aware of these interests and took
these interests into account in adopting the Merger Agreement.
EMPLOYMENT AGREEMENT. On August 4, 1995, Robert W.
Murray, President and Chief Executive Officer of Hawkeye,
entered into an employment agreement (the "Employment
Agreement") with MBI. The Employment Agreement is effective
only upon the consummation of the Merger. It provides for the
employment of Mr. Murray as Chairman of Hawkeye Bank, Des
Moines, and any successor thereto ("Hawkeye Bank"), for a term
of four years from the Effective Time (the "Employment
Period"). In addition, Mr. Murray will be proposed for
election to the Board of Directors of MBI for a term expiring
on the third anniversary of the MBI annual meeting date for the
year in which the Merger is consummated. Hawkeye Bank will pay
Mr. Murray for each consecutive year of the Employment Period a
base salary (inclusive in each case of all fees which would
otherwise be payable to him as a director of Hawkeye Bank) of
$250,000, $150,000, $100,000 and $100,000, respectively. Mr.
Murray will also be entitled during the Employment Period,
unless terminated for "cause" (as defined in the Employment
Agreement), to employee benefits and customary prerequisites
equivalent to those provided by MBI to similarly situated
officers, including, pension benefits, health and welfare
benefits, disability insurance benefits, life insurance
benefits, vacation benefits and other fringe benefits.
If Mr. Murray's employment is terminated by reason of
death or "disability" (as defined in the Employment Agreement)
or is involuntarily terminated other than for "cause," in each
case prior to the expiration of the Employment Period, Mr.
Murray, or his estate, will be entitled to continue to be paid
his salary under the Employment Agreement to the same extent as
if Mr. Murray had completed his employment obligations
thereunder.
INDEMNIFICATION. In the Merger Agreement, MBI agreed
that the Merger will not affect or diminish any of Hawkeye's
duties and obligations of indemnification existing as of the
Effective Time in favor of employees, agents, directors or
officers of Hawkeye or its subsidiaries arising by virtue of
their respective articles of incorporation or bylaws in the
form in effect on August 4, 1995, or arising by operation of
law or by virtue of any contract, resolution or other agreement
or document existing on August 4, 1995, and such duties and
obligations will continue in full force and effect for so long
as they would (but for the Merger) otherwise survive.
OTHER INTERESTS. Certain executive officers,
including certain directors, of Hawkeye currently hold Hawkeye
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employee stock options and/or Hawkeye stock appreciation rights
which will be converted at the Effective Time into rights with
respect to MBI Common Stock. See "TERMS OF THE PROPOSED MERGER
-- Employee Benefits." In addition, Robert W. Murray and
R. Douglas Fisher will be entitled to receive in
connection with the Merger up to $900,000 and $525,000,
respectively, pursuant to certain change of control agreements
between each of them and Hawkeye. In connection with the anticipated
retirement of Donald R. Runger, Hawkeye and Mr. Runger entered into
a deferred compensation agreement on July 25, 1995, pursuant to
which Mr. Runger will be paid in the aggregate $775,000. The
deferred compensation agreement superseded and replaced the change
of control agreement between Hawkeye and Mr. Runger.
See "-- Employee Benefits."
CONDITIONS OF THE MERGER
The respective obligations of MBI and Hawkeye to
consummate the Merger are subject to the fulfillment or waiver
at or prior to the Effective Time of the following conditions:
(i) The Merger Agreement shall have received
the requisite approval of shareholders of Hawkeye.
(ii) All requisite approvals of the Merger
Agreement and the transactions contemplated thereby shall
have been received from the Federal Reserve Board, the
Superintendent of the Banking Division of the Commerce
Department of the State of Iowa (the "State Bank
Regulator"), if required, and any other necessary
governmental or regulatory authority or agency (the
"Regulatory Authorities").
(iii) The Registration Statement shall have been
declared effective and shall not be subject to a stop
order or any threatened stop order.
(iv) Neither MBI nor Hawkeye shall be subject to
any order, decree or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(v) Each of MBI and Hawkeye shall have
received, from counsel reasonably satisfactory to it, an
opinion reasonably satisfactory in form and substance to
it to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the
Internal Revenue Code and that no gain or loss will be
recognized by the shareholders of Hawkeye to the extent
they receive MBI Common Stock solely in exchange for
shares of Hawkeye Common Stock.
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Hawkeye's obligation to effect the Merger is subject
to the fulfillment or waiver at or prior to the Effective Time
of the following additional conditions:
(i) The representations and warranties of MBI
set forth in Article III of the Merger Agreement shall be
true and correct in all material respects as of August 4,
1995 and as of the Effective Time (as though made on and
as of the Effective Time except (A) to the extent such
representations and warranties are by their express
provisions made as of a specified date or period and (B)
for the effect of transactions contemplated by the Merger
Agreement).
(ii) MBI shall have performed in all material
respects all obligations required to be performed by it
under the Merger Agreement prior to the Effective Time.
(iii) Hawkeye shall have received a certificate
of the chairman or chief financial officer of MBI as to
the satisfaction of the conditions set forth in clauses
(i) and (ii).
MBI's obligation to effect the Merger is subject to
the fulfillment or waiver at or prior to the Effective Time of
the following additional conditions:
(i) The representations and warranties of
Hawkeye set forth in Article II of the Merger Agreement
shall be true and correct in all material respects as of
August 4, 1995 and as of the Effective Time (as though
made on and as of the Effective Time except (A) to the
extent such representations and warranties are by their
express provisions made as of a specified date or period
and (B) for the effect of transactions contemplated by the
Merger Agreement).
(ii) Hawkeye shall have performed in all
material respects all obligations required to be performed
by it under the Merger Agreement prior to the Effective
Time.
(iii) MBI shall have received certificates of the
chairman and the president and chief executive officer of
Hawkeye as to the satisfaction of the conditions set forth
in clauses (i) and (ii).
(iv) MBI shall have received an opinion
addressed to MBI from KPMG Peat Marwick LLP, satisfactory
in form and substance to MBI, stating that the Merger will
qualify for pooling-of-interests accounting treatment (the
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"Pooling Letter") and such opinion shall not have been
withdrawn (see "-- Accounting Treatment").
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after any
requisite shareholder approval: (i) by mutual consent of the
Executive Committee of the Board of Directors of MBI and the
Board of Directors of Hawkeye; (ii) by the Executive Committee
of the Board of Directors of MBI or the Board of Directors of
Hawkeye (A) at any time after August 4, 1996 if the Merger
shall not theretofore have been consummated (provided that the
terminating party is not then in material breach of the Merger
Agreement), (B) if the Federal Reserve Board has denied
approval of the Merger and such denial has become final and
nonappealable or (C) if shareholders of Hawkeye shall not have
approved the Merger Agreement at the Special Meeting following
a favorable recommendation of Hawkeye's Board of Directors;
(iii) by the Executive Committee of the Board of Directors of
MBI in the event (A) of a material breach by Hawkeye of the
Merger Agreement, which breach is not cured within 30 days
after written notice thereof to Hawkeye by MBI or (B) that
(x)(1) the estimated costs of all remedial or other corrective
actions or measures with regard to certain real properties
referred to in the Merger Agreement required by applicable law
exceed $5,000,000 in the aggregate or (2) such cost cannot be
reasonably estimated to be such amount or less with any
reasonable degree of certainty and (y) after providing Hawkeye
with written notice of MBI's intent to so terminate the Merger
Agreement Hawkeye shall not have taken and completed, within
the six-month period from the date of such notice, to the
reasonable satisfaction of MBI, all such remedial or other
corrective actions and measures (the aggregate cost of which
incurred by Hawkeye and its subsidiaries shall not exceed
$5,000,000); or (iv) by the Board of Directors of Hawkeye in
the event of a material breach by MBI of the Merger Agreement,
which breach is not cured within 30 days after written notice
thereof is given to MBI by Hawkeye.
No assurance can be given that the Merger will be
consummated, that MBI and Hawkeye will not mutually agree to
terminate the Merger Agreement or that MBI or Hawkeye will not
elect to terminate the Merger Agreement if the Merger has not
been consummated on or before August 4, 1996.
CLOSING AND EFFECTIVE TIME
Unless the parties otherwise agree, the Closing of
the Merger will take place at 10:00 A.M., local time, on the
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date on which the Effective Time occurs, which shall be such
date as MBI notifies Hawkeye in writing but not earlier than
the Approval Date, and not later than the first business day of
the first full calendar month commencing at least five business
days after the Approval Date. The Effective Time will occur
upon the filing of the articles of merger with the Iowa
Secretary of State. It is currently anticipated that the
Effective Time will occur shortly after the date of the Special
Meeting assuming the Merger Agreement is approved at such
meeting.
SURRENDER OF HAWKEYE STOCK CERTIFICATES AND RECEIPT OF MBI
COMMON STOCK
Except for the shares of Hawkeye Common Stock subject
to the exercise of dissenters' rights, at the Effective Time of
the Merger, each outstanding share of Hawkeye Common Stock
(other than shares held by Hawkeye or MBI or any of their
respective subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, which
shall be cancelled) will be converted into the right to receive
.585 of a share of MBI Common Stock.
As soon as practicable after the Effective Time,
holders of record of certificates formerly representing shares
of Hawkeye Common Stock (the "Certificates") will be instructed
to tender such Certificates to the Exchange Agent pursuant to a
letter of transmittal that MBI will deliver or cause to be
delivered to such holders. Such letters of transmittal will
specify that risk of loss and title to Certificates will pass
only upon delivery of such Certificates to the Exchange Agent.
After the Effective Time, each previous holder of a
Certificate that surrenders such Certificate to the Exchange
Agent will, upon acceptance thereof by the Exchange Agent, be
entitled to a certificate or certificates representing the
number of full shares of MBI Common Stock into which the
Certificate so surrendered will have been converted pursuant to
the Merger Agreement and any dividend theretofore declared and
not yet paid with respect to such shares of MBI Common Stock,
without interest. The Exchange Agent will accept Certificates
upon compliance with such reasonable terms and conditions as
MBI or the Exchange Agent may impose to effect an orderly
exchange thereof in accordance with customary exchange
practices. Certificates must be appropriately endorsed or
accompanied by such instruments of transfer as MBI or the
Exchange Agent may require.
Each outstanding Certificate will, until duly
surrendered to the Exchange Agent, be deemed to evidence
ownership
-43-<PAGE>
of the Merger Consideration into which the stock previously
represented by such Certificate will have been converted in the
Merger. After the Effective Time, holders of Certificates will
cease to have rights with respect to the stock previously
represented by such Certificates, and their sole right will be
to exchange such Certificates for such Merger Consideration.
After the Effective Time, there will be no further transfer on
the records of Hawkeye of Certificates, and if such
Certificates are presented to Hawkeye for transfer, they will
be cancelled against delivery of such Merger Consideration.
MBI will not be obligated to deliver the Merger
Consideration to which any former holder of Hawkeye Common
Stock is entitled as a result of the Merger until such holder
surrenders the Certificates as provided herein. No dividends
declared on MBI Common Stock will be remitted to any person
entitled to receive MBI Common Stock in the Merger until such
person surrenders the Certificate representing the right to
receive such MBI Common Stock, at which time such dividends
will be remitted to such person, without interest and less any
taxes that may have been imposed thereon.
Certificates surrendered for exchange by any person
constituting an "affiliate" of Hawkeye for purposes of Rule 145
of the Securities Act will not be exchanged for certificates
representing MBI Common Stock until MBI has received a written
agreement from such person not to sell or otherwise dispose of
any shares of MBI Common Stock received by such person until
financial results covering at least 30 days of combined
operations have been published and thereafter only in
compliance with Rule 145. See "INFORMATION REGARDING MBI STOCK
-- Restrictions on Resale of MBI Capital Stock by Affiliates;
Affiliate Agreement."
Neither the Exchange Agent nor Hawkeye nor MBI, nor
any affiliate thereof, will be liable to any holder of stock
represented by any Certificate for any Merger Consideration
paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. MBI and the Exchange Agent
will be entitled to rely upon the stock transfer books of
Hawkeye to establish the identity of those persons entitled to
receive Merger Consideration, which books will be conclusive
with respect thereto. In the event of a dispute with respect
to ownership of stock represented by any Certificate, MBI and
the Exchange Agent will be entitled to deposit any Merger
Consideration represented thereby in escrow with an independent
third party and thereafter be relieved with respect to any
claims thereto.
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FRACTIONAL SHARES
No fractional shares of MBI Common Stock will be
issued to the former shareholders of Hawkeye in connection with
the Merger. Each former holder of Hawkeye Common Stock who
otherwise would have been entitled to receive a fraction of a
share of MBI Common Stock will receive cash in lieu thereof,
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 (or in the absence thereof, by any other
authoritative source) on the last business day preceding the
Effective Time. No shareholder of Hawkeye entitled to receive
cash in lieu of fractional shares will be entitled to
dividends, voting rights or any other rights in respect of such
fractional shares. Cash received by Hawkeye shareholders in
lieu of fractional shares may give rise to taxable income. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
REGULATORY APPROVAL
The obligations of the parties to effect the Merger
are subject to prior approval of the Federal Reserve Board and
the State Bank Regulator, if required, and any other necessary
regulatory authority.
The Merger is subject to the prior approval of the
Federal Reserve Board under the BHCA. Under the BHCA, the
Federal Reserve Board is required, in approving transactions
such as the Merger, to take into consideration the financial
and managerial resources and future prospects of the existing
and proposed institutions and the convenience and needs of the
communities to be served. In considering financial resources
and future prospects, the Federal Reserve Board will, among
other things, evaluate the adequacy of the capital levels of
MBI and its bank subsidiaries following the Merger.
The BHCA prohibits the Federal Reserve Board from
approving the Merger if the Merger would result in a monopoly
or be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking
in any part of the United States, or if their effect in any
section of the country may be substantially to lessen
competition or to tend to create a monopoly, or if it would in
any other manner result in a restraint of trade, unless the
Federal Reserve Board finds that the anticompetitive effects of
the Merger are clearly outweighed in the public interest by the
probable effect of transactions in meeting the convenience and
needs of the communities to be served. In addition, under the
Community Reinvestment Act of 1977, as amended, the Federal
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Reserve Board must take into account the record of performance
of the existing institutions in meeting the credit needs of the
entire community, including low- and moderate-income
neighborhoods, served by such institutions.
Under the BHCA, the Merger may not be consummated
until the 30th day following the date of Federal Reserve Board
approval (or, if the Department of Justice has not submitted
adverse comments with respect to competitive factors, the 15th
day), during which time the United States Department of Justice
may challenge the Merger on antitrust grounds. The
commencement of an antitrust action would stay the
effectiveness of the Federal Reserve Board's approval unless a
court specifically orders otherwise.
The BHCA provides for the publication of notice and
public comment on the applications and authorizes the Federal
Reserve Board to permit interested parties to intervene in the
proceedings. If an interested party is permitted to intervene,
such intervention could delay the regulatory approvals required
for consummation of the Merger.
Application for such Federal Reserve Board approval has
been or will be filed. MBI and Hawkeye are not aware of any
governmental approvals or actions that may be required for consum-
mation of the Merger other than as described above. Should any
other approval or action be required, it is presently conemplated
that such approval or action would be sought. There can be no ass-
urance that any necessary regulatory approval or action will be re-
ceived or taken, as to the timing of such approval or action, that
no action will be brought challenging such approval or action, or if
such a challenge is brought, the result thereof, or that any such
approval or action will not be conditioned in a manner that would
cause the parties to abandon the Merger.
See "-- Effective Time," "-- Conditions of the
Merger," "-- Waiver and Amendment," "-- Termination of the
Merger Agreement" and "SUPERVISION AND REGULATION."
BUSINESS PENDING THE MERGER
From August 4, 1995 to the Effective Time, each of
MBI and Hawkeye agreed to, and agreed to cause each of their
respective subsidiaries to, conduct its business according to
the ordinary and usual course consistent with past practices,
and agreed to, and agreed to cause each such subsidiary to, use
its best efforts to maintain and preserve its business
organization, employees and advantageous business relationships
and retain the services of its officers and key employees.
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Furthermore, from August 4, 1995 to the Effective
Time, the Merger Agreement provides that, except as provided in
the Merger Agreement, Hawkeye has agreed not to, and to cause
each of its subsidiaries not to, without the prior written
consent of MBI:
(i) declare, set aside or pay any dividends or
other distributions, directly or indirectly, in respect of
its capital stock (other than dividends from a subsidiary
of Hawkeye to Hawkeye or another subsidiary of Hawkeye),
except that Hawkeye may declare and pay (x) for dividends
payable in 1995, regular quarterly cash dividends of not
more than $0.17 per share on the Hawkeye Common Stock, and
(y) for dividends payable in 1996, quarterly cash
dividends of not more than $0.19 per share; PROVIDED, that
Hawkeye may not declare or pay any dividends on Hawkeye
Common Stock for any period in which its shareholders will
be entitled to receive any regular quarterly dividend on
the shares of MBI Common Stock to be issued in the Merger;
(ii) enter into or amend any employment,
severance or similar agreement or arrangement with any
director or officer or employee, or materially modify any
of Hawkeye's employee benefit plans specified in the
Merger Agreement or grant any salary or wage increase or
materially increase any employee benefit (including
incentive or bonus payments), except normal individual
increases in compensation to employees consistent with
past practice, or as required by law or contract;
(iii) authorize, recommend (subject to the
fiduciary duties of Hawkeye's Board of Directors, upon
written advice of counsel to Hawkeye, which counsel is
reasonably acceptable to MBI), propose or announce an
intention to authorize, recommend or propose, or enter
into an agreement in principle with respect to, any
merger, consolidation or business combination (other than
the Merger), any acquisition of a material amount of
assets or securities, any disposition of a material amount
of assets or securities or any release or relinquishment
of any material contract rights;
(iv) propose or adopt any amendments to its
articles of incorporation, association or other charter
document or by-laws;
(v) issue, sell, grant, confer or award any of
its Equity Securities (as defined in the Merger Agreement)
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(except shares of Hawkeye Common Stock issued upon
exercise of Hawkeye Employee Stock Options outstanding on
August 4, 1995) or effect any stock split or adjust,
combine, reclassify or otherwise change its capitalization
as it existed on August 4, 1995;
(vi) purchase, redeem, retire, repurchase, or
exchange, or otherwise acquire or dispose of, directly or
indirectly, any of its Equity Securities, whether pursuant
to the terms of such Equity Securities or otherwise;
(vii) (A) without first consulting with MBI,
enter into, renew or increase any loan or credit
commitment (including stand-by letters of credit) to, or
invest or agree to invest in any person or entity or
modify any of the material provisions or renew or
otherwise extend the maturity date of any existing loan or
credit commitment (collectively, "lend to") in an amount
in excess of $1,500,000, or in an amount which, when
aggregated with any and all loans or credit commitments to
such person or entity, would be in excess of $1,500,000;
(B) without first obtaining the written consent of MBI,
lend to any person or entity in an amount in excess of
$3,000,000 or in an amount which, when aggregated with any
and all loans or credit commitments to such person or
entity, would be in excess of $3,000,000; (C) Lend to any
person other than in accordance with lending policies as
in effect on August 4, 1995; PROVIDED that in the case of
clauses (B) and (C) Hawkeye or any Hawkeye subsidiary may
make any such loan in the event (1) Hawkeye or any Hawkeye
subsidiary has delivered to MBI or its designated
representative a notice of its intention to make such loan
and such information as MBI or its designated
representative may reasonably require in respect thereof
and (2) MBI or its designated representative shall not
have reasonably objected to such loan by giving written or
facsimile notice of such objection within two business
days following the delivery to MBI of the notice of
intention and information as aforesaid; or (D) Lend to any
person or entity any of the loans or other extensions of
credit to which, or investments in which, are on a "watch
list" or similar internal report of Hawkeye or any Hawkeye
subsidiary (except those denoted "pass" thereon), in an
amount in excess of $500,000; PROVIDED, HOWEVER, that
nothing described in this paragraph will prohibit Hawkeye
or any Hawkeye subsidiary from honoring any contractual
obligation in existence on August 4, 1995, PROVIDED
FURTHER, HOWEVER, that notwithstanding clauses (A) and (B)
of this paragraph, Hawkeye is authorized without first
consulting with MBI or obtaining MBI's prior written
consent, to increase the aggregate amount of
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any credit facilities theretofore established in favor of
any person or entity (each a "Pre-Existing Facility"),
provided that the aggregate amount of any and all such
increases with respect to any Pre-Existing Facility shall
not be in excess of the lesser of ten percent (10%) of
such Pre-Existing Facility or $250,000;
(viii) 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 Hawkeye or any Hawkeye
subsidiary or the acquisition of Equity Securities of
Hawkeye or any Hawkeye subsidiary or the merger of Hawkeye
or any Hawkeye subsidiary with any person (other than MBI)
or any similar transaction (each such transaction being
referred to as an "Acquisition Transaction"), or provide
any such person with information or assistance or
negotiate with any such person with respect to an
Acquisition Transaction, and Hawkeye shall promptly notify
MBI orally of all the relevant details relating to all
inquiries, indications of interest and proposals which it
may receive with respect to any Acquisition Transaction;
(ix) take any action that would (A) materially
impede or delay the consummation of the transactions
contemplated by the Merger Agreement or the ability of MBI
or Hawkeye to obtain any approval of any Regulatory
Authority required for the transactions contemplated by
the Merger Agreement or to perform its covenants and
agreements under the Merger Agreement or (B) prevent the
Merger from qualifying as a reorganization within the
meaning of Section 368 of the Internal Revenue Code;
(x) other than in the ordinary course of
business consistent with past practice, incur any
indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other
individual, corporation or other entity, or, without prior
approval of MBI, which shall not be unreasonably withheld,
pay fees and expenses to attorneys, accountants or
investment bankers in connection with the Merger in excess
of the amount set forth in the Merger Agreement;
(xi) restructure or materially change its
investment securities portfolio, through purchases, sales
or otherwise, or the manner in which the portfolio is
classified or reported or execute any individual
investment
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transaction (A) in United States Treasury securities in
excess of $5,000,000 and (B) in any other investment
securities in excess of $1,000,000; or
(xii) 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 act
which would make any of the representations and warranties
of Hawkeye 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 act.
BANK MINORITY SHARES
Hawkeye has agreed to use, as soon as reasonably
possible, all reasonable efforts to cooperate with MBI in
respect of each person holding capital stock of any of the bank
subsidiaries of Hawkeye (other than Hawkeye or any of its
subsidiaries), whether as qualifying shares or otherwise, with
the goal of purchasing such shares at any time and/or from time
to time, at a price reasonably acceptable to MBI.
WAIVER AND AMENDMENT
Any term, condition or provision of the Merger
Agreement may be waived in writing at any time by the party
which is, or whose shareholders are, entitled to the benefits
thereof. The Merger Agreement and the schedules thereto may be
amended by or on behalf of the Boards of Directors of MBI and
Hawkeye at any time before or after approval of the Merger
Agreement by the shareholders of Hawkeye, by an instrument in
writing signed on behalf of each party; PROVIDED that after any
such approval by the shareholders of Hawkeye no such
modification may alter or change the amount or kind of
consideration to be received by holders of Hawkeye Common Stock
in the Merger. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER."
ACCOUNTING TREATMENT
It is intended that the Merger be accounted for under
the pooling-of-interests method of accounting. It is a
condition to the obligations of MBI to effect the Merger that
the Pooling Letter shall have been received by MBI and shall
not have been withdrawn. See "-- Conditions of the Merger."
MBI and Hawkeye have agreed to use their best efforts to cause
the Merger to qualify for pooling-of-interest accounting
treatment.
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Under the pooling-of-interests method of accounting,
the historical basis of the assets and liabilities of MBI and
Hawkeye will be combined at the Effective Time and carried
forward at their previously recorded amounts, and the
shareholders' equity accounts of MBI and Hawkeye will be
combined on MBI's consolidated balance sheet and no goodwill or
other intangible assets will be created. Financial statements
of MBI issued after the Effective Time will be restated
retroactively to reflect the consolidated operations of MBI and
Hawkeye as if the Merger had taken place prior to the periods
covered by such financial statements. See "SUMMARY INFORMATION
-- Comparative Unaudited Per Share Data," "SUMMARY INFORMATION
-- Summary Financial Data," "-- Conditions of the Merger," and
"PRO FORMA FINANCIAL INFORMATION."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Merger Sub, a wholly owned subsidiary of MBI, will be
the surviving corporation resulting from the Merger. Merger
Sub will be governed by the laws of the state of Iowa and will
operate in accordance with the articles of incorporation and
bylaws of Merger Sub as in effect immediately prior to the
Merger, until otherwise amended or repealed after the Effective
Time.
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS. The provisions of Hawkeye's stock
option and incentive plans set forth in the Merger Agreement
("Hawkeye Stock Plans") and of any other plan, program or
arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of Hawkeye or any
Hawkeye subsidiary will be deleted and terminated as of the
Effective Time, and Hawkeye will ensure that following the
Effective Time no holder of Hawkeye employee stock options or
any participant in any Hawkeye Stock Plan shall have any right
thereunder to acquire any securities of Hawkeye or any Hawkeye
subsidiary.
Except as set forth in the Merger Agreement, the
Hawkeye Employee Plans (as defined and set forth in the Merger
Agreement) will not be terminated by reason of the Merger but
will continue thereafter as plans of the Surviving Corporation
until such time as the employees of Hawkeye and Hawkeye's
subsidiaries are integrated into MBI's employee benefit plans
that are available to other employees of MBI and MBI's
subsidiaries, subject to the terms and conditions specified in
such plans and to such changes therein as may be necessary to
reflect the consummation of the Merger. MBI will take such
steps as are necessary or required to integrate the employees
of Hawkeye and
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Hawkeye's subsidiaries in to MBI's employee benefit plans
available to other employees of MBI and MBI's subsidiaries as
soon as practicable after the Effective Time, with (i) full
credit for prior service with Hawkeye or any Hawkeye subsidiary
for purposes of vesting and eligibility for participation (but
not benefit accruals under any defined benefit plan), and co-
payments and deductibles, and (ii) waiver of all waiting
periods and pre-existing condition exclusions or penalties.
EMPLOYEE STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
At the Effective Time, all rights with respect to Hawkeye
Common Stock pursuant to Hawkeye employee stock options that
are outstanding at the Effective Time, whether or not then
exercisable, will be converted into and become rights with
respect to MBI Common Stock, and MBI will assume each Hawkeye
employee stock option in accordance with the terms of the stock
option plan under which it was issued and the stock option
agreement by which it is evidenced. From and after the
Effective Time, (i) each Hawkeye employee stock option assumed
by MBI will be exercisable solely for shares of MBI Common
Stock, (ii) the number of shares of MBI Common Stock subject to
each Hawkeye employee stock option will be equal to the number
of shares of Hawkeye Common Stock subject to such Hawkeye
employee stock option immediately prior to the Effective Time
multiplied by the Exchange Ratio and (iii) the per share
exercise price under each Hawkeye employee stock option will be
adjusted by dividing the per share exercise price under such
Hawkeye employee stock option by the Exchange Ratio and
rounding down to the nearest cent; provided, however, that the
terms of each Hawkeye employee stock option will, in accordance
with its terms, be subject to further adjustment as appropriate
to reflect any stock split, stock dividend, recapitalization or
other similar transaction subsequent to the Effective Time. It
is intended that the foregoing assumption will be undertaken in
a manner that will not constitute a "modification" as defined
in the Internal Revenue Code, as to any Hawkeye employee stock
option that is an "incentive stock option."
At the Effective Time, all stock appreciation rights
with respect to Hawkeye Common Stock that are outstanding at
the Effective Time, whether or not then exercisable, will be
converted into and become stock appreciation rights with
respect to MBI Common Stock with the same terms
and conditions as were applicable to such Hawkeye stock
appreciation rights immediately prior to the Effective Time.
Certain executive officers, including certain executive
officers who are directors, of Hawkeye currently hold Hawkeye
employee stock options and/or Hawkeye stock appreciation rights
which will be
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converted into rights with respect to MBI Common Stock as
described above.
INDEMNIFICATION. In the Merger Agreement, MBI agreed
that the Merger will not affect or diminish any of Hawkeye's
duties and obligations of indemnification existing as of the
Effective Time in favor of employees, agents, directors or
officers of Hawkeye or its subsidiaries arising by virtue of
their respective articles of incorporation or bylaws in the
form in effect on August 4, 1995, or arising by operation of
law or by virtue of any contract, resolution or other agreement
or document existing on August 4, 1995, and such duties and
obligations will continue in full force and effect for so long
as they would (but for the Merger) otherwise survive.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material
federal income tax consequences of the Merger. The discussion
does not address all aspects of federal taxation that may be
relevant to particular Hawkeye shareholders, and it may not be
applicable to shareholders who are not citizens or residents of
the United States, or who acquired their Hawkeye Common Stock
pursuant to the exercise of employee stock options or otherwise
as compensation. The discussion does not address the effect of
any applicable state, local or foreign tax laws or any federal
tax laws other than those pertaining to the income tax. EACH
HAWKEYE SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE
MERGER.
This discussion is based on the Internal Revenue
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 to Hawkeye shareholders discussed herein.
This discussion is also based on certain assumptions regarding
the factual circumstances that will exist at the Effective
Time, including certain representations to be made by Hawkeye
and MBI. This discussion assumes that Hawkeye shareholders
hold their Hawkeye Common Stock as a capital asset within the
meaning of Section 1221 of the Internal Revenue Code.
MBI has received an opinion from Wachtell, Lipton,
Rosen & Katz, counsel to MBI, and Hawkeye has received an
opinion from Baird, Holm, McEachen, Pedersen, Hamann &
Strasheim,
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counsel to Hawkeye, that, assuming the Merger occurs in
accordance with the Merger Agreement, and conditioned on the
accuracy of certain representations made by MBI and Hawkeye,
the material federal income tax consequences expected to result
from the Merger, under currently applicable law, are as
follows:
(i) The Merger will constitute a "reorganization"
for federal income tax purposes under Section 368(a) of
the Internal Revenue Code.
(ii) No gain or loss will be recognized by Hawkeye or
MBI as a result of the Merger.
(iii) Hawkeye shareholders will recognize no gain or
loss as a result of the exchange of their Hawkeye Common
Stock solely for shares of MBI Common Stock pursuant to
the Merger, except with respect to cash received in lieu
of fractional shares, if any, as discussed below.
(iv) A holder of shares of Hawkeye Common Stock who
receives cash in the Merger in lieu of a fractional share
interest of MBI Common Stock will be treated as if the
fractional shares were received in the exchange and then
redeemed by MBI. A holder of shares of Hawkeye Common
Stock will be treated as if the shareholder sold his or
her fractional share of MBI Common Stock for the amount of
cash received and will therefore recognize gain (or loss)
to the extent that the amount of cash received exceeds (or
is less than) the tax basis of the fractional share. Such
gain or loss will be capital gain or loss if the shares of
Hawkeye Common Stock were held as capital assets and will
be long-term capital gain or loss if the holding period of
the shares of Hawkeye Common Stock so exchanged was more
than one year.
(v) The aggregate adjusted tax basis of the MBI
Common Stock received by a shareholder of Hawkeye in the
Merger, including for the purpose of (iv) above the tax
basis of any fractional share interest, will be equal to
the aggregate adjusted tax basis of the respective shares
of Hawkeye Common Stock surrendered.
(vi) The holding period of the shares of MBI Common
Stock received by a shareholder of Hawkeye in the Merger,
including for purposes of (iv) above the holding period of
any fractional share interest, will include the holding
period of the respective shares of Hawkeye Common Stock
exchanged therefor, provided the shares of Hawkeye Common
Stock were held as capital assets.
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(vii) A Hawkeye shareholder who receives only cash as
a result of the exercise of dissenters' rights, will
realize gain or loss for federal income tax purposes
(determined separately as to each block of Hawkeye Common
Stock exchanged) in an amount equal to the difference
between (x) the amount of cash received by such
shareholder, and (y) such shareholder's tax basis for the
shares of Hawkeye Common Stock surrendered in exchange
therefor, provided that the cash payment does not have the
effect of the distribution of a dividend. Any such gain
or loss will be recognized for federal income tax purposes
and will be treated as capital gain or loss, provided the
shares of Hawkeye Common Stock were held as capital
assets. However, if the cash payment does have the effect
of the distribution of a dividend, the amount of taxable
income recognized generally will equal the amount of cash
received; such income generally will be taxable as a
dividend; and no loss (or other recovery of such
shareholder's tax basis for the shares of Hawkeye Common
Stock surrendered in the exchange) generally will be
recognized by such shareholder. The determination of
whether a cash payment has the effect of the distribution
of a dividend will be made pursuant to the provisions and
limitations of Section 302 of the Internal Revenue Code,
taking into account the constructive stock ownership rules
of Section 318 of the Internal Revenue Code.
