<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1996
Registration No. 333------
===============================================================================
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 Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
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)
-------------------------
Copies to:
JOHN Q. ARNOLD ROBERT M. LaROSE, ESQ. JAMES H. ERLINGER III, ESQ.
Chief Financial Officer Thompson Coburn Bryan Cave LLP
Mercantile Bancorporation Inc. Suite 3400 211 North Broadway
P.O. Box 524 One Mercantile Center Suite 3600
St. Louis, Missouri St. Louis, Missouri St. Louis, Missouri
63166-0524 63101 63102-2750
(314) 425-2525 (314) 552-6000 (314) 259-2000
-------------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
-------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
<CAPTION>
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per unit aggregate offering price <F2> registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $5.00 par value <F1> 600,419 $19.30 $11,586,747.04 $3,511.14
shares
====================================================================================================================================
<FN>
<F1> Includes one attached Preferred Share Purchase Right per share.
<F2> Estimated solely for purposes of computing the registration fee
pursuant to the provisions of Rule 457(f), and based upon the
$23,886,676.00 aggregate book value of the 25,321 shares of
common stock, $10.00 par value, of Regional Bancshares, Inc.
issued and outstanding as of November 30, 1996, less
$12,299,928.96, the respective portion of such aggregate book
value to be paid in cash by the Registrant in connection with
the exchange.
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
===============================================================================
<PAGE> 2
[LETTERHEAD OF REGIONAL BANCSHARES, INC.]
----------------, 1996
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of
Regional Bancshares, Inc. ("Regional"), I cordially invite you to
attend a Special Meeting of Shareholders of Regional to be held at
- --:-0 -.m., Central Time, on ---------, -------------------, 1997,
at the offices of Bryan Cave LLP, 201 North Broadway, Suite 3600,
St. Louis, Missouri (the "Special Meeting"). At this important
meeting, you will be asked to consider and vote upon the Agreement
and Plan of Merger, dated as of August 23, 1996 (the "Merger
Agreement"), and each of the transactions contemplated thereby,
pursuant to which Regional will be merged (the "Merger") with and
into Ameribanc, Inc., a Missouri corporation and wholly owned
subsidiary of Mercantile Bancorporation Inc. ("MBI"). Upon
consummation of the Merger, each share of Regional common stock
will be converted into the right to receive as consideration in the
Merger: (i) an amount in cash equal to $485.76; (ii) 23.7123
shares of MBI common stock; and (iii) 0.4838 of a share of West
Pointe Bank And Trust Company common stock, all as more fully
described in the accompanying Proxy Statement/Prospectus.
I have enclosed the following items relating to the
Special Meeting and the Merger:
1. A Proxy Statement/Prospectus;
2. A proxy card; and
3. A return envelope pre-addressed to Regional 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 Regional 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.
THE BOARD OF DIRECTORS OF REGIONAL HAS CAREFULLY
CONSIDERED AND UNANIMOUSLY APPROVED THE TERMS OF THE MERGER
AGREEMENT. THE BOARD HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTEREST OF REGIONAL AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT. ---
It is very important that your shares are represented at
the Special Meeting, whether or not you plan to attend in person.
The affirmative vote of at least two-thirds of the outstanding
Regional common stock is required for approval of the Merger
Agreement. A failure to vote for approval of the Merger Agreement
will have the same effect as a vote against the Merger Agreement.
Therefore, I urge you to execute, date and return the enclosed
proxy card in the enclosed postage-paid envelope as soon as
possible to assure that your shares will be voted at the Special
Meeting.
The Board of Directors and management of Regional
appreciate your continued support and look forward to seeing you at
the Special Meeting. If you have any questions or require
assistance, please contact ------------------------------ at
- ----------------------.
Very truly yours,
DAVID B. UTTERBACK
President and Chairman
<PAGE> 3
REGIONAL BANCSHARES, INC.
1520 WASHINGTON AVE.
ALTON, ILLINOIS 62002
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON -------------, 1997
TO THE SHAREHOLDERS OF REGIONAL:
Notice is hereby given that a Special Meeting of
Shareholders of Regional Bancshares, Inc., an Illinois corporation
("Regional"), will be held at the offices of Bryan Cave LLP, 211
North Broadway, Suite 3600, St. Louis, Missouri on -----------------,
1997, at --:-0 -.m., Central Time, for the following purposes:
(1) To consider and vote upon the adoption and approval
of the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of August 23, 1996, and each of the transactions contemplated
thereby, pursuant to which Regional will be merged (the "Merger")
with and into Ameribanc, Inc. ("Ameribanc"), a wholly owned
subsidiary of Mercantile Bancorporation Inc. ("MBI"), and the
business and operations of Regional will be continued through
Ameribanc, and whereby, upon consummation of the Merger, each share
(other than shares held by MBI or shares as to which a shareholder
has perfected dissenters' rights) of Regional common stock will be
converted into the right to receive per share of Regional common
stock as consideration in the Merger: (i) an amount in cash equal
to $485.76; (ii) 23.7123 shares of MBI common stock; and (iii)
0.4838 of a share of West Pointe Bank And Trust Company common
stock.
(2) To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements
thereof.
The record date for determining the shareholders entitled
to receive notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof has been fixed as of the
close of business on ----------------------------------------, 1996.
In the event the Merger is approved and consummated, each
holder of Regional common stock will have the right to dissent from
the Merger and demand payment of the fair value of his or her
shares. The right of a shareholder to receive such payment is
contingent upon strict compliance with the requirements of Section
11.70 of the Illinois Business Corporation Act of 1983, as amended,
the full text of which is attached as Annex A to the accompanying
-------
Proxy Statement/Prospectus. For a summary of these requirements, see
"APPRAISAL RIGHTS OF SHAREHOLDERS OF REGIONAL" in the accompanying
Proxy Statement/Prospectus.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN
IT TO REGIONAL IN THE ACCOMPANYING ENVELOPE.
By Order of the Board of Directors
-------------------------------------
Secretary
- --------------------, 1996
<PAGE> 4
MERCANTILE BANCORPORATION INC.
PROSPECTUS
----------------------------
REGIONAL BANCSHARES, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON --------------, 1997
This Prospectus of Mercantile Bancorporation Inc., a Missouri
corporation ("MBI"), relates to up to 600,419 shares of common stock, $5.00
par value (the "MBI Stock"), and attached preferred share purchase rights
(the "MBI Rights"), of MBI (the MBI Stock and MBI Rights are collectively
referred to herein as the "MBI Common Stock"), to be issued to the
shareholders of Regional Bancshares, Inc., an Illinois corporation
("Regional"), upon consummation of the proposed merger (the "Merger") of
Regional with and into Ameribanc, Inc., a Missouri corporation and wholly
owned subsidiary of MBI ("Ameribanc"). Upon receipt of the requisite
shareholder and regulatory approvals, the Merger will be consummated in
accordance with the terms and conditions of the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of August 23, 1996, by and among
MBI, Ameribanc and Regional. This Prospectus also serves as the Proxy
Statement for Regional in connection with the Special Meeting of
Shareholders of Regional (the "Special Meeting"), which will be held on
- ---------------------------------, 1997, at the time and place and for the
purposes stated in the Notice of Special Meeting of Shareholders
accompanying this Proxy Statement/Prospectus.
Pursuant to the Merger Agreement, MBI will issue up to an
aggregate of 600,419 shares of MBI Common Stock. Upon consummation of the
Merger, the business and operations of Regional will be continued through
Ameribanc and each share (other than a share held by MBI or a share as to
which a shareholder of Regional has perfected dissenters' rights) of the
common stock, $10.00 par value, of Regional (the "Regional Common Stock")
will be converted into the right to receive as consideration in the Merger:
(i) an amount in cash equal to $485.76 (the "Cash Consideration"); (ii)
23.7123 shares of MBI Common Stock (the "Stock Consideration"); and (iii)
0.4838 of a share of the common stock (the "West Pointe Common Stock") of
West Pointe Bank And Trust Company ("West Pointe") (the "West Pointe
Consideration") (the Cash Consideration, the Stock Consideration and the
West Pointe Consideration are collectively referred to herein as the
"Merger Consideration"), all as more fully described in detail at pages
- ---- of this Proxy Statement/Prospectus. The fair market value of the MBI
Common Stock and the West Pointe Common Stock to be received pursuant to
the Merger may fluctuate and at the consummation of the Merger may be more
or less than the current fair market value of such shares. See "TERMS OF
THE PROPOSED MERGER - General Description of the Merger." No fractional
shares of MBI Common Stock or West Pointe Common Stock will be issued in
the Merger, but cash will be paid in lieu of fractional shares. See "TERMS
OF THE PROPOSED MERGER - Fractional Shares."
The Merger is intended to qualify as a reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"),
and is intended to achieve certain federal income tax tax-deferral benefits
for Regional shareholders with respect to shares of MBI Common Stock
received in the Merger. See "SUMMARY INFORMATION - Certain Federal Income
Tax Consequences" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER."
MBI Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "MTL." On December 10, 1996, the closing sale
price for MBI Common Stock as reported on the NYSE Composite Tape was
$51 3/8 per share. Neither the Regional Common Stock nor the West Pointe
Common Stock has an established trading market.
<PAGE> 5
This Proxy Statement/Prospectus, the Notice of Special Meeting
and the form of proxy were first mailed to the shareholders of Regional on
or about December ---, 1996.
THESE SECURITIES 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 NON-BANK SUBSIDIARY
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
FEDERAL OR STATE GOVERNMENTAL AGENCY.
All information contained in this Proxy Statement/Prospectus with
respect to MBI has been supplied by MBI and all information with respect
to Regional has been supplied by Regional.
The date of this Proxy Statement/Prospectus is December ---, 1996.
- 2 -
<PAGE> 6
AVAILABLE INFORMATION
---------------------
MBI is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files with the Commission reports, proxy statements
and other information. Such reports, proxy statements and other
information filed with the Commission by MBI can be inspected and copied
at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices located at Suite 1300, Seven World Trade Center, New York, New York
10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. The Commission maintains an Internet site on the World
Wide Web containing reports, proxy and information statements and other
information filed electronically by MBI with the Commission. The address
of the World Wide Web site maintained by the Commission is http://www.sec.gov.
MBI Common Stock is listed on the NYSE, and such reports, proxy statements and
other information concerning MBI are available for inspection and copying at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 and
exhibits thereto (the "Registration Statement") covering the securities
offered hereby which has been filed by MBI with the Commission. As
permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information contained or incorporated
by reference in the Registration Statement. Statements contained in this
Proxy Statement/Prospectus provide a summary of the contents of any
contract or other document referenced herein but are not necessarily
complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration
Statement. For such further information, reference is made to the
Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE
DOCUMENTS RELATING TO MBI WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. IN ADDITION, THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY
REFERENCE DOCUMENTS RELATING TO MARK TWAIN BANCSHARES, INC. ("MARK TWAIN"),
A MISSOURI CORPORATION AND BANK HOLDING COMPANY THAT RECENTLY ENTERED INTO
A DEFINITIVE AGREEMENT WITH MBI TO BE ACQUIRED BY MBI. SUCH DOCUMENTS,
EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN, ARE AVAILABLE
WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF STOCK OF
MBI TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST, TO JON W. BILSTROM, GENERAL COUNSEL AND SECRETARY, MERCANTILE
BANCORPORATION INC., P.O. BOX 524, ST. LOUIS, MISSOURI 63166-0524, TELEPHONE
(314) 425-2525. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO
THE SPECIAL MEETING, ANY REQUEST SHOULD BE MADE BY -----------------, 1996.
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 for the year ended
December 31, 1995.
(b) MBI's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
(c) MBI's Current Reports on Form 8-K dated January 16, 1996,
March 11, 1996 and November 6, 1996.
- 3 -
<PAGE> 7
(d) The description of the MBI Stock set forth in Item 1 of
MBI's Registration Statement on Form 8-A, dated March 5,
1993, and any amendment or report filed for the purpose of
updating such description.
(e) The description of the MBI Rights set forth in Item 1 of
MBI's Registration Statement on Form 8-A, dated March 5,
1993, and any amendment or report filed for the purpose of
updating such description.
The following documents filed with the Commission by Mark Twain
under the Exchange Act are incorporated herein by reference:
(a) Mark Twain's Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) Mark Twain's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996.
Such incorporation by reference shall not be deemed to
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
All documents filed by MBI and Mark Twain pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and
until the date of the Special 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 Mark Twain 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 herein by reference shall be deemed to be modified or
superseded for purposes hereof to the extent that a subsequent statement
contained herein or in any other subsequently filed document incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part hereof.
Any statements contained in this 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 AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY MBI OR REGIONAL. THIS PROXY STATEMENT/
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF MBI COMMON STOCK TO
WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES PURSUANT HERETO SHALL IMPLY
OR CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
MBI OR REGIONAL OR ANY OF THEIR SUBSIDIARIES OR IN THE INFORMATION SET
FORTH HEREIN SUBSEQUENT TO THE DATE HEREOF.
- 4 -
<PAGE> 8
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. . . . . . . . . . 3
SUMMARY INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 7
Business of MBI. . . . . . . . . . . . . . . . . . . . . . . . . 7
Business of Ameribanc. . . . . . . . . . . . . . . . . . . . . . 8
Business of Regional . . . . . . . . . . . . . . . . . . . . . . 8
Business of West Pointe. . . . . . . . . . . . . . . . . . . . . 8
The Proposed Merger. . . . . . . . . . . . . . . . . . . . . . . 9
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 9
Effective Time; Closing Date . . . . . . . . . . . . . . . . . . 9
Amendment; Termination . . . . . . . . . . . . . . . . . . . . . 10
Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . . 10
Interests of Certain Persons in the Merger . . . . . . . . . . . 10
Effect on Benefit Plans. . . . . . . . . . . . . . . . . . . . . 11
Special Meeting of Regional Shareholders . . . . . . . . . . . . 11
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . 11
Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . 12
Certain Federal Income Tax Consequences. . . . . . . . . . . . . 12
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 12
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 13
Markets and Market Prices. . . . . . . . . . . . . . . . . . . . 14
Comparative Unaudited Per Share Data . . . . . . . . . . . . . . 15
Summary Financial Data . . . . . . . . . . . . . . . . . . . . . 16
INFORMATION REGARDING SPECIAL MEETING. . . . . . . . . . . . . . . . 19
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Date, Time and Place . . . . . . . . . . . . . . . . . . . . . . 19
Record Date; Vote Required; Voting Agreements. . . . . . . . . . 19
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . 19
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . 20
TERMS OF THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . 20
General Description of the Merger. . . . . . . . . . . . . . . . 21
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 21
Effective Time; Closing Date . . . . . . . . . . . . . . . . . . 23
Amendment of Merger Agreement. . . . . . . . . . . . . . . . . . 23
Termination of Merger Agreement. . . . . . . . . . . . . . . . . 24
Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . . 25
Interests of Certain Persons in the Merger . . . . . . . . . . . 25
Effect on Benefit Plans. . . . . . . . . . . . . . . . . . . . . 25
Background of and Reasons for the Merger; Board Recommendations. 26
Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . 27
Surrender of Regional Stock Certificates and Receipt of Merger
Consideration. . . . . . . . . . . . . . . . . . . . . . . . . 28
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 28
Business Pending the Merger. . . . . . . . . . . . . . . . . . . 29
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 32
- 5 -
<PAGE> 9
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. . . . . . . . 32
RIGHTS OF DISSENTING SHAREHOLDERS OF REGIONAL. . . . . . . . . . . . 36
PRO FORMA FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . 38
Comparative Unaudited Per Share Data . . . . . . . . . . . . . . 38
Pro Forma Combined Consolidated Financial Statements (Unaudited) 39
INFORMATION REGARDING REGIONAL . . . . . . . . . . . . . . . . . . . 47
Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . 55
Security Ownership of Certain Beneficial Owners and Management . 64
INFORMATION REGARDING MBI STOCK. . . . . . . . . . . . . . . . . . . 65
Description of MBI Common Stock and Attached Preferred Share
Purchase Rights. . . . . . . . . . . . . . . . . . . . . . . . 65
Restrictions on Resale of MBI Stock by Affiliates. . . . . . . . 67
Comparison of the Rights of Shareholders of MBI and Regional . . 67
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . 70
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Certain Transactions with Affiliates . . . . . . . . . . . . . . 71
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . 71
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . 71
FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . 71
Proposals to Overhaul the Savings Association Industry . . . . . 72
Support of Subsidiary Banks. . . . . . . . . . . . . . . . . . . 73
FIRREA and FDICIA. . . . . . . . . . . . . . . . . . . . . . . . 73
Depositor Preference Statute . . . . . . . . . . . . . . . . . . 74
The Interstate Banking and Community Development Legislation . . 74
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . 74
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . 75
CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . 76
ANNEX A -- Dissenters' Rights Provisions of the Illinois Business
Corporation Act . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
- 6 -
<PAGE> 10
SUMMARY INFORMATION
-------------------
THE FOLLOWING SUMMARY OF THE IMPORTANT TERMS OF THE PROPOSED
MERGER AND RELATED INFORMATION DISCUSSED ELSEWHERE IN THIS PROXY STATEMENT/
PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION WHICH APPEARS ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
SHAREHOLDERS OF REGIONAL ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS IN
ITS ENTIRETY. ALL MBI PER SHARE DATA REFLECT A THREE-FOR-TWO STOCK SPLIT
DISTRIBUTED IN THE FORM OF A STOCK DIVIDEND ON APRIL 11, 1994.
BUSINESS OF MBI
MBI, a Missouri corporation, was organized in 1970 and is a
registered bank holding company under the federal Bank Holding Company Act
of 1956, as amended (the "BHCA"). At September 30, 1996, MBI indirectly
owned all of the capital stock of Mercantile Bank of St. Louis National
Association ("Mercantile Bank"), 37 other commercial banks and one
federally-chartered thrift, which together operated from 437 banking
offices and 405 Fingertip Banking automated teller machines, including 42
off-premises machines, located throughout Missouri, Illinois, eastern
Kansas, northern Arkansas and Iowa. MBI's services concentrate in four
major lines of business -- consumer, corporate, investment banking and
trust services. MBI also operates non-banking subsidiaries which provide
related financial services, including investment management, brokerage
services and asset-based lending. As of September 30, 1996, MBI had
60,163,042 shares of its Common Stock outstanding and reported, on a
consolidated basis, total assets of $18.2 billion, total deposits of $14.6
billion, total loans of $12.2 billion and shareholders' equity of $1.5
billion.
On January 2, 1996, MBI completed the acquisitions of (i) Hawkeye
Bancorporation ("Hawkeye"), an Iowa corporation and registered bank holding
company under the BHCA, located in Des Moines, Iowa, and (ii) First Sterling
Bancorp, Inc. ("Sterling"), an Illinois corporation and registered bank holding
company under the BHCA, located in Sterling, Illinois. These acquisitions were
accounted for under the pooling-of-interests method of accounting. As of
January 2, 1996, Hawkeye and Sterling reported total assets of $2.0 billion and
$168 million, respectively.
On February 9, 1996 and March 7, 1996, respectively, MBI completed the
acquisitions of (i) Security Bank of Conway, F.S.B. ("Conway"), a federal stock
savings bank located in Conway, Arkansas, and (ii) Metro Savings Bank, F.S.B.
("Metro"), a federal stock savings bank located in Wood River, Illinois. These
acquisitions were accounted for under the purchase method of accounting. As of
February 9, 1996, Conway reported total assets of $103 million. As of March 7,
1996, Metro reported total assets of $81 million.
In connection with the acquisition of Hawkeye, MBI restated its
consolidated financial statements as of and for the years ended December 31,
1995, 1994 and 1993. MBI filed supplemental financial statements as of and for
the years ended December 31, 1995, 1994 and 1993 in a Current Report on Form
8-K, dated March 11, 1996, which has been incorporated by reference into this
Proxy Statement/Prospectus. Due to the immateriality of the financial condition
and results of operations of Sterling to that of MBI, the supplemental
consolidated financial statements of MBI do not reflect the acquisition of
Sterling.
On August 22, 1996, November 1, 1996 and November 7, 1996,
respectively, MBI completed the acquisitions of (i) Peoples State Bank
("Peoples"), a Kansas state-chartered bank, located in Topeka, Kansas, (ii)
First Financial Corporation of America ("First Financial"), a Missouri
corporation and registered bank holding company under the BHCA, located in
Salem, Missouri, and (iii) TODAY'S BANCORP, INC. ("TODAY'S"), a Delaware
corporation and registered bank holding company under the
- 7 -
<PAGE> 11
BHCA, located in Freeport, Illinois. These acquisitions were accounted for
under the purchase method of accounting. As of August 22, 1996, November 1,
1996 and November 7, 1996, respectively, Peoples, First Financial and TODAY'S
reported total assets of $96 million, $88 million and $501 million.
On October 27, 1996, MBI entered into an agreement to acquire
Mark Twain, a Missouri corporation, located in St. Louis, Missouri. This
acquisition will be accounted for under the pooling-of-interests method of
accounting. As of September 30, 1996, Mark Twain reported total assets of
$3.1 billion, total deposits of $2.4 billion, total loans and leases of
$2.1 billion and shareholders' equity of $289 million.
On July 15, 1996, Mark Twain entered into an agreement to acquire
First City Bancshares, Incorporated of Missouri ("First City"), a Missouri
corporation, located in Springfield, Missouri. Such acquisition is expected
to be consummated prior to the consummation of the Merger and will be
accounted for under the purchase method of accounting. As of September 30,
1996, First City reported total assets of $89 million, total deposits of $77
million, total loans and leases of $58 million and shareholders' equity of
$6 million.
MBI's principal executive offices are located at One Mercantile
Center, St. Louis, Missouri 63101 and its telephone number is (314) 425-2525.
BUSINESS OF AMERIBANC
Ameribanc, a Missouri corporation which was organized in 1991,
is a wholly owned subsidiary of MBI and registered bank holding company
under the BHCA. At September 30, 1996, Ameribanc owned, directly or
indirectly, all of the capital stock of 38 banks, one federally-chartered
thrift and one trust company, which together operated from 437 locations
in Missouri, Illinois, northern Arkansas, eastern Kansas and Iowa.
Ameribanc will be the surviving corporation upon consummation of the
Merger.
BUSINESS OF REGIONAL
Regional, an Illinois corporation, was organized in 1979 and is
registered as a bank holding company under the BHCA. Regional currently
owns all of the issued and outstanding shares of capital stock of the Bank
of Alton ("Bank of Alton"), an Illinois state-chartered bank, located in
Alton, Illinois. As of September 30, 1996, 25,321 shares of Regional
Common Stock were issued and outstanding and Regional reported, on a
consolidated basis, total assets of $182 million, total deposits of $147
million, total loans and leases of $103 million and shareholders' equity
of $23 million. See "INFORMATION REGARDING REGIONAL."
Regional's principal executive offices are located at 1520
Washington Avenue, Alton, Illinois 62002 and its telephone number is (618)
474-3500.
BUSINESS OF WEST POINTE
West Pointe, an Illinois state-chartered bank located in
Belleville, Illinois, was organized in 1990. West Pointe currently
operates from two locations in Belleville and Swansea, Illinois. As of
September 30, 1996, 350,000 shares of West Pointe Common Stock were issued
and outstanding and West Pointe reported total assets of $125 million,
total deposits of $114 million, net loans and leases of $81 million and
shareholders' equity of $9.3 million.
- 8 -
<PAGE> 12
THE PROPOSED MERGER
Subject to the satisfaction of the terms and conditions set forth
in the Merger Agreement, Regional, an Illinois corporation, will be merged
with and into Ameribanc, a Missouri corporation. Upon consummation of the
Merger, Regional's corporate existence will terminate and Ameribanc will
continue as the surviving entity. Simultaneously with the effectiveness
of the Merger, each share of Regional Common Stock (other than (a) a share
held by MBI or any MBI corporate affiliate, except a share held in a
fiduciary capacity or in satisfaction of a debt previously contracted in
good faith, or (b) a share as to which a Regional shareholder has perfected
dissenters' rights pursuant to Section 11.70 of the Illinois Act
("Dissenting Shares")) will be converted into the right to receive as
consideration in the merger: (i) the Cash Consideration (cash equal to
$485.76); (ii) the Stock Consideration (23.7123 shares of MBI Common
Stock); and (iii) the West Pointe Consideration (0.4838 of a share of West
Pointe Common Stock). The Stock Consideration and West Pointe
Consideration are subject to certain anti-dilution protections but are not
adjustable based on the operating results, financial condition or other
factors affecting MBI, Regional or West Pointe prior to the consummation
of the Merger. The fair market value of the MBI Common Stock and West
Pointe Common Stock to be received pursuant to the Merger may fluctuate and
at the consummation of the Merger may be more or less than the current fair
market value of such shares.
MBI will select an exchange agent (the "Exchange Agent") for
purposes of effecting the conversion of Regional Stock into the right to
receive cash, MBI Common Stock and West Pointe Common Stock upon
consummation of the Merger. Within two business days following the
Effective Time (as defined below), a letter of transmittal (including
instructions setting forth the procedures for exchanging certificates
representing shares of Regional Common Stock for the cash, MBI Common Stock
and West Pointe Common Stock payable to each holder thereof pursuant to the
Merger Agreement) will be sent to each record holder as of the Effective
Time (as defined below). Upon surrender to the Exchange Agent of such
certificate(s), together with a duly completed and executed letter of
transmittal, such holder will receive the cash, shares of MBI Common Stock
and shares of West Pointe Common Stock to which such holder is entitled
under the Merger Agreement, together with an amount in cash for any
fractional shares of MBI Common Stock or West Pointe Common Stock which
such holder would otherwise be entitled to receive. See "TERMS OF THE
PROPOSED MERGER - Surrender of Stock Certificates and Receipt of Merger
Consideration" and "- Fractional Shares."
CONDITIONS TO THE MERGER
The Merger Agreement provides that the consummation of the Merger
is subject to certain terms and conditions, including the approval of the
Merger Agreement by the holders of the outstanding shares of Regional
Common Stock and the receipt of both the requisite regulatory approvals and
an opinion of MBI Counsel regarding certain federal income tax aspects of
the transaction. For a discussion of each of the conditions to the Merger,
see "TERMS OF THE PROPOSED MERGER - Conditions to the Merger."
EFFECTIVE TIME; CLOSING DATE
The Merger will become effective on the date and at the time (the
"Effective Time") of the issuance of a certificate of merger by each of the
Office of the Secretary of State of the State of Missouri and the Office
of the Secretary of State of the State of Illinois. Unless MBI, Ameribanc
and Regional otherwise agree, the closing for the Merger (the "Closing")
will occur on a date (the "Closing Date") mutually agreed upon by the
parties which is no later than forty-five days following the satisfaction
or waiver of the conditions to the consummation of the Merger provided in
the Merger Agreement. See
- 9 -
<PAGE> 13
"TERMS OF THE PROPOSED MERGER - Effective Time; Closing Date" and "- Conditions
to the Merger."
AMENDMENT; TERMINATION
The Merger Agreement may be amended by a subsequent writing
signed by each of MBI, Ameribanc and Regional upon the approval of their
respective Boards of Directors, whether before or after the approval of the
Merger Agreement by the Regional shareholders at the Special Meeting;
provided, however, that after such shareholder approval, no modification
may, without the approval of the Regional shareholders who are affected by
such modification (i) alter or change the amount or form of Merger
Consideration to be received by the Regional shareholders or (ii) otherwise
materially adversely affect the Regional shareholders.
The Merger Agreement may be terminated at any time prior to the
Effective Time by the mutual consent of the parties or unilaterally by
either party (i) upon the occurrence of certain events or (ii) if the
Merger is not consummated by August 23, 1997. See "TERMS OF THE PROPOSED
MERGER - Conditions to the Merger" and "- Termination of the Merger
Agreement."
VOTING AGREEMENTS
In addition to and contemporaneously with the Merger Agreement,
MBI executed separate Voting Agreements (the "Voting Agreements") with
certain of the executive officers and directors of Regional and the
controlling shareholder of Regional, pursuant to which such officers,
directors and controlling shareholder agreed that they will vote or cause to
be voted all of the shares of Regional Common Stock then beneficially owned
or controlled or subsequently acquired in favor of the approval of the
Merger Agreement at the Special Meeting. In addition, until the earliest to
occur of the Closing Date, the termination of the Merger Agreement or the
abandonment of the Merger by mutual agreement of MBI and Regional, such
officers, directors and controlling shareholder further agreed not to vote
or cause to be voted any of such shares in favor of the approval of any
other agreement relating to the merger or sale of substantially all of the
assets of Regional to any person other than MBI or its affiliates. Such
officers, directors and controlling shareholder also agreed not to transfer
such shares unless, prior to such transfer, the transferee executes an
agreement with respect to the transferred shares in substantially the same
form as the Voting Agreement and reasonably satisfactory to MBI. As of the
Record Date, such officers, directors and controlling shareholder owned
beneficially an aggregate of 23,987 shares of Regional Common Stock, or
approximately 94.7% of the issued and outstanding shares. See "TERMS OF THE
PROPOSED MERGER - Other Agreements - Voting Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
From and after the Effective Time, MBI and Ameribanc, as
applicable, have agreed to indemnify each present and former director,
officer, employee and agent of Regional or Bank of Alton, to the extent
provided in the Articles of Incorporation, By-Laws and applicable
indemnification agreements of Regional and Bank of Alton as in effect on
August 23, 1996, against amounts paid by such person in connection with any
action or omission occurring prior to the Effective Time and arising from
such person's position as an officer, director or other fiduciary capacity
with Regional or Bank of Alton. MBI has also agreed to advance to
indemnifiable persons expenses incurred in connection with indemnifiable
claims upon the receipt of certain undertakings by such persons. See
"TERMS OF THE PROPOSED MERGER - Interests of Certain Persons in the
Merger."
- 10 -
<PAGE> 14
EFFECT ON BENEFIT PLANS
The Merger Agreement provides that MBI will cause Ameribanc to
honor all provisions for vested benefits earned or accrued through the
Effective Time under employee benefit plans of Regional and Bank of Alton
(the "Benefit Plans"); provided, however, that the provisions of any plan,
program or arrangement that provide for the issuance or grant of any other
interest in respect of the capital stock of Regional or Bank of Alton will
be terminated as of the date of the Merger Agreement. The Benefit Plans
will not be terminated by reason of the Merger but will continue after the
Merger as plans of Ameribanc until such time as the employees of Regional
and Bank of Alton are integrated into MBI's employee benefit plans that are
available to other employees of MBI. MBI will take such steps as are
necessary to integrate the former employees of Regional and Bank of Alton
into such MBI employee benefit plans as soon as practicable after the
Effective Time. See "TERMS OF THE PROPOSED MERGER - Effect on Benefit
Plans."
SPECIAL MEETING OF REGIONAL SHAREHOLDERS
The Special Meeting will be held on ----------------------, 1997,
at ---:--- --.m. Central Time, at the offices of Bryan Cave LLP, 211 North
Broadway, Suite 3600, St. Louis, Missouri. Approval by the Regional
shareholders of the Merger Agreement requires the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Regional Common
Stock. Only holders of record of Regional Common Stock at the close of
business on ----------------------------------, 1996 (the "Record Date")
will be entitled to notice of, and to vote at, the Special Meeting. At
such date, there were 25,321 shares of Regional Common Stock issued and
outstanding.
As of the Record Date, the executive officers and directors of
Regional and the controlling shareholder of Regional owned beneficially an
aggregate of 23,987 shares of Regional Common Stock, or approximately 94.7%
of the issued and outstanding shares of Regional Common Stock entitled to
vote at the Special Meeting. Pursuant to his or her respective Voting
Agreement, each of such officers, directors and controlling shareholder
has committed to vote his or her shares of Regional Common Stock for the
approval of the Merger Agreement.
THE BOARD OF DIRECTORS OF REGIONAL HAS CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE MERGER. THE BOARD HAS DETERMINED
THAT THE MERGER IS IN THE BEST INTEREST OF REGIONAL AND ITS SHAREHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL
---
TO APPROVE THE MERGER AGREEMENT.
REASONS FOR THE MERGER
REGIONAL. The Board of Directors of Regional believes that the
Merger is in the best interest of Regional and its shareholders. In
reaching the decision to recommend the Merger to the shareholders, the
Board of Directors, without assigning any relative or specific weights,
considered a number of factors, including (i) the Cash Consideration, Stock
Consideration, West Pointe Consideration and the other terms of the Merger,
(ii) the benefits expected to result from the combination of Regional and
MBI and (iii) recent federal and state legislative changes affecting the
banking industry in general. See "TERMS OF THE PROPOSED MERGER -
Background of and Reasons for the Merger; Board Recommendations."
MBI. The Board of Directors of MBI believes that the Merger will
enable MBI to (i) increase its presence in southwestern Illinois through
the acquisition of an established banking organization and (ii) enhance its
ability to compete in the increasingly competitive banking and financial
- 11 -
<PAGE> 15
services industry. See "TERMS OF THE PROPOSED MERGER - Background of and
Reasons for the Merger; Board Recommendations."
FRACTIONAL SHARES
No fractional shares of MBI Common Stock or West Pointe Common
Stock will be issued to the shareholders of Regional in connection with the
Merger. Each holder of Regional Common Stock who otherwise would have been
entitled to receive a fraction of a share of MBI Common Stock shall receive
in lieu thereof cash, without interest, in an amount equal to the holder's
fractional share interest multiplied by $47.80, the average of the closing
stock price of MBI Common Stock on the NYSE Composite Tape as reported in
The Wall Street Journal for the five trading days prior to August 23, 1996,
the date of execution of the Merger Agreement (the "Average MBI Stock
Price"). Each holder of Regional Common Stock who otherwise would have
been entitled to receive a fraction of a share of West Pointe Common Stock
shall receive in lieu thereof cash, without interest, in an amount equal
to such holder's fractional share interest multiplied by $30.00. Cash
received by Regional shareholders in lieu of fractional shares of MBI
Common Stock or West Pointe Common Stock may give rise to taxable income.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
DISSENTERS' RIGHTS
Under the Illinois Act, each holder of Regional Common Stock may,
in lieu of receiving the Merger Consideration, seek the fair value of his
or her shares of Regional Common Stock and, if the Merger is consummated,
receive payment of such fair value in cash by following certain procedures
set forth in Section 11.70 of the Illinois Act, the text of which is
attached hereto as Annex A. Failure to follow such procedures may
-------
result in a loss of such shareholder's dissenters' rights. Any Regional
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 REGIONAL."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Thompson Coburn, MBI's legal counsel, has delivered its opinion
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, Regional and the majority shareholder of Regional, the Merger
will constitute a "reorganization" for federal income tax purposes and
that, accordingly, no gain or loss will be recognized by Regional
shareholders with regard to the MBI Common Stock received solely in
exchange for shares of Regional Common Stock in the Merger. However, gain
(but not loss) or dividend income realized as a result of the receipt of
the Cash Consideration and the West Pointe Consideration (including cash
received in lieu of fractional shares, if any) will be recognized. Cash
received in lieu of fractional shares of MBI Common Stock also may give
rise to taxable income. EACH REGIONAL 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 APPLICABILITY OF VARIOUS STATE,
LOCAL, AND FOREIGN TAX LAWS. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER."
REGULATORY APPROVALS
Applications regarding the Merger have been filed with the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board")
and the Illinois Commissioner of Banks and Real Estate (the "Illinois
Commissioner") (the Federal Reserve Board, Illinois Commissioner and any
other regulatory authority that may be necessary or appropriate are
collectively referred to herein as the "Regulatory Authorities" and,
individually, as a "Regulatory Authority"). The Merger cannot be
- 12 -
<PAGE> 16
consummated until receipt of approvals from such Regulatory Authorities.
In reviewing the Merger, the Regulatory Authorities will consider various
factors, including possible anticompetitive effects of the Merger, and will
examine the financial and managerial resources and future prospects of the
combined organization. There can be no assurance that the necessary
regulatory approvals will be received or as to the timing of such
approvals. See "TERMS OF THE PROPOSED MERGER - Regulatory Approval" and
"SUPERVISION AND REGULATION."
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of
accounting. See "TERMS OF THE PROPOSED MERGER - Accounting Treatment."
- 13 -
<PAGE> 17
MARKETS AND MARKET PRICES
MBI Common Stock is currently traded on the NYSE under the symbol
"MTL." The last sale price reported for MBI Common Stock on August 23,
1996, the last trading date preceding the public announcement of the
Merger, was $47.75.
As of the Record Date, Regional had eight shareholders of
record. There is no established public trading market for Regional
Common Stock; to the knowledge of management of Regional, there has never
been a sale of Regional Common Stock. In addition, there is no established
public trading market for West Pointe Common Stock. The last sale price
for West Pointe Common Stock known to management of West Pointe prior to
the public announcement of the Merger was $32.00 per share in 1996.
Because of this lack of established trading market for shares of Regional
Common Stock and West Pointe Common Stock, the respective managements of
Regional and West Pointe do not have knowledge of the prices paid in all
transactions involving their shares and have not necessarily verified the
prices indicated in the table with the parties to the relevant
transactions. Thus, the sale prices listed below may not reflect the
prices that would have been paid in an active market.
The following table sets forth for the periods indicated the high
and low prices per share of MBI Common Stock as reported on the NYSE, of
Regional Common Stock as known to management of Regional and of West Pointe
as known to management of West Pointe, along with the quarterly cash
dividends per share declared. The per share prices do not include
adjustments for retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
MBI REGIONAL WEST POINTE
----------------------------- ------------------------- -----------------------
SALES PRICE CASH SALES PRICE CASH SALES PRICE CASH
------------------- DIVIDEND ------------- DIVIDEND ------------- DIVIDEND
HIGH LOW DECLARED HIGH LOW DECLARED HIGH LOW DECLARED
-------- ------- -------- ---- ----- -------- ---- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994
- ----
First Quarter $34.125 $29.875 $.28 <F2> <F2> $ -- <F3> <F3> $.14
Second Quarter 38.125 31.125 .28 <F2> <F2> -- <F3> <F3> .14
Third Quarter 39.250 34.875 .28 <F2> <F2> -- <F3> <F3> .14
Fourth Quarter 36.875 29.500 .28 <F2> <F2> 5.93 <F3> <F3> .14
1995
- ----
First Quarter $37.250 $31.250 $.33 <F2> <F2> $ 7.10 <F3> <F3> $.14
Second Quarter 44.875 36.000 .33 <F2> <F2> 7.10 <F3> <F3> .14
Third Quarter 47.000 41.625 .33 <F2> <F2> 16.97 <F3> <F3> .14
Fourth Quarter 46.500 41.500 .33 <F2> <F2> 9.66 <F3> <F3> .14
1996
- ----
First Quarter $46.500 $41.500 $.41 <F2> <F2> $10.00 <F3> <F3> $.14
Second Quarter 47.875 43.500 .41 <F2> <F2> 10.00 <F3> <F3> .14
Third Quarter 52.875 43.375 .41 <F2> <F2> 10.00 <F3> <F3> .14
Fourth Quarter (through
December 10, 1996)<F1> 54.000 49.000 .41 <F2> <F2> -- 32.00 32.00 .14
<FN>
- --------------------
<F1> For recent sale prices of MBI Common Stock, see page 2 of this Proxy
Statement/Prospectus.
<F2> No trades known to management of Regional for the period indicated or
during any other period.
<F3> No trades known to management of West Pointe.
</TABLE>
- 14 -
<PAGE> 18
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated
selected historical per share data of MBI and Regional and the
corresponding pro forma and pro forma equivalent per share amounts,
giving effect to the proposed acquisition of Regional, the completed
acquisitions of First Financial and TODAY'S, and the proposed
acquisitions of First City and Mark Twain. The data presented is based
upon the supplemental consolidated financial statements and consolidated
financial statements and related notes of MBI and the consolidated
financial statements and related notes of Regional and Mark Twain
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 - Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)." 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 proposed acquisition of
Regional, the completed acquisitions of TODAY'S and First Financial or
the proposed acquisitions of First City and Mark Twain had been
consummated at the beginning of the periods indicated. All adjustments
consisting of only normal recurring adjustments necessary for a fair
statement of results of interim periods have been included.
<TABLE>
<CAPTION>
MBI/ MBI/ MBI/All MBI/
Regional Regional Entities All Entities
MBI Regional Pro Forma Pro Forma Pro Forma Pro Forma
Reported Reported Combined <F1> Equivalent <F2> Combined <F3> Equivalent <F2>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Book Value per Share:
September 30, 1996 $ 25.51 $924.77 $25.73 $610.12 $23.84 $565.30
December 31, 1995 26.04 913.16 26.24 622.21 25.04 593.76
Cash Dividends Declared per Share:
Nine months ended
September 30, 1996 $ 1.23 $ 30.00 $ 1.23 $ 29.17 $ 1.23 $ 29.17
Year ended December 31, 1995 1.32 40.83 1.32 31.30 1.32 31.30
Earnings per Share:
Nine months ended
September 30, 1996 $ 2.01 $ 79.37 $ 1.99 $ 47.19 $ 2.03 $ 48.14
Year ended December 31, 1995 3.74 108.93 3.71 87.97 3.47 82.28
Market Price per Share:
At August 23, 1996 <F4> $47.750 n/a n/a n/a n/a n/a
At December 10, 1996 <F4> 51.375 n/a n/a n/a n/a n/a
<FN>
- --------------------
<F1> Includes the effect of pro forma adjustments for Regional. See
"PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements (Unaudited)."
<F2> Based on the pro forma combined per share amounts multiplied by
23.7123, the Stock Consideration. Further explanation of the
assumptions used in the preparation of the pro forma combined
consolidated financial statements is included in the notes to the
pro forma financial statements. See "PRO FORMA FINANCIAL
INFORMATION - Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F3> Includes the effect of pro forma adjustments for Regional,
TODAY'S, First Financial, First City and Mark Twain. See
"PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements (Unaudited)."
<F4> The market price per share of MBI Common Stock was determined as
of August 23, 1996 and December 10, 1996, the last trading day
preceding the public announcement of the proposed Merger and as of
the latest available date prior to the filing of the Registration
Statement, respectively, based on the last sale price as reported
on the NYSE Composite Tape. There are no publicly available
quotations of Regional Common Stock.
</TABLE>
- 15 -
<PAGE> 19
SUMMARY FINANCIAL DATA
The following table sets forth for the periods indicated
certain summary historical consolidated financial information for MBI
and Regional. The balance sheet data and income statement data of MBI
included in the summary financial data as of and for the five years
ended December 31, 1995 are taken from the audited supplemental
consolidated financial statements of MBI as of the end of and for each
such year. The balance sheet data and income statement data of Regional
included in the summary financial data as of and for the five years
ended December 31, 1995 are taken from the audited consolidated
financial statements of Regional as of and for the year ended December
31, 1995 and the unaudited consolidated financial statements of Regional
as of and for the years ended December 31, 1994, 1993, 1992 and 1991.
The balance sheet data and income statement data included in the summary
financial data as of and for the nine months ended September 30, 1996
and 1995 are taken from the unaudited consolidated financial statements
of MBI and the unaudited consolidated financial statements of Regional
as of and for the nine months ended September 30, 1996 and 1995. These
data include all adjustments which are, in the opinion of the respective
managements of MBI and Regional, necessary to present a fair statement
of these periods and are of a normal recurring nature. Results for the
nine months ended September 30, 1996 are not necessarily indicative of
results for the entire year. The following information should be read
in conjunction with the supplemental consolidated financial statements
of MBI and the consolidated financial statements of Regional, and the
related notes thereto, included herein or in documents incorporated
herein by reference, and in conjunction with the unaudited pro forma
combined consolidated financial information, including the notes
thereto, appearing elsewhere in this Proxy Statement/Prospectus. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "PRO FORMA
FINANCIAL INFORMATION."
- 16 -
<PAGE> 20
<TABLE>
MERCANTILE BANCORPORATION INC.
SUMMARY FINANCIAL DATA
<CAPTION>
As of or for the
Nine Months Ended As of or for the
September 30 Year Ended December 31
--------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income<F1> $ 2.01 $ 2.85 $ 3.74 $ 3.19 $ 2.79 $ 2.40 $ 2.34
Dividends declared 1.23 .99 1.32 1.12 .99 .93 .93
Book value at period end 25.51 25.31 26.04 23.32 21.59 19.44 18.12
Average common shares
outstanding (thousands) 62,161 61,498 61,884 59,757 58,751 55,050 47,159
EARNINGS (THOUSANDS)
Interest income $987,701 $962,361 $1,293,944 $1,118,069 $1,094,611 $1,139,807 $1,156,821
Interest expense 465,821 459,432 620,534 450,950 444,573 549,642 668,578
-------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income 521,880 502,929 673,410 667,119 650,038 590,165 488,243
Provision for possible loan losses 55,915 29,177 36,530 43,265 64,302 79,551 64,028
Other income 211,929 199,616 273,653 236,561 245,589 224,456 195,237
Other expense 482,170 407,120 553,748 555,176 570,182 529,645 486,490
Income taxes 70,407 90,164 124,109 113,165 96,074 69,681 28,418
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income $125,317 $176,084 $ 232,676 $ 192,074 $ 165,069 $ 135,744 $ 104,544
======== ======== ========== ========== ========== ========== ==========
ENDING BALANCE SHEET (MILLIONS)
Total assets $ 18,199 $ 18,007 $ 17,928 $ 16,724 $ 16,293 $ 16,033 $ 14,045
Earning assets 16,744 16,590 16,264 15,427 14,980 14,678 12,854
Investment securities 4,320 4,263 4,211 4,280 4,670 4,632 3,412
Loans and leases,
net of unearned income 12,166 11,948 11,731 10,904 9,809 9,570 8,809
Deposits 14,610 13,552 13,714 12,865 13,243 13,260 11,685
Long-term debt 303 344 325 330 316 336 238
Shareholders' equity 1,535 1,612 1,640 1,409 1,295 1,143 939
Reserve for possible loan losses 202 209 202 216 206 199 176
SELECTED RATIOS
Return on average assets .93% 1.35% 1.33% 1.17% 1.03% .89% .78%
Return on average equity 10.35 15.58 15.14 14.06 13.46 12.76 11.81
Net interest rate margin 4.29 4.29 4.28 4.53 4.52 4.33 4.12
Equity to assets 8.43 8.95 9.15 8.42 7.95 7.13 6.68
Reserve for possible loan losses to:
Outstanding loans 1.66 1.75 1.72 1.98 2.10 2.08 2.00
Non-performing loans 348.56 366.62 245.18 583.17 290.02 154.17 109.79
Dividend payout ratio 61.19 34.74 35.29 35.11 35.48 38.75 39.74
<FN>
<F1> Based on weighted average common shares outstanding.
</TABLE>
- 17 -
<PAGE> 21
<TABLE>
REGIONAL BANCSHARES, INC.
SUMMARY FINANCIAL DATA
<CAPTION>
As of or for the
Nine Months Ended As of or for the
September 30 Year Ended December 31
--------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income $ 79.37 $ 78.94 $ 108.93 $ 100.55 $ 119.21 $ 105.92 $ 2.37
Dividends declared 30.00 31.17 40.83 5.93 -- -- --
Book value at period end 924.77 883.02 913.16 777.42 724.06 604.83 498.83
Average common shares
outstanding 25,321 25,321 25,321 25,321 25,321 25,321 25,321
EARNINGS (THOUSANDS)
Interest income $ 9,682 $ 8,707 $ 11,840 $ 10,311 $ 9,609 $ 10,594 $ 12,386
Interest expense 4,826 3,833 5,318 4,048 3,742 4,744 6,837
Net interest income 4,856 4,874 6,522 6,263 5,867 5,850 5,549
Provision for possible loan losses 75 42 42 (280) (960) 1,040 3,130
Other income 798 840 1,108 829 1,269 1,769 992
Other expense 3,128 2,973 3,897 4,030 4,437 3,390 3,397
Income taxes 441 700 933 796 1,158 507 (46)
Cumulative effect adjustment of
accounting change -- -- -- -- 518 -- --
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income $ 2,010 $ 1,999 $ 2,758 $ 2,546 $ 3,019 $ 2,682 $ 60
======== ======== ========== ========== ========== ========== ==========
ENDING BALANCE SHEET (THOUSANDS)
Total assets $182,082 $162,268 $ 167,680 $ 148,140 $ 143,063 $ 133,149 $ 131,479
Earning assets 169,741 153,450 156,733 138,476 134,890 124,798 122,737
Investment and mortgage-backed
securities 66,077 55,991 56,424 45,735 55,068 44,807 46,088
Loans and leases,
net of unearned income 103,169 96,259 96,684 91,316 75,922 75,091 76,649
Borrowings and advances
from Federal Home Loan Bank 10,000 -- -- -- -- -- --
Shareholders' equity 23,416 22,359 23,122 19,685 18,334 15,315 12,631
Reserve for possible loan losses 1,473 1,383 1,350 1,825 1,897 2,322 1,600
SELECTED RATIOS
Return on average assets 1.54% 1.74% 1.74% 1.73% 2.24% 2.03% 0.04%
Return on average equity 11.53 12.85 11.93 12.77 16.47 17.51 0.48
Net interest rate margin<F1> 4.35 4.89 4.83 5.05 5.19 5.35 4.79
Equity to assets 12.86 13.78 13.79 13.29 12.82 11.50 9.61
Reserve for possible loan losses to:
Outstanding loans 1.43 1.44 1.40 2.00 2.50 3.09 2.09
Non-performing loans 162.05 131.59 130.31 73.74 69.77 186.51 173.91
Cash dividend payout 37.79 39.48 37.49 5.90 -- -- --
<FN>
<F1> Based on interest income on a fully tax-equivalent basis.
</TABLE>
- 18 -
<PAGE> 22
INFORMATION REGARDING SPECIAL MEETING
-------------------------------------
GENERAL
This Proxy Statement/Prospectus is being furnished to
holders of Regional Common Stock in connection with the
solicitation of proxies by the Board of Directors of Regional for
use at the Special Meeting and any adjournments or postponements
thereof at which the shareholders of Regional will consider and
vote upon a proposal to approve the Merger Agreement and each of
the transactions contemplated thereby and any other business
which may properly be brought before the Special Meeting or any
adjournments or postponements thereof. Each copy of this Proxy
Statement/Prospectus is accompanied by a Notice of Special
Meeting of Shareholders, a proxy card and a return envelope pre-
addressed to Regional for the proxy card.
This Proxy Statement/Prospectus is also furnished by
MBI to each holder of Regional Common Stock as a prospectus in
connection with the issuance by MBI of shares of MBI Common Stock
upon the consummation of the Merger. This Proxy Statement/
Prospectus and the Notice of Special Meeting and proxy card are
being first mailed to shareholders of Regional on December ---,
1996.
DATE, TIME AND PLACE
The Special Meeting will be held at the offices of Bryan
Cave LLP, 211 North Broadway, Suite 3600, St. Louis, Missouri,
on ------------------------, --------------------, 1997,
at -------------- ----.m., Central Time.
RECORD DATE; VOTE REQUIRED; VOTING AGREEMENTS
On the Record Date, there were 25,321 shares of
Regional Common Stock outstanding and entitled to vote at the
Special Meeting. Each such share is entitled to one vote on each
matter properly brought before the Special Meeting. The
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Regional Common Stock is required to
approve the Merger Agreement.
As of the Record Date, certain of the executive
officers and directors of Regional and certain of the other
shareholders of Regional owned beneficially an aggregate of
23,987 shares of Regional Common Stock, or approximately 94.7% of
the outstanding shares of Regional Common Stock entitled to vote
at the Special Meeting. Such shareholders, pursuant to the terms
of their respective Voting Agreements, have committed to vote or
cause to be voted all of the shares of Regional Common Stock
beneficially owned or controlled or subsequently acquired in
favor of the approval of the Merger Agreement at the Special
Meeting.
VOTING AND REVOCATION OF PROXIES
Shares of Regional Common Stock which are represented
by a properly executed proxy card 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 designation
is revoked in the manner set forth herein in advance of the vote
at the Special Meeting. ANY REGIONAL SHAREHOLDER RETURNING AN
EXECUTED PROXY CARD WHICH DOES NOT PROVIDE INSTRUCTIONS TO VOTE
AGAINST THE APPROVAL OF THE MERGER AGREEMENT WILL BE DEEMED TO
HAVE APPROVED THE MERGER AGREEMENT. Failure to return a properly
executed proxy card or to vote in person at the Special Meeting
will have the practical effect of a vote against the approval of
the Merger Agreement.
- 19 -
<PAGE> 23
Shares subject to abstentions will be treated as shares
that are present and voting 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. Such shares will, therefore, have the effect of votes
against the approval of the Merger Agreement. Broker "non-votes"
(i.e., proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owners
or other persons entitled to vote shares with respect to which
such brokers or nominees do not have discretionary power to vote)
will be considered as present for purposes of determining the
presence of a quorum but will not be considered as voting at the
Special Meeting. Broker non-votes, therefore, will also have the
effect of votes against the approval of the Merger Agreement.
Any shareholder of Regional giving a proxy may revoke
it at any time prior to the vote at the Special Meeting.
