<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 10, 1998
MERCANTILE BANCORPORATION INC.
(Exact name of registrant as specified in its charter)
MISSOURI 1-11792 43-0951744
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
organization) Number)
P.O. BOX 524
ST. LOUIS, MISSOURI 63166-0524
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 425-2525
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ITEM 5. OTHER EVENTS
On January 10, 1998, Mercantile Bancorporation Inc., a corporation
organized and existing under the laws of the State of Missouri
("Mercantile"), and CBT Corporation, a corporation organized and existing
under the laws of the State of Kentucky ("CBT"), and each registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended,
entered into an Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which CBT will be merged with and into Ameribanc, Inc., a
Missouri corporation and wholly owned subsidiary of Mercantile (the
"Merger"). The Executive Committee of the Board of Directors of Mercantile
and the Board of Directors of CBT approved the Merger at their meetings held
on January 8, 1998 and January 10, 1998, respectively.
In accordance with the terms of the Merger Agreement, each share of CBT
common stock, no par value (the "CBT Common Stock"), outstanding immediately
prior to the effective time of the Merger (the "Effective Time") will be
converted into the right to receive 0.6513 of a share of Mercantile common
stock, par value $.01 per share (the "Common Stock"), and the associated
preferred share purchase rights under Mercantile's Rights Agreement, dated
May 23, 1988, between Mercantile and Mercantile Bank National Association, as
Rights Agent (together with the Common Stock, the "Mercantile Common Stock").
In addition, at the Effective Time, all rights with respect to CBT
Common Stock pursuant to stock options outstanding at the Effective Time,
whether or not then exercisable, shall be converted into and shall become
rights with respect to Mercantile Common Stock.
The Merger is intended to constitute a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, and to be accounted for as a
pooling of interests.
Consummation of the Merger is subject to various conditions, including:
(i) the approval of the Merger Agreement and the Merger by the shareholders
of CBT; (ii) the receipt of requisite regulatory approvals from the Board of
Governors of the Federal Reserve System, the Kentucky Department of Financial
Institutions and any other necessary federal and state regulatory authorities;
(iii) the registration pursuant to the Securities Act of 1933, as amended (the
"Act"), of the shares of Mercantile Common Stock to be issued in the Merger and
upon exercise of options to acquire Mercantile Common Stock following the
Merger; (iv) the receipt by each of Mercantile and CBT of an opinion of counsel
in reasonably satisfactory form as to the tax treatment of certain aspects of
the Merger; (v) the receipt of a letter from KPMG Peat Marwick LLP,
Mercantile's independent public accountants, to the effect that the merger
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will qualify for pooling-of-interests accounting treatment; and (vi) the
satisfaction of certain other conditions.
The Merger Agreement and the Merger will be submitted for approval at a
meeting of the shareholders of CBT. Prior to such meeting, Mercantile will
file a registration statement with the Securities and Exchange Commission
registering under the Act the shares of Mercantile Common Stock to be issued
in the Merger. Such shares of Mercantile Common Stock will be offered to the
CBT shareholders pursuant to a prospectus that will also serve as a proxy
statement for the shareholders' meeting.
In connection with the Merger Agreement, each of the directors of
CBT, who in the aggregate have voting power over approximately 13.4% of
the outstanding shares of CBT Common Stock, based upon 7,862,627 shares of
CBT Common Stock outstanding as of December 31, 1997, has agreed with
Mercantile pursuant to a separate Voting Agreement to vote all shares of CBT
Common Stock over which such director has voting power to approve the Merger
Agreement and the Merger.
Also in connection with the Merger Agreement, Mercantile and CBT
entered into a Stock Option Agreement, dated January 10, 1998 (the "Stock
Option Agreement"), pursuant to which CBT granted to Mercantile an
irrevocable option to purchase, under certain circumstances, up to 1,564,662
shares of CBT Common Stock at a price, subject to certain adjustments, of
$33.25 per share (the "Mercantile Option"). The Mercantile Option, if
exercised, would equal, before giving effect to the Mercantile Option, 19.9%
of the total number of shares of CBT Common Stock outstanding. The
Mercantile Option was granted by CBT as a condition and inducement to
Mercantile's willingness to enter into the Merger Agreement. Under certain
circumstances, CBT may be required to repurchase the Mercantile Option or the
shares acquired pursuant to the exercise of the Mercantile Option.
Each of the preceding descriptions of the Merger Agreement, Voting
Agreements and Stock Option Agreement is qualified in its entirety by
reference to the copies of the Merger Agreement, form of Voting Agreement and
Stock Option Agreement included as Exhibits 2.1, 2.2 and 2.3 hereto,
respectively, and which are incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
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<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
2.1 Agreement and Plan of Merger, dated January 10, 1998, by and
among Mercantile Bancorporation Inc., Ameribanc, Inc. and CBT
Corporation.
2.2 Form of Voting Agreement, dated January 10, 1998, by and
between Mercantile Bancorporation Inc. and certain of the
directors of CBT Corporation.
2.3 Stock Option Agreement, dated January 10, 1998, by and
between Mercantile Bancorporation Inc. and CBT Corporation.
99.1 Text of joint press release, dated January 12, 1998, issued
by Mercantile Bancorporation Inc. and CBT Corporation.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 15, 1998
MERCANTILE BANCORPORATION INC.
By: /s/ Jon W. Bilstrom
------------------------------------
Jon W. Bilstrom
General Counsel and Secretary
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<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit No. Description
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<S> <C>
2.1 Agreement and Plan of Merger, dated January 10, 1998, by and
among Mercantile Bancorporation Inc., Ameribanc, Inc. and CBT
Corporation.
2.2 Form of Voting Agreement, dated January 10, 1998, by and
between Mercantile Bancorporation Inc. and certain of the
directors of CBT Corporation.
2.3 Stock Option Agreement, dated January 10, 1998, by and
between Mercantile Bancorporation Inc. and CBT Corporation.
99.1 Text of joint press release, dated January 12, 1998, issued
by Mercantile Bancorporation Inc. and CBT Corporation.
</TABLE>
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AGREEMENT AND PLAN OF MERGER
among
MERCANTILE BANCORPORATION INC.,
a Missouri corporation
and
AMERIBANC, INC.,
a Missouri corporation
and
CBT CORPORATION,
a Kentucky corporation
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January 10, 1998
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<TABLE>
TABLE OF CONTENTS
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<CAPTION>
Page
----
<S> <C>
Recitals 1
ARTICLE I
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THE MERGER
1.01 The Merger 1
1.02 Closing 2
1.03 Effective Time 2
1.04 Additional Actions 2
1.05 Articles of Incorporation and By-Laws 2
1.06 Board of Directors and Officers 2
1.07 Conversion of Securities 3
1.08 Exchange Procedures 3
1.09 No Fractional Shares 5
1.10 Dissenting Shares 5
1.11 Closing of Stock Transfer Books 6
1.12 Anti-Dilution 6
1.13 Reservation of Right to Revise Transaction 7
1.14 Material Adverse Effect 7
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization and Authority 8
2.02 Subsidiaries 8
2.03 Capitalization 9
2.04 Authorization 10
2.05 Seller Financial Statements 11
2.06 Seller Reports 12
2.07 Title to and Condition of Assets 12
2.08 Real Property 13
2.09 Taxes 14
2.10 Material Adverse Effect 15
2.11 Loans, Commitments and Contracts 15
2.12 Absence of Defaults 19
2.13 Litigation and Other Proceedings 19
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Page
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<S> <C>
2.14 Directors' and Officers' Insurance 19
2.15 Compliance with Laws 19
2.16 Labor 22
2.17 Material Interests of Certain Persons 22
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets;
Financial Assets 22
2.19 Employee Benefit Plans 24
2.20 Conduct of Seller to Date 26
2.21 Absence of Undisclosed Liabilities 27
2.22 Proxy Statement, Etc. 27
2.23 Registration Obligations 28
2.24 Tax, Regulatory and Accounting Matters 28
2.25 Brokers and Finders 28
2.26 Interest Rate Risk Management Instruments 28
2.27 Accuracy of Information 29
2.28 Year 2000 Compliant 29
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF THE BUYERS
3.01 Organization and Authority 30
3.02 Capitalization of Mercantile 30
3.03 Authorization 31
3.04 Mercantile Financial Statements 32
3.05 Mercantile Reports 33
3.06 Material Adverse Effect 33
3.07 Registration Statement, etc. 33
3.08 Brokers and Finders 33
3.09 Accuracy of Information 34
ARTICLE IV
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CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time 34
4.02 Forbearances of Seller 34
4.03 Forbearances of the Buyers 37
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<CAPTION>
Page
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ARTICLE V
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ADDITIONAL AGREEMENTS
<S> <C>
5.01 Access and Information; Due Diligence 38
5.02 Registration Statement; Regulatory Matters 38
5.03 Shareholder Approval 39
5.04 Current Information 40
5.05 Conforming Entries 40
5.06 Environmental Reports 41
5.07 Agreements of Affiliates 42
5.08 Expenses 42
5.09 Miscellaneous Agreements and Consents 42
5.10 Employee Agreements and Benefits 43
5.11 Press Releases 44
5.12 State Takeover Statutes 44
5.13 Directors' and Officers' Indemnification 44
5.14 Tax Opinion Certificates 45
5.15 Employee Stock Options 45
5.16 Best Efforts to Insure Pooling 46
ARTICLE VI
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CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger 46
6.02 Conditions to Obligations of Seller 47
6.03 Conditions to Obligations of the Buyers 48
ARTICLE VII
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TERMINATION, AMENDMENT AND WAIVER
7.01 Termination 49
7.02 Effect of Termination 50
7.03 Amendment 50
7.04 Waiver 51
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<CAPTION>
Page
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ARTICLE VIII
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GENERAL PROVISIONS
<S> <C>
8.01 Non-Survival of Representations, Warranties and Agreements 51
8.02 Indemnification 51
8.03 No Assignment; Successors and Assigns 52
8.04 Severability 52
8.05 No Implied Waiver 52
8.06 Headings 52
8.07 Entire Agreement 52
8.08 Counterparts 53
8.09 Notices 53
8.10 Governing Law 54
8.11 Knowledge 54
8.12 Time of Essence 54
LIST OF EXHIBITS
Exhibit A - Affiliate Letter
Exhibit B - Director/Officer Certificate
Exhibit C - Shareholder Certificate
Exhibit D - Buyer's Opinion
Exhibit E - Seller's Opinion
</TABLE>
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LIST OF SCHEDULES
Schedule 2.01 Articles/Bylaws
Schedule 2.02 Subsidiaries/Equity Securities
Schedule 2.03 Seller Stock Plans
Schedule 2.04(b) Authorizations
Schedule 2.05(a) Seller Financial Statements
Schedule 2.08(a) Owned Real Property/Leased Real Property
Schedule 2.08(c) Interests in Real Property
Schedule 2.09 Taxes
Schedule 2.11(a) Deposits/Commitments
Schedule 2.11(b) Contracts
Schedule 2.11(c Insurance
Schedule 2.11(f) Loans
Schedule 2.13 Litigation
Schedule 2.15 Compliance with Laws
Schedule 2.18(c) Real Estate Acquired through Foreclosure and Repossession
Schedule 2.18(f) Investment Securities
Schedule 2.19(a) Employee Benefit Plans
Schedule 2.19(d) Post-Retirement Health and Medical Benefits
Schedule 2.19(f) Change in Control Payments
Schedule 2.20 Conduct of Seller
Schedule 2.26(a) Derivative Securities
Schedule 4.02 Forbearances of Seller
Schedule 5.07 Affiliates
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AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered
into as of January 10, 1998 by and among Mercantile Bancorporation Inc., a
Missouri corporation ("Mercantile"), Ameribanc, Inc., a Missouri corporation
("Merger Sub" and, collectively, with Mercantile, the "Buyers"), and CBT
Corporation, a Kentucky corporation ("Seller").
WHEREAS, Merger Sub is a wholly owned subsidiary of Mercantile, and
each of Mercantile and Merger Sub is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended (the "BHCA"); and
WHEREAS, Seller is registered as a bank holding company under the BHCA;
and
WHEREAS, the respective Boards of Directors of Seller and Merger Sub
and the Executive Committee of the Board of Directors of Mercantile have
approved the merger (the "Merger") of Seller with and into Merger Sub
pursuant to the terms and subject to the conditions contained in this
Agreement; and
WHEREAS, the parties desire to provide certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties
agree as follows:
ARTICLE I
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THE MERGER
1.01 The Merger. Subject to the terms and conditions of this
----------
Agreement, Seller shall be merged with and into Merger Sub in accordance with
Chapter 351 of the Missouri Revised Statutes (the "Missouri Statute") and
Section 271B.11-070 of the Kentucky Business Corporation Act (the "KBCA"),
and the separate corporate existence of Seller shall cease. Merger Sub shall
be the surviving corporation in the Merger (sometimes hereinafter referred to
as the "Surviving Corporation") and shall continue to be governed by the laws
of the State of Missouri.
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1.02 Closing. The closing (the "Closing") of the Merger, unless the
-------
parties hereto shall otherwise mutually agree, shall take place at the
offices of Mercantile in St. Louis, Missouri, at 10:00 am, local time, on the
date that the Effective Time (as defined in Section 1.03) occurs (the
"Closing Date").
1.03 Effective Time. The Merger shall become effective (the
--------------
"Effective Time") upon the later of (i) the issuance of a Certificate of
Merger by the Office of the Secretary of State of the State of Missouri and
(ii) the filing of Articles of Merger with the Office of the Secretary of
State of the Commonwealth of Kentucky. Unless otherwise mutually agreed in
writing by Buyers and Seller, subject to the terms and conditions of this
Agreement, the Effective Time shall occur on such date as Buyers shall notify
Seller in writing (such notice to be at least five business days in advance
of the Effective Time) but (A) not earlier than the satisfaction of all
conditions set forth in Section 6.01(a) and 6.01(b) (the "Approval Date") and
(B) not later than the first business day of the first full calendar month
commencing at least five business days after the Approval Date. On the
Closing Date, the parties hereto will cause the Merger to be consummated by
delivering to the Secretary of State of the State of Missouri and the
Secretary of State of the Commonwealth of Kentucky, for filing, Articles of
Merger, in such form as required by, and executed and acknowledged in
accordance with, the relevant provisions of the Missouri Statute and the
KBCA.
1.04 Additional Actions. If, at any time after the Effective Time,
------------------
the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary or
desirable to (a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Seller or Merger Sub, or (b) otherwise carry
out the purposes of this Agreement, Seller and its officers and directors
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds, assignments or
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Surviving Corporation are
authorized in the name of Seller or otherwise to take any and all such
action.
1.05 Articles of Incorporation and By-Laws. The Articles of
-------------------------------------
Incorporation and By-Laws of Merger Sub in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation following the Merger, unless otherwise repealed or
amended.
1.06 Board of Directors and Officers. At the Effective Time, the
-------------------------------
directors and officers of Merger Sub immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving
Corporation following the
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Merger, and such directors and officers shall hold office in accordance with
the Surviving Corporation's By-Laws and applicable law.
1.07 Conversion of Securities. At the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of the Buyers, Seller or the
holder of any of the following securities:
(a) Each share of the common stock, $1.00 par value, of Merger
Sub that is issued and outstanding immediately prior to the Effective
Time shall remain outstanding and shall be unchanged after the Merger
and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation; and
(b) Subject to Sections 1.09, 1.10 and 1.11 hereof, each share
of common stock, no par value, of Seller ("Seller Common Stock") issued
and outstanding immediately prior to the Effective Time, other than
Dissenting Shares (as defined in Section 1.10 hereof), shall cease to
be outstanding and shall be converted into and become the right to
receive 0.6513 of a share (the "Exchange Ratio") of common stock, $0.01
par value, and the associated "Rights" under the "Rights Agreement," as
those terms are defined in Section 3.02 hereof, of Mercantile
(collectively, "Mercantile Common Stock"); provided, however, that any
shares of Seller Common Stock held by Seller, Mercantile or any of
their respective Subsidiaries (as defined in Section 2.02 hereof), in
each case other than in a fiduciary capacity or as a result of debts
previously contracted, shall be canceled and shall not be exchanged for
shares of Mercantile Common Stock. The Exchange Ratio was computed by
(i) aggregating (A) the total number of shares of Seller Common Stock
that were issued and outstanding on the date of this Agreement (as set
forth in Section 2.03 hereof) with (B) the total number of shares of
Seller Common Stock that are reserved for issuance pursuant to options
or other rights relating to Seller Common Stock and outstanding as of
December 31, 1997 (as set forth in Section 2.03 hereof) and dividing
such number of shares of Seller Common Stock (computed by aggregating
(A) and (B) hereof (the "Fully Diluted Shares")) into (ii) 5,400,000,
the aggregate number of shares of Mercantile Common Stock to be issued
in the Merger.