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 effects of the Merger,
and no such ruling has been requested.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED
FOR GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES
NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF
EACH SHAREHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT, THE
FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING
DISCUSSION MAY NOT APPLY TO EACH SHAREHOLDER. IN VIEW OF THE
INDIVIDUAL NATURE OF INCOME TAX CONSEQUENCES, EACH SHAREHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER,
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.
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DISSENTERS' RIGHTS OF SHAREHOLDERS OF HAWKEYE
Each shareholder of Hawkeye has the right to demand
to be paid the fair value of his or her shares of Hawkeye
Common Stock in cash upon consummation of the Merger if the
shareholder follows the dissenters' rights procedures set forth
in Division XIII of the Iowa Act. "Fair value" is defined in
the Iowa Act as the value of the subject shares immediately
prior to the consummation of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger
unless such an exclusion would be inequitable.
Under the Iowa Act, a shareholder of Hawkeye may
dissent from the Merger and obtain the fair value of the shares
owned by such shareholder with such fair value to be paid in
cash if the Merger is consummated. Any shareholder of Hawkeye
who wishes to assert his or her dissenters' rights must do each
of the following: (i) deliver to Hawkeye before the vote on
the Merger Agreement is taken a written notice of such
shareholder's intent to demand payment of the fair value of his
or her shares if the Merger is effectuated, and (ii) not vote
such shares in favor of the approval of the Merger Agreement at
the Special Meeting. A VOTE AGAINST THE APPROVAL OF THE MERGER
AGREEMENT WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN NOTICE
OF A SHAREHOLDER'S INTENT TO ASSERT DISSENTERS' RIGHTS.
If the Merger Agreement is approved at the Special
Meeting, Hawkeye shall deliver a written notice to each person
who asserted dissenters' rights and who did not vote in favor
of the approval of the Merger Agreement as described above.
The notice must be sent by Hawkeye no later than 10 days after
the Special Meeting and must contain the following information:
(i) a statement as to where a demand for payment must be sent
by the dissenting shareholder and where and when the
certificates evidencing shares of Hawkeye Common Stock owned by
such shareholders must be deposited, (ii) a statement to
holders of uncertificated shares stating to what extent
transfer of the shares will be restricted after the payment is
received, (iii) a form with which dissenting shareholders may
make their demands for payment, which form will include the
date of the first public announcement of the proposed Merger
and a requirement that all dissenting shareholders certify as
to whether or not he or she had acquired beneficial ownership
of the shares subject to the dissenters' rights demand prior to
the date of the first public announcement of the proposed
Merger, (iv) a statement as to the date by which Hawkeye must
receive the demand for payment from the dissenting shareholder,
such date to be not fewer than 30 nor more than 60 days after
the date of Hawkeye's notice to dissenting shareholders, and
(v) a copy of Division XIII of the Iowa Act.
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A dissenting shareholder must demand payment for his
or her shares, certify as to whether the acquisition dates of
such shares were prior to or after the public announcement of
the proposed Merger and deposit the certificates evidencing
such shares prior to the date set in and in accordance with the
notice sent by Hawkeye to the dissenting shareholders. A
shareholder who does not demand payment or deposit certificates
for shares by the date or in the manner set forth in the notice
to dissenting shareholders sent by Hawkeye will be deemed to
have waived his or her dissenters' rights and will not be
entitled to payment of the fair value of his or her shares
under Division XIII of the Iowa Act.
Hawkeye (or Merger Sub, as the Surviving Corporation
in the Merger) must make a cash payment to each dissenting
shareholder who files a demand for payment as described above
equal to Hawkeye's (or Merger Sub's) estimate of the fair value
of the shares of Hawkeye Common Stock owned by such
shareholders, plus accrued interest on such payment from the
Closing Date. Such payment must be made upon the later of:
(i) the time the Merger is consummated or (ii) the receipt of
the demand for payment from the dissenting shareholder. If the
Merger is not consummated within 60 days of the date set by
Hawkeye for receipt of the dissenting shareholders' demands for
payment and deposits of stock certificates, Hawkeye must return
the deposited certificates and release the transfer
restrictions on uncertificated shares and send a new notice to
dissenting shareholders when the Merger is actually consummated
and repeat the payment demand procedure. The payment must be
accompanied by the following: (i) Hawkeye's balance sheet as
of the end of its most recently completed fiscal year, an
income statement and a statement of changes in shareholders'
equity as of the most recently completed fiscal year and
interim financial statements of Hawkeye as of and for the most
recent date or period available, (ii) a statement of Hawkeye's
(or Merger Sub's) estimate of the fair value of the Hawkeye
shares, (iii) an explanation as to how the interest payment was
calculated, (iv) a statement of the dissenting shareholder's
right to demand a greater payment than Hawkeye's estimate as
described below, and (v) a copy of Division XIII of the Iowa
Act.
Hawkeye may elect to withhold payment from those
dissenting shareholders who do not certify in their demand for
payment that they owned the shares subject to the dissenters'
rights demand prior to the public announcement of the proposed
Merger. To the extent that Hawkeye elects to withhold payment
from such dissenting shareholders, Hawkeye shall estimate the
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fair value of the shares owned by such holders and accrued
interest thereon and offer to pay the same to each such
dissenting shareholder who agrees to accept it in full
satisfaction of his or her demand. The offer to such
shareholders must be accompanied by: (i) a statement of
Hawkeye's estimate of fair value, (ii) an explanation as to how
the interest payment was calculated and (iii) a statement of
the dissenting shareholder's right to demand a greater payment
than Hawkeye's estimate as described below.
After receipt of Hawkeye's (or Merger Sub's) estimate
of fair value in either of the above cases, the dissenting
shareholder may deliver notice to Hawkeye (or Merger Sub) of
his or her own estimate of fair value for the shares and the
amount of interest due and demand payment of the difference in
amount, if any, previously paid by Hawkeye (or Merger Sub) to
such shareholder and the amount of the shareholder's estimate.
In order to make such a demand: (i) the dissenting shareholder
must believe that the amount paid or offered by Hawkeye (or
Merger Sub) is less than the fair value of the shares or the
interest is incorrectly calculated, or (ii) Hawkeye (or Merger
Sub) has not made payment for the shares within 60 days after
the date set by Hawkeye (or Merger Sub) as the last day that
Hawkeye (or Merger Sub) set for accepting demands for payment,
or (iii) the Merger has not been consummated within the 60-day
period after the last date that Hawkeye (or Merger Sub) set for
accepting demands for payment and Hawkeye has not returned the
stock certificates deposited by the dissenting shareholder or
released the transfer restrictions imposed on uncertificated
shares. A dissenting shareholder will waive his or her right
to seek a greater payment than Hawkeye's estimate of fair value
and accrued interest unless such shareholder notifies Hawkeye
(or Merger Sub) in writing of the same within 30 days of the
receipt of Hawkeye's (or Merger Sub's) payment or offer of
payment for the shares.
If, within 60 days of receiving the dissenting
shareholder's notice of a demand for increased payment, the
demand remains unsettled, Hawkeye (or Merger Sub) must commence
proceedings in the district court of the county where its
principal office is located, petitioning the court to determine
the fair value and accrued interest of such shares. If Hawkeye
(or Merger Sub) fails to start such proceedings within the 60-
day period, Hawkeye (or Merger Sub) must pay each dissenting
shareholder whose demand remains unsettled the amount that such
shareholder has demanded. All dissenting shareholders with
claims remaining unsettled will be made parties to the
proceedings and the court may appoint one or more appraisers to
receive evidence and recommend the fair value of the shares.
The
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court will find either (i) that the fair value and accrued
interest already paid by Hawkeye (or Merger Sub) equals or
exceeds the amount determined by the court, in which case the
shareholder will be entitled to no additional payment from
Hawkeye (or Merger Sub), or (ii) Hawkeye (or Merger Sub) must
pay an additional amount equal to the difference between the
court's determination of fair value and accrued interest and
the amount already paid by Hawkeye (or Merger Sub) to the
shareholder.
The court shall also determine all costs of the
proceedings, including the reasonable compensation and expenses
of the appraisers and shall assess such costs against Hawkeye
(or Merger Sub) unless the court finds that such an assessment
would be inequitable because the dissenting shareholders had
acted arbitrarily, vexatiously or not in good faith, in which
case the court may assess costs against all or some of the
dissenters. Fees and expenses of legal counsel and experts
will generally be borne by each of the parties except that the
experts' and attorneys' fees and expenses of the dissenting
shareholders will be assessed against Hawkeye (or Merger Sub)
to the extent that the court finds Hawkeye did not
substantially comply with the procedures set forth in Division
XIII of the Iowa Act or to either party in favor of the other
party to the extent that the court finds that the assessed
party acted arbitrarily, vexatiously or not in good faith. To
the extent that counsel for one dissenting shareholder is found
by the court to have provided a substantial benefit to other
dissenting shareholders, the court may order that the fees of
such counsel be paid out of the amounts awarded to the
dissenting shareholders who have been benefited.
THE PRECEDING DISCUSSION IS A SUMMARY OF THE
PROVISIONS REGARDING DISSENTERS' RIGHTS UNDER THE IOWA ACT AND
IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF DIVISION XIII OF
THE IOWA ACT WHICH IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS. HAWKEYE SHAREHOLDERS WHO ARE INTERESTED
IN ASSERTING DISSENTERS' RIGHTS PURSUANT TO THE IOWA 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 Hawkeye
and the corresponding pro forma and pro forma equivalent per
share
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amounts giving effect to the proposed Merger, the proposed
acquisitions of Sterling, Security Bank and Metro and the
acquisition of ABNK by merger with and into a wholly owned
subsidiary of MBI, which was completed on April 30, 1992 (ABNK
is the surviving entity from that merger). The data presented
is based upon the supplemental consolidated financial
statements and related notes of MBI and the consolidated
financial statements and related notes of Hawkeye, Sterling,
Security Bank and Metro included in this 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 to the pro
forma financial information appearing elsewhere in the Proxy
Statement/Prospectus. See "-- Pro Forma Combined Consolidated
Financial Statements (Unaudited)." 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 Merger, the completed merger of ABNK, or
the proposed mergers of Sterling, Security Bank and Metro had
been consummated prior to the periods indicated.
-60-<PAGE>
<TABLE>
<CAPTION>
MBI/HAWKEYE
MBI HAWKEYE Pro Forma
Reported Reported Combined(1)
-------- -------- -----------
<S> <C> <C> <C>
Book Value per Common Share:
September 30, 1995..................... $ 25.43 $14.32 $25.09
December 31, 1994...................... 23.47 13.06 23.03
Cash Dividends Declared Per Common Share:
Nine months ended September 30, 1995... $ .99 $ .47 $ .99
Year ended December 31, 1994 .......... 1.12 .50 1.12
Year ended December 31, 1993 .......... .99 .42 .99
Year ended December 31, 1992 .......... .93 .33 .93
Earnings per Common Share Before Change
in Accounting Principle:
Nine months ended September 30, 1995... $ 2.95 $ 1.28 $ 2.89
Year ended December 31, 1994 .......... 3.22 1.78 3.21
Year ended December 31, 1993 .......... 2.79 1.64 2.80
Year ended December 31, 1992 .......... 2.42 1.38 2.42
Market Price per Common Share:
August 3, 1995(4)...................... $43.88 $22.75 --
________, 1995(4)...................... -- -- --
-61-<PAGE>
MBI/HAWKEYE MBI/All Entities MBI/All Entities
Pro Forma Pro Forma Pro Forma
Equivalent(2) Combined(3) Equivalent(2)
------------- ----------- -------------
<C> <C> <C>
$14.68 $25.16 $14.72
13.47 23.09 13.51
$ .58 $ .99 $ .58
.66 1.12 .66
.58 .99 .58
.54 .93 .54
$ 1.69 $ 2.88 $ 1.68
1.88 3.22 1.88
1.64 2.80 1.64
1.42 2.44 1.43
-- -- --
-- -- --
<FN>
------------------
(1) Includes the effect of pro forma adjustments for ABNK and
Hawkeye as appropriate. See "PRO FORMA FINANCIAL
INFORMATION."
(2) Based upon the pro forma combined per share amounts multiplied
by .585, the Exchange Ratio applicable to one share of Hawkeye
Common Stock. See "PRO FORMA FINANCIAL INFORMATION."
(3) Includes the effect of pro forma adjustments for ABNK,
Hawkeye, Security Bank, Sterling and Metro as appropriate.
See "PRO FORMA FINANCIAL INFORMATION."
(4) The market values of MBI Common Stock and Hawkeye Common Stock
were determined as of the last trading day preceding the
public announcement of the Merger and as of the most recent
practicable date prior to the mailing of this Proxy Statement/
Prospectus based on the last sales price as reported on the
NYSE and NASDAQ/NM, respectively.
</FN>
/TABLE
<PAGE>
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma combined
consolidated balance sheet gives effect to the Merger and the
proposed acquisitions of Sterling, Security Bank and Metro as
if each of the mergers were consummated on December 31, 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, 1992 through the date of acquisition.
The following pro forma combined consolidated income
statements for the nine months ended September 30, 1995 and
1994 and for the years ended December 31, 1994, 1993, and 1992
set forth the results of operations of MBI combined with the
results of operations of Hawkeye, Sterling, Security Bank and
Metro as if the Merger, and the proposed acquisitions of
Sterling, Security Bank and Metro had occurred as of the first
day of the period presented. As stated above, the pro forma
combined consolidated income statements for the year ended
December 31, 1992 include the results of operations of ABNK
from January 1, 1992 through the date of acquisition.
The unaudited pro forma combined consolidated
financial statements should be read in conjunction with the
accompanying Notes to Pro Forma Combined Consolidated Financial
Statements and with the historical financial statements of MBI,
Hawkeye, Sterling, Security Bank, Metro and ABNK. The
historical interim financial information for the nine months
ended September 30, 1995 and 1994, 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 the results of operations that may be
achieved in the future.
-62-<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
September 30, 1995
(Thousands)
(Unaudited) MBI, Hawkeye
Pro Forma
Hawkeye Combined
MBI(1) Hawkeye Adjustments(2) Consolidated
--- ------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks........... $822,849 $96,917 ($33,961)(3) $885,805
Due from banks - interest bearing. 97,473 200 97,673
Federal funds sold and repurchase
agreements........................ 179,778 102,004 281,782
Investments in debt and equity
securities:
Trading.......................... 4,696 0 4,696
Available-for-sale............... 768,422 287,270 1,055,692
Held-to-Maturity................. 3,074,207 127,896 3,202,103
--------- ------- ----------- ---------
Total....................... 3,847,325 415,166 0 4,262,491
Loans and Leases................... 10,648,008 1,298,589 11,946,597
Reserve for possible loan losses... (187,872) (21,553) (209,425)
---------- --------- ----------- ----------
Net Loans and Leases.............. 10,460,136 1,277,036 0 11,737,172
Other assets....................... 611,092 101,242 712,334
192,819(8)
(192,819)(9)
----------- ---------- ----------- ----------
Total Assets..................... $16,018,653 $1,992,565 ($33,961) $17,977,257
=========== ========== =========== ===========
-63-<PAGE>
Sterling All Entities
Security Bank Pro Forma
Metro Combined
Sterling Security Bank Metro Adjustments(2) Consolidated
-------- ------------- ----- ------------ ------------
<C> <C> <C> <C> <C>
$7,167 $15,043 $200 ($2,373)(3) $903,522
(1,420)(3)
(900)(3)
99 1,366 99,138
827 125 0 282,734
0 0 0 4,696
46,239 577 7,084 1,109,592
26,675 4,353 19,247 3,252,378
-------- -------- ------- ------- ----------
72,914 4,930 26,331 0 4,366,666
85,681 75,792 54,674 12,162,744
(1,380) (287) (510) (211,602)
-------- -------- ------- ------- ----------
84,301 75,505 54,164 0 11,951,142
4,793 4,620 1,288 18,259(6) 723,035
(18,259)(7)
8,598(4)
(8,598)(5)
5,911(10)
(5,911)(11)
-------- -------- ------- ------- ----------
$170,002 $100,322 $83,349 ($4,693) $18,326,237
======== ======== ======= ======= ===========
See notes to pro forma combined consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
September 30, 1995
(Thousands)
(Unaudited)
MBI, Hawkeye
Pro Forma
Hawkeye Combined
MBI(1) Hawkeye Adjustments(2) Consolidated
--- ------- ----------- ------------
<S> <C> <C> <C> <C>
LIABILITIES:
Deposits:
Non-interest bearing............. $1,798,605 $204,619 $2,003,224
Interest bearing................. 9,875,943 1,512,456 11,388,399
Foreign.......................... 160,736 0 160,736
---------- --------- --------- ----------
Total Deposits............... 11,835,284 1,717,075 0 13,552,359
Federal funds purchased and
repurchase agreements............ 1,611,392 15,003 1,626,395
Other borrowings.................. 949,186 46,241 995,427
Other liabilities................. 203,624 21,427 225,051
---------- --------- --------- ----------
Total Liabilities................ 14,599,486 1,799,746 0 16,399,232
SHAREHOLDERS' EQUITY:
Preferred stock................... 12,153 12,153
Common stock...................... 279,658 135 319,033
39,375(8)
(135)(9)
Capital surplus.................... 216,757 105,129 282,646
65,889(8)
(105,129)(9)
Retained earnings.................. 936,311 87,555 1,023,866
87,555(8)
(87,555)(9)
-64-<PAGE>
Treasury stock..................... (25,712) (33,961)(3) (59,673)
----------- ---------- --------- -----------
Total Shareholders' Equity.... 1,419,167 192,819 (33,961) 1,578,025
----------- ---------- --------- -----------
Total Liabilities and
Shareholders' Equity........ $16,018,653 $1,992,565 ($33,961) $17,977,257
=========== ========== ========= ===========<PAGE>
Sterling All Entities
Security Bank Pro Forma
Metro Combined
Sterling Security Bank Metro Adjustments(2) Consolidated
-------- ------------- ----- ------------ ------------
<C> <C> <C> <C> <C>
$20,613 $1,191 $2,728 $0 $2,027,756
111,900 86,725 73,984 11,661,008
0 0 0 160,736
------- ------ ------ ------ ----------
132,513 87,916 76,712 0 13,849,500
17,917 0 0 1,644,312
0 3,248 400 999,075
1,303 560 326 227,240
------- ------ ------ ------ ----------
151,733 91,724 77,436 0 16,720,127
12,153
3,685 1,032 192 2,607(6) 324,247
(3,685)(7)
1,610(4)
(1,032)(5)
997(10)
(192)(11)
799 4 1,409 1,877(6) 284,553
(799)(7)
(574)(4)
(4)(5)
604(10)
(1,409)(11)
13,785 7,562 4,310 13,785(6) 1,049,523
(13,785)(7)
7,562(4)
(7,562)(5)
4,310(10)
(4,310)(11)<PAGE>
(2,373)(3) (64,366)
(1,420)(3)
(900)(3)
-------- -------- ------- ------- -----------
18,269 8,598 5,911 (4,693) 1,606,110
-------- -------- ------- ------- -----------
$170,002 $100,322 $83,349 ($4,693) $18,326,237
======== ======== ======= ======= ===========
See notes to pro forma combined consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Nine Months Ended September 30, 1995
(Thousands except per share data)
(Unaudited)
MBI, Hawkeye
Pro Forma
Combined
MBI(1) Hawkeye Consolidated
--- ------- ------------
<S> <C> <C> <C>
Interest Income......................... $854,404 $105,900 $960,304
Interest Expense........................ 410,097 49,337 459,434
-------- -------- --------
Net Interest Income................... 444,307 56,563 500,870
Provision for Possible Loan Losses...... 28,928 249 29,177
-------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses............. 415,379 56,314 471,693
Other Income:
Trust................................. 48,252 3,888 52,140
Service charges....................... 50,062 6,267 56,329
Credit card fees...................... 14,169 1,451 15,620
Securities gains (losses)............. 3,672 104 3,776
Other................................. 65,325 8,485 73,810
-------- ------- --------
Total Other Income.................. 181,480 20,195 201,675
Other Expense:
Salaries and employee benefits...... 195,825 23,528 219,353
Net occupancy and equipment......... 53,547 6,825 60,372
Other............................... 107,572 19,825 127,397
-------- ------- --------
Total Other Expense............... 356,944 50,178 407,122
-------- ------- --------
Income Before Income Taxes........ 239,915 26,331 266,246
Income Taxes ........................... 81,156 9,004 90,160
-------- ------- --------
Net Income Before
Change in Accounting
Principle....................... $158,759 $17,327 $176,086
======== ======= ========
-65-<PAGE>
Per Share Data:
Average Common Shares Outstanding... 53,629,980 60,717,393
Net Income Before Change
in Accounting Principle........... $2.95 $2.89<PAGE>
All Entities
Pro Forma
Combined
Sterling Security Bank Metro Consolidated(12)
-------- ------------- ----- ------------
<C> <C> <C> <C>
$9,069 $5,704 $4,745 $979,822
4,247 3,291 2,614 469,586
------ ------ ------ --------
4,822 2,413 2,131 510,236
162 45 30 29,414
------ ----- ----- --------
4,660 2,368 2,101 480,822
129 0 0 52,269
242 138 0 56,709
0 0 0 15,620
(1) 0 (508) 3,267
286 169 214 74,479
------ ---- ---- --------
656 307 (294) 202,344
1,735 682 766 222,536
475 243 137 61,227
1,411 520 627 129,955
------ ---- ---- --------
3,621 1,445 1,530 413,718
------ ----- ----- --------
1,695 1,230 277 269,448
386 382 293 91,221
------ ----- ---- --------<PAGE>
$1,309 $848 ($16) $178,227
====== ==== ==== ========
61,656,363
$2.88
See notes to pro forma combined consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Nine Months Ended September 30, 1994
(Thousands except per share data)
(Unaudited)
MBI, Hawkeye
Pro Forma
Combined
MBI(1) Hawkeye Consolidated
--- ------- ------------
<S> <C> <C> <C>
Interest Income......................... $730,270 $90,495 $820,765
Interest Expense........................ 284,939 37,414 $322,353
-------- ------- --------
Net Interest Income................... 445,331 53,081 498,412
Provision for Possible Loan Losses...... 26,374 48 26,422
-------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses ............ 418,957 53,033 471,990
Other Income:
Trust................................. 46,560 3,804 50,364
Service charges....................... 52,089 5,918 58,007
Credit card fees...................... 18,087 1,272 19,359
Securities gains ..................... 1,718 396 2,114
Other................................. 40,971 8,702 49,673
-------- ------- --------
Total Other Income.................. 159,425 20,092 179,517
Other Expense:
Salaries and employee benefits...... 190,801 22,878 213,679
Net occupancy and equipment......... 51,837 6,032 57,869
Other............................... 117,502 18,349 135,851
-------- ------- --------
Total Other Expense............... 360,140 47,259 407,399
-------- ------- --------
Income Before Income Taxes........ 218,242 25,866 244,108
Income Taxes............................ 78,033 8,420 86,453
-------- ------- --------
Net Income Before
Change in Accounting
Principle....................... $140,209 $17,446 $157,655
======== ======= ========
-66-<PAGE>
Per Share Data:
Average Common Shares Outstanding... 51,900,015 58,987,428
Net Income Before
Change in Accounting
Principle......................... $2.68 $2.64<PAGE>
All Entities
Pro Forma
Combined
Sterling Security Bank Metro Consolidated
-------- ------------- ----- ------------
<C> <C> <C> <C>
$8,289 $4,765 $4,149 $837,968
3,257 2,564 2,188 330,362
------ ------ ------ --------
5,032 2,201 1,961 507,606
66 45 (17) 26,516
------ ----- ----- --------
4,966 2,156 1,978 481,090
124 0 0 50,488
289 89 0 58,385
0 0 0 19,359
(44) 0 0 2,070
300 301 240 50,514
------ ---- ---- --------
669 390 240 180,816
1,766 585 756 216,786
491 191 133 58,684
1,650 689 524 138,714
------ ---- ---- --------
3,907 1,465 1,413 414,184
------ ----- ----- --------
1,728 1,081 805 247,722
441 397 295 87,586
------ ----- ---- --------<PAGE>
$1,287 $684 $510 $160,136
====== ==== ==== ========
59,926,398
$2.64
See notes to pro forma combined consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1994
(Thousands except per share data)
(Unaudited)
MBI, Hawkeye
Pro Forma
Combined
MBI(1) Hawkeye Consolidated
--- ------- ------------
<S> <C> <C> <C>
Interest Income......................... $994,896 $123,173 $1,118,069
Interest Expense........................ 399,349 51,601 450,950
-------- -------- ----------
Net Interest Income................... 595,547 71,572 667,119
Provision for Possible Loan Losses...... 43,201 64 43,265
-------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses............. 552,346 71,508 623,854
Other Income:
Trust................................. 60,769 5,119 65,888
Service charges....................... 68,783 8,024 76,807
Credit card fees...................... 24,895 1,693 26,588
Securities gains...................... 2,177 402 2,579
Other................................. 53,134 11,565 64,699
-------- ------- --------
Total Other Income.................. 209,758 26,803 236,561
Other Expense:
Salaries and employee benefits...... 258,546 30,229 288,775
Net occupancy and equipment......... 69,784 8,101 77,885
Other............................... 163,740 24,776 188,516
-------- ------- --------
Total Other Expense............... 492,070 63,106 555,176
-------- ------- --------
Income Before Income Taxes........ 270,034 35,205 305,239
Income Taxes............................ 101,705 11,460 113,165
-------- ------- --------
Net Income Before
Change in Accounting
Principle........................ $168,329 $23,745 $192,074
======== ======= ========
-67-<PAGE>
Per Share Data:
Average Common Shares Outstanding... 51,957,002 59,044,415
Net Income Before Change
in Accounting Principle............ $3.22 $3.21<PAGE>
All Entities
Pro Forma
Combined
Sterling Security Bank Metro Consolidated
-------- ------------- ----- ------------
<C> <C> <C> <C>
$11,236 $6,257 $5,680 $1,141,242
4,471 3,487 3,046 461,954
------- ------ ------ ----------
6,765 2,770 2,634 679,288
66 60 10 43,401
------ ----- ----- --------
6,699 2,710 2,624 635,887
168 0 0 66,056
386 195 0 77,388
0 0 0 26,588
(43) 0 0 2,536
368 211 471 65,749
------ ---- ---- --------
879 406 471 238,317
2,380 727 953 292,835
583 236 157 78,861
2,170 750 728 192,164
------ ---- ---- --------
5,133 1,713 1,838 563,860
------ ----- ----- --------
2,445 1,403 1,257 310,344
591 551 474 114,781
------ ----- ----- --------<PAGE>
$1,854 $852 $783 $195,563
====== ==== ==== ========
59,983,385
$3.22
See notes to pro forma combined consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1993
(Thousands except per share data)
(Unaudited)
MBI, Hawkeye
Pro Forma
Combined
MBI(1) Hawkeye Consolidated
--- ------- ------------
<S> <C> <C> <C>
Interest Income......................... $971,482 $123,129 $1,094,611
Interest Expense........................ 390,911 53,662 444,573
-------- -------- ----------
Net Interest Income................... 580,571 69,467 650,038
Provision for Possible Loan Losses...... 63,513 789 64,302
-------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses............. 517,058 68,678 585,736
Other Income:
Trust................................. 61,996 4,786 66,782
Service charges....................... 67,144 7,317 74,461
Credit card fees...................... 24,312 1,377 25,689
Securities gains...................... 5,121 179 5,300
Other................................. 61,130 12,227 73,357
------- ------- --------
Total Other Income.................. 219,703 25,886 245,589
Other Expense:
Salaries and employee benefits...... 245,469 30,080 275,549
Net occupancy and equipment......... 70,911 7,763 78,674
Other............................... 191,663 24,296 215,959
-------- ------- --------
Total Other Expense............... 508,043 62,139 570,182
-------- ------- --------
Income Before Income Taxes........ 228,718 32,425 261,143
Income Taxes............................ 85,467 10,607 96,074
-------- ------- --------
Net Income Before Change in
Accounting Principle............. $143,251 $21,818 $165,069
======== ======= ========
-68-<PAGE>
Per Share Data:
Average Common Shares Outstanding... 50,965,103 58,052,516
Net Income Before Change in Accounting
Principle......................... $2.79 $2.80<PAGE>
All Entities
Pro Forma
Combined
Sterling Security Bank Metro Consolidated
-------- ------------- ----- ------------
<C> <C> <C> <C>
$11,261 $5,849 $6,306 $1,118,027
4,568 3,309 3,561 456,011
------- ------ ------ ----------
6,693 2,540 2,745 662,016
258 60 129 64,749
------ ----- ----- --------
6,435 2,480 2,616 597,267
147 0 0 66,929
363 112 0 74,936
0 0 0 25,689
11 0 9 5,320
344 173 366 74,240
------ ---- ---- --------
865 285 375 247,114
2,678 559 858 279,644
929 186 153 79,942
2,050 614 714 219,337
------ ---- ---- --------
5,657 1,359 1,725 578,923
------ ----- ----- --------
1,643 1,406 1,266 265,458
366 517 477 97,434
------ ----- ----- --------<PAGE>
$1,277 $889 $789 $168,024
====== ==== ==== ========
58,991,486
$2.80
See notes to pro forma combined consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1992
(Thousands except per share data)
(Unaudited)
MBI, Hawkeye
Pro Forma
Combined
MBI(1) Hawkeye Consolidated
--- ------- ------------
<S> <C> <C> <C>
Interest Income......................... $1,040,492 $128,261 $1,168,753
Interest Expense........................ 501,802 64,389 566,191
---------- -------- ----------
Net Interest Income................... 538,690 63,872 602,562
Provision for Possible Loan Losses...... 79,787 1,677 81,464
-------- ------- --------
Net Interest Income after Provision
for Possible Loan Losses............. 458,903 62,195 521,098
Other Income:
Trust................................. 58,835 4,174 63,009
Service charges....................... 64,813 6,482 71,295
Credit card fees...................... 21,745 547 22,292
Securities gains...................... 5,590 617 6,207
Other................................. 55,091 10,671 65,762
-------- ------- --------
Total Other Income.................. 206,074 22,491 228,565
Other Expense:
Salaries and employee benefits...... 224,948 27,887 252,835
Net occupancy and equipment......... 64,466 6,893 71,359
Other............................... 196,930 22,960 219,890
-------- ------- --------
Total Other Expense............... 486,344 57,740 544,084
-------- ------- --------
Income Before Income Taxes........ 178,633 26,946 205,579
Income Taxes............................ 60,990 8,609 69,599
-------- ------- --------
Net Income Before Change in
Accounting Principle.............. $117,643 $18,337 $135,980
======== ======= ========
-69-<PAGE>
Per Share Data:
Average Common Shares Outstanding... 47,972,446 55,059,859
Net Income Before Change in
Accounting Principle.............. $2.43 $2.42<PAGE>
All Entities
Pro Forma
Combined
Sterling Security Bank Metro Consolidated
-------- ------------- ----- ------------
<C> <C> <C> <C>
$12,541 $6,142 $7,293 $1,194,729
6,026 3,874 4,753 580,844
------- ------ ------ ----------
6,515 2,268 2,540 613,885
375 60 202 82,101
------ ----- ----- --------
6,140 2,208 2,338 531,784
129 0 0 63,138
469 97 0 71,861
0 0 0 22,292
24 4 (29) 6,206
251 72 486 66,571
------ ---- ---- --------
873 173 457 230,068
2,402 438 816 256,491
566 103 171 72,199
2,037 525 733 223,185
----- ---- ---- --------
5,005 1,066 1,720 551,875
----- ----- ----- --------
2,008 1,315 1,075 209,977
457 459 445 70,960
------ ----- ----- --------<PAGE>
$1,551 $856 $630 $139,017
====== ==== ==== ========
55,998,829
$2.44
See notes to pro forma combined consolidated financial statements.
/TABLE
<PAGE>
MERCANTILE BANCORPORATION INC.