Shareholders of Regional wishing to revoke a proxy prior to the
vote may do so by delivering to the Secretary of Regional at 1520
Washington Avenue, Alton, Illinois, 62002, at or before the
Special Meeting, a written notice of revocation bearing a later
date than the proxy or a later dated proxy relating to the same
shares, or by attending the Special Meeting and voting the same
shares in person. Attendance at the Special Meeting will not in
itself constitute the revocation of a proxy.
The Board of Directors of Regional 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 adjournments
or postponements 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 Regional.
SOLICITATION OF PROXIES
Regional 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
Regional may also solicit proxies in person or by telephone.
Directors, executive officers and any other employees of Regional
who solicit proxies will not be specially compensated for such
services. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward proxy materials to
beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial
owners.
HOLDERS OF REGIONAL COMMON STOCK ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT
TO REGIONAL PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
TERMS OF THE PROPOSED MERGER
----------------------------
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS AND
CONDITIONS OF THE MERGER AGREEMENT, WHICH DOCUMENT IS
INCORPORATED BY REFERENCE HEREIN. THIS SUMMARY IS QUALIFIED IN
ITS ENTIRETY BY THE FULL TEXT OF THE MERGER AGREEMENT. MBI, UPON
WRITTEN OR ORAL REQUEST, WILL FURNISH A COPY OF THE MERGER
AGREEMENT, WITHOUT CHARGE, TO ANY PERSON WHO RECEIVES A COPY OF
THIS PROXY STATEMENT/PROSPECTUS. SUCH REQUESTS SHOULD BE
DIRECTED TO JON W. BILSTROM, GENERAL COUNSEL AND SECRETARY,
MERCANTILE BANCORPORATION INC., P.O. BOX 524, ST. LOUIS, MISSOURI
63166-0524, TELEPHONE (314) 425-2525.
- 20 -
<PAGE> 24
GENERAL DESCRIPTION OF THE MERGER
Subject to the satisfaction or waiver of the terms and
conditions set forth in the Merger Agreement, which are described
below, Regional, an Illinois corporation, will be merged with and
into Ameribanc, a Missouri corporation. Upon consummation of the
Merger, Regional's corporate existence will terminate and
Ameribanc will continue as the surviving entity. Simultaneously
with the effectiveness of the Merger, each share of Regional
Common Stock (other than (a) a share held by MBI or any MBI
corporate affiliate, except a share held in a fiduciary capacity
or in satisfaction of a debt previously contracted in good faith,
or (b) a share as to which a Regional shareholder has perfected
dissenters' rights pursuant to Section 11.70 of the Illinois Act)
will be converted into the right to receive as consideration in
the Merger: (i) an amount in cash equal to $485.76; (ii)
23.7123 shares of MBI Common Stock; and (iii) 0.4838 of a share
of West Pointe Common Stock. Such consideration is subject to
certain anti-dilution protections but is not adjustable based on
the operating results, financial condition or other factors
affecting MBI, Regional or West Pointe prior to the consummation
of the Merger. The fair market value of the MBI Common Stock and
the West Pointe Common Stock received pursuant to the Merger may
fluctuate and at the consummation of the Merger may be more or
less than the current fair market value of such shares.
The amount and nature of the Merger Consideration was
established through arm's-length negotiations between MBI,
Ameribanc and Regional, 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 of and Reasons for the Merger;
Board Recommendations."
NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET
VALUE OF MBI COMMON STOCK OR WEST POINTE COMMON STOCK WILL BE
EQUIVALENT TO THE FAIR MARKET VALUE OF MBI COMMON STOCK OR WEST
POINTE COMMON STOCK, RESPECTIVELY, ON THE DATE SUCH STOCK IS
RECEIVED BY A REGIONAL SHAREHOLDER OR AT ANY OTHER TIME. THE
FAIR MARKET VALUE OF MBI COMMON STOCK AND WEST POINTE COMMON
STOCK AT THE TIME IT IS RECEIVED BY A REGIONAL SHAREHOLDER MAY BE
GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE OF MBI COMMON
STOCK OR WEST POINTE COMMON STOCK, RESPECTIVELY, DUE TO NUMEROUS
MARKET FACTORS.
At the Effective Time of the Merger, each outstanding
share of Regional Common Stock will be converted into the right
to receive the Cash Consideration, the Stock Consideration and
the West Pointe Consideration. See "- Surrender of Regional
Stock Certificates and Receipt of Merger Consideration."
CONDITIONS TO THE MERGER
The respective obligations of MBI, Ameribanc and
Regional to consummate the Merger are subject to the satisfaction
on or before the Closing Date of the following mutual conditions,
except as such parties may waive such conditions in writing:
(1) At the Special Meeting, the Merger and the
Merger Agreement shall have been duly approved by the
Regional shareholders.
(2) Orders, consents and approvals, in form and
substance reasonably satisfactory to MBI, Ameribanc and
Regional, shall have been entered by the Regulatory
Authorities and shall remain in force, granting the
authority necessary: (i) for
- 21 -
<PAGE> 25
consummation of the transactions contemplated by the
Merger Agreement pursuant to the provisions of the
Securities Act of 1933, as amended (the "Securities
Act") and other applicable laws; and (ii) to satisfy
all other requirements prescribed by applicable laws
and the rules and regulations of the Regulatory
Authorities.
(3) No judgment, order or decree of any court and
no order, notice, statute or regulation of any
government or governmental agency having jurisdiction
or authority over Regional, Bank of Alton, MBI or
Ameribanc shall be in effect which restrains or
prohibits, and no litigation, proceeding or
investigation shall be pending or threatened by or
before any such court or governmental agency attempting
to restrain or prohibit: (i) consummation of the
transactions contemplated by the Merger Agreement; or
(ii) the exercise of control by MBI or Ameribanc over
Regional or Bank of Alton following the Merger.
(4) The Registration Statement shall have become
effective under the Securities Act and as of the
Closing Date no stop order suspending the effectiveness
thereof shall have been issued or threatened.
(5) The MBI Common Stock shall be listed for
trading on the NYSE.
(6) MBI shall have delivered to Regional an
opinion of Thompson Coburn dated as of the Closing Date
or a mutually agreeable earlier date, reasonably
satisfactory in form and substance to Regional and its
legal counsel, to the effect that the Merger will
constitute a reorganization within the meaning of
Section 368 of the Code and that no gain or loss will
be recognized by Regional or the shareholders of
Regional or Bank of Alton to the extent that each
received shares of MBI Common Stock solely in exchange
for shares of Regional Common Stock in the Merger,
which opinion shall not have been withdrawn at or prior
to the Effective Time.
The obligation of MBI to consummate the Merger is
subject to the satisfaction on or before the Closing Date of the
following conditions, except as MBI may waive such conditions in
writing:
(1) All representations and warranties of
Regional contained in the Merger Agreement shall be
true and correct in all material respects on and as of
the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and
Regional shall have performed in all material respects
all agreements and covenants required by the Merger
Agreement to be performed by it on or prior to the
Closing Date.
(2) Regional shall have furnished to MBI a
certificate dated as of the Closing Date, signed by an
executive officer of Regional to the effect that, to
his knowledge, the representations and warranties of
Regional contained in the Merger Agreement are true and
correct in all material respects as of the Closing Date
and Regional has performed all agreements, covenants
and obligations required to be performed by it in all
material respects.
(3) Since the date of the Merger Agreement, there
shall have been no material adverse change in the
financial condition of Regional and Bank of Alton,
taken as a whole, except as may have resulted from
changes to laws and regulations, generally accepted
accounting principles ("GAAP") or regulatory accounting
principles,
- 22 -
<PAGE> 26
interpretations thereof, other conditions that affect
the banking industry generally or changes in the
general level of interest rates.
(4) MBI shall have received from Bryan Cave LLP
an opinion as to certain legal matters.
The obligation of Regional to consummate the Merger
shall be subject to the satisfaction on or before the Closing
Date of all of the following conditions, except as Regional may
waive such conditions in writing:
(1) All representations and warranties of MBI and
Ameribanc contained in the Merger Agreement shall be
true and correct in all material respects on and as of
the Closing Date as if such representations and
warranties were made on and as of the Closing Date, and
MBI shall have performed in all material respects all
agreements and covenants required by the Merger
Agreement to be performed by it on or prior to the
Closing Date.
(2) MBI shall have furnished to Regional a
certificate, dated as of the Closing Date, signed by an
executive officer of MBI and to the effect that, to the
knowledge of such officer, the representations and
warranties of MBI and Ameribanc contained in the Merger
Agreement are true and correct in all material respects
as of the Closing Date and MBI and Ameribanc have
performed all agreements, covenants and obligations
required to be performed by them.
(3) Since the date of the Merger Agreement, there
shall have been no material adverse change in the
financial condition of MBI or its subsidiaries (as
defined in the Merger Agreement), taken as whole,
except as may have resulted from changes to laws and
regulations, GAAP, interpretations thereof, other
conditions that affect the banking industry generally,
or changes in the general level of interest rates.
(4) Regional shall have received from Thompson
Coburn an opinion as to certain legal matters.
(5) The Registration Statement shall have become
effective under the Securities Act and, as of the
Effective Time, no stop order suspending the
effectiveness thereof shall have been issued or
threatened.
EFFECTIVE TIME; CLOSING DATE
The Merger will be consummated and the Effective Time
will occur at the time of the issuance of a certificate of merger
by each of the Office of the Secretary of State of the State of
Missouri and the Office of the Secretary of State of the State of
Illinois. Pursuant to the Merger Agreement, unless MBI,
Ameribanc and Regional otherwise agree, the Effective Time shall
occur no later than forty-five days following satisfaction or
waiver of the conditions to the consummation of the Merger
provided in the Merger Agreement. See " - Conditions to the
Merger."
AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be amended at any time by
written agreement of the parties upon the approval of their
respective Boards of Directors; provided, however, that after
the approval of
- 23 -
<PAGE> 27
the Merger Agreement by the shareholders of Regional at the
Special Meeting, no such modification may, without approval of
the shareholders of Regional (i) alter or change the amount or
form of the Merger Consideration to be received by such
shareholders or (ii) otherwise materially adversely affect such
shareholders.
TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by
the shareholders of Regional:
(1) by mutual consent of the Boards of Directors
of MBI and Regional;
(2) unilaterally by the Board of Directors of MBI
or the Board of Directors of Regional:
(i) at any time after August 23, 1997,
if the Merger has not been consummated by such date
(provided that the failure of such consummation to
occur is not a result of a willful and deliberate
breach, through action or failure to act, of any
representation, warranty, covenant or agreement
under the Merger Agreement by the terminating
party);
(ii) if there shall have been a final
judicial or regulatory determination that any of
the material provisions of the Merger Agreement
are illegal, invalid or unenforceable or denying
any regulatory application the approval of which
is a condition precedent to such party's
obligations under the Merger Agreement;
(iii) if the Merger Agreement is not
approved by the holders of the outstanding shares
of Regional Common Stock at the Special Meeting;
or
(iv) in the event of a material breach
by a party of any representation, warranty,
covenant or agreement contained in the Merger
Agreement, which breach cannot be or is not cured
within 30 days after written notice thereof is
given to the breaching party by the non-breaching
party; provided, however, that the departure of
any Executive Officer from the employ of Regional
will not be deemed a material breach of the Merger
Agreement; or
(3) by the Executive Committee of the Board of
Directors of MBI in the event that: (i) an
environmental audit discloses the existence of certain
material environmental liabilities on the properties or
assets of Regional or Bank of Alton; (ii) Regional does
not choose to correct the condition leading to such
environmental liability and to otherwise indemnify MBI
from such liability; and (iii) MBI reasonably believes
the cost of such remediation or potential liability
exceeds $250,000.
No assurance can be given that the Merger will be
consummated on or before August 23, 1997 or that MBI or Regional
will not elect to terminate the Merger Agreement if the Merger
has not been consummated on or before such date. In the event of
the termination of the Merger Agreement, the Merger Agreement
shall become void and there shall be no continuing obligations on
the part of any party or their respective officers and directors,
except that: (i) confidentiality obligations shall survive
termination; (ii) MBI and Ameribanc shall pay all printing,
mailing and filing expenses with respect to the Registration
Statement, this Proxy Statement/Prospectus and the regulatory
applications; and (iii) in
- 24 -
<PAGE> 28
the case of termination due to the intentional, deliberate and
willful non-performance of any covenant contained in the Merger
Agreement after notice and opportunity to cure, the breaching
party shall not be relieved of liability to the nonbreaching
party arising from such nonperformance.
VOTING AGREEMENTS
In addition to and contemporaneously with the Merger
Agreement, MBI executed separate Voting Agreements with certain
of the executive officers and directors of Regional and the
controlling shareholder of Regional, pursuant to which such
officers, directors and controlling shareholder agreed that they
will vote or cause to be voted all of the shares of Regional
Common Stock that they beneficially own, control or subsequently
acquire in favor of the approval of the Merger Agreement at the
Special Meeting. In addition, until the earliest to occur of the
Closing Date, the termination of the Merger Agreement or the
abandonment of the Merger by mutual agreement of Regional and MBI,
such officers, directors and controlling shareholder further
agreed that they will not vote or cause to be voted any such
shares in favor of the approval of any other agreement relating to
the merger or sale of all or substantially all the assets of
Regional to any person other than MBI or its affiliates. Such
officers, directors and controlling shareholder also agreed that
they will not transfer shares of Regional Common Stock unless,
prior to such transfer, the transferee executes an agreement with
respect to the transferred shares in substantially the same form
as the Voting Agreement and in a form reasonably satisfactory to
MBI. As of the Record Date, such officers, directors and
controlling shareholder together owned beneficially
an aggregate of 23,987 shares of Regional Common Stock, or
approximately 94.7% of the issued and outstanding shares.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
From and after the Effective Time, MBI and Ameribanc,
as applicable, subject to any limitations or other provisions of
applicable law and to the full extent provided in the respective
Articles of Incorporation, Bylaws and applicable indemnification
agreements of Regional and Bank of Alton as in effect on August
23, 1996, have agreed to indemnify and hold harmless each present
and former director, officer, employee and agent of Regional or
Bank of Alton, against any costs or expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
in connection with any claim, action, suit, proceeding or
investigation, whether civil, administrative or investigative,
arising out of, relating to or in connection with any action or
omission occurring prior to the Effective Time including, without
limitation, acts or omissions arising from such person's position
as an officer, director or other fiduciary capacity with Regional
or Bank of Alton. MBI will also make advances of expenses
incurred prior to the final disposition of a civil,
administrative or investigative action, suit, proceeding or claim
to any indemnifiable person upon the receipt of certain
undertakings from such person that such person shall repay such
amounts advanced in the event that it is ultimately determined
that such person is not entitled to such indemnification.
EFFECT ON BENEFIT PLANS
The Merger Agreement provides that MBI will cause
Ameribanc to honor all provisions for vested benefits earned or
accrued through the Effective Time under the Benefit Plans of
Regional and Bank of Alton; provided, however, that the
provisions of any plan, program or arrangement that provide for
the issuance or grant of any other interest in respect of the
capital stock of Regional or Bank of Alton will be terminated as
of the date of the Merger Agreement. The Benefit Plans will not
be terminated by reason of the Merger but will continue after the
Merger as plans of Ameribanc until such time as the employees of
Regional and Bank of Alton are integrated into MBI's employee
benefit plans that are available to other employees of MBI. MBI
will take such steps as are necessary to integrate the former
- 25 -
<PAGE> 29
employees of Regional and Bank of Alton into such MBI employee
benefit plans as soon as practicable after the Effective Time,
with (i) full credit for prior service with Regional and Bank of
Alton 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, to the extent met or satisfied by an affected
employee of Regional or Bank of Alton under the Benefit Plans,
all pre-existing condition exclusions or penalties.
BACKGROUND OF AND REASONS FOR THE MERGER; BOARD RECOMMENDATIONS
BACKGROUND OF THE MERGER. The Board of Directors of
Regional has periodically evaluated Regional's corporate strategy
based upon general conditions in the banking industry,
legislative changes and other developments affecting the industry
in general and Regional specifically. These developments have
included the ongoing consolidation of the banking industry, and
recent state and federal legislative changes that will facilitate
nationwide consolidation of the banking industry.
Beginning in the second quarter of 1996, the Board of
Directors of Regional began reviewing the desirability of a
business combination with a larger financial institution in light
of increased economic and competitive pressures on community
banks and the current trends in acquisitions and consolidations
of banking organizations within Regional's service areas. As a
result of this review, the Board of Directors determined that
pursuing such a business combination was in the best interests of
Regional and its shareholders.
Accordingly, in May 1996, the Board of Directors
solicited several institutions for preliminary expressions of
interest in such a transaction. Upon receipt of confidentiality
agreements, interested institutions were given access to a
limited collection of Regional's financial and business
documents. Initially, three large regional bank holding
companies, none of which was MBI, expressed a preliminary
interest and reviewed these documents. After completing their
review of the documents, these parties were asked to submit firm
expressions of interest along with the general terms of a
proposed transaction by May 31, 1996. Each of these three
companies submitted a firm expression of interest along with the
basic terms of a proposed transaction.
A fourth and fifth regional bank holding company, one
of which was MBI, later expressed a preliminary interest. After
representatives of Regional undertook discussions with these
additional regional bank holding companies, each chose to execute
a confidentiality agreement and examine the limited collection of
Regional's financial and business documents. After examining
these documents, MBI chose to submit a firm expression of
interest and the other party, after discussions with
representatives of Regional, chose not to proceed with the
bidding process.
All four remaining parties were provided, for their
comment and review, a form of merger agreement setting forth
proposed terms on which Regional would proceed with a transaction
and were asked for definitive proposals representing their
highest and best offers. After further discussion and due
diligence review, each of these four bank holding companies
submitted their highest and best offers to acquire all the
Regional Common Stock. Each final bid was made in terms of a
combination of cash and common stock in exchange for each share
of Regional Common Stock.
After further discussions between representatives of
Regional and the four bank holding companies, on June --, 1996,
Regional's Board of Directors considered the definitive proposals
submitted by the four regional bank holding companies. At that
meeting, the Board of Directors approved the bid submitted by MBI
and authorized certain directors to conduct final negotiations.
During June and July 1996, representatives of Regional's Board of
Directors, MBI and their respective counsel negotiated the
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form of merger agreement. On August --, 1996 the board approved
the final terms of the Merger Agreement and approved the
execution of the Merger Agreement.
REGIONAL'S REASONS AND BOARD RECOMMENDATIONS. The
Board of Directors of Regional, after careful study and
evaluation of economic, financial, legal and market factors,
believes that the Merger Agreement and the Merger are in the best
interest of Regional and its shareholders.
The Board of Directors believes that the Stock
Consideration, in addition to the Cash Consideration and West
Pointe Consideration to be received by the shareholders of
Regional in the Merger, represents an opportunity for the
shareholders of Regional to exchange their shares of Regional
Common Stock for MBI Common Stock at a favorable exchange ratio
for a security with a greater market liquidity. Among the other
factors considered by the Board of Directors of Regional in
deciding to approve and recommend the execution of the Merger
Agreement were MBI's respective businesses, the results of
operations and financial condition (including asset quality and
capital levels), growth prospects, products available to
customers, historical dividend and market performance, and the
fact that MBI Common Stock is traded on the NYSE. Additionally,
the Board considered MBI's commitment to serving the banking and
other needs of the Bank of Alton's depositors, employees,
customers and community. Upon careful review and analysis of all
of the factors described above, no single factor being
substantially more important in the review process than any
other, the Board of Directors unanimously approved the Merger
Agreement as being in the best interests of Regional and its
shareholders.
The Board of Directors of Regional unanimously recommends
approval of the Merger Agreement. The Board believes that the
terms of the Merger Agreement are fair and that the Stock
Consideration, Cash Consideration, distribution of the West
Pointe Common Stock and the Merger are in the best interest of
Regional and its shareholders. See "INFORMATION REGARDING
SPECIAL MEETING - Record Date; Vote Required; Voting Agreements."
THE BOARD OF DIRECTORS OF REGIONAL CAREFULLY CONSIDERED AND
UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING
IN THE BEST INTEREST OF REGIONAL AND ITS SHAREHOLDERS. THE BOARD
OF DIRECTORS OF REGIONAL UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
OF REGIONAL VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT.
MBI'S REASONS AND BOARD RECOMMENDATIONS. The Executive
Committee of the Board of Directors of MBI considered a number of
factors, including, among other things, the financial condition
of Regional and projected synergies which MBI anticipates will
result from the Merger. The Executive Committee concluded that
the Merger presents an unique opportunity for MBI to increase its
presence in southwestern Illinois through the acquisition of an
established banking organization having significant operations in
the targeted area. MBI's decision to pursue discussions with
Regional was primarily a result of MBI's assessment of the value
of Regional banking franchise, its asset base within that area
and the compatibility of the businesses of the two banking
organizations.
FRACTIONAL SHARES
No fractional shares of MBI Common Stock or West Pointe
Common Stock will be issued to the shareholders of Regional in
connection with the Merger. Each holder of Regional Common Stock
who otherwise would have been entitled to receive a fraction of a
share of MBI Common Stock shall receive in lieu thereof cash,
without interest, in an amount equal to the holder's fractional
share interest multiplied by $47.80, the Average MBI Stock Price.
Each holder of Regional Common Stock who otherwise would have been
entitled to receive a fraction of a share of West Pointe Common
Stock shall
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<PAGE> 31
receive in lieu thereof cash, without interest, in an amount equal
to the holder's fractional share interest multiplied by $30.00.
Cash received by Regional shareholders in lieu of fractional
shares of MBI Common Stock or West Pointe Common Stock may give
rise to taxable income. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER."
SURRENDER OF REGIONAL STOCK CERTIFICATES AND RECEIPT OF MERGER
CONSIDERATION
At the Effective Time of the Merger, each outstanding
share of Regional Common Stock will be converted into the right
to receive the Cash Consideration, the Stock Consideration and
the West Pointe Consideration. See "- General Description of
the Merger."
Within two business days following the Effective Time,
the Exchange Agent will mail to each former Regional shareholder
a form of letter of transmittal which shall specify instructions
for use in effecting the surrender of the certificate or
certificates which as of the Effective Time represented
outstanding shares of Regional Common Stock (each, a
"Certificate"). Upon the surrender to the Exchange Agent of a
Certificate for cancellation (or a lost certificate affidavit or
bond in a form reasonably acceptable to the Exchange Agent),
together with a duly executed letter of transmittal, the holder
of such Certificate shall be entitled to receive the cash, the
certificate representing MBI Common Stock and the certificate
representing West Pointe Common Stock to which such shareholder
is entitled as Merger Consideration. No interest will be accrued
or paid with respect to the cash component of the Merger
Consideration. No dividends or other distributions declared
after the Effective Time will be paid to a former Regional
shareholder with respect to the MBI Common Stock or West Pointe
Common Stock issuable as Merger Consideration until such
shareholder's letter of transmittal and Certificate(s) are
delivered to the Exchange Agent. Upon such delivery, all such
dividends or other distributions declared after the Effective
Time with respect to the whole number of shares of MBI Common
Stock and West Pointe Common Stock to which such shareholder is
entitled will be paid to such shareholder (without interest
thereon). No fractional shares of MBI Common Stock or West
Pointe Common Stock will be issued in the Merger. Cash, without
interest, determined by multiplying the holder's fractional share
interest by $47.80, the Average MBI Stock Price, will be paid in
lieu of fractional shares of MBI Common Stock. Cash, without
interest, determined by multiplying the holder's fractional share
interest by $30.00, will be paid in lieu of fractional shares of
West Pointe Common Stock. See "- Fractional Shares." The shares
of MBI Common Stock and West Pointe Common Stock issued as Merger
Consideration will be freely transferable, except that shares of
MBI Common Stock issued as Merger Consideration to certain
shareholders of Regional who are deemed to be "affiliates" of
Regional will be restricted in their transferability in
accordance with the rules and regulations promulgated by the
Commission. No such restrictions on transfer exist with respect
to the West Pointe Common Stock. See "INFORMATION REGARDING MBI
STOCK - Restrictions on Resale of MBI Stock by Affiliates."
After the Effective Time, there will be no further
transfers of Regional stock certificates on the records of
Regional and, if any such certificates are presented to MBI or
the Exchange Agent for transfer, they will be cancelled against
delivery of the Merger Consideration.
REGULATORY APPROVALS
In addition to the approval of the Merger Agreement by
the shareholders of Regional, the obligations of the parties to
effect the Merger are subject to prior approval of the Federal
Reserve Board and the Illinois Commissioner. As a bank holding
company, MBI is subject to regulation under the BHCA. The Merger
is subject to prior approval by the Federal Reserve Board under
Section 3 of the BHCA. The Federal Reserve Board may withhold
such approval if, among other things, the Federal Reserve Board
determines that the effect of the Merger would be to lessen
substantially competition in
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<PAGE> 32
the relevant markets. In addition, the Federal Reserve Board
will consider whether the combined organization meets the
requirements of the Community Reinvestment Act of 1977, as
amended, by assessing the involved entities' respective records
of meeting the credit needs of the local communities in which
they are chartered, consistent with the safe and sound operation
of such institutions. The Federal Reserve Board must also
examine the financial and managerial resources and future
prospects of the combined organization and analyze the capital
structure and soundness of the resulting entity. The Federal
Reserve Board has the authority to deny an application if it
concludes that the combined organization would have inadequate
capital. MBI must also file an application with the Illinois
Commissioner. The Illinois Commissioner will review the record
of MBI's subsidiary financial institutions in meeting the credit
needs of the communities they serve.
Applications for such approvals have been filed with
the Federal Reserve Board and the Illinois Commissioner. The
Merger cannot be consummated prior to receipt of such approvals
and the passage of any applicable waiting periods. MBI and
Regional are not aware of any governmental approvals or actions
that may be required for consummation of the Merger other than as
described above. Should any other approval or action be
required, it is presently contemplated that such approval or
action would be sought. There can be no assurance that any
necessary regulatory approvals or actions will be timely received
or taken, that no action will be brought challenging any such
approval or action or, if such a challenge is brought, as to 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 "SUPERVISION AND REGULATION."
BUSINESS PENDING THE MERGER
The Merger Agreement provides that, during the period
from August 23, 1996 to the Effective Time, except as consented
to by MBI in writing, Regional will, and will cause Bank of Alton
to:
(1) maintain its tangible property and assets in
the present state of repair, order and condition,
reasonable wear and tear excepted;
(2) maintain its books, accounts and records in
accordance with GAAP or regulatory accounting
principles, as the case may be, consistently applied;
(3) comply in all material respects with all laws
applicable to the conduct of its business;
(4) conduct its business only in the usual,
regular and ordinary course consistent with prior
practice, and not make any purchase or sale or
introduce any method of management or operation in
respect of such business or property, except in a
manner consistent with prior practice;
(5) make no change in its Articles of
Incorporation, Charters or Bylaws;
(6) maintain and keep in full force and effect
all fire and other insurance on property and assets,
all of the liability and other casualty insurance, and
all bonds on personnel, presently carried by it;
(7) duly and timely file all reports, tax returns
and other documents required to be filed with federal,
state and local and other authorities;
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<PAGE> 33
(8) unless it is contesting the same in good
faith and have established reasonable reserves
therefor, pay when required to pay all taxes indicated
by such tax returns or otherwise lawfully levied or
assessed upon it, or any of its properties or assets,
or which it is otherwise legally obligated to pay and
withhold or collect and pay to the proper governmental
authorities or hold in separate bank accounts for such
payment all taxes and other assessments which it
believes in good faith to be required by law to be so
withheld or collected;
(9) not sell, mortgage, subject to lien, pledge
or encumber or otherwise dispose of any of its assets
other than in the ordinary course of business;
(10) not redeem, retire or otherwise acquire or
agree to redeem or otherwise acquire any of its capital
stock or any option, warrant or right to acquire shares
of its capital stock or any security convertible into
its capital stock, or redeem or otherwise acquire any
notes, or make any prepayment on account of or in
respect of any indebtedness for any borrowed money;
(11) make no change in the number of shares of its
capital stock issued and outstanding, and grant no
option or commitment relating to their capital stock or
any security convertible into its capital stock or any
security the value or return of which is measured by
capital stock or any security subordinated to the
claims of its general creditors;
(12) except as otherwise specifically provided in
the Merger Agreement, not enter into or amend any
employment or severance contract or agreement with or
employee plan covering, or grant any salary or wage
increase to, any director, officer, employee or agent
of Regional or Bank of Alton except for normal
increases in compensation to individual non-officer
employees in accordance with past practice, and not
increase in any amount the benefits or compensation, if
any, of any such directors, officers, employees or
agents under any Benefit Plan or other contract or
commitment, and not pay nor agree to pay any bonus or
commission to any such director, officer, employee or
agent;
(13) not declare, set aside or pay any dividends
or other distributions, directly or indirectly, in
respect of its capital stock (other than dividends from
Bank of Alton to Regional), except that Regional may
pay its regular quarterly dividend of $10.00 per share,
in accordance with its past practice; provided however,
that if the Effective Time shall not have occurred
prior to March 10, 1997, Regional may declare, set
aside or pay a dividend for each share of Regional
Common Stock for each quarter thereafter in which the
MBI Board of Directors shall declare a dividend on
shares of MBI Common Stock in an amount that equals the
product of (i) 164% of the Stock Consideration, and
(ii) the amount of the dividend per share declared by
the Board of Directors of MBI; provided further,
however, that Regional shall not declare or pay any
such regular quarterly dividend for any quarter in
which Regional shareholders will be entitled to receive
a regular quarterly dividend on the shares of MBI
Common Stock to be issued in the Merger;
(14) not merge or consolidate with any other
corporation or other entity, acquire any stock (except
in a fiduciary capacity or to realize upon collateral
obtained in the ordinary course of business), effect
any reorganization or recapitalization involving
Regional or Bank of Alton; not acquire any assets of
any other person, corporation or
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<PAGE> 34
business organization except in the ordinary course of
business, or acquire any assets (including, without
limitation, deposits) of, or make any investment in,
any financial institution;
(15) not lease, sell or dispose of any material
part of its assets, make capital or fixed asset
expenditures in excess of $100,000 for any single item
or $250,000 in the aggregate, enter into any leases of
fixed assets, purchase any data processing equipment,
waive or release any right or cancel or compromise any
debt or claim except in the ordinary course of
business, enter into any management, maintenance,
servicing or similar contracts having a term of more
than one year or providing for fees in excess of a rate
of $250,000 per year, or otherwise enter into any
material contract, transaction or commitment except in
the ordinary course of business;
(16) not make any loans, discounts or commitments
to loan or discount in excess of the applicable legal
lending limits;
(17) not: (i) 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 equal to or in excess of $200,000; (ii) without
first consulting with and obtaining the written consent
of MBI, Lend to any person or entity in an amount equal
to or in excess of $400,000; (iii) Lend to any person
other than in accordance with lending policies as in
effect on August 23, 1996, provided that in the case of
clauses (i) through (iii) Regional or Bank of Alton may
make any such loan in the event (A) Regional or Bank of
Alton has delivered to MBI or its designated
representative a notice of its intent to make such loan
and such information as MBI or its designated
representative may reasonably require in respect
thereof and (B) 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
or its designated representative of the notice of
intention and information as aforesaid; or (iv) 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
Regional or Bank of Alton (except those denoted "pass"
thereon), in an amount equal to or in excess of
$50,000; provided, however, Regional and Bank of Alton
may honor any contractual obligation in existence on
August 23, 1996, or, with respect to loans made in
compliance with clauses (i) through (iii) above, make
such loans after consulting with MBI. Notwithstanding
clauses (i) and (ii), Regional or Bank of Alton shall
be authorized without first consulting with MBI or
obtaining MBI'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 shall not be in
excess of $25,000.
(18) not, directly or indirectly (including
through its officers, directors, employees or other
representatives) (i) initiate, solicit or encourage any
discussions, inquiries or proposals with any third
party (other than MBI) relating to the disposition of
any significant portion of the business or assets of
Regional or Bank of Alton or the acquisition of equity
securities of Regional or Bank of Alton or the merger
of Regional or Bank of Alton with any person (other
than MBI) or any similar transaction (each, an
"Acquisition Transaction"), or (ii) provide any such
person with information or assistance
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<PAGE> 35
or negotiate with any such person with respect to an
Acquisition Transaction, and Regional 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;
(19) not 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 Regional to obtain any approval of any
regulatory authority required for the transactions
contemplated by the Merger Agreement or to perform
their respective covenants and agreements under the
Merger Agreement or (B) prevent or impede the
transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the
Code;
(20) not materially restructure or change its
investment securities portfolio, through purchases,
sales or otherwise, or the manner in which the
portfolio is classified or reported, or execute
individual investment transactions of greater than
$500,000 for U.S. Treasury or Federal Agency Securities
and $100,000 for all other investment instruments; or
(21) not agree in writing or otherwise to take any
of the foregoing actions or engage in any activity,
enter into any transaction or intentionally take or
omit to take any other action which would make any of
its representations and warranties in the Merger
Agreement untrue or incorrect in any material respect
if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other
action.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase
method of accounting. Accordingly, data regarding the financial
condition and results of operations of Regional will be included
in MBI's consolidated financial statements on and after the
Closing Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
-----------------------------------------------------
The following discussion is a general summary of the
material United States federal income tax ("federal income tax")
consequences of the Merger to certain Regional shareholders and
does not purport to be a complete analysis or listing of all
potential tax considerations or consequences relevant to a
decision whether to vote for the approval of the Merger. The
discussion does not address all aspects of federal income
taxation that may be applicable to Regional shareholders in light
of their status or personal investment circumstances, nor does it
address the federal income tax consequences of the Merger that
are applicable to Regional shareholders subject to special
federal income tax treatment including (without limitation)
foreign persons, insurance companies, tax-exempt entities,
retirement plans, dealers in securities, persons who acquired
their Regional Common Stock pursuant to the exercise of employee
stock options or otherwise as compensation, and persons who hold
their Regional Common Stock as part of a "straddle," "hedge" or
"conversion transaction." In addition, the discussion does not
address the effect of any applicable state, local or foreign tax
laws, or the effect of any federal tax laws other than those
pertaining to the federal income tax. AS A RESULT, EACH REGIONAL
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
SHAREHOLDER. The discussion assumes that shares of Regional
Common Stock are held as capital assets (within the meaning of
Section 1221 of the Code) at the Effective Time.
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<PAGE> 36
Regional has received an opinion from Thompson Coburn
solely to the effect that, assuming the Merger occurs in
accordance with the Merger Agreement, the Merger will constitute
a "reorganization" for federal income tax purposes under Section
368 of the Code.
If the Merger constitutes a reorganization under the
Code, each holder of Regional Common Stock who exchanges, in the
Merger, shares of Regional Common Stock solely for shares of MBI
Common Stock and the Cash Consideration:
(i) will realize gain, determined separately as
to each block of Regional Common Stock (shares of
Regional Common Stock acquired at the same time in
a single transaction) exchanged, if (x) the sum of
the fair market value of the shares of MBI Common
Stock received and the amount of the Cash
Consideration received exceeds (y) the aggregate
adjusted tax basis of the Regional Common Stock
surrendered in exchange therefor, and will
recognize such gain, if any, up to but not in
excess of amount of Cash Consideration received;
(ii) will not recognize any loss realized
(determined separately as to each block of
Regional Common Stock exchanged);
(iii) will have basis for the shares of MBI
Common Stock received (including any fractional
share of MBI Common Stock deemed to be received,
as described below) equal to the aggregate
adjusted tax basis of the shares of Regional
Common Stock surrendered, increased by the amount
of gain, if any, recognized by such holder and
decreased by the amount of Cash Consideration
received; and
(iv) will have a holding period for the shares of
MBI Common Stock received (including any
fractional share of MBI Common Stock deemed to be
received, as described below) which includes the
holding period of the Regional Common Stock
surrendered.
The recognized gain described in clause (ii) above will
be capital gain or will be treated as the receipt of a taxable
dividend, depending on the facts and circumstances of each
Regional shareholder. Under Section 356 of the Code, the
determination of whether the receipt of the Cash Consideration
has the effect of the distribution of a dividend will be made
generally in accordance with the principles of Section 302 of the
Code, taking into account the stock ownership attribution rules
of Section 318 of the Code. Provided that the receipt of the
Cash Consideration by a Regional shareholder does not have the
effect of the distribution of a dividend, such gain will be
capital gain, and long-term or short-term depending on the
holder's holding period for each block of Regional Common Stock
surrendered. However, if the receipt of the Cash Consideration
does have the effect of the distribution of a dividend, such gain
generally will be taxable as a dividend.
The receipt of the Cash Consideration by a Regional
shareholder will be considered not to have the effect of the
distribution of a dividend under Section 302 of the Code and such
shareholder's recognized gain will be capital only if the receipt
of the Cash Consideration (i) results in a "substantially
disproportionate" reduction in such shareholder's actual and
constructive stock interest, or (ii) is "not essentially
equivalent to a dividend." These two tests will be applied as if
all Regional Common Stock exchanged for the Cash Consideration in
the Merger had instead been exchanged in the Merger solely for
shares of MBI Common Stock, and such shares of MBI Common Stock
were then redeemed by MBI in return for the Cash Consideration (a
deemed post-Merger redemption). Accordingly, the determination
of whether the receipt of the Cash Consideration by a Regional
shareholder satisfies either of the foregoing
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<PAGE> 37
tests will be made by comparing (i) such shareholder's actual and
constructive stock interest in MBI before the deemed post-Merger
redemption (determined as if such shareholder had received solely
MBI Common Stock in the Merger), with (ii) such shareholder's
actual and constructive stock interest in MBI after the deemed
post-Merger redemption.
The receipt of the Cash Consideration will result in a
"substantially disproportionate" reduction in a Regional
shareholder's stock interest and such shareholder's recognized
gain will be capital if the percentage of outstanding MBI Common
Stock actually and constructively owned by such shareholder after
the deemed post-Merger redemption is less than four-fifths
(i.e., 80%) of the percentage of outstanding MBI Common Stock
----
actually and constructively owned by such shareholder immediately
prior to the deemed post-Merger redemption (determined as if such
shareholder had received solely MBI Common Stock in the Merger).
The receipt of the Cash Consideration will not be "essentially
equivalent to a dividend" and such shareholder's recognized gain
will be capital if the deemed post-Merger redemption results in a
meaningful reduction in the percentage of outstanding shares
actually and constructively owned by such shareholder. No
specific tests apply to determine whether a reduction in a
shareholder's ownership interest is meaningful; rather, such
determination will be made based on all the facts and
circumstances applicable to such Regional shareholder. No
general guidelines dictating the appropriate interpretation of
facts and circumstances have been announced by the courts or
issued by the Internal Revenue Service (the "Service"). However,
the Service has indicated in Revenue Ruling 76-385 that a
minority shareholder (i.e., a holder who exercises no control
----
over corporate affairs and whose proportionate stock interest is
minimal in relation to the number of shares outstanding)
generally is treated as having had a "meaningful reduction" in
interest if the receipt of the Cash Consideration reduces such
holder's actual and constructive stock ownership by even a small
amount.
The determination of ownership for purposes of the
foregoing tests will be made by taking into account both shares
owned actually by such shareholder and shares owned
constructively by such shareholder pursuant to Section 318 of the
Code. Under Section 318 of the Code, a shareholder will be
deemed to own stock that is actually or constructively owned by
certain members of his or her family (spouse, children,
grandchildren, and parents) and other related parties including,
for example, certain entities in which such shareholder has a
direct or indirect interest (including partnerships, estates,
trusts and corporations), as well as shares of stock that such
shareholder (or a related person) has the right to acquire upon
exercise of an option or conversion right.
Because the determination of whether the receipt of the
Cash Consideration will be treated as having the effect of the
distribution of a dividend will generally depend upon the facts
and circumstances of each Regional shareholder, Regional
shareholders are strongly advised to consult their own tax
advisors regarding the tax treatment of the Cash Consideration
received in the Merger.
A Regional shareholder who receives cash in the Merger
in lieu of a fractional share of MBI Common Stock should be
treated as if the fractional share had been received by such
shareholder in the Merger and then redeemed by MBI in return for
the cash. The receipt of such cash will cause the recipient to
recognize capital gain or loss equal to the difference between
the amount of cash received and the portion of such holder's
adjusted tax basis in the shares of MBI Common Stock allocable to
the fractional share.
The appropriate treatment of the West Pointe
Consideration (including cash received in lieu of fractional
shares thereof, if any) is unclear. The West Pointe
Consideration could be accorded the same treatment as the Cash
Consideration, in which case the West Pointe Consideration would
be taken into account in determining gain, loss and basis as
described above, and gain attributable to the West Pointe
Consideration would be characterized either as capital gain or
dividend income as described above. Alternatively,
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<PAGE> 38
the West Pointe Consideration could be treated as having been
received in a pre-Merger dividend. If such pre-Merger dividend
treatment were appropriate, each Regional shareholder would
recognize dividend income in an amount equal to the fair market
value of the West Pointe Consideration received, and the West
Pointe Consideration would not be taken into account in
determining gain, loss or basis as described in the foregoing
discussion.
Each Regional shareholder should consult his or her own
tax advisor as to the determination of basis and holding period
in any one share of MBI Common Stock, because several methods of
determination may be available. In this regard, the transmittal
letter to be received by each Regional shareholder from the
Exchange Agent after the Closing Date permits each Regional
shareholder to designate the number of MBI Common Stock
certificates he or she wishes to receive, in order to permit
tracing of basis and holding period. See "TERMS OF THE PROPOSED
MERGER - Surrender of Regional Stock Certificates and Receipt of
Merger Consideration."
Thompson Coburn's opinion is subject to the conditions
and assumptions that are stated therein and relies upon various
representations made by MBI, Regional and the majority
shareholder of Regional, the truth and accuracy of which are
assumed for purposes of rendering such opinion. If any of these
conditions, assumptions or representations is inaccurate, the
Merger may fail to qualify as a reorganization and the tax
consequences of the Merger could differ from those described
herein. In particular, the Merger must satisfy the "continuity
of interest" requirement to qualify as a reorganization.
To satisfy the "continuity of interest" requirement,
Regional shareholders must not, pursuant to a plan or intent
existing at or prior to the Effective Time of the Merger, dispose
of or transfer so much of the MBI Common Stock to be received in
the Merger ("Planned Dispositions"), such that the Regional
shareholders, as a group, would no longer retain a significant,
albeit indirect, equity interest in the former business of
Regional. Regional shareholders generally will be regarded as
having a significant equity interest as long as the MBI Common
Stock received in the Merger (after taking into account Planned
Dispositions), in the aggregate, represents a substantial portion
of the entire consideration received by the Regional shareholders
in the Merger. For advance ruling purposes, the IRS considers an
interest equal to 50% or more of the fair market value of the
outstanding shares of Regional held immediately before the Merger
as a significant equity interest (the "IRS Continuity Test").
Notwithstanding the IRS Continuity Test, case law clearly
supports less than the 50% threshold required for advance ruling
purposes. In rendering its opinion, Thompson Coburn has relied
upon a representation of the majority shareholder of Regional
that such shareholder has no plan or intention to sell, exchange
or otherwise dispose of shares of MBI Common Stock received in
the Merger. Based on such representation, which is the sole
representation that Thompson Coburn relied upon with regard to
the continuity of interest requirement, the IRS Continuity Test
should be satisfied. However, Regional shareholders should be
aware that the majority shareholder of Regional holds sufficient
Regional Common Stock such that Planned Dispositions by such
shareholder alone could cause the Merger to fail to satisfy the
continuity of interest test.
A successful IRS challenge to the Reorganization status
of the Merger (as a result of a failure of the "continuity of
interest" requirement or otherwise) would result in significant
tax consequences. A Regional shareholder would recognize capital
gain or loss with respect to each share of Regional Common Stock
surrendered equal to the difference between the shareholder's
basis in such share and the fair market value, as of the
Effective Time, of the Merger Consideration received with in
respect of such share of Regional Common Stock. In such event, a
shareholder's aggregate basis in the MBI Common Stock so received
would equal its fair market value, and the shareholder's holding
period for such stock would begin the day after the Merger.
- 35 -
<PAGE> 39
Thompson Coburn's opinion is also based upon the Code,
regulations proposed or promulgated thereunder, judicial
precedent relating thereto, and current administrative rulings
and practice, all of which are subject to change. Any such
change, which may or may not be retroactive, could alter the tax
consequences discussed herein. The opinion is available without
charge upon written request to Jon W. Bilstrom, General Counsel
and Secretary, Mercantile Bancorporation Inc., P.O. Box 524, St.
Louis, Missouri 63166-0524. The receipt of Counsel's opinion
again as of the date of the closing of the Merger is a condition
to the consummation of the Merger. An opinion of counsel, unlike
a private letter ruling from the Service, has no binding effect
on the Service. The Service could take a position contrary to
Counsel's opinion and, if the matter were litigated, a court may
reach a decision contrary to the opinion. Neither MBI nor
Regional has requested an advance ruling as to the federal income
tax consequences of the Merger, and the Service is not expected
to issue such a ruling.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO CERTAIN REGIONAL
SHAREHOLDERS AND IS INCLUDED FOR GENERAL INFORMATION ONLY. THE
FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR
FACTS AND CIRCUMSTANCES OF EACH REGIONAL SHAREHOLDER'S TAX STATUS
AND ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES
ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH
REGIONAL SHAREHOLDER. ACCORDINGLY, EACH REGIONAL SHAREHOLDER
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER, 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.
RIGHTS OF DISSENTING SHAREHOLDERS OF REGIONAL
---------------------------------------------
Each holder of Regional Common Stock has the right to
dissent from the Merger and receive the fair value of such shares
of Regional Common Stock in cash if the shareholder follows the
procedures set forth in the Illinois Act, included as Annex A
-------
hereto and the material provisions of which are summarized below.
Pursuant to the Illinois Act, a holder of Regional
Common Stock may dissent and Ameribanc, as the surviving
corporation, will pay to such shareholder the fair value of such
shareholder's shares of Regional Common Stock, exclusive of any
appreciation or depreciation in anticipation of the Merger, as of
immediately before the consummation of the Merger if such
shareholder: (1) files with Regional prior to the vote being
taken a written demand for payment for his or her shares if the
Merger is consummated; and (2) does not vote in favor
---
thereof. MBI will include notice of the Effective Time in its
letter to all shareholders of Regional notifying them of the
procedures to exchange their shares of Regional Common Stock for
the Merger Consideration. Such letter shall be sent within two
business days following the Effective Time. Within 10 days after
the shareholder's vote is effective or 30 days after such
shareholder delivers to Regional a written demand for payment,
whichever is later, Ameribanc shall send each shareholder who has
delivered a written demand for payment a statement setting forth
the opinion of Ameribanc as to the estimated fair value of the
shares of Regional Common Stock, Regional's latest balance sheet
as of the end of a fiscal year ended not earlier than 16 months
before the delivery of the statement, together with the statement
of income for that year and the latest available interim
financial statements, and either (i) a commitment to pay for the
shares of the dissenting shareholder at the estimated fair value
thereof upon transmittal to Ameribanc of the certificate or
certificates, or other evidence of ownership, with respect to
such shares or (ii) instructions to the dissenting shareholder to
sell his or her
- 36 -
<PAGE> 40
shares within 10 days after the delivery of such statement to the
shareholder. A VOTE AGAINST THE MERGER, WHETHER BY PROXY OR IN
PERSON, WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN DEMAND FOR
PAYMENT FOR PURPOSES OF ASSERTING DISSENTERS' RIGHTS.
Upon consummation of the Merger, Ameribanc shall pay to
each dissenter who transmits to Ameribanc the certificate or
other evidence of ownership of the shares of Regional Common
Stock the amount Ameribanc estimates to be the fair value of such
shares, plus accrued interest, accompanied by a written
explanation of how the interest was calculated. Upon payment of
the agreed value, the dissenting shareholder shall cease to have
any interest in such shares of Regional Common Stock or in
Regional, Ameribanc or MBI.
If the dissenting shareholder does not agree with the
opinion of Ameribanc as to the estimated fair value of the shares
of Regional Common Stock or the amount of interest due, the
dissenting shareholder must, within 30 days from the delivery of
Ameribanc's statement of value, notify Ameribanc in writing, of
the shareholder's estimated fair value and interest due and
demand payment for the difference between the shareholder's
estimate of fair value and interest due and the amount of the
payment by Ameribanc. If, within 60 days from delivery to
Ameribanc of the shareholder notification of estimate of fair
value of shares of Regional Common Stock and interest due,
Ameribanc and the dissenting shareholder have not agreed in
writing upon the fair value of such shares and interest due,
Ameribanc shall either pay the difference in value demanded by
the shareholder, with interest, or file a petition in the circuit
court of the county in which either the registered office or the
principal office of Regional is located, requesting the court to
determine the fair value of such shares and interest due. The
"fair value" determined by the court may be more or less than the
amount offered to Regional shareholders under the Merger
Agreement. The judgment shall be payable only upon, and
simultaneously with, the surrender to MBI of the certificate or
certificates representing said shares of Regional Common Stock.
Upon the payment of the judgment, the dissenting shareholder
shall cease to have any interest in such shares of Regional
Common Stock or in Regional, Ameribanc or MBI.
FAILURE TO COMPLY STRICTLY WITH THESE PROCEDURES WILL
CAUSE THE SHAREHOLDER TO LOSE HIS OR HER DISSENTERS' RIGHTS.
CONSEQUENTLY, ANY SHAREHOLDER WHO DESIRES TO EXERCISE HIS OR HER
DISSENTERS' RIGHTS IS URGED TO CONSULT A LEGAL ADVISOR BEFORE
ATTEMPTING TO EXERCISE SUCH RIGHTS.
THE PRECEDING DISCUSSION IS A SUMMARY OF THE PROVISIONS
REGARDING DISSENTERS' RIGHTS UNDER THE ILLINOIS ACT AND IS
QUALIFIED IN ITS ENTIRETY BY THE TEXT OF SECTION 11.70 OF THE
ILLINOIS ACT WHICH IS ATTACHED HERETO AS ANNEX A. REGIONAL
-------
SHAREHOLDERS WHO ARE INTERESTED IN PERFECTING DISSENTERS' RIGHTS
PURSUANT TO THE ILLINOIS ACT IN CONNECTION WITH THE MERGER SHOULD
CONSULT WITH THEIR COUNSEL FOR ADVICE AS TO THE PROCEDURES
REQUIRED TO BE FOLLOWED.
- 37 -
<PAGE> 41
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 Regional
and the corresponding pro forma and pro forma equivalent per
share amounts, giving effect to the proposed acquisition of
Regional, the recent acquisitions of First Financial and TODAY'S
and the proposed acquisitions of First City and Mark Twain. The
data presented is based upon the supplemental consolidated
financial statements and consolidated financial statements and
related notes of MBI and the consolidated financial statements
and related notes of Regional and Mark Twain 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 "- Notes to Pro Forma Combined Consolidated
Financial Statements (Unaudited)." 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 proposed acquisition of Regional, the recent
acquisitions of First Financial and TODAY'S and the proposed
acquisitions of First City and Mark Twain had been consummated at
the beginning of the periods indicated. All adjustments
consisting of only normal recurring adjustments for a fair
statement of results of interim periods have been included.
<TABLE>
<CAPTION>
MBI/ MBI/ MBI/All MBI/
Regional Regional Entities All Entities
MBI Regional Pro Forma Pro Forma Pro Forma Pro Forma
Reported Reported Combined <F1> Equivalent <F2> Combined <F3> Equivalent <F2>
-------- -------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Book Value per Share:
September 30, 1996 $ 25.51 $924.77 $25.73 $610.12 $23.84 $565.30
December 31, 1995 26.04 913.16 26.24 622.21 25.04 593.76
Cash Dividends Declared per Share:
Nine months ended
September 30, 1996 $ 1.23 $ 30.00 $ 1.23 $ 29.17 $ 1.23 $ 29.17
Year ended December 31, 1995 1.32 40.83 1.32 31.30 1.32 31.30
Earnings per Share:
Nine months ended
September 30, 1996 $ 2.01 $ 79.37 $ 1.99 $ 47.19 $ 2.03 $ 48.14
Year ended December 31, 1995 3.74 108.93 3.71 87.97 3.47 82.28
Market Price per Share:
At August 23, 1996 <F4> $47.750 n/a n/a n/a n/a n/a
At December 10, 1996 <F4> 51.375 n/a n/a n/a n/a n/a
<FN>
- --------------------
<F1> Includes the effect of pro forma adjustments for Regional.
See "- Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F2> Based on the pro forma combined per share amounts
multiplied by 23.7123, the Stock Consideration. Further
explanation of the assumptions used in the preparation of
the pro forma combined consolidated financial statements is
included in the notes to pro forma financial statements.
See "- Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F3> Includes the effect of pro forma adjustments for Regional,
TODAY'S, First Financial, First City and Mark Twain. See
"- Notes to Pro Forma Combined Consolidated Financial
Statements (Unaudited)."
<F4> The market price per share of MBI Common Stock was
determined as of August 23, 1996, and December 10, 1996,
the last trading day preceding the public announcement of
the proposed Merger and as of the latest available date
prior to the filing of the Registration Statement,
respectively, based on the last sale price as reported on
the NYSE Composite Tape. There are no publicly available
quotations of Regional Common Stock.