1.08 Exchange Procedures.
-------------------
(a) As soon as practicable following the Effective Time,
Mercantile shall mail or cause to be mailed to holders of record of
certificates formerly representing shares of Seller Common Stock (the
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"Certificates"), as identified on the Seller Shareholder List (as
provided pursuant to Section 1.11(b) hereof), letters advising them of
the effectiveness of the Merger and instructing them to tender such
Certificates to Mercantile's duly appointed exchange agent (the
"Exchange Agent"), or in lieu thereof, such evidence of lost, stolen or
mutilated Certificates and such surety bond or other security as the
Exchange Agent may reasonably require (the "Required Documentation").
(b) Subject to Sections 1.09, 1.10 and 1.12 hereof, after the
Effective Time, each previous holder of a Certificate that surrenders
such Certificate or in lieu thereof, the Required Documentation, to the
Exchange Agent, with a properly completed and executed letter of
transmittal with respect to such Certificate, will be entitled to a
certificate or certificates representing the number of full shares of
Mercantile Common Stock into which the Certificate so surrendered shall
have been converted pursuant to this Agreement, and any distribution
theretofore declared and not yet paid with respect to such shares of
Mercantile Common Stock and any amount due with respect to fractional
shares, without interest (the "Merger Consideration"). Such shares of
Mercantile Common Stock, any amount due with respect to fractional
shares and any distribution shall be delivered by the Exchange Agent to
each such holder as promptly as practicable after such surrender.
(c) Each outstanding Certificate, until duly surrendered to the
Exchange Agent, shall be deemed to evidence ownership of the Merger
Consideration into which the stock previously represented by such
Certificate shall have been converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates shall
cease to have rights with respect to the stock previously represented
by such Certificates, and their sole rights shall be to exchange such
Certificates for the Merger Consideration to which the shareholder may
be entitled pursuant to the provisions of Section 1.07 hereof. After
the closing of the transfer books as described in Section 1.11 hereof,
there shall be no further transfer on the records of Seller of
Certificates, and if such Certificates are presented to Seller for
transfer, they shall be canceled against delivery of the Merger
Consideration. Neither Buyers nor the Exchange Agent shall be
obligated to deliver the Merger Consideration until such holder
surrenders the Certificates or furnishes the Required Documentation as
provided herein. No dividends or distributions declared after the
Effective Time (including any redemption by Mercantile
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of the Rights associated therewith) on the Mercantile Common Stock will be
remitted to any person entitled to receive Mercantile Common Stock under
this Agreement until such person surrenders the Certificate representing
the right to receive such Mercantile Common Stock or furnishes the
Required Documentation, at which time such dividends or distributions
shall be remitted to such person, without interest and less any taxes that
may have been imposed thereon. Certificates surrendered for exchange by
an affiliate shall not be exchanged until Buyers have received a written
agreement from such affiliate as required pursuant to Section 5.07 hereof.
Neither the Exchange Agent nor any party to this Agreement nor any
affiliate thereof shall be liable to any holder of stock represented by
any Certificate for any Merger Consideration issuable or payable in the
Merger that is paid to a public official pursuant to applicable abandoned
property, escheat or similar laws.
1.09 No Fractional Shares. Notwithstanding any other provision of
--------------------
this Agreement, neither certificates nor scrip for fractional shares of
Mercantile Common Stock shall be issued in the Merger. Each holder of shares
of Seller Common Stock who otherwise would have been entitled to a fraction
of a share of Mercantile Common Stock shall receive (by check from the
Exchange Agent, mailed to the shareholder with the certificate(s) for
Mercantile Common Stock which such holder is to receive pursuant to the
Merger) in lieu thereof, cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder would
otherwise be entitled by the closing stock price of Mercantile Common Stock
on the New York Stock Exchange (the "NYSE") Composite Tape as reported in The
Wall Street Journal on the Closing Date. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional
share.
1.10 Dissenting Shares.
-----------------
(a) "Dissenting Shares" means any shares of Seller Common Stock
held by any holder who becomes entitled to payment of the fair value of
such shares under Chapter 271B.13 of the KBCA. Any holders of
Dissenting Shares shall be entitled to payment for such shares only to
the extent permitted by and in accordance with the provisions of the
KBCA; provided, however, that if, in accordance with the KBCA, any
holder of Dissenting Shares shall forfeit such right to payment of the
fair value of such Dissenting Shares, such shares shall thereupon be
deemed to have been converted into and to have become exchangeable for,
as of the Effective Time, the right to receive the Merger
Consideration.
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(b) Seller shall give to Mercantile (i) prompt notice of any written
objections to the Merger and/or any written demands for the payment of
the fair value of any shares of Seller Common Stock, withdrawals of
such demands, and any other instruments served pursuant to Chapter
271B.13 of the KBCA received by Seller, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such
demands under the KBCA. Seller shall not voluntarily make any payment
with respect to demands for payment of fair value and shall not,
voluntarily make any payment with respect to any demands for payment of
fair value and shall not, except with the prior consent of Mercantile,
settle or offer to settle any such demands.
1.11 Closing of Stock Transfer Books.
-------------------------------
(a) The stock transfer books of Seller shall be closed at the
end of business on the business day immediately preceding the Closing
Date. In the event of a transfer of ownership of Seller Common Stock
that is not registered in the transfer records prior to the closing of
such record books, the Merger Consideration issuable or payable with
respect to such stock may be delivered to the transferee, if the
Certificate or Certificates representing such stock is presented to the
Exchange Agent accompanied by all documents required to evidence and
effect such transfer and all applicable stock transfer taxes are paid.
(b) At the Effective Time, Seller shall provide Buyers with a
complete and verified list of registered holders of Seller Common Stock
based upon its stock transfer books as of the closing of said transfer
books, including the names, addresses, certificate numbers and taxpayer
identification numbers of such holders (the "Seller Shareholder List").
Buyers shall be entitled to rely upon the Seller Shareholder List to
establish the identity of those persons entitled to receive the Merger
Consideration, which list shall be conclusive with respect thereto. In
the event of a dispute with respect to ownership of stock represented
by any Certificate, Buyers shall be entitled to deposit any Merger
Consideration represented thereby in escrow with an independent third
party and thereafter be relieved with respect to any claims thereto.
1.12 Anti-Dilution. If between the date of this Agreement and the
-------------
Effective Time a share of Mercantile Common Stock shall be changed into a
different number of shares of Mercantile Common Stock or a different class of
shares by reason of reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or if a stock dividend
thereon shall be declared with a record date
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within such period, then appropriate and proportionate adjustment or adjustments
will be made to the Exchange Ratio such that each shareholder of Seller shall be
entitled to receive such number of shares of Mercantile Common Stock or other
securities as such shareholder would have received pursuant to such
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment or as a result of such stock dividend had the record date therefor
been immediately following the Effective Time.
1.13 Reservation of Right to Revise Transaction. Buyers may at any
------------------------------------------
time change the method of effecting the acquisition of Seller by Buyers
(including, without limitation, the provisions of this Article I) if and to
the extent Buyers deem such change to be desirable, including, without
limitation, to provide for (i) a merger of Merger Sub with and into Seller,
in which Seller is the surviving corporation, or (ii) a merger of Seller
directly into Mercantile, in which Mercantile is the surviving corporation;
provided, however, that no such change shall (A) alter or change the amount
or kind of the Merger Consideration to be received by the shareholders of
Seller, (B) adversely affect the tax treatment to Seller shareholders, as
generally described in Section 6.01(e) hereof, (C) materially impede or delay
receipt of any approvals referred to in Section 6.01(b) or the consummation
of the transactions contemplated by this Agreement, or (D) prevent or impede
the transactions contemplated hereby from qualifying for pooling-of-interests
accounting treatment unless Buyers first waive Seller's covenants set forth
in Sections 5.02(b) and 5.16 hereof and the condition to Buyers' obligation
to consummate the Merger set forth in Section 6.03(f) hereof.
1.14 Material Adverse Effect. As used in this Agreement, the term
-----------------------
"Material Adverse Effect" with respect to an entity means any condition,
event, change or occurrence that has or may reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
properties, business or results of operations, of such entity and its
Subsidiaries, taken as a whole as reflected in the Seller Financial
Statements (as defined in Section 2.05(b)) or the Mercantile Financial
Statements (as defined in Section 3.04), as the case may be; it being
understood that a Material Adverse Effect shall not include: (i) a change
with respect to, or effect on, such entity and its Subsidiaries resulting
from a change in law, rule, regulation, generally accepted accounting
principles or regulatory accounting principles; (ii) a change with respect
to, or effect on, such entity and its Subsidiaries resulting from any other
matter affecting depository institutions generally including, without
limitation, changes in general economic conditions and changes in prevailing
interest and deposit rates; (iii) a change disclosed in the Seller Financial
Statements or the Mercantile Financial Statements, as the case may be; (iv)
any charges taken by Mercantile in connection with pending or completed
acquisitions or the disposition of
- 7 -
<PAGE> 14
certain businesses or lines of business; or (v) in the case of Seller, any
financial change resulting from adjustments made pursuant to Section 5.05 or
5.09(b) hereof.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Buyers as follows:
2.01 Organization and Authority. Seller is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State
of Kentucky, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified, except where the failure of
Seller to so qualify would not have a Material Adverse Effect on Seller and
the Seller Subsidiaries, taken as a whole, and has the corporate power and
authority to own its properties and assets and to carry on its business as it
is now being conducted. Seller is registered as a bank holding company with
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") under the BHCA. True and complete copies of the Articles of
Incorporation and By-Laws of Seller and the Articles of Incorporation and
By-Laws of Citizens Bank and Trust Company, a Kentucky state chartered bank
and a wholly owned Subsidiary of Seller ("Citizens"), each as in effect on
the date of this Agreement, are attached hereto as Schedule 2.01.
-------------
2.02 Subsidiaries.
------------
(a) Schedule 2.02 sets forth a complete and correct list of
-------------
all of Seller's "Subsidiaries" (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC"); each
a "Seller Subsidiary" and, collectively, the "Seller Subsidiaries"),
and all outstanding Equity Securities (as defined in Section 2.03) of
each Seller Subsidiary, all of which are owned directly or indirectly
by Seller. Except as disclosed in Schedule 2.02, all of the
-------------
outstanding shares of capital stock of the Seller Subsidiaries owned
directly or indirectly by Seller are validly issued, fully paid and
nonassessable and are owned free and clear of any lien, claim, charge,
option, encumbrance, agreement, mortgage, pledge, security interest or
restriction (a "Lien") with respect thereto. Each of the Seller
Subsidiaries is a corporation, bank or savings bank duly incorporated
or organized and validly existing under the laws of its jurisdiction of
incorporation or organization, and has corporate power and authority to
own or lease its properties and assets and to
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<PAGE> 15
carry on its business as it is now being conducted. Each of the Seller
Subsidiaries is duly qualified to do business in each jurisdiction where
its ownership or leasing of property or the conduct of its business
requires it so to be qualified, except where the failure to so qualify
would not have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole. Except as set forth in Schedule 2.02,
-------------
neither Seller nor any Seller Subsidiary owns beneficially, directly or
indirectly, any shares of any class of Equity Securities or similar
interests of any corporation, bank, business trust, association or
organization, or any interest in a partnership or joint venture of any
kind, other than those identified as Seller Subsidiaries in Schedule
--------
2.02 hereof.
----
(b) Citizens is a commercial bank duly organized, validly
existing and in good standing under the laws of the State of Kentucky.
The deposits of Citizens are insured by the Federal Deposit Insurance
Corporation (the "FDIC") under the Federal Deposit Insurance Act of
1950, as amended (the "FDI Act").
2.03 Capitalization. The authorized capital stock of Seller
--------------
consists of (i) 12,000,000 shares of Seller Common Stock, of which, as of
December 31, 1997, 7,862,627 shares were issued and outstanding. As of December
31, 1997, Seller had reserved 645,000 shares of Seller Common Stock for issuance
under Seller's stock option and incentive plans (including grants reflected in
the Board minutes), a list of which is set forth on Schedule 2.03 (the "Seller
-------------
Stock Plans"), pursuant to which options ("Seller Employee Stock Options")
covering 428,118 shares of Seller Common Stock were outstanding as of
December 31, 1997. Since December 31, 1997, no equity securities of Seller
have been issued, other than shares of Seller Common Stock which may have
been issued upon the exercise of Seller Stock Options. "Equity Securities"
of an issuer means capital stock or other equity securities of such issuer,
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of any capital stock or other equity securities of such issuer, or
contracts, commitments, understandings or arrangements by which such issuer
is or may become bound to issue additional shares of its capital stock or
other equity securities of such issuer, or options, warrants, scrip or rights
to purchase, acquire, subscribe to, calls on or commitments for any shares of
its capital stock or other equity securities. Except as set forth above,
there are no other Equity Securities of Seller outstanding. All of the
issued and outstanding shares of Seller Common Stock are validly issued,
fully paid and nonassessable, and have not been issued in violation of any
preemptive right of any shareholder of Seller. Neither Seller nor any Seller
Subsidiary has taken or agreed to take any action or has any knowledge of any
fact or circumstance and neither Seller nor any Seller Subsidiary will take
any action that
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<PAGE> 16
would prevent the Merger from qualifying for pooling-of- interests accounting
treatment.
2.04 Authorization.
-------------
(a) Seller has the corporate power and authority to enter into
this Agreement and, subject to the approval of this Agreement by the
shareholders of Seller and the Regulatory Authorities (as defined in
Section 2.06), to carry out its obligations hereunder. The only
shareholder vote required for Seller to approve this Agreement is the
affirmative vote of the holders of 67% of the outstanding shares of
Seller Common Stock entitled to vote at a meeting called for such
purpose. The execution, delivery and performance of this Agreement by
Seller and the consummation by Seller of the transactions contemplated
hereby in accordance with and subject to the terms of this Agreement
have been duly authorized by the Board of Directors of Seller. Subject
to the approval of Seller's shareholders and subject to the receipt of
such approvals of the Regulatory Authorities as may be required by
statute or regulation, this Agreement is a valid and binding obligation
of Seller enforceable against Seller in accordance with its terms.
(b) Except as disclosed on Schedule 2.04(b), neither the
----------------
execution nor delivery nor performance by Seller of this Agreement, nor
the consummation by Seller of the transactions contemplated hereby, nor
compliance by Seller with any of the provisions hereof, will (i)
violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in
a right of termination or acceleration of, or result in the creation
of, any Lien upon any of the properties or assets of Seller or any of
the Seller Subsidiaries under any of the terms, conditions or
provisions of (x) its Articles of Incorporation, charter or By-Laws or
(y) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Seller or any of
the Seller Subsidiaries is a party or by which it may be bound, or to
which Seller or any of the Seller Subsidiaries or any of the properties
or assets of Seller or any of the Seller Subsidiaries may be subject,
other than those as to which any such violation, conflict, breach,
event, termination, acceleration or creation would not have a Material
Adverse Effect on Seller and the Seller Subsidiaries, taken as a whole,
or (ii) subject to compliance with the statutes and regulations
referred to in subsection (c) of this
- 10 -
<PAGE> 17
Section 2.04, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Seller or any of the
Seller Subsidiaries or any of their respective properties or assets.
(c) Other than in connection or in compliance with the
provisions of the Missouri Statute, the KBCA, the Securities Act of
1933, as amended, and the rules and regulations thereunder (the
"Securities Act"), the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act"), the
securities or blue sky laws of the various states or filings, consents,
reviews, authorizations, approvals or exemptions required under the
BHCA or the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, or any required approvals of the Federal Reserve Board, the
Kentucky Department of Financial Institutions, the FDIC, the Office of
Thrift Supervision ("OTS") or other governmental agencies or governing
boards having regulatory authority over Seller or any Seller
Subsidiary, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Seller of the transactions
contemplated by this Agreement.