NOTES TO PRO FORMA COMBINED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Represents MBI restated historical consolidated
financial statements reflecting the acquisition of UNSL
Financial Corp. effective January 3, 1995 and the
acquisitions of Central Mortgage Bancshares, Inc. and
TCBankshares, Inc. effective May 1, 1995, each of which
was accounted for as a pooling-of-interest.
(2) The acquisitions of Security Bank, Sterling, Metro and
Hawkeye will be accounted for as of pooling-of-
interests.
(3) In conjunction with all of the proposed acquisitions,
MBI may repurchase up to 891,390 shares of its own
common stock in the open market.
(4) Acquisition of Security Bank with 322,000 shares of MBI
Common Stock.
(5) Elimination of MBI's investment in Security Bank.
(6) Acquisition of Sterling with 521,424 shares of MBI
Common Stock.
(7) Elimination of MBI's investment in Sterling.
(8) Acquisition of Hawkeye with 7,874,903 shares of MBI
common stock, based on the exchange ratio of .585 shares
of MBI Common Stock per share of Hawkeye Common Stock.
(9) Elimination of MBI's investment in Hawkeye.
(10) Acquisition of Metro with 199,446 shares of MBI Common
Stock, based on the exchange ratio of 1.0286 shares of
MBI Common Stock per share of Metro common stock.
(11) Elimination of MBI's investment in Metro.
(12) Upon consummation of the Merger, MBI expects to record
certain adjustments related to the proposed Merger and
to conform Hawkeye's accounting and credit policies
regarding loan and other asset valuations to those of
MBI. The pre-tax adjustments are expected to total $30-
35 million and would include an increase in the
provision for loan losses to conform Hawkeye's credit
evaluation policies to those of Mercantile and an
increase in other expense to largely accrue for the
change of control agreements, contract cancellation
penalties and professional fees.
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INFORMATION REGARDING MBI STOCK
DESCRIPTION OF MBI COMMON STOCK AND ATTACHED PREFERRED SHARE
PURCHASE RIGHTS
GENERAL. MBI has authorized 5,000,000 shares of
Preferred Stock, and 100,000,000 shares of MBI Common Stock.
At the Record Date, MBI had 5,306 shares of Series B-1
Preferred Stock and 9,500 shares of Series B-2 Preferred Stock
issued and outstanding and 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 MBI Common Stock without
stockholder 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 Preferred Stock. MBI's Board of Directors
has designated and reserved Series A Junior Participating
Preferred Stock pursuant to MBI's Preferred Share Purchase
Rights Plan described below.
The existence of a substantial number of unissued and
unreserved shares of MBI Common Stock and undesignated shares
of Preferred Stock may enable the MBI Board of Directors to
issue shares to such persons and in such manner as may be
deemed to have an antitakeover effect.
DIVIDENDS. The holders of the MBI Common Stock are
entitled to share ratably in dividends when, as and if declared
by the MBI Board of Directors from funds legally available
therefor, after full cumulative dividends have been paid or
declared, and funds sufficient for the payment thereof set
apart, on all series of Preferred Stock ranking superior as to
dividends to the MBI Common Stock.
The Board of Directors of MBI intends to maintain its
present policy of paying quarterly cash dividends on the 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."
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VOTING RIGHTS. Each holder of MBI Common Stock has
one vote for each share held on matters presented for
consideration by the stockholders, except that, in the election
of directors, such stockholders presently have cumulative
voting rights which entitle each such stockholder to the number
of votes which equals the number of shares held by the
stockholder 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 stockholders after the
satisfaction of its liabilities (or after adequate provision is
made therefor) and after preferences on any outstanding
Preferred Stock.
ASSESSMENT AND REDEMPTION. Shares of MBI Common
Stock issuable in the Merger will be, when issued, fully paid
and nonassessable. Such shares do not have any redemption
provisions.
PREFERRED SHARE PURCHASE RIGHTS PLAN. One 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 10th day after public announcement, or notice to MBI,
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, or notice to MBI, 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 a
majority of the Board of Directors. When exercisable, each
Right will entitle the holder to buy 1/100 of a share of 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
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Rights are designed to protect the interests of MBI and its
stockholders 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
stockholders 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 of the directors of MBI will be
elected at each annual meeting of the stockholders. 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
stockholders 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 Restated 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 approve 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 approve such an
amendment, alteration, change or repeal. MBI's Restated
Articles of Incorporation also requires the Board of Directors,
in considering any business combination, to give due
consideration to all factors that the Board of Directors may
consider relevant, including the effects of the proposed
transaction on the depositors and customers of MBI and its
subsidiaries, on their communities and geographic areas and on
any of their businesses and properties; and the adequacy of the
consideration offered in the proposed transaction in relation
to the current market price of MBI's
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outstanding securities and to the value of MBI in a freely
negotiated transaction and the Board's estimate of the future
value of MBI. Such provisions may be deemed to have an
antitakeover effect.
RESTRICTIONS ON RESALE OF MBI CAPITAL STOCK BY AFFILIATES;
AFFILIATE AGREEMENTS
MBI COMMON STOCK. Under Rule 145 of the Securities
Act, all Supporting Stockholders, by virtue of being
"affiliates" of Hawkeye, will be limited in their right to
resell the stock so received in the Merger. Supporting
Stockholders who desire to resell the MBI Common Stock so
received must sell such stock either pursuant to an effective
registration statement under the Securities Act or in
accordance with an applicable exemption. In addition,
Supporting Stockholders who become "affiliates" of MBI
following the Merger will be limited in their right to resell
the MBI Common Stock received in the Merger.
Rule 145(d) provides that persons deemed to be
affiliates of a company such as MBI solely by virtue of having
been affiliates of a company such as Hawkeye prior to a
transaction such as the Merger may resell their stock 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 Hawkeye may
freely resell the stock received in the Merger 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 Common Stock to be received by
affiliates of Hawkeye in the Merger will be legended as to the
restrictions imposed upon resale of such stock.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF MBI AND HAWKEYE
MBI is incorporated under the laws of the State of
Missouri. Hawkeye is organized under the laws of the State of
Iowa. The rights of MBI's stockholders are governed by MBI's
Restated Articles of Incorporation and By-Laws and The General
and Business Corporation Law of the State of Missouri (the
"Missouri Act"). The rights of Hawkeye's shareholders are
governed by Hawkeye's Restated Articles of Incorporation and
By-Laws and by the Iowa Act. The rights of Hawkeye
shareholders
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who receive shares of MBI Common Stock in the Merger will
thereafter be governed by MBI's Restated Articles of
Incorporation and By-Laws and by the Missouri Act. The
material rights of such shareholders, and, where applicable,
material differences between the rights of MBI stockholders and
Hawkeye shareholders, are summarized below.
PREFERRED SHARE PURCHASE RIGHTS PLAN. As described
above under "-- Description of MBI Common Stock and Attached
Preferred Share Purchase Rights," MBI Common Stock has attached
Rights, which may deter certain takeover proposals. Hawkeye
does not have a rights plan.
SUPERMAJORITY PROVISIONS. MBI's Restated Articles of
Incorporation and MBI's By-Laws contain provisions requiring a
supermajority vote of the stockholders of MBI to approve
certain proposals. Under both MBI's Restated Articles and By-
Laws, removal by the stockholders 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 stockholders called
for the election of directors. Amendment by the stockholders
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 MBI Restated Articles of Incorporation
also provides that, in addition to any stockholder vote
required under Missouri law, 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
stockholders as provided by Missouri law or
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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.
Hawkeye's Articles of Incorporation and By-Laws do
not require supermajority approval by shareholders of any
corporate actions.
VOTING FOR DIRECTORS. MBI's By-Laws provide for
cumulative voting in the election of directors. Cumulative
voting entitles each stockholder 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 stockholder 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. Hawkeye's Articles and By-Laws likewise
provide for cumulative voting in the election of directors.
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 of Directors
diminishes the benefits of the cumulative voting rights of
minority stockholders. Hawkeye's Board of Directors is
likewise divided into three classes of directors, with each
class being elected to a staggered three-year term.
DISSENTERS' RIGHTS. Under the Missouri Act, a
stockholder of any corporation which is 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
Iowa Act, shareholders of Hawkeye are entitled to dissenters'
rights upon the consolidation or merger of Hawkeye or the sale
of all or substantially all of Hawkeye's property which are
similar but not identical to those under the Missouri Act.
Specifically, the procedures and the filing deadlines
applicable to dissenters' rights under the Missouri Act are
somewhat different than those applicable in dissenters' rights
proceedings under the Iowa Act.
ANTITAKEOVER STATUTES. The Missouri Act contains
certain provisions applicable to Missouri corporations such as
MBI which may be deemed to have an antitakeover effect. Such
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provisions include Missouri's Business Combination Statute 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.
Specifically, 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, mortgages, pledges, transfers
and similar dispositions of corporate assets or stock and
certain reclassifications, recapitalizations, liquidations or
dissolutions. 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 on or prior to the date of the transaction on which
the Interested Shareholder became "interested." Furthermore,
no Business Combinations may occur unless (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, unless the articles
provide otherwise; (ii) corporations which adopt, as provided
in the statute, provisions in their articles of incorporation
or by-laws expressly electing not to be covered by the statute;
and (iii) certain circumstances in which a stockholder
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
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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 or more, of the voting power of
outstanding stock of such corporation must obtain stockholder
approval for the purchase of the "Control Shares." If approval
is not given, the Acquiring Person's Control Shares lose the
right to vote. The statute prohibits an Acquiring Person from
voting its Control 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 elected or appointed by the directors of the
corporation. Stockholders 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 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 (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 by-laws 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 Iowa Act does not include similar anti-takeover
statutes.
SHAREHOLDER'S RIGHT TO INSPECT. Under the Iowa Act,
any shareholder may inspect the corporation's stock ledger,
shareholder list and other books and records if the
shareholder's demand for inspection is made in good faith and
for a proper purpose. The Iowa Act specifically provides that
a shareholder may appoint an agent for the purpose of examining
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the books and records of the corporation. The right of
stockholders to inspect under the Missouri Act is generally
similar to that of shareholders under the Iowa Act. However,
in comparison with the Iowa Act, in a given situation a
Missouri stockholder 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. MBI's By-Laws
provide for 19 directors on the Board of Directors of MBI.
MBI's Board currently has 16 directors. Similar to the
Missouri Act, the Iowa Act provides that a corporation may fix
the number of directors in its articles of incorporation or by-
laws. Hawkeye's Articles of Incorporation provide for a
classified board with three classes of directors serving three-
year terms. Hawkeye's By-Laws provide for 17 directors on the
Board of Directors of Hawkeye. Hawkeye's By-Laws, including
the provision establishing the number of members of Hawkeye's
Board of Directors, may be amended by the vote of the holders
of a majority of the Hawkeye Common Stock or by the vote of a
majority of the members of the Hawkeye Board of Directors.
Hawkeye's Board currently has 14 directors.
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 (or, in the case of
certain non-bank companies, prior notice to) the Federal
Reserve Board. In addition, bank holding companies are
generally prohibited under the BHCA from engaging in nonbanking
activities, subject to certain exceptions.
As a savings and loan holding company, MBI is also subject to
regulatory oversight by the Office of Thrift Supervision (the
"OTS"). As such, MBI is required to register
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and file reports with the OTS and is subject to regulation by
the OTS. In addition, the OTS has enforcement authority over
MBI which permits the OTS to restrict or prohibit activities
that are determined to be a serious risk to its subsidiary
savings association.
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, the OTS, the Federal
Deposit Insurance Corporation (the "FDIC"), the Comptroller of
the Currency (the "Comptroller") and the state banking
regulatory agencies. 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 such as MBI and its nonbank
subsidiaries can engage in certain transactions, including
borrowing or otherwise obtaining 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 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 bank's capital
stock and surplus. See "-- Recent Legislation."
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 generally 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 authorities, for such year combined with its
retained net profits for the preceding two years. In addition,
a national bank or a state member bank generally may not pay a
dividend in an amount
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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 but not identical to 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 stockholders' equity, certain
noncumulative 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. See "-- Recent Legislation."
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.
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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.
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.
RECENT LEGISLATION
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, some of which have delayed effective dates or
require implementing regulations. FDICIA instituted certain
changes to the supervisory process, including provisions that
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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 provisions of FDICIA
require 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 making 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")
shall be: (i) subject to increased monitoring by the
appropriate federal banking regulator; (ii) required to submit
an acceptable capital restoration plan within 45 days after the
institution becomes undercapitalized; (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 at the time the institution became
undercapitalized 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 bank regulatory agencies have discretionary
authority to reclassify a well capitalized institution as
adequately capitalized or to impose on an adequately
capitalized institution requirements or actions specified for
undercapitalized institutions if the agency determines after
notice and an opportunity for hearing that the institution is
in an unsafe or unsound condition or is engaging in an unsafe
or unsound practice, which can consist of the receipt of an
unsatisfactory examination rating if the deficiencies cited are
not corrected. A significantly undercapitalized institution,
as well as any undercapitalized institution that did not submit
or implement an acceptable capital restoration plan, may be
subject to regulatory demands for recapitalization, broader
application of restrictions on transactions with affiliates,
limitations on
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interest rates paid on deposits, restrictions on asset growth
and other activities, possible replacement of directors and
officers, and restrictions on capital distributions by any bank
holding company controlling the institution. Any company
controlling the institution could also be required to divest
the institution or the institution could be required to divest
subsidiaries. The senior executive officers of a significantly
undercapitalized institution may not receive bonuses or
increases in compensation without prior approval and a
critically undercapitalized institution is prohibited from
making payments of principal or interest on its debt that is
subordinated to claims of general creditors. If an
institution's ratio of tangible equity to total assets falls
below a level established by the appropriate federal banking
regulator, which may not be less than 2% of total assets nor
more than 65% of the minimum tangible equity level otherwise
required (the "critical capital level"), the institution will
be subject to conservatorship or receivership within 90 days
unless periodic determinations are made that forbearance from
such action would better protect the deposit insurance fund.
Unless appropriate findings and certifications are made to the
appropriate federal bank regulatory agencies, a critically
undercapitalized institution must be placed in receivership if
it remains critically undercapitalized on average during the
calendar quarter beginning 270 days after the date it became
critically undercapitalized.
The FDIC, the Comptroller and the Federal Reserve
Board have adopted capital-related regulations under FDICIA.
Under those regulations, a bank will be deemed well capitalized
if it: (a) has a risk-based capital ratio of 10% or greater;
(b) has a ratio of Tier 1 capital to risk-adjusted assets of 6%
or greater; (c) has a ratio of Tier 1 capital to adjusted total
assets of 5% or greater; and (d) is not subject to an order,
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 deemed
adequately capitalized if it was not "well-capitalized" and:
(a) has a risk-based capital ratio of 8% or greater; (b) has a
ratio of Tier 1 capital to risk-adjusted assets of 4% or
greater; and (c) has 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 ratio of
Tier 1 capital to adjusted total assets were 3% or greater).
An institution that does not meet one or more of the
"adequately capitalized" tests is deemed to be
"undercapitalized." If the institution has a total risk-based
capital ratio that is less than 6%, a Tier 1 risk-based capital
ratio that is less than 3%, or a leverage ratio that is less
than 3%, the institution
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is deemed to be "significantly undercapitalized." An
institution is deemed to be "critically undercapitalized" if it
has a ratio of tangible equity (as defined in the OCC's
regulations) to total assets that is equal to or less than 2%.
The federal bank regulatory agencies have issued
various proposals to amend the risk-based capital guidelines
for banks and bank holding companies. Under one proposal, a
bank would be required to give explicit consideration to
interest rate risk as an element of capital adequacy by
maintaining capital to compensate for such risk in an amount
measured by such bank's exposure to interest rate risk in
excess of a regulatory threshold. Another proposal would
revise the treatment given to (i) low-level recourse
arrangements to reduce the amount of capital required and (ii)
certain direct credit substitutes provided by banking
organizations to require that capital be maintained against the
value of the assets enhanced or the loans protected. A
proposal recently issued by the Federal Reserve Board and
expected to be joined in by the other bank regulatory agencies
increases the amount of capital required to be carried against
certain long-term derivative contracts; in addition, the
proposal recognizes the effect of certain bilateral netting
arrangements in reducing potential future exposure under these
contracts.
The FDIC has adopted final regulations under FDICIA
governing the receipt of brokered deposits. Under these
regulations, a bank cannot accept brokered deposits unless (i)
it is "well capitalized" or (ii) it is "adequately capitalized"
and receives a waiver from the FDIC. In addition, banks that
accept brokered deposits pursuant to such waivers (as well as
banks in conservatorship) may not pay interest on such deposits
in excess of 75 basis points over prevailing market rates. A
bank that cannot receive brokered deposits also cannot offer
"pass-through" insurance on certain employee benefit accounts.
There are no such restrictions on a bank that is "well
capitalized."
The FDIC, pursuant to the directive of FDICIA, has
adopted a risk-based premium schedule. Each financial
institution is assigned to one of the three capital groups --
well capitalized, adequately capitalized or undercapitalized --
and further assigned to one of three subgroups, within a
capital group, on the basis of supervisory evaluations by the
institution's primary federal and, if applicable, state super-
visiors and on the basis of other information relevant to the
institution's financial conditions and the risk posed to the
applicable insurance fund. The actual assessment rate applicable
to a particular institution will, therefore, depend in part
upon the risk assessment classification so assigned to the
institution by the FDIC.
The legislation adopted in August 1989 to provide for
the resolution of insolvent savings associations also required
the FDIC to establish separate deposit insurance funds -- the
Bank Insurance Fund ("BIF") for banks and the Savings
Association Insurance Fund ("SAIF") for savings associations.
The law also requires the FDIC to set deposit insurance
assessments at such levels as will cause BIF and SAIF to reach
their "designated reserve ratios" of 1.25 percent of the
deposits insured by them within a reasonable period of time.
Due to low costs of resolving bank insolvencies in the last few
years, BIF reached its designated reserve ratio in May, 1995.
As a result, the FDIC recently lowered deposit insurance assessment
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rates on banks by revising the range to $.04 to $.31 for every
$100 of deposits. However, the balance in SAIF is not expected
to reach the designated reserve ratio until about the year
2002, as the law provides that a significant portion of the
costs of resolving past insolvencies of savings associations
must be paid from its source.
MBI, which has acquired substantial amounts of
SAIF-insured deposits during the years from 1989 to the
present, is required to pay deposit insurance premiums on these
SAIF-insured deposits. Currently, SAIF-member institutions pay
deposit insurance premiums based on a schedule of from $0.23 to
$0.31 per $100 of deposits. Bills have recently been proposed
by the U.S. Congress to recapitalize the SAIF through a
one-time special assessment of approximately 85 basis points on
the amount of deposits held by the institution. If such
special assessment occurs, it is expected that the deposit
premiums paid by the SAIF-member institutions would be reduced
to approximately $.04 for every $100 of deposits and would
have the effect of immediately reducing the capital of
SAIF-member institutions by the amount of the fee (provided
SAIF-member institutions are not permitted to amortize the
expense of the one-time fee over a period of years). MBI
cannot predict whether the special assessment proposal will be
enacted, or, if enacted, the amount of any one-time fee or
whether ongoing SAIF premiums will be reduced to a level equal
to that of BIF premiums. If the one-time assessment is not
enacted, it is presently expected that the SAIF will not be
recapitalized until 2002 and the disparity between SAIF and BIF
deposit premiums will continue. MBI does not expect that
either such additional deposit insurance costs or the proposed
one-time assessment will have a significant, adverse effect on
its earnings.
Proposals recently have been introduced in the U.S.
Congress that, if adopted, would overhaul the savings
association industry. The most significant of these proposals
would recapitalize the SAIF through a one-time special
assessment, spread the FICO Bond obligation across the BIF and
SAIF, merge the Comptroller and the OTS, abolish the federal
savings association charter, require federal thrifts to convert
to commercial banks and merge the SAIF and the BIF. MBI cannot
predict whether these or any other legislative proposals will
be enacted, or, if enacted, the final form of the law.
FDICIA also made 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 imposed new
responsibilities on management, the independent audit committee
and outside
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accountants to develop or approve reports regarding the
effectiveness of internal controls, legal compliance and off-
balance sheet liabilities and assets.
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 Hawkeye's 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 stockholders of such an
institution in their capacity as such.
In September 1994, legislation was enacted that is
expected to have a significant effect in restructuring the
banking industry in the United States. The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994
facilitates the interstate expansion and consolidation of
banking organizations (i) by permitting bank holding companies
that are adequately capitalized and managed, one year after
enactment of the legislation, to acquire banks located in
states outside their home states regardless of whether such
acquisitions are authorized under the law of the host state,
(ii) by permitting the interstate merger of banks after June 1,
1997, subject to the right of individual states to "opt in" or
to "opt out" of this authority before that date, (iii) by
permitting banks to establish new branches on an interstate
basis provided that such action is specifically authorized by
the law of the host state, (iv) by permitting foreign banks to
establish, with approval of the regulators in the United
States, branches outside their home states to the same extent
that national or state banks located in the home state would be
authorized to do so, and (v) by permitting, beginning September
29, 1995, banks to receive deposits, renew time deposits, close
loans, service loans and receive payments on loans and other
obligations as agent for any bank or thrift affiliate, whether
the affiliate is located in the same state or a different
state. One effect of this legislation will be to permit MBI to
acquire banks located in any state and to permit bank holding
companies located in any state to acquire banks and bank
holding companies in Missouri. Overall, this legislation is
likely to have the effects of increasing competition and
promoting geographic diversification in the banking industry.
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LEGAL MATTERS
The validity of the MBI Common Stock to be issued in
the Merger will be passed upon by Jon W. Bilstrom, General
Counsel and Secretary of MBI, who, as of the Record Date,
beneficially owned [30,216] shares of MBI Common Stock and held
options to acquire [51,749] additional shares of MBI Common
Stock.
EXPERTS
The consolidated financial statements of MBI as of
December 31, 1994, 1993 and 1992, and for each of the years in
the three-year period ended December 31, 1994, incorporated by
reference in the 1994 MBI Form 10-K, and the supplemental
consolidated financial statements of MBI as of December 31,
1994, 1993 and 1992, and for each of the years in the three-
year period ended December 31, 1994, contained in MBI's Current
Report on Form 8-K dated May 31, 1995, have been incorporated
by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements incorporated in
this Proxy Statement/Prospectus by reference from the 1994
Hawkeye Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is
incorporated herein by this reference, and have been so
incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
OTHER MATTERS
The Board of Directors of Hawkeye, at the date
hereof, is not aware of any business to be presented at the
Special Meeting other than that referred to in the Notice of
Special Meeting and discussed herein. If any other matter
should properly come before the Special Meeting, 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 Hawkeye.
STOCKHOLDER PROPOSALS
If the Merger is consummated, shareholders of Hawkeye
will become stockholders of MBI at the Effective Time. MBI
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stockholders may submit to MBI proposals for formal
consideration at the 1996 annual meeting of MBI's stockholders
and inclusion in MBI's proxy statement and proxy 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 25, 1995 in
order to be considered for inclusion in MBI's Proxy Statement
and proxy for the 1996 annual meeting.
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ANNEX A
DISSENTERS' RIGHTS PROVISIONS UNDER THE
IOWA BUSINESS CORPORATION ACT
Set forth below is the text of the statutory
dissenters' rights provisions under Division XIII of the Iowa
Business Corporation Act.
DIVISION XIII
DISSENTERS' RIGHTS
PART A
490.1301 DEFINITIONS FOR DIVISION XIII.--In this
division:
1. "Beneficial shareholder" means the person who is a
beneficial owner of shares held by a nominee as the record
shareholder.
2. "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that
issuer.
3. "Dissenter" means a shareholder who is entitled to
dissent from corporate action under section 490.1302 and who
exercises that right when and in the manner required by
sections 490.1320 through 490.1328.
4. "Fair value", with respect to a dissenter's shares,
means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be
inequitable.
5. "Interest" means interest from the effective date of
the corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank
loans or, if none, at a rate that is fair and equitable under
all the circumstances.
6. "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted
by a nominee certificate on file with a corporation.
A-1<PAGE>
7. "Shareholder" means the record shareholder or the
beneficial shareholder.
490.1302 SHAREHOLDERS' RIGHT TO DISSENT.--1. A
shareholder is entitled to dissent from, and obtain payment of
the fair value of the shareholder's shares in the event of, any
of the following corporate actions:
a. Consummation of a plan of merger to which the
corporation is a party if either of the following apply:
(1) Shareholder approval is required for the merger by
section 490.1103 or the articles of incorporation and the
shareholder is entitled to vote on the merger.
(2) The corporation is a subsidiary that is merged with
its parent under section 490.1104.
b. Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
c. Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other
than in the usual and regular course of business, if the
shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the
sale will be distributed to the shareholders within one year
after the date of sale.
d. An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a
dissenter's shares because it does any or all of the following:
(1) Alters or abolishes a preferential right of the
shares.
(2) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for
the redemption or repurchase, of the shares.
(3) Alters or abolishes a preemptive right of the holder
of the shares to acquire shares or other securities.
(4) Excludes or limits the right of the shares to vote on
any matter, or to cumulate votes, other than a limitation by
dilution through issuance of shares or other securities with
similar voting rights.
A-2<PAGE>
(5) Reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so created is
to be acquired for cash under section 490.604.
(6) Extends, for the first time after being governed by
this chapter, the period of duration of a corporation organized
under chapter 491 or 496A and existing for a period of years on
the day preceding the date the corporation is first governed by
this chapter.
e. Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
2. A shareholder entitled to dissent and obtain payment
for the shareholder's shares under this chapter is not entitled
to challenge the corporate action creating the shareholder's
entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
490.1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--1. A
record shareholder may assert dissenters' rights as to fewer
than all the shares registered in that shareholder's name only
if the shareholder dissents with respect to all shares
beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person
on whose behalf the shareholder asserts dissenters' rights.
The rights of a partial dissenter under this subsection are
determined as if the shares as to which the shareholder
dissents and the shareholder's other shares were registered in
the names of different shareholders.
2. A beneficial shareholder may assert dissenters' rights
as to shares held on the shareholder's behalf only if the
shareholder does both of the following:
a. Submits to the corporation the record shareholder's
written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights.
b. Does so with respect to all shares of which the
shareholder is the beneficial shareholder or over which that
beneficial shareholder has power to direct the vote.
PART B
490.1320 NOTICE OF DISSENTERS' RIGHTS.--1. If proposed
corporate action creating dissenters' rights under section
A-3<PAGE>
490.1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be
entitled to assert dissenters' rights under this part and be
accompanied by a copy of this part.
2. If corporate action creating dissenters' rights under
section 490.1302 is taken without a vote of shareholders, the
corporation shall notify in writing all shareholders entitled
to assert dissenters' rights that the action was taken and send
them the dissenters' notice described in section 490.1322.
490.1321 NOTICE OF INTENT TO DEMAND PAYMENT.--1. If
proposed corporate action creating dissenters' rights under
section 490.1302 is submitted to a vote at a shareholders'
meeting, a shareholder who wishes to assert dissenters' rights
must do all of the following:
a. Deliver to the corporation before the vote is taken
written notice of the shareholder's intent to demand payment
for the shareholder's shares if the proposed action is
effectuated.
b. Not vote the dissenting shareholder's shares in favor
of the proposed action.
2. A shareholder who does not satisfy the requirements of
subsection 1, is not entitled to payment for the shareholder's
shares under this part.
490.1322 DISSENTERS' NOTICE--1. If proposed corporate
action creating dissenters' rights under section 490.1302 is
authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who
satisfied the requirements of section 490.1321.
2. The dissenters' notice must be sent no later than ten
days after the PROPOSED corporate action is AUTHORIZED AT A
SHAREHOLDERS' MEETING, OR, IF THE CORPORATE ACTION IS TAKEN
WITHOUT A VOTE OF THE SHAREHOLDERS, NO LATER THAN TEN DAYS
AFTER THE CORPORATE ACTION IS TAKEN, and must do all of the
following:
a. State where the payment demand must be sent and where
and when certificates for certificated shares must be
deposited.
b. Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received.
A-4<PAGE>
c. Supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action and requires that
the person asserting dissenters' rights certify whether or not
the person acquired beneficial ownership of the shares before
that date.
d. Set a date by which the corporation must receive the
payment demand, which date shall not be fewer than thirty nor
more than sixty days after the date the DISSENTERS' notice is
delivered.
e. Be accompanied by a copy of this division.
490.1323 DUTY TO DEMAND PAYMENT.--1. A shareholder sent
a dissenter's notice described in section 490.1322 must demand
payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set
forth in the dissenter's notice pursuant to section 490.1322,
subsection 2, paragraph "c", and deposit the shareholder's
certificates in accordance with the terms of the notice.
2. The shareholder who demands payment and deposits the
shareholder's shares under subsection 1 retains all other
rights of a shareholder until these rights are canceled or
modified by the taking of the proposed corporate action.
3. A shareholder who does not demand payment or deposit
the shareholder's share certificates where required, each by
the date set in the dissenters' notice, is not entitled to
payment for the shareholder's shares under this division.
490.1324 SHARE RESTRICTIONS.--1. The corporation may
restrict the transfer or uncertificated shares from the date
the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under
section 490.1326.
2. The person for whom dissenters' rights are asserted as
to uncertificated shares retains all other rights of a
shareholder until these rights are canceled or modified by the
taking of the proposed corporate action.
490.1325 PAYMENT.--1. Except as provided in section
490.1327, AT THE TIME the proposed corporate action is taken,
or upon receipt of a payment demand, WHICHEVER OCCURS LATER,
the corporation shall pay each dissenter who complied with
section 490.1323 the amount the corporation estimates to be the
fair value of the dissenter's shares, plus accrued interest.
A-5<PAGE>
2. The payment must be accompanied by all of the
following:
a. The corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen months before the date
of payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest
available interim financial statements, if any.
b. A statement of the corporation's estimate of the fair
value of the shares.
c. An explanation of how the interest was calculated.
d. A statement of the dissenter's right to demand payment
under section 490.1328.
e. A copy of this division.
490.1326 FAILURE TO TAKE ACTION.--1. If the corporation
does not take the proposed action within sixty days after the
date set for demanding payment and depositing share
certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on
uncertificated shares.
2. If after returning deposited certificates and
releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under
section 490.1322 AS IF THE CORPORATE ACTION WAS TAKEN WITHOUT A
VOTE OF THE SHAREHOLDERS and repeat the payment demand
procedure.
490.1327 AFTER-ACQUIRED SHARES.--1. A corporation may
elect to withhold payment required by section 490.1325 from a
dissenter unless the dissenter was the beneficial owner of the
shares before the date set forth in the dissenters' notice as
the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
2. To the extent the corporation elects to withhold
payment under subsection 1, after taking the proposed corporate
action, it shall estimate the fair value of the shares, plus
accrued interest, and shall pay this amount to each dissenter
who agrees to accept it in full satisfaction of the dissenter's
demand. The corporation shall send with its offer a statement
of its estimate of the fair value of the shares, an explanation
of how the interest was calculated, and a statement of the
dissenter's right to demand payment under section 490.1328.
A-6<PAGE>
490.1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH
PAYMENT OR OFFER.--1. A dissenter may notify the corporation
in writing of the dissenter's own estimate of the fair value of
the dissenter's shares and amount of interest due, and demand
payment of the dissenter's estimate, less any payment under
section 490.1325, or reject the corporation's offer under
section 490.1327 and demand payment of the fair value of the
dissenter's shares and interest due, if any of the following
apply:
a. The dissenter believes that the amount paid under
section 490.1325 or offered under section 490.1327 is less than
the fair value of the dissenter's shares or that the interest
due is incorrectly calculated.
b. The corporation fails to make payment under section
490.1325 within sixty days after the date set for demanding
payment.
c. The corporation, having failed to take the proposed
action, does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares
within sixty days after the date set for demanding payment.
2. A dissenter waives the dissenter's right to demand
payment under this section unless the dissenter notifies the
corporation of the dissenter's demand in writing under
subsection 1 within thirty days after the corporation made or
offered payment for the dissenter's shares.
PART C
490.1330 COURT ACTION.--1. If a demand for payment under
section 490.1328 remains unsettled, the corporation shall
commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair
value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period,
it shall pay each dissenter whose demand remains unsettled the
amount demanded.
2. The corporation shall commence the proceeding in the
district court of the county where a corporation's principal
office or, if none in this state, its registered office is
located. If the corporation is a foreign corporation without a
registered office in this state, it shall commence the
proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
A-7<PAGE>
3. The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled
parties to the proceeding as in an action against their shares
and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or
by publication as provided by law.