</TABLE>
- 38 -
<PAGE> 42
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma combined consolidated
balance sheet gives effect to the proposed Merger, the recent
acquisitions of First Financial and TODAY'S and the proposed
acquisitions of First City and Mark Twain as if each of the
acquisitions were consummated on September 30, 1996.
The following pro forma combined consolidated income
statements for the nine months ended September 30, 1996 and 1995
and the year ended December 31, 1995 set forth the results of
operations of MBI combined with the results of operations of
Regional, First Financial, TODAY'S, First City and Mark Twain as
if the proposed Merger, the recent acquisitions of First
Financial and TODAY'S and the proposed acquisitions of First City
and Mark Twain had occurred as of the first day of the period
presented.
The unaudited pro forma combined consolidated financial
statements should be read in conjunction with the accompanying
Notes to the Pro Forma Combined Consolidated Financial Statements
and with the historical financial statements of MBI, Regional and
Mark Twain. These pro forma combined consolidated financial
statements may not be indicative of the results of operations
that actually would have occurred if the proposed acquisitions
had been consummated on the dates assumed above or of the results
of operations that may be achieved in the future.
- 39 -
<PAGE> 43
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
September 30, 1996
(Thousands)
(Unaudited)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Mark Twain
----------- --------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 909,350 $ 7,452 $ (12,330)<F4> $ 904,472 $ 169,916
Due from banks-interest bearing 74,713 -- 74,713 16
Federal funds sold and repurchase
agreements 183,227 495 183,722 15,879
Investments in debt and equity
securities
Trading 804 -- 804 43,669
Available-for-sale 3,959,361 66,077 4,025,438 459,690
Held to maturity 359,682 -- 359,682 225,384
----------- -------- --------- ----------- ----------
Total 4,319,847 66,077 -- 4,385,924 728,743
Loans and leases 12,166,461 103,169 12,269,630 2,143,218
Reserve for possible loan losses (202,149) (1,473) (203,622) (32,068)
----------- -------- --------- ----------- ----------
Net loans and leases 11,964,312 101,696 -- 12,066,008 2,111,150
Other assets 747,092 6,362 23,416 <F4> 771,038 122,229
(23,416)<F5>
17,584 <F15>
----------- -------- --------- ----------- ----------
Total Assets $18,198,541 $182,082 $ 5,254 $18,385,877 $3,147,933
=========== ======== ========= =========== ==========
<CAPTION>
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
---------- --------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSSETS
Cash and due from banks $ 5,864 $ 2,466 $ 14,461 $ (35,000)<F3> $ 1,014,534
(10,310)<F8>
(3,335)<F11>
(34,000)<F14>
Due from banks-interest bearing -- -- 270 74,999
Federal funds sold and repurchase
agreements 11,279 -- 10,250 221,130
Investments in debt and equity
securities
Trading -- -- -- 44,473
Available-for-sale 9,988 34,328 89,223 4,618,667
Held to maturity 2,022 -- 25,139 612,227
-------- -------- -------- --------- -----------
Total 12,010 34,328 114,362 -- 5,275,367
Loans and leases 57,687 48,226 358,239 14,876,999
Reserve for possible loan losses (822) (651) (3,769) (240,932)
-------- -------- -------- --------- ----------
Net loans and leases 56,864 47,575 354,470 -- 14,636,067
Other assets 3,134 3,502 25,290 289,433 <F6> 973,975
(289,433)<F7>
5,942 <F9>
(5,942)<F10>
10,831 <F11>
(10,831)<F12>
47,164 <F13>
(47,164)<F14>
4,517 <F15>
4,149 <F15>
40,098 <F15>
-------- -------- -------- --------- -----------
Total Assets $ 89,151 $ 87,871 $519,103 $ (33,881) $22,196,054
======== ======== ======== ========= ===========
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 40 -
<PAGE> 44
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
September 30, 1996
(Thousands)
(Unaudited)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Mark Twain
----------- --------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Deposits
Non-interest bearing $ 2,659,811 $ 13,717 $ 2,673,528 $ 449,001
Interest bearing 11,621,523 133,270 11,754,793 1,983,483
Foreign 328,717 -- 328,038 --
----------- -------- ------- ----------- ----------
Total deposits 14,610,051 146,987 -- 14,757,038 2,432,484
Federal funds purchased and
repurchase agreements 1,022,995 -- 1,022,995 --
Other borrowings 778,990 10,000 788,990 361,617
Other liabilities 251,633 1,679 253,312 64,399
----------- -------- ------- ----------- ----------
Total liabilities 16,663,669 158,666 -- 16,822,335 2,858,500
SHAREHOLDERS' EQUITY
Preferred stock -- -- -- --
Common stock 316,276 253 (253)<F5> 316,276 21,089
Capital surplus 232,873 2,907 1,933<F4> 234,806 67,077
(2,907)<F5>
Retained earnings 1,122,371 20,256 (20,256)<F5> 1,122,371 215,951
Treasury stock (136,648) -- 26,737<F4> (109,911) (14,684)
----------- -------- ------- ----------- ----------
Total shareholders' equity 1,534,872 23,416 5,254 1,563,542 289,433
----------- -------- ------- ----------- ----------
Total liabilities and shareholders'
equity $18,198,541 $182,082 $ 5,254 $18,385,877 $3,147,933
=========== ======== ======= =========== ==========
<CAPTION>
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
----------- --------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Deposits
Non-interest bearing $ 12,369 $ 7,520 $ 48,073 $ (10,310)<F8> $ 3,180,181
Interest bearing 64,234 67,783 398,500 14,268,793
Foreign -- -- -- 328,717
----------- -------- -------- ----------- -----------
Total deposits 76,603 75,303 446,573 (10,310) 17,777,691
Federal funds purchase and
repurchase agreements -- 1,076 8,938 1,033,009
Other borrowings 6,285 -- 10,833 1,167,725
Other liabilities 321 661 5,595 324,288
----------- -------- -------- ----------- -----------
Total liabilities 83,209 77,040 471,939 (10,310) 20,302,713
SHAREHOLDERS' EQUITY
Preferred stock -- -- -- --
Common stock 17 8 13,809 76,750 <F6> 394,276
(21,089)<F7>
1,250<F9>
(17)<F10>
(8)<F12>
(13,809)<F14>
Capital surplus 1,259 771 6,627 (78,345)<F6> 167,274
(67,077)<F7>
9,209<F15>
(1,259)<F10>
215<F11>
(771)<F12>
1,389<F13>
(6,627)<F14>
Retained earnings 5,581 10,052 26,728 215,951 <F6> 1,338,322
(215,951)<F7>
(5,581)<F10>
(10,052)<F12>
(26,728)<F14>
Treasury stock (915) -- -- (35,000)<F3> (6,531)
75,077<F6>
14,684<F7>
915<F10>
11,430<F11>
51,873<F13>
----------- -------- -------- ----------- -----------
Total shareholders' equity 5,942 10,831 47,164 (23,571) 1,893,341
----------- -------- -------- ----------- -----------
Total liabilities and shareholders'
equity $ 89,151 $ 87,871 $519,103 $ (33,881) $22,196,054
=========== ======== ======== =========== ===========
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 41 -
<PAGE> 45
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Mark Twain
--------- -------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Interest income $ 987,701 $9,682 $(1,465) $ 995,918 $170,209
Interest expense 465,821 4,826 470,647 75,803
--------- ------ ------- --------- --------
Net interest income 521,880 4,856 (1,465) 525,271 94,406
Provision for possible loan losses 55,915 75 55,990 2,001
--------- ------ ------- --------- --------
Net Interest Income after provision
for Possible Loan Losses 465,965 4,781 (1,465) 469,281 92,405
Other Income
Trust 59,491 142 59,633 4,976
Service charges 59,492 260 59,752 6,061
Credit card fees 18,515 18 18,533 795
Securities gains (losses) (2,843) (11) (2,854) 234
Other 77,274 389 77,663 17,134
--------- ------ ------- --------- --------
Total Other Income 211,929 798 -- 212,727 29,200
Other Expense
Salaries and employee benefits 237,447 1,528 238,975 36,968
Net occupancy and equipment 66,069 407 66,476 9,297
Other 178,654 1,193 879 180,726 14,173
--------- ------ ------- --------- --------
Total Other Expense 482,170 3,128 879 486,177 60,438
--------- ------ ------- --------- --------
Income Before Income Taxes 195,724 2,451 (2,344) 195,831 61,167
Income Taxes 70,407 441 (527) 70,321 22,197
--------- ------ ------- --------- --------
Net Income $ 125,317 $2,010 $(1,817) $ 125,510 $ 38,970
========= ====== ======= ========= ========
Per Share Data
Average Common Shares Outstanding 62,160,601 62,761,019
Net Income $2.01 $1.99
<CAPTION>
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
---------- --------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Interest income $5,214 $4,894 $28,985 $(2,815) $1,198,631
(554)
(3,220)
Interest expense 2,692 2,174 14,730 566,046
------ ------ ------- ------- ----------
Net interest income 2,522 2,720 14,255 (6,589) 632,585
Provision for possible loan losses 146 18 1,440 59,595
------ ------ ------- ------- ----------
Net Interest Income after provision
for Possible Loan Losses 2,376 2,702 12,815 (6,589) 572,990
Other Income
Trust -- -- 1,334 65,943
Service charges 226 154 1,246 67,439
Credit card fees -- -- 37 19,365
Securities gains (losses) -- -- 6 (2,614)
Other 1,688 175 960 97,620
------ ------ ------- ------- ----------
Total Other Income 1,914 329 3,583 -- 247,753
Other Expense
Salaries and employee benefits 975 1,177 5,598 283,693
Net occupancy and equipment 466 268 1,107 77,614
Other 594 360 6,254 226 204,545
207
2,005
------ ------ ------- ------- ----------
Total Other Expense 2,035 1,805 12,959 2,438 565,852
------ ------ ------- ------- ----------
Income Before Income Taxes 2,255 1,226 3,439 (9,027) 254,891
Income Taxes 271 390 1,148 (1,014) 91,955
(199)
(1,159)
------ ------ ------- ------- ----------
Net Income $1,984 $ 836 $ 2,291 $(6,655) $ 162,936
====== ====== ======= ======= ==========
Per Share Data
Average Common Shares Outstanding 80,029,801
Net Income $2.03
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 42 -
<PAGE> 46
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI Regional Adjustments<F2> Consolidated Mark Twain
--------- -------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Interest income $ 962,361 $8,707 $(1,465) $ 969,603 $166,669
Interest expense 459,432 3,833 463,265 70,299
--------- ------ ------- --------- --------
Net interest income 502,929 4,874 (1,465) 506,338 96,370
Provision for possible loan losses 29,177 42 29,219 3,344
--------- ------ ------- --------- --------
Net Interest Income after provision
for Possible Loan Losses 473,752 4,832 (1,465) 477,119 93,026
Other Income
Trust 52,142 149 52,291 --
Service charges 56,331 252 56,583 5,220
Credit card fees 15,622 16 15,638 --
Securities gains (losses) 3,776) 22 3,798 46
Other 71,745 401 72,146 22,123
--------- ------ ------- --------- --------
Total Other Income 199,616 840 200,456 27,389
Other Expense
Salaries and employee benefits 219,540 1,366 220,906 36,300
Net occupancy and equipment 60,371 328 60,699 9,934
Other 127,209 1,279 879 129,367 18,386
--------- ------ ------- --------- --------
Total Other Expense 407,120 2,973 879 410,972 64,620
--------- ------ ------- --------- --------
Income Before Income Taxes 266,248 2,699 (2,344) 266,603 55,795
Income Taxes 90,164 700 (527) 90,337 20,579
--------- ------ ------- --------- --------
Net Income $ 176,084 $1,999 $(1,817) $ 176,266 $ 35,216
========= ====== ======= ========= ========
Per Share Data
Average Common Shares Outstanding 61,497,977 62,098,395
Net Income $2.85 $2.83
<CAPTION>
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
---------- --------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Interest income $4,490 $4,490 $29,099 $(2,815) $1,168,489
(554)
Interest expense 2,557 1,982 14,605 (3,220) 552,708
------ ------ ------- ------- ----------
Net interest income 2,660 2,508 14,494 (6,589) 615,781
Provision for possible loan losses 146 -- 615 33,324
------ ------ ------- ------- ----------
Net Interest Income after provision
for Possible Loan Losses 2,514 2,508 13,879 (6,589) 582,457
Other Income
Trust -- 155 1,216 53,662
Service charges 241 -- 1,347 63,391
Credit card fees -- -- -- 15,638
Securities gains (losses) (18) (82) 140 3,884
Other 264 290 1,188 96,011
------ ------ ------- ------- ----------
Total Other Income 487 363 3,891 -- 232,586
Other Expense
Salaries and employee benefits 951 1,137 5,783 265,077
Net occupancy and equipment 405 325 2,093 73,456
Other 729 500 4,518 226 155,938
207
2,005
------ ------ ------- ------- ----------
Total Other Expense 2,085 1,962 12,394 2,438 494,471
------ ------ ------- ------- ----------
Income Before Income Taxes 916 909 5,376 (9,027) 320,572
Income Taxes 336 286 1,874 (1,014) 111,040
(199)
(1,159)
------ ------ ------- ------- ----------
Net Income $ 580 $ 623 $ 3,502 $(6,655) $ 209,532
====== ====== ======= ======= ==========
Per Share Data
Average Common Shares Outstanding 79,252,494
Net Income $2.63
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 43 -
<PAGE> 47
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
MBI,
Regional
Pro Forma
Regional Combined
MBI<F1> Regional Adjustments<F2> Consolidated Mark Twain
--------- -------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Interest income $1,293,944 $11,840 $(1,953) $1,303,831 $223,173
Interest expense 620,534 5,318 625,852 94,932
---------- ------- ------- ---------- --------
Net interest income 673,410 6,522 (1,953) 677,979 128,241
Provision for possible loan losses 36,530 42 36,572 5,003
---------- ------- ------- ---------- --------
Net Interest Income after provision
for Possible Loan Losses 636,880 6,480 (1,953) 641,407 123,238
Other Income
Trust 70,751 198 70,949 6,364
Service charges 75,408 341 75,749 7,051
Credit card fees 19,690 21 19,711 676
Securities gains (losses) 4,042 10 4,052 296
Other 103,762 538 -- 104,300 22,399
---------- ------- ------- ---------- --------
Total Other Income 273,653 1,108 -- 274,761 36,786
Other Expense
Salaries and employee benefits 298,625 1,811 300,436 47,531
Net occupancy and equipment 82,674 439 83,113 13,222
Other 172,449 1,647 1,172 175,268 25,769
---------- ------- ------- ---------- --------
Total Other Expense 553,748 3,897 1,172 558,817 86,522
---------- ------- ------- ---------- --------
Income Before Income Taxes 356,785 3,691 (3,125) 357,351 73,502
Income Taxes 124,109 933 (703) 124,339 25,789
---------- ------- ------- ---------- --------
Net Income $ 232,676 $ 2,758 $(2,422) $ 233,012 $ 47,713
========== ======= ======= ========== ========
Per Share Data
Average Common Shares Outstanding 61,883,723 62,484,141
Net Income $3.74 $3.71
<CAPTION>
Mark Twain,
First City, All Entities
First Financial, Pro Forma
First TODAY'S Combined
First City Financial TODAY'S Adjustments<F2> Consolidated
---------- --------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Interest income $7,030 $6,104 $39,180 $(3,754) $1,570,532
(738)
(4,294)
Interest expense 3,517 2,693 19,775 746,769
------ ------ ------- ------- ----------
Net interest income 3,513 3,411 19,405 (8,786) 823,763
Provision for possible loan losses 311 -- 960 42,846
------ ------ ------- ------- ----------
Net Interest Income after provision
for Possible Loan Losses 3,202 3,411 18,445 (8,786) 780,917
Other Income
Trust -- -- 1,624 78,937
Service charges 347 264 1,655 85,066
Credit card fees -- -- -- 20,387
Securities gains (losses) (18) (37) 62 4,355
Other 348 484 1,640 129,171
------ ------ ------- ------- ----------
Total Other Income 677 711 4,981 -- 317,916
Other Expense
Salaries and employee benefits 1,221 1,569 7,318 358,075
Net occupancy and equipment 546 191 2,806 99,878
Other 2,209 934 5,836 301 213,267
277
2,673
------ ------ ------- ------- ----------
Total Other Expense 3,976 2,694 15,960 3,261 671,220
------ ------ ------- ------- ----------
Income Before Income Taxes (97) 1,428 7,466 (12,037) 427,613
Income Taxes (76) 430 2,587 (1,351) 149,906
------ ------ ------- ------- ----------
(266)
(1,546)
------ ------ ------- ------- ----------
Net Income $ (21) $ 998 $ 4,879 $(8,874) $ 277,707
====== ====== ======= ======= ==========
Per Share Data
Average Common Shares Outstanding 79,676,965
Net Income $3.47
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 44 -
<PAGE> 48
MERCANTILE BANCORPORATION INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
[FN]
<F1> Represents MBI restated historical consolidated financial
statements reflecting the acquisition of Hawkeye, effective
January 2, 1996. Such acquisition was accounted for as a pooling
of interests. The acquisition of Sterling was also accounted for
as a pooling of interests; however, due to the immateriality of
the financial condition and results of operations of Sterling to
that of MBI, MBI did not restate its historical financial
statements to reflect the acquisition of Sterling. Each of
Sterling, Conway, Metro and Peoples is included in these pro forma
financial statements only from its acquisition date forward. The
full impact of these acquisitions is immaterial to the pro forma
combined consolidated financial statements.
<F2> The acquisition of Mark Twain will be accounted for as a pooling
of interests. The acquisitions of Regional, First City, First
Financial and TODAY'S will be accounted for as purchase
transactions. Purchase price adjustments offset each other or are
immaterial. Included herein are the amortization of goodwill over
a 15-year period (see footnote 15 below) and the lost interest
income on the cash consideration (for Regional, First Financial
and TODAY'S) and stock buybacks. Goodwill is considered non-
deductible. The balance sheet impact of goodwill amortization and
lost interest income is ignored due to immateriality.
<F3> In conjunction with the proposed acquisition of Mark Twain, MBI
plans on issuing 900,000 shares of MBI Common Stock held as
treasury shares that were previously acquired in the open market
at an average price per share of $44.53. An additional 700,000
shares may be repurchased with an estimated price per share of
$50.00. In conjunction with the proposed acquisitions of
Regional, First Financial and TODAY'S, MBI repurchased 2,036,267
shares of MBI Common Stock in the open market at an average price
per share of $44.22.
<F4> Purchase entry of Regional with assumed consideration consisting
of 600,418 reissued treasury shares at $47.75 per share, plus
$12,330,000 in cash. The closing price for MBI Common Stock on
August 23, 1996 (the date of execution of the Merger Agreement)
was $47.75. Exclusion of the West Pointe Consideration from the
purchase entry is not material to the financial condition or
results of operations reflected in the Pro Forma Combined
Consolidated Statements.
<F5> Elimination of MBI's investment in Regional.
<F6> Acquisition of Mark Twain with 16,950,000 shares of issued MBI
Common Stock, including 1,600,000 reissued treasury shares, based
on the exchange ratio of .952 shares of MBI Common Stock per share
of Mark Twain common stock. Mark Twain acquired Northland
Bancshares, Inc., owner of First National Bank of Platte County,
in September 1996 in an acquisition accounted for as a pooling of
interests; however, due to the immateriality of the financial
condition and results of operations of Northland Bancshares, Inc.
to that of Mark Twain, Mark Twain did not restate its historical
financial statements to reflect this acquisition. The full impact
of the acquisition of Northland Bancshares, Inc. is immaterial to
the pro forma combined consolidated financial statements.
<F7> Elimination of non-interest bearing deposit balance of Mark Twain
subsidiary bank with MBI subsidiary bank.
<F8> Elimination of MBI's investment in Mark Twain.
- 45 -
<PAGE> 49
<F9> The purchase of First City by Mark Twain is expected to be
completed prior to the acquisition of Mark Twain by MBI. Assumed
consideration of First City is 261,479 shares of Mark Twain common
stock valued at $40 per share. Based on the exchange ratio of
.952 shares of MBI Common Stock per share of Mark Twain common
stock, approximately 250,000 equivalent shares of MBI Common Stock
will be issued in the First City acquisition.
<F10>Elimination of MBI's investment in First City.
<F11>Purchase entry of First Financial with assumed consideration
consisting of 258,783 reissued treasury shares at $45.00 per
share, plus $3,335,000 in cash. The closing price for MBI Common
Stock on July 9, 1996 (the date of execution of the definitive
merger agreement between MBI and First Financial) was $45.00.
<F12>Elimination of MBI's investment in First Financial.
<F13>Purchase entry of TODAY'S with assumed consideration of 1,177,066
reissued treasury shares at $45.25 per share, plus $34,000,000 in
cash. The closing price for MBI Common Stock on March 19, 1996
(the date of the execution of the definitive merger agreement
between MBI and TODAY'S) was $45.25.
<F14>Elimination of MBI's investment in TODAY'S.
<F15>The pro forma excess of cost over fair value of net assets
acquired was $17,584,000, $4,517,000, $4,149,000 and $40,098,000
as of September 30, 1996 for Regional, First City, First Financial
and TODAY'S, respectively.
<F16>Upon consummation of the acquisition of Mark Twain, MBI expects
to record certain adjustments related to such acquisition at an
approximate pre-tax total of $30 million.
- 46 -
<PAGE> 50
INFORMATION REGARDING REGIONAL
------------------------------
BUSINESS
Regional is a registered single bank holding company that was
incorporated in 1979 under the laws of the State of Illinois. As of
September 30, 1996, Regional had consolidated assets of $182,082,000,
deposits of $146,987,000, loans, net of unearned discount, of
$103,169,000 and shareholders' equity of $23,416,000 and employed
fifty full-time employees and fourteen part-time employees. Regional
owns 100% of the outstanding capital stock of Bank of Alton.
Bank of Alton is a full-service community bank that offers
banking services to commercial and residential customers throughout
Madison County, Illinois. Such banking services include commercial,
real estate and personal loans, money market accounts, checking,
savings and time deposit accounts and trust services. The lending
portion of Bank of Alton's business relates primarily to the activities
of small- to medium-sized businesses, local community residences and
other consumer purposes.
Regional is subject to vigorous competition from major
banking institutions, as well as other financial institutions in its
principal service area, such as savings and loan associations,
insurance companies, credit unions and finance companies.
Regional and Bank of Alton are subject to supervision,
regulation and examination by the Federal Reserve Board, the Illinois
Commissioner and the Federal Deposit Insurance Corporation (the
"FDIC"). The deposits of Bank of Alton are primarily insured by the
Bank Insurance Fund ("BIF") of the FDIC.
In the following pages, statistical information about
Regional is presented. Such information should be read in conjunction
with " -- Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of
Regional included elsewhere herein.
- 47 -
<PAGE> 51
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
AND INTEREST RATES
The following tables show the condensed average balance
sheets for the periods presented and the percentage of each principal
category of assets, liabilities and shareholders' equity to total
assets. Also shown are the average yield on each category of interest-
earning assets and the average rate paid on interest-bearing
liabilities for each of the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------
1996 1995
--------------------------------------- ---------------------------------------
PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE
AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD
BALANCE ASSETS EXPENSE RATE<F1> BALANCE ASSETS EXPENSE RATE<F1>
------- ------ ------- -------- ------- ------ ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans<F2> $99,433 57.25% $ 6,679 8.96% $94,584 61.58% $6,285 8.86%
Taxable investment securities 43,757 25.19 2,018 6.15 30,229 19.68 1,426 6.29
Non-taxable investment securities<F3> 19,911 11.47 1,441 9.65 16,687 10.87 1,291 10.31
Federal funds sold 806 0.46 34 5.62 3,294 2.14 143 5.79
-------- ------ ------- ---- -------- ------ ------ -----
Total interest-earning assets 163,907 94.37 10,172 8.27 144,794 94.27 9,145 8.42
Noninterest earning assets:
Cash and due from banks 5,083 2.90 4,316 2.81
Premises and equipment 3,576 2.06 3,338 2.17
Other assets 2,589 1.49 2,738 1.78
Allowance for possible loan losses (1,422) (0.82) (1,580) (1.03)
-------- ------ -------- ------
Total assets $173,688 100.00% $153,606 100.00%
======== ====== ======== ======
Liabilities and shareholders' equity:
Interest-bearing liabilities:
Demand deposits $ 17,807 10.25% $ 272 2.04 $ 17,013 11.08% $ 263 2.06
Savings deposits 13,231 7.62 294 2.96 12,859 8.37 285 2.96
Money market 23,094 13.30 702 4.05 18,975 12.35 530 3.72
Time deposits 76,966 44.31 3,323 5.76 70,239 45.73 2,745 5.21
Federal funds purchased and
short-term borrowings 5,383 3.10 235 5.82 218 0.14 10 6.12
-------- ------ ------- ---- -------- ------ ------ -----
Total interest-bearing liabilities 136,481 78.58 4,826 4.71 119,304 77.67 3,833 4.28
Noninterest-bearing liabilities:
Demand deposits 12,195 7.02 12,153 7.91
Other liabilities 1,775 1.02 1,405 0.92
-------- ------ -------- ------
Total liabilities 150,451 86.62 132,862 86.50
Shareholders' equity 23,237 13.38 20,744 13.50
-------- ------ -------- ------
Total liabilities and shareholders' equity $173,688 100.00% $153,606 100.00%
======== ====== ======== ======
Net interest Income $ 5,346 $5,312
======= ======
Interest rate spread 3.56% 4.14%
==== =====
Net interest rate margin 4.35% 4.89%
==== =====
<FN>
- --------------------
<F1> Average yield/rate for the nine months ended September 30, 1996 and
1995 is annualized.
<F2> Average balances include non-accrual loans. The income on such
loans is included in interest but is recognized only upon receipt.
<F3> Non-taxable investment income presented on a fully tax-equivalent
basis. The tax effect resulted in an increase in interest income of
$490,000 and $439,000 for the nine months ended September 30, 1996 and
1995, respectively.
- 48 -
<PAGE> 52
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1995 1994
--------------------------------------- ---------------------------------------
PERCENT INTEREST AVERAGE PERCENT INTEREST AVERAGE
AVERAGE OF TOTAL INCOME/ YIELD/ AVERAGE OF TOTAL INCOME/ YIELD
BALANCE ASSETS EXPENSE RATE BALANCE ASSETS EXPENSE RATE
------- ------ ------- ---- ------- ------ ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans<F1> $ 95,077 60.12% $ 8,529 8.97% $ 84,372 57.19% $ 6,889 8.17%
Taxable investment securities 32,103 20.30 2,000 6.23 33,515 22.72 1,872 5.59
Non-taxable investment securities<F2> 17,065 10.79 1,723 10.10 20,307 13.77 2,264 11.15
Federal funds sold 3,017 1.91 173 5.73 1,171 0.79 55 4.70
-------- ------ ------- ----- -------- ------ ------- -----
Total interest-earning assets 147,262 93.12 12,425 8.44 139,365 94.47 11,080 7.95
Noninterest earning assets:
Cash and due from banks 4,418 2.79 3,913 2.65
Premises and equipment 3,330 2.11 3,220 2.18
Other assets 4,673 2.95 3,127 2.12
Allowance for possible loan losses (1,527) (0.97) (2,097) (1.42)
-------- ------ -------- ------
Total assets $158,156 100.00% $147,528 100.00%
======== ====== ======== ======
Liabilities and shareholders' equity
Interest-bearing liabilities:
Demand deposits $ 17,265 10.92% $ 355 2.06 $ 15,800 10.71% $ 328 2.08
Savings deposits 12,848 8.12 381 2.97 12,731 8.63 381 2.99
Money market 19,692 12.45 752 3.82 20,737 14.06 553 2.67
Time deposits 71,277 45.07 3,810 5.35 61,508 41.69 2,688 4.37
Federal funds purchased and
short-term borrowings 322 0.20 20 6.21 2,167 1.47 98 4.52
-------- ------ ------- ----- -------- ------ ------- -----
Total interest-bearing liabilities 121,404 76.76 5,318 4.38 112,943 76.56 4,048 3.58
Noninterest-bearing liabilities:
Demand deposits 12,143 7.68 13,049 8.85
Other liabilities 1,487 0.94 1,600 1.08
-------- ------ -------- ------
Total liabilities 135,034 85.38 127,592 86.49
Shareholders' equity 23,122 14.62 19,936 13.51
-------- ------ -------- ------
Total liabilities and shareholders' equity $158,156 100.00% $147,528 100.00%
======== ====== ======== ======
Net interest income $ 7,107 $ 7,032
======= =======
Interest rate spread 4.06% 4.37%
===== =====
Net interest rate margin 4.83% 5.05%
===== =====
<FN>
- --------------------
<F1> Average balances include non-accrual loans. The income on such
loans is included in interest but is recognized only upon receipt.
<F2> Non-taxable investment income presented on a fully tax-equivalent
basis. The tax effect resulted in an increase in interest income of
$585,000 and $770,000 for the years ended December 31, 1995 and 1994,
respectively.
</TABLE>
- 49 -
<PAGE> 53
INTEREST DIFFERENTIAL
The following table sets forth, on a tax-equivalent
basis for the periods presented, a summary of the changes in
interest income and expenses resulting from changes in yields/
rates. The change in interest due to both rate and volume
has been allocated to rate and volume changes in proportion to
the relationship of the absolute dollar amounts of the changes in
each.
<TABLE>
<CAPTION>
AMOUNT OF INCREASE (DECREASE)
1995 COMPARED TO 1994
INCREASE (DECREASE) DUE TO:
-------------------------------------------
VOLUME<F1> RATE<F2> NET
---------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest earned on:
Loans $ 926 $ 714 $1,640
Taxable investment securities (81) 209 128
Non-taxable investment securities<F3> (340) (201) (541)
Federal funds sold 104 14 118
----- ----- ------
Total interest-earning assets 609 736 1,345
----- ----- ------
Interest paid on:
Interest-bearing demand deposits 30 <F3> 27
Savings deposits 3 <F3> --
Money market (29) 228 199
Time deposits 465 657 1,122
Federal funds purchased & other
short-term borrowings (105) 27 (78)
----- ----- ------
Total interest-bearing liabilities 364 906 1,270
----- ----- ------
Net interest income $ 245 $(170) $ 75
===== ===== ======
<FN>
- --------------------
<F1> Change in volume multiplied by yield/rate of prior period.
<F2> Change in yield/rate multiplied by volume of prior period.
<F3> Nontaxable investment securities are presented on a fully
tax-equivalent basis assuming a tax rate of 34%.
</TABLE>
INVESTMENT PORTFOLIO
The book value of investment securities is summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1995 1994
--------------------------- ---------------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT SECURITIES AMOUNT SECURITIES
------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
U.S. government agencies and
corporations $27,775 49.2% $21,012 45.9%
State and municipal 27,070 48.0% 20,586 45.0%
Other 1,579 2.8% 4,137 9.1%
------- ----- ------- -----
Total $56,424 100.0% $45,735 100.0%
======= ===== ======= =====
</TABLE>
- 50 -
<PAGE> 54
The following table summarizes maturity and yield
information on investment securities at December 31, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
MATURING
-----------------------------------------------------------------------------------------
OVER ONE OVER FIVE
IN ONE THROUGH THROUGH OVER
YEAR OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL
------------------ ------------------- ------------------ ------------------ -------
AMOUNT YIELD<F1> AMOUNT YIELD<F1> AMOUNT YIELD<F1> AMOUNT YIELD<F1> AMOUNT
------ --------- ------ --------- ------ --------- ------ --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and other
U.S. government agencies and
corporations $1,008 6.80% $21,132 5.59% $2,229 6.76% $ -- --% $24,369
State and municipal 887 7.01 8,699 8.00 4,314 8.67 13,170 9.45 27,070
Other (includes MBS)<F2> 102 9.00 3,406 5.75 -- -- -- -- 3,508
------ ------- ------ ------- -------
Total $1,997 7.01% $33,237 6.24% $6,543 8.02% $13,170 9.45% $54,947
====== ==== ======= ==== ====== ==== ======= ==== =======
<FN>
- --------------------
<F1> Presented on a fully tax-equivalent basis assuming a tax
rate of 34%.
<F2> Equity securities of $1,035,000 in Federal Home Loan
Mortgage Corporation stock and $442,400 in Federal Home
Loan Bank of Chicago stock are not included in this table
as these equity securities have no stated maturity.
</TABLE>
LOAN PORTFOLIO
The composite of the loan portfolio is summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1995 1994
--------------------------- ---------------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT LOANS AMOUNT LOANS
------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $36,539 36.6% $35,410 37.7%
Real estate-mortgage 22,368 22.4 25,351 27.0
Installment 37,859 38.0 30,360 32.4
Consumer 3,004 3.0 2,513 2.7
Loans held for sale -- -- 214 0.2
------- ----- ------- -----
Total $99,770 100.0% $93,848 100.0%
======= ===== ======= =====
</TABLE>
- 51 -
<PAGE> 55
The following table sets forth the maturities and
sensitivities composition of total loans at December 31, 1995 and
summarizes maturity information for the loan portfolio as of
December 31, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------
AFTER ONE
IN ONE THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed Rate Loans:
- ----------------
Commercial, financial and agricultural $12,111 $10,344 $ 259 $22,174
Real estate-mortgage 2,678 6,586 5,528 14,792
Installment 1,484 34,897 1,469 37,850
Consumer 225 -- -- 225
------- ------- ------- -------
Total $16,498 $51,827 $ 7,256 $75,581
======= ======= ======= =======
Variable Rate Loans:
- -------------------
Commercial, financial and agricultural $ 6,531 $ 6,949 $ 345 $13,825
Real estate-mortgage 1,108 -- 6,468 7,576
Installment 9 -- -- 9
Consumer 2,779 -- -- 2,779
------- ------- ------- -------
Total $10,427 $ 6,949 $ 6,813 $24,189
======= ======= ======= =======
Total Loans:
- -----------
Commercial, financial and agricultural $18,642 $17,293 $ 604 $36,539
Real estate-mortgage 3,786 6,586 11,996 22,368
Installment 1,493 34,897 1,469 37,859
Consumer 3,004 -- -- 3,004
------- ------- ------- -------
Total $26,925 $58,776 $14,069 $99,770
======= ======= ======= =======
</TABLE>
RISK ELEMENTS INVOLVED IN LENDING ACTIVITIES. The
following table details the nonperforming asset information for
the periods presented:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-accrual loans $ 730 $1,031 $2,414
Loans past due 90 days or more 179 5 61
Restructured loans -- -- --
------ ------ ------
Total non-performing loans 909 1,036 2,475
Foreclosed property 631 960 719
------ ------ ------
Total non-performing assets $1,540 $1,996 $3,194
====== ====== ======
Non-performing loans to loans 0.88% 1.07% 2.71%
Non-performing assets to loans plus
foreclosed property 1.48% 2.04% 3.47%
Non-performing assets to total assets 0.85% 1.19% 2.16%
</TABLE>
It is generally the policy of Regional to discontinue
the accrual of interest on loans when principal or interest is
due and has remained unpaid for 90 days or more, unless the loan
is well secured and in the process of collection. If interest on
nonaccrual loans had been accrued, such income would have
amounted to $85,000 for 1995. Interest income on those loans,
representing cash payments received, amounted to $20 for 1995.
- 52 -
<PAGE> 56
POTENTIAL PROBLEM LOANS. Certain loans may require
frequent management attention and are reviewed on a monthly or
more frequent basis. Although payments on these loans are less
than 90 days past due or in many cases are current, the borrowers
have or have had a history of financial difficulties and
management has concern as to the borrower's ability to comply
with present loan repayment terms. As such, these loans may
result in classification at some future point as nonperforming.
At September 30, 1996 and December 31, 1995, such loans
(excluding all nonperforming loans described above) amounted to
$4,146,000 and $3,887,000, respectively.
FOREIGN OUTSTANDING. Regional had no loans to any
foreign countries on any of the dates specified in the tables.
LOAN CONCENTRATIONS. Regional does not have a
particular concentration of credit in any one economic
sector.
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes changes in the allowance
for loan loss arising from loans charged off and recoveries on
loans previously charged off, by loan category and additions to
the allowance that have been charged to expense.
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------
1996 1995 1994
------------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $1,350 $1,825 $1,897
Loans charged off:
Commercial, financial and agricultural 29 800 7
Real estate-mortgage -- -- --
Installment and consumer 150 114 24
------ ------ ------
Total charge-offs 179 914 31
------ ------ ------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 194 384 231
Real estate-mortgage 2 -- --
Installment and consumer 31 13 8
------ ------ ------
Total recoveries 227 397 239
------ ------ ------
Net charge-offs (recoveries) (48) 517 (208)
------ ------ ------
Additions to allowance charged to (credited to) expense 75 42 (280)
------ ------ ------
Balance at end of period $1,473 $1,350 $1,825
====== ====== ======
Net charge-offs (recoveries) to average loans (0.05)% 0.54% (0.25)%
Allowance for loan losses to loans 1.43 % 1.40% 2.00 %
Allowance for loan losses to
non-performing loans 162.05 % 130.31% 73.74 %
</TABLE>
The level of the allowance for loan loss is reviewed
quarterly by the board of directors and management utilizing two
methods of analysis. The first method assigns specific
allocation percentages based on the loans' risk ratings and
includes unused loan commitments. These specific allocation
percentages are reviewed annually by the board of directors and
management. The second method utilizes a loss history for each
type of loan category while estimating the potential loss
exposure.
- 53 -
<PAGE> 57
Management views the allowance for loan losses as being
available for all potential or previously unidentified loan
losses which may occur in the future. The risk of future losses
that is inherent in the loan portfolio is not precisely
attributable to a particular loan or category of loans. Based on
its review of adequacy, Regional's management has estimated those
portions of the allowance that could be attributable to major
categories of loans as detailed in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------
1995 1994
------------------------------ --------------------------------
PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO
ALLOWANCE TOTAL LOANS ALLOWANCE TOTAL LOANS
--------- ------------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 848 36.6% $1,146 37.7%
Real estate-mortgage 892 2.4 120 27.0
Installment 356 38.0 482 32.4
Consumer 57 3.0 7 2.7
Loans held for sale -- -- -- 0.2
------ ----- ------ -----
Total $1,350 100.0% $1,825 100.0%
====== ===== ====== =====
</TABLE>
Allocations estimated for the loan categories do not
specifically represent that loan charge-offs of that magnitude
will necessarily be incurred. The allocation does not restrict
future loan losses attributable to other categories. The risk
factors considered when determining the overall level of the
allowance for loan losses are the same when estimating the
allocation by major category, as specified in the allowance
category.
DEPOSITS
The following table shows, for each type of deposit,
the average balance and rate paid on each type of deposit for the
years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1995 1994
--------------------------------------------------------------
AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
-------------------------- --------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest bearing demand deposits $ 12,143 --% $ 13,049 --%
Interest-bearing demand deposits 36,956 3.00 36,537 2.41
Savings deposits 12,848 2.97 12,731 2.99
Time deposits 71,277 5.35 61,508 4.37
-------- --------
Total $133,224 3.98% $123,825 3.19%
======== ==== ======== ====
</TABLE>
The following table shows the maturity of time deposits of
$100,000 or more at December 31, 1995:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less $1,069
Over three through six months 3,940
Over six through twelve months 2,427
Over twelve months 1,727
------
$9,163
======
</TABLE>
- 54 -
<PAGE> 58
RETURN OF EQUITY AND ASSETS
The following ratios are among those commonly used in
analyzing the performance of banks and bank holding companies:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Return on average assets 1.74% 1.73%
Return on average equity 11.93% 12.77%
Dividend payout ratio 37.49% 5.90%
Equity to assets ratio 14.62% 13.51%
</TABLE>
PROPERTIES
Both Regional's and Bank of Alton's principal office is
located at 1520 Washington Avenue, Alton, Illinois 62002. Bank
of Alton also operates two branch facilities; one of which is
located at 2627 State Street, Alton, Illinois 62002; and the
other of which is located at One Terminal Drive, Bethalto,
Illinois 62010.
LEGAL PROCEEDINGS
During the normal course of business, various legal
claims have arisen which, in the opinion of the management of
Regional, will not result in any material liability to Regional.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION. The following discussion and analysis is
intended to review the significant factors affecting the
financial condition and results of operations of Regional for the
nine months ended September 30, 1996 and 1995 and the three-year
period ended December 31, 1995. It provides a more comprehensive
review of factors not otherwise apparent from the consolidated
financial statements of Regional alone. Reference should be made
to those financial statements and the selected financial data
presented elsewhere herein for an understanding of the following
review.
NET INCOME ANALYSIS. Regional's net income for 1995
was $2,758,000, compared to $2,546,000 for 1994 and $3,019,000
for 1993. The increase in net income for 1995 as compared to 1994
was due primarily to a decrease in non-interest expense offset by
an increase in provision for loan loss expense. The decrease in
net income for 1994 as compared to 1993 was due to both the
adoption of a new accounting standard for income taxes, which
added $518,000 to 1993 net income, and the change in the
provision for loan loss credit from $(960,000) in 1993 to
$(280,000) in 1994.
For the nine months ended September 30, 1996 and 1995,
net income was $2,010,000 and $1,999,000, respectively. The
increase was due primarily to a decrease in income tax expense.
NET INTEREST INCOME. Net interest income is the
largest component of earnings and is affected by the volume of
the sources and uses of funds, the respective rates earned and
paid on those funds, the mix of those funds and the volume of
non-performing assets. Regional's net interest income increased
4.1% to $6,522,000 for 1995 and increased 6.7% to $6,263,000 for
1994. The net interest margin, which is calculated by dividing
tax-equivalent net interest income by average interest-earning
assets, was 4.83% in 1995, compared to 5.05% and 5.19% in 1994
and 1993, respectively. Regional's yield on interest-earning
assets increased to 8.44% in 1995 from 7.95% in 1994 while the
cost of funds
- 55 -
<PAGE> 59
increased to 4.38% in 1995 from 3.58% in 1994. The decreases in
net interest margin were attributable to the increasing rate
environment and intense competition for deposits between local
financial institutions.
During 1995, increases in the average volume of loans
and federal funds sold resulted in an increase in interest income
of $1,030,000. This increase was partially offset by a $421,000
decrease in average volume of taxable and non-taxable investment
securities. Changes in interest rates on the average volume of
loans and federal funds sold increased interest income by
$728,000. Changes in interest rates on the average volume of
money markets and time deposits increased interest expense by
$885,000. The net effect of the volume and rate changes
associated with all categories of interest-earning assets during
1995 as compared to 1994 increased interest income by $1,345,000,
while the net effect of the volume and rate changes associated
with all categories of interest-bearing liabilities increased
interest expense by $1,270,000.
Net interest income was $4,856,000 for the first nine
months of 1996, a .3% decrease from the same period of 1995.
Interest income increased $975,000 for the first nine months of
1996 and interest expense increased $993,000. The net decrease
was primarily attributable to lower than expected loan demand and
strong local competition for deposits.
PROVISION FOR LOAN LOSSES. The provision for loan
losses charged to expense was $42,000 in 1995, compared to
credits of $(280,000) in 1994 and $(960,000) in 1993. The
negative provisions recorded by Regional in 1994 and 1993 were
due to significant performance improvements on several credits
which resulted in management's decision to reduce the level of
the allowance for loan losses in 1994 and 1993.
The allowance for loan losses is maintained at a level
considered adequate to provide for potential losses. The
provision for loan losses is based on a periodic analysis,
considering, among other factors, current economic conditions,
loan portfolio composition, past loan loss experience,
independent appraisals, loan collateral and payment experience.
In addition to the allowance for losses on identified problem
loans, an overall unallocated allowance is established to provide
for unidentified credit losses inherent in the portfolio. As
adjustments become necessary, they are reflected in the results
of operations in the periods in which they become known.
Management believes the allowance for loan losses is
adequate to absorb losses in the loan portfolio. While management
uses available information to recognize loan losses, future
additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as
an integral part of the examination process, periodically review
the allowance for loan losses. Such agencies may require Regional
to increase the allowance for loan losses based on their
judgments and interpretations about information available to them
at the time of their examinations.
The ratio of nonperforming loans to loans decreased
since 1993 as a result of a more aggressive approach to account
collections and the effectiveness of management in working with
the problem credits coupled with acquisitions of foreclosed real
estate.
The provision for loan losses was $75,000 in the first
nine months of 1996, compared to $42,000 in the same period for
1995.
NON-INTEREST INCOME. Regional's 1995 non-interest
income was $1,108,000, representing a 33.7% increase from 1994
results, while 1994 non-interest income represents a 34.7%
decrease from 1993 results. The increase in 1995 was due to an
increase of $35,000 in ATM switch income, a $10,000 increase in
gain on sale of investment securities, offset by a decrease of
$37,000 in gain on sale of other
- 56 -
<PAGE> 60
real estate. In addition, no security losses were recorded in
1995, compared to a loss of $250,000 in 1994 resulting from
repositioning the investment portfolio. The decrease in 1994
non-interest income was due primarily to a decrease of 80% on
gain on sale of mortgage loans due to a decrease of the volume of
loans sold from $13,356,000 in 1993 to $5,084,000 in 1994,
partially offset by a $85,000 increase in ATM switch income. In
addition, Regional recorded a gain on sale of investment
securities of $176,000 in 1993, compared to the loss of $250,000
in 1994.
Non-interest income for the first nine months of 1996
was $798,000, a 5.0% decrease from 1995. The decrease was due
primarily to a decrease in gains on sales of investment
securities, mortgage loans and other real estate.
NON-INTEREST EXPENSE. Non-interest expense decreased
3.3% in 1995 and 9.2% in 1994. FDIC insurance assessment
decreased 47.5% in 1995, primarily due to the FDIC's reduction of
deposit premiums charged to commercial banks, which resulted from
the BIF reaching its required reserve level of 1.25% of total
insured deposits during 1995. These decreases in non-interest
expense were offset by an increase in equipment and data
processing expense of 18.0% and 55.2%, respectively, due to
implementation of a new data processing system in August 1994.
The 1994 decrease was attributable to a decrease in occupancy
expense of 35.7% and a decrease in legal and professional fees of
27.8%. In 1993, the useful lives of many fixed assets were
evaluated and shortened, resulting in a one-time charge to
depreciation expense which inflated 1993 occupancy expense. In
addition, 1993 legal and professional fees contained expenses
associated with regulatory matters involving a former bank
officer. These decreases were offset by a 46.7% increase in data
processing expense, again due to implementation of a new data
processing system in August 1994.
Non-interest expense for the first nine months of 1996
was $3,128,000 compared to $2,973,000 in the first nine months of
1995. The addition of a new facility in Bethalto, Illinois
increased salaries and employee benefits 11.9%, increased
occupancy 34.4% and increased equipment expense 17.7%. These
increases were partially offset by a 99.5% decrease in FDIC
insurance assessment, again primarily due to the FDIC's reduction
in the deposit premium charged to commercial banks. Other non-
interest expense increased 12.0% partially due to a write-down on
other real estate of $50,000.
INCOME TAXES. Regional recorded income tax expense of
$933,000 for 1995, $796,000 for 1994 and $1,158,000 for 1993.
The effective income tax rates were 25.3%, 23.8% and 31.6% for
the years ended December 31, 1995, 1994 and 1993, respectively.
Income tax expense of $441,000 and $700,000 was
recorded for the nine months ended September 30, 1996 and 1995,
respectively.
In February 1992, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes ("SFAS 109"). SFAS 109 was
effective for fiscal years beginning after December 15, 1992 and
could have been applied through retroactive restatement of
previously issued financial statements, or through reporting the
cumulative effect of applying the changes in the period of its
initial application. Regional implemented SFAS 109 during 1993
and reported the cumulative effect of this change in the method
of accounting for income taxes resulting in an increase in
earnings of $518,000 in Regional's 1993 consolidated statement of
income.
LIQUIDITY AND INTEREST RATE SENSITIVITY. Liquidity is
provided to Regional through earning assets, including short-term
investments in federal funds sold, and through maturities in the
investment
- 57 -
<PAGE> 61
and loan portfolios. In addition, liquidity is provided by
advances from the Federal Home Loan Bank of Chicago.
The asset/liability management process, which involves
management of the components of the balance sheet to allow assets
and liabilities to reprice at approximately the same time, is a
dynamic process essential to minimizing the effect of interest
rate fluctuations on net interest income. The following tables
reflect Regional's GAP analysis (rate-sensitive assets minus
rate-sensitive liabilities) as of September 30, 1996 and December
31, 1995, respectively:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------------------------------------
OVER OVER
3 MONTHS 1 YEAR
3 MONTHS THROUGH 12 THROUGH OVER
OR LESS MONTHS 5 YEARS 5 YEARS TOTAL
-------- ---------- ------- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt and equity securities $ 155 $ 2,287 $ 36,937 $26,698 $ 66,077
Loans 21,408 15,701 48,733 20,685 106,527
Federal funds sold 495 -- -- -- 495
Interest-bearing deposits -- -- -- -- --
-------- -------- -------- ------- --------
Total interest-sensitive assets 22,058 17,988 85,670 47,383 173,099
-------- -------- -------- ------- --------
Liabilities:
Money market deposits
(interest-bearing demand) 41,797 -- -- -- 41,797
Savings 12,547 -- -- -- 12,547
Time deposits 30,757 23,944 24,225 -- 78,926
Short-term borrowings 4,000 5,000 1,000 -- 10,000
-------- -------- -------- ------- --------
Total interest-sensitive liabilities 89,101 28,944 25,255 -- 143,270
-------- -------- -------- ------- --------
Interest-sensitivity gap at September 30, 1996:
Incremental $(67,043) $(10,956) $ 60,445 $47,383 $ 29,829
======== ======== ======== ======= ========
Cumulative $(67,043) $(77,999) $(17,554) $47,383
======== ======== ======== =======
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------------------
OVER OVER
3 MONTHS 1 YEAR
3 MONTHS THROUGH 12 THROUGH OVER
OR LESS MONTHS 5 YEARS 5 YEARS TOTAL
-------- ---------- ------- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt and equity securities $ -- $ 1,997 $ 33,237 $21,190 $ 56,424
Loans 19,661 12,178 49,355 18,576 99,770
Federal funds sold 3,625 -- -- -- 3,625
-------- ------- --------
Total interest-sensitive assets 23,286 14,175 82,592 39,766 159,819
-------- -------- -------- ------- --------
Liabilities:
Money market deposits
(interest-bearing demand) 43,013 -- -- -- 43,013
Savings 13,041 -- -- -- 13,041
Time deposits 22,062 33,502 19,286 -- 74,850
Total interest-sensitive liabilities 78,116 33,502 19,286 -- 130,904
-------- -------- -------- ------- --------
Interest-sensitivity gap at December 31, 1995:
Incremental $(54,830) $(19,327) $ 63,306 $39,766 $ 28,915
======== ======== ======== ======= ========
Cumulative $(54,830) $(74,157) $(10,851) $28,915
======== ======== ======== =======
</TABLE>
As indicated in the preceding tables, Regional was
liability sensitive on a cumulative basis in the near term (three
months or less) at September 30, 1996 and December 31, 1995,
based on contractual maturities and earliest repricing dates. In
this regard, an increase in the general level of interest rates
would generally have a negative effect on Regional's net interest
income as the repricing of the larger volume of interest-
sensitive liabilities would create a larger amount of interest
expense than
- 58 -
<PAGE> 62
the additional amount of interest income created by the repricing
of the smaller volume of interest-sensitive assets.
The following table summarizes certain trends in
Regional's consolidated balance sheet during the two-year period:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total assets $167,680 $148,140
Earning assets $156,733 $138,476
Deposits $142,714 $127,107
Loans to deposits (net loans) 67.75% 71.84%
Loans to total assets (net loans) 57.66% 61.64%
Debt securities to total assets 33.65% 30.87%
</TABLE>
The composition of total assets and earning assets
changed during 1995 as funds were shifted into investments due to
lower than expected loan growth. Regional's earning assets
increased $18,257,000 from December 31, 1994 to December 31,
1995. Investment securities were $56,424,000 at December 31,
1995 as compared to $45,375,000 at December 31, 1994. Loans, net
of unearned discount, were $96,684,000 at December 31, 1995,
compared to $91,316,000 at December 31, 1994. Deposits increased
$15,607,000 from December 31, 1994 to December 31, 1995.
Interest-bearing deposits increased $17,182,000, while non
interest-bearing deposits decreased $1,575,000.
CAPITAL ADEQUACY. Regional's equity capital was
$23,416,000, $23,122,000 and $19,685,000 at September 30, 1996,
December 31, 1995 and December 31, 1994, respectively. During
1996, equity capital increased $294,000 as a result of net income
of $2,010,000, offset by dividends paid of $760,000 and a net
unrealized loss on securities available-for-sale of $(956,000).
During 1995, equity capital increased $3,437,000. This increase
was attributable to net income of $2,758,000, and a $1,713,000
net unrealized gain on marketable equity securities, offset by
dividends paid of $1,034,000.