2.05 Seller Financial Statements.
---------------------------
(a) Attached hereto as Schedule 2.05(a) are copies of the
----------------
following documents: (i) Seller's Annual Report to Shareholders for
the year ended December 31, 1996; and (ii) Seller's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997.
(b) The financial statements contained in the documents
referenced in Schedule 2.05(a) are referred to collectively as the
----------------
"Seller Financial Statements." The Seller Financial Statements have
been prepared in accordance with generally accepted accounting
principles ("GAAP") during the periods involved, and present fairly the
consolidated financial position of Seller and the Seller Subsidiaries
at the dates thereof and the consolidated results of operations,
changes in shareholders' equity and cash flows, as applicable, of
Seller and the Seller Subsidiaries for the periods stated therein.
(c) Seller and the Seller Subsidiaries have each prepared, kept
and maintained through the date hereof true, correct and complete
financial books and records which fairly reflect their respective
financial
- 11 -
<PAGE> 18
conditions, results of operations, changes in shareholders'
equity and cash flows.
2.06 Seller Reports. Since January 1, 1995, each of Seller and the
--------------
Seller Subsidiaries has timely filed all material reports, registrations and
statements, together with any required amendments thereto, that it was
required to file with (i) the SEC, including, but not limited to, Forms 10-K,
Forms 10-Q, Forms 8-K and proxy statements, (ii) the Federal Reserve Board,
(iii) the OTS, (iv) the FDIC and (iv) any federal, state, municipal or local
government, securities, banking, savings and loan, environmental, insurance
and other governmental or regulatory authority, and the agencies and staffs
thereof (the entities in the foregoing clauses (i) through (v) being referred
to herein collectively as the "Regulatory Authorities" and individually as a
"Regulatory Authority"), having jurisdiction over the affairs of it. All
such material reports and statements filed with any such Regulatory Authority
are collectively referred to herein as the "Seller Reports." As of each of
their respective dates, the Seller Reports complied in all material respects
with all the rules and regulations promulgated by the applicable Regulatory
Authority. With respect to Seller Reports filed with the Regulatory
Authorities, there is no material unresolved violation, criticism or
exception by any Regulatory Authority with respect to any report or statement
filed by, or any examinations of, Seller or any of the Seller Subsidiaries.
2.07 Title to and Condition of Assets.
--------------------------------
(a) Except as may be reflected in the Seller Financial
Statements and with the exception of all "Real Property" (which is the
subject of Section 2.08 hereof), Seller and the Seller Subsidiaries
have, and at the Closing Date will have, good and marketable title to
their owned properties and assets, including, without limitation, those
reflected in the Seller Financial Statements (except those disposed of
in the ordinary course of business since the date thereof), free and
clear of any Lien, except for Liens for (i) taxes, assessments or other
governmental charges not yet delinquent, (ii) as set forth or described
in the Seller Financial Statements or any subsequent Seller Financial
Statements delivered to Buyers prior to the Effective Time, and (iii)
pledges to secure deposits and other Liens incurred in the ordinary
course of business.
(b) No material properties or assets that are reflected as
owned by Seller or any of the Seller Subsidiaries in the Seller
Financial Statements as of September 30, 1997, have been sold, leased,
transferred, assigned or otherwise disposed of since such date, except
in the ordinary course of business.
- 12 -
<PAGE> 19
(c) All furniture, fixtures, vehicles, machinery and equipment
and computer software owned or used by Seller or the Seller Subsidiaries,
including any such items leased as a lessee (taken as a whole as to
each of the foregoing with no single item deemed to be of material
importance) are in good working order and free of known defects,
subject only to normal wear and tear. The operation by Seller or the
Seller Subsidiaries of such properties and assets is in compliance in
all material respects with all applicable laws, ordinances and rules
and regulations of any governmental authority having jurisdiction over
such use.
2.08 Real Property.
-------------
(a) A list of each parcel of real property owned by Seller or
any of the Seller Subsidiaries (other than real property acquired in
foreclosure or in lieu of foreclosure in the course of the collection
of loans and being held by Seller or a Seller Subsidiary for
disposition as required by law is set forth in Schedule 2.08(a) under
----------------
the heading "Owned Real Property" (such real property being herein
referred to as the "Owned Real Property"). A list of each parcel of
real property leased by Seller or any of the Seller Subsidiaries is
also set forth in Schedule 2.08(a) under the heading "Leased Real
----------------
Property" (such real property being herein referred to as the "Leased
Real Property"). Seller shall update Schedule 2.08(a) within ten (10)
----------------
days of acquiring any Owned Real Property or leasing any Leased Real
Property after the date hereof. Collectively, the Owned Real Property
and the Leased Real Property are herein referred to as the "Real
Property."
(b) There is no pending action involving Seller or any of the
Seller Subsidiaries as to the title of or the right to use any of the
Real Property.
(c) Except as disclosed on Schedule 2.08(c), neither Seller
----------------
nor any of the Seller Subsidiaries has any interest in any real property
other than as described above in Section 2.08(a) except interests as a
mortgagee, any real property acquired in foreclosure or in lieu of
foreclosure and being held for disposition as required by law and
property held by any Seller Subsidiary in its capacity as trustee.
(d) To the best knowledge of Seller, none of the buildings,
structures or other improvements located on the Real Property
encroaches upon or over any adjoining parcel of real estate or any
easement or right-of-way or "setback" line and all such buildings,
- 13 -
<PAGE> 20
structures and improvements are located and constructed in conformity
with all applicable zoning ordinances and building codes.
(e) None of the buildings, structures or improvements located
on the Owned Real Property are the subject of any official complaint or
notice by any governmental authority of violation of any applicable
zoning ordinance or building code, and there is no zoning ordinance,
building code, use or occupancy restriction or condemnation action or
proceeding pending, or, to the best knowledge of Seller, threatened,
with respect to any such building, structure or improvement. The Owned
Real Property is in generally good condition for its intended purpose,
ordinary wear and tear excepted, and has been maintained in accordance
with reasonable and prudent business practices applicable to like
facilities.
(f) Except as may be reflected in the Seller Financial
Statements or with respect to such easements, Liens, defects or
encumbrances as do not individually or in the aggregate materially
adversely affect the use or value of the parcel of Owned Real Property,
Seller and the Seller Subsidiaries have, and at the Closing Date will
have, good and marketable title to their respective Owned Real
Properties.
(g) Neither Seller nor any of the Seller Subsidiaries has
caused or allowed the generation, treatment, storage, disposal or
release at any Real Property of any Toxic Substance, except in
accordance in all material respects with all applicable federal, state
and local laws and regulations. "Toxic Substance" means any hazardous,
toxic or dangerous substance, pollutant, waste, gas or material,
including, without limitation, petroleum and petroleum products, metals,
liquids, semi-solids or solids, that are regulated under any federal,
state or local statute, ordinance, rule, regulation or other law
pertaining to environmental protection, contamination, quality, waste
management or cleanup. There are no underground storage tanks located
on, in or under any Owned Real Property or Leased Real Property.
2.09 Taxes. Seller and each Seller Subsidiary have timely filed or
-----
will timely file (including extensions) all material tax returns required to
be filed at or prior to the Closing Date ("Seller Returns"). Each of Seller
and the Seller Subsidiaries has paid, or set up adequate reserves on the
Seller Financial Statements for the payment of, all taxes required to be paid
in respect of the periods covered by such Seller Returns and has set up
adequate reserves on the most recent Seller Financial Statements for the
payment of all taxes anticipated to be payable in respect of all periods up
to and including the latest period covered by such Seller Financial
Statements. Neither Seller nor any Seller Subsidiary has any material
liability for any
- 14 -
<PAGE> 21
such taxes in excess of the amounts so paid or reserves so
established, and no material deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed in writing
(tentatively or definitely) against Seller or any of the Seller Subsidiaries
which have not been settled or would not be covered by existing reserves.
Neither Seller nor any of the Seller Subsidiaries is delinquent in the
payment of any material tax, assessment or governmental charge, nor has it
requested any extension of time within which to file any tax returns in
respect of any fiscal year which have not since been filed and no requests
for waivers of the time to assess any tax are pending. Except as set forth
on Schedule 2.09, no federal or state income tax return of Seller or any
-------------
Seller Subsidiaries has been audited by the Internal Revenue Service (the
"IRS") or any state tax authority for the seven most recent full calendar
years. Except as set forth on Schedule 2.09, there is no deficiency or
-------------
refund litigation or, to the best knowledge of Seller, matter in controversy
with respect to Seller Returns. Except as set forth on Schedule 2.09
-------------
hereof, neither Seller nor any of the Seller Subsidiaries has extended or waived
any statute of limitations on the assessment of any tax due that is currently in
effect.
2.10 Material Adverse Effect. Since September 30, 1997, there has
-----------------------
been no Material Adverse Effect on Seller and the Seller Subsidiaries, taken
as a whole.
2.11 Loans, Commitments and Contracts.
--------------------------------
(a) Schedule 2.11(a) contains a complete and accurate
----------------
listing, as of November 30, 1997, of all contracts entered into with
respect to deposits and repurchase agreements of $1,000,000 or more, by
account, and, as of September 30, 1997, all loan agreements, notes,
security agreements, bankers' acceptances, outstanding letters of
credit, participation agreements, and other documents relating to or
involving extensions of credit by Seller or any of the Seller
Subsidiaries and, as of December 31, 1997, all loan commitments and
commitments to issue letters of credit and other commitments to extend
credit with respect to any one entity or related group of entities in
excess of $1,000,000 to which Seller or any of the Seller Subsidiaries
is a party or by which it is bound, by account.
(b) Except for the contracts and agreements required to be
listed on Schedule 2.11(a) and the loans required to be listed
----------------
on Schedule 2.11(f), and except as otherwise listed on
----------------
Schedule 2.11(b), as of November 30, 1997, neither Seller nor any of the
----------------
Seller Subsidiaries is a party to or is bound by any:
(i) agreement, contract, arrangement, understanding
or commitment with any labor union;
- 15 -
<PAGE> 22
(ii) material franchise or license agreement, excluding
software license agreements entered into in the ordinary course
of business;
(iii) written employment, severance, termination pay,
agency, consulting or similar agreement or commitment in respect
of personal services;
(iv) material agreement, arrangement or commitment (A) not
made in the ordinary course of business, and (B) pursuant to
which Seller or any of the Seller Subsidiaries is or may become
obligated to invest in or contribute to any Seller Subsidiary
other than pursuant to Seller Employee Plans (as that term is
defined in Section 2.19 hereof) or agreements relating to joint
ventures or partnerships set forth in Schedule 2.02, true and
-------------
complete copies of which have been furnished to Buyers;
(v) agreement, indenture or other instrument not
disclosed in the Seller Financial Statements relating to the
borrowing of money by Seller or any of the Seller Subsidiaries or
the guarantee by Seller or any of the Seller Subsidiaries of any
such obligation (other than trade payables or instruments related
to transactions entered into in the ordinary course of business
by Seller or any of the Seller Subsidiaries, such as deposits,
Federal Home Loan Bank ("FHLB") and Federal Funds borrowings and
repurchase and reverse repurchase agreements), other than such
agreements, indentures or instruments providing for annual
payments of less than $200,000;
(vi) contract containing covenants which limit the ability
of Seller or any of the Seller Subsidiaries to compete in any
line of business or with any person or which involves any
restrictions on the geographical area in which, or method by
which, Seller or any of the Seller Subsidiaries may carry on
their respective businesses (other that as may be required by law
or any applicable Regulatory Authority);
(vii) contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K as
promulgated by the SEC to be performed after the date of this
Agreement that has not been filed or incorporated by reference in
the Seller Reports;
- 16 -
<PAGE> 23
(viii) lease with annual rental payments aggregating
$100,000 or more;
(ix) loans or other obligations payable or owing to any
officer, director or employee except (A) salaries, wages and
directors' fees or other compensation incurred and accrued in the
ordinary course of business and (B) obligations due in respect of
any depository accounts maintained by any of the foregoing with
Seller or any of the Seller Subsidiaries in the ordinary course
of business; or
(x) other agreement, contract, arrangement, understanding
or commitment involving an obligation by Seller or any of the
Seller Subsidiaries of more than $250,000 and extending beyond
six months from the date hereof that cannot be canceled without
cost or penalty upon notice of 30 days or less, other than
contracts entered into in respect of deposits, loan agreements
and commitments, notes, security agreements, repurchase and
reverse repurchase agreements, bankers' acceptances, outstanding
letters of credit and commitments to issue letters of credit,
participation agreements and other documents relating to
transactions entered into by Seller or any of the Seller
Subsidiaries in the ordinary course of business and not involving
extensions of credit with respect to any one entity or related
group of entities in excess of $1,000,000.
(c) Seller and/or the Seller Subsidiaries carry property,
liability, director and officer errors and omissions, products
liability and other insurance coverage as set forth in Schedule
--------
2.11(c) under the heading "Insurance."
-------
(d) True, correct and complete copies of the agreements,
contracts, leases and other documents referred to in Section 2.11(b)
have been included with Schedule 2.11(b) hereto. True, correct and
----------------
complete copies of the agreements, contracts, leases, insurance
policies and other documents referred to in Schedules 2.11(a) and (c)
-------------------------
have been or shall be furnished or made available to Buyers.
(e) To the best knowledge of Seller, each of the agreements,
contracts, leases, insurance policies and other documents referred to
in Schedules 2.11 (a), (b) and (c) is a valid, binding and
-------------------------------
enforceable obligation of the parties sought to be bound thereby, except
as the enforceability thereof against the parties thereto (other than
Seller or
- 17 -
<PAGE> 24
any of the Seller Subsidiaries) may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws now or hereafter in effect
relating to the enforcement of creditors' rights generally, and except
that equitable principles may limit the right to obtain specific
performance or other equitable remedies.
(f) Schedule 2.11(f) under the heading "Loans" contains a
----------------
true, correct and complete listing, as of November 30, 1997, by account,
of (i) all loans in excess of $500,000 of Seller or any of the Seller
Subsidiaries that have been accelerated during the past twelve months;
(ii) all loan commitments or lines of credit of Seller or any of the
Seller Subsidiaries in excess of $500,000 which have been terminated by
Seller or any of the Seller Subsidiaries during the past twelve months
by reason of default or adverse developments in the condition of the
borrower or other events or circumstances affecting the credit of the
borrower; (iii) all loans, lines of credit and loan commitments in
excess of $500,000, as to which Seller or any of the Seller
Subsidiaries has given written notice of its intent to terminate during
the past twelve months; (iv) with respect to all loans in excess of
$500,000 all notification letters and other written communications from
Seller or any of the Seller Subsidiaries to any of their respective
borrowers, customers or other parties during the past twelve months
wherein Seller or any of the Seller Subsidiaries has requested or
demanded that actions be taken to correct existing defaults or facts or
circumstances which may become defaults; (v) each borrower, customer or
other party which has notified Seller or any of the Seller Subsidiaries
during the past twelve months of, or has asserted against Seller or any
of the Seller Subsidiaries, in each case in writing, any "lender
borrower, customer or other party which has given Seller or any of the
Seller Subsidiaries any oral notification of, or orally asserted to or
against Seller or any of the Seller Subsidiaries, any such claim; or
(vi) all loans in excess of $250,000 (A) that are contractually past
due 90 days or more in the payment of principal and/or interest, (B)
that are on non-accrual status, (C) that have been classified
"doubtful," "loss" or the equivalent thereof by any Regulatory
Authority, (D) where a reasonable doubt exists as to the timely future
collectibility of principal and/or interest, whether or not interest is
still accruing or the loan is less than 90 days past due, (E) the
interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was
originally created due to concerns regarding the borrower's ability to
pay in accordance
- 18 -
<PAGE> 25
with such initial terms, or (F) where a specific reserve allocation
exists in connection therewith.
2.12 Absence of Defaults. Neither Seller nor any of the Seller
-------------------
Subsidiaries is in violation of its charter documents or By-Laws or in
default under any material agreement, commitment, arrangement, lease,
insurance policy or other instrument, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has
not occurred any event that, with the lapse of time or giving of notice or
both, would constitute such a default, except in all cases where such default
would not have a Material Adverse Effect on Seller and its Subsidiaries,
taken as a whole.