4. The jurisdiction of the court in which the proceeding
is commenced under subsection 2 is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive
evidence and recommend decision on the question of fair value.
The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil
proceedings.
5. Each dissenter made a party to the proceeding is
entitled to judgment for either of the following:
a. The amount, if any, by which the court finds the fair
value of the dissenter's shares, plus interest, exceeds the
amount paid by the corporation.
b. The fair value, plus accrued interest, of the
dissenter's after-acquired shares for which the corporation
elected to withhold payment under section 490.1327.
490.1331 COURT COSTS AND COUNSEL FEES.--1. The court in
an appraisal proceeding commenced under section 490.1330 shall
determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court.
The court shall assess the costs against the corporation,
except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under
section 490.1328.
2. The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable, for either of the following:
a. Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of sections 490.1320
through 490.1328.
b. Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
A-8<PAGE>
arbitrarily, vexatiously, or not it good faith with respect to
the rights provided by this chapter.
3. If the court finds that the services of counsel for
any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
A-9<PAGE>
ANNEX B
FORM OF OPINION OF DLJ
__________, 1995
Board of Directors
Hawkeye Bancorporation
222 Equitable Building
604 Locust Street
Des Moines, Iowa 50309-3723
Members of the Board:
You have requested our opinion as to the fairness,
from a financial point of view, to the holders of the
outstanding shares of common stock, without par value (the
"Hawkeye Common Stock"), of Hawkeye Bancorporation ("Hawkeye")
of the exchange ratio for the exchange of common shares in the
merger (the "Merger") of Hawkeye with and into Mercantile
Bancorporation Inc. of Iowa, a wholly-owned subsidiary of
Mercantile Bancorporation Inc. ("MBI"), pursuant to the
Agreement and Plan of Reorganization, dated August 4, 1995,
between Hawkeye and MBI (the "Merger Agreement").
Pursuant to the Merger Agreement, in the Merger each
share of Hawkeye Common Stock shall be converted into the right
to receive .585 of a share of common stock, par value $5.00 per
share, of MBI ("MBI Common Stock") (the "Exchange Ratio"). We
understand that the Merger is conditioned upon, among other
things, receipt of opinions to the effect that the Merger will
qualify for treatment as a tax-free reorganization and as a
pooling of interests for accounting purposes. In connection
with the Merger, the parties have also entered into an
agreement (the "Stock Option Agreement") pursuant to which
Hawkeye has irrevocably granted MBI an option to purchase
2,678,000 shares of Hawkeye Common Stock (subject to adjustment
in certain circumstances but in no event to exceed 19.9% of the
then outstanding shares of Hawkeye Common Stock), at a price
and on
B-1<PAGE>
Board of Directors
Hawkeye Bancorporation
___________, 1995
Page 2
the terms and conditions set forth in the Stock Option
Agreement. The terms of the Merger are more fully set forth in
the Merger Agreement.
For purposes of this opinion and in connection with
our review of the proposed transaction, we have, among other
things:
1. Participated in discussions and negotiations
among representatives of Hawkeye and MBI and
their respective legal advisors that resulted in
the Merger Agreement;
2. Reviewed the terms of the Merger Agreement and
Stock Option Agreement;
3. Reviewed the proxy statement/prospectus dated
the date hereof relating to the Merger to be
sent to the holders of Hawkeye Common Stock;
4. Reviewed certain publicly available financial
statements, both audited and unaudited, of
Hawkeye and MBI, including those included in
their respective Annual Reports on Form 10-K for
the five years ended December 31, 1994 and the
respective Quarterly Reports on Form 10-Q for
the periods ended March 31, 1995 and June 30,
1995;
5. Reviewed certain financial statements and other
financial and operating data concerning Hawkeye
and MBI prepared by their respective
managements;
6. Reviewed certain financial forecasts of Hawkeye
prepared by its management and made inquiries of
representatives of MBI management as to the
expected future financial performance of MBI on
a stand-alone basis and giving effect to the
Merger;
7. Discussed certain aspects of the past and
current business operations, financial condition
and future prospects of Hawkeye and MBI with
certain members of their respective managements;
B-2<PAGE>
Board of Directors
Hawkeye Bancorporation
___________, 1995
Page 3
8. Reviewed reported market prices and historical
trading activity of Hawkeye Common Stock and MBI
Common Stock;
9. Reviewed certain aspects of the financial
performance of Hawkeye and MBI and compared such
financial performance of Hawkeye and MBI,
together with stock market data relating to
Hawkeye Common Stock and MBI Common Stock, with
similar data available for certain other financial
institutions and certain of their publicly traded
securities;
10. Reviewed certain of the financial terms, to the
extent publicly available, of certain recent
business combinations involving other financial
institutions; and
11. Conducted such other studies, analyses, and
examinations as we deemed appropriate.
We have relied upon and assumed without independent
verification the accuracy and completeness of all of the
financial and other information that has been provided to us by
Hawkeye, MBI and their respective representatives and of the
publicly available information that was reviewed by us. With
your permission, we have also relied upon the managements of
both Hawkeye and MBI as to the reasonableness and achievability
of the financial and operating forecasts provided to us (and
the assumptions and bases therefor). In that regard, we have
assumed with your permission that such forecasts, including
without limitation projected cost savings and operating
synergies resulting from the Merger, reflect the best currently
available estimates and judgments of such respective
managements and that such forecasts will be realized in the
amounts and in the time periods currently estimated by the
managements of Hawkeye and MBI. We have not independently
verified and have relied on and assumed that the aggregate
allowances for loan losses set forth in the balance sheets of
each of Hawkeye and MBI at June 30, 1995 are adequate to cover
such losses and complied fully with applicable law, regulatory
policy and sound banking practice as of the date of such
financial statements. We were not retained to and we did not
conduct a physical inspection of any of the properties or
facilities of Hawkeye or MBI, did not make any independent
evaluation or appraisal of the assets, liabilities or prospects
of Hawkeye or MBI, were
B-3<PAGE>
Board of Directors
Hawkeye Bancorporation
___________, 1995
Page 4
not furnished with any such evaluation or appraisal, and did
not review any individual credit files. In rendering our
opinion, we have been advised by Hawkeye and MBI and have
assumed with your permission that there are no other factors
that would delay or subject to adverse conditions any necessary
regulatory or governmental approval for the Merger, and we have
assumed that all conditions to the Merger will be satisfied and
not waived.
Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), as part of its investment banking business, is
regularly engaged, with respect to bank holding companies and
other corporations, in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements, and valuations for corporate and other purposes.
DLJ has performed investment banking services for Hawkeye in
the past and has been compensated for such services. In the
ordinary course of our business we may actively trade the debt
and equity securities of companies, including Hawkeye and MBI,
for our own account and for the accounts of customers and may
hold a long or short position in such securities at any time.
Our opinion is based solely upon the information
available to us and the economic, market, and other
circumstances as they exist as of the date hereof. Events
occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We have not
undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring after the date hereof.
We are not expressing any opinion herein as to the
prices at which shares of MBI Common Stock issued in the Merger
may trade if and when they are issued or at any future time.
Our opinion as expressed herein is limited to the fairness,
from a financial point of view, of the Exchange Ratio to the
holders of Hawkeye Common Stock and does not address Hawkeye's
underlying business decision to proceed with the Merger. We
have been retained on behalf of Hawkeye's Board of Directors,
and our opinion does not constitute a recommendation to any
holder of Hawkeye Common Stock as to how such holder should
vote with respect to the Merger Agreement at any meeting of
holders of Hawkeye Common Stock.
B-4<PAGE>
Board of Directors
Hawkeye Bancorporation
___________, 1995
Page 5
Subject to the foregoing and based on our experience
as investment bankers, our activities as described above, and
other factors we have deemed relevant, we are of the opinion as
of the date hereof that the Exchange Ratio is fair, from a
financial point of view, to the holders of Hawkeye Common
Stock.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_________________________
David D. Olson
Managing Director <PAGE>
[FORM OF PROXY]
[FRONT]
HAWKEYE BANCORPORATION
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
_____________ __, 1995
The undersigned hereby appoints Paul D. Dunlap,
Robert W. Murray and R. Douglas, and each of them with full
power to act alone, the true and lawful attorneys in fact and
proxies of the undersigned to vote all shares of Common Stock
of HAWKEYE BANCORPORATION, an Iowa corporation (the "Company"),
held by the undersigned, with full power of substitution, with
the same force and effect as the undersigned would be entitled
to vote if personally present at the Special Meeting of
Shareholders of the Company to be held at ______________, Des
Moines, Iowa, on __________ __, 1995, at ______ a.m. (Central
Time), and at any adjournment or postponement thereof, as
follows:
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
1. Approval and adoption of the Agreement and FOR AGAINST ABSTAIN
Plan of Reorganization, dated August 4, [ ] [ ] [ ]
1995 (the "Merger Agreement"), by and
between Mercantile Bancorporation Inc., a
Missouri corporation, and the Company.
2. OTHER MATTERS: Discretionary authority is
hereby granted to transact such other
business as may properly come before the
meeting or any adjournment or postponement
thereof.
=======================================================================
[BACK]
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.<PAGE>
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY, USING THE ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF THIS PROXY IS SUBMITTED, BUT NO DIRECTIONS
ARE MADE, THIS PROXY WILL BE VOTED "FOR" THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
The undersigned hereby acknowledges receipt of the Notice of
Special Meeting of Shareholders and the Proxy Statement/
Prospectus, each dated _________ __, 1995, furnished herewith.
Dated: ______________________, 1995
Signature: ____________________________________________________
Signature(s) (if held jointly): _______________________________
Title or Authority:____________________________________________<PAGE>
IMPORTANT: Please sign your name exactly as it appears hereon.
When signing as attorney, agent, executor, administrator,
trustee, guardian or corporate officer, please give your full
title as such. Each joint owner should sign the proxy. If
executed by a partnership, this proxy should be signed by an
authorized partner.<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
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 (including attorneys' fees),
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 331.355(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, as provided in Article 12 of the Restated
Articles of Incorporation of the Registrant, 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<PAGE>
its directors and executive officers the indemnification
specified in subsections (1) and (2) and may also extend 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' lability
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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. See Exhibit Index.
(b) FINANCIAL STATEMENT SCHEDULES. Not Applicable.
(c) REPORT, OPINION OR APPRAISAL. Not Applicable.
ITEM 22. UNDERTAKINGS
(a) 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
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.
(b) 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)
II-2<PAGE>
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.
(c) 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.
(d) The Registrant undertakes that every prospectus: (i)
that is filed pursuant to paragraph (c) 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, 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.
(e) 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.
(f) 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.
(g) The undersigned Registrant hereby undertakes:
1. 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-3<PAGE>
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the information set forth in the Registration
Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement.
2. 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.
3. 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-4<PAGE>
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 October 23, 1995.
MERCANTILE BANCORPORATION INC.
By: /S/ THOMAS H. JACOBSEN
--------------------------------
Thomas H. Jacobsen
Chairman of the Board,
President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of
Mercantile Bancorporation Inc., hereby severally and
individually constitute and appoint Thomas H. Jacobsen and John
H. Beirise, and each of them, the true and lawful attorneys and
agents of each of us to execute in the name, place and stead of
each of us (individually and in any capacity stated below) any
and all amendments to this Registration Statement on Form S-4
and all instruments necessary or advisable in connection
therewith and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have the power
to act with or without the others and to have full power and
authority to do and perform in the name and on behalf of each
of the undersigned every act whatsoever necessary or advisable
to be done in the premises as fully and to all intents and
purposes as any of the undersigned might or could do in person,
and we hereby ratify and confirm our signatures as they may be
signed by our said attorneys and agents or each of them to any
and all such amendments and instruments.
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.
Signature Title Date
/s/ Thomas H. Jacobsen Chairman of the Board, October 20, 1995
Thomas H. Jacobsen President, Chief Executive
Principal Executive Officer Officer and Director
II-5<PAGE>
Signature Title Date
/s/ John Q. Arnold Senior Executive October 20, 1995
John Q. Arnold Vice President and
Principal Financial Officer Chief Financial Officer
/s/ Michael T. Normile Senior Vice President -- October 20, 1995
Michael T. Normile Finance and Control
Principal Accounting Officer
/s/ Richard P. Conerly Director October 20, 1995
Richard P. Conerly
/s/ Harry M. Cornell, Jr. Director October 20, 1995
Harry M. Cornell, Jr.
/s/ Earl K. Dille Director October 20, 1995
Earl K. Dille
/s/ William A. Hall Director October 20, 1995
William A. Hall
/s/ Thomas A. Hays Director October 20, 1995
Thomas A. Hays
/s/ William G. Heckman Director October 20, 1995
William G. Heckman
/s/ Charles H. Price II Director October 20, 1995
Charles H. Price II
/s/ Harvey Saligman Director October 20, 1995
Harvey Saligman
________________ Director _______ __, 1995
Craig D. Schnuck
_______________ Director _______ __, 1995
Robert L. Stark
II-6<PAGE>
Signature Title Date
/s/ Patrick T. Stokes Director October 20, 1995
Patrick T. Stokes
/s/ Francis A. Stroble Director October 20, 1995
Francis A. Stroble
______________ Director _______ __, 1995
John A. Wright
/s/ Frank Lyon, Jr. Director October 20, 1995
Frank Lyon, Jr.
II-7<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
2.1 Agreement and Plan of Reorganization dated as
of August 4, 1995 by and among MBI and Hawk-
eye.
2.2 Stock Option Agreement, dated August 4, 1995,
between MBI and Hawkeye.
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
(File No. 1-11792), are incorporated herein
by reference.
3.2 MBI's By-Laws, as amended and currently in
effect, filed as Exhibit 3.2 to MBI's Regis-
tration Statement No. 33-57489, are incorpo-
rated herein by reference.
4.1 Form of Indenture Regarding Subordinated Se-
curities 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 (File No. 1-11792), is incorporated
herein by reference.
4.2 Rights Agreement dated as of May 23, 1988
between MBI and Mercantile Bank of St. Louis
National Association, as Rights Agent (in-
cluding as exhibits thereto the form of Cer-
tificate of Designation, Preferences and
Rights of Series A Junior Participating Pre-
ferred Stock and the form of Right Certifi-
cate), filed on May 24, 1988 as Exhibits 1
and 2 to MBI's Registration Statement on Form
8-A (File No. 1-11792), is incorporated
herein by reference.
4.3 Certificate of Designation, Preferences, and
Relative Rights, Qualifications, Limitations
and Restrictions of the Series B-1 Preferred
Stock of MBI, filed as Exhibit 4-1 to MBI's
Report on Form 10-Q for the quarter ended
March 31, 1995 (File No. 1-11792), is incor-
porated herein by reference.
II-8<PAGE>
Exhibit
Number Description Page
4.4 Certificate of Designation, Preferences, and
Relative Rights, Qualifications, Limitations
and Restrictions of the Series B-2 Preferred
Stock of MBI, filed as Exhibit 4-2 to MBI's
Report on Form 10-Q for the quarter ended
March 31, 1995 (File No. 1-11792), is incor
porated herein by reference.
5 Opinion of Jon W. Bilstrom as to the legality
of the securities being issued.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz as
to certain tax matters in the Merger.
8.2 Opinion of Baird, Holm, McEachen, Pedersen,
Hamann & Strasheim as to certain tax matters
in the Merger.
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 Hawkeye's finan-
cial statements.
23.3 Consent of Jon W. Bilstrom (included in Ex-
hibit 5).
23.4 Consent of Wachtell, Lipton, Rosen & Katz
(included in Exhibit 8.1).
23.5 Consent of Baird, Holm, McEachen, Pedersen,
Hamann & Strasheim (included in Exhibit 8.2).
23.6 Consent of Donaldson, Lufkin & Jenrette Secu-
rities Corporation.
24.1 Power of Attorney (included on signature
page).
99.9 Form of Support Agreement dated as of August
4, 1995 by and between MBI and the directors
of Hawkeye.
II-9
AGREEMENT AND PLAN OF REORGANIZATION
between
MERCANTILE BANCORPORATION INC.,
as Buyer,
and
HAWKEYE BANCORPORATION,
as Seller
Dated August 4, 1995
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made and entered into on August 4, 1995 by
and between MERCANTILE BANCORPORATION INC., a Missouri
corporation ("Buyer"), and HAWKEYE BANCORPORATION, an Iowa
corporation (together with its predecessors, "Seller").
W I T N E S S E T H:
WHEREAS, Buyer is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended (the
"Holding Company Act"); and
WHEREAS, Seller is a registered bank holding
company under the Holding Company Act; and
WHEREAS, the Board of Directors of Seller and the
Executive Committee of the Board of Directors of Buyer have
approved the merger (the "Merger") of Seller with and into a
wholly owned subsidiary of Buyer organized or to be organized
under the laws of Iowa ("Merger Sub") pursuant to the terms and
subject to the conditions of this Agreement; and
WHEREAS, as a condition to, and immediately after
the execution of this Agreement, Buyer and each director of
Seller will enter into Support Agreements (the "Support
Agreements") in the form attached hereto as Exhibit A; and
-1-<PAGE>
WHEREAS, as a condition to, and immediately prior to
execution of this Agreement, Buyer and Seller will enter into a
stock option agreement (the "Stock Option Agreement") in the
form attached hereto as Exhibit B; and
WHEREAS, the parties 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:
ARTICLE I
THE MERGER
1.01. The Merger. (a) Subject to the terms and
conditions of this Agreement, Seller shall be merged with and
into Merger Sub in accordance with the Iowa Business
Corporation Act (the "Iowa Act") and the separate corporate
existence of Seller shall cease. Merger Sub shall be the
surviving corporation of the Merger (sometimes referred to
herein as the "Surviving Corporation") and shall continue to
be governed by the laws of the State of Iowa.
-2-<PAGE>
1.02. Closing. The closing (the "Closing") of the
Merger shall take place at 10:00 a.m., local time, on the
date that the Effective Time (as defined in Section 1.03)
occurs, or at such other time, and at such place, as Buyer
and Seller shall agree (the "Closing Date").
1.03. Effective Time. The Merger shall become
effective on the date and at the time (the "Effective Time")
on which appropriate documents in respect of the Merger are
filed with the Secretary of State of the State of Iowa in
such form as required by, and in accordance with, the
relevant provisions of the Iowa Act. Subject to the terms
and conditions of this Agreement, the Effective Time shall
occur on such date as Buyer shall notify Seller in writing
(such notice to be at least five business days in advance of
the Effective Time) but (i) not earlier than the satisfaction
of all conditions set forth in Section 6.01(a) and 6.01(b)
(the "Approval Date") and (ii) subject to clause (i), not
later than the first business day of the first full calendar
month commencing at least five business days after the
Approval Date. As soon as practicable following the
Effective Time, Buyer and Seller shall cause a certificate or
plan of merger reflecting the terms of this Agreement to be
delivered for filing and recordation with other appropriate
state or local officials in the State of Iowa in accordance
with the Iowa Act.
-3-<PAGE>
1.04. Additional Actions. If, at any time after
the Effective Time, Buyer or the Surviving Corporation shall
consider or be advised that any further deeds, assignments or
assurances or any other acts are necessary or desirable to
(b) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of Seller or
Merger Sub or (c) otherwise carry out the purposes of this
Agreement, Seller and Merger Sub and each of their respective
officers and directors, shall be deemed to have granted to
the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such deeds, assignments or assurances
and to do all acts necessary or desirable to vest, perfect or
confirm title and possession to such rights, properties or
assets in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the
name of Seller or otherwise to take any and all such action.
1.05. Articles of Incorporation and Bylaws. The
Articles of Incorporation and Bylaws of Merger Sub in effect
immediately prior to the Effective Time shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation
following the Merger until otherwise amended or repealed.
-4-<PAGE>
1.06. Boards of Directors and Officers. At the
Effective Time, the directors and officers of Merger Sub
immediately prior to the Effective Time shall be directors
and officers, respectively, of the Surviving Corporation
following the Merger; such directors and officers shall hold
office in accordance with the Surviving Corporation's Bylaws
and applicable law.
1.07. Conversion of Securities. At the Effective
Time, by virtue of the Merger and without any action on the
part of Buyer, Seller or the holder of any of the following
securities:
(i) Each share of the common stock, par value
$.01 per share, of Merger Sub that is issued and outstanding
immediately prior to the Effective Time shall remain
outstanding and shall be unchanged after the Merger and shall
thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation; and
(ii) Each share of the common stock, without par
value ("Seller Common Stock"), of Seller issued and
outstanding immediately prior to the Effective Time, other
than any Dissenting Shares (as defined in Section 1.09),
shall cease to be outstanding and shall be converted into and
become the right to receive 0.585 (the "Exchange Ratio") of a
share of common stock, par value $5.00 per share ("Buyer
-5-<PAGE>
Common Stock"), of Buyer; provided, however, that any shares
of Seller Common Stock held by Seller or any of its wholly
owned Subsidiaries (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the
"SEC")), or Buyer or any of its wholly owned Subsidiaries, in
each case other than in a fiduciary capacity or as a result
of debts previously contracted, shall be cancelled and shall
not represent capital stock of the Surviving Corporation and
shall not be exchanged for shares of Buyer Common Stock.
1.08. Exchange Procedures. (a) As soon as
practicable after the Effective Time, holders of record of
certificates formerly representing shares of Seller Common
Stock (the "Certificates") shall be instructed to tender such
Certificates to Buyer pursuant to a letter of transmittal
that Buyer shall deliver or cause to be delivered to such
holders. Such letters of transmittal shall specify that risk
of loss and title to Certificates shall pass only upon
delivery of such Certificates to Buyer.
(b) Subject to Section 1.10, after the Effective
Time, each previous holder of a Certificate that surrenders
such Certificate to the Buyer or, at the election of Buyer,
an exchange agent designated by Buyer (the "Exchange Agent")
will, upon acceptance thereof by Buyer or the Exchange Agent,
be entitled to a certificate or certificates representing the
-6-<PAGE>
number of full shares of Buyer Common Stock into which the
Certificate so surrendered shall have been converted pursuant
to this Agreement and any distribution theretofore declared
and not yet paid with respect to such shares of Buyer Common
Stock, without interest.
(c) Buyer or, at the election of Buyer, the
Exchange Agent shall accept Certificates upon compliance with
such reasonable terms and conditions as Buyer or the Exchange
Agent may impose to effect an orderly exchange thereof in
accordance with customary exchange practices. Certificates
shall be appropriately endorsed or accompanied by such
instruments of transfer as Buyer or the Exchange Agent may
require.
(d) Each outstanding Certificate shall until duly
surrendered to Buyer or the Exchange Agent be deemed to
evidence ownership of the consideration into which the stock
previously represented by such Certificate shall have been
converted pursuant to this Agreement.
(e) After the Effective Time, holders of
Certificates shall cease to have rights with respect to the
stock previously represented by such Certificates, and their
sole rights shall be to exchange such Certificates for the
consideration provided for in this Agreement. After the
Effective Time, there shall be no further transfer on the
records
-7-<PAGE>
of Seller of Certificates, and if such Certificates are
presented to Seller for transfer, they shall be cancelled
against delivery of the consideration provided therefor in
this Agreement. Buyer shall not be obligated to deliver the
consideration to which any former holder of Seller Common
Stock is entitled as a result of the Merger until such holder
surrenders the Certificates as provided herein. No dividends
declared will be remitted to any person entitled to receive
Buyer Common Stock under this Agreement until such person
surrenders the Certificate representing the right to receive
such Buyer Common Stock, at which time such dividends shall
be remitted to such person, without interest and less any
taxes that may have been imposed thereon. Certificates
surrendered for exchange by any person constituting an
"affiliate" of Seller for purposes of Rule 145 of the
Securities Act of 1933, as amended (together with the rules
and regulations thereunder, the "Securities Act"), shall not
be exchanged for certificates representing Buyer Common Stock
until Buyer has received a written agreement from such person
in the form attached as Exhibit C. Neither the Exchange
Agent nor any party to this Agreement nor any affiliate
thereof shall be liable to any holder of stock represented by
any Certificate for any consideration paid to a public
official pursuant to applicable abandoned property, escheat
or similar laws. Buyer and the Exchange Agent shall be
entitled to rely upon
-8-<PAGE>
the stock transfer books of Seller to establish the identity
of those persons entitled to receive consideration specified
in this Agreement, which books shall be conclusive with
respect thereto. In the event of a dispute with respect to
ownership of stock represented by any Certificate, Buyer and
the Exchange Agent shall be entitled to deposit any
consideration represented thereby in escrow with an
independent third party and thereafter be relieved with
respect to any claims thereto.
1.09. Dissenting Shares. (a) "Dissenting Shares"
means any shares held by any holder who becomes entitled to
payment of the fair value of such shares under the Iowa Act.
Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in
accordance with the provisions of the Iowa Act; provided,
however, that if, in accordance with the Iowa Act, any holder
of Dissenting Shares shall forfeit such right to payment of
the fair value of such shares, such shares shall thereupon be
deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to
receive the consideration provided in this Article I.
(b) Seller shall give Buyer (i) prompt notice of
any written objections to the Merger and any written demands
for the payment of the fair value of any shares, withdrawals
-9-<PAGE>
of such demands, and any other instruments served pursuant to
the Iowa Act received by Seller and (ii) the opportunity to
direct all negotiations and proceedings with respect to such
demands under the Iowa Act. Seller 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 Buyer, 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 Buyer Common Stock shall be
issued in the Merger. Each holder who otherwise would have
been entitled to a fraction of a share of Buyer Common Stock
shall receive in lieu thereof cash (without interest) in an
amount determined by multiplying the fractional share
interest to which such holder would otherwise be entitled by
the Closing Price per share of Buyer Common Stock on the last
business day preceding the Effective Time. With respect to a
share of stock, "Closing Price" shall mean: the closing
price as reported on the Consolidated Tape (as reported in
The Wall Street Journal or in the absence thereof, by any
other authoritative source). No such holder shall be
entitled to dividends, voting rights or any other rights in
respect of any fractional share.
-10-<PAGE>
1.11. Anti-Dilution Adjustments. If prior to the
Effective Time Buyer shall declare a stock dividend or make
distributions upon or subdivide, split up, reclassify or
combine Buyer Common Stock or declare a dividend or make a
distribution on Buyer Common Stock in any security
convertible into Buyer Common Stock, appropriate adjustment
or adjustments will be made to the Exchange Ratio.
1.12. Reservation of Right to Revise Transaction.
Buyer may at any time change the method of effecting the
acquisition of Seller or Seller's Subsidiaries by Buyer
(including without limitation the provisions of this Article I)
if and to the extent it deems such change to be desirable,
including without limitation to provide for a merger of Seller
directly into Buyer, in which Buyer is the surviving
corporation, provided, however, that no such change shall (A)
alter or change the amount or kind of consideration to be
issued to holders of Seller Common Stock as provided for in
this Agreement (the "Merger Consideration"), (B) adversely
affect the tax treatment to Seller's stockholders as a result
of receiving the Merger Consideration or (C) materially impede
or delay receipt of any approval referred to in Section 6.01(b)
or the consummation of the transactions contemplated by this
Agreement.
-11-<PAGE>
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
Seller represents and warrants to and covenants
with Buyer as follows:
2.01. Organization and Authority. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa 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 corporate power and authority to own its properties
and assets and to carry on its business as it is now being
conducted. Seller is registered as a bank holding company
with the Board of Governors of the Federal Reserve System
(the "Board") under the Holding Company Act. True and
complete copies of the Restated Articles of Incorporation and
the Bylaws of Seller and, to the extent requested in writing
by Buyer, of the Articles of Incorporation and Bylaws of the
Seller Subsidiaries (as defined in Section 2.02), each as in
effect on the date of this Agreement, have been provided to
Buyer.
2.02. Subsidiaries. Schedule 2.02 sets forth,
among other things, a complete and correct list of all of
-12-<PAGE>
Seller's Subsidiaries (each a "Seller Subsidiary" and
collectively the "Seller Subsidiaries"), all outstanding
Equity Securities of each of which, except as set forth on
Schedule 2.02, are owned directly or indirectly by Seller.
"Equity Securities" of an issuer means capital stock or other
equity securities of such issuer, options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible
into, shares of any capital stock or other Equity Securities
of such issuer, or contracts, commitments, understandings or
arrangements by which such issuer is or may become bound to
issue additional shares of its capital stock or other Equity
Securities of such issuer, or options, warrants, scrip or
rights to purchase, acquire, subscribe to, calls on or
commitments for, or stock appreciation or similar rights in
respect of, any shares of its capital stock or other Equity
Securities. Except as set forth on Schedule 2.02, all of the
outstanding shares of capital stock of the Seller
Subsidiaries are validly issued, fully paid and
nonassessable, and those shares owned by Seller are owned
free and clear of any lien, claim, charge, option,
encumbrance, agreement, mortgage, pledge, security interest
or restriction (a "Lien") with respect thereto. Each of the
Seller Subsidiaries is a corporation or association duly
incorporated or organized, validly existing, and in good
standing under the laws of its
-13-<PAGE>
jurisdiction of incorporation or organization, and has
corporate power and authority to own or lease its properties
and assets and to carry on its business as it is now being
conducted. Each of the Seller Subsidiaries is duly qualified
to do business in each jurisdiction where its ownership or
leasing of property or the conduct of its business requires
it so to be qualified, except where the failure to so qualify
would not have a material adverse effect on the financial
condition, results of operations or business (collectively,
the "Condition") of Seller and its Subsidiaries, taken as a
whole. Except as set forth on Schedule 2.02, Seller does not
own beneficially, directly or indirectly, five percent or
more of any shares of any class of Equity Securities or
similar interests of any corporation, bank, business trust,
association or similar organization. All of Seller's bank
Subsidiaries (the "Banks") are either state banking
associations chartered under the laws of the State of Iowa or
national banking associations chartered by the Office of the
Comptroller of the Currency. The deposits of each of the
Banks are insured by the Bank Insurance Fund ("BIF") or, to
the extent transferred to a Bank by the Resolution Trust
Corporation, by the Savings Association Insurance Fund, of
the Federal Deposit Insurance Corporation (the "FDIC"). The
aggregate "adjusted attributable deposit amount" (as defined
in 12 U.S.C. Section 1815) of the Banks, as of June 30, 1995,
is
-14-<PAGE>
$54,866,000. The Banks identified as such on Schedule 2.02
are members in good standing of the Federal Reserve System.
Except as set forth on Schedule 2.02, neither Seller nor any
Seller Subsidiary holds any interest in a partnership or
joint venture of any kind.
2.03. Capitalization. The authorized capital
stock of Seller consists of (i) 200,000,000 shares of Seller
Common Stock, of which, as of June 30, 1995, 13,461,373
shares were issued and outstanding, (ii) 200,000,000 shares
of Preference Stock, without par value, of which no shares
are issued and outstanding, (iii) 5,000,000 shares of
Preferred Stock, par value $1.00 per share, of which no
shares are issued and outstanding. As of June 30, 1995,
Seller had reserved 208,630 shares of Seller Common Stock for
issuance under Seller's stock option and incentive plans, a
list of which is set forth on Schedule 2.03 (the "Seller
Stock Plans"), pursuant to which options ("Seller Stock
Options") covering 208,630 shares of Seller Common Stock and
65,000 stock appreciation rights were outstanding as of June
30, 1995. Since June 30, 1995, no Equity Securities of
Seller have been issued other than shares of Seller Common
Stock which may have been issued upon the exercise of Seller
Employee Stock Options. Except as set forth above, there are
no other Equity Securities of Seller outstanding. All of the
issued and outstanding shares of Seller Common Stock are
-15-<PAGE>
validly issued, fully paid, and nonassessable, and have not
been issued in violation of any preemptive right of any
stockholder of Seller. Seller maintains no dividend
reinvestment or similar plan.
2.04. Authorization. (a) Seller has the
corporate power and authority to enter into this Agreement
and, subject to the approval of this Agreement by the
stockholders of Seller, to carry out its obligations
hereunder. The only stockholder vote required for Seller to
approve this Agreement is the affirmative vote of the holders
of at least a majority of the votes entitled to be cast on
the Agreement by the holders of shares of Seller Common
Stock. The execution, delivery and performance of this
Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by
the Board of Directors of Seller. Subject to approval by the
stockholders of Seller, this Agreement is a valid and binding
obligation of Seller enforceable against Seller in accordance
with its terms.