Risk-based capital guidelines for financial
institutions were adopted by regulatory authorities and were
effective January 1, 1991. These guidelines were designed to
relate regulatory capital requirements to the risk profile of the
specific institutions and to provide for uniform requirements
among the various regulators. Currently, the risk-based capital
guidelines require Regional to meet a minimum total capital ratio
of 8.0%, of which at least 4.0% must consist of Tier 1 capital.
Tier 1 capital generally consists of (a) common shareholders'
equity, (b) qualifying perpetual preferred stock and related
surplus subject to certain limitations specified by the FDIC and
(c) minority interests in the equity accounts of consolidated
subsidiaries less goodwill and any other intangible assets and
investments in subsidiaries that the FDIC determines should be
deducted from Tier 1 capital. The FDIC also requires a minimum
leverage ratio of 3.0%, defined as the ratio of Tier 1 capital
less purchased mortgage servicing rights to total assets, for
banking organizations deemed the strongest and most highly-rated
by banking regulators. A higher minimum leverage ratio is
required of less highly-rated banking organizations.
- 59 -
<PAGE> 63
The following tables summarize, on a consolidated
basis, Regional's risk-based capital and leverage ratios:
<TABLE>
<CAPTION>
RISK BASED CAPITAL RATIOS
-------------------------------------------------------------------------------------------------
TOTAL TIER 1
-------------------------------------------- -------------------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
------------- ---------------------- ------------- ---------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C>
21.97% 22.43% 22.99% 20.72% 21.18% 21.74%
<CAPTION>
LEVERAGE RATIOS
--------------------------------------------
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------
1996 1995 1994
---- ---- ----
<C> <C> <C>
12.86% 13.79% 13.29%
</TABLE>
Risk Management. Regional's management objective in
structuring the balance sheet is to maximize the return on
stockholders' equity while minimizing the associated risks. The
major risks involved in the banking industry are market, credit
and liquidity risks. The following is a discussion of Regional's
management of these risks.
Market Risk Management. Regional's management
----------------------
believes its loan and investment portfolios are sufficiently
diversified to minimize the effect of a downturn in any
particular industry or market. Regional does not have any
particular concentration of credit in any one economic
sector. Installment loans as of December 31, 1995 totaled
$37,859,000, or 38%, of the loan portfolio, while real
estate loans totaled $22,368,000, or 22.4%, of the loan
portfolio. Commercial loans as of December 31, 1995 totaled
$36,539,000, or 36.6%, of the loan portfolio. The commercial
loan portfolio, which includes loans made primarily to
businesses located in Madison County and served by Regional,
is generally secured by business assets such as inventory,
accounts receivable and equipment. At December 31, 1995 the
total investment portfolio was $56,424,000. Approximately
49.2% of the portfolio is comprised of U.S. Government
issues and approximately 48.0% is comprised of State and
Municipal Bonds.
Credit Risk Management. The risks Regional's
----------------------
management assumes in providing credit products to customers
is fundamental to its business operation. Credit risk
management includes defining an acceptable level of risk and
return, establishing policies and procedures to govern the
credit process and maintaining a thorough portfolio review
function. Credit policies are ultimately the responsibility
of Regional's Board of Directors and, as such, are reviewed
and approved by the Board of Directors. Of equal importance
in this risk management process are the ongoing monitoring
procedures performed by management.
Nonperforming loans represented .88% of total loans at
September 30, 1996, compared to 1.07% and 2.71% at December
31, 1995 and 1994, respectively. Other real estate owned by
Regional totaled $631,000 at September 30, 1996 and $960,000
and $719,000 at December 31, 1995 and 1994, respectively.
Liquidity Risk Management. Liquidity is a
-------------------------
measurement of Regional's ability to meet the borrowing
needs and the deposit withdrawal requirements of its
customers. Regional actively manages the composition of its
assets and liabilities to maintain the appropriate level of
liquidity in the balance sheet. Management is guided by
regularly reviewed policies when determining the
- 60 -
<PAGE> 64
appropriate portion of total assets, which should be
comprised of readily marketable assets available to meet
future liquidity needs.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS. During May
1993, FASB issued Statement of Financial Accounting Standards No.
114, Accounting by Creditors for Impairment of a Loan ("SFAS
114") and SFAS 115, Accounting for Certain Investments in Debt
and Equity Securities ("SFAS 115"). During October 1994, the FASB
issued SFAS 118, Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures ("SFAS 118"), which amends
SFAS 114. During October 1994, the FASB issued SFAS 119,
Disclosure About Derivative Financial Instruments and Fair Value
of Financial Instruments ("SFAS 119"). In March 1995, the FASB
issued SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121").
In May 1995, the FASB issued SFAS 122, Accounting for Mortgage
Servicing Rights ("SFAS 122"), an amendment of FASB Statement No.
65. In June 1995, the FASB issued SFAS 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities ("SFAS 125").
SFAS 114, as amended by SFAS 118, amends SFAS 5,
Accounting for Contingencies, and SFAS 15, Accounting by Debtors
and Creditors for Troubled Debt Restructurings, and became
effective for Regional on January 1, 1995. SFAS 114 defines the
recognition criterion for loan impairment and the measurement
methods for certain impaired loans and restructured loans, loans
whose terms have been modified in troubled-debt restructurings.
Specifically, a loan is considered impaired when it is probable a
creditor will be unable to collect all amounts due, including
both principal and interest, according to the contractual terms
of the loan agreement. When measuring impairment, the expected
future cash flows of an impaired loan will be discounted at the
loan's effective interest rate. Alternatively, impairment could
be measured by reference to an observable market price, if one
exists, or the fair value of the collateral for a collateral-
dependent loan. Regardless of the measurement method used, SFAS
114 requires a creditor to measure impairment based on the fair
value of the collateral when the creditor determines foreclosure
is probable. Additionally, impairment of a restructured loan
will be measured by discounting the total expected future cash
flow at the loan's effective rate of interest as stated in the
original loan agreement.
SFAS 118 amends SFAS 114 to allow creditors to use
existing methods of recognizing interest income on impaired
loans. Regional has elected to continue to use its existing
nonaccrual methods of recognizing interest on impaired loans.
The impact of initially applying SFAS 114 and SFAS 118
was not reported as an accounting change; rather, it was reported
as a component of the provision for loan losses charged to
operations, and had no effect on Regional's consolidated results
of operation as a result of implementation. SFAS 114 and SFAS
118 are effective for fiscal years beginning after December 15,
1994.
SFAS 115 supersedes SFAS 12, Accounting for Certain
Marketable Securities and related interpretations, and
significantly amends SFAS 65, Accounting for Certain Mortgage
Banking Activities, and SFAS No. 60, Accounting and Reporting by
Insurance Enterprises. Regional adopted the provisions of SFAS
115 on January 1, 1994. SFAS 115 addresses the accounting and
reporting for investments in equity securities that have readily
determinable fair values, and all investments in debt securities.
Under SFAS 115, debt and equity securities are classified into
one of three categories; trading; available-for-sale and held-to-
maturity. Trading securities are bought and held principally for
the purpose of selling them in the near term. Held-to-maturity
securities are those securities in which Regional has the ability
and intent to hold until maturity. All other securities not
included in trading or held-to-maturity are classified as
available-for-sale. Regional has classified all securities as
available-for-sale.
- 61 -
<PAGE> 65
As previously mentioned, effective January 1, 1994,
Regional adopted SFAS 115, for which the cumulative effect was
recorded on the consolidated balance sheet on that date. On
January 1, 1994: (i) debt and marketable equity securities with
an amortized cost of $55,075,000 were classified as available-
for-sale securities; (ii) a market valuation account was
established for the available-for-sale securities of $2,713,000
to increase the recorded balance of such securities at January 1,
1994 to their fair value on that date; (iii) a deferred liability
of $922,000 was recorded to reflect the tax effect of the market
valuation account; and (iv) the net increase resulting from the
market valuation adjustment at January 1, 1994 was recorded as a
separate component of shareholders' equity. Regional did not
classify any securities as held-to-maturity or trading securities
at January 1, 1994. Prior to the adoption of SFAS 115,
marketable equity securities were carried at the lower of cost or
estimated market value. A deferred tax benefit was established
for the unrealized loss on marketable equity securities at
January 1, 1994.
SFAS 119 requires disclosures about the amounts, nature
and terms of derivative financial instruments that are not
subject to SFAS 105, Disclosure of Information about Financial
Instruments with Off-Balance Sheet Risk and Financial Instruments
with Concentrations of Credit Risk, because they do not result in
off-balance-sheet risk of accounting loss. SFAS 119 requires
that a distinction be made between financial instruments held or
issued for trading purposes and financial instruments held or
issued for purposes other than trading. SFAS 119 was effective
for financial statements issued for fiscal years ending after
December 15, 1994 and resulted in no effect on Regional's
consolidated financial statements, other than additional
disclosure requirements with respect to fixed rate loan
commitments.
Effective January 1, 1996, Regional adopted SFAS 121.
SFAS 121 provides guidance for recognition and measurement of
impairment on long-lived assets, certain identifiable intangibles
and goodwill related both to assets to be held and used and
assets to be disposed of. The statement requires entities to
perform separate calculations for assets to be held and used to
determine whether recognition of an impairment loss is required,
and, if so, to measure impairment. If the sum of the expected
future cash flows, undiscounted and without interest charges, is
less than the asset's carrying amount, an impairment loss can be
recognized. If the sum of the expected future cash flows is more
than the assets carrying amount, an impairment loss cannot be
recognized. Measurement of an impairment loss is based on the
fair value of the asset. SFAS 121 also requires long-lived
assets and certain identifiable intangibles to be disposed of to
be reported at the lower of carrying amount or fair value less
cost to sell. As of the adoption date January 1, 1996, Regional
had no impaired long-lived or intangible assets affected by SFAS
121.
SFAS 122 amends SFAS 65, Accounting for Certain
Mortgage Banking Activities, to require that a mortgage banking
enterprise recognize as separate assets rights to service
mortgage loans for others, regardless of how such servicing
rights are acquired. A mortgage banking enterprise that acquires
mortgage servicing rights through either the purchase or
origination of mortgage loans sells or securitizes those loans
with servicing rights and the loans (without mortgage servicing
rights) based on their relative fair values, if it is practicable
to estimate those fair values. If it is not practicable to
estimate the fair values of the mortgage servicing rights and the
mortgage loans (without the mortgage servicing rights), the
entire cost of purchasing or originating the loans should be
allocated to the mortgage loans and no cost should be allocated
to mortgage servicing rights. SFAS 122 also requires that a
mortgage banking enterprise assess its capitalized mortgage
servicing rights for impairment based on the fair value of those
rights. SFAS 122 must be applied prospectively for fiscal years
beginning after December 15, 1995, with earlier adoption
encouraged, to transactions in which a mortgage banking
enterprise sells or securitizes mortgage loans with servicing
rights retained and to impairment evaluations of all amounts
capitalized as mortgage servicing rights, including those
purchased before the adoption of SFAS 122. Retroactive
capitalization of mortgage servicing rights retained in
transactions in which a mortgage banking enterprise originates
mortgage loans and sells or securitizes those loans before the
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<PAGE> 66
adoption of SFAS 122 is prohibited. Regional adopted the
provisions of SFAS 122 effective January 1, 1996. The adoption
of SFAS 122 had no impact on Regional's consolidated financial
position or results of operations.
SFAS 125 established accounting and reporting standards
for transfers and servicing of financial assets and
extinguishment of liabilities. The standards established by SFAS
125 are based on consistent applications of a "financial-
components" approach that focuses on control. Under such
approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities that it has incurred, derecognizes financial assets
when control has been surrendered and derecognizes liabilities
when extinguished. SFAS 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
SFAS 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring
after December 31, 1996 and is to be applied prospectively.
Earlier or retroactive application is not permitted. Regional
does not believe that the implementation of SFAS 125 will have a
material effect on its consolidated financial position or results
of operation.
EFFECT OF INFLATION. Persistent high rates of
inflation can have a significant effect on the reported financial
condition and results of operations of all industries. However,
the asset and liability structure of commercial banks is
substantially different from that of an industrial company in
that virtually all assets and liabilities of commercial banks are
monetary in nature. Accordingly, changes in interest rates may
have a significant impact on a commercial bank's performance.
Interest rates do not necessarily move in the same direction or
in the same magnitude as the prices of goods and services.
Inflation does have an impact on the growth of total
assets in the banking industry, often resulting in a need to
increase equity capital at higher than normal rates to maintain
an appropriate equity-to-assets ratio.
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<PAGE> 67
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date
the number of shares of Regional Common Stock beneficially owned
and the percentage of ownership of outstanding shares of Regional
Common Stock by (a) each director and executive officer of
Regional, (b) each person who is known by Regional to own
beneficially 5% or more of such stock and (c) all directors and
executive officers of Regional as a group:
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS
- ------------------- ----- -----
<S> <C> <C>
Paul E. Utterback<F1> 23,373 92.31%
94 Fairmount
Alton, IL 62002
David B. Utterback 267 1.05%
President and Chairman
4305 S.W. 83rd Way
Gainesville, Florida 32608
Mark P. Utterback 38 .15%
Vice President
4530 Pershing
St. Louis, MO 63108
Sarah E. Utterback 38 .15%
Secretary and Treasurer
7515 Parkdale, #1 West
St. Louis, MO 63105
Virgil D. Hook<F2> 1,334 5.27%
All Directors and 614 2.42%
Executive Officers
as a Group (three persons)
<FN>
- --------------------
<F1> Includes shares held by the Paul E. Utterback Voting Trust,
of which Billy R. Summers is the trustee and Paul E.
Utterback is the sole beneficiary. Also includes shares held
by the Mary G. Utterback Family Trust and the Mary G. Utterback
Marital Trust; Paul E. Utterback is the trustee and sole
beneficiary for each.
<F2> Includes shares held by the Virgil D. Hook Living Trust and
the Margaret A. Hook Living Trust.
</TABLE>
For purposes of the above table, a person is deemed to
be a beneficial owner of shares of Regional Common Stock if the
person has or shares the power to vote or to dispose of such
shares. Unless otherwise indicated in the footnotes, each person
has sole voting and investment power with respect to shares shown
in the table as beneficially owned by such person.
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<PAGE> 68
INFORMATION REGARDING MBI STOCK
-------------------------------
DESCRIPTION OF MBI COMMON STOCK AND ATTACHED PREFERRED SHARE
PURCHASE RIGHTS
GENERAL. MBI has authorized 5,000,000 shares of MBI
Preferred Stock, no par value, and 100,000,000 shares of MBI
Common Stock, $5.00 par value. At September 30, 1996, MBI had no
shares of MBI Preferred Stock issued and outstanding and
60,163,042 shares of MBI Common Stock outstanding. Under
Missouri law, MBI's Board of Directors may generally approve the
issuance of authorized shares of Preferred Stock and Common Stock
without shareholder approval.
MBI's Board of Directors is also authorized to fix the
number of shares and determine the designation of any series of
Preferred Stock and to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed
upon any series of MBI Preferred Stock. Except for the
designation and reservation of Series A Junior Participating
Preferred Stock pursuant to MBI's Preferred Share Purchase Rights
Plan described below, MBI's Board of Directors has not acted to
designate or issue any shares of MBI Preferred Stock. The
existence of a substantial number of unissued and unreserved
shares of MBI Common Stock and undesignated shares of MBI
Preferred Stock may enable the Board of Directors to issue shares
to such persons and in such manner as may be deemed to have an
anti-takeover effect.
The following summary of the terms of MBI's capital
stock does not purport to be complete and is qualified in its
entirety by reference to the applicable provisions of MBI's
Restated Articles of Incorporation and By-Laws and Missouri law.
DIVIDENDS. The holders of MBI Common Stock are
entitled to share ratably in dividends when, as and if declared
by the Board of Directors from funds legally available therefor,
after full cumulative dividends have been paid or declared, and
funds sufficient for the payment thereof set apart, on all series
of MBI Preferred Stock ranking superior as to dividends to MBI
Common Stock.
The Board of Directors of MBI intends to maintain its
present policy of paying quarterly cash dividends on MBI Common
Stock, when justified by the financial condition of MBI and its
subsidiaries. The declaration and amount of future dividends
will depend on circumstances existing at the time, including
MBI's earnings, financial condition and capital requirements as
well as regulatory limitations, note and indenture provisions and
such other factors as the Board of Directors may deem relevant.
The payment of dividends to MBI by subsidiary banks is subject to
extensive regulation by various state and federal regulatory
agencies. See "SUPERVISION AND REGULATION."
VOTING RIGHTS. Each holder of MBI Common Stock has one
vote for each share held on matters presented for consideration
by the shareholders, except that, in the election of directors,
each shareholder has cumulative voting rights which entitle each
such shareholder to the number of votes which equals the number
of shares held by the shareholder multiplied by the number of
directors to be elected. All such 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
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<PAGE> 69
any of its assets or funds that are available for distribution to
its shareholders after the satisfaction of its liabilities (or
after adequate provision is made therefor) and after preferences
on any outstanding MBI Preferred Stock.
ASSESSMENT AND REDEMPTION. Shares of MBI Common Stock
are and will be, when issued, fully paid and nonassessable. Such
shares do not have any redemption provisions.
PREFERRED SHARE PURCHASE RIGHTS PLAN. One preferred
share purchase right is attached to each share of MBI Common
Stock. The MBI Rights trade automatically with shares of MBI
Common Stock, and become exercisable and will trade separately
from the MBI Common Stock on the tenth day after public
announcement that a person or group has acquired, or has the
right to acquire, beneficial ownership of 20% or more of the
outstanding shares of MBI Common Stock, or upon commencement or
announcement of intent to make a tender offer for 20% or more of
the outstanding shares of MBI Common Stock, in either case
without prior written consent of the Board. When exercisable,
each MBI Right will entitle the holder to buy 1/100 of a share of
MBI Series A Junior Participating Preferred Stock at an exercise
price of $100 per MBI Right. In the event a person or group
acquires beneficial ownership of 20% or more of MBI Common Stock,
holders of MBI 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 MBI Right. If MBI is
acquired by any person or group after the Rights become
exercisable, each MBI Right will entitle its holder to purchase
stock of the acquiring company having a market value of twice the
current exercise price of each MBI Right. The MBI Rights are
designed to protect the interests of MBI and its shareholders
against coercive takeover tactics. The purpose of the MBI Rights
is to encourage potential acquirors to negotiate with MBI's Board
of Directors prior to attempting a takeover and to give the Board
leverage in negotiating on behalf of all shareholders the terms
of any proposed takeover. The MBI Rights may deter certain
takeover proposals. The MBI 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 shareholders. While this provision
promotes stability and continuity of the Board of Directors,
classification of the Board of Directors may also have the effect
of decreasing the number of directors that could otherwise be
elected at each annual meeting of shareholders by a person who
obtains a controlling interest in the MBI Common Stock and
thereby could impede a change in control of MBI. Because fewer
directors will be elected at each annual meeting, such
classification also will reduce the effectiveness of cumulative
voting as a means of establishing or increasing minority
representation on the Board of Directors.
OTHER MATTERS. MBI's 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 shares of outstanding capital stock of
MBI entitled to vote in the election of directors to remove a
director or directors without cause; (ii) require the affirmative
vote of the holders of at least 75% of the voting power of all
shares of the outstanding capital stock of MBI to approve certain
"business combinations" with "interested parties" unless at least
two-thirds of the Board of Directors first approves such business
combinations; and (iii) require an affirmative vote of at least
75% of the voting power of all shares of the outstanding capital
stock of MBI for the amendment, alteration, change or repeal of
any of the above provisions unless at least two-thirds of the
Board of Directors first approves such an amendment, alteration,
change or repeal. Such provisions may be deemed to have an anti-
takeover effect.
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<PAGE> 70
RESTRICTIONS ON RESALE OF MBI STOCK BY AFFILIATES
Under Rule 145 of the Securities Act, certain persons
who receive MBI Common Stock pursuant to the Merger and who are
deemed to be "affiliates" of Regional will be limited in their
right to resell the stock so received. The term "affiliate" is
defined to include any person who, directly or indirectly,
controls, or is controlled by, or is under common control with
Regional at the time the Merger is submitted to a vote of the
shareholders of Regional. Each affiliate of Regional (generally
each director and executive officer of Regional and each
shareholder who beneficially owns a substantial number of
outstanding shares of Regional Common Stock) who desires to
resell the MBI Common Stock received in the Merger must sell such
stock either pursuant to an effective Registration Statement or
in accordance with an applicable exemption, such as the
applicable provisions of Rule 145(d) under the Securities Act.
Rule 145(d) provides that persons deemed to be
affiliates may resell their stock received in the Merger 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 Regional 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 Regional 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 REGIONAL
MBI is incorporated under the laws of the State of
Missouri, while Regional is incorporated under the laws of the
State of Illinois. The rights of the shareholders of MBI are
governed by MBI's Restated Articles of Incorporation and By-Laws
and the Missouri Act. The rights of Regional shareholders are
governed by Regional's Articles of Incorporation and By-Laws and
by the Illinois Act. The rights of Regional shareholders 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, the differences between the
rights of MBI shareholders and Regional shareholders, are
summarized below.
PREFERRED SHARE PURCHASE RIGHTS PLAN. As described
above under "-- Preferred Share Purchase Rights Plan," MBI Common
Stock has attached Rights, which may deter certain takeover
proposals. Regional 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 shareholders of MBI to approve certain
proposals. Under both MBI's Restated Articles and By-Laws,
removal by the shareholders of the entire Board of Directors or
any individual director from office without cause requires the
affirmative vote of not less than 75% of the total votes entitled
to be voted at a meeting of shareholders called for the election
of directors. Amendment by the shareholders of MBI's Restated
Articles or By-Laws relating to (i) the number or qualification
of directors; (ii) the classification of the Board of Directors;
(iii) the filling of vacancies on the Board of Directors; or (iv)
the removal of directors, requires the affirmative vote of not
less than 75% of the total votes of MBI's then outstanding shares
of capital stock entitled to vote, voting together as a single
class, unless such amendment has previously been expressly
approved by at least two-thirds of the Board of Directors. The
Restated Articles of MBI additionally provide that, in addition
to any shareholder vote required under the Missouri Act, the
affirmative vote of the holders of not less than 75% of the total
votes to which all of the then outstanding shares of capital
stock of MBI
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<PAGE> 71
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 two-thirds of the Board of Directors of MBI
approve the Business Combination, such Business Combination shall
require only the vote of shareholders as provided by Missouri law
or otherwise. The amendment of the provisions of MBI's Restated
Articles relating to the approval of Business Combinations
requires the affirmative vote of the holders of at least 75% of
the Voting Stock unless such amendment has previously been
approved by at least two-thirds of the Board of Directors.
To the extent that a potential acquiror's strategy
depends on the passage of proposals which require a supermajority
vote of MBI's shareholders, such provisions requiring a
supermajority vote may have the effect of discouraging takeover
attempts that do not have Board approval by making passage of
such proposals more difficult. Neither Regional's Articles of
Incorporation nor Regional's By-Laws require a supermajority vote
of shareholders with respect to any item.
VOTING FOR DIRECTORS. MBI's By-Laws provide for
cumulative voting in the election of directors. Cumulative
voting entitles each shareholder to cast an aggregate number of
votes equal to the number of voting shares held, multiplied by
the number of directors to be elected. Each shareholder may cast
all such votes for one nominee or distribute them among two or
more nominees, thus permitting holders of less than a majority of
the outstanding shares of voting stock to achieve board
representation. Neither Regional's Articles of Incorporation or
By-Laws provide for cumulative voting.
CLASSIFIED BOARD. As described under "--
Classification of Board of Directors," the Board of Directors of
MBI is divided into three classes of directors, with each class
being elected to a staggered three-year term. By reducing the
number of directors to be elected in any given year, the
existence of a classified Board diminishes the benefits of the
cumulative voting rights to minority shareholders. Regional does
not have a classified Board of Directors.
ANTI-TAKEOVER STATUTES. The Missouri Act contains
certain provisions applicable to Missouri corporations such as
MBI which may be deemed to have an anti-takeover effect. Such
provisions include Missouri's business combination statute and
the control share acquisition statute.
The Missouri business combination statute protects
domestic corporations after hostile takeovers by prohibiting
certain transactions once an acquiror has gained control. The
statute restricts certain "Business Combinations" between a
corporation and an "Interested Shareholder" or affiliates of the
Interested Shareholder for a period of five years unless certain
conditions are met. A "Business Combination" includes a merger
or consolidation, certain sales, leases, exchanges, pledges and
similar dispositions of corporate assets or stock and certain
reclassifications and recapitalizations. An "Interested
Shareholder" includes any person or entity which beneficially
owns or controls 20% or more of the outstanding voting shares of
the corporation.
During the initial five-year restricted period, no
Business Combination may occur unless such Business Combination
or the transaction in which an Interested Shareholder becomes
"interested" (the "Acquisition Transaction") was approved by the
board of directors of the corporation on or before the date of
the Acquisition Transaction. Business Combinations may occur
after the five-year period
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<PAGE> 72
following the Acquisition Transaction only if: (i) prior to the
stock acquisition by the Interested Shareholder, the board of
directors approves the transaction in which the Interested
Shareholder became an Interested Shareholder or approves the
Business Combination in question; (ii) the holders of a majority
of the outstanding voting stock, other than stock owned by the
Interested Shareholder, approve the Business Combination; or
(iii) the Business Combination satisfies certain detailed
fairness and procedural requirements.
The Missouri Act exempts from its provisions: (i)
corporations not having a class of voting stock registered under
Section 12 of the Exchange Act; (ii) corporations which adopt
provisions in their articles of incorporation or bylaws expressly
electing not to be covered by the statute; and (iii) certain
circumstances in which a shareholder inadvertently becomes an
Interested Shareholder. MBI's Restated Articles of Incorporation
and By-Laws do not contain an election to "opt out" of the
Missouri business combination statute.
The Missouri Act also contains a "Control Share
Acquisition Statute" which provides that an "Acquiring Person"
who after any acquisition of shares of a publicly traded
corporation has the voting power, when added to all shares of the
same corporation previously owned or controlled by the Acquiring
Person, to exercise or direct the exercise of: (i) 20% but less
than 33 1/3%, (ii) 33 1/3% or more but less than a majority or (iii) a
majority, of the voting power of outstanding stock of such
corporation, must obtain shareholder approval for the purchase of
the "Control Shares." If approval is not given, the Acquiring
Person's shares lose the right to vote. The statute prohibits an
Acquiring Person from voting its shares unless certain disclosure
requirements are met and the retention or restoration of voting
rights is approved by both: (i) a majority of the outstanding
voting stock, and (ii) a majority of the outstanding voting stock
after exclusion of "Interested Shares." Interested Shares are
defined as shares owned by the Acquiring Person, by directors who
are also employees, and by officers of the corporation.
Shareholders are given dissenters' rights with respect to the
vote on Control Share Acquisitions and may demand payment of the
fair value of their shares.
A number of acquisitions of shares are deemed not to
constitute Control Share Acquisitions, including good faith
gifts, transfers pursuant to wills, purchases pursuant to an
issuance by the corporation, mergers involving the corporation
which satisfy the other requirements of the Missouri Act,
transactions with a person who owned a majority of the voting
power of the corporation within the prior year, or purchases from
a person who has previously satisfied the provisions of the
Control Share Acquisition Statute so long as the transaction does
not result in the purchasing party having voting power after the
purchase in a percentage range (such ranges are as set forth in
the immediately preceding paragraph) beyond the range for which
the selling party previously satisfied the provisions of the
statute. Additionally, a corporation may exempt itself from
application of the statute by inserting a provision in its
articles of incorporation or bylaws expressly electing not to be
covered by the statute. MBI's Restated Articles of Incorporation
and By-Laws do not contain an election to "opt out" of the
Control Share Acquisition Statute.
Illinois has a business combination statute similar to
Missouri's which generally prohibits a domestic corporation from
engaging in mergers or other business combinations with certain
"interested shareholders" for a period of three years from the
time that the person becomes an "interested shareholder." The
three year moratorium can be avoided if (i) the business
combination or transaction in which the shareholder became an
interested shareholder is approved by the Board of Directors
prior to the date on which the interested shareholder acquires
the requisite percentage of stock, (ii) as a result of the
transaction pursuant to which the shareholder became an
"interested shareholder," the interested shareholder owned 85% or
more of the voting shares of the corporation, excluding for
purposes of determining the number of shares outstanding those
shares owned by (A) persons who are directors and
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<PAGE> 73
also officers, and (B) employee stock plans in which employee
participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a
tender or exchange offer, or (iii) subsequent to becoming an
interested shareholder the transaction is approved by the Board
of Directors and authorized (but not by written consent) by 66
2/3% or more of the corporation's shareholders (other than the
interested shareholder).
DISSENTERS' RIGHTS. Under both Section 351.455 of the
Missouri Act and Section 11.65 of the Illinois Act, a shareholder
of any corporation which is a party to a merger or consolidation,
or which sells all or substantially all of its assets, has the
right to dissent from such corporate action and to demand payment
of the value of such shares. The provisions of the Illinois Act
are applicable to the shareholders of Regional.
SHAREHOLDERS' RIGHT TO INSPECT. Under Section 351.215
of the Missouri Act, any shareholder of MBI may inspect the
corporation's books and records for any reasonable and proper
purpose. Such inspection may be made at any reasonable time or
times. Shareholders of Regional have similar rights under
Section 7.75 of the Illinois Act.
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 two-thirds of the number of
directors then authorized under the By-Laws. MBI's Board of
Directors currently has twelve members. Regional's Board of
Directors currently has three members. The supermajority vote
required for the amendment of MBI's By-Laws regarding a change in
the number of directors may have the effect of making it more
difficult to force an immediate change in the composition of a
majority of the Board of Directors and may be deemed to have an
anti-takeover effect.
SUPERVISION AND REGULATION
--------------------------
GENERAL
As a bank holding company, MBI is subject to regulation
under the BHCA and its examination and reporting requirements.
Under the BHCA, a bank holding company may not directly or
indirectly acquire the ownership or control of more than 5% of
the voting shares or substantially all of the assets of any
company, including a bank or savings and loan association,
without the prior approval of the Federal Reserve Board. In
addition, bank holding companies are generally prohibited under
the BHCA from engaging in nonbanking activities, subject to
certain exceptions.
MBI and its subsidiaries are subject to supervision and
examination by applicable federal and state banking agencies.
The earnings of MBI's subsidiaries, and therefore the earnings of
MBI, are affected by general economic conditions, management
policies and the legislative and governmental actions of various
regulatory authorities, including the Federal Reserve Board, the
Office of Thrift Supervision, the FDIC, the Office of the
Comptroller of the Currency (the "Comptroller") and various state
financial institution regulatory agencies. In addition, there
are numerous governmental requirements and regulations that
affect the activities of MBI and its subsidiaries.
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<PAGE> 74
CERTAIN TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to
which a bank holding company and certain of its nonbank
subsidiaries can borrow or otherwise obtain credit from its bank
subsidiaries. In general, these restrictions require that any
such extensions of credit must be on non-preferential terms and
secured by designated amounts of specified collateral and be
limited, as to any one of the holding company or such nonbank
subsidiaries, to 10% of the lending bank's capital stock and
surplus, and as to the holding company and all such nonbank
subsidiaries in the aggregate, to 20% of such capital stock and
surplus.
PAYMENT OF DIVIDENDS
MBI is a legal entity separate and distinct from its
wholly owned financial institutions and other subsidiaries. The
principal source of MBI's revenues is dividends from its
financial institution subsidiaries. Various federal and state
statutory provisions limit the amount of dividends the affiliate
financial institutions can pay to MBI without regulatory
approval. The approval of the appropriate federal or state bank
regulatory agencies is required for any dividend if the total of
all dividends declared by the bank in any calendar year would
exceed the total of the institutions net profits, as defined by
regulatory agencies, for such year combined with its retained net
profits for the preceding two years. In addition, a national
bank or a state member bank may not pay a dividend in an amount
greater than its net profits then on hand. The payment of
dividends by any financial institution subsidiary may also be
affected by other factors, such as the maintenance of adequate
capital.
CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for
measuring capital adequacy for bank holding companies. These
standards are designed to provide risk-responsive capital
guidelines and to incorporate a consistent framework for use by
financial institutions operating in major international financial
markets. The banking regulators have issued standards for banks
that are similar to, but not identical with, the standards for
bank holding companies.
In general, the risk-related standards require
financial institutions and financial institution holding
companies to maintain capital levels 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, financial institutions and
financial institution holding companies are required to maintain
capital to support off-balance sheet activities such as loan
commitments.
FDIC INSURANCE ASSESSMENTS
The subsidiary depository institutions of MBI are
subject to FDIC deposit insurance assessments. The FDIC has
adopted a risk-based premium schedule. Each financial institution
is assigned to one of 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 supervisors, and on the basis of other
information relevant to the institution's financial condition 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. See "- FIRREA and
FDICIA."
The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), adopted in August 1989 to
provide for the resolution of insolvent savings associations,
required the FDIC
- 71 -
<PAGE> 75
to establish separate deposit insurance funds -- the BIF for
banks and the Savings Association Insurance Fund ("SAIF") for
savings associations. FIRREA also required the FDIC to set
deposit insurance assessments at such levels as would 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, effective January 1, 1996, the FDIC
eliminated deposit insurance assessments (except for the minimum
$2,000 payment required by law) for banks that are well
capitalized and well managed and reduced the deposit insurance
assessments for all other banks. As of January 1, 1996, the SAIF
had not reached the designated reserve ratio. MBI, which has
acquired substantial amounts of SAIF-insured deposits during the
years from 1989 to the present, is required to pay SAIF deposit
insurance premiums on these SAIF-insured deposits.
The Deposit Insurance Funds Act of 1996 (the "Funds
Act"), enacted on September 30, 1996, required the FDIC to take
immediate steps to recapitalize the SAIF and to change the basis
on which funds are raised to make the scheduled payments on the
FICO bonds issued in 1987 to replenish the Federal Savings and
Loan Insurance Corporation. The new legislation, combined with
regulations issued by the FDIC immediately after enactment of the
Funds Act, provides for the following:
(i) A special assessment in the amount of 65.7
basis points on SAIF-insured deposits held by
depository institutions on March 31, 1995 (the special
assessment was required by the Funds Act to
recapitalize the SAIF to the designated reserve ratio
of 1.25 percent of the deposits insured by SAIF).
Payments of this assessment were made in November 1996,
but were accrued by financial institutions in the third
calendar quarter of 1996. Institutions such as MBI
that have deposits insured by both the BIF and the SAIF
("Oakar Banks") were required to pay the special
assessment on 80% of their "adjusted attributable
deposit amounts" ("AADA"). In addition, for purposes
of future regular deposit insurance assessments, the
AADA on which Oakar Banks pay assessments to SAIF was
also reduced by 20%.
(ii) Commencing January 1, 1997, BIF insured
institutions will be responsible for a portion of the
annual carrying costs of the FICO bonds. Such
institutions will be assessed at 80% of the rate
applicable to SAIF-insured institutions until December
31, 1999. Additionally, pursuant to the Funds Act, if
the reserves in BIF at the end of any semiannual
assessment period exceed 1.25% of insured deposits, the
FDIC is required to refund the excess to the BIF-
insured institutions.
(iii) The merger of the BIF and the SAIF on
January 1, 1999 to create the Deposit Insurance Fund,
but only if no more savings associations are in
existence at that time. The Deposit Act also directs
the Secretary of the Treasury to conduct a study and
submit recommendations to Congress regarding the
establishment of a common charter for depository
institutions.
PROPOSALS TO OVERHAUL THE SAVINGS ASSOCIATION INDUSTRY
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 merge
the Comptroller and the OTS, abolish the federal savings
association charter and require federal thrifts to convert to
commercial banks. MBI cannot predict whether these or any other
legislative proposals will be enacted, or, if enacted, the final
form of the law.
- 72 -
<PAGE> 76
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. This support may be required at times when MBI may not
find itself able to provide it. 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.
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 shareholders has been sufficient to
fully fund the dividends and the prospective rate of earnings
retention appears consistent with the bank holding company's
capital needs, asset quality and overall financial condition.
FIRREA AND FDICIA
FIRREA contains a cross-guarantee provision which could
result in insured depository institutions owned by MBI being
assessed for losses incurred by the FDIC in connection with
assistance provided to, or the failure of, any other insured
depository institution owned by MBI. Under FIRREA, failure to
meet the capital guidelines could subject a banking institution
to a variety of enforcement remedies available to federal
regulatory authorities, including the termination of deposit
insurance by the FDIC.
The Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") made extensive changes to the federal
banking laws. FDICIA instituted certain changes to the
supervisory process, including provisions that mandate certain
regulatory agency actions against undercapitalized institutions
within specified time limits. FDICIA contains various other
provisions that may affect the operations of banks and savings
institutions.
The prompt corrective action provision of FDICIA
requires the federal banking regulators to assign each insured
institution to one of five capital categories ("well
capitalized," "adequately capitalized" or one of three
"undercapitalized" categories) and to take progressively more
restrictive actions based on the capital categorization, 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.
The FDIC and the Federal Reserve Board adopted capital-
related regulations under FDICIA. Under those regulations, a bank
will be well capitalized if it: (i) had a risk-based capital
ratio of 10% or greater; (ii) had a ratio of Tier 1 capital to
risk-adjusted assets of 6% or greater; (iii) had a ratio of Tier
1 capital to adjusted total assets of 5% or greater; and (iv) was
not subject to an order, written agreement, capital directive, or
prompt corrective action directive to meet and maintain a
specific capital level for any capital measure. An association
will be adequately capitalized if it was not "well capitalized"
and: (i) had a risk-based capital ratio of 8% or greater;
(ii) had a ratio of Tier 1 capital to risk-adjusted assets of 4%
or greater; and (iii) had a ratio of Tier 1 capital to adjusted
total assets of 4% or greater (except that certain associations
rated "Composite 1" under the federal banking agencies'
- 73 -
<PAGE> 77
CAMEL rating system may be adequately capitalized if their ratios
of core capital to adjusted total assets were 3% or greater).
FDICIA also makes extensive changes in existing rules
regarding audits, examinations and accounting. It generally
requires annual on-site, full scope examinations by each bank's
primary federal regulator. It also imposes new responsibilities
on management, the independent audit committee and outside
accountants to develop or approve reports regarding the
effectiveness of internal controls, legal compliance and off-
balance sheet liabilities and assets.
DEPOSITOR PREFERENCE STATUTE
Legislation enacted in August 1993 provides a
preference for deposits and certain claims for administrative
expenses and employee compensation against an insured depository
institution, in the liquidation or other resolution of such an
institution by any receiver. Such obligations would be afforded
priority over other general unsecured claims against such an
institution, including federal funds and letters of credit, as
well as any obligation to shareholders of such an institution in
their capacity as such.
THE INTERSTATE BANKING AND COMMUNITY DEVELOPMENT LEGISLATION
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 ("Riegle-
Neal") facilitates the interstate expansion and consolidation of
banking organizations by permitting (i) 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) 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) banks to establish new branches
on an interstate basis provided that such action is specifically
authorized by the law of the host state, (iv) 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) 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 Riegle-Neal is 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, Riegle-Neal is likely to have
the effects of increasing competition and promoting geographic
diversification in the banking industry.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
-----------------------------------------
KPMG Peat Marwick LLP served as MBI's independent
accountants for the year ended December 31, 1995 and continues to
serve in such capacity. Services provided in connection with the
audit function included examination of the annual consolidated
financial statements, review and consultation regarding filings
with the Commission and other regulatory authorities and
consultation on financial accounting and reporting matters.
KPMG Peat Marwick LLP served as Regional's independent
accountants for the year ended December 31, 1995 and continues to
serve in such capacity. Services provided in connection with the
audit function included examination of the annual consolidated
financial statements, review and consultation regarding filings
with regulatory authorities and consultation on financial
accounting and reporting matters.
- 74 -
<PAGE> 78
LEGAL MATTERS
-------------
Certain legal matters will be passed upon for MBI by
Thompson Coburn, St. Louis, Missouri and for Regional by Bryan
Cave LLP, St. Louis, Missouri.
EXPERTS
-------
The consolidated financial statements of MBI as of
December 31, 1995, 1994 and 1993, and for each of the years in
the three-year period ended December 31, 1995, incorporated by
reference in MBI's Annual Report on Form 10-K, and the
supplemental consolidated financial statements of MBI as of
December 31, 1995, 1994 and 1993, and for each of the years in
the three-year period ended December 31, 1995, contained in MBI's
Current Report on Form 8-K dated March 11, 1996, have been
incorporated by reference herein in reliance upon the reports of
KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Mark Twain
incorporated by reference in Mark Twain's Annual Report on Form
10-K for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated
herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of Regional as of
and for the year ended December 31, 1995 have been included
herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, whose report is
included herein, and upon the authority of such firm as experts
in accounting and auditing.
OTHER MATTERS
-------------
The Board of Directors of Regional, 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 Regional.
SHAREHOLDER PROPOSALS
---------------------
If the Merger is approved, the other conditions to the
Merger are satisfied and the Merger is consummated, shareholders
of Regional will become shareholders of MBI at the Effective
Time. MBI shareholders may submit to MBI proposals for formal
consideration at the 1997 and 1998 annual meetings of MBI's
shareholders and inclusion in MBI's proxy statements for such
meetings. The deadline for all such proposals to be considered
for inclusion in MBI's Proxy Statement and proxy for the 1997
annual meeting was November 22, 1996. All such proposals to
be considered for inclusion in MBI's Proxy Statement and proxy
for the 1998 annual meeting must be received in writing by the
Corporate Secretary at Mercantile Bancorporation Inc., P.O. Box
524, St. Louis, Missouri 63166-0524 by November 22, 1997.
- 75 -
<PAGE> 79
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
-----
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . .F-1
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996
(UNAUDITED) AND DECEMBER 31, 1995
AND 1994 (UNAUDITED) . . . . . . . . . . . . . . . . . . .F-2
CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND 1995
(UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31,
1995, 1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . .F-3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1995,
1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . . . . .F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
1995 (UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31,
1995, 1994 (UNAUDITED) AND 1993 (UNAUDITED). . . . . . . .F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . .F-6 TO F-14
- 76 -
<PAGE> 80
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Regional Bancshares, Inc.:
We have audited the accompanying consolidated balance sheet of Regional
Bancshares, Inc. and subsidiary as of December 31, 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Regional
Bancshares, Inc. and subsidiary as of December 31, 1995, and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
March 1, 1996
F-1
<PAGE> 81
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 1996, and December 31, 1995 and 1994
<CAPTION> December 31,
September 30, ---------------------------
Assets 1996 1995 1994
------ ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 7,452,252 6,068,895 4,810,081
Federal funds sold 495,000 3,625,000 1,425,000
------------ ----------- -----------
Cash and cash equivalents 7,947,252 9,693,895 6,235,081
------------ ----------- -----------
Investments in debt and marketable equity
securities available-for-sale, at estimated
market value 66,076,952 56,424,260 45,734,728
Loans 106,526,609 99,770,366 93,848,406
Less:
Unearned discount and fees 3,357,540 3,086,141 2,532,455
Allowance for loan losses 1,473,078 1,350,143 1,825,044
------------ ----------- -----------
Net loans 101,695,991 95,334,082 89,490,907
------------ ----------- -----------
Premises and equipment, net 3,702,882 3,303,592 3,361,715
Accrued interest receivable 1,317,682 1,361,231 1,226,868
Other real estate 630,600 960,100 718,600
Other assets 710,838 602,805 1,372,506
------------ ----------- -----------
Total assets $182,082,197 167,679,965 148,140,405
============ =========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Non-interest-bearing 13,716,585 11,809,821 13,384,765
Interest-bearing 133,269,970 130,904,150 113,721,824
------------ ----------- -----------
Total deposits 146,986,555 142,713,971 127,106,589
Short-term borrowings 10,000,000 - -
Other liabilities 1,679,405 1,844,082 1,348,932
------------ ----------- -----------
Total liabilities 158,665,960 144,558,053 128,455,521
------------ ----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $10 par value; 30,000 shares
authorized, 25,321 shares issued and
outstanding 253,210 253,210 253,210
Surplus 2,906,963 2,906,963 2,906,963
Retained earnings 20,543,954 19,293,738 17,569,329
Net unrealized gains (losses) on securities
available-for-sale (287,890) 668,001 (1,044,618)
------------ ----------- -----------
Total stockholders' equity 23,416,237 23,121,912 19,684,884
------------ ----------- -----------
Total liabilities and
stockholders' equity $182,082,197 167,679,965 148,140,405
============ =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-2
<PAGE> 82
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Nine months ended September 30, 1996 and 1995 and
years ended December 31, 1995, 1994 and 1993
<CAPTION>
September 30, December 31,
------------------ -------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $6,679,393 6,284,770 8,529,234 6,889,208 6,171,383
Interest on federal funds sold 34,068 143,317 173,471 54,733 86,873
Interest and dividends on debt and marketable equity
securities:
Taxable 2,017,769 1,426,393 2,000,033 1,872,382 2,002,935
Exempt from federal income taxes 950,790 852,160 1,137,487 1,494,383 1,347,806
---------- --------- ---------- ---------- ---------
Total interest income 9,682,020 8,706,640 11,840,225 10,310,706 9,608,997
---------- --------- ---------- ---------- ---------
Interest expense:
Interest on deposits 4,591,052 3,822,975 5,297,799 3,949,964 3,739,384
Other interest expense 234,837 10,345 20,402 98,015 2,207
---------- --------- ---------- ---------- ---------
Total interest expense 4,825,889 3,833,320 5,318,201 4,047,979 3,741,591
---------- --------- ---------- ---------- ---------
Net interest income 4,856,131 4,873,320 6,522,024 6,262,727 5,867,406
Provision for loan losses 74,997 41,665 41,665 (280,000) (960,000)
---------- --------- ---------- ---------- ---------
Net interest income after provision for loan losses 4,781,134 4,831,655 6,480,359 6,542,727 6,827,406
---------- --------- ---------- ---------- ---------
Noninterest income:
Service charges on deposits 259,993 252,170 341,352 360,877 326,380
Trust income 142,497 150,000 198,028 208,194 218,790
ATM switch income 153,818 109,142 144,863 109,694 24,529
Gain on sale of mortgage loans 19,531 42,417 65,664 42,103 213,616
Gain (loss) on sale of debt and marketable equity
securities, net (11,513) 21,852 10,072 (249,608) 176,248
Gain on sale of other real estate, net 7,380 34,156 35,616 72,580 19,238
Other noninterest income 225,910 229,961 312,404 285,189 289,944
---------- --------- ---------- ---------- ---------
Total noninterest income 797,616 839,698 1,107,999 829,029 1,268,745
---------- --------- ---------- ---------- ---------
Noninterest expense:
Salaries and employee benefits 1,527,667 1,365,600 1,811,480 1,889,273 1,793,117
Occupancy 163,511 122,234 164,513 186,760 290,561
Equipment 253,440 214,968 287,587 244,427 268,560
Data processing 188,327 178,798 238,990 153,660 105,202
FDIC insurance assessment 800 193,899 146,213 278,547 276,002
Legal and professional fees 143,549 137,043 168,043 171,380 236,766
Other noninterest expense 850,614 760,009 1,080,617 1,105,773 1,467,135
---------- --------- ---------- ---------- ---------
Total noninterest expense 3,127,908 2,972,551 3,897,443 4,029,820 4,437,343
---------- --------- ---------- ---------- ---------
Income before income tax expense and cumulative
effect of change in accounting principle 2,450,842 2,698,802 3,690,915 3,341,936 3,658,808
Income tax expense 440,995 700,054 932,650 796,010 1,158,085
---------- --------- ---------- ---------- ---------
Income before cumulative effect of change in
accounting principle 2,009,847 1,998,748 2,758,265 2,545,926 2,500,723
Cumulative effect of change in accounting for income
taxes - - - - 517,850
---------- --------- ---------- ---------- ---------
Net income $2,009,847 1,998,748 2,758,265 2,545,926 3,018,573
========== ========= ========== ========== =========
Earnings per share (based on weighted average shares
outstanding of 25,321):
Income before cumulative effect of change in
accounting principle $ 79.37 78.94 108.93 100.55 98.76
Cumulative effect of change in accounting for
income taxes - - - - 20.45
---------- --------- ---------- ---------- ---------
Net income $ 79.37 78.94 108.93 100.55 119.21
========== ========= ========== ========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE> 83
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Nine months ended September 30, 1996 and
years ended December 31, 1995, 1994, and 1993
<CAPTION>
Net unrealized
gains (losses)
on securities
Common Retained available-
stock Surplus earnings for-sale Total
----- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992
(unaudited) $253,210 2,906,963 12,154,982 - 15,315,155
Net income (unaudited) - - 3,018,573 - 3,018,573
-------- --------- ---------- ---------- ----------
Balance, December 31, 1993
(unaudited) 253,210 2,906,963 15,173,555 - 18,333,728
Cumulative effect of implementation
of change in accounting for debt and
marketable equity securities, net
of tax (unaudited) - - - 1,790,579 1,790,579
Net income (unaudited) - - 2,545,926 - 2,545,926
Cash dividends ($5.93 per
share) (unaudited) - - (150,152) - (150,152)
Net change in unrealized
gains (losses) on securities
available-for-sale (unaudited) - - - (2,835,197) (2,835,197)
-------- --------- ---------- ---------- ----------
Balance, December 31, 1994
(unaudited) 253,210 2,906,963 17,569,329 (1,044,618) 19,684,884
Net income - - 2,758,265 - 2,758,265
Cash dividends ($40.83 per share) - - (1,033,856) - (1,033,856)
Net change in unrealized gains (losses)
on securities available-for-sale - - - 1,712,619 1,712,619
-------- --------- ---------- ---------- ----------
Balance, December 31, 1995 253,210 2,906,963 19,293,738 668,001 23,121,912
Net income (unaudited) - - 2,009,847 - 2,009,847
Cash dividends ($30.00 per
share) (unaudited) - - (759,631) - (759,631)
Net change in unrealized
gains (losses) on securities
available-for-sale (unaudited) - - - (955,891) (955,891)
-------- --------- ---------- ---------- ----------
Balance, September 30, 1996
(unaudited) $253,210 2,906,963 20,543,954 (287,890) 23,416,237
======== ========= ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE> 84
<TABLE>
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1995 and
years ended December 31, 1995, 1994, and 1993
<CAPTION>
September 30, December 31,
------------------ -------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,009,847 1,998,748 2,758,265 2,545,926 3,018,573
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 74,997 41,665 41,665 (280,000) (960,000)
Depreciation and amortization 227,885 191,169 231,619 218,450 355,140
Loss (gain) on sale of debt and marketable
equity securities, net 11,513 (21,852) (10,072) 249,608 (176,248)
Gain on sale of other real estate, net (7,380) (34,156) (35,616) (72,580) (19,238)
Decrease (increase) in accrued interest receivable 43,549 (39,293) (134,363) 993 110,901
Origination of secondary market mortgage loans (1,753,210) (3,838,026) (7,003,556) (5,232,318) (13,336,807)
Proceeds from the sale of secondary market
mortgage loans 1,735,991 4,080,372 7,454,345 5,084,103 13,355,616
Other operating activities, net 277,328 639,004 502,662 268,197 (760,984)
------------ ----------- ----------- ----------- -----------
Net cash provided by operating activities 2,620,520 3,017,631 3,804,949 2,782,379 1,586,953
------------ ----------- ----------- ----------- -----------
Cash flows from investing activities:
Proceeds from calls and maturities of and principal
payments on debt securities 4,797,330 5,273,079 7,340,948 8,433,681 5,245,399
Proceeds from sales of debt and marketable equity
securities 3,947,913 7,641,243 10,635,198 11,118,812 12,930,256
Purchase of debt and marketable equity securities (19,903,741) (20,941,923) (26,051,008) (12,089,885) (28,285,368)
Net (increase) decrease in loans (6,298,656) (6,440,935) (7,166,055) (15,056,625) 87,374
Purchase of premises and equipment (609,842) (132,061) (209,810) (372,911) (252,097)
Proceeds from sale of premises and equipment 1,500 19,200 26,600 35,467 -
Proceeds from sales of other real estate 185,380 456,006 504,466 241,498 359,595
------------ ----------- ----------- ----------- -----------
Net cash used in investing activities (17,880,116) (14,125,391) (14,919,661) (7,689,963) (9,914,841)
------------ ----------- ----------- ----------- -----------
Cash flows from financing activities:
Net increase in deposits 4,272,584 11,050,916 15,607,382 3,385,333 7,494,289
Proceeds from short-term borrowings 10,000,000 - - - -
Cash dividends paid on common stock (759,631) (789,255) (1,033,856) (150,152) -
------------ ----------- ----------- ----------- -----------
Net cash provided by financing activities 13,512,953 10,261,661 14,573,526 3,235,181 7,494,289
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents (1,746,643) (846,099) 3,458,814 (1,672,403) (833,599)
Cash and cash equivalents at beginning of period 9,693,895 6,235,081 6,235,081 7,907,484 8,741,083
------------ ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 7,947,252 5,388,982 9,693,895 6,235,081 7,907,484
============ =========== =========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowed funds $ 4,762,136 3,756,570 5,249,746 3,992,433 3,753,166
Income taxes 399,300 580,803 610,000 787,300 980,300
Noncash transactions:
Transfers to other real estate in settlement of
loans 2,500 813,458 813,458 140,600 39,079
Loans originated to facilitate sales of other real
estate 104,000 - 66,500 80,000 22,500
Unrealized gain (loss) on securities available-
for-sale (1,482,071) 2,219,258 2,594,877 (1,582,754) -
============ =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE> 85
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995 (audited) and
December 31, 1994 and 1993 (unaudited)
NOTE 1 -- SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Regional Bancshares, Inc. and subsidiary (the Company) provides a full
range of banking services to individual and corporate customers through its
wholly owned subsidiary bank, Bank of Alton. The Company is subject to
competition from other financial and nonfinancial institutions providing
financial services in its customer service area, which is primarily the
Alton-Wood River area of Southwestern Illinois. Additionally, the Company
is subject to the regulations of certain federal and state agencies and
undergoes periodic examinations by those regulatory agencies.