2.13 Litigation and Other Proceedings. Except as set forth on
--------------------------------
Schedule 2.13 or otherwise disclosed in the Seller Financial Statements,
- -------------
neither Seller nor any of the Seller Subsidiaries is a party to any pending
or, to the best knowledge of Seller, threatened claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or reasonably
could not be expected to have, a Material Adverse Effect on Seller and the
Seller Subsidiaries, taken as a whole. Without limiting the generality of
the foregoing, there are no actions, suits or proceedings pending or, to the
best knowledge of Seller, threatened against Seller or any of the Seller
Subsidiaries or any of their respective officers or directors by any
shareholder of Seller or any of the Seller Subsidiaries (or any former
shareholder of Seller or any of the Seller Subsidiaries) or involving claims
under the Community Reinvestment Act of 1977, as amended, the Bank Secrecy
Act, the fair lending laws or any other similar laws.
2.14 Directors' and Officers' Insurance. Each of Seller and the
----------------------------------
Seller Subsidiaries has taken or will take all requisite action (including,
without limitation, the making of claims and the giving of notices) pursuant
to its directors' and officers' liability insurance policy or policies in
order to preserve all rights thereunder with respect to all matters (other
than matters arising in connection with this Agreement and the transactions
contemplated hereby) occurring prior to the Effective Time that are known to
Seller.
2.15 Compliance with Laws
--------------------
(a) To the best knowledge of Seller, Seller and each of the
Seller Subsidiaries have all permits, licenses, authorizations, orders
and approvals of, and have made all filings, applications and
registrations with, all Regulatory Authorities that are required in
order to permit them to own or lease their respective properties and
assets and to carry on their respective businesses as presently
conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force
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<PAGE> 26
and effect and, to the best knowledge of Seller, no suspension or
cancellation of any of them is threatened; and all such filings,
applications and registrations are current; in each case except for
permits, licenses, authorizations, orders, approvals, filings,
applications and registrations the failure to have (or have made) would
not have a Material Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole.
(b) (i) Each of Seller and the Seller Subsidiaries has complied
with all laws, regulations and orders (including, without limitation,
zoning ordinances, building codes, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and securities, tax,
environmental, civil rights, and occupational health and safety laws
and regulations including, without limitation, in the case of Seller or
any Seller Subsidiary that is a bank or savings association, banking
organization, banking corporation or trust company, all statutes,
rules, regulations and policy statements pertaining to the conduct of a
banking, deposit-taking, lending or related business, or to the
exercise of trust powers) and governing instruments applicable to it
and to the conduct of its business, and (ii) neither Seller nor any of
the Seller Subsidiaries is in default under, and no event has occurred
which, with the lapse of time or notice or both, could result in the
default under, the terms of any judgment, order, writ, decree, permit,
or license of any Regulatory Authority or court, whether federal,
state, municipal or local, and whether at law or in equity, except in
the case of subparts (i) and (ii) where such failure to comply or
default would not have a Material Adverse Effect on Seller and the
Seller Subsidiaries, taken as a whole.
(c) Except as set forth on Schedule 2.15(c), neither Seller
----------------
nor any of the Seller Subsidiaries is subject to or reasonably likely to
incur a liability as a result of its ownership, operation, or use of
any Property (as defined below) of Seller (whether directly or, to the
best knowledge of Seller, as a consequence of such Property being
acquired in foreclosure or in lieu of foreclosure or being part of the
investment portfolio of Seller or any of the Seller Subsidiaries) (A)
that is contaminated by or contains any Toxic Substance (as defined in
Section 2.08), including, without limitation, petroleum and petroleum
products, asbestos, PCBs, pesticides, herbicides and any other
substance or waste that is hazardous to human health or the environment
and regulated by federal, state or local law, or (B) on which any Toxic
Substance has been stored, disposed of, placed or used at the Property
or in the construction of structures thereon; and which, in each case,
reasonably could be expected to have a Material Adverse
- 20 -
<PAGE> 27
Effect on Seller and the Seller Subsidiaries, taken as a whole.
"Property" shall include all property (real or personal, tangible or
intangible) owned or controlled by Seller or any of the Seller
Subsidiaries, including, without limitation, property acquired under
foreclosure or in lieu of foreclosure, property in which any venture
capital or similar unit of Seller or any of the Seller Subsidiaries has an
interest and, to the best knowledge of Seller, property held by Seller or
any of the Seller Subsidiaries in its capacity as a trustee. No claim,
action, suit or proceeding is pending or, to the best knowledge of Seller,
threatened, and no material claim has been asserted against Seller or any
of the Seller Subsidiaries relating to Property of Seller or any of the
Seller Subsidiaries before any court or other Regulatory Authority or
arbitration tribunal relating to Toxic Substances, pollution or the
environment, and there is no outstanding judgment, order, writ,
injunction, decree or award against or affecting Seller or any of the
Seller Subsidiaries with respect to the same.
(d) Neither Seller nor any of the Seller Subsidiaries has
received any notification or communication that has not been finally
resolved from any Regulatory Authority (i) asserting that the Seller or
any of the Seller Subsidiaries or any Property is not in substantial
compliance with any of the statutes, regulations or ordinances that
such Regulatory Authority enforces, except with respect to matters
which reasonably could not be expected to have a Material Adverse
Effect on the Seller and the Seller Subsidiaries, taken as a whole,
(ii) threatening to revoke any license, franchise, permit or
governmental authorization that reasonably could be expected to have a
Material Adverse Effect on the Seller and the Seller Subsidiaries,
taken as a whole, including, without limitation, such company's status
as an insured depository institution under the FDI Act, or (iii)
requiring or threatening to require Seller or any of the Seller
Subsidiaries, or indicating that Seller or any of the Seller
Subsidiaries may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement
restricting or limiting or purporting to direct, restrict or limit in
any manner the operations of Seller or any of the Seller Subsidiaries,
including, without limitation, any restriction on the payment of
dividends. No such cease and desist order, agreement or memorandum of
understanding or other agreement is currently in effect.
(e) Neither Seller nor any of the Seller Subsidiaries is
required by Section 32 of the FDI Act to give prior notice to any
federal banking agency of the proposed addition of an individual to its
board of directors or the employment of an individual as a senior
executive officer.
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<PAGE> 28
2.16 Labor. No work stoppage involving Seller or any of the Seller
-----
Subsidiaries is pending or, to the best knowledge of Seller, threatened.
Except as set forth on Schedule 2.13, neither Seller nor any of the Seller
-------------
Subsidiaries is involved in, or, to the best knowledge of Seller, threatened
with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding that reasonably could be expected to have a
Material Adverse Effect on the Seller and the Seller Subsidiaries, taken as
a whole. None of the employees of Seller or the Seller Subsidiaries are
represented by any labor union or any collective bargaining organization.
2.17 Material Interests of Certain Persons. Except as set forth in
-------------------------------------
Seller's proxy statement for its 1997 Annual Meeting of Shareholders, no
officer or director of Seller or any of the Seller Subsidiaries, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such officer or director, has any interest in any contract or property
(real or personal, tangible or intangible), used in, or pertaining to the
business of, Seller or any of the Seller Subsidiaries, which in the case of
Seller and each of the Seller Subsidiaries would be required to be disclosed
by Item 404 of Regulation S-K promulgated by the SEC.
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets;
-----------------------------------------------------------
Financial Assets.
- ----------------
(a) All of the accounts, notes and other receivables that are
reflected in the Seller Financial Statements as of September 30, 1997
were acquired in the ordinary course of business and were collectible
in full in the ordinary course of business, except for possible loan
and lease losses that are adequately provided for in the allowance for
loan and lease losses reflected in such Seller Financial Statements,
and the collection experience of Seller and the Seller Subsidiaries
since September 30, 1997 to the date hereof, has not deviated in any
material and adverse manner from the credit and collection experience
of Seller and the Seller Subsidiaries, taken as a whole, for the nine
months ended September 30, 1997.
(b) The allowances for loan losses contained in the Seller
Financial Statements were established in accordance with the past
practices and experiences of Seller and the Seller Subsidiaries, and
the allowance for loan and lease losses shown on the consolidated
balance sheet of Seller and the Seller Subsidiaries as of September 30,
1997, were adequate in all material respects under the requirements of
GAAP, or regulatory accounting principles, as the case may be, to
provide for possible losses on loans and leases (including, without
limitation, accrued interest receivable) and credit commitments
(including, without limitation, stand-by letters of credit) as of the
date of such balance sheet.
- 22 -
<PAGE> 29
(c) Schedule 2.18(c) sets forth as of the date of this
----------------
Agreement all assets classified by Seller as real estate acquired
through foreclosure or repossession, including foreclosed assets.
(d) As of November 30, 1997, the aggregate amount of all
Non-Performing Assets (as defined below) on the books of Seller and the
Seller Subsidiaries did not exceed $8,000,000. "Non-Performing Assets"
shall mean (i) all loans (A) that are contractually past due 90 days or
more in the payment of principal and/or interest, (B) that are on
nonaccrual status, (C) that have been classified "doubtful," "loss" or
the equivalent thereof by any Regulatory Agency or (D) where the
interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was
originally created due to concerns regarding the borrower's ability to
pay in accordance with such initial terms, and (ii) all assets
classified by Seller as real estate acquired through foreclosure or in
lieu of foreclosure, including in-substance foreclosures, and all other
assets acquired through foreclosure or in lieu of foreclosure.
(e) All loans receivable (including discounts) and accrued
interest entered on the books of Seller and the Seller Subsidiaries, to
the extent unpaid on the Closing Date, arose out of bona fide
arm's-length transactions, were made for good and valuable
consideration in the ordinary course of Seller's or the appropriate Seller
Subsidiary's respective business, and the notes or other evidences of
indebtedness with respect to such loans or discounts are true and genuine
and are what they purport to be. The loans, discounts and the accrued
interest reflected on the books of Seller and the Seller Subsidiaries are
subject to no defenses, set-offs or counterclaims (including, without
limitation, those afforded by usury or truth-in-lending laws), except
as may be provided by bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by general principles of equity. All
such loans are owned by Seller or the appropriate Seller Subsidiary
free and clear of any liens, restrictions or encumbrances.
(f) The notes and other evidences of indebtedness evidencing
the loans described in Section 2.18(e) above, and all pledges,
mortgages, deeds of trust and other collateral documents or security
instruments relating thereto are and will be, in all material respects,
valid, true, genuine and enforceable, and what they purport to be.
Seller and each of the Seller Subsidiaries has good and valid title to
the investment securities shown on the Seller Financial Statements and
all securities
- 23 -
<PAGE> 30
entered on the books of Seller or the appropriate Seller Subsidiary
subsequent to September 30, 1997, except for those sold or redeemed in the
ordinary course of business. A complete and accurate list of such
investment securities as of December 31, 1997 is attached as Schedule
--------
2.18(f). Such list shall be updated each month in writing until the
-------
Closing.
2.19 Employee Benefit Plans.
----------------------
(a) Schedule 2.19(a) lists all pension, retirement,
----------------
supplemental retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, medical, disability, workers'
compensation, vacation, group insurance, severance and other employee
benefit, incentive and welfare policies, contracts, plans and
arrangements, and all trust agreements related thereto, maintained by
or contributed to by Seller or any of the Seller Subsidiaries in
respect of any of the present or former directors, officers, or other
employees of and/or consultants to Seller or any of the Seller
Subsidiaries (collectively, "Seller Employee Plans"). Seller has
furnished Buyers with the following documents with respect to each
Seller Employee Plan: (i) a true and complete copy of all written
documents comprising such Seller Employee Plan (including amendments
and individual agreements relating thereto) or, if there is no such
written document, an accurate and complete description of the Seller
Employee Plan; (ii) the most recently filed Form 5500 or Form 5500-C/R
(including all schedules thereto), if applicable; (iii) the most recent
financial statements and actuarial reports, if any; (iv) the summary
plan description currently in effect and all material modifications
thereof, if any; and (v) the most recent IRS determination letter, if
any.
(b) All Seller Employee Plans have been maintained and operated
in all material respects in accordance with their terms and the
material requirements of all applicable statutes, orders, rules and
final regulations, including, without limitation, to the extent
applicable, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"). All contributions required to be made to Seller Employee
Plans have been made or reserved.
(c) With respect to each of the Seller Employee Plans which is
a pension plan (as defined in Section 3(2) of ERISA) (the "Pension
Plans"): (i) each Pension Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined to
be so qualified by the IRS and such determination letter may still be
relied upon, and each related trust is exempt from taxation under
Section 501(a) of
- 24 -
<PAGE> 31
the Code; (ii) the present value of all benefits vested and all benefits
accrued under each Pension Plan which is subject to Title IV of ERISA did
not, in each case, as of the last applicable annual valuation date (as
indicated on Schedule 2.19(a), exceed the value of the assets of the
----------------
Pension Plan allocable to such vested or accrued benefits; (iii) there has
been no "prohibited transaction," as such term is defined in Section 4975
of the Code or Section 406 of ERISA, which could subject any Pension Plan
or associated trust, or Seller or any of the Seller Subsidiaries, to any
material tax or penalty; (iv) no defined benefit Pension Plan or any
trust created thereunder has been terminated, nor has there been any
"reportable events" with respect to any Pension Plan, as that term is
defined in Section 4043 of ERISA since January 1, 1991; and (v) no
Pension Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA (whether or not waived). No Pension Plan is a
"multiemployer plan" as that term is defined in Section 3(37) of ERISA.
(d) Except as disclosed in Schedule 2.19(d) or as reflected
----------------
on the Seller Financial Statements or the notes thereto, neither Seller
nor any of the Seller Subsidiaries has any liability for any post-
retirement health, medical or similar benefit of any kind whatsoever,
except as required by statute or regulation.
(e) Neither Seller nor any of the Seller Subsidiaries has any
material liability under ERISA or the Code as a result of its being a
member of a group described in Sections 414(b), (c), (m) or (o) of the
Code.
(f) Except as disclosed in Schedule 2.19(f), neither the
----------------
execution nor delivery of this Agreement, nor the consummation of any
of the transactions contemplated hereby, will (i) result in any payment
(including, without limitation, severance, unemployment compensation or
golden parachute payment) becoming due to any director or employee of
Seller or any of the Seller Subsidiaries from any of such entities,
(ii) increase any benefit otherwise payable under any of the Seller
Employee Plans or (iii) result in the acceleration of the time of
payment of any such benefit. Seller shall use its best efforts to
insure that no amounts paid or payable by Seller, the Seller
Subsidiaries or Buyers to or with respect to any employee or former
employee of Seller or any of the Seller Subsidiaries will fail to be
deductible for federal income tax purposes by reason of Section 280G of
the Code.
- 25 -
<PAGE> 32
2.20 Conduct of Seller to Date. From and after September 30, 1997
-------------------------
through the date of this Agreement, except as set forth in the Seller
Financial Statements and the Seller Reports: (i) Seller and the Seller
Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practices; (ii) except upon the exercise of
Seller Stock Options, neither Seller nor any of the Seller Subsidiaries has
issued, sold, granted, conferred or awarded any of its Equity Securities, or
any corporate debt securities which would be classified under GAAP as
long-term debt on the balance sheets of Seller or the Seller Subsidiaries;
(iii) Seller has not effected any stock split or adjusted, combined,
reclassified or otherwise changed its capitalization; (iv) Seller has not
declared, set aside or paid any dividend (other than its regular quarterly
dividends) or other distribution in respect of its capital stock, or purchased,
redeemed, retired, repurchased or exchanged, or otherwise acquired or disposed
of, directly or indirectly, any of its Equity Securities, whether pursuant to
the terms of such Equity Securities or otherwise; (v) neither Seller nor any of
the Seller Subsidiaries has incurred any obligation or liability (absolute or
contingent), except liabilities incurred in the ordinary course of business
or in connection with the transactions contemplated by this Agreement, or
subjected to Lien any of its assets or properties other than in the ordinary
course of business consistent with past practice; (vi) neither Seller nor any
of the Seller Subsidiaries has discharged or satisfied any Lien or paid any
obligation or liability (absolute or contingent), other than in the ordinary
course of business; (vii) neither Seller nor any of the Seller Subsidiaries
has sold, assigned, transferred, leased, exchanged, or otherwise disposed of
any of its properties or assets other than for a fair consideration in the
ordinary course of business; (viii) except as required by contract or law,
neither Seller nor any of the Seller Subsidiaries has (A) increased the rate
of compensation of, or paid any bonus to, any of its directors, officers, or
other employees, except in accordance with existing policy, (B) entered into
any new, or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar contract, (C)
entered into, terminated, or substantially modified any of the Seller
Employee Plans or (D) agreed to do any of the foregoing; (ix) neither Seller
nor any Seller Subsidiary has suffered any material damage, destruction, or
loss, whether as the result of fire, explosion, earthquake, accident,
casualty, labor trouble, requisition, or taking of property by any Regulatory
Authority, flood, windstorm, embargo, riot, act of God or the enemy, or other
casualty or event, and whether or not covered by insurance; (x) neither
Seller nor any of the Seller Subsidiaries has canceled or compromised any
debt, except for debts charged off or compromised in accordance with the past
practice of Seller and the Seller Subsidiaries; and (xi) neither Seller nor
any of the Seller Subsidiaries has entered into any material transaction,
contract or commitment outside the ordinary course of its business, except in
connection with the transactions contemplated by this Agreement.