(b) Except as set forth on Schedule 2.04B, neither
the execution nor delivery nor performance by Seller of this
Agreement, nor the consummation by Seller of the transactions
contemplated hereby, nor compliance by Seller with any of the
provisions hereof, will (i) violate, conflict with, or result
in a breach of any provisions of, or constitute a default (or
-16-<PAGE>
an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the
creation of, any Lien upon any of the material properties or
assets of Seller or any Seller Subsidiary under any of the
terms, conditions or provisions of (x) its articles or
certificate of incorporation or bylaws or (y) any material
note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
Seller or any Seller Subsidiary is a party or by which it may
be bound, or to which Seller or any Seller Subsidiary or any
of the material properties or assets of Seller or any Seller
Subsidiary may be subject, or (ii) subject to compliance with
the statutes and regulations referred to in paragraph (c) of
this Section 2.04, to the best knowledge of Seller, violate
any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Seller or any
Seller Subsidiary or any of their respective material
properties or assets.
(c) Other than in connection or in compliance with
the provisions of the Iowa Act, 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,
-17-<PAGE>
authorizations, approvals or exemptions required under the
Holding Company Act, and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), or any required
approvals of or filings with the Superintendant of the
Banking Division of the Commerce Department of the State of
Iowa (the "State Bank Regulator"), no notice to, filing with,
exemption or review by, or authorization, consent or approval
of, any public body or authority is necessary for the
consummation by Seller of the transactions contemplated by
this Agreement.
2.05. Seller Financial Statements. The
consolidated and parent-company only balance sheets of Seller
and its Subsidiaries as of December 31, 1994, 1993 and 1992
and related consolidated statements of income, cash flows and
changes in stockholders' equity for each of the three years
in the three-year period ended December 31, 1994, together
with the notes thereto, audited by Deloitte & Touche LLP and
included in an annual report on Form 10-K as filed with the
SEC, and the unaudited consolidated balance sheets of Seller
and its Subsidiaries as of March 31 and June 30, 1995 and the
related unaudited consolidated statements of income and cash
flows for the periods then ended included in quarterly
reports on Form 10-Q (each a "Seller Form 10-Q") as filed
with the SEC (collectively, the "Seller Financial
Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
("GAAP"),
-18-<PAGE>
present fairly the consolidated financial position of Seller
and its Subsidiaries at the dates and the consolidated
results of operations, cash flows and changes in
stockholders' equity of Seller and its Subsidiaries for the
periods stated therein and are derived from the books and
records of Seller and its Subsidiaries, which are complete
and accurate in all material respects and have been
maintained in all material respects in accordance with
applicable laws and regulations. Neither Seller nor any of
its Subsidiaries has any material contingent liabilities that
are not described in the financial statements described
above. The Seller Financial Statements are set forth on
Schedule 2.05.
2.06. Seller Reports. Since January 1, 1992, each
of Seller and the Seller Subsidiaries has filed all material
reports, registrations and statements, together with any
required material amendments thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms
10-K, Forms 10-Q, Forms 8-K and proxy statements, (ii) the
Board, (iii) the FDIC, (iv) the State Bank Regulator, and (v)
any other federal, state, municipal, local or foreign
government, securities, banking, savings and loan, insurance
and other governmental or regulatory authority and the
agencies and staffs thereof (the entities in the foregoing
clauses (i) through (v) being referred to herein collectively
as the "Regulatory Authorities" and individually as a
"Regulatory
-19-<PAGE>
Authority"). All such reports and statements filed with any
such Regulatory Authority are collectively referred to herein
as the "Seller Reports." As of its respective date, each
Seller Report complied in all material respects with all the
rules and regulations promulgated by the applicable
Regulatory Authority and did not contain any untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
2.07. Properties and Leases. Except as may be
reflected in the Seller Financial Statements, except for any
Lien for current taxes not yet delinquent and except with
respect to assets classified as real estate owned, Seller and
its Subsidiaries have good title free and clear of any
material Lien to all the real and personal property reflected
in Seller's consolidated balance sheet as of June 30, 1995
included in the most recent Seller Form 10-Q and, in each
case, all real and personal property acquired since such
date, except such real and personal property as has been
disposed of in the ordinary course of business. All leases
material to Seller or any Seller Subsidiary pursuant to which
Seller or any Seller Subsidiary, as lessee, leases real or
personal property, are valid and effective in accordance with
their respective terms, and there is not, under any of such
leases,
-20-<PAGE>
any material existing default by Seller or any Seller
Subsidiary or any event which, with notice or lapse of time
or both, would constitute such a material default.
Substantially all of Seller's and Seller Subsidiaries'
buildings, structures and equipment in regular use have been
well maintained and are in good and serviceable condition,
normal wear and tear excepted.
2.08. Taxes. Except as previously disclosed,
Seller and each Seller Subsidiary have timely filed or will
timely (including extensions) file all material tax returns
required to be filed at or prior to the Closing Date ("Seller
Returns"). Each of Seller and its Subsidiaries has paid, or
set up adequate reserves on the Seller Financial Statements
for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and has set up
adequate reserves on the most recent financial statements
Seller has filed under the Exchange Act for the payment of
all taxes anticipated to be payable in respect of all periods
up to and including the latest period covered by such
financial statements. Neither Seller nor any Seller
Subsidiary will have any liability material to the Condition
of Seller and the Seller Subsidiaries, taken as a whole, for
any such taxes in excess of the amounts so paid or reserves
so established and no material deficiencies for any tax,
assessment
-21-<PAGE>
or governmental charge have been proposed, asserted or
assessed (tentatively or definitely) against any of Seller or
any Seller Subsidiary which would not be covered by existing
reserves. Neither Seller nor any Seller Subsidiary is
delinquent in the payment of any material tax, assessment or
governmental charge, nor, except as previously disclosed, 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 and state income tax
returns of Seller and the Seller Subsidiaries have been
audited and settled by the Internal Revenue Service (the
"IRS") or appropriate state tax authorities for all periods
ended through December 31, 1981. There is no deficiency or
refund litigation or matter in controversy with respect to
Seller Returns. Neither Seller nor any Seller Subsidiary has
extended or waived any statute of limitations on the
assessment of any tax due that is currently in effect.
2.09. Material Adverse Change. Since December 31,
1994, there has been no material adverse change in the
Condition of Seller and its Subsidiaries, taken as a whole,
except as may have resulted or may result from changes to
laws and regulations or changes in economic conditions
applicable to banking institutions generally or in general
levels of interest rates affecting banking institutions
generally.
-22-<PAGE>
2.10. Commitments and Contracts. (a) Except as set
forth on Schedule 2.10A, neither Seller nor any Seller
Subsidiary is a party or subject to any of the following
(whether written or oral, express or implied):
(i) any material agreement, arrangement or
commitment (A) not made in the ordinary course of
business or (B) pursuant to which Seller or any of
its Subsidiaries is or may become obligated to
invest in or contribute capital to any Seller
Subsidiary;
(ii) any agreement, indenture or other
instrument not disclosed in the Seller Financial
Statements relating to the borrowing of money by
Seller or any Seller Subsidiary or the guarantee by
Seller or any Seller Subsidiary of any such
obligation (other than trade payables or
instruments related to transactions entered into in
the ordinary course of business by any Seller
Subsidiary, such as deposits and Fed Funds
borrowings);
(iii) any contract, agreement or
understanding with any labor union or collective
bargaining organization;
-23-<PAGE>
(iv) any contract containing covenants
which limit the ability of Seller or any Seller
Subsidiary to compete in any line of business or
with any person or which involve any restriction of
the geographical area in which, or method by which,
Seller or any Seller Subsidiary may carry on its
business (other than as may be required by law or
any applicable Regulatory Authority);
(v) any other contract or agreement which
is a "material contract" within the meaning of Item
601(b)(10) of Regulation S-K promulgated by the
SEC; or
(vi) any lease with annual rental payments
aggregating $250,000 or more.
(b) Neither Seller nor any Seller Subsidiary is in
violation of its charter documents or bylaws or in default
under any material agreement, commitment, arrangement, lease,
insurance policy, or other instrument, whether entered into in
the ordinary course of business or otherwise and whether
written or oral, and there has not occurred any event that,
with the lapse of time or giving of notice or both, would
constitute such a default, except, in all cases, where such
default would not have a material adverse effect on the
Condition of Seller and its Subsidiaries, taken as a whole.
-24-<PAGE>
2.11. Litigation and Other Proceedings. Except as
set forth on Schedule 2.11, neither Seller nor any Seller
Subsidiary is a party to any pending or, to the best
knowledge of Seller, threatened claim, action, suit,
investigation or proceeding, or is subject to any order,
judgment or decree, except for matters which, in the
aggregate, will not have, or reasonably could not be expected
to have, a material adverse effect on the Condition of Seller
and its Subsidiaries, taken as a whole, or which purports or
seeks to enjoin or restrain the transactions contemplated by
this Agreement. Without limiting the generality of the
foregoing, there are no actions, suits, or proceedings
pending or, to the best knowledge of Seller, threatened
against Seller or any Seller Subsidiary or any of their
respective officers or directors by any stockholder of Seller
or any Seller Subsidiary (or any former stockholder of Seller
or any Seller Subsidiary) or involving claims under the
Securities Act, the Exchange Act, the Community Reinvestment
Act of 1977, as amended, or the fair lending laws.
2.12. Insurance. Set forth on Schedule 2.12 is a
list of all insurance policies maintained by or for the
benefit of Seller or its Subsidiaries or their directors,
officers, employees or agents.
-25-<PAGE>
2.13. Compliance with Laws. (a) Seller and each of
its Subsidiaries have all permits, licenses, authorizations,
orders and approvals of, and have made all filings,
applications and registrations with, all Regulatory Authorities
that are required in order to permit them to own or lease their
properties and assets and to carry on their business as
presently conducted and that are material to the business of
Seller and its Subsidiaries; all such permits, licenses,
certificates of authority, orders and approvals are in full
force and effect and, to the best knowledge of Seller, no
suspension or cancellation of any of them is threatened; and
all such filings, applications and registrations are current.
(b) Except for failures to comply or defaults
which individually or in the aggregate would not have a
material adverse effect on the Condition of Seller and its
Subsidiaries, taken as a whole, (i) each of Seller and its
Subsidiaries has complied with all laws, regulations and
orders (including without limitation zoning ordinances,
building codes, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and securities, tax,
environmental, civil rights, and occupational health and
safety laws and regulations and including without limitation
in the case of any Seller Subsidiary that is a bank or
savings association, banking organization, banking
corporation or trust
-26-<PAGE>
company, all statutes, rules, regulations and policy
statements pertaining to the conduct of a banking, deposit-
taking, lending or related business, or to the exercise of
trust powers) and governing instruments applicable to them
and to the conduct of their business, and (ii) neither Seller
nor any Seller Subsidiary is in default under, and no event
has occurred which, with the lapse of time or notice or both,
could result in the default under, the terms of any judgment,
order, writ, decree, permit, or license of any Regulatory
Authority or court, whether federal, state, municipal, or
local and whether at law or in equity. Except for
liabilities which individually or in the aggregate would not
have a material adverse effect on the Condition of Seller and
its Subsidiaries, taken as a whole, neither Seller nor any
Seller Subsidiary is subject to or reasonably likely to incur
a liability as a result of its ownership, operation, or use
of any Property (as defined below) of Seller (whether
directly or, to the best knowledge of Seller, as a
consequence of such Property being part of the investment
portfolio of Seller or any Seller Subsidiary) (A) 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 "Toxic Substance"), or (B) on
which any Toxic Substance has
-27-<PAGE>
been stored, disposed of, placed, or used in the construction
thereof. "Property" of a person shall include all property
(real or personal, tangible or intangible) owned or
controlled by such person, including without limitation
property under foreclosure, property held by such person or
any Subsidiary of such person in its capacity as a trustee
and property in which any venture capital or similar unit of
such person or any Subsidiary of such person has an interest.
No claim, action, suit, or proceeding is pending against
Seller or any Seller Subsidiary relating to Property of
Seller before any court or other Regulatory 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 Seller or any Seller Subsidiary with respect to
the same. Except for statutory or regulatory restrictions of
general application, no Regulatory Authority has placed any
restriction on the business of Seller or any Seller
Subsidiary which reasonably could be expected to have a
material adverse effect on the Condition of Seller and its
Subsidiaries, taken as a whole.
(c) From and after January 1, 1992, neither Seller
nor any Seller Subsidiary has received any notification or
communication which has not been resolved from any Regulatory
Authority (i) asserting that any Seller or any Subsidiary of
-28-<PAGE>
Seller, is not in substantial compliance with any of the
statutes, regulations or ordinances that such Regulatory
Authority enforces, except with respect to matters which (A)
are set forth on Schedule 2.13(c) or in any writing previously
furnished to Buyer or (B) reasonably could not be expected to
have a material adverse effect on the Condition of Seller and
its Subsidiaries, taken as a whole, (ii) threatening to revoke
any license, franchise, permit or governmental authorization
that is material to the Condition of Seller and its
Subsidiaries, taken as a whole, including without limitation
such company's status as an insured depositary institution
under the Federal Deposit Insurance Act, or (iii) requiring or
threatening to require Seller or any of its Subsidiaries, or
indicating that Seller or any of its Subsidiaries may be
required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting
or limiting or purporting to direct, restrict or limit in any
manner the operations of Seller or any of its Subsidiaries,
including without limitation any restriction on the payment of
dividends. No such cease and desist order, agreement or
memorandum of understanding or other agreement is currently in
effect.
(d) Neither Seller nor any Seller Subsidiary is
required by Section 32 of the Federal Deposit Insurance Act
to give prior notice to any federal banking agency of the
proposed addition of an individual to its board of directors
-29-<PAGE>
or the employment of an individual as a senior executive
officer.
2.14. Labor. No work stoppage involving Seller or
any Seller Subsidiary, is pending or, to the best knowledge of
Seller, threatened. Neither Seller nor any Seller Subsidiary
is involved in, or, to the best knowledge of Seller, threatened
with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding which reasonably could be expected to
have a material adverse affect on the Condition of Seller and
its Subsidiaries, taken as a whole. Employees of neither
Seller nor any Seller Subsidiary, are represented by any labor
union or any collective bargaining organization.
2.15. Material Interests of Certain Persons. (a)
Except as set forth in Seller's Proxy Statement for its 1995
Annual Meeting of Stockholders, to the best knowledge of
Seller, no officer or director of Seller or any Subsidiary of
Seller, or any "associate" (as such term is defined in Rule
l4a-1 under the Exchange Act) of any such officer or
director, has any material interest in any material contract
or property (real or personal, tangible or intangible), used
in, or pertaining to the business of, Seller or any
Subsidiary of Seller, which in the case of Seller is required
to be disclosed by Item 404 of Regulation S-K promulgated by
the SEC or in the case of any such Subsidiary would be
required to be
-30-<PAGE>
so disclosed if such Subsidiary had a class of securities
registered under Section 12 of the Exchange Act.
(b) Except as set forth in Seller's Proxy
Statement for its 1995 Annual Meeting of Stockholders or on
Schedule 2.15B, as of June 30, 1995, there are no loans from
Seller or any Seller Subsidiary to any present officer,
director, employee or any associate or related interest of
any such person which was or would be required under any rule
or regulation to be approved by or reported to Seller's or
Seller Subsidiary's Board of Directors ("Insider Loans"), and
no Insider Loans in excess of $500,000 have been made since
June 30, 1995. All outstanding Insider Loans from Seller or
any Seller Subsidiary were approved by or reported to the
appropriate board of directors in accordance with applicable
law and regulations.
2.16. Allowance for Loan and Lease Losses;
Nonperforming Assets. (a) The allowances for loan and lease
losses contained in the Seller Financial Statements were
established in accordance with the past practices and
experiences of Seller and its Subsidiaries, and the allowance
for loan losses shown on the consolidated condensed balance
sheet of Seller and its Subsidiaries contained in the most
recent Seller Form 10-Q is adequate in all material respects
under the requirements of GAAP to provide for possible losses
on
-31-<PAGE>
loans (including without limitation accrued interest
receivable) and credit commitments (including without
limitation stand-by letters of credit) outstanding as of the
date of such balance sheet.
(b) The aggregate amount of all Nonperforming Assets
(as defined below) on the books of Seller and its Subsidiaries
does not exceed $5,498,000. "Nonperforming Assets" shall mean
(i) all loans and leases (A) that are contractually past due 90
days or more in the payment of principal and/or interest, (B)
that are on nonaccrual status, (C) where the interest rate
terms have been reduced and/or the maturity dates have been
extended subsequent to the agreement under which the loan was
originally created due to concerns regarding the borrower's
ability to pay in accordance with such initial terms, (D) that
have been classified "doubtful", "loss" or the equivalent
thereof by any Regulatory Authority, and (ii) all assets
classified as real estate acquired through foreclosure or
repossession and other assets acquired through foreclosure or
repossession.
2.17. Employee Benefit Plans. (a) Except as set
forth in Schedule 2.17A, neither Seller nor any Seller
Subsidiary is a party to any existing employment, management,
consulting, deferred compensation, change-in-control or other
similar contract. "Seller Employee Plans" means all pension,
-32-<PAGE>
retirement, supplemental retirement, savings, profit sharing,
stock option, stock purchase, stock ownership, stock
appreciation right, deferred compensation, consulting, bonus,
medical, disability, workers' compensation, vacation, group
insurance, severance and other material employee benefit,
incentive and welfare policies, contracts, plans and
arrangements, and all trust agreements related thereto,
maintained (currently or at any time in the last five years)
by or contributed to by Seller or any Seller Subsidiary in
respect of any of the present or former directors, officers,
or other employees of and/or consultants to Seller or any
Seller Subsidiary. Schedule 2.17A lists all Seller Employee
Plans currently in effect. Seller has furnished Buyer with
the following documents with respect to each Seller Employee
Plan: (i) a true and complete copy of all written documents
comprising such Seller Employee Plan (including amendments
and individual agreements relating thereto) or, if there is
no such written document, an accurate and complete
description of the Seller Employee Plan; (ii) the most recent
Form 5500 or Form 5500-C (including all schedules thereto),
if applicable; (iii) the most recent financial statements and
actuarial reports, if any; (iv) the summary plan description
currently in effect and all material modifications thereof,
if any; and (v) the most recent Internal Revenue Service
determination letter, if any. Without limiting the
generality
-33-<PAGE>
of the foregoing, Seller has furnished Buyer with true and
complete copies of each form of stock option grant or stock
option agreement that is outstanding under any stock option
plan of Seller or any Seller Subsidiary.
(b) Except as set forth in Schedule 2.17A, all
Seller Employee Plans have been maintained and operated
materially in accordance with their terms and with the
material requirements of all applicable statutes, orders,
rules and final regulations, including without limitation
ERISA and the Internal Revenue Code. All contributions
required to be made to Seller Employee Plans have been made.
(c) With respect to each of the Seller Employee
Plans which is a pension plan (as defined in Section 3(2) of
ERISA) (the "Pension Plans"): (i) each Pension Plan which is
intended to be "qualified" within the meaning of Section
401(a) of the Internal Revenue Code has been determined to be
so qualified by the Internal Revenue Service and, to the
knowledge of Seller, such determination letter may still be
relied upon, and each related trust is exempt from taxation
under Section 501(a) of the Internal Revenue Code; (ii) the
present value of all benefits vested and all benefits accrued
under each Pension Plan which is subject to Title IV of
-34-<PAGE>
ERISA, valued using the assumptions in the most recent
actuarial report, did not, in each case, as of the last
applicable annual valuation date (as indicated on Schedule
2.17A), exceed the value of the assets of the Pension Plan
allocable to such vested or accrued benefits; (iii) to the
best knowledge of Seller, there has been no "prohibited
transaction," as such term is defined in Section 4975 of the
Internal Revenue Code or Section 406 of ERISA, which could
subject any Pension Plan or associated trust, or the Seller
or any Seller Subsidiary, to any material tax or penalty;
(iv) except as set forth on Schedule 2.17C, no Pension Plan
subject to Title IV of ERISA 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 on or after January 1, 1985;
and (v) no Pension Plan or any trust created thereunder has
incurred any "accumulated funding deficiency", as such term
is defined in Section 302 of ERISA (whether or not waived).
No Pension Plan is a "multiemployer plan" as that term is
defined in Section 3(37) of ERISA. With respect to each
Pension Plan that is described in Section 4063(a) of ERISA (a
"Multiple Employer Pension Plan"): (i) neither Seller nor
any Seller Subsidiary would have any liability or obligation
to post a bond under Section 4063 of ERISA if Seller and all
-35-<PAGE>
Seller Subsidiaries were to withdraw from such Multiple
Employer Pension Plan; and (ii) neither Seller nor any Seller
Subsidiary would have any liability under Section 4064 of
ERISA if such Multiple Employer Pension Plan were to
terminate.
(d) Except as set forth on Schedule 2.17D, neither
Seller nor any Seller Subsidiary has any liability for any
post-retirement health, medical or similar benefit of any
kind whatsoever, except as required by statute or regulation.
(e) Neither Seller nor any Seller Subsidiary has
any material liability under ERISA or the Internal Revenue
Code as a result of its being a member of a group described
in Sections 414(b), (c), (m) or (o) of the Internal Revenue
Code.
(f) Except as set forth on Schedule 2.17F, neither
the execution nor delivery of this Agreement, nor the
consummation of any of the transactions contemplated hereby,
will (i) result in any material payment (including without
limitation severance, unemployment compensation or golden
parachute payment) becoming due to any director or employee
of Seller or any Seller Subsidiary from any of such entities,
(ii) materially increase any benefit otherwise payable under
any of the Seller Employee Plans or (iii) result in the
acceleration of the time of payment of any such benefit. No
-36-<PAGE>
holder of an option to acquire stock of Seller has or will
have at any time through the Effective Time the right to
receive any cash or other payment (other than the issuance of
stock of Seller) in exchange for or with respect to all or
any portion of such option. Seller shall use its best
efforts to insure that no amounts paid or payable by Seller,
Seller Subsidiaries or Buyer to or with respect to any
employee or former employee of Seller or any Seller
Subsidiary will fail to be deductible for federal income tax
purposes by reason of Section 280G of the Internal Revenue
Code. No Seller Employee Stock Option has an associated
"Additional Option Right" or similar "re-load" feature.
2.18. Conduct of Seller to Date. From and after
January 1, 1995 through the date of this Agreement, except as
set forth on Schedule 2.18 or in Seller Financial Statements:
(i) Seller and the Seller Subsidiaries have conducted their
respective businesses in the ordinary and usual course
consistent with past practices; (ii) Seller has not issued,
sold, granted, conferred or awarded any of its Equity
Securities (except shares of Seller Common Stock upon
exercise of Seller Employee Stock Options), or any corporate
debt securities which would be classified under GAAP as long-
term debt on the balance sheets of Seller; (iii) Seller has
not effected any stock split or adjusted, combined,
reclassified or otherwise changed its capitalization; (iv)
Seller has not
-37-<PAGE>
declared, set aside or paid any dividend (other than its
regular quarterly or regular semi-annual common dividends) or
other distribution in respect of its capital stock, or
purchased, redeemed, retired, repurchased, or exchanged, or
otherwise acquired or disposed of, directly or indirectly,
any of its Equity Securities, whether pursuant to the terms
of such Equity Securities or otherwise; (v) neither Seller
nor any Seller Subsidiary has incurred any material
obligation or liability (absolute or contingent), except
normal trade or business obligations or liabilities incurred
in the ordinary course of business, or subjected to Lien any
of its assets or properties other than in the ordinary course
of business consistent with past practice; (vi) neither
Seller nor any Seller Subsidiary has discharged or satisfied
any material Lien or paid any material obligation or
liability (absolute or contingent), other than in the
ordinary course of business; (vii) neither Seller nor any
Seller Subsidiary has sold, assigned, transferred, leased,
exchanged, or otherwise disposed of any of its properties or
assets other than for a fair consideration in the ordinary
course of business; (viii) except as required by contract or
law, neither Seller nor any Seller Subsidiary has (A)
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, (B) entered into
-38-<PAGE>
any new, or amended or supplemented any existing, employment,
management, consulting, deferred compensation, severance, or
other similar contract, (C) entered into, terminated, or
substantially modified any of the Seller Employee Plans or
(D) agreed to do any of the foregoing; (ix) neither Seller
nor any Seller Subsidiary has suffered any material damage,
destruction, or loss, whether as the result of fire,
explosion, earthquake, accident, casualty, labor trouble,
requisition, or taking of property by any Regulatory
Authority, flood, windstorm, embargo, riot, act of God or the
enemy, or other casualty or event, and whether or not covered
by insurance; (x) neither Seller nor any Seller Subsidiary
has cancelled or compromised any debt, except for debts
charged off or compromised in accordance with the past
practice of Seller and its Subsidiaries, and (xi) neither
Seller nor any Seller Subsidiary has entered into any
material transaction, contract or commitment outside the
ordinary course of its business.
2.19. Proxy Statement, etc. None of the
information regarding Seller or any Seller Subsidiary
supplied or to be supplied by Seller for inclusion or
included in (i) the registration statement on Form S-4 to be
filed with the SEC by Buyer for the purpose of registering
the shares of Buyer Common Stock to be exchanged for shares
of Seller Common Stock pursuant to the provisions of this
Agreement (the
-39-<PAGE>
"Registration Statement"), (ii) the proxy or information
statement (the "Proxy Statement") to be mailed to Seller's
stockholders in connection with the transactions contemplated
by this Agreement or (iii) any other documents to be filed
with any Regulatory Authority in connection with the
transactions contemplated hereby will, at the respective
times such documents are filed with any Regulatory Authority
and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement,
when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading or, in
the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the meeting of Seller's
stockholders referred to in Section 5.03 (the "Meeting") (or,
if no Meeting is held, at the time the Proxy Statement is
first furnished to Seller's stockholders), 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 the Meeting. All documents which Seller or any
Seller Subsidiary is responsible for filing with any
Regulatory Authority in connection with the Merger will
comply as to form in all material respects with the
provisions of applicable law.
-40-<PAGE>
2.20. Registration Obligations. Except as set
forth on Schedule 2.20, neither Seller nor any Seller
Subsidiary is under any obligation, contingent or otherwise
to register any of its securities under the Securities Act.
2.21. State Takeover Statutes. The transactions
contemplated by this Agreement are not subject to any
applicable state takeover law under the laws of the State of
Iowa.
2.22. Accounting, Tax and Regulatory Matters.
Neither Seller nor any Seller Subsidiary has taken or agreed
to take any action or has any knowledge of any fact or
circumstance that would (i) prevent the transactions
contemplated hereby from qualifying (A) for pooling-of-
interests accounting treatment or (B) as a reorganization
within the meaning of Section 368 of the Internal Revenue
Code or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation
of the transactions contemplated by this Agreement.
2.23. Brokers and Finders. Except for Donaldson,
Lufkin & Jenrette Securities Corporation, neither Seller nor
any Seller Subsidiary 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
-41-<PAGE>
finder has acted directly or indirectly for Seller or any
Seller Subsidiary in connection with this Agreement or the
transactions contemplated hereby. Schedule 2.23 discloses a
bona fide estimate of the aggregate amount of all fees and
expenses expected to be paid by Seller to all attorneys,
accountants or investment bankers in connection with the
Merger ("Merger Fees").
2.24. Other Activities. (a) Except as set forth
on Schedule 2.24A, neither Seller nor any of its Subsidiaries
engages in any insurance activities other than acting as a
principal, agent or broker for insurance that is directly
related to an extension of credit by Seller or any of its
Subsidiaries and limited to assuring the repayment of the
balance due on the extension of credit in the event of the
death, disability or involuntary unemployment of the debtor.
(b) Except as set forth on Schedule 2.24B, to the
knowledge of Seller's management: each Subsidiary that is a
bank that performs personal trust, corporate trust and other
fiduciary activities ("Trust Activities") has done so with
requisite authority under applicable law of Regulatory
Authorities and in material accordance with the agreements
and instruments governing such Trust Activities, sound
fiduciary principles and applicable law and regulation
(specifically including but not limited to Section 9 of Title
12 of the
-42-<PAGE>
Code of Federal Regulations); there is no investigation or
inquiry by any governmental entity pending or threatened
against Seller or any of its Subsidiaries thereof relating to
the compliance by Seller or any of its Subsidiaries with
sound fiduciary principles and applicable law and
regulations; and each employee of any such bank had the
authority to act in the capacity in which such employee acted
with respect to Trust Activities in each case in which such
employee was held out as a representative of such bank; and
such bank has established policies and procedures for the
purpose of complying with applicable laws of governmental
entities relating to Trust Activities, has followed such
policies and procedures in all material respects and has
performed appropriate internal audit reviews of Trust
Activities, which audits have disclosed no material
violations of applicable laws of governmental entities or
such policies and procedures.
2.25. Interest Rate Risk Management Instruments.
(a) Set forth on Schedule 2.25A is a list of all interest
rate swaps, caps, floors, and option agreements and other
interest rate risk management arrangements to which Seller or
any of its Subsidiaries is a party or by which any of their
properties or assets may be bound.
-43-<PAGE>
(b) All interest rate swaps, caps, floors and
option agreements and other interest rate risk management
arrangements to which Seller or any of its Subsidiaries is a
party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business
and in accordance with prudent banking practice and
applicable rules, regulations and policies of Regulatory
Authorities and with counterparties believed to be
financially responsible at the time and are legal, valid and
binding obligations and are in full force and effect. Seller
and each of its Subsidiaries has duly performed in all
material respects all of its obligations thereunder to the
extent that such obligations to perform have accrued, and
there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
2.26. Accuracy of Information. The statements of
Seller contained in this Agreement, the Schedules and any
other written document executed and delivered by or on behalf
of Seller pursuant to the terms of this Agreement are true
and correct in all material respects, and such statements and
documents do not omit any material fact necessary to make the
statements contained therein not misleading.
-44-<PAGE>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents, and warrants to and covenants
with Seller as follows:
3.01. Organization and Authority. Buyer and each
of its Subsidiaries is a corporation, bank, trust company or
other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of organization,
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 corporate power and authority to own its properties
and assets and to carry on its business as it is now being
conducted, except, in the case of the Buyer Subsidiaries,
where the failure to be so qualified would not have a
material adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole. Buyer is registered as a
bank holding company with the Board under the Holding Company
Act. True and complete copies of the Articles of
Incorporation and Bylaws of Buyer, each in effect on the date
of this Agreement, have been provided to Seller.
3.02. Capitalization of Buyer. The authorized
capital stock of Buyer consists of (i) 100,000,000 shares of
Buyer Common Stock, of which, as of July 31, 1995, 54,423,205
-45-<PAGE>
shares were issued and outstanding and (ii) 5,000,000 shares
of preferred stock, no par value ("Buyer Preferred Stock"),
issuable in series, of which 5,306 shares of Series B-1
Preferred Stock and 9,500 shares of Series B-2 Preferred
Stock are issued or outstanding. Buyer has designated
1,000,000 shares of Buyer Preferred Stock as "Series A Junior
Participating Preferred Stock" and has reserved such shares
under a Rights Agreement dated May 23, 1988 (the "Buyer
Rights Agreement"), between Buyer and Mercantile Bank of St.
Louis National Association, as Rights Agent. As of July 31,
1995 Buyer had reserved (i) 4,515,373 shares of Buyer Common
Stock for issuance under various stock option and incentive
plans ("Buyer Stock Options"), (ii) 322,000 shares of Buyer
Common Stock for issuance upon the acquisition of Security
Bank of Conway, FSB ("Conway") pursuant to an Agreement and
Plan of Reorganization dated July 7, 1995, (iii) 675,000
shares of Buyer Common Stock for issuance upon the
acquisition of Southwest Bancshares, Inc. ("Southwest")
pursuant to an Agreement and Plan of Merger dated January 27,
1995, (iv) 661,385 shares of Buyer Common Stock for issuance
upon the acquisition of AmeriFirst Bancorporation Inc.