The consolidated financial statements of the Company have been
prepared in conformity with generally accepted accounting principles and
conform to predominant practices within the banking industry. The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions, including the determination of the allowance for
loan losses, that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant accounting policies used by the Company in the preparation
and presentation of the consolidated financial statements are summarized
below:
CONSOLIDATION
The consolidated financial statements include the accounts of Regional
Bancshares, Inc. and Bank of Alton. All significant intercompany balances
and transactions have been eliminated.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash and due from banks and federal funds sold.
INVESTMENTS IN DEBT AND
MARKETABLE EQUITY SECURITIES
The Company classifies its debt and equity securities as
available-for-sale.
Available-for-sale securities are recorded at fair value. Unrealized
gains and losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and reported as a separate component
of stockholders' equity until realized.
A decline in the market value of any available-for-sale security below
cost that is deemed other than temporary results in a charge to earnings and
the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the lives of the
respective securities as an adjustment to yield using the interest method.
Amortization of premiums and accretion of discounts on mortgage-backed
securities are amortized in relation to the corresponding prepayment rates,
both historical and estimated, using a method which approximates the
interest method. Interest income is recognized when earned. Realized gains
and losses for securities are included in earnings using the specific
identification method for determining the cost of securities sold.
LOANS
Interest on commercial, real estate mortgage, and most consumer loans
is recognized using the simple-interest method. Interest on some consumer
loans is recognized using a method which approximates the interest method.
The accrual of interest on loans is discontinued when, in management's
judgment, the interest will not be collectible in the normal course of
business. Subsequent payments received on such loans are applied to
principal if doubt exists as to the collectibility of such principal;
otherwise, the portion of such receipts representing interest is recorded as
income. Loans are returned to accrual status when management believes full
collectibility of principal and interest is expected.
(Continued)
F-6
<PAGE> 86
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Net loan origination fees are deferred and recognized over the lives
of the related loans as a yield adjustment using a method approximating the
interest method.
The allowance for loan losses is available to absorb loan charge-offs.
The allowance is increased by provisions charged to operations and reduced
by loan charge-offs less recoveries. Management utilizes a systematic,
documented approach in determining the appropriate level of the allowance
for loan losses. Management's approach, which provides for general and
specific allocations of the allowance for loan losses, is based on current
economic conditions, past losses, collection experience, risk
characteristics of the portfolio, assessment of collateral values by
obtaining independent appraisals for significant properties, and such other
factors which, in management's judgment, deserve current recognition in
estimating loan losses.
Management believes the allowance for loan losses is adequate to
absorb losses in the loan portfolio. While management uses available
information to recognize loan losses, future additions to the allowance may
be necessary based on changes in economic conditions. Additionally, various
regulatory agencies, as an integral part of the examination process,
periodically review Bank of Alton's allowance for loan losses. Such
agencies may require Bank of Alton to increase its allowance for loan losses
based on their judgments and interpretations about information available to
them at the time of their examinations.
On January 1, 1995, the Company adopted SFAS No. 114, Accounting by
Creditors for Impairment of a Loan (SFAS 114), as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures (SFAS 118).
SFAS 114 (as amended by SFAS 118) defines the recognition criteria for
loan impairment and the measurement methods for certain impaired loans and
loans for which terms have been modified in troubled-debt restructurings (a
restructured loan). Specifically, a loan is considered impaired when it is
probable a creditor will be unable to collect all amounts due - both
principal and interest - according to the contractual terms of the loan
agreement. When measuring impairment, the expected future cash flows of an
impaired loan is discounted at the loan's effective interest rate.
Alternatively, impairment could be measured by reference to an observable
market price, if one exists, or the fair value of the collateral for a
collateral-dependent loan. Regardless of the historical measurement method
used, SFAS 114 requires a creditor to measure impairment based on the fair
value of the collateral when the creditor determines foreclosure is
probable. Additionally, impairment of a restructured loan is measured by
discounting the total expected future cash flows at the loan's effective
rate of interest as stated in the original loan agreement.
SFAS 118 amends SFAS 114 to allow creditors to use existing methods of
recognizing interest income on impaired loans. The Company has elected to
continue to use its existing nonaccrual methods for recognizing interest on
impaired loans.
The adoption of SFAS 114 and SFAS 118 resulted in no prospective
adjustment to the provision for loan losses.
SECONDARY MORTGAGE MARKET OPERATIONS
The Bank of Alton originates mortgage loans for sale in the secondary
market to the Federal Home Loan Mortgage Corporation (FHLMC). Any such
mortgage loans held for sale are maintained on the Company's consolidated
balance sheets at the lower of cost or market as determined by outstanding
commitments from FHLMC to purchase such loans. Gains and losses on the sale
of these loans and loan origination fees are recognized upon sale of the
related loans and included in the consolidated statements of income as
noninterest income. Additionally, loan administration fees, representing
income earned from servicing these loans, are calculated on the outstanding
principal balances of the loans serviced and recorded as noninterest income
as earned.
In May 1995, the Financial Accounting Standards Board issued SFAS No.
122, Accounting for Mortgage Servicing Rights (SFAS 122) which
(Continued)
F-7
<PAGE> 87
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
requires that a mortgage banking enterprise recognize as separate assets the
rights to service mortgage loans for others at the origination or purchase
date of the loans when the enterprise has definitive plans to sell or
securitize the loans and retain the mortgage servicing rights, assuming the
fair value of the loans and servicing rights may be practically estimated.
Otherwise, servicing rights should be recognized when the underlying loans are
sold or securitized, using an allocation of total cost of the loans based on
the relative fair values at the date of sale. SFAS 122 also requires an
assessment of capitalized mortgage servicing rights for impairment to be
based on the current fair value of those rights. SFAS 122 is required to be
applied prospectively in fiscal years beginning after December 31, 1995.
The Company believes SFAS 122 will not have a material effect on its
financial position or results of operations.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization of premises
and equipment are provided using the straight-line method over the estimated
useful lives of the respective assets or the respective lease terms for
leasehold improvements. The estimated useful lives range from 30-40 years
for buildings and improvements and 3-10 years for furniture, fixtures and
equipment. Expenditures for major renewals and betterments of premises and
equipment are capitalized, and those for maintenance and repairs are
expensed as incurred.
INCOME TAXES
The Company and Bank of Alton file a consolidated federal income tax
return.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period which includes the enactment date.
OTHER REAL ESTATE
Other real estate represents property acquired through foreclosure or
deeded to the Company's banking subsidiary in lieu of foreclosure on loans
on which the borrowers have defaulted as to payment of principal and
interest. Other real estate is recorded on an individual asset basis at the
lower of fair value minus estimated selling costs or cost. If the fair
value minus estimated selling costs is less than cost, the deficiency is
recorded in a valuation reserve account through a provision charged to
income. Subsequent increases in the fair value minus estimated selling
costs are recorded through a reversal of the valuation reserve, but not
below zero.
TRUST OPERATIONS
Assets held in fiduciary or agency capacities for customers are not
included in the accompanying consolidated balance sheets since such items
are not assets of the Company. Trust income is recognized on the accrual
basis.
FINANCIAL INSTRUMENTS
Financial instruments are defined as cash, evidence of ownership
interest in an entity, or a contract that both:
* Imposes on one entity a contractual obligation to deliver cash or another
financial instrument to a second entity or to exchange other
financial instruments on potentially unfavorable terms with the
second entity; and
* Conveys to that second entity a contractual right to receive cash or
another financial instrument from the first entity or to exchange
other financial instruments on potentially favorable terms with the
first entity.
EARNINGS PER SHARE
Earnings per share is computed based upon the weighted average shares
outstanding.
(Continued)
F-8
<PAGE> 88
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 2 -- REGULATORY RESTRICTIONS
Subsidiary bank dividends are the principal source of funds for
payment of dividends by the Company to its stockholders. Bank of Alton is
subject to regulations by regulatory authorities which require the
maintenance of minimum capital levels. As of December 31, 1995, there are
no regulatory restrictions, other than maintenance of minimum capital
standards, as to the amount of dividends Bank of Alton may pay.
Bank of Alton is required to maintain certain daily reserve balances
on hand in accordance with Federal Reserve Board requirements. The reserve
balance maintained in accordance with such requirements as of December 31,
1995 and 1994 was $771,000 and $722,000, respectively.
NOTE 3 -- INVESTMENTS IN DEBT
AND MARKETABLE EQUITY SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses,
and estimated market value for available-for-sale securities, by major
security type, at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury
securities $ 9,484,634 130,583 16,932 9,598,285
Securities of U.S.
government
agencies and
corporations 15,426,541 30,329 685,315 14,771,555
Obligations of states
and political
subdivisions 25,494,784 1,575,616 720 27,069,680
Mortgage-backed
and other asset-
backed securities 3,464,233 - 58,623 3,405,610
Corporate debt
security 99,544 2,186 - 101,730
Federal Home
Loan Mortgage
Corporation
stock 1,000,000 35,000 - 1,035,000
Federal Home Loan
Bank stock 442,400 - - 442,400
----------- --------- ------- ----------
Total $55,412,136 1,773,714 761,590 56,424,260
=========== ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
unreal- unreal- Estimated
Amortized ized ized market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury
securities $7,962,495 8,289 262,654 7,708,130
Securities of U.S.
government
agencies and
corporations 11,000,000 - 1,239,374 9,760,626
Obligations of states
and political
subdivisions 20,230,039 418,314 62,114 20,586,239
Mortgage-backed
and other asset-
backed securities 6,901,599 - 525,045 6,376,554
Corporate debt
security 98,996 1,070 - 100,066
Federal Home
Loan Mortgage
Corporation stock 1,000,000 - 20,000 980,000
Student Loan Mortgage
Association stock 124,352 98,761 - 223,113
----------- ------- --------- ----------
Total $47,317,481 526,434 2,109,187 45,734,728
=========== ======= ========= ==========
</TABLE>
As a member of the Federal Home Loan Bank System administered by the
Federal Housing Finance Board, Bank of Alton is required to maintain an
investment in the capital stock of the Federal Home Loan Bank of Chicago
(FHLB) in an amount equal to the greater of 1% of the aggregate outstanding
balance of loans secured by dwelling units at the beginning of each year or
.3% of the total assets of Bank of Alton. The stock is recorded at cost,
which represents redemption value.
The amortized cost and estimated market value of investments in debt
and marketable equity securities at December 31, 1995, by contractual
maturity, are shown below. Actual maturities may differ from contractual
maturities because borrowers have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
---- -----
<S> <C> <C>
Due in one year or less $ 1,979,887 1,997,240
Due after one year through
five years 29,963,223 29,831,571
Due after five years through
ten years 6,278,299 6,543,676
Due after ten years 12,284,094 13,168,763
Mortgage-backed securities 3,464,233 3,405,610
FHLMC stock 1,000,000 1,035,000
FHLB stock 442,400 442,400
----------- ----------
$55,412,136 56,424,260
=========== ==========
</TABLE>
(Continued)
F-9
<PAGE> 89
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Proceeds from sales of debt and marketable equity securities during
1995, 1994, and 1993 were $10,635,198, $11,118,812, and $12,930,256,
respectively. Gross gains of $511,353, $341,867, and $212,895 and gross
losses of $501,281, $591,475, and $36,647 were realized on these sales
during 1995, 1994, and 1993, respectively.
Debt securities with a carrying value of $15,230,641 and $15,807,188
at December 31, 1995 and 1994, respectively, were pledged to secure public
deposits, securities sold under agreements to repurchase, and for other
purposes required or permitted by law.
NOTE 4 -- LOANS
The composition of the loan portfolio at December 31, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial, financial,
and agricultural $36,539,413 35,410,169
Real estate mortgage 22,367,669 25,565,124
Consumer 40,863,284 32,873,113
----------- ----------
Total $99,770,366 93,848,406
=========== ==========
</TABLE>
The Company grants commercial, financial, agribusiness, residential,
and consumer loans to customers throughout their service area, which is
primarily in the Alton-Wood River area of Southwestern Illinois. The
Company has a diversified loan portfolio, with no particular concentration
of credit in any one economic sector; however, a substantial portion of the
portfolio is concentrated in and secured by real estate. The ability of the
Company's borrowers to honor their contractual obligations is dependent upon
the local economy and its effect on the real estate market.
The Company's management has determined that no loans other than those
on nonaccrual status were impaired during 1995. A summary of impaired loans
at December 31, 1995 follows:
<TABLE>
<CAPTION>
Impaired
loans with
Total Allowance no related
impaired/ for losses on allowance
nonaccrual impaired for loan
loans loans losses
----- ----- ------
<C> <C> <C>
$1,030,205 200,000 668,638
========== ======= =======
</TABLE>
The average balance of impaired loans during 1995 was $1,593,228.
If interest on impaired loans, consisting only of nonaccrual loans,
had been accrued, such income would have amounted to $85,401 for 1995.
Interest income on those loans, representing cash payments received,
amounted to $20 for 1995.
At December 31, 1994, the Company had loans on a nonaccrual basis
totaling $2,413,832. If interest on these loans had been accrued, such
additional income would have been $453,934 for the year ended December 31,
1994.
Bank of Alton is an authorized seller of residential real estate
mortgage loans to the FHLMC. Loans sold in this capacity are sold without
recourse, with Bank of Alton servicing all loans sold in exchange for a
servicing fee. Loans serviced for others totaled $22,059,196 and
$17,135,000 at December 31, 1995 and 1994, respectively. Servicing fees
received on loans serviced for others and included in other noninterest
income were $50,064, $50,123, and $19,373 for the years ended December 31,
1995, 1994, and 1993, respectively.
(Continued)
F-10
<PAGE> 90
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Transactions in the allowance for loan losses for the years ended December
31, 1995, 1994, and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $1,825,044 1,896,942 2,321,897
Provision charged to
operations 41,665 (280,000) (960,000)
Loans charged off (913,499) (31,735) (660,795)
Recoveries on loans
previously charged off 396,933 239,837 1,195,840
---------- --------- ---------
Net (charge-offs)
recoveries (516,566) 208,102 535,045
---------- --------- ---------
Balance, end of year $1,350,143 1,825,044 1,896,942
========== ========= =========
</TABLE>
Certain officers and directors of the Company (including associates of
officers and directors) and certain corporations in which officers and
directors had substantial beneficial interest or corporations in which
officers and directors serve as trustees or in a similar capacity incurred
indebtedness, in the form of loans, as customers, in the aggregate amount of
$2,888,459 and $2,515,669 at December 31, 1995 and 1994, respectively.
These loans were made in the normal course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other customers and did not
involve more than the normal risk of collectibility.
NOTE 5 -- PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 871,524 853,232
Buildings and improve-
ments 2,370,545 2,378,451
Furniture, fixtures and
equipment 1,957,596 1,799,729
---------- ---------
5,199,665 5,031,412
Less accumulated deprecia-
tion 1,896,073 1,669,697
---------- ---------
$3,303,592 3,361,715
========== =========
</TABLE>
Amounts charged to occupancy and equipment expense for depreciation
aggregated $241,341, $180,049, and $330,216 for the years ended December 31,
1995, 1994, and 1993, respectively.
NOTE 6 -- INTEREST-BEARING DEPOSITS
A summary of interest-bearing deposits at December 31, 1995 and 1994
is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NOW, super NOW,
and money market
demand accounts $ 43,013,204 32,646,370
Savings accounts 13,041,075 13,057,398
Time deposits:
Less than $100,000 65,686,704 60,312,982
$100,000 or more 9,163,167 7,705,074
------------ -----------
$130,904,150 113,721,824
============ ===========
</TABLE>
A summary of interest on deposits for the years ended December 31,
1995, 1994, and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NOW, super NOW,
and money market
demand accounts $1,107,416 881,415 953,827
Savings accounts 381,358 381,382 378,328
Time deposits:
Less than $100,000 3,320,364 2,255,619 2,004,989
$100,000 or more 488,661 431,548 402,240
---------- --------- ---------
$5,297,799 3,949,964 3,739,384
========== ========= =========
</TABLE>
NOTE 7 -- INCOME TAXES
The components of income tax expense for the year ended December 31,
1995 are as follows:
<TABLE>
<S> <C>
Current $619,085
Deferred 313,565
--------
$932,650
========
</TABLE>
A reconciliation of expected income tax expense, computed by applying
the federal statutory rate of 34% to income before applicable income tax
expense for the year ended December 31, 1995 to reported income tax expense,
is as follows:
<TABLE>
<S> <C>
Expected statutory federal income tax $1,254,911
Tax-exempt interest income (341,267)
State tax expense, net of federal tax benefit 63,442
Other, net (44,436)
----------
$ 932,650
==========
(Continued)
F-11
<PAGE> 91
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The tax effects of temporary differences which give rise to
significant portions of the deferred tax assets and deferred tax liabilities
at December 31, 1995 are as follows:
</TABLE>
<TABLE>
<S> <C>
Deferred tax assets:
Other real estate $ 18,595
Deferred directors' fees 21,234
State income tax 83,211
Deferred loan fees 21,810
---------
Total deferred tax assets 144,850
---------
Deferred tax liabilities:
Allowance for loan losses (345,917)
Investments in debt and
marketable equity securities (25,627)
Premises and equipment (114,448)
Unrealized losses on securities
available-for-sale (344,122)
---------
Total deferred tax
liabilities (830,114)
---------
Net deferred tax
liabilities $(685,264)
=========
</TABLE>
A valuation allowance would be provided on deferred tax assets when it
is more likely than not that some portion of the assets will not be
realized. The Company has not established a valuation allowance as of
December 31, 1995 due to management's belief that all criteria for
recognition have been met, including the existence of a history of taxes
paid sufficient to support the realization of the deferred tax assets.
Income tax expense was $796,010 and $1,158,085 at December 31, 1994
and 1993, respectively.
The Company adopted Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes (SFAS 109), during 1993. The cumulative
effect of this change in accounting for income taxes was $517,850 as of
December 31, 1993.
NOTE 8 -- EMPLOYEE BENEFIT PLANS
The Company maintains an employee savings plan formed in accordance
with Section 401(k) of the Internal Revenue Code. This plan covers
substantially all employees of the Company. The Company's contribution to
this plan was $116,400, $98,717, and $80,004 for the years ended December
31, 1995, 1994, and 1993, respectively.
NOTE 9 -- COMMITMENTS AND
CONTINGENT LIABILITIES
During the normal course of business, various legal claims have arisen
which, in the opinion of management, will not result in any material
liability to the Company.
NOTE 10 -- DISCLOSURES ABOUT
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amounts recognized in the
consolidated balance sheets.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit and standby letters of credit written is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
financial instruments included in the consolidated balance sheets.
Off-balance-sheet financial instruments whose contractual amount
represents credit risk as of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commitments to extend
credit $9,768,184 6,807,000
Standby letters of
credit 964,288 1,221,000
========= =========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Of the total
commitments to extend credit at December 31, 1995 and 1994,
(Continued)
F-12
<PAGE> 92
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
$926,165 and $308,563, respectively, represents fixed-rate loan commitments.
Commitments to extend credit and standby letters of credit generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Since certain of the commitments may expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit-worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Company upon extension of credit, is based on management's credit
evaluation of the borrower. Collateral held varies, but is generally
residential or income-producing property, inventory, accounts receivable, or
equipment.
Following is a summary of the carrying amounts and fair values of the
Company's financial instruments at December 31, 1995:
<TABLE>
<CAPTION>
Carrying Fair
amount value
------ -----
<S> <C> <C>
Balance sheet assets:
Cash and due from
banks $ 6,068,895 6,068,895
Federal funds sold 3,625,000 3,625,000
Investments in debt
and marketable
equity securities
available-for-sale 56,424,260 56,424,260
Loans, net 95,334,082 96,794,054
Accrued interest
receivable 1,361,231 1,361,231
------------ -----------
$162,813,468 164,273,440
============ ===========
Balance sheet liabilities:
Deposits 142,713,971 138,216,402
Accrued interest
payable 486,262 486,262
------------ -----------
$143,200,233 138,702,664
============ ===========
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate such value:
CASH AND OTHER SHORT-TERM INSTRUMENTS
For cash and due from banks, federal funds sold, accrued interest
receivable, and accrued interest payable, the carrying amount is a
reasonable estimate of fair value, as such instruments are payable upon
demand or reprice in a short time.
INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES
For debt and marketable equity securities, fair values are based on
quoted market prices or dealer quotes.
LOANS
The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
DEPOSITS
The fair value of demand accounts, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities.
COMMITMENTS TO EXTEND CREDIT
AND STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit and irrevocable letters
of credit is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements, the likelihood of the counter-parties drawing on such financial
instruments, and the present creditworthiness of such counterparties. The
Company believes such commitments have been made on terms which are
competitive in the markets in which it operates and, accordingly, the
Company has not assigned a value to such instruments for purposes of this
disclosure.
(Continued)
F-13
<PAGE> 93
REGIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 11 -- PARENT COMPANY ONLY
FINANCIAL INFORMATION
Following are condensed balance sheets of Regional Bancshares, Inc.
(parent company only) as of December 31, 1995 and 1994, and condensed
schedules of income and cash flows for the years ended December 31, 1995,
1994, and 1993:
<TABLE>
Condensed Balance Sheets
(dollars expressed in thousands)
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Cash $ 54 106
Investment in Bank of Alton, at equity 22,848 19,047
Other assets 245 662
------- ------
Total assets $23,147 19,815
======= ======
Liabilities and Stockholders' Equity
------------------------------------
Other liabilities 25 130
Stockholders' equity:
Common stock 253 253
Surplus 2,907 2,907
Retained earnings 19,294 17,569
Net unrealized gains (losses) on
securities available-for-sale 668 (1,044)
------- ------
Total stockholders' equity 23,122 19,685
------- ------
Total liabilities and stock-
holders' equity $23,147 19,815
======= ======
</TABLE>
<TABLE>
Condensed Schedules of Income
(dollars expressed in thousands)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income:
Dividends from Bank of Alton $ 720 150 695
Other 7 24 42
------ ----- -----
Total income 727 174 737
------ ----- -----
Expenses:
Salaries and employee benefits 32 125 75
Legal and professional fees 21 1 14
Other noninterest expense 39 17 426
------ ----- -----
Total expenses 92 143 515
------ ----- -----
Income before income tax
benefit and equity in
undistributed earnings
of Bank of Alton 635 31 222
Income tax benefit 34 54 37
------ ----- -----
Income before equity in
undistributed earnings of
Bank of Alton 669 85 259
Equity in undistributed earnings of
Bank of Alton 2,089 2,461 2,760
------ ----- -----
Net income $2,758 2,546 3,019
====== ===== =====
</TABLE>
<TABLE>
Condensed Schedules of Cash Flows
(dollars expressed in thousands)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $2,758 2,546 3,019
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed earnings
of Bank of Alton (2,089) (2,461) (2,760)
Other, net 313 (24) (96)
------ ------ ------
Net cash provided by operating
activities 982 61 163
Cash flows from financing activities -
cash dividends paid on common stock (1,034) (150) -
------ ----- -----
Net increase (decrease) in cash
and cash equivalents (52) (89) 163
Cash and cash equivalents at beginning of year 106 195 32
------ ----- -----
Cash and cash equivalents at end of year $ 54 106 195
====== ===== =====
</TABLE>
NOTE 12 -- UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The unaudited consolidated financial statements as of and for the nine
months ended September 30, 1996 and 1995 and years ended December 31, 1994
and 1993 include the accounts of Regional Bancshares, Inc. and its
subsidiary after elimination of material intercompany transactions. This
unaudited data, in the opinion of the management of the Company, includes
all adjustments necessary for the fair presentation thereof. All
adjustments made were of a normal and recurring nature.
NOTE 13 -- EVENT (UNAUDITED) SUBSEQUENT
TO DATE OF INDEPENDENT AUDITORS'
REPORT
On August 23, 1996, the Company entered into an Agreement and Plan of
Merger with Mercantile Bancorporation Inc. (MBI) to merge (the Merger) the
Company into a wholly owned subsidiary of MBI (the Merger Agreement). As of
September 30, 1996, MBI, which is headquartered in St. Louis, Missouri, had
total assets of approximately $18.2 billion. The Merger Agreement with MBI
will be effected by converting the Company's common stock into the right to
receive as consideration in the Merger, on a per share basis, an amount in
cash equal to $485.76; 23.7123 shares of MBI common stock; and 0.4838 of a
share of West Pointe Bank And Trust Company common stock. The Merger is
contingent upon approval of various regulatory agencies and the affirmative
vote of the holders of at least two-thirds of the outstanding Company
common stock.
F-14
<PAGE> 94
ANNEX A
-------
Following is the text of the statutory dissenters' right as
set forth at Section 11.70 of the Illinois Business Corporation
Act of 1983, as amended:
5/11.70 PROCEDURE TO DISSENT.
(a) If the corporate action giving rise to the right to
dissent is to be approved at a meeting of shareholders, the
notice of meeting shall inform the shareholders of their right to
dissent and the procedure to dissent. If, prior to the meeting,
the corporation furnishes to the shareholders material
information with respect to the transaction that will objectively
enable a shareholder to vote on the transaction that will
objectively enable a shareholder to vote on the transaction and
to determine whether or not to exercise dissenters' rights, a
shareholder may assert dissenters' rights only if the shareholder
delivers to the corporation before the vote is taken a written
demand for payment for his or her shares if the proposed action
is consummated, and the shareholder does not vote in favor of the
proposed action.
(b) If the corporate action giving rise to the right to
dissent is not to be approved at a meeting of shareholders, the
notice to shareholders describing the action taken under Section
11.30 or Section 7.10 shall inform the shareholders of their
right to dissent and the procedure to dissent. If, prior to or
concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction
that will objectively enable a shareholder to determine whether
or not to exercise dissenters' rights, a shareholder may assert
dissenter's rights only if he or she delivers to the corporation
within 30 days from the date of mailing the notice a written
demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate
action giving rise to the right to dissent is effective or 30
days after the shareholder delivers to the corporation the
written demand for payment, whichever is later, the corporation
shall send each shareholder who has delivered a written demand
for payment a statement setting forth the opinion of the
corporation as to the estimated fair value of the shares, the
corporation's latest balance sheet as of the end of a fiscal year
ending not earlier than 16 months before the delivery of the
statement, together with the statement of income for that year
and the latest available interim financial statements, and either
a commitment to pay for the shares of the dissenting shareholder
at the estimated fair value thereof upon transmittal to the
corporation of the certificate or certificates, or other evidence
of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days
after delivery of the corporation's statement to the shareholder.
The corporation may instruct the shareholder to sell only if
there is a public market for the shares at which the shares may
be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for
purposes of this Section the shareholder shall be deemed to have
sold his or her shares at the average closing price of the
shares, if listed on a national exchange, or the average of the
bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange,
during that 10 day period.
(d) A shareholder who makes written demand for payment
under this Section retains all other rights of a shareholder
until those rights are cancelled or modified by the consummation
of the proposed corporate action. Upon consummation of that
action, the corporation shall pay to each dissenter who transmits
to the corporation the certificate or other evidence of ownership
of the shares the amount the corporation estimates to be the fair
value of the shares, plus accrued interest, accompanied by a
written explanation of how the interest was calculated.
A-1
<PAGE> 95
(e) If the shareholder does not agree with the opinion of
the corporation as to the estimated fair value of the shares or
the amount of interest due, the shareholder, within 30 days from
the delivery of the corporation's statement of value, shall
notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the
difference between the shareholder's estimate of fair value and
interest due and the amount of the payment by the corporation or
the proceeds of sale by the shareholder, whichever is applicable
because of the procedure for which the corporation opted pursuant
to subjection (c).
(f) If, within 60 days from the delivery to the corporation
of the shareholder notification of estimate of fair value of the
shares and interest due, the corporation and the dissenting
shareholder have not agreed in writing upon the fair value of the
shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest,
or file a petition in the circuit court of the county in which
either the registered office or the principal office of the
corporation is located, requesting the court to determine the
fair value of the shares and interest due. The corporation shall
make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an
action against their shares and all parties shall be served with
a copy of the petition. Nonresidents may be served by registered
or certified mail or by publication as provided by law. Failure
of the corporation to commence an action pursuant to this Section
shall not limit or affect the right of the dissenting
shareholders to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding
is commenced under subsection (f) by a corporation 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 power described
in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is
entitled to judgment for the amount, if any, by which the court
finds that the fair value of his or her shares, plus interest,
exceeds the amount paid by the corporation or the proceeds of
sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection
(f), shall determine all costs of the proceeding, including the
reasonable compensation and expenses of the appraisers, if any,
appointed by the court under subsection (g), but shall exclude
the fees and expenses of counsel and experts for the respective
parties. If the fair value of the shares as determined by the
court materially exceeds the amount which the corporation
estimated to be the fair value of the shares or if no estimate
was made in accordance with subsection (c), then all or any part
of the costs may be assessed against the corporation. If the
amount which any dissenter estimated to be the fair value of the
shares materially exceeds the fair value of the shares as
determined by the court, then all or any part of the costs may be
assessed against that dissenter. The court may also assess the
fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or
all dissenters if the court finds that the corporation did
not substantially comply with the requirements of
subsections (a), (b), (c), (d) or (f).
(2) Against either the corporation or a dissenter and
in favor of any other party if the court finds that the
party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this Section.
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
A-2
<PAGE> 96
corporation, the court may award to that counsel reasonable fees
to be paid out of the amounts awarded to the dissenters who are
benefited. Except as otherwise provided in this Section, the
practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
(j) As used in this section:
(1) "Fair value", with respect to a dissenter's
shares, means the value of the shares immediately before the
consummation 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.
(2) "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.
A-3
<PAGE> 97
REGIONAL BANCSHARES, INC.
1520 WASHINGTON AVENUE
ALTON, ILLINOIS
FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
- ---------------------------, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder(s) of REGIONAL BANCSHARES, INC.
("Regional"), does hereby nominate, constitute and appoint
- ---------------------- and --------------------, or each of them
(with full power to act alone), true and lawful attorney(s), with
full power of substitution, for the undersigned and in the name,
place and stead of the undersigned to vote all of the shares of
Common Stock, $10.00 par value, of Regional standing in the name
of the undersigned on its books at the close of business on
- ------------------, 1996 at the Special Meeting of Shareholders
to be held at the offices of Bryan Cave LLP, 211 North Broadway,
Suite 3600, St. Louis, Missouri, on ------------------,
- ----------------, 1997, at --------- ---.m., Central Time, and at
any adjournments or postponements thereof, with all the powers
the undersigned would possess if personally present, as follows:
1. A proposal to approve the Agreement and Plan of Merger
dated as of August 23, 1996 (the "Merger Agreement"), and each of
the transactions contemplated thereby, pursuant to which Regional
will be merged with and into a wholly owned subsidiary of
Mercantile Bancorporation Inc. ("MBI") and whereby, upon
consummation of the merger, each share (other than shares owned
by MBI or as to which a Regional shareholder has perfected
dissenters' rights) of Regional common stock will be converted
into the following as consideration in the merger: (i) an amount
in cash equal to $485.76; (ii) 23.7123 shares of MBI common
stock; and (iii) 0.4838 shares of West Pointe Bank And Trust
Company common stock, all as determined by the election
procedures and exchange ratio set forth in detail in the
accompanying Proxy Statement/Prospectus, and subject to certain
adjustments as provided in the Merger Agreement.
/ / FOR / / AGAINST / / ABSTAIN
2. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements
thereof.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO
DIRECTION IS GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" EACH OF
THE PROPOSALS LISTED ABOVE.
Dated:-----------------------------
-----------------------------------
Signature of Shareholder
-----------------------------------
Signature of Shareholder
(When signing as an attorney,
executor, administrator,
trustee or guardian, please
give full title. If more than
one person holds the power to
vote the same shares, all must
sign. All joint owners must
sign.)
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE> 98
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
------------------------------------------
Item 20. Indemnification of Officers and Directors
- ---------------------------------------------------
Sections 351.355(1) and (2) of The General and Business
Corporation Law of the State of Missouri provide that a
corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that
he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful, except that, in the
case of an action or suit by or in the right of the corporation,
the corporation may not indemnify such persons against judgments
and fines and no person shall be indemnified as to any claim,
issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of
his duty to the corporation, unless and only to the extent that
the court in which the action or suit was brought determines upon
application that such person is fairly and reasonably entitled to
indemnity for proper expenses. Section 351.355(3) provides that,
to the extent that a director, officer, employee or agent of the
corporation has been successful in the defense of any such
action, suit or proceeding or any claim, issue or matter therein,
he shall be indemnified against expenses, including attorneys'
fees, actually and reasonably incurred in connection with such
action, suit or proceeding. Section 351.355(7) provides that a
corporation may provide additional indemnification to any person
indemnifiable under subsection (1) or (2), provided such
additional indemnification is authorized by the corporation's
articles of incorporation or an amendment thereto or by a
shareholder-approved bylaw or agreement, and provided further
that no person shall thereby be indemnified against conduct which
was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct or which involved an
accounting for profits pursuant to Section 16(b) of the
Securities Exchange Act of 1934.
Article 12 of the Restated Articles of Incorporation of
the Registrant provides that the Registrant shall extend to its
directors and executive officers the indemnification specified in
subsections (1) and (2) and the additional indemnification
authorized in subsection (7) and that it may extend to other
officers, employees and agents such indemnification and
additional indemnification.
Pursuant to directors' and officers' liability
insurance policies, with total annual limits of $30,000,000, the
Registrant's directors and officers are insured, subject to the
limits, retention, exceptions and other terms and conditions of
such policy, against liability for any actual or alleged error,
misstatement, misleading statement, act or omission, or neglect
or breach of duty by the directors or officers of the Registrant,
individually or collectively, or any matter claimed against them
solely by reason of their being directors or officers of the
Registrant.
Item 21. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
A. Exhibits. See Exhibit Index.
---------
B. Financial Statement Schedules. Not Applicable.
-----------------------------
II-1
<PAGE> 99
Item 22. Undertakings
- ----------------------
(1) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(2) The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other Items of the applicable form.
(4) The Registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph (3) immediately
preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415 (Section 230.415 of
this chapter), will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offering therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) The undersigned Registrant hereby undertakes to
respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13
of this Form, within one business day of receipt of such request
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained
in the documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the
request.
(6) The undersigned Registrant hereby undertakes to
supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-2
<PAGE> 100
(7) The undersigned Registrant hereby undertakes:
(a) To file during any period in which offers and
sales are being made, a post-effective amendment
to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof),
which individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement;
(iii) To include any material information
with respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement.
(b) That for the purpose of determining any
liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to
be a new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities
being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 101
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration Statement
relating to the acquisition of Regional Bancshares, Inc. to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Louis, State of Missouri, on
December 12, 1996.
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 Q. Arnold, 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,
registering the issuance by Mercantile Bancorporation Inc. of
shares of its common stock, and the preferred share purchase
rights which trade therewith, in connection with the acquisition
of Regional Bancshares, Inc., 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas H. Jacobsen Chairman of the Board December 12, 1996
- ------------------------------ President, Chief Executive
Thomas H. Jacobsen Officer and Director
Principal Executive Officer
/s/ John Q. Arnold Senior Executive Vice President and December 12, 1996
- ------------------------------ Chief Financial Officer
John Q. Arnold
Principal Financial Officer
II-4
<PAGE> 102
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael T. Normile Senior Vice President - Finance December 12, 1996
- ------------------------------ and Control
Michael T. Normile
Principal Accounting Officer
/s/ Harry M. Cornell, Jr. Director December 12, 1996
- ------------------------------
Harry M. Cornell, Jr.
/s/ William A. Hall Director December 12, 1996
- ------------------------------
William A. Hall
/s/ Thomas A. Hays Director December 12, 1996
- ------------------------------
Thomas A. Hays
/s/ Frank Lyon, Jr. Director December 12, 1996
- ------------------------------
Frank Lyon, Jr.
/s/ Edward A. Mueller Director December 12, 1996
- ------------------------------
Edward A. Mueller
/s/ Robert W. Murray Director December 12, 1996
- ------------------------------
Robert W. Murray
/s/ Harvey Saligman Director December 12, 1996
- ------------------------------
Harvey Saligman
/s/ Craig D. Schnuck Director December 12, 1996
- ------------------------------
Craig D. Schnuck
/s/ Robert L. Stark Director November 23, 1996
- ------------------------------
Robert L. Stark
/s/ Patrick T. Stokes Director December 12, 1996
- ------------------------------
Patrick T. Stokes
/s/ John A. Wright Director November 22, 1996
- ------------------------------
John A. Wright
</TABLE>
II-5
<PAGE> 103
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of August 23, 1996,
by and among MBI, Ameribanc and Regional.
2.2 Form of Voting Agreement, dated as of August 23, 1996,
executed by MBI and certain of the shareholders of
Regional.
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, 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 Annual Report on Form 10-K for the
year ended December 31, 1995, are incorporated herein by
reference.
4.1 Form of Indenture Regarding Subordinated Securities between
MBI and The First National Bank of Chicago, Trustee, filed
as Exhibit 4.1 to MBI's Report on Form 8-K dated
September 24, 1992, is incorporated herein by reference.
4.2 Rights Agreement dated as of May 23, 1988 between MBI and
Mercantile Bank, as Rights Agent (including as exhibits
thereto the form of Certificate of Designation, Preferences
and Rights of Series A Junior Participating Preferred Stock
and the form of Right Certificate), filed as Exhibits 1 and
2 to MBI's Registration Statement No. 0-6045 on Form 8-A,
dated May 24, 1988, is incorporated herein by reference.
5.1 Opinion of Thompson Coburn as to the legality of the
securities being registered.
8.1 Opinion of Thompson Coburn regarding certain tax matters in
the Merger.
10.1 The Mercantile Bancorporation Inc. 1987 Stock Option Plan,
as amended, filed as Exhibit 10-3 to MBI's Report on Form
10-K for the year ended December 31, 1989 (File No. 1-
11792), is incorporated herein by reference.
10.2 The Mercantile Bancorporation Inc. Executive Incentive
Compensation Plan, filed as Appendix C to MBI's definitive
Proxy Statement for the 1994 Annual Meeting of Shareholders
is incorporated herein by reference.
10.3 The Mercantile Bancorporation Inc. Employee Stock Purchase
Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K
for the year ended December 31, 1989 (File No. 1-11792), is
incorporated herein by reference.
10.4 The Mercantile Bancorporation Inc. 1991 Employee Incentive
Plan, filed as Exhibit 10-7 to MBI's Report on Form 10-K
for the year ended December 31, 1990 (File No. 1-11792), is
incorporated herein by reference.
10.5 Amendment Number One to the Mercantile Bancorporation Inc.
1991 Employee Incentive Plan, filed as Exhibit 10-6 to
MBI's Report on Form 10-K for the year ended December 31,
1994, is incorporated herein by reference.
II-6
<PAGE> 104
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
10.6 The Mercantile Bancorporation Inc. 1994 Stock Incentive
Plan, filed as Appendix B to MBI's definitive Proxy
Statement for the 1994 Annual Meeting of Shareholders, is
incorporated herein by reference.
10.7 The Mercantile Bancorporation Inc. 1994 Stock Incentive
Plan for Non-Employee Directors, filed as Appendix E to
MBI's definitive Proxy Statement for the 1994 Annual
Meeting of Shareholders, is incorporated herein by
reference.
10.8 The Mercantile Bancorporation Inc. Voluntary Deferred
Compensation Plan, filed as Appendix D to MBI's definitive
Proxy Statement for the 1994 Annual Meeting of
Shareholders, is incorporated herein by reference.
10.9 Form of Employment Agreement for Thomas H. Jacobsen, as
amended, filed as Exhibit 10-8 to MBI's Report on Form 10-K
for the year ended December 31, 1989 (File No. 1-11792), is
incorporated herein by reference.
10.10 Form of Change of Control Employment Agreement for John W.
McClure, W. Randolph Adams, John Q. Arnold and Certain
Other Executive Officers, filed as Exhibit 10-10 to MBI's
Report on Form 10-K for the year ended December 31, 1989
(File No. 1-11792), is incorporated herein by reference.
10.11 Amended and Restated Agreement and Plan of Reorganization
dated as of December 2, 1994 by and among MBI and
TCBankshares, Inc., filed as Exhibit 2.1 to MBI's Report on
Form 8-K dated December 21, 1994, is incorporated herein by
reference.
10.12 Agreement and Plan of Reorganization dated August 4, 1995,
by and between MBI and Hawkeye Bancorporation, filed as
Exhibit 2.1 to MBI's Registration Statement No. 33-63609,
is incorporated herein by reference.
10.13 The Mercantile Bancorporation Inc. Supplemental Retirement
Plan, filed as Exhibit 10-12 to MBI's Report on Form 10-K
for the year ended December 31, 1992 (File No. 1-11792), is
incorporated herein by reference.
10.14 Agreement and Plan of Merger, dated October 27, 1996, among
MBI, Ameribanc and Mark Twain Bancshares, Inc., filed as
Exhibit 2.1 to MBI's Current Report on Form 8-K, dated
November 6, 1996, is incorporated herein by reference.
23.1 Consent of Thompson Coburn (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP with regard to the use of
its reports on MBI's financial statements.
23.3 Consent of KPMG Peat Marwick LLP with regard to the use of
its reports on Regional's financial statements.
23.4 Consent of Ernst & Young LLP with regard to the use of its
reports on Mark Twain's financial statements.
II-7
<PAGE> 105
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
24.1 Power of Attorney (included on signature page).
</TABLE>
II-8
<PAGE> 1
[Exhibit 2.1]
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
REGIONAL BANCSHARES, INC.
MERCANTILE BANCORPORATION INC.
AND
AMERIBANC, INC.
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 2
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . .3
2.2 Conversion of Securities. . . . . . . . . . . . . . .3
2.3 Parent Stock Adjustment . . . . . . . . . . . . . . .4
2.4 Closings; Effective Times . . . . . . . . . . . . . .4
2.5 Effect of Merger. . . . . . . . . . . . . . . . . . .5
2.6 Exchange of Shares. . . . . . . . . . . . . . . . . .5
2.7 Funding of Exchange Agent.. . . . . . . . . . . . . .8
2.8 Charter and Bylaws. . . . . . . . . . . . . . . . . .8
2.9 Directors and Officers. . . . . . . . . . . . . . . .8
2.10 Tax Free Reorganization.. . . . . . . . . . . . . . .8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF REGIONAL BANCSHARES . . .9
3.1 Organization, Good Standing and Capital Stock . . . .9
3.2 Regional Bancshares Subsidiaries. . . . . . . . . . 10
3.3 Bank of Alton Subsidiaries. . . . . . . . . . . . . 10
3.4 Corporate Authorizations. . . . . . . . . . . . . . 10
3.5 Corporate Documents . . . . . . . . . . . . . . . . 10
3.6 Regulatory Reports. . . . . . . . . . . . . . . . . 10
3.7 Governmental Regulation . . . . . . . . . . . . . . 11
3.8 Compliance with Laws. . . . . . . . . . . . . . . . 11
3.9 Regional Bancshares and Bank of Alton Consolidated
Financial Statements. . . . . . . . . . . . . . . . 11
3.10 Title to Properties . . . . . . . . . . . . . . . . 12
3.11 Use and Condition of Property . . . . . . . . . . . 13
3.12 Loans; Loan Loss Reserve. . . . . . . . . . . . . . 13
3.13 Employees. . . . . . . . . . . . . . . . . . . . . 15
3.14 Indebtedness to and from Officers, Directors and
Others. . . . . . . . . . . . . . . . . . . . . . . 15
3.15 Absence of Conflicts. . . . . . . . . . . . . . . . 16
3.16 Litigation. . . . . . . . . . . . . . . . . . . . . 16
3.17 Contracts . . . . . . . . . . . . . . . . . . . . . 16
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . 17
3.19 Conduct . . . . . . . . . . . . . . . . . . . . . . 17
3.20 Fiduciary Responsibilities. . . . . . . . . . . . . 18
3.21 FDIC Insurance. . . . . . . . . . . . . . . . . . . 18
3.22 Large Deposits. . . . . . . . . . . . . . . . . . . 18
3.23 Broker. . . . . . . . . . . . . . . . . . . . . . . 19
3.24 Labor . . . . . . . . . . . . . . . . . . . . . . . 19
i
<PAGE> 3
3.25 Intellectual or Other Intangible Property.. . . . . 19
3.26 Environmental Matters . . . . . . . . . . . . . . . 20
3.27 Tax Matters . . . . . . . . . . . . . . . . . . . . 20
3.28 Employee Benefit Plans. . . . . . . . . . . . . . . 22
3.29 Alien Employment Eligibility. . . . . . . . . . . . 25
3.30 Material Adverse Change.. . . . . . . . . . . . . . 25
3.31 Absence of Undisclosed Liabilities. . . . . . . . . 25
3.32 Interest Rate Risk Management Instruments.. . . . . 26
3.33 West Pointe Common. . . . . . . . . . . . . . . . . 26
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MERCANTILE . . . . . . . 26
4.1 Mercantile Organization, Good Standing and Capital
Stock . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Merger Sub Organization, Good Standing and Capital
Stock . . . . . . . . . . . . . . . . . . . . . . . 28
4.3 Authorization . . . . . . . . . . . . . . . . . . . 28
4.4 Consolidated Financial Statements of Mercantile . . 29
4.5 Mercantile Reports. . . . . . . . . . . . . . . . . 29
4.6 Compliance with Laws and Agreements . . . . . . . . 30
4.7 Shares to be Issued in Merger . . . . . . . . . . . 30
4.8 Litigation. . . . . . . . . . . . . . . . . . . . . 30
4.9 Information in Proxy Statement and Registration
Statement . . . . . . . . . . . . . . . . . . . . . 31
4.10 Material Adverse Change . . . . . . . . . . . . . . 31
ARTICLE 5
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1 Joint Covenants . . . . . . . . . . . . . . . . . . 31
5.1(a) Truth and Completeness of Representations and
Warranties. . . . . . . . . . . . . . . . . . . . 31
5.1(b) Best Efforts. . . . . . . . . . . . . . . . 32
5.1(c) Cooperation/Inspection. . . . . . . . . . . 32
5.1(d) Consents. . . . . . . . . . . . . . . . . . 32
5.1(e) Access and Information. . . . . . . . . . . 32
5.2 Expenses. . . . . . . . . . . . . . . . . . . . . . 33
5.3 Covenants of Regional Bancshares. . . . . . . . . . 34
5.3(a) Regional Bancshares Shareholder Approval. . 34
5.3(b) Conduct of Business Pending Merger. . . . . 34
5.3(c) Implementation of Policies. . . . . . . . . 38
5.3(d) Financial Statements to be Delivered. . . . 38
5.3(e) Financial and Call Reports. . . . . . . . . 38
5.3(f) Environmental Matters . . . . . . . . . . . 39
5.3(g) Conforming Entries. . . . . . . . . . . . . 40
5.3(h) Additional Actions. . . . . . . . . . . . . 41
5.4 Covenants of Mercantile and Merger Sub. . . . . . . 41
5.4(a) Approval. . . . . . . . . . . . . . . . . . 41
ii
<PAGE> 4
5.4(b) Payment of Consideration. . . . . . . . . . 41
5.4(c) Registration of Securities and Preparation of
Proxy Statement. . . . . . . . . . . . . . 41
5.4(d) Other Filings and Appeals.. . . . . . . . . 42
5.4(e) Employee Benefit Plans. . . . . . . . . . . 43
5.4(f) Directors' and Officers' Indemnity. . . . . 43
ARTICLE 6
CONDITIONS PRECEDENT TO THE MERGER . . . . . . . . . . . . 44
6.1 Conditions and Obligations of Mercantile, Merger Sub
and Regional Bancshares to the Merger . . . . . . . 44
6.1(a) Approval by Regional Bancshares
Stockholders. . . . . . . . . . . . . . . ..44
6.1(b) Regulatory Authority Approval . . . . . . . 44
6.1(c) No Proceedings, Etc.. . . . . . . . . . . . 45
6.1(d) Registration Statement. . . . . . . . . . . 45
6.1(e) Listing on Stock Exchange.. . . . . . . . . 45
6.1(f) Tax Opinion.. . . . . . . . . . . . . . . . 45
6.2 Conditions to Obligations of Mercantile to the
Merger. . . . . . . . . . . . . . . . . . . . . . . 45
6.2(a) Representations, Warranties and Covenants . 45
6.2(b) Officers' Certificates. . . . . . . . . . . 46
6.2(c) No Material Adverse Change. . . . . . . . . 46
6.2(d) Legal Opinion.. . . . . . . . . . . . . . . 46
6.3 Conditions to Obligations of Regional Bancshares to
the Merger. . . . . . . . . . . . . . . . . . . . . 46
6.3(a) Representations, Warranties and Covenants.. 46
6.3(b) Officers' Certificates. . . . . . . . . . . 46
6.3(c) No Material Adverse Change. . . . . . . . . 46
6.3(d) Legal Opinion.. . . . . . . . . . . . . . . 47
6.3(e) Effective Registration Statement. . . . . . 47
ARTICLE 7
ABANDONMENT AND TERMINATION OF THE MERGER. . . . . . . . . 47
7.1 Termination . . . . . . . . . . . . . . . . . . . . 47
7.2 Procedure for Termination . . . . . . . . . . . . . 48
7.3 Return of Information . . . . . . . . . . . . . . . 48
7.4 Effect of Termination . . . . . . . . . . . . . . . 48
ARTICLE 8
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 49
8.1 Notice. . . . . . . . . . . . . . . . . . . . . . . 49
8.2 Amendments. . . . . . . . . . . . . . . . . . . . . 50
8.4 Benefit and Binding Effect. . . . . . . . . . . . . 50
8.5 Governing Law . . . . . . . . . . . . . . . . . . . 50
8.6 Whole Agreement . . . . . . . . . . . . . . . . . . 50
8.7 Counterparts. . . . . . . . . . . . . . . . . . . . 51
8.8 Reliance on Headings. . . . . . . . . . . . . . . . 51
iii
<PAGE> 5
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
EXHIBIT A
OPINION OF COUNSEL
FOR REGIONAL BANCSHARES. . . . . . . . . . . . . . . . . . 58
EXHIBIT B
OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . 58
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of
the 23rd day of August, 1996, is made among Mercantile
Bancorporation Inc., a Missouri corporation ("Mercantile"),
Ameribanc, Inc. a Missouri corporation and wholly owned subsidiary
of Mercantile ("Merger Sub"), and Regional Bancshares, Inc.
("Regional Bancshares"), an Illinois corporation.
W I T N E S S E T H:
WHEREAS, subject to the terms and conditions herein, the
parties deem it advisable and in the best interests of their
respective stockholders that Regional Bancshares be merged into
Merger Sub with Merger Sub as the Surviving corporation (the
"Merger"), with all issued and outstanding Regional Bancshares
common stock being converted into the right to receive the Merger
Consideration (as defined herein);
WHEREAS, the parties hereto have agreed upon the terms and
provisions of such transaction and desire to provide for certain
undertakings, conditions, representations, warranties and covenants
in connection with the transactions contemplated hereby;
NOW, THEREFORE, for and in consideration of the premises and
mutual covenants and agreements herein contained, the parties
hereto do agree each with the other as follows:
ARTICLE 1
DEFINITIONS
1.1 "Benefit Plan" shall constitute (i) an employee
benefit plan as defined in Section 3(3) of ERISA, together with
all regulations thereunder, even if, because of some other
provision of ERISA, such plan is not subject to any or all of
ERISA's provisions, and (ii) whether or not described in the
preceding clause, (a) any pension, profit sharing, stock bonus,
deferred or supplemental compensation, retirement, thrift, stock
purchase or stock option plan, or any other compensation,
welfare, fringe benefit or retirement plan, program, policy,
understanding or arrangement of any kind whatsoever, whether
formal or informal, oral or written, providing for benefits for
or the welfare of any or all of the current or former employees
or agents of Regional Bancshares, Bank of Alton or any affiliates
thereof or their beneficiaries or dependents, (b) a multi-
employer plan as defined in Section 3(37) of ERISA, or (c) a
multiple employer plan as defined in Section 413 of the Code.