- 26 -
<PAGE> 33
2.21 Absence of Undisclosed Liabilities.
----------------------------------
(a) As of September 30, 1997, neither Seller nor any of the
Seller Subsidiaries has any debts, liabilities or obligations equal to
or exceeding $50,000, individually or $100,000 in the aggregate,
whether accrued, absolute, contingent or otherwise and whether due or
to become due, which are required to be reflected in the Seller
Financial Statements or the notes thereto in accordance with GAAP
except:
(i) debts, liabilities or obligations reflected on the
Seller Financial Statements and the notes thereto;
(ii) operating leases reflected on Schedule 2.11(b); and
----------------
(iii) debts, liabilities or obligations incurred since
September 30, 1997 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 Seller and the Seller
Subsidiaries, taken as a whole.
(b) Neither Seller nor any of the Seller Subsidiaries was as of
September 30, 1997, or since such date to the date hereof, a party to
any contract or agreement, excluding deposits, loan agreements, and
commitments, notes, security agreements, repurchase and reverse
repurchase agreements, bankers' acceptances, outstanding letters of
credit and commitments to issue letters of credit, participation
agreements and other documents relating to transactions entered into by
Seller or any of the Seller Subsidiaries in the ordinary course of
business, that had, has or may be reasonably expected to have a
Material Adverse Effect on Seller and the Seller Subsidiaries, taken as
a whole.
2.22 Proxy Statement, Etc. None of the information regarding Seller
---------------------
or any of the Seller Subsidiaries to be supplied by Seller for inclusion or
included in (i) the Registration Statement on Form S-4 to be filed with the
SEC by Mercantile for the purpose of registering the shares of Mercantile
Common Stock to be exchanged for shares of Seller Common Stock pursuant to
the provisions of this Agreement (the "Registration Statement"), (ii) the
Proxy Statement to be mailed to Seller's shareholders in connection with the
meeting to be called to consider this Agreement and the Merger (the "Proxy
Statement") or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at
the respective times such documents are filed with any Regulatory Authority
and,
- 27 -
<PAGE> 34
in the case of the Registration Statement, when it becomes effective
and, with respect to the Proxy Statement, when mailed, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading or, in the
case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the meeting of Seller's shareholders referred to in Section
5.03, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which Seller or any of the Seller Subsidiaries is responsible
for filing with any Regulatory Authority in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law.
2.23 Registration Obligations. Neither Seller nor any of the Seller
------------------------
Subsidiaries is under any obligation, contingent or otherwise, which will
survive the Effective Time by reason of any agreement to register any
transaction involving any of its securities under the Securities Act.
2.24 Tax, Regulatory and Accounting Matters. Neither Seller nor any
--------------------------------------
of the Seller Subsidiaries has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code, (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement or (iii) prevent or impede the
transactions contemplated hereby from qualifying for pooling-of-interests
accounting treatment.
2.25 Brokers and Finders. Except for Morgan Stanley & Co.,
-------------------
Incorporated, neither Seller nor any of the Seller Subsidiaries nor any of
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Seller or any of the Seller Subsidiaries in
connection with this Agreement or the transactions contemplated hereby.
2.26 Interest Rate Risk Management Instruments
-----------------------------------------
(a) Set forth on Schedule 2.26(a) is a list as of the date
----------------
hereof of all interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which Seller or
any of the Seller Subsidiaries is a party or by which any of their
properties or assets may be bound.
- 28 -
<PAGE> 35
(b) All such interest rate swaps, caps, floors and option
agreements and other interest rate risk management arrangements to
which Seller or any of the Seller Subsidiaries is a party or by which
any of their properties or assets may be bound were entered into in the
ordinary course of business and, to the best knowledge of Seller, in
accordance with prudent banking practice and applicable rules,
regulations and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the time and
are legal, valid and binding obligations of Seller or a Seller
Subsidiary and are in full force and effect. Seller and each of the
Seller Subsidiaries has duly performed in all material respects all of
its obligations thereunder to the extent that such obligations to
perform have accrued, and to the best knowledge of Seller, there are no
material breaches, violations or defaults or allegations or assertions
of such by any party thereunder.
2.27 Accuracy of Information. The statements contained in this
-----------------------
Agreement, the Schedules and any other written document executed and
delivered by or on behalf of Seller pursuant to the terms of this Agreement
are true and correct as of the date hereof or as of the date delivered in all
material respects, and such statements and documents do not omit any material
fact necessary to make the statements contained therein not misleading.
2.28 Year 2000 Compliant. To the best knowledge of Seller, all
-------------------
computer software and hardware utilized by Seller or any Seller Subsidiary
is, or Seller has taken all required steps to be, Year 2000 compliant, which,
for purposes of this Agreement, shall mean that the data outside the range
1990-1999 will be correctly processed in any level of computer hardware or
software including, but not limited to, microcode, firmware, applications
programs, files and data bases. All computer software is, or Seller has
taken steps (including obtaining warranties from the vendors thereof in
respect of compliance) to ensure that all computer software will be, designed
to be used prior to, during and after the calendar year 2000 A.D., and such
software will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of,
date data that represents or references different centuries or more than one
century.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
As an inducement to Seller to enter into and perform its obligations
under this Agreement, and notwithstanding any examinations, inspections,
audits or
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<PAGE> 36
other investigations made by Seller, the Buyers hereby represent
and warrant to Seller as follows:
3.01 Organization and Authority. Mercantile and Merger Sub are each
--------------------------
corporations duly organized, validly existing and in good standing under the
laws of the State of Missouri, are each qualified to do business and are each
in good standing in all jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and
has corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted, except where the failure
to be so qualified would not have a Material Adverse Effect on Mercantile and
its Subsidiaries, taken as a whole. Each of Mercantile and Merger Sub is
registered as a bank holding company with the Federal Reserve Board under the
BHCA.
3.02 Capitalization of Mercantile. The authorized capital stock of
----------------------------
Mercantile consists of (i) 200,000,000 shares of Mercantile Common Stock, of
which, as of December 31, 1997, 130,669,990 shares were issued and
130,508,090 were outstanding and (ii) 5,000,000 shares of preferred stock, no
par value ("Mercantile Preferred Stock"), issuable in series, of which as of
the date hereof, no shares were issued and outstanding. Mercantile has
designated 2,000,000 shares of Mercantile Preferred Stock as "Series A Junior
Participating Preferred Stock" and has reserved such shares under a Rights
Agreement dated May 23, 1988 between Mercantile and Mercantile Bank National
Association, as Rights Agent (the "Rights Agreement" and, the rights to be
issued pursuant thereto, the "Rights"). As of December 31, 1997, Mercantile
had reserved: (i) 14,840,856 shares of Mercantile Common Stock for issuance
under Mercantile's Shareholder Investment Plan (the "Investment Plan") and
various employee and/or director stock option, incentive and/or benefit plans
("Mercantile Employee/Director Stock Grants"); (ii) 2,550,000 shares of
Mercantile Common Stock for issuance upon the acquisition of Horizon Bancorp,
Inc. ("Horizon") pursuant to the Agreement and Plan of Merger, dated as of
July 31, 1997, by and among Mercantile, Merger Sub and Horizon; and (iii)
951,380 shares of Mercantile Common Stock for issuance upon the acquisition
of Homecorp, Inc. ("Homecorp") pursuant to the Agreement and Plan of Merger,
dated as of October 29, 1997, by and among Mercantile, Merger Sub and
Homecorp. From December 31, 1997 through the date of this Agreement, no
shares of Mercantile Common Stock have been issued, excluding any such shares
which may have been issued in connection with the Investment Plan or
Mercantile Employee/Director Stock Grants.
Mercantile continually evaluates possible acquisitions and may prior to
the Effective Time enter into one or more agreements providing for, and may
consummate, the acquisition by it of another bank, association, bank holding
company, savings and loan holding company or other company (or the assets
- 30 -
<PAGE> 37
thereof) for consideration that may include Equity Securities. In addition,
prior to the Effective Time, Mercantile may, depending on market conditions
and other factors, otherwise determine to issue equity, equity-linked or
other securities for financing purposes or repurchase its outstanding Equity
Securities. Notwithstanding the foregoing, neither Mercantile nor any
Mercantile Subsidiary has taken or agreed to take any action or has any
knowledge of any fact or circumstance and neither Mercantile nor Merger Sub
will take any action that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368
of the Code, (ii) materially impede or delay receipt of any approval referred
to in Section 6.01(b) or the consummation of the transactions contemplated by
this Agreement or (iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment. Except as set forth above, there
are no other Equity Securities of Mercantile outstanding. All of the issued
and outstanding shares of Mercantile Common Stock are validly issued, fully
paid, and nonassessable, and have not been issued in violation of any
preemptive right of any shareholder of Mercantile. At the Effective Time,
the Mercantile Common Stock to be issued in the Merger will be duly
authorized, validly issued, fully paid and nonassessable, will not be issued
in violation of any preemptive right of any shareholder of Mercantile.
3.03 Authorization.
-------------
(a) Mercantile and Merger Sub each have the corporate power and
authority to enter into this Agreement and to carry out their
respective obligations hereunder. The execution, delivery and
performance of this Agreement by Mercantile and Merger Sub and the
consummation by Mercantile and Merger Sub of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action of Mercantile and Merger Sub. Subject to the receipt
of such approvals of the Regulatory Authorities as may be required by
statute or regulation, this Agreement is a valid and binding obligation
of Mercantile and Merger Sub enforceable against each in accordance
with its terms.
(b) Neither the execution, delivery and performance by
Mercantile and Merger Sub of this Agreement, nor the consummation by
Mercantile and Merger Sub of the transactions contemplated hereby, nor
compliance by Mercantile and Merger Sub with any of the provisions
hereof, will (i) violate, conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) or result in the
termination of, or accelerate the performance required by, or result in
a right of termination or acceleration of, or result in the creation
of, any Lien upon
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<PAGE> 38
any of the properties or assets of Mercantile or Merger Sub under any of
the terms, conditions or provisions of (x) their respective Articles of
Incorporation or By-Laws, or (y) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which Mercantile or Merger Sub is a party or by which they may be bound,
or to which Mercantile or Merger Sub or any of their respective properties
or assets may be subject, or (ii) subject to compliance with the statutes
and regulations referred to in subsection (c) of this Section 3.03,
violate any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to Mercantile or Merger Sub or any of their
respective properties or assets; other than violations, conflicts,
breaches, defaults, terminations, accelerations or Liens which would not
have a Material Adverse Effect on Mercantile and its Subsidiaries, taken
as a whole.
(c) Other than in connection with or in compliance with the
provisions of the Missouri Statute, the KBCA, the Securities Act, the
Exchange Act, the securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA, the FDI Act or any required approvals of any
other Regulatory Authority, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Mercantile and Merger
Sub of the transactions contemplated by this Agreement.
3.04 Mercantile Financial Statements. The supplemental consolidated
-------------------------------
balance sheets of Mercantile and its Subsidiaries as of December 31, 1996,
1995 and 1994 and related supplemental consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996, together with the notes thereto, audited
by KPMG Peat Marwick LLP, as filed with the SEC on Form 8-K dated May 13,
1997 and the consolidated balance sheets and related statements of income,
changes in shareholders' equity and cash flows as of, and for each of the
nine month periods ended, September 30, 1997 and 1996, as filed with the SEC
on Form 10-Q for the quarter ended September 30, 1997 (collectively, the
"Mercantile Financial Statements"), have been prepared in accordance with
GAAP, present fairly the consolidated financial position of Mercantile and
its Subsidiaries at the dates thereof and the consolidated results of
operations, changes in shareholders' equity and cash flows of Mercantile and
its Subsidiaries for the periods stated therein and are derived from the
books and records of Mercantile and its Subsidiaries, which are complete and
accurate in all material respects and have been maintained in accordance with
good business practices. Neither Mercantile
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<PAGE> 39
nor any of its Subsidiaries has any material contingent liabilities that are not
described in the Mercantile Financial Statements.
3.05 Mercantile Reports. Since January 1, 1995, each of Mercantile
------------------
and its Subsidiaries has filed all reports, registrations and statements,
together with any required amendments thereto, that it was required to file
with any Regulatory Authority. All such reports and statements filed with
any such Regulatory Authority are collectively referred to herein as the
"Mercantile Reports." As of its respective date, each Mercantile Report
complied in all material respects with all the rules and regulations
promulgated by the applicable Regulatory Authority and did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.06 Material Adverse Effect. Since September 30, 1997, there has
-----------------------
been no Material Adverse Effect on Mercantile and its Subsidiaries, taken as
a whole.
3.07 Registration Statement, Etc. None of the information regarding
----------------------------
Mercantile or any of its Subsidiaries to be supplied by Buyers for inclusion
or included in (i) the Registration Statement, (ii) the Proxy Statement, or
(iii) any other documents to be filed with any Regulatory Authority in
connection with the transactions contemplated hereby will, at the respective
times such documents are filed with any Regulatory Authority and, in the case
of the Registration Statement, when it becomes effective and, with respect to
the Proxy Statement, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make
the statements therein not misleading or, in the case of the Proxy Statement
or any amendment thereof or supplement thereto, at the time of the meeting of
shareholders referred to in Section 5.03, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation
of any proxy for such meeting. All documents which Mercantile or Merger Sub
are responsible for filing with any Regulatory Authority in connection with
the Merger will comply as to form in all material respects with the
provisions of applicable law.
3.08 Brokers and Finders. Neither Mercantile, Merger Sub nor any of
-------------------
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Mercantile or Merger Sub in connection with this
Agreement or the transactions contemplated hereby.
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<PAGE> 40
3.09 Accuracy of Information. The statements contained in this
-----------------------
Agreement and any other written document executed and delivered by or on
behalf of Buyers pursuant to the terms of this Agreement are true and correct
as of the date hereof in all material respects, and such statements and
documents do not omit any material fact necessary to make the statements
contained therein not misleading.
ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time. During the
-------------------------------------------------
period from the date of this Agreement to the Effective Time, Seller and each
of the Seller Subsidiaries shall conduct their businesses according to the
ordinary and usual course consistent with past and current practices and
shall use their best efforts to maintain and preserve their business
organization, employees and advantageous business relationships and retain
the services of their officers and key employees.