("AmeriFirst") pursuant to an Agreement and Plan of Merger
dated February 16, 1995, and (v) 521,424 shares of Buyer
Common Stock for issuance upon the acquisition of First
Sterling Bancorp, Inc. ("Sterling") pursuant to an Agreement
and Plan of Merger
-46-<PAGE>
dated July 24, 1995. From July 31, 1995 through the date of
this Agreement, no shares of Buyer Common Stock or other
Equity Securities of Buyer have been issued excluding any
such shares which may have been issued pursuant to stock-
based employee benefit or incentive plans and programs, or
pursuant to the foregoing agreements. Buyer continually
evaluates possible acquisitions and may prior to the
Effective Time enter into one or more agreements providing
for, and may consummate, the acquisition by it of another
bank, association, bank holding company, savings and loan
holding company or other company (or the assets thereof) for
consideration that may include equity securities. In
addition, prior to the Effective Time, Buyer may, depending
on market conditions and other factors, otherwise determine
to issue equity, equity-linked or other securities for
financing purposes. Notwithstanding the foregoing, Buyer
will not take any action that would (i) prevent the
transactions contemplated hereby from qualifying (A) for
pooling-of-interests accounting treatment or (B) as a
reorganization within the meaning of Section 368 of the
Internal Revenue Code or (ii) materially impede or delay
receipt of any approval referred to in Section 6.01(b) or the
consummation of the transactions contemplated by this
Agreement. Except as set forth above and except for
securities to be issued in connection with Buyer's
-47-<PAGE>
pending acquisitions of Conway and Sterling and except
pursuant to the Buyer Rights Agreement, there are no other
Equity Securities of Buyer outstanding. All of the issued
and outstanding shares of Buyer Common Stock are validly
issued, fully paid, and nonassessable, and have not been
issued in violation of any preemptive right of any
stockholder of Buyer. At the Effective Time, the Buyer
Common Stock to be issued in the Merger will be duly
authorized, validly issued, fully paid and non-assessable,
and will not be issued in violation of any preemptive right
of any stockholder of Buyer.
3.03. Authorization. (a) Buyer has the corporate
power and authority to enter into this Agreement and to carry
out its obligations hereunder. No stockholder vote is
required for Buyer to approve this Agreement. The execution,
delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby
have been duly authorized by all requisite corporate action
of Buyer. This Agreement is a valid and binding obligation
of Buyer enforceable against Buyer in accordance with its
terms.
(b) Neither the execution, delivery and
performance by Buyer of this Agreement, nor the consummation
by Buyer of the transactions contemplated hereby, nor
compliance
-48-<PAGE>
by Buyer with any of the provisions hereof, will (i) violate,
conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or
result in the creation of, any Lien upon any of the material
properties or assets of Buyer or any Buyer Subsidiary under
any of the terms, conditions or provisions of (x) its
articles or certificate of incorporation or bylaws, or (y)
any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation
to which Buyer or any of the material properties or assets of
Buyer is a party or by which it may be bound, or to which
Buyer may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in paragraph (c) of this
Section 3.03, to the best knowledge of Buyer, violate any
judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer or any of its
Subsidiaries or any of their respective material properties
or assets.
(c) Other than in connection with or in compliance
with the provisions of The General and Business Corporation
Law of Missouri (the "Missouri Act"), the Iowa Act, the
Securities Act, the Exchange Act, the securities or blue sky
-49-<PAGE>
laws of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required under the
Holding Company Act, and the HSR Act, or any required
approvals of any other Regulatory Authority, no notice to,
filing with, exemption or review by, or authorization,
consent or approval of, any public body or authority is
necessary for the consummation by Buyer of the transactions
contemplated by this Agreement.
3.04. Buyer Financial Statements. The
supplemental consolidated and parent company only balance
sheets of Buyer and its Subsidiaries as of December 31, 1994,
1993 and 1992 and related supplemental consolidated and
parent company only statements of income, cash flows and
changes in stockholders' equity for each of the three years
in the three-year period ended December 31, 1994, together
with the notes thereto, audited by KPMG Peat Marwick ("Buyer
Auditors") and included in Buyer's current report on Form 8-K
dated May 31, 1995 as filed with the SEC, and the unaudited
consolidated balance sheets of Buyer and its Subsidiaries as
of March 31 and June 30, 1995 and the related unaudited
consolidated statements of income and cash flows for the
periods then ended included in quarterly reports on Form 10-Q
as filed with the SEC (collectively, the "Buyer Financial
Statements"), have been prepared in accordance with GAAP,
present fairly the consolidated financial position of Buyer
and its
-50-<PAGE>
Subsidiaries at the dates and the consolidated results of
operations, changes in stockholders' equity and cash flows of
Buyer and its Subsidiaries for the periods stated therein and
are derived from the books and records of Buyer and its
Subsidiaries, which are complete and accurate in all material
respects and have been maintained in all material respects in
accordance with applicable laws and regulations. Neither
Buyer nor any of its Subsidiaries has any material contingent
liabilities that are not described in the financial
statements described above.
3.05. Buyer Reports. Since January 1, 1992, each
of Buyer and the Buyer Subsidiaries has filed all material
reports, registrations and statements, together with any
required material amendments thereto, that it was required to
file with any Regulatory Authority. All such reports and
statements filed with any such Regulatory Authority are
collectively referred to herein as the "Buyer Reports." As
of its respective date, each Buyer Report complied in all
material respects with all the rules and regulations
promulgated by the applicable Regulatory Authority and did
not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading.
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3.06. Material Adverse Change. Since December 31,
1994, there has been no material adverse change in the
Condition of Buyer and its Subsidiaries, taken as a whole,
except as may have resulted or may result from changes to
laws and regulations or changes in economic conditions
applicable to banking institutions generally or in general
levels of interest rates affecting banking institutions
generally.
3.07. Compliance with Laws. (a) Each of Buyer
and its Subsidiaries has complied with all laws, regulations,
and orders (including without limitation zoning ordinances,
building codes, ERISA, and securities, tax, environmental,
civil rights, and occupational health and safety laws and
regulations and including without limitation in the case of
any Buyer Subsidiary that is a bank, banking organization,
thrift, banking corporation or trust company, all statutes,
rules and regulations, pertaining to the conduct of a
banking, deposit-taking or lending or related business or to
the exercise of trust powers) and governing instruments
applicable to them and to the conduct of their business,
except where such failure to comply would not have a material
adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole, and (ii) neither Buyer nor
any Buyer Subsidiary is in default under, and no event has
occurred which, with the lapse of time or notice or both,
could result in the
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default under, the terms of any judgment, order, writ,
decree, permit, or license of any Regulatory Authority or
court, whether federal, state, municipal, or local and
whether at law or in equity, except where such default would
not have a material adverse effect on the Condition of Buyer
and its Subsidiaries, taken as a whole. Neither Buyer nor
any Buyer Subsidiary is subject to or reasonably likely to
incur a liability as a result of its ownership, operation, or
use of any Property of Buyer (whether directly or, to the
best knowledge of Buyer, as a consequence of such Property
being part of the investment portfolio of Buyer or any Buyer
Subsidiary) (A) that is contaminated by or contains any Toxic
Substance, or (B) on which any Toxic Substance has been
stored, disposed of, placed, or used in the construction
thereof; and which, in each case, reasonably could be
expected to have a material adverse effect on the Condition
of Buyer and its Subsidiaries, taken as a whole. Except for
statutory or regulatory restrictions of general application,
no Regulatory Authority has placed any restriction on the
business of Buyer or any Buyer Subsidiary which reasonably
could be expected to have a material adverse effect on the
Condition of Buyer and its Subsidiaries, taken as a whole.
No claim, action, suit, or proceeding is pending against
Buyer or any Buyer Subsidiary relating to Property of Buyer
before any court or other Regulatory Authority or arbitration
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tribunal relating to hazardous substances, pollution, or the
environment, and there is no outstanding judgment, order,
writ, injunction, decree, or award against or affecting Buyer
or any Buyer Subsidiary with respect to the same.
(b) Buyer and each of its Subsidiaries have all
permits, licenses, authorizations, orders and approvals of,
and have made all filings, applications and registrations
with, all Regulatory Authorities that are required in order
to permit them to own or lease their properties and assets
and to carry on their business as presently conducted and
that are material to the business of Buyer and its
Subsidiaries; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect
and, to the best knowledge of Buyer, no suspension or
cancellation of any of them is threatened; and all such
filings, applications and registrations are current.
(c) From and after January 1, 1992, neither Buyer
nor any Buyer Subsidiary has received any notification or
communication which has not been resolved from any Regulatory
Authority (i) asserting that any Buyer or any Subsidiary of
Buyer, is not in substantial compliance with any of the
statutes, regulations or ordinances that such Regulatory
Authority enforces, except with respect to matters which (A)
are set forth on Schedule 3.07 or in any writing previously
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furnished to Buyer or (B) reasonably could not be expected to
have a material adverse effect on the Condition of Buyer and
its Subsidiaries, taken as a whole, (ii) threatening to
revoke any license, franchise, permit or governmental
authorization that is material to the Condition of Buyer and
its Subsidiaries, taken as a whole, including without
limitation such company's status as an insured depositary
institution under the Federal Deposit Insurance Act, or (iii)
requiring or threatening to require Buyer or any of its
Subsidiaries, or indicating that Buyer or any of its
Subsidiaries may be required, to enter into a cease and
desist order, agreement or memorandum of understanding or any
other agreement restricting or limiting or purporting to
direct, restrict or limit in any manner the operations of
Buyer or any of its Subsidiaries, including without
limitation any restriction on the payment of dividends. No
such cease and desist order, agreement or memorandum of
understanding or other agreement is currently in effect.
3.08. Registration Statement, etc. None of the
information regarding Buyer or any of its Subsidiaries supplied
or to be supplied by Buyer for inclusion or included in (i) the
Registration Statement, (ii) the Proxy Statement, or (iii) any
other documents to be filed with any Regulatory Authority in
connection with the transactions contemplated hereby will, at
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the respective times such documents are filed with any
Regulatory Authority and, in the case of the Registration
Statement, when it becomes effective and, with respect to the
Proxy Statement, when mailed (or furnished to stockholders of
Seller), 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 Meeting, 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
the Meeting. All documents which Buyer or any of its
Subsidiaries are responsible for filing with any Regulatory
Authority in connection with the Merger will comply as to form
in all material respects with the provisions of applicable law.
3.09. Brokers and Finders. Neither Buyer nor any
of its Subsidiaries nor any of their respective officers,
directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker
or finder has acted directly or indirectly for Buyer or any
of its Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
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3.10. Commitments and Contracts. Neither Buyer
nor any Buyer Subsidiary is in violation of its charter
documents or bylaws or in default under any material
agreement, commitment, arrangement, lease, insurance policy,
or other instrument, whether entered into in the ordinary
course of business or otherwise and whether written or oral,
and there has not occurred any event that, with the lapse of
time or giving of notice or both, would constitute such a
default, except, in all cases, where such default would not
have a material adverse effect on the Condition of Buyer and
its Subsidiaries, taken as a whole.
3.11. Litigation and Other Proceedings. Neither
Buyer nor any Buyer Subsidiary is a party to any pending or,
to the best knowledge of Buyer, threatened claim, action,
suit, investigation or proceeding, or is subject to any
order, judgment or decree, except for matters which, in the
aggregate, will not have, or reasonably could not be expected
to have, a material adverse effect on the Condition of Buyer
and its Subsidiaries, taken as a whole, or which purports or
seeks to enjoin or restrain the transactions contemplated by
this Agreement. Without limiting the generality of the
foregoing, there are no actions, suits, or proceedings
pending or, to the best knowledge of Buyer, threatened
against Buyer or any Buyer Subsidiary or any of their
respective officers or directors by any stockholder of Buyer
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or any Buyer Subsidiary (or any former stockholder of Buyer
or any Buyer Subsidiary) or involving claims under the
Securities Act, the Exchange Act, the Community Reinvestment
Act of 1977, as amended, or the fair lending laws.
3.12. Interest Rate Risk Management Instruments.
All interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which
Buyer or any of its Subsidiaries is a party or by which any
of their properties or assets may be bound were entered into
in the ordinary course of business and in accordance with
prudent banking practice and applicable rules, regulations
and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the
time and are legal, valid and binding obligations and are in
full force and effect. Buyer and each of its Subsidiaries
has duly performed in all material respects all of its
obligations thereunder to the extent that such obligations to
perform have accrued, and there are no material breaches,
violations or defaults or allegations or assertions of such
by any party thereunder.
3.13. Taxes. Buyer and each Buyer Subsidiary have
timely filed or will timely (including extensions) file all
material tax returns required to be filed at or prior to the
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Closing Date ("Buyer Returns"). Each of Buyer and its
Subsidiaries has paid, or set up adequate reserves on the Buyer
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 most recent financial
statements Buyer has filed under the Exchange Act for the
payment of all taxes anticipated to be payable in respect of
all periods up to and including the latest period covered by
such financial statements. Neither Buyer nor any Buyer
Subsidiary will have any liability material to the Condition of
Buyer and the Buyer Subsidiaries, taken as a whole, for any
such taxes in excess of the amounts so paid or reserves so
established and no material deficiencies for any tax,
assessment or governmental charge have been proposed, asserted
or assessed (tentatively or definitely) against any of Buyer or
any Buyer Subsidiary which would not be covered by existing
reserves. Neither Buyer nor any Buyer Subsidiary is delinquent
in the payment of any material tax, assessment or governmental
charge, nor, except as previously disclosed, 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 and state income tax returns of Buyer and
the Buyer Subsidiaries have been audited and settled by the
Internal Revenue Service
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(the "IRS") or appropriate state tax authorities for all
periods ended through December 31, 1988. There is no
deficiency or material refund litigation or matter in
controversy with respect to Buyer Returns. Neither Buyer nor
any Buyer Subsidiary has extended or waived any statute of
limitations on the assessment of any tax due that is currently
in effect.
3.14. Accounting, Tax and Regulatory Matters.
Neither Buyer nor any Buyer Subsidiary has taken or agreed to
take any action or has any knowledge of any fact or
circumstance that would (i) prevent the transactions
contemplated hereby from qualifying (A) for pooling-of-
interests accounting treatment or (B) as a reorganization
within the meaning of Section 368 of the Internal Revenue Code
or (ii) materially impede or delay receipt of any approval
referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement.
3.15. Accuracy of Information. The statements of
Buyer contained in this Agreement, the Schedules and in any
other written document executed and delivered by or on behalf
of Buyer pursuant to the terms of this Agreement are true and
correct in all material respects, and such statements and
documents do not omit any material fact necessary to make the
statements contained herein or therein not misleading.
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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, each of Buyer and Seller shall, and shall
cause each of their respective Subsidiaries to, conduct its
business according to the ordinary and usual course
consistent with past practices and shall, and shall cause
each such Subsidiary to, use its best efforts to maintain and
preserve its business organization, employees and
advantageous business relationships and retain the services
of its officers and key employees.
4.02. Forbearances. Except as set forth on
Schedule 4.02 or as otherwise contemplated by this Agreement,
during the period from the date of this Agreement to the
Effective Time, Seller shall not and shall not permit any of
its Subsidiaries to, without the prior written consent of
Buyer:
(a) declare, set aside or pay any dividends or
other distributions, directly or indirectly, in respect
of its capital stock (other than dividends from a
Subsidiary of Seller to Seller or another Subsidiary of
Seller), except that Seller may declare and pay cash
dividends on the Seller Common Stock of not more than
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(x) for dividends payable in 1995, $.17 per share per
quarterly period and (y) for dividends payable in 1996,
per quarterly period, $.19 per share; provided, that
Seller shall not declare or pay any dividends on Seller
Common Stock for any period in which its stockholders
will be entitled to receive any regular quarterly
dividend on the shares of Buyer Common Stock to be
issued in the Merger; or,
(b) enter into or amend any employment, severance
or similar agreement or arrangement with any director or
officer or employee, or materially modify any of the
Seller Employee Plans or grant any salary or wage
increase or materially increase any employee benefit
(including incentive or bonus payments), except normal
individual increases in compensation to employees
consistent with past practice, or as required by law or
contract; or,
(c) authorize, recommend (subject to the fiduciary
duties of Seller's Board of Directors, based upon
written advice of counsel to Seller, which counsel is
reasonably acceptable to Buyer), propose or announce an
intention to authorize, so recommend or propose, or
enter into an agreement in principle with respect to,
any merger, consolidation or business combination (other
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than the Merger), any acquisition of a material amount
of assets or securities, any disposition of a material
amount of assets or securities or any release or
relinquishment of any material contract rights; or
(d) propose or adopt any amendments to its
articles of incorporation, association or other charter
document or bylaws; or
(e) issue, sell, grant, confer or award any of its
Equity Securities (except shares of Seller Common Stock
issued upon exercise of Seller Employee Stock Options
outstanding on the date of this Agreement) or effect any
stock split or adjust, combine, reclassify or otherwise
change its capitalization as it existed on the date of
this Agreement; or
(f) purchase, redeem, retire, repurchase, or
exchange, or otherwise acquire or dispose of, directly
or indirectly, any of its Equity Securities, whether
pursuant to the terms of such Equity Securities or
otherwise; or
(g) (i) without first consulting with Buyer,
enter into, renew or increase any loan or credit
commitment (including stand-by letters of credit) to, or
invest or agree to invest in any person or entity or
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modify any of the material provisions or renew or
otherwise extend the maturity date of any existing loan
or credit commitment (collectively, "Lend to") in an
amount in excess of $1,500,000 or in an amount which, or
when aggregated with any and all loans or credit
commitments to such person or entity, would be in excess
of $1,500,000; (ii) without first obtaining the written
consent of Buyer, lend to any person or entity in an
amount in excess of $3,000,000 or in an amount which,
when aggregated with any and all loans or credit
commitments to such person or entity, would be in excess
of $3,000,000; (iii) Lend to any person other than in
accordance with lending policies as in effect on the
date hereof; provided that in the case of clauses (ii)
and (iii) Seller or any Seller Subsidiary may make any
such loan in the event (A) Seller or any Seller
Subsidiary has delivered to Buyer or its designated
representative a notice of its intention to make such
loan and such information as Buyer or its designated
representative may reasonably require in respect thereof
and (B) Buyer or its designated representative shall not
have reasonably objected to such loan by giving written
or facsimile notice of such objection within two
business days following the delivery to Buyer of the
notice of intention and information as aforesaid; or
(iv) Lend to any
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person or entity any of the loans or other extensions of
credit to which or investments in which are on a "watch
list" or similar internal report of Seller or any Seller
Subsidiary (except those denoted "pass" thereon), in an
amount in excess of $500,000; provided, however, that
nothing in this paragraph shall prohibit Seller or any
Seller Subsidiary from honoring any contractual
obligation in existence on the date of this Agreement.
Notwithstanding clauses (i) and (ii) of this Section
4.02(g), Seller shall be authorized without first
consulting with Buyer or obtaining Buyer's prior written
consent, to increase the aggregate amount of any credit
facilities theretofore established in favor of any
person or entity (each a "Pre-Existing Facility"),
provided that the aggregate amount of any and all such
increases with respect to any Pre-Existing Facility
shall not be in excess of the lesser of ten percent
(10%) of such Pre-Existing Facility or $250,000; or
(h) 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 Seller or any Seller Subsidiary or
the acquisition of Equity Securities of Seller or any
Seller
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Subsidiary or the merger of Seller or any Seller
Subsidiary with any person (other than Buyer) or any
similar transaction (each such transaction being
referred to herein as an "Acquisition Transaction"), or
provide any such person with information or assistance
or negotiate with any such person with respect to an
Acquisition Transaction, and Seller shall promptly
notify Buyer orally of all the relevant details relating
to all inquiries, indications of interest and proposals
which it may receive with respect to any Acquisition
Transaction; or
(i) take any action that would (A) materially impede
or delay the consummation of the transactions contemplated
by this Agreement or the ability of Buyer or Seller to
obtain any approval of any Regulatory Authority required
for the transactions contemplated by this Agreement or to
perform its covenants and agreements under this Agreement
or (B) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of
Section 368 of the Internal Revenue Code; or
(j) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as
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an accommodation become responsible or liable for the
obligations of any other individual, corporation or other
entity, or, without prior approval of Buyer, which shall
not be unreasonably withheld, pay any Merger Fees in
excess of the amount set forth on Schedule 2.23; or
(k) restructure or materially change its investment
securities portfolio, through purchases, sales or
otherwise, or the manner in which the portfolio is
classified or reported, or execute any individual
investment transaction (i) in United States Treasury
securities in excess of $5,000,000 and (ii) in any other
investment securities in excess of $1,000,000; or
(l) 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
act which would make any of the representations and
warranties in Article II of this Agreement untrue or
incorrect in any material respect if made anew after
engaging in such activity, entering into such
transaction, or taking or omitting such other act.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Access and Information. (a) Buyer and its
Subsidiaries, on the one hand, and Seller and its
Subsidiaries, on the other hand, shall each afford to each
other, and to the other's accountants, counsel and other
representatives, full access during normal business hours,
during the period prior to the Effective Time, to all their
respective properties, books, contracts, commitments and
records and, during such period, each shall furnish promptly
to the other (i) a copy of each report, schedule and other
document filed or received by it during such period pursuant
to the requirements of federal and state securities laws and
(ii) all other information concerning its business,
properties and personnel as such other party may reasonably
request. Each party hereto shall, and shall cause its
advisors and representatives to, (A) hold confidential all
information obtained in connection with any transaction
contemplated hereby with respect to the other party which is
not otherwise public knowledge, (B) return all documents
(including copies thereof) obtained hereunder from the other
party to such other party and (C) use its best efforts to
cause all information obtained pursuant to this Agreement or
in connection with the negotiation of this Agreement to be
treated as confidential and not use, or knowingly permit
others to use, any
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such information unless such information becomes generally
available to the public.
(b) Each party promptly following the date of this
Agreement shall commence its review of the other and the
respective operations, business affairs, prospects and
financial conditions of each, including, without limitation,
those matters which are the subject of Seller's
representations and warranties (the "Due Diligence Review").
Each party shall conclude such review by not later than
thirty (30) business days after the date of this Agreement
(the "Due Diligence Period"), but the pendency of such Due
Diligence Review shall not delay Buyer'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. Each party shall promptly advise the other of any
situation, event, circumstance or other matter which first
came to the attention of such party after the date hereof
which could result in the termination of this Agreement
pursuant to Section 7.01 hereof, or, if applicable, of the
absence of any situation, event, circumstance or other
matter. Notwithstanding anything herein or implied to the
contrary, the Due Diligence Review shall not limit, restrict
or preclude, or be construed to limit, restrict or preclude,
either party, at any time or from time to time thereafter,
from conducting such further
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reviews or from exercising any rights available to it
hereunder as a result of the existence or occurrence prior to
the Due Diligence Period of any event or condition which was
not detected in the Due Diligence Review and which would
constitute a breach of any representation, warranty or
agreement under this Agreement.
5.02. Registration Statement; Regulatory Matters.
(a) Buyer shall prepare and, subject to the review and consent
of Seller with respect to matters relating to Seller, file with
the SEC as soon as is reasonably practicable the Registration
Statement (or the equivalent in the form of preliminary proxy
material) with respect to the shares of Buyer Common Stock to
be issued in the Merger. Buyer shall prepare and file an
application with the Federal Reserve Board as soon as
reasonably practicable. Buyer shall use all reasonable efforts
to cause the Registration Statement to become effective. Buyer
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 Seller and its Subsidiaries
shall furnish Buyer all information concerning Seller and its
Subsidiaries and the stockholders thereof as Buyer may
reasonably request in connection with any such action.
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(b) Seller and Buyer shall cooperate and use their
respective best efforts to prepare all documentation, to
effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and
Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement and, as and if directed by
Buyer, to consummate such other mergers, consolidations or
asset transfers or other transactions by and among Buyer's
Subsidiaries and Seller's Subsidiaries concurrently with or
following the Effective Time.
5.03. Stockholder Approval. Seller shall call a
meeting of its stockholders to be held as soon as practicable
for the purpose of voting upon the Merger or take other
action for stockholders to authorize the Merger. In
connection therewith, Buyer shall prepare the Proxy Statement
and, with the approval of each of Buyer and Seller, the Proxy
Statement shall be filed with the SEC and mailed to the
stockholders of Seller. The Board of Directors of Seller
shall submit for approval of Seller's stockholders the
matters to be voted upon in order to authorize the Merger.
The Board of Directors of Seller hereby does and (subject to
the fiduciary duties of Seller's Board of Directors, based
upon written advice of counsel to Seller, which counsel is
reasonably acceptable to Buyer) will recommend this Agreement
and the transactions contemplated hereby to stockholders of
Seller
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and will use its best efforts to obtain any vote of Seller's
stockholders that is necessary for the approval and adoption
of this Agreement and consummation of the transactions
contemplated hereby.
5.04. Current Information. During the period from
the date of this Agreement to the Effective Time, each party
shall promptly furnish the other with copies of all monthly
and other interim financial information or reports as the
same become available and shall cause one or more of its
designated representatives to confer on a regular and
frequent basis with representatives of the other party. Each
party shall promptly notify the other party of any material
change in its business or operations and of any governmental
complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the
institution or the threat of material litigation involving
such party, and shall keep the other party fully informed of
such events.
5.05. Agreements of Affiliates. As soon as
practicable after the date of this Agreement, Seller shall
deliver to Buyer a letter identifying all persons whom Seller
believes to be, at the time this Agreement is submitted to a
vote of the stockholders of Seller, "affiliates" of Seller
for purposes of Rule 145 under the Securities Act. Seller
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shall use its best efforts to cause each person who is so
identified as an "affiliate" to deliver to Buyer as soon as
practicable thereafter, and in any event no later than the
publication of notice in the Federal Register of Buyer's
application with the Federal Reserve Board referred to in
Section 5.02, a written agreement providing that from the
date of such agreement each such person will agree not to
sell, pledge, transfer or otherwise dispose of any shares of
stock of Seller held by such person or any shares of Buyer
Common Stock to be received by such person in the Merger
except in compliance with the applicable provisions of the
Securities Act and until such time as financial results
covering at least 30 days of combined operations of Buyer and
Seller shall have been published. Prior to the Effective
Time, Seller 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 set forth 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 to consummating the Merger.
5.07. Miscellaneous Agreements and Consents. (a)
Subject to the terms and conditions herein provided, each of
the parties hereto agrees to use its respective best efforts
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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 as
expeditiously as possible, including without limitation using
its respective best efforts to lift or rescind any injunction
or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions
contemplated hereby. Each party shall, and shall cause each
of its respective subsidiaries to, use its best efforts to
obtain consents of all third parties and Regulatory
Authorities necessary or, in the opinion of Buyer, desirable
for the consummation of the transactions contemplated by this
Agreement.
(b) Seller, prior to the Effective Time, shall (i)
consult and cooperate with Buyers regarding the
implementation of those policies and procedures established
by Buyer for its governance and that of its Subsidiaries and
not otherwise referenced in Section 5.16 hereof, including,
without limitation, policies and procedures pertaining to the
accounting, asset/liability management, audit, credit, human
resources, treasury and legal functions, and (ii) at the
request of Buyer, conform Seller's existing policies and
procedures in respect of such matters to Buyer's policies and
procedures or, in the absence of any existing Seller policy
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or procedure regarding any such function, introduce Buyer's
policies or procedures in respect thereof, unless to do so
would cause Seller or any of the Seller Subsidiaries to be in
violation of any law, rule or regulation of any Regulatory
Authority having jurisdiction over Seller and/or the Seller
Subsidiary affected thereby.
5.08. Employee Benefits. (a) The provisions of
the Seller Stock Plans and of any other plan, program or
arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of Seller or any
Seller Subsidiary shall be deleted and terminated as of the
Effective Time, and Seller shall ensure that following the
Effective Time no holder of Seller Employee Stock Options or
any participant in any Seller Stock Plan shall have any right
thereunder to acquire any securities of Seller or any Seller
Subsidiary.
(b) Except as set forth in Section 5.08(a) hereof,
the Seller Employee Plans shall not be terminated by reason
of the Merger but shall continue thereafter as plans of the
Surviving Corporation until such time as the employees of the
Seller and the Seller Subsidiaries are integrated into
Buyer's employee benefit plans that are available to other
employees of Buyer and Buyer Subsidiaries, subject to the
terms and conditions specified in such plans and to such
-75-<PAGE>
changes therein as may be necessary to reflect the
consummation of the Merger. Buyer shall take such steps as
are necessary or required to integrate the employees of
Seller and the Seller Subsidiaries in Buyer's employee
benefit plans available to other employees of Buyer and Buyer
Subsidiaries as soon as practicable after the Effective Time,
with (i) full credit for prior service with Seller or any of
the Seller Subsidiaries for purposes of vesting and
eligibility for participation (but not benefit accruals under
any defined benefit plan), and co-payments and deductibles,
and (ii) waiver of all waiting periods and pre-existing
condition exclusions or penalties.
5.09. Employee Stock Options. At the Effective
Time, all rights with respect to Seller Common Stock pursuant
to Seller Employee Stock Options that are outstanding at the
Effective Time, whether or not then exercisable, shall be
converted into and become rights with respect to Buyer Common
Stock, and Buyer shall assume each Seller Employee Stock Option
in accordance with the terms of the stock option plan under
which it was issued and the stock option agreement by which it
is evidenced. From and after the Effective Time, (i) each
Seller Employee Stock Option assumed by Buyer shall be
exercised solely for shares of Buyer Common Stock, (ii) the
number of shares of Buyer Common Stock subject to each Seller
Employee Stock Option shall be equal to the number of shares of
Seller
-76-<PAGE>
Common Stock subject to such Seller Employee Stock Option
immediately prior to the Effective Time multiplied by the
Exchange Ratio and (iii) the per share exercise price under
each Seller Employee Stock Option shall be adjusted by dividing
the per share exercise price under such Seller Employee Stock
Option by the Exchange Ratio and rounding down to the nearest
cent; provided, however, that the terms of each Seller Employee
Stock Option shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split,
stock dividend, recapitalization or other similar transaction
subsequent to the Effective Time. It is intended that the
foregoing assumption shall be undertaken in a manner that will
not constitute a "modification" as defined in the Internal
Revenue Code, as to any Seller Employee Stock Option that is an
"incentive stock option."
5.10. Press Releases. Except as may be required
by law, Seller and Buyer shall consult and agree with each
other as to the form and substance of any proposed press
release relating to this Agreement or any of the transactions
contemplated hereby.
5.11. State Takeover Statutes. Seller will take
all steps necessary to exempt the transactions contemplated
by this Agreement and any agreement contemplated hereby from,
-77-<PAGE>
and if necessary challenge the validity of, any applicable
state takeover law.
5.12 D&O Indemnification. Buyer agrees that the
Merger shall not affect or diminish any of Seller's duties
and obligations of indemnification existing as of the
Effective Time in favor of employees, agents, directors or
officers of Seller or its Subsidiaries arising by virtue of
their respective Articles of Incorporation or Bylaws in the
form in effect at the date of this Agreement or arising by
operation of law or arising by virtue of any contract,
resolution or other agreement or document existing at the
date of this Agreement, and such duties and obligations shall
continue in full force and effect for so long as they would
(but for the Merger) otherwise survive and continue in full
force and effect.
5.13. Best Efforts. Each of Buyer and Seller
undertakes and agrees to use its best efforts to cause the
Merger (i) to qualify (A) for pooling-of-interests accounting
treatment and (B) as a reorganization within the meaning of
Section 368 of the Internal Revenue Code (including, if
necessary, to take reasonable steps to restructure the
transactions contemplated by this Agreement to so qualify)
and (ii) to occur as soon as practicable. Each of Buyer and
Seller agrees to not take any action that would materially
impede or
-78-<PAGE>
delay the consummation of the transactions contemplated by
this Agreement or the ability of Buyer or Seller to obtain
any approval of any Regulatory Authority required for the
transactions contemplated by this Agreement or to perform its
covenants and agreements under this Agreement.
5.14. Insurance. As soon as practicable following
the date hereof, Seller shall, and Seller shall cause its
Subsidiaries to, use its best efforts to maintain its
existing insurance and, if not already obtained, obtain (and
maintain through the Effective Time) insurance with respect
to employee benefit matters and umbrella insurance in respect
of automobile fleet coverage for amounts as reasonably
requested by Buyer with financially sound and reputable
insurance companies.
5.15. Bank Minority Shares. As soon as reasonably
practicable, Seller shall use all reasonable efforts to
cooperate with Buyer in respect of each person holding
capital stock of any of the Banks (other than Seller or any
of the Seller Subsidiaries), whether as qualifying shares or
otherwise, with the goal of purchasing such shares at any
time and/or from time to time, at a price reasonably
acceptable to Buyer.