<PAGE> 7
1.2 "Business Day" means any day which is not a Saturday,
Sunday or a day on which banking institutions in Illinois or
Missouri are authorized or obligated by law or executive order to
close.
1.3 "Environmental Claim" means any written notice from
any governmental authority or third party alleging potential
liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or
penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of
Environmental Concern.
1.4 "Environmental Laws" means any current federal, state
or local law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or
restoration of the environment (including, without limitation,
air, water vapor, surface water, groundwater, drinking water
supply, surface soil, subsurface soil, plant and animal life or
any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Materials
of Environmental Concern. The term Environmental Law includes
without limitation: (1) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Sec. 9601,
et seq; the Resource Conservation and Recovery Act, as
- -- ---
amended, 42 U.S.C. Sec. 6901, et seq; the Clean Air Act,
-- ---
as amended, 42 U.S.C. Sec. 7401, et seq; the Federal
-- ---
Water Pollution Control Act, as amended, 33 U.S.C. Sec. 1251,
et seq; the Toxic Substances Control Act, as amended, 15
- -- ---
U.S.C. Sec. 2601, et seq; the Emergency Planning and
-- ---
Community Right to Know Act, 42 U.S.C. Sec. 11001, et seq;
-- ---
the Safe Drinking Water Act, 42 U.S.C. Sec. 300f, et seq;
-- ---
and all comparable state and local laws; and (2) any common
law (including without limitation common law that may impose
strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental
Concern.
1.5 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.6 "Intellectual Property" means patents, trademarks,
trade names, corporate names, service marks, copyrights, and
copyrighted works; registrations thereof and applications
therefor; trade secrets, software, firmware, programs,
inventions, processes, and items of proprietary know-how,
information or data; and licenses, sublicenses, assignments, and
agreements in respect of any of the foregoing; in each case as
used by or licensed or assigned by or to Regional Bancshares or
Bank of Alton.
2
<PAGE> 8
1.7 "Materials of Environmental Concern" means
pollutants, contaminants, wastes, radioactive materials or
wastes, hazardous wastes, hazardous substances, asbestos and any
material containing asbestos, medical wastes, toxic substances,
petroleum products and wastes, and any other materials regulated
under Environmental Laws.
1.8 "Taxes" means all taxes, charges, fees, levies, or
other like assessments, including without limitation income,
gross receipts, ad valorem, value added, premium, excise, real
property, personal property, windfall profit, sales, use,
transfer, license, withholding, employment, payroll, bank, and
franchise taxes imposed by: the United States or any other
nation, state, or bilateral or multilateral governmental
authority, any local governmental unit or subdivision thereof, or
any branch, agency, or judicial body thereof; and shall include
any interest, fines, penalties, assessments, or additions to tax
resulting from, attributable to, or incurred in connection with
any such Taxes or any contest or dispute thereof.
ARTICLE 2
MERGER
2.1 The Merger. Subject to the satisfaction of the
----------
terms and conditions of this Agreement, including, without
limitation, receipt of all requisite governmental and stockholder
approvals, at the Merger Effective Time (as defined below),
subject to the satisfaction of the terms and conditions of this
Agreement, Regional Bancshares shall be merged with and into
Merger Sub in accordance with the provisions of the general
corporation laws of the States of Missouri and Illinois with
Merger Sub as the surviving corporation ("Surviving
Corporation"); each share of the common stock of Regional
Bancshares, $10.00 par value ("Regional Bancshares Common")
issued and outstanding immediately prior to the Merger Effective
Time shall thereupon and without further action be converted into
the right to receive the Merger Consideration (as defined below)
in the manner specified herein. As of the Merger Effective Time,
the separate existence of Regional Bancshares shall cease.
2.2 Conversion of Securities. At the Merger
------------------------
Effective Time, by virtue of the Merger and without any action on
the part of Mercantile, Merger Sub, Regional Bancshares or the
holder of any of the following securities:
(a) Each share of the common stock, $1.00 par
value, of Merger Sub that is issued and outstanding
immediately prior to the Merger 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
3
<PAGE> 9
(b) Subject to Sections 2.3 and 2.5(d) hereof,
each share of common stock, $10.00 par value of Regional
Bancshares ("Regional Bancshares Common") issued and
outstanding at the Merger Effective Time shall cease to be
outstanding and shall be converted into the following:
(i) the right to receive an amount in cash (the
"Cash Distribution") equal to $485.76;
(ii) the right to receive 23.7123 shares of
Mercantile common stock, $5.00 par value, and the
associated "Rights" under the "Rights Agreement," as
those terms are defined in Section 4.1 hereof
(collectively, "Mercantile Common") (the "Stock
Distribution" ; and
(iii) the right to receive 0.4838 shares of the
Common Stock of West Pointe Bank & Trust Company
("West Point Common") held of record by Regional
Bancshares as of the date hereof (the "West Pointe
Consideration" and collectively with the Cash
Consideration and Stock Consideration, the "Merger
Consideration").
2.3 Parent Stock Adjustment. If prior to the Merger
-----------------------
Effective Time Mercantile and/or West Pointe Bank & Trust Company
shall declare a stock dividend or make distributions upon or
subdivide, split up, reclassify or combine Mercantile Common
and/or West Pointe Common, as appropriate, or declare a dividend
or make a distribution on Mercantile Common in any security
convertible into Mercantile Common and/or West Pointe Common, as
appropriate, adjustment or adjustments will be made to the Stock
Distribution and/or West Pointe Consideration, as appropriate.
2.4 Closings; Effective Times. A closing for the
-------------------------
Merger (the "Merger Closing") shall take place at 10:00 a.m. on a
day within forty-five (45) days, as mutually agreed by the
parties, following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the consummation of the
Merger specified in Article 6 of this Agreement at the offices of
Bryan Cave LLP, 211 North Broadway, St. Louis, Missouri 63102 or
at such other place, at such other time, or on such other date as
the parties may mutually agree upon. At the Merger Closing,
there shall be delivered to Regional Bancshares and Mercantile
the opinions, certificates and other documents required to be
delivered under Article 6 hereof. At the Merger Closing, the
parties shall exchange the certificates specified in Article 6
and shall execute an appropriate certificate of merger and such
other documents as may be deemed necessary or advisable in the
opinion of Mercantile to effectuate the Merger as promptly as
practicable. At or after the Merger Closing, the parties shall
cause their representatives to file the Agreement or such
certificate of merger with the appropriate authority and shall
take such other actions as may be deemed necessary or advisable
in the opinion of Mercantile to
4
<PAGE> 10
effectuate the Merger. The "Merger Effective Time" shall occur upon the
issuance of the certificate of merger by the Secretaries of the States of
Missouri and Illinois.
2.5 Effect of Merger. The Surviving Corporation
-----------------
shall have the name "Ameribanc, Inc." and shall possess all
rights, privileges, powers and franchises and shall be subject to
all restrictions, liabilities and duties of Merger Sub and
Regional Bancshares; and the rights, privileges, powers and
franchises of Merger Sub and Regional Bancshares, and all
property, real, personal and mixed, and all debts due Merger Sub
or Regional Bancshares, as well as for all other things in action
or belonging to Merger Sub and Regional Bancshares, shall be
vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other
interest shall be thereafter the property of the Surviving
Corporation as they were of Merger Sub and Regional Bancshares,
and the title to any real estate vested by deed or otherwise,
under the laws of any state or jurisdiction, in Merger Sub or
Regional Bancshares, shall not revert or be in any way impaired
by reason of the Merger; but all rights of creditors and all
liens upon any property of Merger Sub or Regional Bancshares
shall be preserved unimpaired, and all respective debts,
liabilities and duties of Merger Sub or Regional Bancshares shall
thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by it. If
at any time the Surviving Corporation shall consider or be
advised that any further assignments, conveyances or assurances
in law are necessary or desirable to vest, perfect or confirm of
record in the Surviving Corporation the title to any property or
rights of Regional Bancshares or otherwise to carry out the
provisions hereof, the proper officers and directors of Regional
Bancshares immediately prior to the Merger Effective Time (or
their successors in office) shall execute and deliver any and all
proper deeds, assignments and assurances in law, and do all
things necessary or proper, to vest, perfect or confirm title to
such property or rights in the Surviving Corporation and
otherwise to carry out the provisions hereof. The Surviving
Corporation shall be governed by the laws of the State of
Missouri.
2.6 Exchange of Shares. From and after the Merger
-------------------
Effective Time and as and when required by the provisions of this
Agreement, Mercantile shall issue the Merger Consideration in the
form of cashand shares of Mercantile Common to stockholders of
Regional Bancshares pursuant to the provisions hereinafter set
forth. The manner of converting the shares of Regional
Bancshares Common shall be as follows:
2.6(a) At the Merger Effective Time, each share of
Regional Bancshares Common outstanding immediately prior to the
Merger Effective Time (other than (i) any Regional Bancshares
Common shares held by Mercantile or any corporate affiliate, with
the exception of shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted in good faith or
(ii) shares held by a holder who has made a demand for appraisal
and payment in accordance with
5
<PAGE> 11
applicable law and who has not voted for the Merger) shall thereupon, and
without further action on the part of the holder thereof, be converted into
the right to receive the Merger Consideration, as set forth in Section 2.2
hereof. Each share of Regional Bancshares Common held in the treasury of
Regional Bancshares or owned by Mercantile at the Merger Effective Time (other
than those specifically described in (i) and (ii) of the immediately preceding
sentence) shall be cancelled.
2.6(b) Within 2 Business Days after the Merger
Effective Time, the Surviving Corporation or an exchange agent
appointed by the Surviving Corporation (the "Exchange Agent")
shall send or cause to be sent to each holder of record of a
certificate or certificates which as of the Merger Effective Time
represented outstanding shares of Regional Bancshares Common (the
"Certificates") a form letter of transmittal which shall specify
instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon the
surrender of a Certificate for cancellation to the Exchange Agent
(or a lost certificate affidavit or bond in a form reasonably
acceptable to the Exchange Agent), together with such letter of
transmittal duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor (w) the Cash
Distribution multiplied by the number of shares of Regional
Bancshares Common theretofore represented by the Certificate so
surrendered, (x) a certificate or certificates representing the
Stock Distribution multiplied by the number of shares of Regional
Bancshares Common theretofore represented by the Certificate so
surrendered, (y) a certificate or certificates representing the
West Pointe Consideration multiplied by the number of shares of
Regional Bancshares Common theretofore represented by the
Certificate so surrendered, plus (z) an amount of cash as
provided in subsection (d) below for any fractional shares of
Mercantile Common and/or West Pointe Common, as appropriate,
which such holder would otherwise be entitled to receive, and the
Certificate so surrendered shall forthwith be cancelled.
2.6(c) No dividends or other distributions declared
after the Merger Effective Time with respect to Mercantile Common
payable to holders of record after the Merger Effective Time
shall be paid to the holder of any unsurrendered Certificate
evidencing ownership of shares of Regional Bancshares Common
represented thereby until the holder of record shall surrender
such Certificate. Until so surrendered and exchanged, each such
outstanding Certificate shall, for all purposes, other than the
payment of dividends or other distributions, if any, to holders
of record of shares of Mercantile Common, evidence the right to
ownership of the shares of Mercantile Common into and for which
such shares have been so converted; provided, however, that upon
surrender of a Certificate, there shall be paid to the record
holder or holders of such Certificate, the amount, without
interest thereon, of such dividends and other distributions, if
any, which theretofore have become payable with respect to the
number of whole shares of Mercantile Common represented by such
Certificate.
6
<PAGE> 12
2.6(d) No fractional shares of Mercantile Common
shall be issued upon the surrender or exchange of Certificates
which prior to the Merger Effective Time shall have represented
any shares of Regional Bancshares Common; no dividend or
distribution of Mercantile shall relate to any fractional share
interest; and fractional share interests shall not entitle the
owner thereof to vote or to any rights of a stockholder of
Mercantile. Instead, each holder of shares of Regional
Bancshares Common having a fractional interest arising upon the
conversion or exchange of such shares pursuant to the Merger
shall, at the time of surrender of the Certificate or
Certificates theretofore representing Regional Bancshares Common,
be paid by Mercantile an amount in cash (without interest)
determined by multiplying the fractional share interest to which
such holder otherwise would be entitled by the average of the
closing stock price of Mercantile Common on The New York Stock
Exchange Composite Tape as reported in The Wall Street Journal
-----------------------
for the five trading days prior to the date on which this Agreement is
executed. The fractional share interests of each stockholder will be
aggregated such that no stockholder will receive cash in lieu of fractional
share interests in an amount greater than one full share of Mercantile Common.
In the event West Pointe Bank & Trust Company shall not
issue certificates representing fractional shares of West Pointe
Common upon the request of the Exchange Agent therefore, the
holder of Regional Bancshares Common entitled to such fractional
interest shall, at the time of surrender of the Certificate or
Certificates theretofore representing Regional Bancshares Common,
be paid by Mercantile an amount in cash (without interest)
determined by multiplying the fractional share interest to which
such holder otherwise would be entitled by $30.00. The
fractional share interests of each stockholder will be aggregated
such that no stockholder will receive cash in lieu of fractional
shares interests in an amount greater than one full share of West
Pointe Common.
2.6(e) All rights to receive (i) shares of
Mercantile Common into and for which shares of Regional
Bancshares Common shall have been converted and exchanged
pursuant to this Agreement, (ii) cash , and (iii) West Pointe
Common shall be deemed to have been issued or paid, as the case
may be, in full satisfaction of all rights pertaining to such
converted and exchanged shares of Regional Bancshares Common.
2.6(f) At the Merger Effective Time, Regional
Bancshares shall deliver a certified copy of a list of its
stockholders to Mercantile, after which there shall be no further
registration of transfers on the stock transfer books of Regional
Bancshares of the shares of Regional Bancshares Common which were
outstanding immediately prior to the Merger Effective Time. If,
after the Merger Effective Time, Certificates representing such
shares of Regional Bancshares Common are presented to Mercantile,
they shall be cancelled and exchanged for cash and certificates
representing shares of Mercantile Common as provided in this
Agreement.
7
<PAGE> 13
2.6(g) If any cash and any certificate representing
shares of Mercantile Common or West Pointe Common is to be paid
to or issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a
condition of the payment or issuance thereof that the Certificate
so surrendered shall be properly endorsed, accompanied by all
documents required to evidence and effect such transfer and
otherwise in proper form for transfer.
2.6(h) If there are appraisal rights available under
applicable law with respect to shares of Regional Bancshares
Common as a result of the Merger, then each such share of
Regional Bancshares Common as to which a legally sufficient
demand for appraisal has been made in accordance with the
applicable law and which was not voted in favor of, or the record
holder of which did not consent in writing to, the Merger, shall
not be converted into or represent a right to receive the Merger
Consideration pursuant to this Agreement unless and until the
holder of such share shall have failed to perfect or shall have
effectively withdrawn or lost the right to appraisal of and
payment for such shares, at which time such holder's shares shall
be converted into the right to receive the Merger Consideration
in accordance with the terms of this Agreement and the applicable
law.
2.7 Funding of Exchange Agent. Mercantile shall
--------------------------
deliver to the Exchange Agent from time to time as needed by the
Exchange Agent an amount in cash necessary to pay the cash
portion of the Merger Consideration and to pay the cash in lieu
of fractional shares payable for certificates theretofore
representing shares of Regional Bancshares Common.
2.8 Charter and Bylaws. On and after the Merger
-------------------
Effective Time, the Articles of Incorporation and Bylaws of the
Surviving Corporation shall remain the Articles of Incorporation
and Bylaws of Merger Sub immediately prior to the Merger
Effective Time until further amended in accordance with
applicable law.
2.9 Directors and Officers. On and after the Merger
-----------------------
Effective Time, the officers and directors of the Surviving
Corporation shall remain the officers and directors of Merger Sub
in office as of the Merger Effective Time, and shall hold such
offices in the Surviving Corporation which they held in Merger
Sub as of the Merger Effective Time, until their successors are
elected or appointed in accordance with the Bylaws of the
Surviving Corporation and shall have been duly qualified.
On and after the Merger Effective Time, the directors and
officers of the Surviving Corporation shall have the right to act
in any respect as directors and officers for Regional Bancshares
or Merger Sub in order to perfect in the Surviving Corporation
the effects of the Merger set forth in Section 2.5 hereof.
8
<PAGE> 14
2.10 Tax Free Reorganization. The parties intend to
------------------------
adopt this Agreement and the Merger as a tax-free plan of
reorganization under Section 368(a)(1)(A) of the Code by virtue
of the provisions of Section 368(a)(2)(D) of the Code. The
parties shall not take a position on any tax return inconsistent
with this Section 2.10.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF REGIONAL BANCSHARES
Regional Bancshares represents and warrants to Mercantile as
of the date first written above, and continuing to the Merger
Closing, as follows:
3.1 Organization, Good Standing and Capital Stock.
---------------------------------------------
Regional Bancshares is a corporation and Bank of Alton is a
banking corporation, in each case duly organized, validly
existing and in good standing under the laws of the State of
Illinois and have all requisite power and authority (corporate or
other) to (i) enter into this Agreement and to perform the
obligations hereunder and thereunder on its part to be performed
and (ii) own, operate and lease their properties and carry on
their businesses as they are now being conducted in each
jurisdiction where their business is being conducted. Regional
Bancshares and Bank of Alton are duly qualified and in good
standing in each jurisdiction where the character of the
properties owned or leased by them or the nature of the business
transacted by them requires that they be qualified to do
business. Regional Bancshares is a bank holding company duly
registered with the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended (the "Act"). The authorized
capital stock of Regional Bancshares consists entirely of 30,000
shares of Common Stock, par value $10.00 per share, of which
25,321 shares are issued and outstanding. All of such shares are
validly issued, fully paid and nonassessable. The authorized
capital stock of Bank of Alton consists entirely of 30,000 shares
of Common Stock, par value $12.00 per share ("Bank of Alton
Common"), of which 30,000 shares are issued and outstanding. All
of such shares are validly issued, fully paid and nonassessable.
Regional Bancshares owns 100% of the outstanding shares of Bank
of Alton Common of record and beneficially, free and clear of any
liens, pledges, security interests, charges or other
encumbrances. Neither Regional Bancshares or Bank of Alton have
any authorized shares of preferred stock. Neither Regional
Bancshares Common or Bank of Alton Common is subject to any
restriction on transfer under their respective Certificates or
Articles of Incorporation or Bylaws or any contract, indenture,
agreement or instrument by which they are bound. Neither
Regional Bancshares nor Bank of Alton has issued or granted nor
is either a party to any outstanding warrants, options, rights,
calls or commitments of any kind relating to, or any presently
effective agreements or understandings with respect to, the
capital stock of Regional Bancshares or Bank of Alton, whether
issued or unissued, or securities convertible into capital stock
of Regional Bancshares or Bank of Alton, whether issued or
unissued. Neither Regional Bancshares or Bank of Alton is a
party to, or bound by, any contract, indenture,
9
<PAGE> 15
agreement or instrument or any note, debenture, bond or other security, under
the terms of which, or pursuant to which, their right to declare or pay
dividends on its capital is restricted.
3.2 Regional Bancshares Subsidiaries. Except for
--------------------------------
Bank of Alton, Regional Bancshares does not own or control,
directly or indirectly, a 5% or more equity interest in any
corporation, bank or other entity.
3.3 Bank of Alton Subsidiaries. Bank of Alton does
--------------------------
not own or control, directly or indirectly, a 5% or more equity
interest in any corporation, bank or other entity.
3.4 Corporate Authorizations. Except for the
------------------------
shareholder vote provided for in Section 5.3(a), the execution,
delivery and performance of this Agreement have been duly and
validly authorized by all necessary corporate action on the part
of Regional Bancshares. This Agreement has been duly executed
and delivered by Regional Bancshares. Assuming due
authorization, execution and delivery by Mercantile and Merger
Sub, this Agreement constitutes the valid, binding and
enforceable obligation of Regional Bancshares, except as limited
by applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights and remedies
generally from time to time in effect and by applicable law which
may affect the availability of equitable remedies.
3.5 Corporate Documents. True and correct copies of
-------------------
the Certificate or Articles of Incorporation and Bylaws of
Regional Bancshares and Bank of Alton, certified by the
appropriate officer of Regional Bancshares or Bank of Alton, as
the case may be, have been delivered to Mercantile prior to the
date hereof and except as set forth in the such documents, have
not been amended since such certification. The corporate record
books, transfer books and stock ledgers of Regional Bancshares
and Bank of Alton are complete and accurate in all material
respects.
3.6 Regulatory Reports. Regional Bancshares and Bank
------------------
of Alton have filed all reports, registrations and statements,
together with any amendments required to be made with respect
thereto, that they were required to file with (i) the Federal
Reserve Board, (ii) the Federal Depository Insurance Company (the
"FDIC") and (iii) the Commissioner of Banks and Real Estate of
the State of Illinois (the "Commissioner") and all other material
reports and statements required to be filed by them, including,
without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the Federal Reserve
Board, the FDIC or the State of Illinois (collectively, the
"Regional Bancshares Reports") and have paid all fees or
assessments due and payable in connection therewith. The
Regional Bancshares Reports comply in all material respects as to
form and content with applicable law. To the extent permitted by
law, Mercantile has been furnished with a copy of any report or
statement by any federal, state or local government
10
<PAGE> 16
agency, commission or other entity available to Regional Bancshares
relating to an examination of Bank of Alton within the past five
years. Except as set forth on Schedule 3.6 (Regulatory
------------
Matters), there is no unresolved violation, criticism or
exception of a material nature by the Federal Reserve Board, the
FDIC, the Commissioner, or other agency, commission or entity
with respect to any report or statement referred to in this
Section.
3.7 Governmental Regulation. Regional Bancshares and
-----------------------
Bank of Alton hold all licenses, certificates, permits,
franchises, patents, trademarks, service marks, trade names,
copyrights or rights thereto, and adequate authorizations,
approvals, consents, licensing, clearances and orders of and
registrations with all appropriate federal, state or other
authorities necessary for the conduct of their business as now
conducted and as presently proposed to be conducted.
3.8 Compliance with Laws and Agreements. Neither
------------------------------------
Regional Bancshares nor Bank of Alton is in violation of any
provision of its Articles or Certificate of Incorporation,
Articles of Association or Bylaws or any note, bond, indenture,
mortgage, deed of trust, loan agreement, or any other agreement
to which it is a party or by which it is bound or to which any of
its properties or assets is subject, other than such defaults or
violations as would not (singly or in the aggregate) have a
material adverse effect on the business, operations, prospects or
financial condition of Regional Bancshares or Bank of Alton,
taken as a whole, nor is Regional Bancshares or Bank of Alton, in
violation of any statute, rule, regulation, order, writ, decree,
or injunction of any court or governmental agency or any body
having jurisdiction over them or any of their respective
properties (collectively "Laws") which, if enforced, could have
(singly or in the aggregate) a material adverse effect on the
business, operations, prospects or financial condition of
Regional Bancshares and Bank of Alton taken as whole. Except as
set forth on Schedule 3.8 (Compliance with Laws and
------------
Agreements), neither Regional Bancshares nor Bank of Alton has
received any inquiry or statement from any regulatory agency or
other governmental official relating to its compliance with any
of the Laws.
3.9 Regional Bancshares and Bank of Alton Consolidated
--------------------------------------------------
Financial Statements
- --------------------
3.9(a) Attached hereto as Schedule 3.9 (Regional
------------
Financial Statements) are copies of the following financial
statements:
3.9(a)(i) Audited, consolidated balance sheet of
Regional Bancshares as of December 31, 1995, related consolidated
statements of income, changes in shareholders' equity and cash flows
for the year then ended, together with the notes thereto certified by
Regional Bancshares's independent auditors;
3.9(a)(ii) Audited, balance sheets of Bank of
Alton as of December 31, 1994 and 1993 and related statements of
income, changes in
11
<PAGE> 17
shareholders' equity and cash flows for the two-year period ended
December 31, 1994;
3.9(a)(iii) Unaudited, consolidated balance sheets
of Regional Bancshares as of June 30, 1996 and 1995, and related
consolidated statements of income and cash flows for the six-
month periods ended June 30, 1996 and 1995;
3.9(a)(iv) Form FR Y-6 reports of Regional
Bancshares as of December 31, 1995, 1994 and 1993 and all Forms
FR Y-6A, FR Y-9LP, FR Y-9SP and FR Y-9C, as appropriate, filed
with the Federal Reserve Board during the period beginning
January 1, 1993, and ending on the date hereof; and
3.9(a)(v) Consolidated Reports of Condition and
Income for Bank of Alton for the fiscal years ended December 31,
1995, 1994 and 1993 and for the six-month period ended June 30,
1996.
3.9(b) The financial statements document referenced
in Schedule 3.9 are referred to collectively as the "Regional
Financial Statements." The Regional Financial Statements have
been prepared in accordance with generally accepted accounting
principles ("GAAP") or, as to the financial statements referenced
in subsections (a) (iv) and (v) above, regulatory accounting
principles, consistently applied during the periods involved, and
present fairly in all material respects the consolidated
financial positions of Regional Bancshares and Bank of Alton, as
the case may be, at the dates thereof and the consolidated
results of operations and cash flows of Regional Bancshares and
Bank of Alton, as the case may be, for the periods stated
therein.
3.9(c) Regional Bancshares and Bank of Alton have
each prepared, kept and maintained through the date hereof true,
correct and complete financial and other books and records of
their affairs which fairly reflect their respective financial
conditionsand results of operations and cash flows.
3.10 Title to Properties. Except as set forth in
--------------------
Schedule 3.10 (Real Property), Regional Bancshares and Bank
- -------------
of Alton have good and marketable title to all of their
respective properties and assets, tangible and intangible, real
and personal, free and clear of all mortgages, liens, pledges,
security interests, charges or encumbrances. There exists no
restriction on the transfer of any such properties or assets
other than any restrictions resulting from investments being
designated as "Held to Maturity." Included in Schedule 3.10
-------------
is a complete and accurate list, with legal description, of each
parcel of real estate owned or leased by Regional Bancshares and
Bank of Alton. Neither Regional Bancshares nor Bank of Alton has
any obligation to acquire any interest in any real property other
than those described in Schedule 3.10. The real and personal
-------------
properties and assets held under lease by Regional Bancshares and
Bank of Alton are held by them under valid, subsisting and
enforceable leases with such exceptions as do not interfere
12
<PAGE> 18
with the use made and proposed to be made of such properties and
assets by Regional Bancshares and Bank of Alton. No consent is
necessary under the terms of any such lease in connection with
the consummation of the transactions contemplated hereby.
3.11 Use and Condition of Property and Assets. All of
---------------------------------------
the property and assets of Regional Bancshares and Bank of Alton
are in suitable operating condition and repair as required for
their current use and conform to all applicable laws, and no
notice of any violation of any law, statute, ordinance, or
regulation relating to any of such property or assets has been
received by Regional Bancshares or Bank of Alton except such as
have been fully complied with. All improvements located on, and
the use presently being made of all real property materially
comply with all applicable zoning and building code ordinances
and all applicable fire, occupational safety and health standards
and similar rules established by law or regulation and the same
use thereof by Mercantile or Merger Sub will not result in any
violation of any such code, ordinance, or standard.
There is no pending or, to Regional Bancshares' knowledge,
threatened condemnation proceeding or similar action affecting
the property of Regional Bancshares or Bank of Alton or with
respect to any streets or public amenities appurtenant thereto or
in the vicinity thereof which would adversely affect the business
or assets of Regional Bancshares or Bank of Alton.
3.12 Loans; Loan Loss Reserve. All loans and loan
-------------------------
commitments extended by Regional Bancshares or Bank of Alton
(collectively, the "Regional Bancshares Loans") were made in
accordance with customary lending standards of Bank of Alton in
the ordinary course of business, which standards have been
disclosed to Mercantile. The consolidated loan loss reserve as
of June 30, 1996 (as defined in the instructions for the Call
Reports) of Bank of Alton is at least $1,467,000. Set forth in
Schedule 3.12 (Loans and Investments), is a true, correct and
- -------------
complete listing, as of the date hereof, by account of (i) all
Regional Bancshares Loans in excess of $50,000 which have been
accelerated during the past twelve months; (ii) all loans
commitments or lines of credit in excess of $50,000 which have
been terminated by Regional Bancshares or Bank of Alton during
the past twelve months by reason of default or adverse
developments in the condition of the borrower or other events or
circumstances affecting the credit of the borrower; (iii) all
loan commitments and lines of credit in excess of $50,000 as to
which Regional Bancshares or Bank of Alton has given written
notice of its intent to terminate during the past twelve months;
(iv) with respect to all Regional Bancshares Loans in excess of
$50,000, all notification letters and other written
communications from Regional Bancshares or Bank of Alton to any
of their respective borrowers, customers or other parties during
the past twelve months wherein Regional Bancshares or Bank of
Alton has requested or demanded that actions be taken to correct
existing defaults or facts or circumstances which may become
defaults; (v) each borrower, customer, or other party which has
notified Regional Bancshares
13
<PAGE> 19
or Bank of Alton during the past twelve months of, or has asserted against, in
writing, any "lender liability" or similar claim, and, to the best knowledge
of Regional Bancshares, each borrower, customer or other party
which has given any oral notification of, or orally asserted
against Regional Bancshares or Bank of Alton, any such claim;
(vi) all Regional Bancshares Loans in excess of $50,000 (A) that
are contractually past due 90 days or more in the payment of
principal and/or interest, (B) that are on non-accrual status,
(C) that have been classified "doubtful," or "loss" or the
equivalent thereof by any regulatory agency, (D) where a
reasonable doubt exists as to the timely future collectibility of
principal and/or interest, whether or not interest is still
accruing or the loan is less than 90 days past due, (E) where the
interest rate terms have been reduced and/or the maturity dates
have been extended subsequent to the agreement under which the
loan was originally created due to concerns regarding the
borrower's ability to pay in accordance with such initial terms,
or (F) where a specific reserve allocation exists in connection
therewith; (vii) all Regional Bancshares Loans payable or owing
by any executive officer or director of Regional Bancshares or
Bank of Alton or any other person or entity deemed a "related
interest" of any of the foregoing, as such terms are defined in
Regulation O of the Federal Reserve Board; and (viii) all assets
classified as real estate acquired through foreclosure, including
in-substance foreclosed real estate. The aggregate amounts of all
Regional Bancshares Loans of the type identified in subsections
(vi)(A), (B), (C) and (E), plus all assets classified by
----
Regional Bancshares or Bank of Alton as real estate acquired
through foreclosure or in lieu of foreclosure, including in-
substance foreclosures, does not as of the date hereof and shall
not at the Merger Effective Time exceed $4,000,000.
The Regional Bancshares Loans are evidenced by appropriate
and sufficient documentation and constitute valid and binding
obligations of the obligors and any guarantor named therein,
enforceable in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights and remedies
generally from time to time in effect and by applicable law which
may affect the availability of equitable remedies. All the
Regional Bancshares Loans are, and at the Merger Effective Time
will be, free and clear of any security interest, lien,
encumbrance or other charge, except such as exist in favor of
Regional Bancshares or Bank of Alton and Regional Bancshares or
Bank of Alton has complied, and at the Merger Effective Time will
have complied, in all respects with all laws and regulations
relating to such Regional Bancshares Loans. The Regional
Bancshares Loans are not subject to any defenses, counterclaims,
offsets or claims of offset which taken as a whole would be
material to Regional Bancshares and Bank of Alton taken as a
whole and, to the best knowledge of Regional Bancshares, as of
June 30, 1996, were collectible in full in the ordinary course of
business, except for possible loan and lease losses which are
adequately provided for in the allowance for loan and lease
losses in such Regional Financial Statements and the collection
experience of Regional Bancshares and Bank of Alton since June
30, 1996 to the date hereof has not
14
<PAGE> 20
been materially adverse to the credit and collection experience of Regional
Bancshares and Bank of Alton, taken as a whole, in the six-months ended June
30, 1996.
Except as set forth on Schedule 3.12A (Allowance for
--------------
Loan and Lease Losses), the allowances for loan losses contained
in the Regional Financial Statements were established in
accordance with the past practices and experiences of Regional
Bancshares and Bank of Alton, and the allowance for loan and
lease losses shown on the consolidated condensed balance sheets
of Regional Bancshares and Bank of Alton as of June 30, 1996 were
adequate in all material respects under the requirements of GAAP
or regulatory accounting principles, as the case may be, to
provide for possible losses on loans and leases (including
without limitation accrued interest receivable) and credit
commitments (including without limitation stand-by letters of
credit) as of the date of such balance sheet.
Except as set forth in Schedule 3.12B (Restricted
--------------
Investments) and except for pledges to secure public and trust
deposits, none of the investments reflected in the consolidated
balance sheet of Regional Bancshares as of June 30, 1996 under
the heading "Investment Securities," and none of the investments
made by Regional Bancshares or Bank of Alton since June 30, 1996
is subject to any restriction, whether contractual or statutory,
which materially impairs the ability of Regional Bancshares or
Bank of Alton freely to dispose of such investment at any time
other than any restriction resulting from the designation of such
securities as "Held to Maturity." With respect to all reverse
repurchase agreements to which Regional Bancshares or Bank of
Alton is a party, Regional Bancshares or Bank of Alton has a
valid, perfected first lien or security interest in the
government securities or other collateral securing the repurchase
agreement, and the value of the collateral securing each such
repurchase agreement equals or exceeds the amount of the debt
secured by such collateral under such agreement.
Except as set forth in Schedule 3.12C (Obligations to
--------------
Acquire Assets), neither Regional Bancshares nor Bank of Alton
has sold or otherwise disposed of any assets in a transaction in
which the acquiror of such assets or other person has the right,
either conditionally or absolutely, to require Regional
Bancshares or Bank of Alton to repurchase or otherwise reacquire
any such assets. (The foregoing is not intended to include
certificates of deposit or repurchase agreements by Bank of
Alton.)
3.13 Employees. Set forth on Schedule 3.13
--------- -------------
(Employees) is a complete list of all officers of Regional
Bancshares and Bank of Alton.
3.14 Indebtedness to and from Officers, Directors and
------------------------------------------------
Others. Except as set forth on Schedule 3.14 (Indebtedness
- ------ -------------
to and from Officers, Directors and Others), Regional Bancshares
and Bank of Alton are not indebted to any of their shareholders,
directors, officers, employees or agents except for amounts due as
15
<PAGE> 21
normal salaries, wages and bonuses and in reimbursement of
ordinary expenses on a current basis, and except as set forth on
Schedule 3.14, no such shareholder, director, officer,
- -------------
employee or agent is indebted to Regional Bancshares or Bank of
Alton except for advancements for ordinary business expenses in a
normal amount.
3.15 Absence of Conflicts. The execution and delivery
--------------------
by Regional Bancshares of this Agreement and the consummation of
the transactions herein contemplated do not and will not violate
or conflict with any statute, regulation, judgment, order, writ,
decree or injunction applicable to Regional Bancshares or Bank of
Alton or any of their respective properties or assets. Except as
set forth in Schedule 3.15 (Conflicts) (as to which all
-------------
appropriate consents, waivers or approvals have been or will be
obtained by Regional Bancshares prior to the Merger Closing), the
execution and delivery by Regional Bancshares of this Agreement
and the consummation of the transactions herein contemplated do
not and will not violate, conflict with, result in a breach of,
constitute a default (or an event which with due notice or lapse
of time or both would constitute a default) under, result in the
termination of, accelerate the performance required by, or result
in the creation of any lien, pledge, security interest, charge or
other encumbrance upon any of the properties or assets of
Regional Bancshares or Bank of Alton under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, or loan agreement or other agreement, instrument
or obligation to which Regional Bancshares or Bank of Alton is a
party, or by which either of them or any of their respective
properties or assets may be bound or affected.
3.16 Litigation. Except as set forth in Schedule 3.16
---------- -------------
(Regional Bancshares Litigation), neither Regional Bancshares nor Bank of
Alton is engaged in, or party to or (to the knowledge of Regional Bancshares)
threatened with, any legal action or other proceeding or investigation before
any court, arbitrator or governmental agency, the outcome of which could
result in a judgment that (singly or in the aggregate) could
materially affect the business, properties, assets, prospects or
condition of Regional Bancshares and Bank of Alton taken as a
whole. Except as set forth in Schedule 3.16, there are no
-------------
outstanding orders, rulings, decrees, judgments or stipulations
to which Regional Bancshares or Bank of Alton is a party or by
which either is bound by or with any court, arbitrator or
governmental agency which could result in a judgment, order or
award that (singly or in the aggregate) could materially affect
the business, properties, assets, prospects or condition of
Regional Bancshares and Bank of Alton taken as a whole.
3.17 Contracts. Except as set forth in Schedule 3.17
--------- -------------
(Contracts), (i) there are no employment, management,
consulting, deferred compensation, severance or other similar
agreements or any union or collective bargaining agreements or
any contracts or agreements with any labor organizations
(collectively, "Employment Agreements") binding upon Regional
Bancshares or Bank of Alton, (ii) there is no deferred
compensation, savings, profit sharing, severance pay, pension or
retirement plan or arrangement; (iii) there is no material lease
or license with
16
<PAGE> 22
respect to any property, real or personal, whether as landlord, tenant,
licensor or licensee; (iv) there is no agreement, contract, or indenture
relating to the borrowing of money by Regional Bancshares or Bank of Alton,
excluding endorsements made for collection and guarantees made in the
ordinary course of business, and (v) there is no other contract,
agreement, arrangement, understanding or other obligation, to or
by which Regional Bancshares or Bank of Alton is subject or
bound, which requires any payment of $100,000 or more or is
otherwise material to Regional Bancshares or Bank of Alton taken
as a whole. (The foregoing is not intended to include
certificates of deposit or loan commitments issued in the
ordinary course of business).
3.18 Insurance. Each of Regional Bancshares and Bank
---------
of Alton maintains and has maintained continuously since
January 1, 1993 insurance with insurers that in the best judgment
of management of Regional Bancshares are sound and reputable, on
its assets, and upon its business and operations, against loss or
damage, risks, hazards and liabilities of the kinds customarily
insured against by prudent corporations engaged in the same or
similar businesses. Each of Regional Bancshares and Bank of
Alton maintains in effect all insurance required to be carried by
it by law or by any agreement by which either is bound. All
material claims under any policies of insurance maintained by
Regional Bancshares have been filed in due and timely fashion; in
the best judgment of the management of Regional Bancshares, such
insurance coverage is adequate. Schedule 3.18 (Insurance
-------------
Policies) contains a complete and accurate list and brief
description of Regional Bancshares' and Bank of Alton's business
and property insurance policies and of life insurance policies
maintained by Regional Bancshares or Bank of Alton on the lives
of certain of its officers and employees.
To the best of Regional Bancshares' knowledge, Regional
Bancshares and Bank of Alton have each taken or will take all
requisite action (including without limitation the making of
claims and the giving of notices) pursuant to its directors' and
officers' liability insurance policy or policies in order to
preserve all rights thereunder with respect to all matters (other
than matters arising in connection with this Agreement and the
transactions contemplated hereby) occurring prior to the Merger
Effective Time that are known to Regional Bancshares, except for
such matters which, individually or in the aggregate, will not
have and reasonably could not be expected to have a material
adverse effect on the financial condition of Regional Bancshares
and Bank of Alton, taken as a whole.
3.19 Conduct. Since June 30, 1996, Regional
-------
Bancshares and Bank of Alton have not:
3.19(a) conducted their business or entered into any
transaction otherwise than in the ordinary course;
17
<PAGE> 23
3.19(b) discharged or satisfied any lien or
encumbrance or paid any obligation or liability other than those
shown on the June 30, 1996 Regional Financial Statements or
incurred after the date thereof in the ordinary course of
business;
3.19(c) purchased or otherwise acquired assets, or
mortgaged, pledged, or subjected to lien, charge or other
encumbrance any of their assets, or sold or transferred any such
assets, except in the ordinary course of business;
3.19(d) declared, agreed to declare, set aside or
paid any dividend or other distribution in respect of their
capital stock (except regular cash dividends of Regional
Bancshares on its capital stock of the character, amount and
frequency theretofore paid or dividends to Regional Bancshares
from Bank of Alton) or, directly or indirectly purchased,
redeemed, or otherwise acquired or agreed to purchase or redeem
or otherwise acquire any shares of such stock. (The foregoing
shall not prevent any dividend made in accordance with Section
5.3((b)(xiii)).)
3.19(e) except as set forth in Schedule 3.19(e)
----------------
(Bonuses), made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any of their present employees, except for
bonuses in accordance with the normal and usual practice of
Regional Bancshares and Bank of Alton, increased the rate of
compensation payable or to become payable by them to any of their
employees, except in accordance with the normal and usual
practice of Regional Bancshares and Bank of Alton, or instituted
or made any material increase in any employee welfare, retirement
or similar plan or arrangement;
3.19(f) entered into any other transaction other
than in the ordinary course of business; or
3.19(g) agreed to take any of the foregoing actions.
3.20 Fiduciary Responsibilities. Regional Bancshares,
--------------------------
to its knowledge, represents that Bank of Alton has performed all
of its duties in its capacity as trustee, executor,
administrator, registrar, guardian, custodian, escrow agent,
receiver or any other fiduciary in a manner which complies in all
material respects with all applicable laws, regulations, orders,
agreements, wills, instruments and common law standards.
3.21 FDIC Insurance. The deposits of Bank of Alton
--------------
are insured by the FDIC in accordance with the Federal Depository
Insurance Act ("FDIA"), and Bank of Alton has paid all
assessments and filed all reports required under the FDIA.
3.22 Large Deposits. Except as set forth in Schedule
--------------
3.22 (Large Deposits), (which sets forth the amount of deposits
over $250,000 maintained by any
18
<PAGE> 24
depositor, without naming such depositors), no person, corporation,
partnership, trust, estate or other entity, either alone or together with such
person's or entity's affiliates, has deposits in certificates of deposits or
checking, savings or other accounts of Bank of Alton in any amount aggregating
more than $500,000. Schedule 3.22 sets forth the total dollar amount of all
-------------
deposits in certificates of deposits or checking, savings or other accounts of
Bank of Alton by directors and executive officers of Regional Bancshares and
Bank of Alton and their affiliates as a group as of June 30, 1996. As used in
this Section 3.22 an "affiliate" of a person or entity includes such person's
------------
spouse and minor children and any entity ten or more percent of whose voting
securities or other ownership interests are known by Regional Bancshares, to
be owned, directly or indirectly, by such person, his spouse and/or minor
children or by such entity.
3.23 Broker. No broker or finder has acted on behalf
------
of Regional Bancshares or Bank of Alton in connection with this
Agreement (or the consummation of the transactions contemplated
herein) or is entitled to any commission or finder's fee based
upon agreements or understandings made by Regional Bancshares or
Bank of Alton in connection with this Agreement (or the
consummation of the transactions contemplated herein).
3.24 Labor. No work stoppage involving Regional
-----
Bancshares or Bank of Alton is pending or, to the best knowledge
of Regional Bancshares, threatened. Neither Regional Bancshares
nor Bank of Alton is involved in, or to the best knowledge of
Regional Bancshares, threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding
involving the employees of Regional Bancshares or Bank of Alton.
Employees of Regional Bancshares and Bank of Alton are not
represented by any labor union nor are any collective bargaining
agreements otherwise in effect with respect to such employees,
and to the best of Regional Bancshares' knowledge, there have
been no efforts to unionize or organize any employees of Regional
Bancshares or Bank of Alton during the past five years.
3.25 Intellectual or Other Intangible Property. To
------------------------------------------
the best of Regional Bancshares' knowledge, (a) all Intellectual
Property or other intangible property used by Regional Bancshares
or Bank of Alton is valid and existing, (b) good and marketable
title to all such items together with all common law rights to
the subject matter thereof is held by Regional Bancshares or Bank
of Alton, free and clear of liens; (c) there exists no
restriction on the use or transfer of any such item; (d) there
are no interferences, challenges, proceedings or infringement
suits pending or threatened with respect to any such item; and
(e) neither Regional Bancshares nor Bank of Alton has granted a
license to any other party with respect to any such item. To the
best of Regional Bancshares' knowledge, neither Regional
Bancshares nor Bank of Alton is infringing and has not infringed
upon the right of any other person under any Intellectual
Property or other intangible property right
19
<PAGE> 25
and no other person is infringing upon any Intellectual Property or other
intangible property right held by Regional Bancshares or Bank of Alton.
3.26 Environmental Matters
---------------------
3.26(a) Regional Bancshares and Bank of Alton are in
material compliance with all Environmental Laws. Neither
Regional Bancshares or Bank of Alton has received any
communication alleging that Regional Bancshares or Bank of Alton
is not in such compliance and, to the best knowledge of Regional
Bancshares, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
3.26(b) To the best of Regional Bancshares'
knowledge, there are no past or current operations, conditions,
activities, practices or circumstances on any of the properties
owned, leased or operated by Regional Bancshares or Bank of Alton
which have been or are in material violation of, or may give rise
to a material liability, loss or expense under any Environmental
Law. To the best of Regional Bancshares' knowledge, there has
been no material disposal or release of any Materials of
Environmental Concern on, under or from such properties.
3.26(c) To the best of Regional Bancshares'
knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents that could
reasonably form the basis of any material Environmental Claim or
other claim or action or governmental investigation under any
Environmental Law against Regional Bancshares or Bank of Alton or
against any person or entity whose liability for any material
Environmental Claim Regional Bancshares or Bank of Alton has or
may have retained or assumed either contractually or by operation
of law.
3.26(d) Regional Bancshares has disclosed any
environmental studies conducted by it or Bank of Alton during the
past five years with respect to any properties owned, leased or
operated by it as of the date hereof.
3.26(e) To the best knowledge of Regional
Bancshares, there have been no Materials of Environmental Concern
disposed or released on, under or from any real property which
Regional Bancshares Bank has a security interest in, nor is there
any Environmental Claim in connection with such properties.
3.27 Tax Matters
-----------
3.27(a) Regional Bancshares and Bank of Alton have
timely filed or caused to be filed with the appropriate
Government entity all tax returns and reports required to be
filed, including income, withholding, employment, and estimated
tax and informational returns ("Tax Returns") and no Tax Returns
have been amended. There are no grounds for assertion of any
understatement penalty
20
<PAGE> 26
under Section 6661 (prior to repeal) of the Internal Revenue Code of 1986, as
amended (the "Code") or Section 6662 of the Code.
3.27(b) All Taxes (whether or not reflected in Tax
Returns as filed) payable by Regional Bancshares or Bank of Alton
with respect to all periods reflected on Tax Returns have been
timely and fully paid, and to the best knowledge of Regional
Bancshares, there are no grounds for the assertion or assessment
of any additional Taxes against Regional Bancshares or Bank of
Alton or their assets with respect to such periods. There is no
waiver of any statute of limitations in effect with respect to
any Tax Returns.
3.27(c) The consolidated balance sheets of Regional
Bancshares as of June 30, 1996 provide an adequate reserve,
computed in accordance with GAAP as applicable to Regional
Bancshares for the year-to-date period, for all Taxes up to and
including the dates of such balance sheets, whether or not a Tax
Return has been filed for such period.
3.27(d) Copies of all U.S. federal income Tax
Returns, tax examination reports and statements of deficiencies
assessed against, or agreed to with respect to Regional
Bancshares or Bank of Alton with respect to the last three (3)
years have been made available to Mercantile.
3.27(e) Regional Bancshares and Bank of Alton are
not and never have been members of an "affiliated group" within
the meaning of Section 1504 of the Code other than the affiliated
group of which Regional Bancshares is the common parent.
3.27(f) Regional Bancshares and Bank of Alton have
materially complied with all laws relating to the withholding of
Taxes and the payment thereof (including, without limitation,
withholding of Taxes under Section 1441 and 1442 of the Code, or
any similar provision under foreign laws), and have timely and
properly withheld from employee wages and paid over to the proper
Government authority all amounts required to be withheld and paid
over under applicable law.
3.27(g) Neither Regional Bancshares nor Bank of
Alton are a party to any safe harbor lease within the meaning of
Section 168(f)(8) of the Code, as in effect prior to amendment by
the Tax Equity and Fiscal Responsibility Act of 1982. None of
the assets of Regional Bancshares or Bank of Alton have been
financed with or directly or indirectly secures any industrial
revenue bonds or debt the interest on which is tax-exempt under
Section 103(a) of the Code. Neither Regional Bancshares nor Bank
of Alton is a borrower or guarantor of any outstanding industrial
revenue bonds, and are not a tenant, principal user or related
person to any principal user (within the meaning of Section
144(a) of the Code) of any property which has been financed or
improved with the proceeds of any industrial revenue bonds.
21
<PAGE> 27
3.27(h) Regional Bancshares is not a United States
Real Property Holding Company within the meaning of Section
897(c) of the Code and Treasury Regulations thereunder.
3.27(i) None of the property owned by Regional
Bancshares or Bank of Alton is tax-exempt use property within the
meaning of Section 168(h) of the Code.
3.27(j) No consent has been filed relating to
Regional Bancshares or Bank of Alton pursuant to Section 341(f)
of the Code.
3.27(k) As of the Merger Effective Time, neither
Regional Bancshares or Bank of Alton is a partner in any joint
venture, partnership or other arrangement or contract that could
be treated as a partnership for federal income tax purposes.
3.27(l) Neither Regional Bancshares nor Bank of
Alton has any unused net operating loss, unused net capital loss,
unused credit, unused foreign tax credit, or excess charitable
contribution for federal income tax purposes as of the Merger
Effective Time.
3.28 Employee Benefit Plans
----------------------
3.28(a) Set forth in Schedule 3.28 (Benefit
-------------
Plans) is a schedule of all Regional Bancshares or Bank of Alton
stock option, employee stock purchase and stock bonus plans,
stock appreciation rights or phantom stock plans, qualified
pension or profit-sharing plans, any deferred compensation, bonus
or group insurance contract, any plan or policy providing for
"fringe benefits" to its employees (including but not limited to,
vacation, disability, sick leave, medical, hospitalization, life
insurance and other insurance plans and related benefits), any
employment agreement and any other incentive, welfare or employee
benefit plan or agreement maintained for the benefit of
directors, former directors, employees or former employees of
Regional Bancshares or Bank of Alton, and has furnished to
Mercantile accurate and complete copies of the same together with
(i) the most recent actuarial and financial reports prepared with
respect to any qualified plans, (ii) the most recent annual
reports filed with any governmental agency, and (iii) all rulings
and determination letters and any open requests for rulings or
letters that pertain to any qualified plan, and (iv) general
notification to employees of their rights under Code Section
4980B and form of letter(s) distributed upon the occurrence of a
qualifying event described in Code Section 4980B, in the case of
a Plan that is a "group health plan" as defined in Code Section
162(i). There are no negotiations, demands or proposals which
are pending or have been made which concern matters now covered,
or that would be covered, by the employee benefit plans.
22
<PAGE> 28
3.28(b) None of Regional Bancshares, Bank of Alton,
any pension plan maintained by any of them and qualified under
Section 401 of the Code or, to the best of Regional Bancshares'
knowledge, any fiduciary of such plan has incurred any material
liability to the Pension Benefit Guaranty Corporation (the
"PBGC") or the Internal Revenue Service with respect to any
employees of Regional Bancshares or Bank of Alton, except
liabilities to the PBGC pursuant to Section 4007 of ERISA, all of
which have been fully paid. To the best of Regional Bancshares'
knowledge, no reportable event, except reportable events for
which the 30-day notice requirement has been waived by PBGC
Regulation 2615, under Section 4043(b) of ERISA has occurred with
respect to any such pension plan.
3.28(c) Neither Regional Bancshares nor Bank of
Alton (i) participates in or has ever participated in a multi-
employer plan (as such term is defined in ERISA), (ii) has been a
member of a controlled group which contributed to a multi-
employer plan, or (iii) has been under common control with an
employer which contributed to a multi-employer plan.
3.28(d) A favorable determination letter has been
issued by the Internal Revenue Service with respect to each
"employee pension plan" (as defined in Section 3(2) of ERISA) of
Regional Bancshares or Bank of Alton which is intended to qualify
under Section 401 of the Code to the effect that such plan is
qualified under Section 401 of the Code and the trust associated
with such employee pension plan is tax exempt under Section 501
of the Code. No such letter has been revoked or, to the best of
Regional Bancshares' knowledge, is threatened to be revoked and
Regional Bancshares does not know of any ground on which such a
revocation could be based. Neither Regional Bancshares nor Bank
of Alton has any material liability under any such plan that is
not reflected on the consolidated balance sheet of Regional
Bancshares at June 30, 1996 included in the Regional Financial
Statements, other than liabilities incurred in the ordinary
course of business in connection therewith subsequent to the date
thereof.
3.28(e) To the best of Regional Bancshares'
knowledge, no prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt
under Section 408 of ERISA or Section 4975 of the Code) has
occurred with respect to any employee benefit plan maintained by
Regional Bancshares or Bank of Alton.
3.28(f) Except as set forth in Schedule 3.28,
-------------
neither Regional Bancshares nor Bank of Alton maintains any
defined benefit plans or other plans subject to Section 412 of
the Code or Title IV of ERISA.