4.02 Forbearances of Seller Except as set forth in Schedule 4.02,
---------------------- -------------
and except to the extent required by law, regulation or Regulatory Authority, or
with the prior written consent of Buyers (unless otherwise specifically noted
in this Section 4.02), during the period from the date of this Agreement to
the Effective Time, Seller shall not and shall not permit any of the Seller
Subsidiaries to:
(a) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital stock
(other than dividends from any of the Seller Subsidiaries to Seller or
to another of the Seller Subsidiaries), except that Seller may declare
and pay regular quarterly cash dividends of not more than $0.14 per
share on the Seller Common Stock; provided, however, that Seller shall
not declare or pay a quarterly dividend for any quarter in which
Seller shareholders will be entitled to receive a regular quarterly
dividend on the shares of Mercantile Common Stock to be issued in the
Merger;
(b) enter into or amend any employment, severance or similar
agreement or arrangement with any director, officer or employee, or
materially modify any of the Seller Employee Plans or grant any salary
or wage increase or materially increase any employee benefit (including
incentive or bonus payments), except (i) normal individual increases in
compensation to employees consistent with past practice, (ii) as
required by law or contract, (iii) such increases of which Seller
notifies Buyers in writing and which Buyers do not disapprove within 10
days of
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<PAGE> 41
the receipt of such notice and (iv) pursuant to the provisions
of Section 5.10 hereof;
(c) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of a material
amount of assets or securities, any disposition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights;
(d) propose or adopt any amendments to its Articles of
Incorporation or other charter document or By-Laws;
(e) issue, sell, grant, confer or award any of its Equity
Securities, except that the Seller may issue shares of Seller Common
Stock upon exercise of the Seller Stock Options outstanding on the date
of this Agreement and pursuant to the option granted to Mercantile in
connection with the transaction contemplated by this Agreement, or
effect any stock split or adjust, combine, reclassify or otherwise
change its capitalization as it existed on the date of this Agreement;
(f) purchase, redeem, retire, repurchase or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of its
Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise;
(g) without first consulting with and obtaining the written
consent of Mercantile, cause or permit Citizens to enter into, renew or
increase any loan or credit commitment (including stand-by letters of
credit) to, or invest or agree to invest in any person or entity or
modify any of the material provisions or renew or otherwise extend the
maturity date of any existing loan or credit commitment (collectively,
"Lend to") in an amount equal to or in excess of $1,000,000 or in any
amount which, when aggregated with any and all loans or credit
commitments of Seller and the Seller Subsidiaries to such person or
entity, would be equal to or in excess of $1,000,000; provided,
however, that Seller or any of the Seller Subsidiaries may make any
such loan or credit commitment in the event (A) Seller or any Seller
Subsidiary has delivered to Buyers or their designated representative a
notice of its intention to make such loan and such information as
Buyers or their designated representative may reasonably require in
respect thereof and (B) Buyers or their designated representative shall
not have reasonably objected to such loan by giving
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<PAGE> 42
written or facsimile notice of such objection within two (2) business
days following the delivery to Buyers or their designated representative
of the notice of intention and information as aforesaid; provided
further, however, that nothing in this paragraph shall prohibit Seller
or any Seller Subsidiary from honoring any contractual obligation in
existence on the date of this Agreement. Notwithstanding this Section
4.02(g), Seller shall be authorized without first consulting with Buyers
or obtaining Buyers' prior written consent, to cause or permit Citizens
to increase the aggregate amount of any credit facilities theretofore
established in favor of any person or entity (each a "Pre-Existing
Facility"), provided that the aggregate amount of any and all such
increases shall not be in excess of the lesser of 10% of such
Pre-Existing Facilities or $25,000;
(h) directly or indirectly (including through its officers,
directors, employees or other representatives) (i) initiate, solicit or
encourage any discussions, inquiries or proposals with any third party
(other than Buyers) relating to the disposition of any significant
portion of the business or assets of Seller or any of the Seller
Subsidiaries or the acquisition of Equity Securities of Seller or any
of the Seller Subsidiaries or the merger of Seller or any of the Seller
Subsidiaries with any person (other than Buyers) or any similar
transaction (each such transaction being referred to herein as an
"Acquisition Transaction"), (ii) provide any such person with
information or assistance or negotiate with any such person with
respect to an Acquisition Transaction, and Seller shall promptly notify
Buyers orally of all the relevant details relating to all inquiries,
indications of interest and proposals which it may receive with respect
to any Acquisition Transaction;
(i) take any action that would (i) prevent or impede the
transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code, (ii) materially impede
or delay the consummation of the transactions contemplated by this
Agreement or the ability of Buyers or Seller to obtain any approval of
any Regulatory Authority required for the transactions contemplated by
this Agreement or to perform its covenants and agreements under this
Agreement, or (iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment;
(j) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
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<PAGE> 43
responsible or liable for the obligations of any other individual,
corporation or other entity;
(k) materially restructure or change its investment securities
portfolio, through purchases, sales or otherwise, or the manner in
which the portfolio is classified or reported, or execute individual
investment transactions for its own account of greater than $2,000,000
for U.S. Treasury or Federal Agency Securities and $250,000 for all
other investment instruments;
(l) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or
intentionally take or omit to take any other act which would make any
of the representations and warranties in Article II of this Agreement
untrue or incorrect in any material respect if made anew after engaging
in such activity, entering into such transaction, or taking or omitting
such other act; or
(m) enter into, increase or renew any loan or credit commitment
(including standby letters of credit) to any executive officer or
director of Seller or any of the Seller Subsidiaries, any holder of
10% or more of the outstanding shares of Seller Common Stock, or any
entity controlled, directly or indirectly, by any of the foregoing or
engage in any transaction with any of the foregoing which is of the
type or nature sought to be regulated in 12 U.S.C. Section 371c and 12
U.S.C. Section 371c-1, without first obtaining the prior written consent
of Buyers, which consent shall not be unreasonably withheld. For
purposes of this subsection (m), "control" shall have the meaning
associated with that term under 12 U.S.C. Section 371c.
4.03 Forbearances of the Buyers. During the period from the date of
--------------------------
this Agreement to the Closing Date, the Buyers shall not, without the prior
consent of Seller, agree in writing or otherwise to engage in any activity,
enter into any transaction or take or omit to take any other action:
(a) that would (i) prevent or impede the transactions
contemplated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code, (ii) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Mercantile or Seller to obtain any necessary approvals of
any Regulatory Authority required for the transactions contemplated by
this Agreement or to perform its covenants and agreements under this
- 37 -
<PAGE> 44
Agreement, or (iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment; or
(b) which would make any of the representations and warranties
of Article III of this Agreement untrue or incorrect in any material
respect if made anew after engaging in such activity, entering into
such transaction, or taking or omitting such other action.
ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence. Buyers and Seller shall
-------------------------------------
each afford to the other, and to the other's accountants, counsel and other
representatives, full access during normal business hours, during the period
prior to the Effective Time, to all their respective properties, books,
contracts, commitments and records and, during such period, each shall
furnish promptly to the other (i) a copy of each report, schedule and other
document filed or received by it during such period pursuant to the
requirements of federal and state securities laws and (ii) all other
information concerning its business, properties and personnel as the other
may reasonably request. Each party shall, and shall cause its advisors and
representatives to, (A) hold confidential all information obtained in
connection with any transaction contemplated hereby with respect to the other
party and its Subsidiaries which is not otherwise public knowledge, (B) in
the event of a termination of this Agreement, return all documents (including
copies thereof) obtained hereunder from the other party or any of its
Subsidiaries to such other party or its Subsidiaries and (C) use its best
efforts to cause all information obtained pursuant to this Agreement or in
connection with the negotiation of this Agreement to be treated as
confidential and not use, or knowingly permit others to use, any such
information unless such information becomes generally available to the
public.
5.02 Registration Statement; Regulatory Matters.
------------------------------------------
(a) Mercantile shall prepare and, subject to the review and
consent of Seller with respect to matters relating to Seller, file
with the SEC as soon as is reasonably practicable the Registration
Statement (or the equivalent in the form of preliminary proxy
materials) with respect to the shares of Mercantile Common Stock to be
issued in the Merger and the exercise of the Seller Stock Options
after the Effective Time. Mercantile shall promptly prepare and,
subject to the review and consent of Seller with respect to matters
relating to Seller, use its best efforts
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<PAGE> 45
to file as soon as is reasonably practicable an application for approval
of the Merger with the Federal Reserve Board, and such additional
regulatory authorities as may require an application, and shall use its
best efforts to cause the Registration Statement to become effective.
Mercantile shall also take any action required to be taken under any
applicable state blue sky or securities laws in connection with the
issuance of such shares and the exercise of such options, and Seller and
the Seller Subsidiaries shall furnish Mercantile all information
concerning Seller and the Seller Subsidiaries and the shareholders thereof
as Mercantile may reasonably request in connection with any such action.
(b) Seller and Buyers shall cooperate and use their respective
best efforts to prepare all documentation, to effect all filings and to
obtain all permits, consents, approvals and authorizations of all third
parties and Regulatory Authorities necessary to consummate the
transactions contemplated by this Agreement and, as and if directed by
Mercantile, to consummate such other transactions by and among
Mercantile's Subsidiaries and the Seller Subsidiaries concurrently with
or following the Effective Time, provided, however, that such actions
do not: (i) prevent or impede the transactions contemplated hereby
from qualifying as a reorganization within the meaning of Section 368
of the Code; (ii) materially impede or delay the receipt of any
approval referred to in Section 6.01(b); (iii) prevent or impede the
transactions contemplated hereby from qualifying for
pooling-of-interests accounting treatment unless Buyers first waive
Seller's covenants in Sections 5.02(b) and 5.16 hereof and the condition
to Buyers' obligation to consummate the Merger set forth in Section
6.03(f) hereof; or (iv) materially impede or delay the consummation of
the transactions contemplated by this Agreement.
5.03 Shareholder Approval. Seller shall call a special meeting of
--------------------
its shareholders to be held as soon as is reasonably possible for the purpose
of voting upon this Agreement and the Merger and related matters. In
connection with such meeting, Mercantile shall prepare, subject to the review
and consent of Seller, the Proxy Statement (which shall be part of the
Registration Statement to be filed with the SEC by Mercantile) and mail the
same to the shareholders of Seller. The Board of Directors of Seller shall
submit for approval of Seller's shareholders the matters to be voted upon at
such meeting. The Board of Directors of Seller hereby does and, subject to
the fiduciary duties of the Seller's Board of Directors, as advised by
outside legal counsel, will recommend this Agreement and the transactions
contemplated hereby to the shareholders of Seller and use its reasonable best
efforts to obtain any vote of Seller's shareholders necessary for the
approval of this
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<PAGE> 46
Agreement. Buyers and Seller agree that the special meeting of Seller's
shareholders shall be scheduled as of a date which is mutually acceptable to
Buyers and Seller and, subject to Section 1.03 hereof, as close as practicable
to the Closing Date.
5.04 Current Information. During the period from the date of this
-------------------
Agreement to the Closing Date, (i) each party will promptly furnish the other
with copies of all monthly and other interim financial statements as the same
become available and shall cause one or more of its designated
representatives to confer on a regular and frequent basis with
representatives of the other party and (ii) Mercantile shall promptly furnish
to the Seller copies of all filings by Mercantile with each of the Federal
Reserve Board and the SEC. Each party shall promptly notify the other party
of the following events immediately upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken by the affected
party with respect thereto: (a) the occurrence of any event which could cause
any representation or warranty of such party or any schedule, statement,
report, notice, certificate or other writing furnished by such party to be
untrue or misleading in any material respect; (b) any Material Adverse
Effect; (c) the issuance or commencement of any governmental and/or
regulatory agency complaint, investigation or hearing or any communications
indicating that the same may be contemplated and, as to any such matter which
shall now or hereafter be in effect, any communications pertaining thereto;
or (d) the institution or the threat of any material litigation involving
such party.
5.05 Conforming Entries.
------------------
(a) Notwithstanding that Seller believes that Seller and Seller
Subsidiaries have established all reserves and taken all provisions for
possible loan losses required by GAAP and applicable laws, rules and
regulations, Seller recognizes that Buyers may have adopted different
loan, accrual and reserve policies (including loan classifications and
levels of reserves for possible loan losses). From and after the date
of this Agreement, Seller and Buyers shall consult and cooperate with
each other with respect to conforming the loan, accrual and reserve
policies of Seller and the Seller Subsidiaries to those policies of
Buyers, as specified in each case in writing to Seller, based upon such
consultation and as hereinafter provided.
(b) In addition, from and after the date of this Agreement,
Seller and Buyers shall consult and cooperate with each other with
respect to determining appropriate Seller accruals, reserves and
charges to establish and take in respect of excess equipment write-off
or write-down of various assets and other appropriate charges and
accounting adjustments taking into account the parties' business plans
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<PAGE> 47
following the Merger, as specified in each case in writing to Seller,
based upon such consultation and as hereinafter provided.
(c) Seller and Buyers shall consult and cooperate with each
other with respect to determining the amount and the timing for
recognizing for financial accounting purposes Seller's expenses of the
Merger and the restructuring charges, if any, related to or to be
incurred in connection with the Merger.
(d) With respect to clauses (a) through (c) of this Section
5.05, it is the objective of Mercantile and Seller that such reserves,
accruals, charges and divestitures, if any, to be taken shall be
consistent with GAAP.
5.06 Environmental Reports. Buyers may perform, as soon as
---------------------
reasonably practicable, but not later than ninety (90) days after the date
hereof, a phase one environmental investigation and/or asbestos survey by
Environmental Operations, Inc. or any other firm designated by Buyers, or any of
them, on all real property owned, leased or operated by Seller or any of the
Seller Subsidiaries as of the date hereof (but excluding space in retail and
similar establishments leased by Seller for automatic teller machines or leased
bank branch facilities where the space leased comprises less than 20% of the
total space leased to all tenants of such property) and within fifteen (15) days
after being notified by Sellers of the acquisition or lease of any real
property acquired or leased by Seller or any of the Seller Subsidiaries after
the date hereof (but excluding space in retail and similar establishments
leased by Seller for automatic teller machines or leased bank facilities
where the space leased comprises less than 20% of the total space leased to
all tenants of such property). If the results of the phase one investigation
indicate, in Buyers' reasonable opinion, that additional investigation is
warranted, Buyers may perform, at Buyers' expense, a phase two subsurface
investigation or investigations by Environmental Operations, Inc. on
properties deemed to warrant such additional study. Buyers shall perform any
such phase two investigation as soon as reasonably practicable after receipt
of the phase one report(s) for such properties and, in any event, shall
notify Seller and Environmental Operations, Inc. within fifteen (15) days
after receipt of the phase one report that Environmental Operations, Inc.
should promptly commence any such phase two investigation. Should the cost
of taking all remedial or other corrective actions and measures (i) required
by applicable law or (ii) recommended by Environmental Operations, Inc. in
such phase one or two report or reports, in the aggregate, exceed the sum of
$1,000,000, as reasonably estimated by Environmental Operations, Inc., or if
the cost of such actions or measures cannot be so reasonably estimated by
Environmental Operations, Inc. to be such amounts or less with any reasonable
degree of certainty, Buyers shall have the right pursuant to
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<PAGE> 48
Section 7.01(e) hereof, for a period of fifteen (15) business days following
receipt from Environmental Operations, Inc. of such estimate or indication that
the cost of such actions and measures cannot be so reasonably estimated, to
terminate this Agreement.
5.07 Agreements of Affiliates. Set forth as Schedule 5.07 is a
------------------------ -------------
list (which includes all individual and beneficial ownership and also identifies
how all such beneficially owned shares are registered on the stock record
book of Seller) of all persons whom Seller believes to be "affiliates" of
Seller for purposes of Rule 145 under the Securities Act and for
pooling-of-interests accounting treatment. Seller shall use its best efforts
to cause each person who is identified as an "affiliate" to deliver to
Mercantile, as of the date hereof, or as soon as practicable hereafter, a
written agreement in substantially the form set forth as Exhibit A to this
---------
Agreement providing that each such person will agree not to sell, pledge,
transfer or otherwise dispose of the shares of Mercantile Common Stock to be
received by such person in the Merger during the period designated in such
letter and thereafter in compliance with the applicable provisions of the
Securities Act. Prior to the Closing Date, and via letter, Seller shall amend
and supplement Schedule 5.07 and use its best efforts to cause each additional
-------------
person who is identified as an "affiliate" to execute a written agreement as
provided in this Section 5.07.
5.08 Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger; provided, however, that any and all fees (excluding
reasonable out-of-pocket expenses) paid by Seller to its legal counsel,
Wyatt, Tarrant & Combs, related to the preparation of this Agreement and all
other agreements and documentation in connection with the consummation of the
transactions contemplated herein, shall not exceed $100,000; provided
further, however, that Buyers shall pay all printing expenses and filing fees
incurred in connection with this Agreement, the Registration Statement and
the Proxy Statement.