5.16. Conforming Entries. (a) Notwithstanding
that Seller believes that Seller and the Seller Subsidiaries
-79-<PAGE>
have established all reserves and taken all provisions for
possible loan losses required by GAAP and applicable laws,
rules and regulations, Seller recognizes that Buyer may have
adopted different loan, accrual and reserve policies
(including loan classifications and levels of reserves for
possible loan losses). From and after the date of this
Agreement to the Effective Time, Seller and Buyer shall
consult and cooperate with each other with respect to
conforming the loan, accrual and reserve policies of Seller
and the Seller Subsidiaries to those policies of Buyer, as
specified in each case in writing to Seller, based upon such
consultation and as hereinafter provided.
(b) In addition, from and after the date of this
Agreement to the Effective Time, Seller and Buyer shall
consult and cooperate with each other with respect to
determining appropriate Seller accruals, reserves and charges
to establish and take in respect of excess equipment write-
off or write-down of various assets and other appropriate
charges and accounting adjustments taking into account the
parties' business plans following the Merger, as specified in
each case in writing to Seller, based upon such consultation
and as hereinafter provided.
(c) Seller and Buyer shall consult and cooperate
with each other with respect to determining, as specified in
-80-<PAGE>
a written notice from Buyer to Seller, based upon such
consultation and as hereinafter provided, the amount and the
timing for recognizing for financial accounting purposes
Seller's expenses of the Merger and the restructuring charges
relating to or to be incurred in connection with the Merger.
(d) At the request of Buyer, Seller shall (i)
establish and take such reserves and accruals as Buyer shall
request to conform Seller's loan, accrual and reserve
policies to Buyer's policies, and (ii) establish and take
such accruals, reserves and charges in order to implement
such policies in respect of excess facilities and equipment
capacity, severance costs, litigation matters, write-off or
write-down of various assets and other appropriate accounting
adjustments, and to recognize for financial accounting
purposes such expenses of the Merger and restructuring
charges related to or to be incurred in connection with the
Merger, in each case at such times as are requested by Buyer
in a written notice to Seller, in accordance with the
following objective. It is the objective of Buyer and Seller
that such reserves, accruals and charges referred to in this
Section 5.16 to be taken as at or immediately prior to
December 31, 1995, provided that if such reserves, accruals
and charges are to be taken as at or prior to December 31,
1995 and the Closing Date is to occur thereafter, Buyer shall
certify to
-81-<PAGE>
Seller on or prior to December 31, 1995, that the bank
regulatory approval conditions to its obligations
contemplated by Section 6.01(b) have been satisfied or waived
(except to the extent that any waiting period associated
therewith may then have commenced but not expired) and Buyer
and Seller shall have mutually agreed by December 31, 1995 to
the scheduling of the Closing Date; and provided, further,
that Seller shall not be required to take any such action
that is not consistent with GAAP.
5.17. Environmental Reports. Seller shall provide
to Buyer as soon as reasonably practicable, but not later
than ninety (90) days after the date hereof, a report of a
phase one environmental investigation on all real property
owned, leased or operated by Seller or any of the Seller
Subsidiaries as of the date hereof (but excluding "other real
estate owned," property held in trust or in a fiduciary
capacity and space in retail or similar establishments leased
by Seller or any of the Seller Subsidiaries for automatic
teller machines or bank branch facilities where the space
leased comprises less than 20% of the total space leased to
all tenants of such property) and within ten (10) days after
the acquisition or lease of any real property acquired or
leased by Seller or any of the Seller Subsidiaries after the
-82-<PAGE>
date hereof (but excluding space in retail and similar
establishments leased by Seller or any of the Seller
Subsidiaries for automatic teller machines or bank branch
facilities where the space leased comprises less than 20% of
the total space leased to all tenants of such property). If
advisable in light of the phase one report with respect to
any parcel of real property referred to above, in the
reasonable opinion of Buyer, Seller shall also provide to
Buyer a phase two investigation report on such designated
parcels. Buyer shall have fifteen (15) business days from
the receipt of any such phase two investigation report to
notify Seller of any dissatisfaction with the contents of
such report. If the estimated costs of all remedial or other
corrective actions or measures with regard to the real
properties referred to above required by applicable law
exceed $5,000,000 in the aggregate, as reasonably estimated
by an environmental expert retained for such purpose by
Seller, at Seller's expense, upon Buyer's reasonable request,
or if such cost cannot be so reasonably estimated by such
expert to be such amount or less with any reasonable degree
of certainty, then Buyer, after providing Seller with written
notice of Buyer's intent to do so and allowing Seller a six-
month period from the date of such notice to take and
complete, to the reasonable satisfaction of Buyer, all such
remedial or other corrective actions and measures (the
aggregate cost of which incurred by
-83-<PAGE>
Seller and the Seller Subsidiaries shall not exceed
$5,000,000), shall have the right pursuant to Section 7.01(h)
hereof to terminate this Agreement, which shall be Buyer's
sole remedy in such event.
ARTICLE VI
CONDITIONS
6.01. Conditions to Each Party's Obligation To
Effect the Merger. The respective obligations of each party
to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have received the
requisite approval of stockholders of Seller.
(b) All requisite approvals of this Agreement and
the transactions contemplated hereby shall have been
received from the Federal Reserve Board, the State Bank
Regulator and any other Regulatory Authority.
(c) The Registration Statement shall have been
declared effective and shall not be subject to a stop
order or any threatened stop order.
(d) Neither Seller nor Buyer shall be subject to
any order, decree or injunction of a court or agency of
-84-<PAGE>
competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(e) Each of Buyer and Seller shall have received,
from counsel reasonably satisfactory to it, an opinion
reasonably satisfactory in form and substance to it to
the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the
Internal Revenue Code and that no gain or loss will be
recognized by the stockholders of Seller to the extent
they receive Buyer Common Stock solely in exchange for
shares of Seller Common Stock.
6.02. Conditions to Obligations of Seller To Effect
the Merger. The obligations of Seller to effect the Merger
shall be subject to the fulfillment or waiver at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Buyer set forth in
Article III of this Agreement shall be true and correct
in all material respects as of the date of this
Agreement and as of the Effective Time (as though made
on and as of the Effective Time except (i) to the extent
such representations and warranties are by their express
provisions made as of a specified date or period and
(ii) for
-85-<PAGE>
the effect of transactions contemplated by this
Agreement) and Seller shall have received a certificate
of the chairman or chief financial officer of Buyer to
that effect.
(b) Performance of Obligations. Buyer shall have
performed in all material respects all obligations
required to be performed by it under this Agreement
prior to the Effective Time, and Seller shall have
received a certificate of the chairman or chief
financial officer of Buyer to that effect.
6.03. Conditions to Obligations of Buyer To Effect
the Merger. The obligations of Buyer to effect the Merger
shall be subject to the fulfillment or waiver at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Seller set forth in
Article II of this Agreement shall be true and correct
in all material respects as of the date of this
Agreement and as of the Effective Time (as though made
on and as of the Effective Time except (i) to the extent
such representations and warranties are by their express
provisions made as of a specific date or period and (ii)
for the effect of transactions contemplated by this
Agreement) and Buyer shall have received a certificate
of the
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chairman of Seller and a certificate of the president
and chief executive officer of Seller to that effect.
(b) Performance of Obligations. Seller shall have
performed in all material respects all obligations
required to be performed by it under this Agreement
prior to the Effective Time, and Buyer shall have
received a certificate of the chairman of Seller and a
certificate of the president and chief executive officer
of Seller to that effect.
(c) Auditors' Opinion. Buyer shall have received
an opinion of Buyer Auditors addressed to Buyer,
satisfactory in form and substance to Buyer, that the
Merger will qualify for pooling-of-interests accounting
treatment, which opinion shall not have been withdrawn.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after any requisite stockholder approval:
(a) by mutual consent by the Executive Committee
of the Board of Directors of Buyer and the Board of
Directors of Seller;
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(b) by the Executive Committee of the Board of
Directors of Buyer or the Board of Directors of Seller
at any time after the date that is twelve months after
the date of this Agreement if the Merger shall not
theretofore have been consummated (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement
contained herein);
(c) by the Executive Committee of the Board of
Directors of Buyer or the Board of Directors of Seller
if (i) the Federal Reserve Board has denied approval of
the Merger and such denial has become final and
nonappealable or (ii) stockholders of Seller shall not
have approved this Agreement at the Meeting following a
favorable recommendation of Seller's Board of Directors;
(d) by the Executive Committee of the Board of
Directors of Buyer in the event of a material breach by
Seller of any representation, warranty, covenant or
other agreement contained in this Agreement, which
breach is not cured within 30 days after written notice
thereof to Seller by Buyer;
(e) by the Executive Committee of the Board of
Directors of Buyer in the event that (i) Buyer's Due
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Diligence Review of Seller and its Subsidiaries
discloses matters the impact of which affects Seller and
its Subsidiaries, taken as a whole, except as may have
resulted from changes to laws and regulations or changes
in economic conditions applicable to banking
institutions generally, or in general interest rates
that affect Seller and its Subsidiaries, taken as a
whole, consistent with the manner in which changes in
the general levels of interest rates since December 31,
1994 have affected Seller and its Subsidiaries, taken as
a whole, which the Executive Committee of the Board of
Directors of Buyer in the good faith exercise of its
reasonable judgment believes either (A) to be
inconsistent in any material and adverse respect with
any of the representations or warranties of Seller, or
(B) (x) to be of such significance as to materially and
adversely affect the Condition of Seller and its
Subsidiaries, taken as a whole, or (y) to deviate
materially and adversely from the financial statements
for the year ended December 31, 1994 of Seller, (ii)
Buyer notifies Seller of such matters within 5 business
days of the expiration of the Due Diligence Period, and
(iii) such matters (A) are not capable of being cured or
(B) have not been cured within 30 days after written
notice thereof to Seller by Buyer;
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(f) by the Board of Directors of Seller in the event
that (i) Seller's Due Diligence Review of Buyer and its
Subsidiaries discloses matters the impact of which affects
Buyer and its Subsidiaries, taken as a whole, except as
may have resulted from changes to laws and regulations or
changes in economic conditions applicable to banking
institutions generally, or in general levels of interest
rates that affect Buyer and its Subsidiaries, taken as a
whole, consistent with the manner in which changes in the
general levels of interest rates since December 31, 1994
has affected Buyer and its Subsidiaries, taken as a whole,
which the Board of Directors of Seller in the good faith
exercise of its reasonable judgment believe either (A) to
be inconsistent in any material and adverse respect with
any of the representations or warranties of Buyer, or (B)
(x) to be of such significance as to materially and
adversely affect the Condition of Buyer and its
Subsidiaries, taken as a whole, or (y) to deviate
materially and adversely from the financial statement for
the year ended December 31, 1994 of Buyer, (ii) Seller
notifies Buyer of such matters within 5 business days of
the expiration of the Due Diligence Period, and (iii) such
matters (A) are not capable of being cured or (B) have not
been cured within 30 days after written notice thereof to
Buyer;
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(g) by the Board of Directors of Seller in the event
of a material breach by Buyer of any representation,
warranty, covenant or other agreement contained in this
Agreement, which breach is not cured within 30 days after
written notice thereof is given to Buyer by Seller; or
(h) by the Executive Committee of the Board of
Directors of Buyer pursuant to and in accordance with the
provisions of Section 5.17 hereof.
7.02. Effect of Termination. In the event of
termination of this Agreement as provided in Sections 7.01(a)
through 7.01(c) and Sections 7.01(e), 7.01(f) and 7.01(h)
above, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Buyer or
Seller or their respective officers or directors except as set
forth in the second sentence of Section 5.01(a) and in Section
5.06.
7.03. Amendment. This Agreement and the Schedules
hereto may be amended by the parties hereto, by action taken
by or on behalf of their respective Boards of Directors, at
any time before or after approval of this Agreement by the
stockholders of Seller; provided, however, that after any
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such approval by the stockholders of Seller no such
modification shall alter or change the amount or kind of
consideration to be received by holders of Seller Common
Stock as provided in this Agreement. This Agreement may not
be amended except by an instrument in writing signed on
behalf of each of Buyer and Seller.
7.04. Severability. Any term, provision, covenant
or restriction contained in this Agreement held by a court or
a Regulatory Authority of competent jurisdiction to be
invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but
neither the remaining terms, provisions, covenants or
restrictions contained in this Agreement nor the validity or
enforceability thereof in any other jurisdiction shall be
affected or impaired thereby. Any term, provision, covenant
or restriction contained in this Agreement that is so found
to be so broad as to be unenforceable shall be interpreted to
be as broad as is enforceable.
7.05. Waiver. Any term, condition or provision of
this Agreement may be waived in writing at any time by the
party which is, or whose stockholders are, entitled to the
benefits thereof.
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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 Buyer and Seller or in any instrument delivered
by Buyer or Seller pursuant to or in connection with this
Agreement shall expire at the Effective Time or upon
termination of this Agreement in accordance with its terms
or, in the case of any other such instrument, in accordance
with the terms of such instrument. In the event of
consummation of the Merger, the agreements contained in or
referred to in Sections 5.02(b), 5.07, 5.08, 5.09 and 5.12
shall survive the Effective Time. In the event of
termination of this Agreement in accordance with its terms,
the agreements contained in or referred to in the second
sentence of Section 5.01(a), Section 5.06 and Section 7.02
shall survive such termination.
8.02. Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed to be duly received (vi) on the date given if
delivered personally
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or (vii) upon confirmation of receipt, if by facsimile
transmission or (viii) on the date received if mailed by
registered or certified mail (return receipt requested), or
(iv) on the business date after being delivered to a
reputable overnight delivery service, if by such service, 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 Buyer:
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, Missouri 63166-0524
Attention: John W. Rowe
Executive Vice President,
Mercantile Bank of St. Louis,
National Association
Copies to:
Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, Missouri 63166-0524
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
Telecopy: (212) 403-2000
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(ii) if to Seller:
Hawkeye Bancorporation
222 Equitable Building
604 Locust Street
Des Moines, Iowa 50309-3723
Attention: Robert W. Murray
President and Chief Executive
Officer
Copies to:
Baird, Holm, McEachen, Pedersen,
Hamann & Strasheim
1500 Woodmen Tower
Omaha, Nebraska 68102-2068
Attention: John S. Zeilinger, Esq.
8.03. Miscellaneous. This Agreement (including
the Schedules and other written documents referred to herein
or provided hereunder) (i) constitutes the entire agreement
and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them,
with respect to the subject matter hereof, including any
confidentiality agreement between the parties hereto, (ii) is
not intended to confer upon any person not a party hereto any
rights or remedies hereunder, (iii) shall not be assigned by
operation of law or otherwise and (iv) shall be governed in
all respects by the laws of the State of Missouri, except as
otherwise specifically provided herein or required by the
Iowa Act. Nothing in this Agreement shall be construed to
require any party (or any subsidiary or affiliate of any
party) to take any action or fail to take any action in
violation of applicable law, rule or regulation. This
Agreement
-95-<PAGE>
may be executed in counterparts which together shall
constitute a single agreement.
-96-<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have caused
this Agreement to be signed and, by such signature,
acknowledged by their respective officers thereunto duly
authorized, and such signatures to be attested to by their
respective officers thereunto duly authorized, all as of the
date first written above.
Attest: MERCANTILE BANCORPORATION INC.
/s/ Jon W. Bilstrom By:/s/ Thomas H. Jacobsen
Name: Jon W. Bilstrom Name: Thomas H. Jacobsen
Title: General Counsel Title: Chairman, President &
Chief Executive Officer
Attest: HAWKEYE BANCORPORATION
/s/ R. Douglas Fisher By: /s/ Robert W. Murray
Name: R. Douglas Fisher Name: Robert W. Murray
Title: Senior Vice President, Title: Chief Executive Officer,
Credit Administration Chief Operating Officer &
Secretary Chief Financial Officer
-97-
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated
August 4, 1995, between MERCANTILE BANCORPORATION INC.
("Buyer"), a Missouri corporation registered as a bank hold-
ing company under the Bank Holding Company Act of 1956, as
amended (the "Holding Company Act"), and HAWKEYE BANCORPORA-
TION ("Seller"), an Iowa corporation registered as a bank
holding company under the Holding Company Act.
W I T N E S S E T H:
WHEREAS, the Executive Committee of the Board of
Directors of Buyer and the Board of Directors of Seller have
approved an Agreement and Plan of Reorganization dated as of
even date herewith (the "Merger Agreement") providing for the
merger of Seller with and into a wholly owned subsidiary of
Buyer;
WHEREAS, as a condition to Buyer's entering into
the Merger Agreement, Buyer has required that Seller agree,
and Seller has agreed, to grant to Buyer the option set forth
herein to purchase authorized but unissued shares of Seller
Common Stock;
NOW, THEREFORE, in consideration of the premises
herein contained, the parties agree as follows:<PAGE>
1. Definitions.
Capitalized terms used but not defined herein shall
have the same meanings as in the Merger Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth
herein, Seller hereby grants to Buyer an option (the "Op-
tion") to purchase up to 2,678,000 authorized and unissued
shares of Seller Common Stock at a price of $22 per share
(the "Purchase Price") payable in cash as provided in Section
4 hereof.
3. Exercise of Option.
(a) Buyer may exercise the Option, in whole or in
part, at any time or from time to time if a Purchase Event
(as defined below) shall have occurred; provided, however,
that (i) to the extent the Option shall not have been exer-
cised, it shall terminate and be of no further force and ef-
fect upon the earliest to occur of the Effective Time of the
Merger and the termination of the Merger Agreement in ac-
cordance with Sections 7.01(a) through 7.01(c) thereof, pro-
vided that if such termination follows an Extension Event (as
defined below), the Option shall not terminate until the date
-2-<PAGE>
that is 12 months following such termination; (ii) if the Op-
tion cannot be exercised on such day because of any injunc-
tion, order or similar restraint issued by a court of compe-
tent jurisdiction, the Option shall expire on the 30th busi-
ness day after such injunction, order or restraint shall have
been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal,
as the case may be; and (iii) that any such exercise shall be
subject to compliance with applicable law, including the
Holding Company Act.
(b) As used herein, a "Purchase Event" shall mean
any of the following events:
(i) Seller or any of its Subsidiaries, without
having received prior written consent from Buyer, shall
have entered into, authorized, recommended, proposed or
publicly announced its intention to enter into, autho-
rize, recommend, or propose, an agreement, arrangement
or understanding with any person (other than Buyer or
any of its Subsidiaries) to (A) effect a merger or con-
solidation or similar transaction involving Seller or
any of its Subsidiaries, (B) purchase, lease or other-
wise acquire 15% or more of the assets of Seller or any
of its Subsidiaries or (C) purchase or otherwise acquire
-3-<PAGE>
(including by way of merger, consolidation, share ex-
change or similar transaction) Beneficial Ownership of
securities representing 10% or more of the voting power
of Seller or any of its Subsidiaries;
(ii) any person (other than Buyer or any Subsidiary
of Buyer, or Seller or any Subsidiary of Seller in a fi-
duciary capacity) shall have acquired Beneficial Owner-
ship or the right to acquire Beneficial Ownership of 10%
or more of the voting power of Seller; or
(iii) Seller's Board of Directors shall have with-
drawn or modified in a manner adverse to Buyer the rec-
ommendation of Seller's Board of Directors with respect
to the Merger Agreement, in each case after an Extension
Event; or
(iv) the holders of Seller Common Stock shall not
have approved the Merger Agreement at the Meeting, or
such Meeting shall not have been held or shall have been
cancelled prior to termination of the Merger Agreement
in accordance with its terms, in each case after an Ex-
tension Event.
(c) As used herein, the term "Extension Event"
shall mean any of the following events:
-4-<PAGE>
(i) a Purchase Event of the type specified in
clauses (b)(i) and (b)(ii) above;
(ii) any person (other than Buyer or any of its
Subsidiaries) shall have "commenced" (as such term is
defined in Rule 14d-2 under the Exchange Act), or shall
have filed a registration statement under the Securities
Act with respect to, a tender offer or exchange offer to
purchase shares of Seller Common Stock such that, upon
consummation of such offer, such person would have Ben-
eficial Ownership (as defined below) or the right to ac-
quire Beneficial Ownership of 10% or more of the voting
power of Seller; or,
(iii) any person (other than Buyer or any Subsidiary
of Buyer, or Seller or any Subsidiary of Seller in a fi-
duciary capacity) shall have publicly announced its
willingness, or shall have publicly announced a pro-
posal, or publicly disclosed an intention to make a pro-
posal, (x) to make an offer described in clause (ii)
above or (y) to engage in a transaction described in
clause (i) above.
(d) As used herein, the terms "Beneficial Owner-
ship" and "Beneficially Own" shall have the meanings ascribed
to them in Rule 13d-3 under the Exchange Act.
-5-<PAGE>
(e) In the event Buyer wishes to exercise the Op-
tion, it shall deliver to Seller a written notice (the date
of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it intends to pur-
chase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 calendar
days from the Notice Date for the closing of such purchase
(the "Closing Date").
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3
hereof, Buyer shall pay to Seller the aggregate purchase
price for the shares of Seller Common Stock purchased pursu-
ant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by
Seller.
(b) At such closing, simultaneously with the de-
livery of cash as provided in Section 4(a), Seller shall de-
liver to Buyer a certificate or certificates representing the
number of shares of Seller Common Stock purchased by Buyer,
registered in the name of Buyer or a nominee designated in
writing by Buyer, and Buyer shall deliver to Seller a letter
agreeing that Buyer shall not offer to sell, pledge or other-
wise dispose of such shares in violation of applicable law or
the provisions of this Option Agreement.
-6-<PAGE>
(c) If at the time of issuance of any Seller Com-
mon Stock pursuant to any exercise of the Option, Seller
shall have issued any share purchase rights or similar secu-
rities to holders of Seller Common Stock, then each such
share of Seller Common Stock shall also represent rights with
terms substantially the same as and at least as favorable to
Buyer as those issued to other holders of Seller Common
Stock.
(d) Certificates for Seller Common Stock delivered
at any closing hereunder shall be endorsed with a restrictive
legend which shall read substantially as follows:
The transfer of the shares represented by this cer-
tificate is subject to certain provisions of an
agreement between the registered holder hereof and
Hawkeye Bancorporation, a copy of which is on file
at the principal office of Hawkeye Bancorporation,
and to resale restrictions arising under the Secu-
rities Act of 1933 and any applicable state secu-
rities laws. A copy of such agreement will be
provided to the holder hereof without charge upon
receipt by Hawkeye Bancorporation of a written re-
quest therefor.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such
legend if Buyer shall have delivered to Seller an opinion of
counsel, in form and substance reasonably satisfactory to
Seller and its counsel, to the effect that such legend is not
required for purposes of the Securities Act and any ap-
plicable state securities laws.
-7-<PAGE>
5. Authorization, etc.
(a) Seller hereby represents and warrants to Buyer
that:
(i) Seller has full corporate authority to execute
and deliver this Option Agreement and, subject to Sec-
tion 11(i), to consummate the transactions contemplated
hereby;
(ii) such execution, delivery and consummation have
been authorized by the Board of Directors of Seller, and
no other corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and
legally binding obligation of Seller, enforceable
against Seller in accordance with its terms; and
(iv) Seller has taken all necessary corporate ac-
tion to authorize and reserve and, subject to Section
11(i), permit it to issue and, at all times from the
date hereof through the date of the exercise in full or
the expiration or termination of the Option, shall have
reserved for issuance upon exercise of the Option,
shares of Seller Common Stock, all of which,
upon issuance pursuant hereto, shall be duly authorized,
-8-<PAGE>
validly issued, fully paid and nonassessable, and shall
be delivered free and clear of all claims, liens, encum-
brances, restrictions (other than federal and state se-
curities restrictions) and security interests and not
subject to any preemptive rights.
(b) Buyer hereby represents and warrants to Seller
that:
(i) Buyer has full corporate authority to execute
and deliver this Option Agreement and, subject to Sec-
tion 11(i), to consummate the transactions contemplated
hereby;
(ii) such execution, delivery and consummation have
been authorized by all requisite corporate action by
Buyer, and no other corporate proceedings are necessary
therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and
legally binding obligation of Buyer, enforceable against
Buyer in accordance with its terms; and
-9-<PAGE>
(iv) any Seller Common Stock or other securities
acquired by Buyer upon exercise of the Option will not
be taken with a view to the public distribution thereof
and will not be transferred or otherwise disposed of ex-
cept in compliance with the Securities Act.
6. Adjustment upon Changes in Capitalization.
In the event of any change in Seller Common Stock
by reason of stock dividends, split-ups, recapitalizations or
the like, the type and number of shares subject to the Op-
tion, and the purchase price per share, as the case may be,
shall be adjusted appropriately. In the event that any addi-
tional shares of Seller Common Stock are issued after the
date of this Option Agreement (other than pursuant to an
event described in the preceding sentence or pursuant to this
Option Agreement), the number of shares of Seller Common
Stock subject to the Option shall be adjusted so that, after
such issuance, it equals at least 19.9% of the number of
shares of Seller Common Stock then issued and outstanding
(without considering any shares subject to or issued pursuant
to the Option).
-10-<PAGE>
7. Repurchase.
(a) Subject to Section 11(i), at the request of
Buyer at any time commencing upon the occurrence of a Pur-
chase Event and ending 13 months immediately thereafter (the
"Repurchase Period"), Seller (or any successor entity
thereof) shall repurchase the Option from Buyer together with
all (but not less than all, subject to Section 10) shares of
Seller Common Stock purchased by Buyer pursuant thereto with
respect to which Buyer then has Beneficial Ownership, at a
price (per share, the "Per Share Repurchase Price") equal to
the sum of:
(i) The exercise price paid by Buyer for any
shares of Seller Common Stock acquired pursuant to the
Option;
(ii) The difference between (A) the "Market/Tender
Offer Price" for shares of Seller Common Stock (defined
as the higher of (x) the highest price per share at
which a tender or exchange offer has been made for
shares of Seller Common Stock or (y) the highest closing
mean of the "bid" and the "ask" price per share of
Seller Common Stock reported by NASDAQ, the automated
quotation system of the National Association of Securi-
ties Dealers, Inc., for any day within that portion of
the Repurchase Period which precedes the date Buyer
-11-<PAGE>
gives notice of the required repurchase under this Sec-
tion 7) and (B) the exercise price as determined pursu-
ant to Section 2 hereof (subject to adjustment as pro-
vided in Section 6), multiplied by the number of shares
of Seller Common Stock with respect to which the Option
has not been exercised, but only if the Market/Tender
Offer Price is greater than such exercise price;
(iii) The difference between the Market/Tender Offer
Price and the exercise price paid by Buyer for any
shares of Seller Common Stock purchased pursuant to the
exercise of the Option, multiplied by the number of
shares so purchased, but only if the Market/Tender Offer
Price is greater than such exercise price; and
(iv) Buyer's reasonable out-of-pocket expenses in-
curred in connection with the transactions contemplated
by the Merger Agreement, including, without limitation,
legal, accounting and investment banking fees.
(b) In the event Buyer exercises its rights under
this Section 7, Seller shall, within 10 business days there-
after, pay the required amount to Buyer by wire transfer of
immediately available funds to an account designated by Buyer
-12-<PAGE>
and Buyer shall surrender to Seller the Option and the cer-
tificates evidencing the shares of Seller Common Stock pur-
chased thereunder with respect to which Buyer then has Ben-
eficial Ownership, and Buyer shall warrant that it has sole
record and Beneficial Ownership of such shares and that the
same are free and clear of all liens, claims, charges, re-
strictions and encumbrances of any kind whatsoever.
(c) In determining the Market/Tender Offer Price,
the value of any consideration other than cash shall be de-
termined by an independent nationally recognized investment
banking firm selected by Buyer and reasonably acceptable to
Seller.
8. Repurchase at Option of Seller and First Re-
fusal.
(a) Except to the extent that Buyer shall have
previously exercised its rights under Section 7, at the re-
quest of Seller during the six-month period commencing 13
months following the first occurrence of a Purchase Event,
Seller may repurchase from Buyer, and Buyer shall sell to
Seller, all (but not less than all, subject to Section 10) of
the Seller Common Stock acquired by Buyer pursuant hereto and
with respect to which Buyer has Beneficial Ownership at the
time of such repurchase at a price per share equal to the
greater of (i) 110% of the Market/Tender Offer Price per
-13-<PAGE>
share, (ii) the Per Share Repurchase Price or (iii) the sum
of (A) the aggregate Purchase Price of the shares so repur-
chased plus (B) interest on the aggregate Purchase Price
paid for the shares so repurchased from the date of purchase
to the date of repurchase at the highest rate of interest an-
nounced by Buyer as its prime or base lending or reference
rate during such period, less any dividends received on the
shares so repurchased, plus (C) Buyer's reasonable out-of-
pocket expenses incurred in connection with the transactions
contemplated by the Merger Agreement, including, without
limitation, legal, accounting and investment banking fees.
Any repurchase under this Section 8(a) shall be consummated
in accordance with Section 7(b).
(b) If, at any time after the occurrence of a Pur-
chase Event and prior to the earlier of (i) the expiration of
18 months immediately following such Purchase Event or (ii)
the expiration or termination of the Option, Buyer shall de-
sire to sell, assign, transfer or otherwise dispose of the
Option or all or any of the shares of Seller Common Stock ac-
quired by it pursuant to the Option, it shall give Seller
written notice of the proposed transaction (an "Offeror's No-
tice"), identifying the proposed transferee, and setting
forth the terms of the proposed transaction. An Offeror's
Notice shall be deemed an offer by Buyer to Seller, which may
-14-<PAGE>
be accepted within 10 business days of the receipt of such
Offeror's Notice, on the same terms and conditions and at the
same price at which Buyer is proposing to transfer the Option
or such shares to a third party. The purchase of the Option
or any such shares by Seller shall be closed within 10 busi-
ness days of the date of the acceptance of the offer and the
purchase price shall be paid to Buyer by wire transfer of im-
mediately available funds to an account designated by Buyer.
In the event of the failure or refusal of Seller to purchase
the Option or all the shares covered by the Offeror's Notice
or if the Board or any other Regulatory Authority disapproves
Seller's proposed purchase of the Option or such shares,
Buyer may, within 60 days from the date of the Offeror's No-
tice, sell all, but not less than all, of the Option or such
shares to such third party at no less than the price speci-
fied and on terms no more favorable to the purchaser than
those set forth in the Offeror's Notice. The requirements of
this Section 8(b) shall not apply to (i) any disposition as a
result of which the proposed transferee would Beneficially
Own not more than 2% of the voting power of Seller or (ii)
any disposition of Seller Common Stock by a person to whom
Buyer has sold shares of Seller Common Stock issued upon ex-
ercise of the Option.
-15-<PAGE>
9. Registration Rights.
At any time after a Purchase Event, Seller shall,
if requested by any holder or beneficial owner of shares of
Seller Common Stock issued upon exercise of the Option (ex-
cept any beneficial holder who acquired all of such holder's
shares in a transaction exempt from the requirements of Sec-
tion 8(b) by reason of clause (i) thereof) (each a "Holder"),
as expeditiously as possible file a registration statement on
a form for general use under the Securities Act if necessary
in order to permit the sale or other disposition of the
shares of Seller Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method
of sale or other disposition requested by any such Holder (it
being understood and agreed that any such sale or other dis-
position shall be effected on a widely distributed basis so
that, upon consummation thereof, no purchaser or transferee
shall Beneficially Own more than 2% of the shares of Seller
Common Stock then outstanding). Each such Holder shall pro-
vide all information reasonably requested by Seller for in-
clusion in any registration statement to be filed hereunder.
Seller shall use its best efforts to cause such registration
statement first to become effective and then to remain effec-
tive for such period not in excess of 180 days from the day
such registration statement first becomes effective as may be
-16-<PAGE>
reasonably necessary to effect such sales or other disposi-
tions. The registration effected under this Section 9 shall
be at Seller's expense except for underwriting commissions
and the fees and disbursements of such Holders' counsel at-
tributable to the registration of such Seller Common Stock.
In no event shall Seller be required to effect more than one
registration hereunder. The filing of the registration
statement hereunder may be delayed for such period of time as
may reasonably be required to facilitate any public distribu-
tion by Seller of Seller Common Stock or if a special audit
of Seller would otherwise be required in connection there-
with. If requested by any such Holder in connection with
such registration, Seller shall become a party to any under-
writing agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of repre-
sentations, warranties, indemnities and other agreements cus-
tomarily included in such underwriting agreements for parties
similarly situated. Upon receiving any request for registra-
tion under this Section 9 from any Holder, Seller agrees to
send a copy thereof to any other person known to Seller to be
entitled to registration rights under this Section 9, in each
case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such
copies.