3.28(g) Each employee benefit plan of Regional
Bancshares and Bank of Alton complies and has been operated in
compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and
23
<PAGE> 29
announcements promulgated or issued thereunder and all other
applicable governmental laws and regulations.
3.28(h) There are no pending or, to the best
knowledge of Regional Bancshares, threatened or anticipated
claims, actions, proceedings or investigations or facts which
would give rise to claims, actions, proceedings or investigations
(other than routine claims for benefits) by, on behalf of or
against any of the employee benefit plans maintained by Regional
Bancshares or Bank of Alton or any trust related thereto or any
fiduciary thereof.
3.28(i) All required reports and descriptions of
each employee benefit plan (including IRS Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions)
have been timely filed and distributed.
3.28(j) Any notices required by ERISA or the Code or
any other state or federal law or any ruling or regulation of any
state or federal administrative agency with respect to each
employee benefit plan have been appropriately given.
3.28(k) All contributions for all periods ending
prior to the Merger Closing (including periods from the first day
of the current plan year to the Merger Closing) will be made
prior to the Merger Closing by Regional Bancshares or Bank of
Alton and all members of the controlled group in accordance with
past practice and the recommended contribution in the applicable
actuarial report.
3.28(l) All insurance premiums (including premiums
to the PBGC) have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to
the plans for policy years or other applicable policy periods
ending on or before the Merger Closing.
3.28(m) All of the employee benefit plans, to the
extent applicable, are in compliance with Section
1862(b)(4)(A)(i) of the Social Security Act and Regional
Bancshares does not have any liability for any excise tax imposed
by Code Section 5000.
3.28(n) With respect to any employee benefit plan
which is an employee welfare benefit plan (within the meaning of
ERISA Section 3(1)) (a "Welfare Plan"): (i) each such Welfare
Plan which is intended to meet the requirements for tax-favored
treatment under Subchapter B of Chapter 1 of the Code meets such
requirements; (ii) there is no disqualified benefit (as such term
is defined in Code Section 4976(b)) which would subject Regional
Bancshares or Bank of Alton or any affiliate to a tax under Code
Section 4976(a); (iii) each and every such Welfare Plan which is
a group health plan (as such term is defined in Code Section
162(i)(3)) complies and in each and every case has complied with
the applicable requirements of Code Section 4980B, Title XXII of
the Public Health Service Act and the applicable provisions of
the Social Security Act; and (iv) each
24
<PAGE> 30
such Welfare Plan (including any such plan covering former employees of
Regional Bancshares or Bank of Alton) may be amended or terminated by
Regional Bancshares or Bank of Alton.
3.28(o) Neither Regional Bancshares nor Bank of
Alton has any liability for any post-retirement health, medical
or similar benefit of any kind whatsoever, except as required by
statute or regulation.
3.28(p) All expenses and liabilities relating to all
of the plans have been, and will upon the Merger Closing be fully
and properly accrued on Regional Bancshares' books and records
and the Regional Financial Statements reflect all of such
liabilities in a manner satisfying the requirements of Financial
Accounting Standards 87 and 88.
3.29 Alien Employment Eligibility. With respect to
----------------------------
each person employed by Regional Bancshares or Bank of Alton, on
or after May 1, 1987, and who actually commenced such employment
on or after November 6, 1986: (a) Regional Bancshares or Bank of
Alton hired such person in compliance with the Immigration Reform
and Control Act of 1986 and the rules and regulations thereunder
("IRCA"); and (b) Regional Bancshares and Bank of Alton have
complied with all recordkeeping and other regulatory requirements
under IRCA.
3.30 Material Adverse Change. Except as otherwise
-----------------------
disclosed in any of the Schedules referenced herein, since June
30, 1996, there has been no material adverse change in the
financial condition, of Regional Bancshares and Bank of Alton,
taken as a whole, except as may have resulted or may result from
changes to laws and regulations, GAAP or regulatory accounting
principles, interpretations thereof, other conditions that affect
the banking industry generally, or changes in the general level
of interest rates.
3.31 Absence of Undisclosed Liabilities.
----------------------------------
3.31(a) As of the date of this Agreement, neither
Regional Bancshares nor Bank of Alton has any debts, liabilities
or obligations, whether accrued, absolute, contingent or
otherwise and whether due or to become due, which are required to
be reflected in the Regional Financial Statements or the notes
thereto in accordance with GAAP, except:
3.31(b) liabilities and obligations reflected on the
Regional Financial Statements;
3.31(c) operating leases reflected on Schedule 3.31(a)
----------------
(Undisclosed Liabilities); and
25
<PAGE> 31
3.31(d) debts, liabilities or obligations incurred
since June 30, 1996 in the ordinary and usual course of their
respective businesses, none of which are for breach of contract,
breach of warranty, torts, infringements or lawsuits and none of
which have a material adverse effect on the financial condition
to Regional Bancshares and Bank of Alton, taken as a whole.
3.31(e) To the best of Regional Bancshares'
knowledge, neither Regional Bancshares nor Bank of Alton was as
of June 30, 1996 and since such date to the date hereof has
become a party to, any contract or agreement which affected,
affects or may reasonably be expected to affect, materially and
adversely, the financial condition or business of Regional
Bancshares and Bank of Alton, taken as a whole.
3.32 Interest Rate Risk Management Instruments.
-----------------------------------------
Neither Regional Bancshares nor Bank of Alton are parties to, nor
are any of their properties or assets bound by, interest rate
swaps, caps, floors and option agreements and other interest rate
risk management arrangements.
3.33 West Pointe Common. Regional Bancshares owns, as
------------------
of the date hereof, 12,250 shares of West Pointe Common. West
Pointe Bank & Trust Company is not an "affiliate" of Regional
Bancshares, as that term is defined in Rule 144 under the 1933
Act. West Pointe Common held of record by Regional Bancshares
was acquired by Regional Bancshares as of a date at least three
years prior to the date hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MERCANTILE AND MERGER SUB
Mercantile and Merger Sub, jointly and severally,
represent and warrant to Regional Bancshares as follows:
4.1 Mercantile Organization, Good Standing and Capital
--------------------------------------------------
Stock. Mercantile is a corporation duly organized, validly
- -----
existing and in good standing under the laws of the State of
Missouri and each Significant Subsidiary (as defined herein) is
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization.
Mercantile has all requisite power and authority (corporate and
other) to (i) enter into this Agreement and to perform the
obligations hereunder and thereunder to be performed by it, and
(ii) own, operate and lease its properties and carry on its
business as it is now being conducted in each jurisdiction where
its business is being conducted. Mercantile is duly qualified to
do business and is in good standing in each jurisdiction where
the character of the properties owned or leased by it or the
nature of the business transacted by it requires that it be so
qualified, except where the failure to so qualify would not have
a material adverse effect on the business, operations or
financial condition of Mercantile. Mercantile is a bank holding
company duly
26
<PAGE> 32
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Act. Mercantile owns in excess of 99% of
the issued and outstanding shares of capital stock of each of the Significant
Subsidiaries (other than directors' qualifying shares). A
"Significant Subsidiary" shall mean a Subsidiary (as defined
herein), the total assets of which comprise 10% or more of the
total assets of Mercantile and its Subsidiaries taken as a whole,
and regardless of such definition shall include Merger Sub. A
"Subsidiary" means a corporation, bank or other entity of which a
25% equity interest is owned or controlled, directly or
indirectly, by Mercantile. The authorized capital stock of
Mercantile consists of (i) 100,000,000 shares of Mercantile
Common, of which, as of June 30, 1996, 63,278,793 shares were
issued and 62,673,041 were outstanding and (ii) 5,000,000 shares
of preferred stock, no par value ("Mercantile Preferred Stock"),
issuable in series, of which, as of the date hereof, no shares
are issued and outstanding. Mercantile has designated 1,000,000
shares of Mercantile Preferred Stock as "Series A Junior
Participating Preferred Stock" and has reserved such shares for
issuance upon exercise of Preferred Stock Purchase Rights (the
"Rights") under a Rights Agreement dated May 23, 1988 (the
"Rights Agreement") between Mercantile and Mercantile Bank of St.
Louis National Association, as Rights Agent. As of June 30,
1996, Mercantile had reserved: (i) 4,112,103 shares of Mercantile
Common for issuance under various Mercantile employee and/or
director stock option, incentive and/or benefit plans
("Mercantile Employee/Director Stock Grants"); (ii) 325,843
shares of Mercantile Common for issuance upon the acquisition of
Peoples State Bank ("Peoples Bank") pursuant to the Agreement and
Plan of Reorganization dated as of December 19, 1995, by and
among Peoples Bank, Mercantile, Merger Sub, and Peoples State
Bankshares, Inc.; (iii) 1,177,066 shares of Mercantile Common for
issuance upon the acquisition of TODAY'S BANCORP, INC.
("Today's") pursuant to the Agreement and Plan of Merger dated as
of March 19, 1996, by and among Today's, Mercantile and Merger
Sub; and (iv) 258,753 shares of Mercantile Common for issuance
upon the acquisition of First Financial Corporation of America
("First Financial") pursuant to Agreement and Plan of Merger
dated as of July 9, 1996, by and among First Financial,
Mercantile and Merger Sub. From June 30, 1996 through the date
of this Agreement, no shares of Mercantile Common have been
issued, excluding any such shares which may have been issued in
connection with Mercantile Employee/Director Stock Grants.
Mercantile continually evaluates possible acquisitions and
may prior to the Merger 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 Merger Effective Time, Mercantile may,
depending on market conditions and other factors, otherwise
determine to issue equity, equity-linked or other securities for
financing purposes. Notwithstanding the foregoing, Mercantile
will not take any action that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within
the meaning of Section 368 of the Code or (ii)
27
<PAGE> 33
materially impede or delay receipt of any approval required hereunder or the
consummation of the transactions contemplated by this Agreement.
Except as set forth above, there are no other equity securities
of Mercantile outstanding. All of the issued and outstanding
shares of Mercantile Common are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any
preemptive right of any shareholder of Mercantile. At the Merger
Effective Time, the Mercantile Common to be issued in the Merger
will be duly authorized, validly issued, fully paid and
nonassessable, and will not be issued in violation of any
preemptive right of any shareholder of Mercantile.
4.2 Merger Sub Organization, Good Standing and Capital
--------------------------------------------------
Stock. Merger Sub is a corporation duly organized, validly
- -----
existing and in good standing under the laws of the State of
Missouri, and has all requisite power and authority (corporate
and other) to enter into this Agreement and to perform the
obligations hereunder and thereunder to be performed by it. The
authorized capital stock of Merger Sub is 30,000 shares Common
Stock, par value $1.00 per share ("Merger Sub Common"). As of
the date hereof, all outstanding shares of Merger Sub Common are
validly issued, outstanding, fully paid and nonassessable and
owned of record and beneficially by Mercantile.
4.3 Authorization.
-------------
4.3(a) The execution, delivery and performance of
this Agreement have been duly and validly authorized by all
necessary corporate action on the parts of Mercantile and Merger
Sub. This Agreement has been duly executed and delivered by
Mercantile and Merger Sub. Assuming due authorization, execution
and delivery by Regional Bancshares and subject to receipt of
such approvals of regulatory authorities as may be required by
applicable law or regulation, this Agreement constitutes valid,
binding and enforceable obligations of Mercantile and Merger Sub,
except as limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of
creditors' rights and remedies generally from time to time in
effect and by applicable law which may affect the availability of
equitable remedies.
4.3(b) Neither the execution, delivery and
performance by Mercantile and Merger Sub of this Agreement, nor
the consummation by Mercantile and Merger Sub of the transactions
contemplated hereby, nor compliance by Mercantile and Merger Sub
with any of the provisions hereof, will (i) violate, conflict
with or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both,
would constitute a default) or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any
lien upon any of the properties or assets of Mercantile or Merger
Sub under any of the terms, conditions or provisions of (x) their
respective Articles of Incorporation or Bylaws, or (y) any note,
bond, mortgage, indenture, deed of trust, license, lease,
agreement or other
28
<PAGE> 34
instrument or obligation to which Mercantile or Merger Sub is a party or by
which they may be bound, or to which Mercantile or Merger Sub or any of their
respective properties or assets may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in
Section 4.3(a), violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to
Mercantile or Merger Sub or any of their respective properties or
assets; other than violations, conflicts, breaches, defaults,
terminations, accelerations or Liens which would not have a
material adverse effect on Mercantile and its Subsidiaries, taken
as a whole.
4.3(c) Other than in connection with or in
compliance with the provisions of the Missouri Statute, the
Securities Act, the Exchange Act, the securities or blue sky laws
of the various states or filings, consents, reviews, authoriza-
tions, approvals or exemptions required under the Bank Holding
Company Act of 1954, as amended, the Federal Deposit Insurance
Act, as amended, or any required approvals of any regulatory
authority, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or
authority is necessary for the consummation by Mercantile and
Merger Sub of the transactions contemplated by this Agreement.
4.4 Consolidated Financial Statements of Mercantile.
-----------------------------------------------
Each of the consolidated balance sheets of Mercantile in or
incorporated by reference into the Mercantile Reports (as defined
below), including any related notes and schedules, fairly
presents the financial position of Mercantile and its
------------------
Subsidiaries, taken as a whole, as of its date and each of the
- -------------------------------
consolidated statements of income, changes in shareholders'
equity and cash flows or equivalent statements in the Mercantile
Reports, including any related notes and schedules, fairly
presents the results of operations, shareholders' equity and cash
flows, as the case may be, of Mercantile and its Subsidiaries,
taken as a whole, for the periods set forth therein, in each case
in accordance with GAAP consistently applied during the period
involved, except as may be noted therein.
4.5 Mercantile Reports.
------------------
4.5(a) Mercantile has filed all its reports and
other documents required to be filed by it under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the
Securities Act of 1933, as amended (the "1933 Act") and has
delivered to Regional Bancshares copies of all such reports and
other documents filed by Mercantile since December 31, 1993.
Mercantile's Annual Report on Form 10-K for the year ended
December 31, 1995, its Quarterly Reports on Form 10-Q for the
periods ended March 31, 1996 and June 30, 1996, and any other
reports and documents filed by Mercantile under the 1934 Act
since December 31, 1995 and all documents filed by Mercantile
under the 1933 Act since December 31, 1993 (collectively, the
"Mercantile Reports") comply in all
29
<PAGE> 35
material respects as to form and content with the 1934 Act or the 1933 Act, as
the case may be.
4.5(b) Mercantile and each Significant Subsidiary
which is a bank ("Significant Banking Subsidiary") have filed all
material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that it was
required to file with (i) the Federal Reserve Board, (ii) the
Office of the Comptroller of the Currency, (iii) the FDIC and
(iv) any applicable state banking regulatory authorities and all
other material reports and statements required to be filed by it,
including, without limitation, any report or statement required
to be filed pursuant to the laws, rules or regulations of the
Federal Reserve Board, the Office of the Comptroller of the
Currency, the FDIC or applicable state banking regulatory
authorities and have paid all fees or assessments due and payable
in connection therewith.
4.6 Compliance with Laws and Agreements. Neither
-----------------------------------
Mercantile nor any of its Subsidiaries is in default under or in
violation of any provision of its Articles or Certificate of
Incorporation, Articles of Association or Bylaws or any note,
bond, indenture, mortgage, deed of trust, loan agreement, or any
other agreement to which it is a party or by which it is bound or
to which any of its properties or assets is subject, other than
such defaults or violations as would not (singly or in the
aggregate) have a material adverse effect on the business,
operations, prospects or financial condition of Mercantile and
its Subsidiaries taken as a whole, nor is Mercantile or any of
its Subsidiaries in violation of any statute, rule, regulation,
order, writ, decree or injunction of any court or governmental
agency or any body having jurisdiction over them or any of their
properties which, if enforced, would have (singly or in the
aggregate) a material adverse effect on the business, operations,
prospects or financial condition of Mercantile and its
Subsidiaries, taken as a whole.
4.7 Shares to be Issued in Merger. The Mercantile
-----------------------------
Common which the holders of Regional Bancshares Common will be
entitled to receive upon consummation of the Merger will, at the
Merger Effective Time, be duly authorized and will, when issued
pursuant to this Agreement, be validly issued and outstanding,
fully paid and nonassessable. In accordance with the provisions
of Section 5.4(c) hereof, Mercantile has agreed to use its
reasonable best efforts to file as soon as practicable with the
Securities and Exchange Commission, and to cause to become
effective, a Registration Statement (as defined in
Section 5.4(c)) concerning the shares of Mercantile Common to be
received in the merger by holders of Regional Bancshares Common,
and to cause such shares to be listed for trading on The New York
Stock Exchange.
4.8 Litigation. Neither Mercantile nor any
----------
Subsidiary is engaged in, or party to, or (to the knowledge of
Mercantile) threatened with, any legal action or other proceeding
or investigation before any court, arbitrator or governmental
30
<PAGE> 36
agency, and neither Mercantile nor any Subsidiary (to the
knowledge of Mercantile) is subject to any potential adverse
claim, the outcome of which could result in a nonmonetary
judgment, order or award that (singly or in the aggregate) could
materially adversely affect the business, properties, assets,
prospects or conditions of Mercantile and its Subsidiaries taken
as a whole. Except as set forth in Schedule 4.8, there are
------------
no outstanding orders, rulings, decrees, judgments or
stipulations to which Mercantile or any Subsidiary is a party or
by which it is bound or with any court, arbitrator or
governmental agency which could result in a nonmonetary judgment,
order or award that (singly or in the aggregate) could materially
adversely affect the business, properties, assets, prospects or
condition of Mercantile and its Subsidiaries, taken as a whole.
4.9 Information in Proxy Statement and Registration
-----------------------------------------------
Statement. None of the information which will be included or
- ---------
incorporated by reference into the Registration Statement related
to Mercantile and any amendments thereto and none of the
information provided in writing by Mercantile to Regional
Bancshares for inclusion in the proxy statement to be furnished
to the stockholders of Regional Bancshares in connection with the
transactions contemplated herein is or will be false or
misleading in any material respect or omits or will omit to state
any fact necessary to make the statements therein, in light of
the circumstances under which they are or will be made, not false
or misleading in any material respect.
4.10 Material Adverse Change. Since June 30, 1996,
-----------------------
there has been no material adverse change in the financial
condition, of Mercantile and its Subsidiaries, taken as a whole,
except as may have resulted or may result from changes to laws
and regulations, GAAP, interpretations thereof, other conditions
that affect the banking industry generally, or changes in the
general level of interest rates.
ARTICLE 5
COVENANTS
5.1 Joint Covenants. Mercantile and Merger Sub
---------------
covenant and agree with Regional Bancshares, and Regional
Bancshares covenants and agrees with Mercantile and Merger Sub,
as follows:
5.1(a) Truth and Completeness of Representations
-----------------------------------------
and Warranties. In the event that either party becomes aware
- --------------
of the occurrence or impending occurrence of any event which
would constitute or cause a breach by it of any of the
representations and warranties herein, or would have constituted
or caused a breach by it of the representations and warranties
herein, had such an event occurred or been known prior to the
date hereof, said party shall immediately give detailed and
written notice thereof to the other party, and shall, unless the
same has been waived in writing by the other party, use its
reasonable efforts to remedy
31
<PAGE> 37
the same, provided that such efforts, if not successful, shall not be deemed
to satisfy any condition precedent to the Merger.
5.1(b) Best Efforts. Subject to the terms and
------------
conditions herein provided, each of the parties hereto agrees to
use its respective best efforts to take, or cause to be taken,
all 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 Mercantile, desirable
for the consummation of the transactions contemplated by this
Agreement.
5.1(c) Cooperation/Inspection. Each party shall
----------------------
cooperate fully with the other in carrying out the transactions
contemplated herein, including without limitation obtaining all
the necessary approvals, regulatory or otherwise, needed to
consummate all such transactions. Each party shall advise each
other of the text of, and shall consult with each other
concerning, any news release proposed to be issued. Neither
party shall issue any such news release to which the other
reasonably objects unless such release is required by law.
Mercantile will timely file with the Securities and Exchange
Commission and promptly deliver thereafter to the other, copies
of all reports or other documents required to be filed under the
1934 Act by each beginning on the date hereof and terminating at
the Merger Effective Time.
5.1(d) Consents. Each party shall use its best
--------
efforts to obtain as promptly as practicable (and in any event
prior to the Merger Closing) all consents or waivers that may be
required under any loan or other agreement or document to which
it or any of its Subsidiaries is a party, or by which it or any
of its Subsidiaries, is bound, and such other consents as are
necessary or advisable in connection with the Merger.
5.1(e) Access and Information.
----------------------
5.1(e)(i) Mercantile and Regional Bancshares shall
each afford to the other, and to the other's accountants, counsel
and other representatives, full access during normal business
hours, during the period prior to the Merger Effective Time, to
all their respective properties, books, contracts, commitments
and records and, during such period, each shall furnish promptly
to the other (A) 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 (B) all
other information concerning its business, properties and
personnel as the
32
<PAGE> 38
other may reasonably request. Each party shall, and shall cause its advisors
and representatives to, (A) hold confidential all information obtained in
connection with any transaction contemplated hereby with respect to the other
party and its Subsidiaries which is not otherwise public knowledge, (B)
use their respective best efforts to cause all of such party's
confidential information obtained pursuant to this Agreement or
in connection with the negotiation of this Agreement to be
treated as confidential and not use, or knowingly permit others
to use, any such information unless such information becomes
generally available to the public. The availability or actual
delivery of information shall not affect the covenants,
representations and warranties of the party providing such
information that are contained in this Agreement or in any
certificates or other documents delivered pursuant hereto.
5.1(e)(ii) Mercantile shall promptly following the
date of this Agreement, commence its review of Regional
Bancshares and Bank of Alton and their respective operations,
business affairs, prospects and financial condition, including,
without limitation, those matters which are the subject of the
Regional Bancshares' representations and warranties (the
"Mercantile Due Diligence Review"). Mercantile shall conclude
such review by no later than fifteen (15) Business Days after the
date of this Agreement (the "Mercantile Due Diligence Review
Period"), but the pendency of such Mercantile Due Diligence
Review shall not delay Mercantile's obligation pursuant to this
Agreement to file a Registration Statement with the Securities
and Exchange Commission and all other necessary applications and
filings with the appropriate Regulatory Authorities. Mercantile
shall advise Regional Bancshares of any situation, event,
circumstance or other matter which comes to the attention of
Mercantile during the Mercantile Due Diligence Review which could
potentially result in the termination of this Agreement by
Mercantile pursuant to Section 7.1(f) hereof, or, if applicable,
the absence of any situation, event, circumstance or other
matter, it being the intention of Mercantile to provide notice to
Regional Bancshares, as promptly as possible, of any perceived
impediment to the consummation of the Merger. Notwithstanding
anything hereinabove contained or implied to the contrary, the
Mercantile Due Diligence Review shall not limit, restrict or
preclude Mercantile, at any time or from time to time thereafter,
from conducting further such reviews or from exercising any
rights available to it hereunder as a result of the existence or
occurrence prior to the Mercantile Due Diligence Period of any
event or condition which was not detected in the Mercantile Due
Diligence Review by Mercantile and which constitutes a breach of
any representation, warranty or agreement of Regional Bancshares
under this Agreement.
5.2 Expenses. Each party hereto shall bear its own
--------
expenses incident to preparing, entering into and carrying out
this Agreement and to consummating the Merger, except Mercantile
or Merger Sub shall pay all printing and filing fees incurred in
connection with the Registration Statement (as hereinafter
defined) and the Proxy Statement (as hereinafter defined).
33
<PAGE> 39
5.3 Covenants of Regional Bancshares. Regional
--------------------------------
Bancshares covenants and agrees with Mercantile and Merger Sub as
follows:
5.3(a) Regional Bancshares Shareholder Approval.
-----------------------------------------
Regional Bancshares will, at a meeting of its stockholders duly
called by its Board of Directors (the "Stockholder Meeting"),
present for the authorization and approval of its stockholders,
this Agreement. The Proxy Statement for such meeting shall
include the materials which constitute the prospectus of
Mercantile and is contained in the Registration Statement on Form
S-4 as described in Section 5.4(c). Regional Bancshares
--------------
agrees that its Board of Directors will, consistent with its
fiduciary duties, at such stockholder meeting and in the proxy
material used in connection therewith, recommend to its
stockholders and request that the Merger be approved and this
Agreement be adopted.
5.3(b) Conduct of Business Pending Merger. From
----------------------------------
and after the date hereof until the Merger Effective Time, and
except as consented to by Mercantile in writing, Regional
Bancshares will and will cause Bank of Alton to:
5.3(b)(i) maintain their tangible property and
assets in the present state of repair, order and condition,
reasonable wear and tear excepted;
5.3(b)(ii) maintain their books, accounts and
records in accordance with GAAP or regulatory accounting
principles, as the case may be, consistently applied;
5.3(b)(iii) comply in all material respects with
all laws applicable to the conduct of their business;
5.3(b)(iv) conduct their business only in the
usual, regular and ordinary course consistent with prior
practice, and will not make any purchase or sale or introduce any
method of management or operation in respect of such business or
property, except in a manner consistent with prior practice;
5.3(b)(v) make no change in their Articles of
Incorporation, Charter or Bylaws;
5.3(b)(vi) maintain and keep in full force and
effect all fire and other insurance on property and assets, all
of the liability and other casualty insurance, and all bonds on
personnel, presently carried by them;
5.3(b)(vii) duly and timely file all reports, tax
returns and other documents required to be filed with federal,
state, and local and other authorities; and
34
<PAGE> 40
5.3(b)(viii) unless they are contesting the same
in good faith and have established reasonable reserves therefor,
pay when required to pay all Taxes indicated by such tax returns
or otherwise lawfully levied or assessed upon them, or any of
their properties or assets, or which they are otherwise legally
obligated to pay and withhold or collect and pay to the proper
governmental authorities or hold in separate bank accounts for
such payment all Taxes and other assessments which they believe
in good faith to be required by law to be so withheld or
collected;
5.3(b)(ix) not sell, mortgage, subject to lien,
pledge or encumber or otherwise dispose of any of their assets
otherwise than in the ordinary course of business;
5.3(b)(x) not redeem, retire or otherwise acquire
or agree to redeem or otherwise acquire any of their capital
stock or any option, warrant or right to acquire shares of its
capital stock or any security convertible into its capital stock,
or redeem or otherwise acquire any notes, or make any prepayment
on account of or in respect of any indebtedness for any borrowed
money;
5.3(b)(xi) make no change in the number of shares
of their capital stock issued and outstanding, and grant no
option or commitment relating to their capital stock or any
security convertible into their capital stock or any security the
value or return of which is measured by capital stock or any
security subordinated to the claims of their general creditors;
5.3(b)(xii) except as otherwise specifically
provided herein, not enter into or amend any employment or
severance contract or agreement with or Employee Plan covering,
or grant any salary or wage increase to, any director, officer,
employee or agent of Regional Bancshares or Bank of Alton except
for normal increases in compensation to individual non-officer
employees in accordance with past practice, and will not increase
in any amount the benefits or compensation, if any, of any such
directors, officers, employees or agents under any Benefit Plan
or other contract or commitment, and will not pay nor agree to
pay any bonus or commission to any such director, officer,
employee or agent;
5.3(b)(xiii) not declare, set aside or pay any
dividends or other distributions, directly or indirectly, in
respect of its capital stock (other than dividends from Bank of
Alton to Regional Bancshares), except that Regional Bancshares
may pay its regular quarterly dividend of $10.00 per share, in
accordance with its past practice; provided however, that if the
Merger Effective Time shall not have occurred prior to March 10,
1997, Regional Bancshares may declare, set aside or pay a
dividend for each share of Regional Bancshares Common for each
quarter thereafter in which the Mercantile Board of Directors
shall declare a dividend on shares of Mercantile Common in an
amount that equals the product of (i) 164% of the Stock
Distribution, and (ii) the amount of the dividend per share
35
<PAGE> 41
declared by the Board of Directors of Mercantile; provided
further, however, that Regional Bancshares shall not declare or
pay any such regular quarterly dividend for any quarter in which
Regional Bancshares shareholders who will receive the Stock
Distribution in the Merger will be entitled to receive a regular
quarterly dividend on the shares of Mercantile Common to be
issued in the Merger;
5.3(b)(xiv) not merge or consolidate with any
other corporation or other entity, acquire any stock (except in a
fiduciary capacity or to realize upon collateral obtained in the
ordinary course of business), effect any reorganization or
recapitalization involving Regional Bancshares or Bank of Alton;
not acquire any assets of any other person, corporation or
business organization except in the ordinary course of business,
or acquire any assets (including without limitation deposits) of,
or make any investment in, any financial institution;
5.3(b)(xv) not lease, sell or dispose of any
material part of their assets, make capital or fixed asset
expenditures in excess of $100,000 for any single item or
$250,000 in the aggregate, enter into any leases of fixed assets,
purchase any data processing equipment, waive or release any
right or cancel or compromise any debt or claim except in the
ordinary course of business, enter into any management,
maintenance, servicing or similar contracts having a term of more
than one year or providing for fees in excess of a rate of
$250,000 per year, or otherwise enter into any material contract,
transaction or commitment except in the ordinary course of
business;
5.3(b)(xvi) not make any loans, discounts or
commitments to loan or discount in excess of the applicable legal
lending limits;
5.3(b)(xvii) not (i) without first consulting with
Mercantile, enter into, renew or increase any loan or credit
commitment (including stand-by letters of credit) to, or invest
or agree to invest in any person or entity or modify any of the
material provisions or renew or otherwise extend the maturity
date of any existing loan or credit commitment (collectively,
"Lend to") in an amount equal to or in excess of $200,000; (ii)
without first consulting with and obtaining the written consent
of Mercantile, Lend to any person or entity in an amount equal to
or in excess of $400,000; (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 (i) through (iii) Regional
Bancshares or Bank of Alton may make any such loan in the event
(A) Regional Bancshares or Bank of Alton has delivered to
Mercantile or its designated representative a notice of its
intention to make such loan and such information as Mercantile or
its designated representative may reasonably require in respect
thereof and (B) Mercantile 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 Mercantile or its designated
representative of the notice of intention and information as
aforesaid; or (iv) Lend to any person or entity any of the loans
or other extensions of credit to
36
<PAGE> 42
which or investments in which are on a "watch list" or similar internal report
of Regional Bancshares or Bank of Alton (except those denoted "pass"
thereon), in an amount equal to or in excess of $50,000;
provided, however, that nothing in this Section 5.3(b)(xvii)
shall prohibit Regional Bancshares or Bank of Alton from honoring
any contractual obligation in existence on the date of this
Agreement or, with respect to loans made in compliance with
clauses (i) through (iii) above, making such loans after
consulting with Mercantile. Notwithstanding clauses (i) and (ii)
of this Section 5.3(b)(xvii), Regional Bancshares or Bank of
Alton shall be authorized without first consulting with
Mercantile or obtaining Mercantile'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 shall not be in excess of $25,000.
5.3(b)(xviii) not, directly or indirectly
(including through its officers, directors, employees or other
representatives) (i) initiate, solicit or encourage any
discussions, inquiries or proposals with any third party (other
than Mercantile) relating to the disposition of any significant
portion of the business or assets of Regional Bancshares or Bank
of Alton or the acquisition of equity securities of Regional
Bancshares or Bank of Alton or the merger of Regional Bancshares
or Bank of Alton with any person (other than Mercantile) or any
similar transaction (each such transaction being referred to
herein as an "Acquisition Transaction"), or (ii) provide any such
person with information or assistance or negotiate with any such
person with respect to an Acquisition Transaction, and Regional
Bancshares shall promptly notify Mercantile 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;
5.3(b)(xix) not take any action that would (A)
materially impede or delay the consummation of the transactions
contemplated by this Agreement or the ability of Mercantile or
Regional Bancshares 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 or impede the transactions contemplated
hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code;
5.3(b)(xx) not materially restructure or change
its investment securities portfolio, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or
reported, or execute individual investment transactions of
greater than $500,000 for U.S. Treasury or Federal Agency
Securities and $100,000 for all other investment instruments; or
5.3(b)(xxi) not agree in writing or otherwise to
take any of the foregoing actions or engage in any activity,
enter into any transaction or intentionally take or omit to take
any other action which would make any of the
37
<PAGE> 43
representations and warranties in Article 3 of this Agreement untrue or
incorrect in any material respect if made anew after engaging in such
activity, entering into such transaction, or taking or omitting
such other action.
5.3(c) Implementation of Policies. Regional
--------------------------
Bancshares, prior to the Merger Effective Time, shall (i) consult
and cooperate with Mercantile regarding the implementation of
those policies and procedures established by Mercantile for its
governance and that of its Subsidiaries and not otherwise
referenced in Section 5.3(h) herein, including, without
limitation, policies and procedures pertaining to the accounting,
asset/liability management, audit, credit, human resources,
treasury and legal functions, and (ii) at the reasonable request
of Mercantile, conform Regional Bancshares' and Bank of Alton's
existing policies and procedures in respect of such matters to
Mercantile's policies and procedures or, in the absence of any
existing Regional Bancshares or Bank of Alton policy or procedure
regarding any such function, introduce Mercantile's policies or
procedures in respect thereof, unless to do so would cause
Regional Bancshares or Bank of Alton to be in violation of any
law, rule or regulation of any Regulatory Authority having
jurisdiction over Regional Bancshares and/or Bank of Alton
affected thereby.
5.3(d) Financial Statements to be Delivered.
------------------------------------
All financial statements contained in the reports to be delivered
to Mercantile pursuant to this Agreement will have been prepared
in accordance with GAAP or regulatory accounting principles, as
the case may be, consistently applied or other standards as
specifically stated herein, or in conformity with the
instructions to such reports, and fairly present the consolidated
financial condition of Regional Bancshares and/or Bank of Alton,
(as the case may be), as of the date thereof or the results of
operations for the period then ended.
5.3(e) Financial and Call Reports. Regional
--------------------------
Bancshares shall deliver to Mercantile monthly Reports of
Condition and Reports of Income and Dividends of Bank of Alton
(certified by an officer of Bank of Alton) and shall deliver to
Mercantile each quarter the Call Reports for Bank of Alton as
filed with the FDIC (collectively, the "Regional Reports"). The
Regional Reports: (i) in the case of the Call Reports, shall have
been prepared in conformity with the rules and regulations
therefor, and in the case of the other Regional Reports shall
have been prepared in accordance with GAAP or regulatory
accounting principles, as the case may be (subject, in the case
of the unaudited interim financial statements, to normal year-end
and audit adjustments and any other adjustments described
therein); (ii) shall present fairly in accordance with GAAP or
regulatory accounting principles, as the case may be,
consistently applied (subject to adjustments that would be
revealed by an audit, none of which is believed to be material in
the aggregate) the financial position of Regional Bancshares or
Bank of Alton (as the case may be) as of the date thereof and the
results of operations for the period then ended.
38
<PAGE> 44
5.3(f) Environmental Matters. Mercantile may
---------------------
obtain, at its option and expense, on or prior to 60 days
following the date hereof, a phase one environmental audit
("Environmental Audit") by Environmental Operations, Inc. or
other firm selected by it, of all the properties and assets which
are, or have in the past been, owned, operated or leased by
Regional Bancshares or Bank of Alton, including, but not limited
to, all real estate and fixtures appurtenant thereto (the
"Properties"). The auditors shall be selected by Mercantile.
The purpose of the Environmental Audit shall be to determine
whether Materials of Environmental Concern exist (i) on or under
any of the Properties, (ii) on or under any other property or in
any natural resources which originated on, under or from the
Properties either prior to, during or after Regional Bancshares'
or Bank of Alton's ownership thereof. The Environmental Audit
shall assess the Properties' compliance with any and all
Environmental Laws.
In the event that such Environmental Audit discloses
the existence of any material liability ("Environmental
Liability") for damages, penalties, fines, charges, interest,
judgments, remedial action, public or private, arising directly
or indirectly, in whole or in part, out of (x) the presence or
release of Materials of Environmental Concern on, under or from
the Properties in amounts or concentrations in excess of those
permitted under applicable law or regulation, or (y) any unlawful
activity carried on or undertaken on or off the Properties either
prior to or after the date hereof, whether by Regional
Bancshares, Bank of Alton or any predecessor in title to any of
the Properties or any employees, agents, affiliates, contractors
or subcontractors of Regional Bancshares, Bank of Alton or of any
such predecessors in title, or any third person arising out of
any Environmental Law or involving the unlawful use, handling,
treatment, removal, storage, decontamination, clean up, release,
transport or disposal of any Materials of Environmental Concern
at any time located or present on, under or from the Properties,
which liability exists against Regional Bancshares or Bank of
Alton or affects in a material and adverse way the Properties, or
Regional Bancshares' or Bank of Alton's rights, or business or
the right to carry on or conduct their respective businesses as
presently conducted, Mercantile shall notify Regional Bancshares
of such Environmental Liability. If Regional Bancshares does not
choose to remediate or correct the condition leading to such
Environmental Liability and to otherwise fully protect and
indemnify Mercantile from such Environmental Liability on terms
and conditions reasonably acceptable to Mercantile, and
Mercantile reasonably believes the cost of such remediation or
potential liability exceeds $250,000, Mercantile shall have the
right to terminate this Agreement under Article VII hereof,
thereby relieving Mercantile of all its obligations hereunder,
including the obligation to cause or engage in the Merger.
5.3(g) Conforming Entries.
------------------
5.3(g)(i) Notwithstanding that Regional Bancshares
believes that Regional Bancshares and Bank of Alton have
established all reserves and taken all
39
<PAGE> 45
provisions for possible loan losses required by GAAP and applicable laws,
rules and regulations, Regional Bancshares recognizes that Mercantile may
have adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). From and
after the Mercantile Due Diligence Review Period to the Merger Effective Time,
Regional Bancshares and Mercantile shall consult and cooperate with each
other with respect to conforming the loan, accrual and reserve
policies of Regional Bancshares and the Bank of Alton to those
policies of Mercantile, as specified in each case in writing to
Regional Bancshares, based upon such consultation and as
hereinafter provided.
5.3(g)(ii) In addition, from and after the
Mercantile Due Diligence Review Period to the Merger Effective
Time, Regional Bancshares and Mercantile shall consult and
cooperate with each other with respect to determining appropriate
Regional Bancshares 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
Regional Bancshares, based upon such consultation and as
hereinafter provided.
5.3(g)(iii) From and after the Mercantile Due
Diligence Review Period to the Merger Effective Time, Regional
Bancshares and Mercantile shall consult and cooperate with each
other with respect to determining the amount and the timing for
recognizing for financial accounting purposes Regional
Bancshares' expenses of the Merger and the restructuring charges
related to or to be incurred in connection with the Merger.
5.3(g)(iv) Subject to subsection (v) below,
Regional Bancshares shall (i) establish and take such reserves
and accruals to conform Regional Bancshares' loan accrual and
reserve policies to Mercantile's policies, (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 various accounting purposes
such expenses of the Merger and restructuring charges related to
or to be incurred in connection with the Merger, and (iii)
effecting such divestitures or otherwise implement such
restructuring in respect of its investment securities portfolio
to conform Regional Bancshares' investment securities portfolio
policies to Mercantile's policies.
5.3(g)(v) With respect to clauses (i) through (vi)
of this Section 5.3(g), it is the objective of Mercantile and
Regional Bancshares that such reserves, accruals, charges and
divestitures, if any, to be taken shall be consistent with GAAP
and taken only after the approval conditions set forth in Section
6.1 hereof have been satisfied or waived (except to the extent
that any waiting period associated therewith may then have
commenced but not expired) and Mercantile has informed Regional
Bancshares that it is not aware of any facts which would
40
<PAGE> 46
indicate that the other Merger Closing conditions in Article 6 herein
cannot be met at Merger Closing.
5.3(g)(vi) No reserves, accruals or charges taken
in accordance with this Section 5.3(h) may be a basis to assert
(i) a violation of a breach of a representation, warranty or
covenant of Regional Bancshares herein, or (ii) the non-
satisfaction of any condition to the obligation of Mercantile to
cause the Merger to be consummated.
5.3(h) Additional Actions. If, at any time
------------------
after the Merger Effective Time, Mercantile 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 (a) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, all right, title or
interest in, to or under any of the rights, properties or assets
of Regional Bancshares or Merger Sub or (b) otherwise carry out
the purposes of this Agreement, Regional Bancshares 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 Regional Bancshares or otherwise to
take any and all such action.
5.4 Covenants of Mercantile and Merger Sub.
---------------------------------------
Mercantile and Merger Sub hereby covenant and agree with Regional
Bancshares as follows:
5.4(a) Approval. Mercantile will authorize and
--------
approve the Merger and this Agreement, and as sole stockholder of
Merger Sub by its execution hereof authorizes and approves the
Merger and this Agreement.
5.4(b) Payment of Consideration. Mercantile
------------------------
represents, warrants and agrees that as and when required by the
provisions of this Agreement, Mercantile will pay the
consideration for which the shares of Regional Bancshares Common
issued and outstanding immediately prior to the Merger Effective
Time are to be converted and exchanged as provided in this
Agreement.
5.4(c) Registration of Securities and Preparation
------------------------------------------
of Proxy Statement. Mercantile agrees to use its reasonable
- ------------------
best efforts to file as soon as practicable with the Securities
and Exchange Commission and to cause to become effective a
Registration Statement on Form S-4 under the 1933 Act
("Registration Statement") registering the issuance and resale of
the Mercantile Common to be received by holders of Regional
Bancshares Common, and shall use reasonable efforts to make all
proper filings under any applicable state securities laws. The
prospectus which forms a part of the Registration Statement will
also constitute the Proxy Statement
41
<PAGE> 47
for solicitation of proxies in connection with the Stockholder Meeting
referred to in Section 5.3(a). The Registration Statement will comply
--------------
in all material respects with the rules and regulations of the
Securities and Exchange Commission. Each of the parties hereto
will cooperate fully with each other in preparation of the
Registration Statement and Proxy Statement (and any and all
amendments thereto) and supply all information necessary, in the
opinion of their respective counsel, in order to complete the
preparation of the Registration Statement and Proxy Statement.
Mercantile will cause the Mercantile Common to be received by the
holders of Regional Bancshares Common to be listed for trading on
the New York Stock Exchange.
5.4(d) Other Filings and Appeals. Mercantile
-------------------------
shall have primary responsibility for preparation of all
applications for regulatory approval of the Merger including but
not limited to the preparation of (a) an application or any
amendment thereto filed or to be filed by any party with the
Federal Reserve Board under the Act for authority to consummate
the transactions contemplated by this Agreement; (b) an
application or any amendment thereto filed or to be filed with
the Commissioner for authority to consummate the transactions
contemplated by this Agreement; and (c) any application or
statements to be made by any party to any governmental body in
connection with such matters and in connection with agreements
and plans of reorganization and merger agreements heretofore or
hereafter entered into between the parties hereto. Mercantile
shall deliver copies of all applications to Regional Bancshares
and Bank of Alton prior to filing, keep Regional Bancshares and
Bank of Alton apprised of the status of all applications and file
such applications as promptly as practicable following the date
of this Agreement. Each of the parties hereto shall use its
reasonable best efforts, separately and jointly with the other
parties, in good faith to take or cause to be taken all such
steps as shall be necessary or advisable to obtain all consents
and approvals of governmental authorities as are required by law
or otherwise to effect the Merger; provided, however, that
Mercantile and Merger Sub shall have no obligation to accept
conditions or restrictions with respect to the aforesaid
approvals of governmental authorities if Mercantile shall
reasonably determine that such conditions or restrictions would
have a material adverse effect on the business, operations,
prospects or financial condition of Regional Bancshares or Bank
of Alton or Mercantile or its Subsidiaries or would be materially
burdensome to Regional Bancshares or Bank of Alton or Mercantile
or its Subsidiaries. In the event of an adverse or unfavorable
determination by any regulatory authority, or should the Merger
be challenged or opposed by any administrative or legal
proceeding, whether by the United States Department of Justice or
otherwise, the determination of whether and to what extent to
seek appeal or review, administrative or otherwise, or other
appropriate remedies shall be made by Mercantile with the
concurrence of Regional Bancshares, which concurrence shall not
be unreasonably withheld, and Mercantile agrees to be fully
responsible for the conduct of such review or other proceeding.
42
<PAGE> 48
5.4(e) Employee Benefit Plans. Following the
----------------------
Merger Effective Time, Mercantile shall cause the Surviving
Corporation to honor in accordance with their terms all
provisions for vested benefits or other vested amounts earned or
accrued through the Merger Effective Time under the Benefit Plans
of Regional Bancshares or Bank of Alton.
5.4(e)(i) The provisions of any plan, program or
arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of Regional Bancshares
or Bank of Alton, including, without limitation, any stock
appreciation rights or phantom stock plan, shall be deleted and
terminated as of the date of this Agreement.
5.4(e)(ii) The Benefit Plans of Regional
Bancshares and/or Bank of Alton 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
Regional Bancshares and Bank of Alton are integrated in
Mercantile's employee benefit plans that are available to other
employees of Mercantile and its Subsidiaries, subject to the
terms and conditions specified in such plans and to such changes
therein as may be necessary to reflect the consummation of the
Merger. Mercantile shall take such steps as are necessary or
required to integrate the employees of Regional Bancshares and
Bank of Alton in Mercantile's employee benefit plans available to
other employees of Mercantile and its Subsidiaries as soon as
practicable after the Merger Effective Time, with (A) full credit
for prior service with Regional Bancshares and Bank of Alton for
purposes of vesting and eligibility for participation (but not
benefit accruals under any defined benefit plan), and co-payments
and deductibles, and (B) waiver of all waiting periods and, to
the extent met or satisfied by an affected employee of Regional
Bancshares or Bank of Alton under the Regional Bancshares Benefit
Plans, all pre-existing condition exclusions or penalties.
5.4(f) Directors' and Officers' Indemnity. From
----------------------------------
and after the Merger Effective Time, Mercantile or Merger Sub, as
applicable, shall, subject to any limitations or other provisions
of applicable Law or action of the FDIC, to the full extent
provided in Regional Bancshares' or Bank of Alton's Articles of
Incorporation or Agreement as the case may be, Bylaws and
applicable indemnification agreements as in effect on the date
hereof, as the case may be, indemnify and hold harmless each
present and former director, officer, employee and agent of
Regional Bancshares or Bank of Alton (each, together with such
person's heirs, executors and administrators, an "Indemnified
Party" and collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys' fees), judgments, fines,
and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil,
administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring prior to the
Merger Effective Time (including, without limitation, acts or
omissions in connection with such persons' serving as an officer,
director or other fiduciary in
43
<PAGE> 49
any entity if such service was at the request or for the benefit of Regional
Bancshares or Bank of Alton) and otherwise observe all of Regional Bancshares'
or Bank of Alton's obligations under their respective Articles of
Incorporation or Agreement, Bylaws or agreements. Mercantile
shall make advances of expenses, including attorneys' fees,
incurred prior to the final disposition of a civil,
administrative or investigative action, suit proceeding or claim
(including an action by or in the right of Regional Bancshares or
Bank of Alton) to any person to whom indemnification is or may be
available under Regional Bancshares' or Bank of Alton's Articles
of Incorporation or Agreement as the case may be, Bylaws and
applicable indemnification agreements, provided, however, that
prior to making any advances, Mercantile shall receive a written
undertaking by or on behalf of such person to repay such amounts
advanced in the event that it shall be ultimately determined that
such person is not entitled to such indemnification. In the
event Mercantile, Merger Sub or any of their successors or
assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers all or
substantially all of its properties and assets to any person,
then and in each such case, proper provisions shall be made so
that the successors and assigns of Mercantile or Merger Sub, as
applicable, shall also agree to assume the obligations set forth
in this Section 5.4(f).
ARTICLE 6
CONDITIONS PRECEDENT TO THE MERGER
6.1 Conditions and Obligations of Mercantile, Merger
------------------------------------------------
Sub and Regional Bancshares to the Merger. The obligations of
- -----------------------------------------
Mercantile, Merger Sub and Regional Bancshares to cause the
Merger to be consummated shall be subject to the satisfaction on
or before the Merger Closing of all of the following conditions,
except as such parties may waive such conditions in writing:
6.1(a) Approval by Regional Bancshares Stockholders.
At the Stockholder Meeting, the Merger and this Agreement shall
have been duly approved by the stockholders of Regional
Bancshares.
6.1(b) Regulatory Authority Approval. Orders,
------------------------------
consents and approvals, in form and substance reasonably
satisfactory to the parties hereto, shall have been entered by
all applicable regulatory authority and shall remain in force,
granting the authority necessary: (i) for consummation of the
transactions contemplated by this Agreement pursuant to the
provisions of the Act and other applicable laws, and (ii) to
satisfy all other requirements prescribed by applicable laws and
the rules and regulations of any regulatory authority.
6.1(c) No Proceedings, Etc. No judgment, order
-------------------
or decree of any court and no order, notice, statute or
regulation of any government or governmental
44
<PAGE> 50
agency having jurisdiction or authority over Regional Bancshares, Bank
of Alton, Mercantile or Merger Sub shall be in effect which shall
restrain or prohibit, and no litigation, proceeding or
investigation shall be pending or threatened by or before any
such court or governmental agency attempting to restrain or
prohibit: (i) consummation of the transactions contemplated by
this Agreement, or (ii) the exercise of control by Mercantile or
Merger Sub over Regional Bancshares or Bank of Alton following
the Merger.
6.1(d) Registration Statement. The Registration
----------------------
Statement on Form S-4 as described in Section 4(c) shall have
become effective under the 1933 Act and as of the Merger Closing
no stop order suspending the effectiveness thereof shall have
been issued or threatened.
6.1(e) Listing on Stock Exchange. The
--------------------------
Mercantile Common is listed for trading on The New York Stock
Exchange.
6.1(f) Tax Opinion. Mercantile shall have
-----------
delivered to Regional Bancshares an opinion of Thompson Coburn
dated as of the Merger Closing or a mutually agreeable earlier
date, reasonably satisfactory in form and substance to Regional
Bancshares and its legal counsel to the effect that the Merger
will constitute a reorganization within the meaning of Section
368 of the Code and that no gain or loss will be recognized by
Regional Bancshares or the shareholders of Regional Bancshares or
Bank of Alton to the extent that each received shares of
Mercantile Common solely in exchange for shares of Regional
Bancshares Common in the Merger, which opinion shall not have
been withdrawn at or prior to the Merger Effective Time.
6.2 Conditions to Obligations of Mercantile to the Merger.
-----------------------------------------------------
The obligations of Mercantile to cause the Merger to be
consummated also shall be subject to the satisfaction on or
before the Merger Closing of all of the following conditions,
except as Mercantile may waive such conditions in writing:
6.2(a) Representations, Warranties and Covenants.
-----------------------------------------
All representations and warranties of Regional Bancshares
contained in this Agreement shall be true and correct in all
material respects on and as of the date of the Merger Closing
as if such representations and warranties were made on and as
of the date of the Merger Closing, and Regional Bancshares shall
have performed in all material respects all agreements and covenants
required by this Agreement to be performed by it on or prior to the
date of the Merger Closing.
6.2(b) Officers' Certificates. Regional
----------------------
Bancshares shall have furnished to Mercantile a certificate dated
as of the date of the Merger Closing, signed by an executive
officer of Regional Bancshares to the effect that, to his
knowledge, the representations and warranties of Regional
Bancshares contained in this Agreement are true and correct in
all material respects as of the date of the Merger Closing
45
<PAGE> 51
and Regional Bancshares has performed all agreements, covenants
and obligations hereunder required to be performed by it in all
material respects.
6.2(c) No Material Adverse Change. Since the
---------------------------
date of this Agreement, there shall have been no material adverse
change in the financial condition of Regional Bancshares and Bank
of Alton, taken as a whole, except as may have resulted from
changes to laws and regulations, GAAP or regulatory accounting
principles, interpretations thereof, other conditions that affect
the banking industry generally, or changes in the general level
of interest rates.
6.2(d) Legal Opinion. Mercantile shall have
-------------
received from Bryan Cave LLP an opinion of counsel for Regional
Bancshares substantially in the form attached hereto as
Exhibit A.
6.3 Conditions to Obligations of Regional Bancshares to
---------------------------------------------------
the Merger. The obligations of Regional Bancshares to cause
- ----------
the Merger to be consummated shall be subject to the satisfaction
on or before the Merger Closing of all of the following
conditions, except as Regional Bancshares may waive such
conditions in writing:
6.3(a) Representations, Warranties and Covenants.
-----------------------------------------
All representations and warranties of Mercantile and Merger Sub contained in
this Agreement shall be true and correct in all material respects on and as of
the date of the Merger Closing as if such representations and warranties were
made on and as of the Merger Closing, and Mercantile shall have performed in
all material respects all agreements and covenants required by this Agreement
to be performed by it on or prior to the date of the Merger Closing.
6.3(b) Officers' Certificates. Mercantile shall
----------------------
have furnished to Regional Bancshares a certificate, dated as of
the Merger Closing, signed by an executive officer of Mercantile
to the effect that, to the knowledge of such officer, the
representations and warranties of Mercantile and Merger Sub
contained in this Agreement are true and correct in all material
respects as of the date of the Merger Closing and Mercantile and
Merger Sub have performed all agreements, covenants and
obligations hereunder required to be performed by them.