5.09 Miscellaneous Agreements and Consents.
-------------------------------------
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its respective best efforts to
take, or cause to be taken, all 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
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<PAGE> 49
Subsidiaries to, use its best efforts to obtain consents of all third
parties and Regulatory Authorities necessary or, in the opinion of Buyers,
desirable for the consummation of the transactions contemplated by this
Agreement.
(b) Seller, prior to the Effective Time, shall (i) consult and
cooperate with Buyers regarding the implementation of those policies
and procedures established by Buyers for its governance and that of its
Subsidiaries and not otherwise referenced in Section 5.05 hereof,
including, without limitation, policies and procedures pertaining to
the accounting, asset/liability management, audit, credit, human
resources, treasury and legal functions, and (ii) at the reasonable
request of Buyers, conform Seller's existing policies and procedures in
respect of such matters to Buyers' policies and procedures or, in the
absence of any existing Seller policy or procedure regarding any such
function, introduce Buyers' policies or procedures in respect thereof,
unless to do so would cause Seller or any of the Seller Subsidiaries to
be in violation of any law, rule or regulation or requirement of any
Regulatory Authority having jurisdiction over Seller and/or the Seller
Subsidiary affected thereby.
5.10 Employee Agreements and Benefits.
--------------------------------
(a) Following the Effective Time, Buyers shall cause the
Surviving Corporation to honor in accordance with their terms all
employment, severance and other compensation contracts set forth on
Schedule 2.11(b) between Seller, any of the Seller Subsidiaries, and
----------------
any current or former director, officer, employee or agent thereof, and
all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the Seller Employee Plans.
(b) Subject to Section 5.15, the provisions of the Seller Stock
Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the Equity
Securities of Seller or any of the Seller Subsidiaries shall be deleted
and terminated as of the Effective Time.
(c) Except as set forth in Section 5.10(b) hereof, the Seller
Employee Plans shall not be terminated by reason of the Merger but
shall continue thereafter as plans of the Surviving Corporation until
such time as the employees of Seller and the Seller Subsidiaries are
integrated into Mercantile's employee benefit plans that are available
to other employees of Mercantile and its Subsidiaries, subject to the
terms and
- 43 -
<PAGE> 50
conditions specified in such plans and to such changes therein as may be
necessary to reflect the consummation of the Merger. Mercantile shall take
such steps as are necessary or required to integrate the employees of
Seller and the Seller Subsidiaries into Mercantile's employee benefit
plans available to other employees of Mercantile and its Subsidiaries as
soon as practicable after the Effective Time, with (i) full credit for
prior service with Seller or any of the Seller Subsidiaries for purposes
of vesting and eligibility for participation and benefit allocation (but
not benefit accruals under any defined benefit plan), and co-payments and
deductibles, (ii) waiver of all waiting periods, evidence of insurability
and pre-existing condition exclusions or penalties, and (iii) full credit
for claims arising prior to the Effective Time for purposes of
deductibles, out-of-pocket maximums, benefit maximums and all other
similar limitations for the applicable plan year in which the Merger is
consummated.
5.11 Press Releases. Seller and the Buyers shall consult with each
--------------
other as to the form and substance of any proposed press release or other
proposed public disclosure of matters related to this Agreement or any of the
transactions contemplated hereby.
5.12 State Takeover Statutes. Seller will take all steps necessary
-----------------------
to exempt the transactions contemplated by this Agreement and any agreement
contemplated hereby from, and if necessary challenge the validity of, any
applicable state takeover law.
5.13 Directors' and Officers' Indemnification. Mercantile agrees
----------------------------------------
that the Merger shall not affect or diminish any of the duties and obligations
of indemnification of Seller or any of the Seller Subsidiaries existing as of
the Effective Time in favor of employees, agents, directors or officers of
Seller or any of the Seller Subsidiaries arising by virtue of its Articles of
Incorporation, Charter or By-Laws in the form in effect at the date of this
Agreement or arising by operation of law or arising by virtue of any
contract, resolution or other agreement or document existing at the date of
this Agreement, and Mercantile shall continue such duties and obligations in
full force and effect for so long as they would (but for the Merger)
otherwise survive and continue in full force and effect. To the extent that
Seller's existing directors' and officers' liability insurance policy would
provide coverage for any action or omission occurring prior to the Effective
Time, Seller agrees to give proper notice to the insurance carrier and to
Mercantile of any potential claim thereunder so as to preserve Seller's
rights to such insurance coverage. Mercantile represents that the directors'
and officers' liability insurance policy maintained by it provides for
coverage of "prior acts" for directors and officers of entities acquired by
Mercantile including
- 44 -
<PAGE> 51
Seller and the Seller Subsidiaries on and after the Effective Time. After the
Effective Time, Mercantile will provide, or cause to be provided, such coverage
to the officers and directors of Seller to the same extent as provided to
officer and directors of Mercantile's other Subsidiaries.
5.14 Tax Opinion Certificates. Seller shall cause such of its
------------------------
executive officers, directors and/or holders of one percent (1%) or more of
the Seller Common Stock (including shares beneficially held or constructively
owned) as may be reasonably requested by Thompson Coburn to timely execute
and deliver to Thompson Coburn certificates substantially in the form of
Exhibit B or Exhibit C hereto, as the case may be.
- --------- ---------
5.15 Employee Stock Options.
----------------------
(a) At the Effective Time, all rights with respect to Seller
Common Stock pursuant to Seller Stock Options that are outstanding at
the Effective Time, whether or not then exercisable, shall be converted
into and become rights with respect to Mercantile Common Stock, and
Mercantile shall assume all Seller Stock Options in accordance with the
terms of the Seller Stock Plan under which it was issued and the Seller
Stock Option Agreement by which it is evidenced. From and after the
Effective Time, (i) each Seller Stock Option assumed by Mercantile
shall be exercised solely for shares of Mercantile Common Stock, (ii)
the number of shares of Mercantile Common Stock subject to each Seller
Stock Option shall be equal to the number of shares of Seller Common
Stock subject to such Seller Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio and (iii) the per share
exercise price under each Seller Stock Option shall be adjusted by
dividing the per share exercise price under such Seller Stock Option by
the Exchange Ratio and rounding down to the nearest cent; provided,
however, that the terms of each Seller Stock Option shall, in
accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction subsequent to the
Effective Time. It is intended that the foregoing assumption shall be
undertaken in a manner that will not constitute a "modification" as
defined in the Code, as to any Seller Stock Option that is an
"incentive stock option" as defined under the Code.
(b) The shares of Mercantile Common Stock covered by the Seller
Stock Options shall be covered by an effective registration statement
filed on Form S-8 with the SEC and shall be duly authorized, validly
issued and in compliance with all applicable federal and state
securities laws, fully paid and nonassessable and not subject to or in
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<PAGE> 52
violation of any preemptive rights. Mercantile shall maintain the
effectiveness of such registration statement (and maintain current
status of the prospectus contained therein) for as long as such options
remain outstanding. Mercantile shall at and after the Effective Time
have reserved sufficient shares of Mercantile Common Stock for issuance
with respect to such options. Mercantile shall also take any action
required to be taken under any applicable state blue sky or securities
laws in connection with the issuance of such shares.
5.16 Best Efforts to Insure Pooling. Each of Mercantile and Seller
------------------------------
undertakes and agrees to use its best efforts to cause the Merger to qualify
for pooling-of-interests accounting treatment.
ARTICLE VI
----------
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. The approval of this Agreement and
--------------------
the Merger shall have received the requisite vote of shareholders of
Seller at the special meeting of shareholders called pursuant to
Section 5.03 hereof.
(b) Regulatory Approval. This Agreement and the transactions
-------------------
contemplated hereby shall have been approved by the Federal Reserve
Board, the Kentucky Department of Financial Institutions and any other
federal and/or state regulatory agencies whose approval is required for
consummation of the transactions contemplated hereby and all requisite
waiting periods imposed by the foregoing shall have expired.
(c) Effectiveness of Registration Statement. The
---------------------------------------
Registration Statement shall have been declared effective and shall not be
subject to a stop order or any threatened stop order.
(d) No Judicial Prohibition. Neither Seller, Mercantile nor
-----------------------
Merger Sub shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
the consummation of the Merger.
- 46 -
<PAGE> 53
(e) Tax Opinion. Each of Buyers and Seller shall have
-----------
received from Thompson Coburn an opinion (which opinion shall not have
been withdrawn at or prior to the Effective Time) reasonably satisfactory
in form and substance to it to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368 of the
Code, (ii) each of the Buyers and Seller will constitute a "party to
the reorganization" within the meaning of Section 368(b) of the Code,
and (iii) consequently, Code Sections 361, 362 and 1032 will apply to
the parties to the reorganization as appropriate, subject to any
applicable statutory, regulatory or judicial limitations, and, to the
effect that, as a result of the Merger, except with respect to
fractional share interests and assuming that such Seller Common Stock
is a capital asset in the hands of the holder thereof at the Effective
Time, (A) holders of Seller Common Stock who receive Mercantile Common
Stock in the Merger will not recognize gain or loss for federal income
tax purposes on the receipt of such stock, (B) the basis of such
Mercantile Common Stock will equal the basis of the Seller Common
Stock for which it is exchanged, and (C) and the holding period of
such Mercantile Common Stock will include the holding period of the
Seller Common Stock for which it is exchanged.
6.02 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
to effect the Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buyers set forth in Article III of this Agreement shall
be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time (as though made on and as of the
Effective Time, except (i) to the extent such representations and
warranties are by their express provisions made as of a specified date
or period, (ii) where the facts which caused the failure of any
representation or warranty to be so true and correct have not resulted,
and are not likely to result, in a Material Adverse Effect on
Mercantile and its Subsidiaries, taken as a whole, and (iii) for the
effect of transactions contemplated by this Agreement), and Seller
shall have received a certificate of any Executive Vice President of
Mercantile, signing solely in his capacity as an officer of Mercantile,
to such effect.
(b) Performance of Obligations. Buyers shall have performed in
--------------------------
all material respects all obligations required to be performed by it
under this Agreement prior to the Effective Time, and Seller shall have
received
- 47 -
<PAGE> 54
a certificate of any Executive Vice President of Mercantile,
signing solely in his capacity as an officer of Mercantile, to that
effect.
(c) Permits, Authorizations, etc. Buyers shall have obtained
-----------------------------
any and all material permits, authorizations, consents, waivers and
approvals required for the lawful consummation of the Merger.
(d) No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall have been no Material Adverse Effect on
Mercantile and its Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Mercantile shall have delivered to
------------------
Seller an opinion of Mercantile's counsel dated as of the Closing Date
or a mutually agreeable earlier date in substantially the form set
forth as Exhibit D to this Agreement.
---------
(f) Listing Approval. The shares of Mercantile Common Stock
----------------
issuable pursuant to the Merger shall have been approved for listing on
the NYSE, subject to official notice of issuance.
6.03 Conditions to Obligations of the Buyers. The obligations of
---------------------------------------
the Buyers to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Seller set forth in Article II of this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and as of the Effective Time (as though made on and as of the
Effective Time, except (i) to the extent such representations and
warranties are by their express provisions made as of a specific date
or period, (ii) where the facts which caused the failure of any
representation or warranty to be so true and correct have not resulted,
and are not likely to result, in a Material Adverse Effect on Seller
and its Subsidiaries, taken as a whole, and (iii) for the effect of
transactions contemplated by this Agreement) and Buyers shall have
received a certificate of the Chief Executive Officer and Chief
Financial Officer of Seller, signing solely in their capacities as
officers of Seller, to such effect.
(b) Performance of Obligations. Seller shall have performed
--------------------------
in all material respects all obligations required to be performed by
it under this Agreement prior to the Effective Time, and Buyers
shall have received a certificate of the Chief Executive Officer and
Chief Financial
- 48 -
<PAGE> 55
Officer, signing solely in their capacities as officers of Seller, to that
effect.
(c) Permits, Authorizations, etc. Seller shall have obtained
-----------------------------
any and all material permits, authorizations, consents, waivers and
approvals required for the lawful consummation by it of the Merger.
(d) No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall have been no Material Adverse Effect on Seller
and the Seller Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Seller shall have delivered to
------------------
Buyers an opinion of Seller's counsel dated as of the Closing Date or a
mutually agreeable earlier date in substantially the form set forth as
Exhibit E to this Agreement.
---------
(f) Pooling Letter. The Buyers shall have received as soon
--------------
as practicable after the date of this Agreement an opinion of KPMG Peat
Marwick LLP, reasonably satisfactory in form and substance to the
Buyers, to the effect that the Merger will qualify for pooling-of-
interests accounting treatment, which opinion shall have not been
withdrawn.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing Date, whether before or after approval by the shareholders
of Seller:
(a) by mutual consent by the Executive Committee of the Board
of Directors of Mercantile and by the Board of Directors of Seller;
(b) by the Executive Committee of the Board of Directors of
Mercantile or the Board of Directors of Seller at any time after
December 31, 1998 if the Merger shall not theretofore have been
consummated (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein);
(c) by the Executive Committee of the Board of Directors of
Mercantile or the Board of Directors of Seller if (i) the Federal
Reserve
- 49 -
<PAGE> 56
Board or any other federal and/or state regulatory agency whose
approval is required for the consummation of the transactions
contemplated hereby has denied approval of the Merger and such denial
has become final and nonappealable or (ii) the shareholders of Seller
shall not have approved this Agreement at the meeting referred to in
Section 5.03;
(d) by the Executive Committee of the Board of Directors of
Mercantile, on the one hand, or by the Board of Directors of Seller, on
the other hand, in the event of a material volitional breach by the
other party to this Agreement of any representation, warranty, covenant
or agreement contained herein, which breach is not cured within 30 days
after written notice thereof is given to the breaching party by the
non-breaching party or is not waived by the non-breaching party during
such period; or
(e) by the Executive Committee of the Board of Directors of
Mercantile pursuant to and in accordance with the provisions of Section
5.06 hereof.
7.02 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 7.01 above, this Agreement shall forthwith
become void and there shall be no liability on the part of Buyers or Seller
or their respective officers or directors except as set forth in the second
sentence of Section 5.01 and in Sections 5.08 and 8.02, and except that no
termination of this Agreement pursuant to Section 7.01(d) shall relieve the
breaching party of any liability to the non-breaching party hereto arising
from the intentional, deliberate or willful breach of any representation,
warranty, covenant or agreement contained herein, after giving notice to such
breaching party and an opportunity to cure as set forth in Section 7.01(d).
7.03 Amendment. This Agreement, the Exhibits and the Schedules
---------
hereto may be amended by the parties hereto, by action taken by or on behalf of
the Executive Committee of the Board of Directors of Mercantile and the
respective Boards of Directors of Merger Sub or Seller, at any time before or
after approval of this Agreement by the shareholders of Seller; provided,
however, that after any such approval by the shareholders of Seller no such
modification shall (A) alter or change the amount or kind of Merger
Consideration to be received by holders of Seller Common Stock as provided in
this Agreement or (B) adversely affect the tax treatment to Seller
shareholders as a result of the receipt of the Merger Consideration. This
Agreement, the Exhibits and the Schedules hereto may not be amended except by
an instrument in writing signed on behalf of each of Buyers and Seller.
- 50 -
<PAGE> 57
7.04 Waiver. Any term, condition or provision of this Agreement may
------
be waived in writing at any time by the party which is, or whose shareholders
or shareholders, as the case may be, are, entitled to the benefits thereof.
ARTICLE VIII
------------
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements. No
----------------------------------------------------------
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein
and each such representation and warranty shall survive such investigation.
Except as set forth below in this Section 8.01, all representations,
warranties and agreements in this Agreement of Buyers and Seller or in any
instrument delivered by Buyers or Seller pursuant to or in connection with
this Agreement shall expire at the Effective Time or upon termination of this
Agreement in accordance with its terms. In the event of consummation of the
Merger, the agreements contained in or referred to in Sections 1.05-1.11,
5.02(b), 5.08, 5.10, 5.13 and 5.15 shall survive the Effective Time. In the
event of termination of this Agreement in accordance with its terms, the
agreements contained in or referred to in the second sentence of Section 5.01
and Sections 5.08, 7.02 and 8.02 shall survive such termination.