-17-<PAGE>
10. Severability.
Any term, provision, covenant or restriction con-
tained in this Option Agreement held by a court or a Regula-
tory Authority of competent jurisdiction to be invalid, void
or unenforceable, shall be ineffective to the extent of such
invalidity, voidness or unenforceability, but neither the re-
maining terms, provisions, covenants or restrictions con-
tained in this Option Agreement nor the validity or enforce-
ability thereof in any other jurisdiction shall be affected
or impaired thereby. Any term, provision, covenant or re-
striction contained in this Option Agreement that is so found
to be so broad as to be unenforceable shall be interpreted to
be as broad as is enforceable. If for any reason such court
or Regulatory Authority determines that applicable law will
not permit Buyer or any other person to acquire, or Seller to
repurchase or purchase, the full number of shares of Seller
Common Stock provided in Section 2 hereof (as adjusted pursu-
ant to Section 6 hereof), it is the express intention of the
parties hereto to allow Buyer or such other person to ac-
quire, or Seller to repurchase or purchase, such lesser num-
ber of shares as may be permissible, without any amendment or
modification hereof.
-18-<PAGE>
11. Miscellaneous.
(a) Expenses. Each of the parties hereto shall
pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, in-
cluding fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, except as other-
wise provided herein.
(b) Entire Agreement. Except as otherwise ex-
pressly provided herein, this Option Agreement and the Merger
Agreement contain the entire agreement between the parties
with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with re-
spect thereto, written or oral.
(c) Successors; No Third Party Beneficiaries. The
terms and conditions of this Option Agreement shall inure to
the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and
their respective successors and assigns, any rights, reme-
dies, obligations, or liabilities under or by reason of this
Option Agreement, except as expressly provided herein.
-19-<PAGE>
(d) Assignment. Other than as provided in Sec-
tions 8 and 9 hereof, neither of the parties hereto may sell,
transfer, assign or otherwise dispose of any of its rights or
obligations under this Option Agreement or the Option created
hereunder to any other person (whether by operation of law or
otherwise), without the express written consent of the other
party.
(e) Notices. All notices or other communications
which are required or permitted hereunder shall be in writing
and sufficient if delivered in accordance with Section 8.02
of the Merger Agreement (which is incorporated herein by ref-
erence).
(f) Counterparts. This Option Agreement may be
executed in counterparts, and each such counterpart shall be
deemed to be an original instrument, but both such counter-
parts together shall constitute but one agreement.
(g) Specific Performance. The parties hereto
agree that if for any reason Buyer or Seller shall have
failed to perform its obligations under this Option Agree-
ment, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled
to specific performance and injunctive and other equitable
-20-<PAGE>
relief, and the parties hereto further agree to waive any re-
quirement for the securing or posting of any bond in connec-
tion with the obtaining of any such injunctive or other equi-
table relief. This provision is without prejudice to any
other rights that either party hereto may have against the
other party hereto for any failure to perform its obligations
under this Option Agreement.
(h) Governing Law. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of Missouri applicable to agreements made and entirely
to be performed within such state. Nothing in this Option
Agreement shall be construed to require any party (or any
subsidiary or affiliate of any party) to take any action or
fail to take any action in violation of applicable law, rule
or regulation.
(i) Regulatory Approvals; Section 16(b). If, in
connection with (A) the exercise of the Option under Sec-
tion 3 or a sale by Buyer to a third party under Section 8,
(B) a repurchase by Seller under Section 7 or a repurchase or
purchase by Seller under Section 8, prior notification to or
approval of the Board or any other Regulatory Authority is
required, then the required notice or application for ap-
proval shall be promptly filed and expeditiously processed
and periods of time that otherwise would run pursuant to such
-21-<PAGE>
Sections shall run instead from the date on which any such
required notification period has expired or been terminated
or such approval has been obtained, and in either event, any
requisite waiting period shall have passed. In the case of
clause (A) of this subsection (i), such filing shall be made
by Buyer, and in the case of clause (B) of this subsection
(i), such filing shall be made by Seller, provided that each
of Buyer and Seller shall use its best efforts to make all
filings with, and to obtain consents of, all third parties
and Regulatory Authorities necessary to the consummation of
the transactions contemplated hereby, including without
limitation applying to the Board under the Holding Company
Act for approval to acquire the shares issuable hereunder.
Periods of time that otherwise would run pursuant to Sections
3, 7 or 8 shall also be extended to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act.
(j) No Breach of Merger Agreement Authorized.
Nothing contained in this Option Agreement shall be deemed to
authorize Seller to issue any shares of Seller Common Stock
in breach of, or otherwise breach any of, the provisions of
the Merger Agreement.
-22-<PAGE>
(k) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is en-
titled to the benefits of such provision. This Option Agree-
ment may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement
executed by the parties hereto.
-23-<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
executed this Option Agreement as of the date first written
above.
MERCANTILE BANCORPORATION INC.
By: /s/ John W. Rowe
Name: John W. Rowe
Title: Executive Vice President
Mercantile Bank of St. Louis
National Association
HAWKEYE BANCORPORATION
By: /s/ Robert W. Murray
Name: Robert W. Murray
Title: Chief Executive Officer,
Chief Operating Officer
& Chief Financial Officer
-24-
Mercantile Mercantile Tower [Mercantile Bancorporation
Bancorporation P.O. Box 524 Inc. Logo]
Inc. St. Louis, MO 63155-0524
JON W. BILSTROM
General Counsel
314-425-8180
October 19, 1995
Board of Directors
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
Gentlemen:
In connection with the proposed registration under
the Securities Act of 1933, as amended, of up to 7,996,952
shares of common stock, par value $5.00 per share
(collectively, the "Shares"), of Mercantile Bancorporation
Inc., a Missouri corporation (the "Company"), which are to be
issued by the Company upon consummation of the merger (the
"Merger") of Hawkeye Bancorporation, an Iowa corporation, with
and into Mercantile Bancorporation Inc. of Iowa, an Iowa
corporation, I have examined such corporate records and other
documents, including the Registration Statement on Form S-4
relating to the Shares (together with the Proxy Statement/
Prospectus contained in such Registration Statement, and any
amendments or supplements thereto, the "Registration
Statement") and have reviewed such matters of law as I have
deemed necessary or appropriate for this opinion. Based on
such examination and review, it is my opinion that, when issued
upon consummation of the Merger as contemplated by the
Registration Statement, the Shares will be duly authorized,
validly issued, fully paid and nonassessable.
I consent to be named in the Registration Statement
as the attorney who passed upon the validity of the Shares, and
to the filing of a copy of this opinion as an exhibit to the
Registration Statement.
Sincerely,
/s/ Jon W. Bilstrom
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
Dated the Effective Date of the
Proxy Statement/Prospectus
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
Gentlemen:
We have acted as special counsel to Mercantile Ban-
corporation Inc., a Missouri corporation ("MBI"), in connec-
tion with the proposed merger (the "Merger") of Hawkeye Ban-
corporation, an Iowa corporation ("Hawkeye"), with and into
Mercantile Bancorporation Inc. of Iowa, an Iowa corporation
and a wholly-owned direct subsidiary of MBI ("Merger Sub"),
upon the terms and conditions set forth in the Agreement and
Plan of Reorganization, dated August 4, 1995 (the "Agree-
ment"), by and between MBI and Hawkeye. At your request, in
connection with the filing by MBI of the Registration State-
ment on Form S-4 (the "Registration Statement") to be filed with
the Securities and Exchange Commission under the Securities Act
Act of 1933, as amended (the "Act"), in respect of
the shares of MBI Common Stock to be issued in the Merger and
the preliminary Proxy Statement/Prospectus of MBI and Hawkeye
filed with the Securities Exchange Commission on October 23,
1995 (the "Proxy Statement/Prospectus") included as part
thereof, we are rendering our opinion concerning certain fed-
eral income tax consequences of the Merger. <PAGE>
Mercantile Bancorporation Inc.
Page 2
For purposes of the opinion set forth below, we
have relied, with the consent of MBI and the consent of Hawk-
eye, upon the accuracy and completeness of the statements and
representations (which statements and representations we have
neither investigated nor verified) contained, respectively,
in the certificates of the officers of MBI, Merger Sub and
Hawkeye (copies of which are attached hereto and which are
incorporated herein by reference), and have assumed that such
certificates will be complete and accurate as of the Effec-
tive Time. We have also relied upon the accuracy of the
Proxy Statement/Prospectus. Any capitalized term used and
not defined herein has the meaning given to it in the Proxy
Statement/Prospectus or the appendices thereto.
We have also assumed that the transactions contem-
plated by the Agreement will be consummated in accordance
therewith and as described in the Proxy Statement/Prospectus
and that the Merger will qualify as a statutory merger under
the applicable laws of the State of Iowa and the United
States.
Based upon and subject to the foregoing, it is our
opinion that, under currently applicable law, the Merger will
constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that, accordingly, the following will be all the
material federal income tax consequences of the Merger:
(i) No gain or loss will be recognized by Hawkeye,
Merger Sub or MBI as a result of the Merger.
(ii) Hawkeye shareholders will recognize no gain or loss
as a result of the exchange of their Hawkeye Common
Stock solely for shares of MBI Common Stock pursu-
ant to the Merger, except with respect to cash re-
ceived in lieu of fractional shares, if any, as
discussed below.
(iii) A holder of shares of Hawkeye Common Stock who re-
ceives cash in the Merger in lieu of a fractional
share interest of MBI Common Stock will be treated
as if the fractional shares were received in ex-
change and then redeemed by MBI. A holder of
shares of Hawkeye Common Stock will be treated as
if the shareholder sold his or her fractional share
of MBI Common Stock for the amount of cash received<PAGE>
Mercantile Bancorporation Inc.
Page 3
and will therefore recognize gain (or loss) to the
extent that the amount of cash received exceeds (or
is less than) the tax basis of the fractional
share. Such gain or loss will be capital gain or
loss if the shares of Hawkeye Common Stock were
held as capital assets and will be long-term capi-
tal gain or loss if the holding period of the
shares of Hawkeye Common Stock so exchanged was
more than one year.
(iv) The aggregate adjusted tax basis of the MBI Common
Stock received by a shareholder of Hawkeye in the
Merger, including for the purpose of (iii) above
the tax basis of any fractional share interest,
will be equal to the aggregate adjusted tax basis
of the respective shares of Hawkeye Common Stock
surrendered.
(v) The holding period of the shares of MBI Common
Stock received by a shareholder of Hawkeye in the
Merger, including for purposes of (iii) above the
holding period of any fractional share interest,
will include the holding period of the respective
shares of Hawkeye Common Stock exchanged therefor,
provided the shares of Hawkeye Common Stock were
held as capital assets.
(vi) A Hawkeye shareholder who receives only cash as a
result of the exercise of dissenters' rights will
realize gain or loss for federal income tax pur-
poses (determined separately as to each block of
Hawkeye Common Stock exchanged) in an amount equal
to the difference between (x) the amount of cash
received by such shareholder, and (y) such
shareholder's tax basis for the shares of Hawkeye
Common Stock surrendered in exchange therefor, pro-
vided that the cash payment does not have the ef-
fect of the distribution of a dividend. Any such
gain or loss will be recognized for federal income
tax purposes and will be treated as capital gain or
loss, provided the shares of Hawkeye Common Stock
were held as capital assets. However, if the cash
payment does have the effect of the distribution of
a dividend, the amount of taxable income recognized
generally will equal the amount of cash received;<PAGE>
Mercantile Bancorporation Inc.
Page 4
such income generally will be taxable as a divi-
dend, and no loss (or other recovery of such
shareholder's tax basis for the shares of Hawkeye
Common Stock surrendered in the exchange) generally
will be recognized by such shareholder. The deter-
mination of whether a cash payment has the effect
of the distribution of a dividend will be made pur-
suant to the provisions and limitations of Section
302 of the Code, taking into account the con-
structive stock ownership rules of Section 318 of
the Code.
This opinion may not be applicable to Hawkeye
shareholders who received their Hawkeye Common Stock pursuant
to the exercise of employee stock options or otherwise as
compensation or who are not citizens or residents of the
United States.
We hereby consent to the filing of this opinion
with the Securities and Exchange Commission as an exhibit to
the Registration Statement, and to the reference to this
opinion under the caption "SUMMARY -- Federal Income Tax Con-
sequences in General", under the caption "CERTAIN FEDERAL IN-
COME TAX CONSEQUENCES OF THE MERGER" and elsewhere in the
Proxy Statement/Prospectus. In giving such consent, we do
not admit to being "experts", within the meaning of the term
used in the Act or the rules and regulations of the Securities
and Exchange Commission promulgated thereunder, with respect
to any part of the Registration Statement, including this opinion
as an exhibit or otherwise.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
[Letterhead of Baird, Holm, McEachen,
Pedersen, Hamann & Strasheim]
October 23, 1995
Hawkeye Bancorporation
222 Equitable Building
604 Locust Street
Des Moines, Iowa 50309-3723
Re: Merger of Hawkeye Bancorporation with and into a
Wholly Owned Subsidiary of Mercantile Bancorporation
Inc.
Ladies and Gentlemen:
This opinion is delivered to you in connection with
that certain Agreement and Plan of Reorganization by and be-
tween Hawkeye Bancorporation ("Hawkeye") and Mercantile Bancor-
poration Inc. ("Mercantile"), dated as of August 4, 1995
(which, together with all Exhibits attached thereto, is re-
ferred to herein as the "Agreement and Plan of Reorganization"
or the "Plan"). Our opinion is based upon a review of the
Plan, the representations which have been submitted for our
consideration as described herein, and our understanding of the
facts as set forth herein. Unless otherwise defined herein,
capitalized terms used herein shall have the same meaning as
set forth in the Plan.
As to all questions of fact material to this opinion,
we have, with the permission of the parties, without any inves-
tigation or independent confirmation, relied upon and assumed
the accuracy of the representations and warranties of the par-
ties contained in the Plan with respect to the relevant facts
stated therein, the representations which have been submitted
for our consideration described in this letter, and our under-
standing of the facts set forth herein. Our opinion is based
upon existing tax law and authorities, which are subject to
change. We have assumed for purposes of this opinion that all
steps necessary to effectuate the Plan will be effected pursu-
ant to and in satisfaction of requirements under applicable
state and federal law and will be consistent with the Plan.
This opinion is not binding on the Internal Revenue
Service and no ruling has been or will be requested from the
Internal Revenue Service as to the federal income tax conse-
quences of the merger pursuant to the Plan of Hawkeye with and
into a wholly owned subsidiary of Mercantile (said merger here-
inafter referred to as the "Merger"; said wholly owned subsid-
iary <PAGE>
Hawkeye Bancorporation
October 23, 1995
Page 2
hereinafter referred to as the "Merger Sub"). Consequently,
there can be no assurance that the tax consequences set forth
below will occur or continue as described herein; nor can any
assurance be given that the issues discussed below will not be
challenged by the Internal Revenue Service, or if so
challenged, will be decided favorably to the parties of the
Merger or their respective shareholders. We express no opinion
as to the laws of, or the effect or applicability of the laws
of, any jurisdiction other than the laws of the United States
of America, and then only with respect to the specific federal
income tax consequences addressed herein.
Our understanding of the relevant facts is as fol-
lows:
Mercantile is a bank holding company which holds One
Hundred Percent (100%) of the outstanding shares of the Merger
Sub. The Boards of Directors of Mercantile and the Merger Sub
believe that combining with Hawkeye, which has a long-
established banking franchise in the State of Iowa, is a natu-
ral and desirable extension of Mercantile's and Merger Sub's
market area. The Boards of Directors of Mercantile and Merger
Sub also believe that the consolidation of resources by reason
of the Merger will enable a wider and improved array of finan-
cial services to be provided to customers and will provide Mer-
cantile and Merger Sub with added flexibility in dealing with
Iowa's changing competitive environment.
To achieve the desired business combination, Hawkeye
will statutorily merge with and into Merger Sub, with Merger
Sub as the surviving corporation. The Merger will be governed
by the laws of the State of Iowa. If the Plan is approved by
holders of the requisite number of shares of Hawkeye Common
Stock and Merger Sub's Common Stock, the outstanding shares of
Hawkeye Common Stock will be converted in the Merger into
shares of Mercantile Common Stock as specified in the Plan.
The following representations have been submitted to
us by Hawkeye, Mercantile and Merger Sub with respect to the
Merger:
(a) The fair market value of Mercantile Common Stock and
other consideration received by the Hawkeye share-
holders will be approximately equal to the fair mar-
ket value of the Hawkeye Common Stock surrendered in
the exchange.
(b) Neither the management of Hawkeye, Mercantile, nor
Merger Sub knows of any plan or intention on the part
of the Hawkeye shareholders to sell, exchange, or
otherwise dispose of the Mercantile Common Stock to
be received by them in the Merger which would reduce
the Hawkeye shareholders' ownership of Mercantile
Common Stock to a number of shares of Mercantile
Common Stock having a value, as of the date of the
Merger, of less than Fifty Percent (50%) of the value
of all of the formerly outstanding Hawkeye Common
Stock as of the date of the <PAGE>
Hawkeye Bancorporation
October 23, 1995
Page 3
Merger. For purposes of this representation, the
following shares of Hawkeye Common Stock will be
treated as outstanding Hawkeye Common Stock on the
date of the Merger: (i) shares surrendered for
Mercantile Common Stock or other consideration (ii)
shares surrendered for fair value pursuant to the
exercise of shareholders' dissenters' rights and
(iii) shares surrendered for cash in lieu of
fractional shares.
In addition, neither the management of Hawkeye, Mer-
cantile, nor Merger Sub is aware of any transfer of
Hawkeye stock by any holder thereof prior to the
Merger which was made in contemplation thereof.
(c) Merger Sub will acquire at least Ninety Percent (90%)
of the fair market value of the net assets and at
least Seventy Percent (70%) of the fair market value
of the gross assets held by Hawkeye immediately prior
to the Merger. For purposes of this representation,
the following amounts will be included as assets of
Hawkeye held immediately prior to the Merger: (i)
amounts paid by Hawkeye for shares surrendered for
fair value pursuant to the exercise of shareholders'
dissenters' rights; (ii) amounts paid by Hawkeye to
shareholders who receive cash or other property;
(iii) assets of Hawkeye used to pay its reorganiza-
tion expenses; and (iv) all redemptions and distribu-
tions (except for regular, normal dividends) made by
Hawkeye immediately preceding the Merger. The man-
agement of Hawkeye, Mercantile, and Merger Sub are
not aware of Hawkeye having redeemed any Hawkeye
stock, having made any distribution with respect to
any of the Hawkeye stock, or having disposed of any
of the Hawkeye assets in anticipation of or as a part
of a plan for the acquisition of Hawkeye by Merger
Sub.
(d) Prior to the Merger, Mercantile will be in control of
Merger Sub within the meaning of Section 368(c) of
the Internal Revenue Code of 1986, as amended (the
"Code").
(e) Following the Merger, Merger Sub will not issue ad-
ditional shares of Merger Sub stock that would result
in Mercantile losing control of Merger Sub within the
meaning of Section 368(c) of the Code.
(f) Mercantile has no plan or intention to redeem or oth-
erwise reacquire any of the Mercantile Common Stock
to be issued in the Merger.
(g) Mercantile has no plan or intention to liquidate
Merger Sub; to merge Merger Sub with and into another
corporation; to sell or otherwise dispose of the
stock <PAGE>
Hawkeye Bancorporation
October 23, 1995
Page 4
of Merger Sub; or to cause Merger Sub to sell or
otherwise dispose of any of the assets of Hawkeye
acquired in the Merger, except for transfers described
in Section 368(a)(2)(C) of the Code or dispositions
made in the ordinary course of business.
(h) The liabilities of Hawkeye assumed by Merger Sub and
the liabilities to which the transferred assets of
Hawkeye are subject were incurred by Hawkeye in the
ordinary course of its business. No liabilities of
any person other than Hawkeye will be assumed by
Merger Sub in the Merger, and none of the shares of
Hawkeye to be surrendered in the exchange for Mercan-
tile Common Stock in the Merger will be subject to
any liabilities.
(i) The assumption by Merger Sub of the liabilities of
Hawkeye pursuant to the Merger is for a bona fide
business purpose and the principal purpose of such
assumption is not the avoidance of federal income tax
on the transfer of assets of Hawkeye to Merger Sub
pursuant to the Merger.
(j) Subsequent to the Merger, Merger Sub will continue
the historic business of Hawkeye or use a significant
portion of the Hawkeye historic business assets in a
business.
(k) Hawkeye, Mercantile, and Merger Sub will pay their
respective expenses, if any, incurred in connection
with the Merger.
(l) There is no intercorporate indebtedness existing be-
tween Mercantile and Hawkeye or between Merger Sub
and Hawkeye that was issued, acquired, or will be
settled at a discount.
(m) No two parties to the Merger are investment companies
as defined in Section 368(a)(2)(F)(iii) and (iv) of
the Code.
(n) Neither Hawkeye, Mercantile, nor Merger Sub, are un-
der the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section
368(a)(3)(A) of the Code.
(o) The fair market value of the Hawkeye assets trans-
ferred to Merger Sub will equal or exceed the sum of
the Hawkeye liabilities assumed by Merger Sub, plus
the amount of liabilities, if any, to which the Hawk-
eye assets are subject.
(p) The total adjusted basis of the Hawkeye assets trans-
ferred to Merger Sub will equal or exceed the sum of
the Hawkeye liabilities assumed by Merger Sub, plus <PAGE>
Hawkeye Bancorporation
October 23, 1995
Page 5
the amount of liabilities, if any, to which the
transferred assets of Hawkeye are subject.
(q) No stock of Merger Sub will be issued in the Merger.
(r) None of the compensation to be received by any Hawk-
eye shareholder/employee will be separate consider-
ation for, or allocable to, any of their shares of
Hawkeye Common Stock; none of the shares of Mercan-
tile Common Stock received by any Hawkeye share-
holder/employee will be separate consideration for,
or allocable to, any employment contract; and the
compensation paid to any Hawkeye shareholder/employee
will be for services actually rendered and will be
commensurate with the amounts paid to third parties
bargaining at arms-length for similar services.
(s) The Merger is being transacted for a bona fide corpo-
rate business purpose.
(t) The Agreement and Plan of Reorganization has been
duly adopted by the Boards of Directors of Hawkeye,
Mercantile, and Merger Sub; the Agreement and Plan of
Reorganization is in effect and, subject to satisfac-
tion of all conditions precedent stated therein, in-
cluding obtaining the requisite shareholder and regu-
latory approvals, the statutory Merger will be com-
pleted in accordance with the laws of the State of
Iowa.
(u) The Merger will be completed in accordance with the
terms and conditions contained in the Agreement and
Plan of Reorganization and all representations and
warranties of Hawkeye, Mercantile, and Merger Sub
contained in the Agreement and Plan of Reorganization
are true and correct.
(v) The payment of cash in lieu of fractional shares of
Mercantile Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Mercantile
of issuing fractional shares and does not represent
separately bargained-for consideration. The total
cash consideration that will be paid in the Merger to
the Hawkeye shareholders instead of issuing frac-
tional shares of Mercantile stock will not exceed One
Percent (1%) of the total consideration that will be
issued in the Merger to the Hawkeye shareholders in
exchange for their shares of Hawkeye stock. The
fractional share interests of each Hawkeye share-
holder will be aggregated, and it is intended that no
Hawkeye shareholder will receive cash in an amount
equal to or greater than the value of One (1) full
share of Mercantile Common Stock.
Based upon the foregoing and subject to the assump-
tions, qualifications and limitations hereinbefore and herein-
after set forth, we are of the opinion that:<PAGE>
Hawkeye Bancorporation
October 23, 1995
Page 6
(i) The Merger will constitute a "reorganization" for
federal income tax purposes under Section
368(a)(1)(A) and (a)(2)(D) of the Code.
(ii) No gain or loss will be recognized by Hawkeye as a
result of the Merger.
(iii) Hawkeye shareholders will recognize no gain or loss
as a result of the exchange of their Hawkeye Common
Stock solely for shares of Mercantile Common Stock
pursuant to the Merger, except with respect to cash
received in lieu of fractional shares, if any, as
discussed below.
(iv) A holder of shares of Hawkeye Common Stock who re-
ceives cash in the Merger in lieu of a fractional
share interest of Mercantile Common Stock will be
treated as if the fractional shares were received in
the exchange and then redeemed by Mercantile. A
holder of shares of Hawkeye Common Stock will be
treated as if the shareholder sold his or her
fractional share of Mercantile Common Stock for the
amount of cash received and will therefore recognize
gain (or loss) to the extent that the amount of cash
received exceeds (or is less than) the tax basis of
the fractional share. Such gain or loss will be
capital gain or loss if the shares of Hawkeye Common
Stock were held as capital assets and will be
long-term capital gain or loss if the holding period
of the shares of Hawkeye Common Stock so exchanged
was more than one year.
(v) The aggregate adjusted tax basis of the Mercantile
Common Stock received by a shareholder of Hawkeye in
the Merger, including for the purposes of (iv) above
the tax basis of any fractional share interest, will
be equal to the aggregate adjusted tax basis of the
respective shares of Hawkeye Common Stock sur-
rendered.
(vi) The holding period of the shares of Mercantile Common
Stock received by a shareholder of Hawkeye in the
Merger, including for purposes of (iv) above the
holding period of any fractional share interest, will
include the holding period of the respective shares
of Hawkeye Common Stock exchanged therefor, provided
the shares of Hawkeye Common Stock were held as capi-
tal assets.
(vii) A Hawkeye shareholder who receives only cash as a
result of the exercise of dissenters' rights, will
realize gain or loss for federal income tax purposes
(determined separately as to each block of Hawkeye
Common Stock exchanged) in an amount equal to the
difference between (x) the <PAGE>
Hawkeye Bancorporation
October 23, 1995
Page 7
amount of cash received by such shareholder, and (y)
such shareholder's tax basis for the shares of
Hawkeye Common Stock surrendered in exchange
therefor, provided that the cash payment does not
have the effect of the distribution of a dividend.
Any such gain or loss will be recognized for federal
income tax purposes and will be treated as capital
gain or loss, provided the shares of Hawkeye Common
Stock were held as capital assets. However, if the
cash payment does have the effect of the distribution
of a dividend, the amount of taxable income
recognized generally will equal the amount of cash
received; such income generally will be taxable as a
dividend; and no loss (or other recovery of such
shareholder's tax basis for the shares of Hawkeye
Common Stock surrendered in exchange) generally will
be recognized by such shareholder. The determination
of whether a cash payment has the effect of the dis-
tribution of a dividend will be made pursuant to the
provisions and limitations of Section 302 of the
Code, taking into account the constructive stock own-
ership rules of Section 318 of the Code.
This opinion is limited in its use solely to Hawkeye
and its shareholders in connection with the Plan, and is not to
be used, circulated, quoted or otherwise relied upon for any
purpose. No other person or entity may rely on or claim reli-
ance upon this opinion, and it is not to be quoted in whole or
in part or otherwise referred to by any governmental agency or
other person or entity without prior written consent of this
firm. Notwithstanding the foregoing provisions of this para-
graph to the contrary, we hereby consent to the use of this
opinion as Exhibit 8.2 to Mercantile's Registration Statement
on Form S-4 filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, with respect to
the shares of Mercantile Common Stock issuable in the Merger
and to the references to us in such Registration Statement un-
der the captions "SUMMARY INFORMATION--Federal Income Taxes in
General" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER."
Yours very truly,
/s/ BAIRD, HOLM, McEACHEN,
PEDERSEN, HAMANN & STRASHEIM
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.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
October 20, 1995
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this
Registration Statement of Mercantile Bancorporation Inc. on
Form S-4 of our report dated January 24, 1995, appearing in the
Annual Report on Form 10-K of Hawkeye Bancorporation for the
year ended December 31, 1994 and to the reference to us under
the headings "Relationship With Independent Accountants" and
"Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Des Moines, Iowa
October 19, 1995
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to the use of our name and to the
description of our form of opinion letter under the captions
"Summary Information" and "Terms of the Proposed
Merger--Opinion of Hawkeye's Financial Advisor" in, and the
inclusion of such form of opinion letter as Annex B to, the
Proxy Statement/Prospectus which is part of the Registration
Statement on Form S-4 of Mercantile Bancorporation Inc. to
which this consent is an exhibit. By giving such consent, we
do not thereby admit that we are experts with respect to any
part of such Registration Statement within the meaning of the
term "expert" as used in, or that may come within the category
of persons whose consent is required under, Section 7 of the
Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission
promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Thomas J. MacDermott
Thomas J. MacDermott
Senior Vice President
New York, New York
October 20, 1995
[Form of Support Agreement]
August 4, 1995
Mercantile Bancorporation Inc.
Mercantile Tower
St. Louis, Missouri 63166
Dear Sirs:
The undersigned understands that Mercantile Ban-
corporation Inc. ("Mercantile"), and Hawkeye Bancorporation
("Seller") are entering into an Agreement and Plan of Reor-
ganization (the "Agreement") providing for, among other
things, a merger between a wholly owned subsidiary of Mer-
cantile, and Seller (the "Merger"), in which all of the out-
standing shares of capital stock of Seller will be exchanged
for shares of common stock, par value $5.00 per share, of
Mercantile.
The undersigned is a stockholder of Seller (the
"Stockholder") and is entering into this letter agreement to
induce you to enter into the Agreement and to consummate the
transactions contemplated thereby.
The undersigned confirms its agreement with you as
follows:
1. The undersigned represents, warrants and
agrees that Schedule I annexed hereto sets forth shares of
the capital stock of Seller of which the undersigned is the
record or beneficial owner (the "Shares") and that the un-
dersigned is on the date hereof the lawful owner of the num-
ber of shares set forth in Schedule I, free and clear of all
liens, charges, encumbrances, voting agreements and commit-
ments of every kind, except as disclosed in Schedule I. Ex-
cept as set forth in the Schedule, the undersigned does not
own or hold any rights to acquire any additional shares of
the capital stock of Seller (by exercise of stock options or
otherwise) or any interest therein or any voting rights with
respect to any additional shares, other than as previously
disclosed to you.
2. The undersigned agrees that the undersigned
will not, and will not permit any company, trust or other en-
tity controlled by the undersigned to, contract to sell, sell
or otherwise transfer or dispose of any of the Shares of any
interest therein or securities convertible thereunto or any
voting rights with respect thereto, other than (i) pursuant
to the Merger, or (ii) with your prior written consent.<PAGE>
Mercantile Bancorporation Inc.
August 4, 1995
Page 2
3. The undersigned agrees that all of the Shares
beneficially owned by the undersigned, or over which the un-
dersigned has voting power or control, directly or indi-
rectly, at the record date for any meeting of stockholders of
Seller called to consider and vote to approve the Agreement
and/or the transactions contemplated thereby will be voted by
the undersigned in favor thereof.
4. The undersigned agrees to, and will cause any
company, trust or other entity controlled by the undersigned
to, cooperate fully with you in connection with the Agreement
and the transactions contemplated thereby. The undersigned
agrees that the undersigned will not, and will not permit any
such company, trust or other entity to directly, or indi-
rectly (including through its officers, directors, employees
or other representatives) initiate, solicit or encourage any
discussions, inquiries or proposals with any third party re-
lating to the disposition of any significant portion of the
business or assets of Seller or the acquisition of any capi-
tal stock or other securities of Seller or the business com-
bination, merger or consolidation of Seller with any person
or any similar transaction (each such transaction being re-
ferred to herein as an "Acquisition Transaction"), or provide
any such person with information or assistance or negotiate
with any such person with respect to an Acquisition Transac-
tion or agree to or otherwise assist in the effectuation of
any Acquisition Transaction.
The undersigned has all necessary power and author-
ity to enter into this letter agreement. This agreement is
the legal, valid and binding agreement of the undersigned,
and is enforceable against the undersigned in accordance with
its terms.
This letter agreement may be terminated at the op-
tion of any party at any time after the earlier of (i) ter-
mination of the Agreement and (ii) the day following the
Closing Date (as defined in the Agreement). Please confirm
that the foregoing correctly states the understanding between
us by signing and returning to us a counterpart hereof.
Nothing herein shall be construed to require the
undersigned or any company, trust or other entity controlled
by the undersigned to<PAGE>
Mercantile Bancorporation Inc.
August 4, 1995
Page 3
take any action or fail to take any action in violation of
applicable law, rule or regulation.
Very truly yours,
By: /s/
Stockholder
Confirmed on the date
first above written.
MERCANTILE BANCORPORATION INC.
By: /s/