6.3(c) No Material Adverse Change. Since the
---------------------------
date of this Agreement, there shall have been no material adverse
change in the financial condition of Mercantile or its
Subsidiaries, taken as a whole, except as may have resulted from
changes to laws and regulations, GAAP, interpretations thereof,
other conditions that affect the banking industry generally, or
changes in the general level of interest rates.
6.3(d) Legal Opinion. Regional Bancshares shall
-------------
have received from Thompson Coburn an opinion of counsel for
Mercantile and Merger Sub substantially in the form attached
hereto as Exhibit B.
46
<PAGE> 52
6.3(e) Effective Registration Statement. The
---------------------------------
Registration Statement as described in Section 5.4(c) shall have
become effective under the 1933 Act and as of the Merger
Effective Time no stop order suspending the effectiveness thereof
shall have been issued or threatened.
ARTICLE 7
ABANDONMENT AND TERMINATION OF THE MERGER
7.1 Termination. This Agreement may be abandoned and
-----------
terminated at any time before the Merger Effective Time, whether
before or after any stockholder action as follows:
7.1(a) At any time prior to the Merger Closing, by
the mutual consent of the Boards of Directors of Regional
Bancshares and Mercantile;
7.1(b) At any time prior to the Merger Closing, by
Regional Bancshares or Mercantile if there shall have been a
final judicial or regulatory determination (as to which all
periods for appeal shall have expired and no appeal shall be
pending) that any material provisions of this Agreement are
illegal, invalid, or unenforceable or denying any regulatory
application the approval of which is a condition precedent to
such party's obligations hereunder;
7.1(c) At any time on or after the date which is
twelve (12) months following the date of this Agreement by
Regional Bancshares or Mercantile if the Merger Closing shall
have not then occurred, provided that Regional Bancshares or
Mercantile, as the case may be, shall not have the right to
terminate this Agreement pursuant to this Section 7.1(c) if the
Merger Closing shall not have occurred because of the failure of
any of the conditions set forth in Article 6 hereof as a result
of any willful and deliberate breach, through action or failure
to act, of any representation, warranty, covenant or agreement
hereunder by Regional Bancshares or Mercantile, respectively;
7.1(d) By either party at any time after the
stockholders of Regional Bancshares fail to approve the Agreement
or the Merger in a vote taken at the Stockholder Meeting duly
convened for that purpose;
7.1(e) By either party hereto, if the Executive
Committee of the Board of Directors of Mercantile or the Board of
Directors of Regional Bancshares so determines by vote of a
majority of their members, in the event of a material breach by
the other party of any representation, warranty, covenant or
agreement herein that cannot be or is not cured within thirty
days after written notice of such breach is given to the party
committing such breach, provided that the departure of any
Executive Officer from the employ of Regional Bancshares shall
not be deemed a material breach of its Agreement.
47
<PAGE> 53
7.1(f) By the Executive Committee of the Board of
Directors of Mercantile in the event (i) any situation, event,
circumstance or other matter shall come to the attention of
Mercantile during the course of the Mercantile Due Diligence
Review conducted pursuant to Section 5.1(e)(ii) hereof which
Mercantile shall, in a good faith exercise of its reasonable
discretion, believe either (A) to be inconsistent in any material
and adverse respect with any of the representations or warranties
of Regional Bancshares, (B) to be of such significance as to
materially and adversely affect the financial condition and/or
business of Regional Bancshares and Bank of Alton, taken as a
whole, or (C) to deviate materially and adversely from the
Regional Financial Statements as of and for the six-months ended
June 30, 1996, and (ii) Mercantile notifies Regional Bancshares
of such matters within five business days after the end of the
Mercantile Due Diligence Review Period and such matters are not
capable of being cured or have not been cured within 30 days
after written notice thereof to Regional Bancshares.
7.1(g) By the Executive Committee of the Board of
Directors of Mercantile pursuant to and in accordance with the
provisions of Section 5.3(f) hereof.
7.2 Procedure for Termination. In the event a party
--------------------------
elects to effect any termination pursuant to Sections 7.1(b)
through 7.1(g) above, it shall give written notice to the other
party hereto specifying the basis for such termination.
7.3 Return of Information. In the event that this
----------------------
Agreement is terminated, each party shall return all nonpublic
documents furnished hereunder, shall destroy all documents or
portions thereof prepared by such a party that contain nonpublic
information furnished by the other party pursuant hereto and, in
any event, shall hold all nonpublic information received pursuant
hereto in the same degree of confidentiality with which it
maintains its own like information unless or until such
information is or becomes known to the party receiving such
information through persons other than the party providing such
information, which persons do not have an obligation to such
party not to disclose such information.
7.4 Effect of Termination. In the event of
----------------------
termination of this Agreement as provided in Section 7.1 hereof,
this Agreement shall forthwith become void and there shall be no
continuing obligations on the part of Mercantile, Merger Sub or
Regional Bancshares or their respective officers or directors
except as set forth in (i) the second sentence of Section
5.1(e)(i), (ii) Section 5.2, and (iii) except that no termination
of this Agreement pursuant to Section 7.1(e) shall relieve the
breaching party of any liability to the non-breaching party
hereto arising from the intentional, deliberate and willful non-
performance of any covenant contained herein, after giving notice
to such breaching party and an opportunity to cure as set forth
in Section 7.1(e).
48
<PAGE> 54
ARTICLE 8
MISCELLANEOUS
8.1 Notice. All notices, requests, demands, and
-------
other communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or
delivered by reliable overnight courier (and shall be deemed
delivered upon delivery) or mailed, first class postage prepaid
(in which case it shall be deemed delivered three days after
deposit in the mail) as follows:
To Regional Bancshares:
94 Fairmount
Alton, Illinois 62002
Attention: Paul E. Utterback
with copies to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway Suite 3300
St. Louis, Missouri 63102
Attention: James H. Erlinger III
To Mercantile or Merger Sub:
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
with copies to:
Jon W. Bilstrom
General Counsel and Secretary
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, Missouri 63166-0524
and to:
Robert M. LaRose, Esq.
Thompson Coburn
49
<PAGE> 55
One Mercantile Center
St. Louis, Missouri 63101
or such other address as the parties hereto may designate in
writing.
8.2 Amendments. This Agreement may be amended by a
-----------
subsequent writing signed by each of the parties hereto upon the
approval of the Board of Directors of each of the parties hereto;
provided, however, that the provisions of Article 2 of this
Agreement relating to the consideration to be paid for the shares
of Regional Bancshares Common shall not be amended after the
transactions hereby have been approved by the stockholders of
Regional Bancshares so as to modify either the amount or the form
of such consideration or to otherwise materially adversely affect
the stockholders of Regional Bancshares without the approval of
the stockholders of Regional Bancshares who are so affected.
8.3 Third Party Beneficiaries. This Agreement shall
--------------------------
grant no rights and is intended to confer no benefit to any party
other than the undersigned parties to this Agreement.
8.4 Benefit and Binding Effect. This Agreement shall
--------------------------
be binding upon and inure to the benefit of the parties named
herein and their respective successors and assigns only and no
other person or entity not a party hereto shall have any rights
hereunder. This Agreement and the rights, interests or
obligations hereunder may not be assigned by any of the parties
hereto without the prior written consent of the other parties
hereto.
8.5 Governing Law. This Agreement shall be construed
-------------
and interpreted according to the laws of the State of Missouri
without regard to conflicts of laws principles thereof, except as
otherwise provided herein.
8.6 Whole Agreement. This Agreement, and the
---------------
agreements to be entered into pursuant hereto, embody the entire
contact between the parties with respect to their respective
subject matters and no understandings or agreements, verbal or
otherwise, with respect to the subject matter hereof or thereof
exists between the parties, except as expressly set forth herein
and in such other agreements.
8.7 Counterparts. This Agreement may be executed in
-------------
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
50
<PAGE> 56
8.8 Reliance on Headings. Article and section headings
--------------------
contained in this Agreement are inserted for convenience of
reference only and shall not form any part of the agreement
between the parties hereto or affect in any way the meaning or
interpretation of this Agreement.
51
<PAGE> 57
IN WITNESS WHEREOF, Regional Bancshares, Mercantile, and
Merger Sub have caused this Agreement to be executed by their
duly authorized officers as of the day and year first above
written.
Regional Bancshares, Inc.
By: /s/ David Utterback
----------------------------
Name: David Utterback
Title: President
Mercantile Bancorporation Inc.
By: /s/ John W. Rowe
---------------------------
Name: John W. Rowe
Title: Executive Vice President -
Mercantile Bank of St. Louis
National Association,
Authorized Officer
Ameribanc, Inc.
By: /s/ John W. Rowe
---------------------------
Name: John W. Rowe
Title: Vice President
52
<PAGE> 58
GLOSSARY
Page
----
1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bank of Alton. . . . . . . . . . . . . . . . . . . . . . . . . 1
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer Bancorp. . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer Bancorp Reports. . . . . . . . . . . . . . . . . . . . . 30
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Commissioner . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company Merger Closing . . . . . . . . . . . . . . . . . . . . 4
Employment Agreements. . . . . . . . . . . . . . . . . . . . . 16
Environmental Claim. . . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 2
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . 6
FDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Federal Reserve Board. . . . . . . . . . . . . . . . . . . . . 27
Government . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Held to Maturity . . . . . . . . . . . . . . . . . . . . . . . 12
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . 43
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . 43
Intellectual Property. . . . . . . . . . . . . . . . . . . . . 2
IRCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Materials of Environmental Concern . . . . . . . . . . . . . . 3
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Effective Time. . . . . . . . . . . . . . . . . . . . . 4
Newco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regional Bancshares. . . . . . . . . . . . . . . . . . . . . . 1
Regional Bancshares Common . . . . . . . . . . . . . . . . . . 3
Regional Reports . . . . . . . . . . . . . . . . . . . . . . . 38
Registration Statement . . . . . . . . . . . . . . . . . . . . 41
Significant Banking Subsidiary . . . . . . . . . . . . . . . . 30
Significant Subsidiary . . . . . . . . . . . . . . . . . . . . 27
Stockholder Meeting. . . . . . . . . . . . . . . . . . . . . . 34
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . 3
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
53
<PAGE> 59
SCHEDULES
Schedule 3.6 (Regulatory Matters)
Schedule 3.8 (Compliance with Laws and Agreements)
Schedule 3.9 (Regional Financial Statements)
Schedule 3.10 (Real Property)
Schedule 3.12 (Loans and Investments)
Schedule 3.12A (Allowance for Loan and Lease Losses)
Schedule 3.12B (Restricted Investments)
Schedule 3.12C (Obligations to Acquire Assets)
Schedule 3.13 (Employees)
Schedule 3.14 (Indebtedness to and from Officers, Directors and Others)
Schedule 3.15 (Conflicts)
Schedule 3.16 (Regional Bancshares Litigation)
Schedule 3.18 (Insurance Policies)
Schedule 3.19(e) (Bonuses)
Schedule 3.22 (Large Deposits)
Schedule 3.28 (Benefit Plans)
Schedule 3.31(a) (Undisclosed Liabilities)
54
<PAGE> 60
EXHIBIT A
OPINION OF COUNSEL
FOR REGIONAL BANCSHARES
a. Regional Bancshares, Inc. is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Illinois, is duly qualified to do business and is
in good standing in all jurisdictions where the ownership or
leasing of its properties or the conduct of its business require
Regional Bancshares, Inc. to be so qualified. Regional
Bancshares, Inc. is registered as a bank holding company with the
Board of Governors of the Federal Reserve System under the Bank
Holding Company Act of 1956, as amended.
b. Bank of Alton is an Illinois chartered banking
corporation validly existing and in good standing under the laws
of the State of Illinois.
c. Regional Bancshares, Inc. and Bank of Alton each
possesses all power and authority (corporate and other) to own,
operate and lease its respective properties and to carry out its
respective business as it is now being conducted in each
jurisdiction where its business is being conducted.
d. Regional Bancshares, Inc. has the power and authority
(corporate and other) to enter into and deliver the Agreement and
to carry out its obligations thereunder.
e. The execution, delivery and performance of the
Agreement has been duly and validly authorized by all necessary
corporate action of Regional Bancshares, Inc., and, assuming due
authorization, execution and delivery of the Agreement by
Mercantile and Merger Sub, such Agreement constitutes a valid and
binding obligation of Regional Bancshares, Inc. that is
enforceable against Regional Bancshares, Inc. in accordance with
its terms, except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights
of creditors generally, or the exercise of judicial discretion in
accordance with general principles applicable to equitable and
similar remedies.
f. Neither Regional Bancshares, Inc. nor Bank of Alton
is in default under or in violation of any provision of its
Articles of Incorporation, Articles of Agreement or ByLaws or any
note, bond, indenture, mortgage, deed of trust, loan agreement or
any other agreement to which it is a party or by which it is
bound or to which any of its properties or assets is subject,
other than such defaults or violations as would not (singly or in
the aggregate) have a material adverse effect on the business,
operation, prospects or financial condition of Regional
Bancshares, Inc. and Bank of Alton taken as a whole, nor is
Regional Bancshares, Inc. or Bank of Alton in violation of any
statute, rule, regulation, order, writ, decree or injunction of
any court or governmental agency or any body having jurisdiction
over them or
55
<PAGE> 61
any of their properties which, if enforced, would have (singly or in the
aggregate) a material adverse effect on the business, operations, prospects or
financial condition of Regional Bancshares, Inc. and Bank of Alton taken as a
whole.
g. Except as received prior to the date hereof, 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 Regional Bancshares, Inc. of the Merger
as contemplated by the Agreement.
h. The authorized and issued capital of Regional
Bancshares, Inc. conforms to the description thereof contained in
Section 3.1 of the Agreement. To the best of our knowledge,
there are no options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any capital
stock of Regional Bancshares, Inc., or contracts, commitments,
understandings or arrangements by which Regional Bancshares, Inc.
is or may become bound to issue additional shares of capital
stock, or options, warrants or rights to purchase or acquire any
additional shares of capital stock of Regional Bancshares, Inc..
To the best of our knowledge, all of the issued and outstanding
shares of Regional Bancshares, Inc. Common Stock are validly
issued, fully paid and nonassessable by Regional Bancshares, Inc.
and none of such shares have been issued in violation of any
preemptive or similar right of any shareholder of Regional
Bancshares, Inc.
i. Regional Bancshares, Inc. is the owner of record of
all of the issued and outstanding shares of Common Stock of Bank
of Alton, other than directors' qualifying shares.Regional
Bancshares, Inc. has no direct or indirect Subsidiaries other
than Bank of Alton To the best of our knowledge, there are no
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or
securities or rights convertible into, shares of any capital
stock of Bank of Alton, or contracts, commitments, understandings
or arrangements by which Bank of Alton is or may become bound to
issue additional shares of capital stock, or options, warrants or
rights to purchase or acquire any additional shares of capital
stock of such entity. To the best of our knowledge, all of the
issued and outstanding shares of common stock of Bank of Alton
are validly issued, fully paid and nonassessable by Bank of Alton
and none of such shares have been issued in violation of any
preemptive or similar right of any stockholder of Bank of Alton.
j. To the best of our knowledge, neither Regional
Bancshares, Inc. nor Bank of Alton is the subject of any order,
decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the
Merger.
k. To the best of our knowledge, there is no litigation,
proceeding or controversy before any court or governmental agency
whether federal, state or
56
<PAGE> 62
local, pending or threatened, that is likely to have a material and adverse
effect on the business, results of operations or financial condition of
Regional Bancshares, Inc. and Bank of Alton, taken as a whole.
57
<PAGE> 63
EXHIBIT B
OPINION OF COUNSEL
a. Each of Mercantile and Merger Sub is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Missouri, is duly qualified to do business
and is in good standing in all jurisdictions where the ownership
or leasing of its respective properties or the conduct of its
business requires it to be so qualified, except where the failure
to so qualify would not have a material adverse effect on the
business, operations or financial condition of Mercantile and
Merger Sub, taken as a whole. Mercantile and Merger Sub are each
registered as bank holding companies with the Board of Governors
of the Federal Reserve System under the Bank Holding Company Act
of 1956, as amended.
b. Mercantile and Merger Sub each possesses all power
and authority (corporate and other) to own, operate and lease its
respective properties and to carry out its respective business as
it is now being conducted in each jurisdiction where its business
is being conducted.
c. Mercantile and Merger Sub each have the power and
authority (corporate and other) to enter into and deliver the
Agreement and to carry out its respective obligations thereunder.
d. The execution, delivery and performance of the
Agreement has been duly and validly authorized by all necessary
corporate action of Mercantile and Merger Sub, respectively, and,
assuming due authorization, execution and delivery of the
Agreement by Regional Bancshares, Inc., such Agreement
constitutes a valid and binding obligation of Mercantile and
Merger Sub that is enforceable against Mercantile and Merger Sub,
as the case may be, in accordance with its terms, except as may
be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the rights of creditors generally, or
the exercise of judicial discretion in accordance with general
principles applicable to equitable and similar remedies.
e. Neither Mercantile nor any of its Significant
Subsidiaries is in default under or in violation of any provision
of its Articles of Incorporation, Articles of Association or By-
Laws or any note, bond, indenture, mortgage, deed of trust, loan
agreement or any other agreement to which it is a party or by
which it is bound or to which any of its properties or assets is
subject, other than such defaults or violations as would not
(singly or in the aggregate) have a material adverse effect on
the business, operation, prospects or financial condition of
Mercantile and its Subsidiaries taken as a whole, nor is
Mercantile or any of its Significant Subsidiaries in violation of
any statute, rule, regulation, order, writ, decree or injunction
of any court or governmental agency or any body having
jurisdiction over them or any of their properties which, if
enforced, would have (singly or in the
58
<PAGE> 64
aggregate) a material adverse effect on the business, operations, prospects or
financial condition of Mercantile and its Subsidiaries taken as a whole.
f. Except as received prior to the date hereof, no
notice to, filing with, exemption or review by or authorization,
consent or approval of, any public body or authority is necessary
for the consummation by Mercantile or Merger Sub of the Merger as
contemplated by the Agreement.
g. To the best of our knowledge, the authorized and
issued capital of Mercantile conforms to the description thereof
contained in Section 4.1 of the Agreement. To the best of our
knowledge, except as set forth in the Agreement or in the
Schedules thereto, there are no options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of
any capital stock of Mercantile, or contracts, commitments,
understandings or arrangements by which Mercantile is or may
become bound to issue additional shares of capital stock, or
options, warrants or rights to purchase or acquire any additional
shares of capital stock of Mercantile. To the best of our
knowledge, all of the issued and outstanding shares of Mercantile
Common Stock are validly issued, fully paid and nonassessable by
Mercantile and none of such shares have been issued in violation
of any preemptive or similar right of any shareholder of
Mercantile. The shares of Mercantile Common Stock issued
pursuant to the Agreement are duly authorized, validly issued,
fully paid and nonassessable by Mercantile, and none of such
shares are subject to preemptive or other similar rights.
h. To the best of our knowledge, neither Mercantile nor
Merger Sub is the subject of any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger.
i. To the best of our knowledge, there is no litigation,
proceeding or controversy before any court or governmental agency
whether federal, state or local, pending or threatened, that is
likely to have a material and adverse effect on the business,
results of operations or financial condition of Mercantile and
its Subsidiaries, taken as a whole.
59
<PAGE> 1
[Exhibit 2.2]
VOTING AGREEMENT
This Voting Agreement dated as of August 23, 1996, is
entered into between MERCANTILE BANCORPORATION INC.
("Mercantile), and Paul E. Utterback ("Stockholder").
WHEREAS, Regional Bancshares, Inc. ("Regional Bancshares)
and Mercantile have proposed to enter into an Agreement and Plan
of Merger (the "Agreement"), dated as of today, which
contemplates the acquisition by Mercantile of 100% of the common
stock of Regional Bancshares by means of a merger between
Regional Bancshares and Mercantile's subsidiary, Ameribanc, Inc.
(the "Merger"); and
WHEREAS, Stockholder is the beneficial owner in excess of
seventy percent (70%) of the issued and outstanding Common Stock
of Regional Bancshares (the "Shares"), the certificate(s) in
respect of which is held pursuant to Voting Trust Agreement dated
as of November 21, 1994, by and between Stockholder and Billy R.
Summers, as Trustee (the "Voting Trust Agreement"), a copy of
which is attached hereto as Exhibit A; and
WHEREAS, Mercantile is willing to expend the substantial
time, effort and expense necessary to implement the Merger only
if Stockholder enters into this Voting Agreement.
NOW, THEREFORE, in consideration of the premises,
Stockholder hereby agrees as follows:
1. Voting Agreement. Stockholder shall vote the
----------------
shares, or, as holder of the Trust Certificate issued under the
Voting Trust Agreement in respect of the Shares, cause the
trustee of the Voting Trust Agreement pursuant to Section 6 of
the Voting Trust Agreement,
<PAGE> 2
to vote all of the Shares and any additional shares of Regional
Bancshares Stock hereafter beneficially owned by Stockholder in
favor of the approval of the Agreement and the Merger at the
meeting of stockholders of Regional Bancshares to be called for
the purpose of approving the Agreement and the Merger (the
"Meeting").
2. No Competing Transaction. Stockholder shall not
------------------------
vote or cause to be voted any of the Shares in favor of the
approval of any other agreement relating to the merger or sale of
all or substantially all the assets of Regional Bancshares to any
person other than Mercantile or its affiliates until closing of
the Merger, termination of the Agreement or abandonment of the
Merger by the mutual agreement of Regional Bancshares and
Mercantile, whichever comes first.
3. Transfers Subject to Agreement. Stockholder
------------------------------
shall not transfer or cause the transfer of any of the Shares
unless the transferee, prior to such transfer, executes a voting
agreement with respect to the transferred shares substantially to
the effect of this Voting Agreement and reasonably satisfactory
to Mercantile.
4. No Ownership Interest. Nothing contained in this
---------------------
Voting Agreement shall be deemed to vest in Mercantile any direct
or indirect ownership or incidence of ownership of or with
respect to any of the Shares. All rights, ownership and economic
benefits of and relating to the shares of Regional Bancshares
Stock covered by this Voting Agreement shall remain and belong to
Stockholder and/or the trustee under the Voting Trust Agreement
and Mercantile shall have no authority to manage, direct,
superintend, restrict, regulate, govern or administer any of the
policies or operations of Regional Bancshares or exercise any
power or authority to direct Stockholder in the voting of any of
the Shares, except as otherwise expressly provided herein.
2
<PAGE> 3
5. Evaluation of Investment. Stockholder, by reason
------------------------
of his knowledge and experience in financial and business matters
and in his capacity as a former director of a financial
institution, believes himself capable of evaluating the merits
and risks of the potential investment in common stock of
Mercantile, $5.00 par value ("Mercantile Common Stock"),
contemplated by the Agreement.
6. Transfers to Family Members. Subject to the
---------------------------
provisions of Section 3 hereof, Stockholder may transfer or cause
the transfer of the Shares to affiliates or family members of
Stockholder, including, without limitation a partnership of which
Stockholder and his family members constitute all the partners.
7. Documents Delivered. Stockholder acknowledges
-------------------
that he has reviewed the Agreement and its attachments and that
reports, proxy statements and other information with respect to
Mercantile filed with the Securities and Exchange Commission (the
"Commission") were, prior to his execution of this Voting
Agreement, available for inspection and copying at the Offices of
the Commission and that Mercantile delivered the following such
documents to Regional Bancshares.
(a) Mercantile's Annual Report on Form 10-K for
the year ended December 31, 1995;
(b) Mercantile's Annual Report to Stockholders for
the year ended December 31, 1995;
(c) Mercantile's Current Reports on Form 8-K dated
January 16, 1996 and March 11, 1996; and
(d) Mercantile's Quarterly Report on Form 10-Q for
the quarters ended March 31, 1996 and June 30,
1996.
3
<PAGE> 4
8. Amendment and Modification. This Voting
--------------------------
Agreement may be amended, modified or supplemented at any time by
the written approval of such amendment, modification or
supplement by Stockholder and Mercantile.
9. Entire Agreement. This Voting Agreement
----------------
evidences the entire agreement among the parties hereto with
respect to the matters provided for herein and there are no
agreements, representations or warranties with respect to the
matters provided for herein other than those set forth herein and
in the Agreement. This Voting Agreement supersedes any
agreements among Regional Bancshares and Stockholder concerning
the voting of the shares of Regional Bancshares Stock covered by
this Voting Agreement for the approval of the Agreement and the
Merger or the disposition or control of such shares of Regional
Bancshares Stock.
10. Severability. The parties agree that if any
------------
provision of this Voting Agreement shall under any circumstances
be deemed invalid or inoperative, this Voting Agreement shall be
construed with the invalid or inoperative provisions deleted to
the extent consistent with the intent of the parties, and the
rights and obligations of the parties shall be construed and
enforced accordingly.
11. Counterparts. This Voting Agreement may be
------------
executed in more than one counterpart, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
12. Governing Law. The validity, construction,
-------------
enforcement and effect of this Voting Agreement shall be governed
by the internal laws of the State of Missouri.
4
<PAGE> 5
13. Headings. The headings for the paragraphs of
--------
this Voting Agreement are inserted for convenience only and shall
not constitute a part hereof or affect the meaning or
interpretation of this Voting Agreement.
14. Termination. This Voting Agreement shall
-----------
terminate upon the consummation of the Merger, abandonment of the
Merger by the mutual agreement of Regional Bancshares and
Mercantile or termination of the Agreement, whichever comes
first.
15. Successors. This Voting Agreement shall be
----------
binding upon and inure to the benefit of Mercantile and its
successors, and Stockholder, such Stockholder's respective
executors, personal representatives, administrators, heirs,
legatees, guardians and other legal representatives. This Voting
Agreement shall survive the death or incapacity of Stockholder.
This Voting Agreement may be assigned by Mercantile only to an
affiliate of Mercantile.
MERCANTILE BANCORPORATION INC.
By: /s/ John W. Rowe
--------------------------------------
John W. Rowe
Executive Vice President
Mercantile Bank of St. Louis
National Association,
Authorized Officer
STOCKHOLDER
/s/ Paul E. Utterback
--------------------------------------
Paul E. Utterback
5
<PAGE> 1
[Exhibit 5.1]
[Letterhead of Thompson Coburn]
December 12, 1996
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
Re: Registration Statement on Form S-4
----------------------------------
Gentlemen:
We refer you to the Registration Statement on Form S-4 filed by
Mercantile Bancorporation Inc. (the "Company") on December 12, 1996 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended, pertaining to the
proposed issuance by the Company of up to 600,419 shares of the Company's
common stock, $5.00 par value (the "Shares"), in connection with the
acquisition of Regional Bancshares, Inc. ("Regional") pursuant to the
Agreement and Plan of Merger, dated as of August 23, 1996 (the "Merger
Agreement"), by and among the Company, Ameribanc, Inc. and Regional, all as
provided in the Registration Statement. In rendering the opinions set forth
herein, we have examined such corporate records of the Company, such laws and
such other information as we have deemed relevant, including the Company's
Restated Articles of Incorporation and Bylaws, as amended and currently in
effect, the resolutions adopted by the Executive Committee of the Company's
Board of Directors relating to the transaction, certificates received from
state officials and statements we have received from officers and
representatives of the Company. In delivering this opinion, the undersigned
assumed the genuineness of all signatures; the authenticity of all documents
submitted to us as originals; the conformity to the originals of all
documents submitted to us as certified, photostatic or conformed copies; the
authenticity of the originals of all such latter documents; and the
correctness of statements submitted to us by officers and representatives of
the Company.
Based only on the foregoing, the undersigned is of the opinion
that:
1. The Company has been duly incorporated and is validly
existing under the laws of the State of Missouri; and
2. The Shares to be sold by the Company, when issued as
provided in the Merger Agreement, will be duly authorized, duly and validly
issued and fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm in the section of
the Proxy Statement/Prospectus entitled "Legal Matters."
Very truly yours,
/s/ Thompson Coburn
<PAGE> 1
[Exhibit 8.1]
December 12, 1996
Board of Directors
Regional Bancshares, Inc.
94 Fairmount
Alton, Illinois 62002
Ladies and Gentlemen:
You have requested our opinion with regard to certain federal income
tax consequences of the proposed merger (the "Merger") of Regional
Bancshares, Inc. ("Regional") with and into Ameribanc, Inc. ("Ameribanc"), a
wholly owned subsidiary of Mercantile Bancorporation Inc. ("MBI").
In connection with the preparation of our opinion, we have examined and
have relied upon the following:
(i) The Agreement and Plan of Merger by and among Regional, MBI
and Ameribanc dated August 23, 1996, including the schedules
and exhibits thereto (the "Agreement");
(ii) MBI's Registration Statement on Form S-4, including the
Proxy Statement/Prospectus contained therein, filed with the
Securities and Exchange Commission on * , 1996 (the
---------
"Registration Statement");
(iii) The representations and undertaking of MBI substantially in
the form of Exhibit A hereto;
(iv) The representations and undertakings of Regional and the
majority holder of Regional common stock, par value $10.00 per
share ("Regional Common Stock"), substantially in the forms of
Exhibit B and Exhibit C hereto; and
(v) The Rights Plan between MBI and Mercantile Bank of St.
Louis National Association, as rights agent, dated May 23, 1988.
Our opinion is based solely upon applicable law and the factual
information and undertakings contained in the above-mentioned documents. In
rendering our opinion, we have assumed the accuracy of all information and
the performance of all undertakings contained in each of such documents. We
also have assumed the authenticity of all original documents, the conformity
of all copies to the original documents, and the genuineness of all
signatures. We have not attempted to verify independently the accuracy of
any information in any such document, and we have assumed that such documents
accurately and completely set forth all material facts relevant to this
opinion. We have also assumed that Regional has earnings and profits for
federal income tax purposes in an amount equal to or exceeding its current
retained earnings. All of our assumptions were made with your consent. If
any fact or assumption described herein or below is incorrect, any or all of
the federal income tax consequences described herein
<PAGE> 2
Regional Bancshares, Inc.
December 12, 1996
Page 2
may be inapplicable. Capitalized terms not otherwise defined herein have the
meaning ascribed to them in the Agreement.
OPINIONS
Subject to the foregoing, to the conditions and limitations expressed
elsewhere herein, and assuming that the Merger is consummated in accordance
with the Agreement, we are of the opinion that the Merger will constitute a
reorganization within the meaning of section 368 of the Internal Revenue Code
of 1986, as amended to the date hereof (the "Code"). Accordingly, pursuant
to the provisions and limitations of section 356 of the Code, Regional
shareholders will recognize no gain or loss as a result of the exchange of
Regional Common Stock solely for MBI Common Stock in the Merger; provided,
however, that (i) gain will be recognized in accordance with the provisions and
limitations of section 356 of the Code in respect of the Cash Distribution
received, and (ii) gain will be recognized in accordance with the provisions
and limitations of section 356 of the Code, or dividend income will be
recognized under section 301 of the Code, with respect to the West Pointe
Consideration received (i.e., shares of West Pointe Common and cash in lieu of
----
fractional shares thereof).
We emphasize that, among other requirements that must be satisfied in
order for the Merger to qualify as a reorganization under section 368 of the
Code, the historic shareholders of Regional must, as a group, retain
approximately 405,000 of the shares of MBI Common Stock received in the Merger
(or more, if the fair market value of the MBI Common Stock is less than $46.00
per share at the Merger Effective Time) for a period of at least five years or,
in the event of early disposition, demonstrate that the early disposition was
not pursuant to a plan or arrangement in place at the time of the Merger (Treas.
Reg. Sec.1.368-1; Rev. Rul. 66-23, 1966-1 C.B. 67; Penrod v. Commissioner, 88
----------------------
T.C. 1415 (1987)). For ruling purposes, the Internal Revenue Service (the
"Service") treats stock as fungible such that, in determining whether 405,000
shares out of the 600,419 shares of MBI Common Stock to be issued in the
Merger are retained by the Regional shareholders, the Service treats shares
of MBI Common Stock which are owned by Regional shareholders before the
Merger and disposed of after the Merger as dispositions of the 600,419 shares
of MBI Common Stock received in the Merger (Rev. Proc. 86-42, Section 7.02,
1986-2 C.B. 722).
Regional is unable to make certain standard representations regarding
the continuity of shareholder interest requirement as interpreted by the
Service, and Regional's shareholders have refused to make certain
representations requested by Thompson Coburn. However, Regional's majority
shareholder has represented, in accordance with Exhibit C hereto, that he alone
has no plan or arrangement to dispose of MBI Common Stock currently owned or to
be received in the Merger. With your consent, we have assumed for all purposes
of this opinion that if such shareholder disposes of any MBI Common Stock owned
prior to or received in the Merger, such shareholder will be able to
demonstrate that the early disposition was not pursuant to a plan or
arrangement in place at the time of the Merger.
* * * * * * * * * * * *
We express no opinion with regard to: (1) the federal income tax
consequences of the Merger not addressed expressly by this opinion, including
without limitation, (i) the tax consequences, if any,
<PAGE> 3
Regional Bancshares, Inc.
December 12, 1996
Page 3
to those shareholders of Regional who acquired shares of Regional Common Stock
pursuant to the exercise of employee stock options or otherwise as
compensation, and (ii) the tax consequences to special classes of
shareholders, if any, including without limitation, foreign persons, insurance
companies, tax-exempt entities, retirement plans, and dealers in securities;
and (2) federal, state, local, or foreign taxes (or any other federal, state,
local, or foreign laws) not specifically referred to and discussed herein.
Further, our opinion is based upon the Code, Treasury Regulations proposed or
promulgated thereunder, and administrative interpretations and judicial
precedents relating thereto, all of which are subject to change at any time,
possibly with retroactive effect, and we assume no obligation to advise you
of any subsequent change thereto. If there is any change in the applicable
law or regulations, or if there is any new administrative or judicial
interpretation of the applicable law or regulations, any or all of the
federal income tax consequences described herein may become inapplicable.
The foregoing opinion reflects our legal judgment solely on the issues
presented and discussed herein. This opinion has no official status or
binding effect of any kind. Accordingly, we cannot assure you that the
Service or any court of competent jurisdiction will agree with this opinion.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to all references made to this letter and to this
firm in the Registration Statement.
Very truly yours,
/s/ Thompson Coburn
<PAGE> 4
Exhibit A
CERTIFICATE
-----------
The undersigned, * , [Undersigned's Title] of Mercantile
-----------
Bancorporation Inc., a Missouri corporation ("MBI"), HEREBY CERTIFIES that
(a) I am familiar with the terms and conditions of the Agreement and Plan of
Merger by and among Regional Bancshares, Inc., an Illinois corporation
("Regional"), MBI, and Ameribanc, Inc., a Missouri corporation ("Ameribanc"),
dated August 23, 1996, including the schedules and exhibits thereto (the
"Agreement"), and (b) I am aware that (i) this Certificate will be relied on
by Thompson Coburn, counsel for MBI, in rendering its opinion to Regional
that the merger of Regional with and into Ameribanc (the "Merger") will
constitute a reorganization within the meaning of section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the
representations and undertaking recited herein will survive the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF MBI, that:
(1) The terms of the exchange of Regional common stock, par value
$10.00 per share ("Regional Common Stock"), in return for the MBI common
stock, par value $5.00 per share ("MBI Common Stock"), the West Pointe Bank
And Trust Company common stock ("West Pointe Common Stock"), and the cash to
be received by each Regional shareholder in the Merger (including cash to be
received in lieu of fractional shares of MBI Common Stock and West Pointe
Common Stock, if any) (such MBI Common Stock, West Pointe Common Stock and
cash are collectively referred to herein as the "Merger Consideration"), were
arrived at in arm's length negotiations between MBI, Ameribanc and Regional.
(2) Except as otherwise set forth by the undersigned on an attachment
hereto, MBI is aware of no plan, intention or arrangement (including any
option or pledge) on the part of any holder of Regional Common Stock to sell,
exchange or otherwise dispose of any of the MBI Common Stock to be received
in the Merger, with the exception of fractional shares of MBI Common Stock to
be exchanged for cash pursuant to the Merger.
(3) Before the Merger, MBI will be in control of Ameribanc within the
meaning of section 368(c) of the Code. After the Merger, (a) Ameribanc will
not issue additional shares of its stock that
<PAGE> 5
would result in MBI losing control of Ameribanc within the meaning of section
368(c) of the Code, and (b) neither Ameribanc nor any other member of MBI's
"affiliated group" (as the quoted term is defined in Code section 1504, the
"MBI Affiliated Group") will have outstanding any warrants, options,
convertible securities, or any other type of right (including any preemptive
right) pursuant to which any person could acquire stock in Ameribanc that, if
exercised or converted, would affect MBI's retention of control of Ameribanc
(as defined above). No stock of Ameribanc will be issued in connection with
the Merger.
(4) In the Merger, MBI and Ameribanc will tender no consideration for
Regional Common Stock other than the "Merger Consideration" (as the quoted
term is defined in the Agreement) and cash in lieu of fractional shares of
MBI Common Stock.
(5) Neither MBI nor any other member of the MBI Affiliated Group has
any plan or intention (a) to liquidate Ameribanc, (b) to merge Ameribanc with
and into another corporation, (c) to sell or otherwise dispose of whether by
dividend distribution or otherwise the stock of Ameribanc, or (d) except for
transfers described in section 368(a)(2)(C) of the Code, dispositions made in
the ordinary course of business or dispositions approved in writing by
Thompson Coburn, to cause, suffer, or permit Ameribanc to sell or otherwise
dispose of (whether by dividend distribution or otherwise) (i) any assets of
Regional acquired in the Merger, or (ii) any assets of any other member of
Regional's "affiliated group" (as the quoted term is defined in Code section
1504, the "Regional Affiliated Group").
(6) After the Merger, Ameribanc will continue the historic businesses
of Regional and the other members of the Regional Affiliated Group, or will
use a significant portion of the historic business assets of the members of
the Regional Affiliated Group in a business (no stock of any member of the
Regional's Affiliated Group shall be treated as a business asset for purposes
of this representation).
(7) MBI, Ameribanc, Regional, and the shareholders of Regional will
each pay their respective expenses, if any, incurred in connection with the
Merger; provided, however, that MBI or Ameribanc may pay and assume those
expenses of Regional that are solely and directly related to the Merger in
accordance with the guidelines established in Rev. Rul. 73-54, 1973-1 C.B.
187, including those printing expenses and filing fees described in Section
5.2 of the Agreement.
<PAGE> 6
(8) Except with regard to Transaction Costs (as defined below),
neither MBI nor any other member of the MBI Affiliated Group will pay any
amount or incur any liability to or for the benefit of, or assume or cancel
any liability of, any shareholder of Regional in connection with the Merger,
and no liability to which Regional Common Stock is subject will be
extinguished as a result of the Merger. For purposes of this representation,
(a) the term "liability" shall include any undertaking to pay or to cause the
reduction, release, or extinguishment of any obligation, without regard to
whether any such undertaking or obligation is contingent or legally
enforceable (for example and without limitation, the term "liability"
includes an unenforceable agreement to cause the repayment of an obligation
guaranteed by a Regional shareholder or to cause by other means the release
of such guaranty), and (b) the term "Transaction Costs" shall mean amounts
paid or liabilities incurred in connection with the Merger (i) to Regional
shareholders with respect to the Merger Consideration to be delivered in the
Merger, (ii) to dissenters, if any, (iii) for legal, accounting, and
investment banking and/or advisor services rendered to MBI or Ameribanc, if
any, (iv) for those expenses payable or assumable by MBI or Ameribanc in
accordance with representation (7) above, and (v) as compensation to any
employee of MBI or Regional or of any other member of the MBI Affiliated
Group or the Regional Affiliated Group for services rendered in the ordinary
course of his or her employment.
(9) No indebtedness between Regional or any other member of the
Regional Affiliated Group, on the one hand, and Ameribanc, MBI or any other
member of the MBI Affiliated Group, on the other hand, exists or will exist
prior to the Merger that (a) was issued or acquired at a discount, (b) will
be settled, as a result of the Merger, at a discount, or (c) will result in
the recognition of gain under Treasury Regulation Sec. 1.1502-13. No
"installment obligation" (as the quoted term is defined for purposes of Code
section 453B), between Regional, on the one hand, and Ameribanc, on the other
hand, exists or will exist prior to the Merger that will be extinguished as a
result of the Merger.
(10) The payment of cash in lieu of fractional shares of MBI Common
Stock in the Merger will be solely for the purpose of avoiding the expense
and inconvenience to MBI of issuing fractional shares and will not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the Merger to the Regional shareholders in lieu of fractional
shares of MBI Common Stock will not exceed one percent of the total
consideration that will be issued in the transaction to the Regional
shareholders in exchange for their shares of Regional Common Stock. The
fractional share interests of each Regional shareholder will be aggregated,
and no Regional shareholder will receive cash
<PAGE> 7
in lieu of fractional share interests in an amount equal to or greater than
the value of one full share of MBI Common Stock.
(11) All payments made to dissenters and all cash payments made in
lieu of fractional shares of MBI Common Stock will be funded with assets of
MBI. No such payments will be funded with assets of Ameribanc or Regional.
(12) Neither MBI nor any other member of the MBI Affiliated Group has
any plan or intention to redeem or otherwise reacquire any of the MBI Common
Stock issued to the shareholders of Regional in the Merger.
(13) None of the compensation to be paid or accrued after the Merger
to or for the benefit of any shareholder-employee of Regional will be
separate consideration for, or allocable to, any of his or her shares of
Regional Common Stock; none of the shares of MBI Common Stock received in the
Merger by any Regional shareholder-employee will be separate consideration
for, or allocable to, any employment agreement; and all compensation to be
paid or accrued after the Merger to or for the benefit of any Regional
shareholder-employee will be for services actually rendered in the ordinary
course of his or her employment and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
(14) With regard to the Rights Plan between MBI and Mercantile Bank of
St. Louis National Association, as rights agent, dated May 23, 1988 (the
"Rights Agreement"), no "Distribution Date" (as the quoted term is defined in
the Rights Agreement) has occurred, and the Merger will not cause the
occurrence of a Distribution Date.
(15) Neither MBI nor any other member of the MBI Affiliated Group has
owned, directly or indirectly, any stock of Regional within the last five
years.
(16) No terms or conditions of the Agreement (including the schedules
and exhibits thereto) have been waived or modified. The Agreement represents
the complete understanding and agreement by and among MBI, Ameribanc and
Regional regarding the Merger.
<PAGE> 8
The undersigned HEREBY AGREES to immediately communicate in writing to
Thompson Coburn at One Mercantile Center, St. Louis, Missouri 63101, to the
attention of Charles H. Binger, any information that could indicate (i) any
of the foregoing representations was inaccurate when made, or (ii) any of the
foregoing representations would be inaccurate if it were made again
immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of MBI this ----- day of ------------, 1996.
------------------------------------
<PAGE> 9
Exhibit B
CERTIFICATE
-----------
The undersigned, * , [Undersigned's Title] of Regional
-------------
Bancshares, Inc., an Illinois corporation ("Regional"), HEREBY CERTIFIES that
(a) I am familiar with the terms and conditions of the Agreement and Plan of
Merger by and among Regional, Mercantile Bancorporation Inc., a Missouri
corporation ("MBI"), and Ameribanc, Inc., a Missouri corporation
("Ameribanc"), dated August 23, 1996, including the schedules and exhibits
thereto (the "Agreement"), and (b) I am aware that (i) this Certificate will
be relied on by Thompson Coburn, counsel for MBI, in rendering its opinion to
Regional that the merger of Regional with and into Ameribanc (the "Merger")
will constitute a reorganization within the meaning of section 368(a)(1) of
the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the
representations and undertaking recited herein will survive the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF Regional, that:
(1) The terms of the exchange of Regional common stock, par value
$10.00 per share ("Regional Common Stock"), in return for the MBI common
stock, par value $5.00 per share ("MBI Common Stock"), the West Pointe Bank
And Trust Company common stock ("West Pointe Common Stock"), and the cash to
be received by each Regional shareholder in the Merger (including cash to be
received in lieu of fractional shares of MBI Common Stock and West Pointe
Common Stock, if any) (such MBI Common Stock, West Pointe Common Stock and
cash are collectively referred to herein as the "Merger Consideration"), were
arrived at in arm's length negotiations between Regional, MBI and Ameribanc.
(2) Regional will transfer to Ameribanc in the Merger assets
representing at least 90 percent of the fair market value of the net assets
and at least 70 percent of the fair market value of the gross assets, in each
case, that were held by Regional immediately prior to the Merger. For
purposes of this representation, Regional assets used to pay shareholders who
receive cash, and Regional assets used to pay expenses of the Merger or to
fund any redemption or distribution within 24 months before the Merger
(except for regular, normal dividends) shall be included as assets of
Regional held immediately prior to the Merger. For purposes of this
representation, (i) any asset of Regional or any other member of Regional's
"affiliated group" (as the quoted term is defined in Code section 1504, the
"Regional Affiliated Group") that is disposed of within 24 months before the
Merger other than in the ordinary course of business also shall be included
as an asset of Regional held immediately prior to the Merger;
<PAGE> 10
and (ii) the 12,250 shares of West Pointe Common Stock presently held by
Regional shall be treated as not transferred to Ameribanc in the Merger.
(3) At the time of the Merger and except with regard to Transaction
Costs (as defined below), each liability of Regional and each liability to
which an asset of Regional is subject will have been incurred by Regional in
the ordinary course of business and no such liability will have been incurred
in anticipation of the Merger. In addition, at the time of the Merger and
except with regard to Transaction Costs, Regional will not, directly or
indirectly, have paid (or loaned) any amount or incurred any liability to or
for the benefit of, or assumed or cancelled any liability of, any Regional
shareholder in connection with the Merger. For purposes of this
representation, (a) the term "Regional" shall be deemed also to refer to each
other member of the Regional Affiliated Group, (b) the term "liability" shall
include any undertaking to pay or to cause the reduction, release, or
extinguishment of, any obligation, without regard to whether any such
undertaking or obligation is contingent or legally enforceable (for example
and without limitation, the term "liability" includes an unenforceable
agreement to cause the repayment of an obligation guaranteed by a Regional
shareholder or to cause by other means the release of such guaranty), and (c)
the term "Transaction Costs" shall mean amounts paid or liabilities incurred
in connection with the Merger (i) to dissenters, if any, (ii) for legal,
accounting, and investment banking and/or advisor services rendered to
Regional or to any other member of the Regional Affiliated Group, if any, and
(iii) as compensation to any employee of Regional or of any other member of
the Regional Affiliated Group for services rendered in the ordinary course of
his or her employment.
(4) Before the Merger, Regional will not have outstanding any
warrants, options, convertible securities, or any other type of right
(including any preemptive right) pursuant to which any person could acquire
stock in Regional that, if exercised or converted after the Merger, would
affect MBI's retention of control of Ameribanc (within the meaning of section
368(c) of the Code).
(5) Expenses, if any, that are incurred in connection with the Merger
and are properly attributable to Regional's shareholders will be paid by
those shareholders and not by Regional. With the exception of those printing
expenses and filing fees described in Section 5.2 of the Agreement, Regional
will pay its own expenses that are incurred in connection with the Merger.
(6) No indebtedness between Regional or any other member of the
Regional Affiliated Group, on the one hand, and Ameribanc, MBI or any other
member of MBI's "affiliated group" (as the quoted term is defined in Code
section 1504), on the other hand, exists or will exist prior to the Merger
that (a) was issued or acquired at a discount, (b) will be settled, as a
result of the Merger, at a discount, or (c) will result in the recognition of
gain under Treasury Regulation Sec. 1.1502-13(g). No "installment
<PAGE> 11
obligation" (as the quoted term is defined for purposes of Code section
453B), between Regional, on the one hand, and Ameribanc, on the other hand,
exists or will exist prior to the Merger that will be extinguished as a
result of the Merger.
(7) The fair market value of the assets of Regional to be transferred
to Ameribanc will exceed the sum of the amount of liabilities to be assumed
by Ameribanc, plus the amount of liabilities, if any, to which the assets to
be transferred are subject.
(8) The payment of cash in lieu of fractional shares of MBI Common
Stock will be solely for the purpose of avoiding the expense and
inconvenience to MBI of issuing fractional shares and will not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the Merger to the Regional shareholders in lieu of fractional
shares of MBI Common Stock will not exceed one percent of the total
consideration that will be issued in the transaction to the Regional
shareholders in exchange for their shares of Regional Common Stock. The
fractional share interests of each Regional shareholder will be aggregated,
and no Regional shareholder will receive cash in lieu of fractional share
interests in an amount equal to or greater than the value of one full share
of MBI Common Stock.
(9) None of the compensation paid or accrued before the Merger to or
for the benefit of any Regional shareholder-employee will be separate
consideration for, or allocable to, any of his or her shares of Regional
Common Stock; none of the shares of MBI Common Stock received in the Merger
by any Regional shareholder-employee will be separate consideration for, or
allocable to, any employment agreement; and all compensation paid or accrued
before the Merger to or for the benefit of any Regional shareholder-employee
will be for services actually rendered in the ordinary course of his or her
employment and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
(10) To the best knowledge of the undersigned, (i) all payments made
to dissenters and all cash payments made in lieu of fractional shares of MBI
Common Stock will be funded with assets of MBI, and (ii) no such payments
will be funded with Regional assets.
(11) Regional meets the requirements of Code section 368(a)(2)(F) or
is not an investment company as defined in Code section 368(a)(2)(F)(iii) and
(iv).
(12) No terms or conditions of the Agreement (including the schedules
and exhibits thereto) have been waived or modified. The Agreement represents
the complete understanding and agreement by and among MBI, Ameribanc and
Regional regarding the Merger.
<PAGE> 12
The undersigned HEREBY AGREES to immediately communicate in writing to
Thompson Coburn at One Mercantile Center, St. Louis, Missouri 63101, to the
attention of Charles H. Binger, any information that could indicate (i) any
of the foregoing representations was inaccurate when made, or (ii) any of the
foregoing representations would be inaccurate if it were made again
immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of Regional this ----- day of ---------------, 1996.
-------------------------------------------
<PAGE> 13
Exhibit C
SHAREHOLDER CERTIFICATE
-----------------------
The undersigned shareholder of Regional Bancshares, Inc., an Illinois
corporation ("Regional"), HEREBY CERTIFIES that (a) I own or have the sole
right to make investment decisions with regard to * shares Regional
-------
common stock, par value $10.00 per share ("Regional Common Stock"), (b) I am
familiar with the terms and conditions of the Agreement and Plan of Merger by
and among Regional, Mercantile Bancorporation Inc., a Missouri corporation
("MBI"), and Ameribanc, Inc., a Missouri corporation ("Ameribanc"), dated
August 23, 1996, and (c) I am aware that (i) this Certificate will be relied
on by MBI and by Thompson Coburn, counsel for MBI, in rendering its opinion
to Regional that the merger of Regional with and into Ameribanc (the
"Merger") will constitute a reorganization within the meaning of section
368(a)(1) of the Internal Revenue Code of 1986, as amended, and (ii) the
representations and undertaking recited herein will survive the Merger.
The undersigned HEREBY FURTHER CERTIFIES that the undersigned has no
plan, intention or arrangement to Dispose of any MBI common stock, par value
$5.00 per share ("MBI Common Stock"), currently owned or to be received as
consideration in the Merger, with the exception of any fractional share of
MBI Common Stock to be exchanged for cash pursuant to the Merger. For
purposes of this representation, "Dispose" (and with correlative meaning,
"Disposition") means to sell, exchange or otherwise dispose (including any
option and any pledge intended to result in a disposition), or enter into any
transaction that reduces the risk of loss (whether by short sale, hedging,
equity swap or otherwise). The undersigned understands that Dispositions
which occur after the Merger may have the effect of rendering the Merger
taxable under federal income tax law, and that if the Merger were to become
taxable, MBI and the former shareholders of Regional each would become liable
for significant amounts of federal and state income taxes (and possibly other
taxes, as well).
If, on or before the date of the Merger, the undersigned forms any
plan, intention or arrangement to Dispose of any MBI Common Stock currently
owned or to be received as consideration in the Merger, the undersigned
HEREBY AGREES to immediately communicate the same in writing to Thompson
Coburn at One Mercantile Center, St. Louis, Missouri 63101, to the attention
of Charles H. Binger.
IN WITNESS WHEREOF, the undersigned has executed this Certificate, or
caused this certificate to be executed by its duly authorized representative,
this ----- day of ---------------, 1996.
-------------------------------------
Signature of Shareholder
<PAGE> 1
[Exhibit 23.2]
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
December 12, 1996
<PAGE> 1
[Exhibit 23.3]
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Regional Bancshares, 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
December 12, 1996
<PAGE> 1
[Exhibit 23.4]
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated January 16, 1996, with respect
to the financial statements and schedules of Mark Twain Bancshares,
Inc. included in the Registration Statement (Form S-4) and related
Prospectus of Mercantile Bancorporation Inc. for the registration
of 600,419 shares of its common stock.
/s/ Ernst & Young LLP
December 11, 1996
St. Louis, Missouri