8.02 Indemnification. Buyers and Seller (hereinafter, in such
---------------
capacity being referred to as the "Indemnifying Party") agree to indemnify
and hold harmless each other and their officers, directors and controlling
persons (each such other party being hereinafter referred to, individually
and/or collectively, as the "Indemnified Party") against any and all losses,
claims, damages or liabilities, joint or several, to which the Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof):
(a) arise primarily out of any information furnished to the Indemnified Party
by the Indemnifying Party and included in the Registration Statement as
originally filed or in any amendment thereof, or in the Proxy Statement, or
in any amendment therefor or supplement thereof, or are based primarily upon
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement as originally filed or in any amendment
thereof, or in the Proxy Statement, or in any amendment thereof or supplement
thereto, and provided for inclusion thereof by the Indemnifying Party or (b)
arise primarily out of or are based primarily upon the omission or alleged
omission by the Indemnifying Party to state in the Registration Statement as
originally filed or in any amendment thereof, or in the Proxy Statement, or
in any amendment thereof, a material fact required to be stated therein or
- 51 -
<PAGE> 58
necessary to make the statements made therein not misleading, and agrees to
reimburse each such Indemnified Party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
8.03 No Assignment; Successors and Assigns. This Agreement shall be
-------------------------------------
binding upon and inure to the benefit of the parties hereto and their
respective successors (including any corporation deemed to be a successor
corporation of any of the parties by operation of law) and assigns, but
neither this Agreement nor any right or obligation set forth in any provision
hereof may be transferred or assigned (except by operation of law) by any
party hereto without the prior written consent of all other parties, and any
purported transfer or assignment in violation of this Section 8.03 shall be
void and of no effect. There shall not be any third party beneficiaries of
any provisions hereof except for Sections 1.09, 1.10, 1.11, 5.10, 5.13, 5.15
and 8.02 which may be enforced against Mercantile or Seller, as the case may
be, by the parties therein identified or described.
8.04 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part of any
-----------------
party hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege.
8.06 Headings. Article, section, subsection and paragraph titles,
--------
captions and headings herein are inserted only as a matter of convenience and
for reference, and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof.
8.07 Entire Agreement. This Agreement and the Schedules and
----------------
Exhibits hereto constitute the entire agreement between the parties with respect
to the subject matter hereof, supersede all prior negotiations, representations,
warranties, commitments, offers, letters of interest or intent, proposal
letters, contracts, writings or other agreements or understandings with
respect thereto. No waiver, and no modification or amendment, of any
provision of this Agreement, shall be effective unless specifically made in
writing and duly signed by all parties thereto.
- 52 -
<PAGE> 59
8.08 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and any party to this Agreement may execute and deliver this
Agreement by executing and delivering any of such counterparts, each of which
when executed and delivered shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument.
8.09 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to be duly received (a) on the date given if
delivered personally or by cable, telegram, telex or telecopy or (b) on the
date received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to the Buyers:
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Attention: John W. Rowe
Executive Vice President
Telecopy: (314) 425-2752
Copy to:
Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Telecopy: (314) 425-1386
and
Robert M. LaRose, Esq.
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Telecopy: (314) 552-7000
- 53 -
<PAGE> 60
(ii) if to Seller:
CBT Corporation
333 Broadway
Paducah, Kentucky 42001
Attention: William J. Jones
President and Chief Executive Officer
Telecopy: (502) 575-5113
Copy to:
Stewart E. Conner, Esq.
Wyatt, Tarrant & Combs
Citizens Plaza
Louisville, Kentucky 40202-2898
Telecopy: (502) 589-0309
8.10 Governing Law. This Agreement shall be governed by and
-------------
controlled as to validity, enforcement, interpretation, effect and in all
other respects by the internal laws of the State of Missouri applicable to
contracts made in that state.
8.11 Knowledge. "Knowledge" or `best knowledge" when used with
---------
respect to a person shall mean those facts that are known by the executive
officers of such person.
8.12 Time of Essence. Time is of the essence to the performance of
---------------
the obligations set forth in this Agreement.
[the remainder of this page is left intentionally blank]
- 54 -
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be affixed hereto, all as of the date first
written above.
Attest: MERCANTILE BANCORPORATION INC.
/s/ David W. Grant By: /s/ John W. Rowe
- --------------------------------- -------------------------------
David W. Grant John W. Rowe
Executive Vice President,
Mercantile Bank National
Association, Authorized
Officer
Attest: AMERIBANC, INC.
/s/ David W. Grant By: /s/ John W. Rowe
- --------------------------------- -------------------------------
David W. Grant John W. Rowe
Vice President
Attest: CBT CORPORATION
/s/ John E. Sircy By: /s/ William J. Jones
- --------------------------------- -------------------------------
John E. Sircy William J. Jones
President and Chief Executive
Officer
- 55 -
<PAGE> 1
VOTING AGREEMENT
This Voting Agreement dated as of January 10, 1998, is entered into
between Mercantile Bancorporation Inc. ("Mercantile"), and the undersigned
director and shareholder ("Shareholder") of CBT Corporation ("CBT").
WHEREAS, CBT, Mercantile and Ameribanc, Inc., a wholly owned subsidiary
of Mercantile ("Ameribanc"), have proposed to enter into an Agreement and
Plan of Merger (the "Agreement"), dated as of today, which contemplates the
acquisition by Mercantile of 100% of the capital stock of CBT (collectively,
the "CBT Stock") by means of a merger between CBT and Ameribanc; and
WHEREAS, Mercantile is willing to expend the substantial time, effort
and expense necessary to implement the Merger, only if Shareholder enters
into this Voting Agreement; and
WHEREAS, the undersigned shareholder of CBT believes that the Merger is
in his best interest and the best interest of CBT.
NOW, THEREFORE, in consideration of the premises, Shareholder hereby
agrees as follows:
1. Voting Agreement. Shareholder shall vote all of the shares
----------------
of CBT Stock he now owns of record or has voting control with respect to or
hereafter acquires, in favor of the Merger at the meeting of shareholders of
CBT to be called for the purpose of approving the Merger (the "Meeting").
2. No Competing Transaction. Shareholder shall not vote any
------------------------
of his shares of CBT Stock in favor of any other merger or sale of all or
substantially all the assets of CBT to any person other than Mercantile or
its affiliates until the Effective Time of the Merger, termination of the
Agreement or abandonment of the Merger by the mutual agreement of CBT and
Mercantile, whichever comes first.
3. Transfers Subject to Agreement. Shareholder shall not
------------------------------
transfer his shares of CBT Stock unless the transferee, prior to such
transfer, executes a voting agreement with respect to the transferred shares
substantially to the effect of this Voting Agreement and satisfactory to
Mercantile.
4. No Ownership Interest. Nothing contained in this Voting
---------------------
Agreement shall be deemed to vest in Mercantile any direct or indirect
ownership or incidence of ownership of or with respect to any shares of CBT
Stock. All rights, ownership and economic benefits of and relating to the
shares of CBT Stock shall remain and belong to Shareholder and Mercantile
shall have no authority to manage,
<PAGE> 2
direct, superintend, restrict, regulate, govern or administer any of the
policies or operations of CBT or exercise any power or authority to direct
Shareholder in the voting of any of his shares of CBT Stock, except as
otherwise expressly provided herein, or the performance of his duties or
responsibilities as a director of CBT.
5. Evaluation of Investment. Shareholder, by reason of his
------------------------
knowledge and experience in financial and business matters and in his
capacity as a director of a financial institution, believes himself capable
of evaluating the merits and risks of the potential investment in common
stock of Mercantile, $0.01 par value ("Mercantile Common Stock"),
contemplated by the Agreement.
6. Documents Delivered. Shareholder acknowledges having
-------------------
reviewed the Agreement and its attachments and that reports, proxy statements
and other information with respect to Mercantile filed with the Securities
and Exchange Commission (the "Commission") were, prior to his execution of
this Voting Agreement, available for inspection and copying at the Offices of
the Commission and that Mercantile delivered the following such documents to
CBT:
(a) Mercantile's Annual Report on Form 10-K for the year
ended December 31, 1996, as amended by Form 10-K/A;
(b) Mercantile's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997; and
(c) Mercantile's Current Reports on Form 8-K dated April
25, 1997, May 13, 1997, July 1, 1997, two dated
September 25, 1997 and Current Report on Form 8-K/A
dated May 22, 1997.
7. Amendment and Modification. This Voting Agreement may be
--------------------------
amended, modified or supplemented at any time by the written approval of such
amendment, modification or supplement by Shareholder and Mercantile.
8. Entire Agreement. This Voting Agreement evidences the
----------------
entire agreement among the parties hereto with respect to the matters
provided for herein and there are no agreements, representations or
warranties with respect to the matters provided for herein other than those
set forth herein and in the Agreement.
9. Severability. The parties agree that if any provision of
------------
this Voting Agreement shall under any circumstances be deemed invalid or
inoperative, this
- 2 -
<PAGE> 3
Voting Agreement shall be construed with the invalid or inoperative
provisions deleted and the rights and obligations of the parties shall be
construed and enforced accordingly.
10. Counterparts. This Voting Agreement may be executed in two
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. The validity, construction, enforcement and
-------------
effect of this Voting Agreement shall be governed by the internal laws of the
State of Missouri, without regard to its conflict of laws principles.
12. Headings. The headings for the paragraphs of this Voting
--------
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect the meaning or interpretation of this Voting Agreement.
13. Termination. This Voting Agreement shall terminate upon
-----------
the consummation of the Merger or upon termination of the Agreement,
whichever comes first.
14. Successors. This Voting Agreement shall be binding upon
----------
and inure to the benefit of Mercantile and its successors, and Shareholder
and Shareholder's spouse and their respective executors, personal
representatives, administrators, heirs, legatees, guardians and other legal
representatives. This Voting Agreement shall survive the death or incapacity
of Shareholder. This Agreement may be assigned by Mercantile only to an
affiliate of Mercantile.
MERCANTILE BANCORPORATION INC.
By:
-------------------------------------
John W. Rowe, Executive Vice President
Mercantile Bank National Association
Authorized Officer
SHAREHOLDER
----------------------------------------
- 3 -
<PAGE> 1
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT ("Option Agreement") dated as of January 10,
1998, by and between MERCANTILE BANCORPORATION INC. ("Buyer"), a Missouri
corporation registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act"), and CBT
CORPORATION ("Seller"), a Kentucky corporation registered as a bank holding
company under the Holding Company Act.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Buyer and Seller are prepared to execute and deliver an
Agreement and Plan of Merger dated as of even date herewith (the "Merger
Agreement") providing for the merger of Seller with and into a wholly owned
subsidiary of Buyer; and
WHEREAS, as a condition to Buyer's entering into the Merger Agreement,
Buyer has required that Seller agree, and Seller has agreed, to grant to
Buyer the option set forth herein to purchase authorized but unissued shares
of the common stock, no par value, of Seller ("Seller Common Stock").
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions. Capitalized terms used but not defined herein
-----------
shall have the same meanings as in the Merger Agreement.
<PAGE> 2
2. Grant of Option. Subject to the terms and conditions set forth
---------------
herein, Seller hereby grants to Buyer an option (the "Option") to purchase up
to 1,564,662 shares of Seller Common Stock (representing approximately 19.9%
of the issued and outstanding shares of Seller Common Stock) at a price per
share equal to $33.25 (the "Purchase Price") payable in cash as provided in
Section 4 hereof. In no event shall shares of Seller Common Stock for which
the Option is exercisable exceed 19.9% of the issued and outstanding shares
of Seller Common Stock, without giving effect to any shares subject to or
issued pursuant to the Option.
- 2 -
<PAGE> 3
3. Exercise of Option.
------------------
(a) If not then in material breach of the Merger Agreement,
Buyer may exercise the Option, in whole or in part, at any time or from time
to time if a Purchase Event (as defined below) shall have occurred;
provided, however, that: (i) to the extent the Option shall not have been
- -------- -------
exercised, it shall terminate and be of no further force and effect upon the
earlier to occur of (A) the Effective Time of the Merger and (B) the termination
of the Merger Agreement in accordance with Article VII thereof, provided that in
--------
the case of a termination by Buyer pursuant to Section 7.01(d) arising from the
volitional breach by Seller of any of its representations, warranties or
covenants in the Merger Agreement, the Option shall not terminate until the
date that is 12 months following such termination; (ii) if the Option cannot
be exercised on such day because of any injunction, order or similar
restraint issued by a court of competent jurisdiction, the Option shall
expire on the 30th business day after such injunction, order or restraint
shall have been dissolved or when such injunction, order or restraint shall
have become permanent and no longer subject to appeal, as the case may be;
and (iii) that any such exercise shall be subject to compliance with
applicable law, including the Holding Company Act.
(b) As used herein, a "Purchase Event" shall mean any of the
following events:
- 3 -
<PAGE> 4
(i) Seller or any of its Subsidiaries, without having
received prior written consent from Buyer, shall have entered into,
authorized, recommended, proposed or publicly announced its intention to
enter into, authorize, recommend or propose, an agreement, arrangement
or understanding with any person (other than Buyer or any of its
Subsidiaries) to (A) effect a merger or consolidation or similar
transaction involving the acquisition of Seller or any of its
Subsidiaries, (B) purchase, lease or otherwise acquire 15% or more of
the assets of Seller or any of its Subsidiaries or (C) purchase or
otherwise acquire (including by way of merger, consolidation, share
exchange or similar transaction) Beneficial Ownership of securities
representing 15% or more of the voting power of Seller or any of its
Subsidiaries (in each case, other than any such merger, consolidation,
purchase, lease, share exchange or similar transaction between or among
any two or more Seller Subsidiaries);
(ii) any person (other than Buyer or any Subsidiary
of Buyer, or Seller or any Subsidiary of Seller in a fiduciary
capacity) shall have acquired Beneficial Ownership or the right to
acquire Beneficial Ownership of 15% or more of the voting power of
Seller; or
- 4 -
<PAGE> 5
(iii) the holders of Seller Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held
for the purpose of voting on the Merger Agreement, such meeting shall
not have been held or shall have been canceled prior to termination of
the Merger Agreement in accordance with its terms or Seller's Board of
Directors shall have withdrawn or modified in a manner adverse to Buyer
the recommendation of Seller's Board of Directors with respect to the
Merger Agreement, in each case after an Extension Event.
(c) As used herein, the term "Extension Event" shall mean any of
the following events:
(i) a Purchase Event described in Section 3(b)(i) or (ii)
hereof;
(ii) any person (other than Buyer or any of its
Subsidiaries) shall have "commenced" (as such term is defined in Rule
14d-2 under the Exchange Act), or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or
exchange offer to purchase shares of Seller Common Stock such that, upon
consummation of such offer, such person would have Beneficial Ownership
(as defined below) or the right to acquire Beneficial Ownership of 15%
or more of the voting power of Seller; or
- 5 -
<PAGE> 6
(iii) any person (other than Buyer or any Subsidiary of
Buyer, or Seller or any Subsidiary of Seller in a fiduciary capacity)
shall have publicly announced its willingness, or shall have publicly
announced a proposal, or publicly disclosed an intention to make a
proposal, (x) to make an offer described in clause (ii) above, or (y)
to engage in a transaction described in clause (i) above.
(d) As used herein, the terms "Beneficial Ownership" and
"Beneficially Own" shall have the meanings ascribed to them in Rule 13d-3
under the Exchange Act.
(e) In the event Buyer wishes to exercise the Option, it shall
deliver to Seller a written notice (the date of which being herein referred to
as the "Notice Date") specifying (i) the total number of shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
ten business days nor later than 30 calendar days from the Notice Date for the
closing of such purchase (the "Closing Date").
- 6 -
<PAGE> 7
4. Payment and Delivery of Certificates.
------------------------------------
(a) At the closing referred to in Section 3 hereof, Buyer shall
pay to Seller the aggregate Purchase Price for the shares of Seller Common
Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Seller.
(b) At such closing, simultaneously with the delivery of cash as
provided in Section 4(a), Seller shall deliver to Buyer a certificate or
certificates representing the number of shares of Seller Common Stock
purchased by Buyer, registered in the name of Buyer or a nominee designated in
writing by Buyer, and Buyer shall deliver to Seller a letter agreeing that
Buyer shall not offer to sell, pledge or otherwise dispose of such shares in
violation of applicable law or the provisions of this Option Agreement.
(c) If at the time of issuance of any Seller Common Stock
pursuant to any exercise of the Option, Seller shall have issued any share
purchase rights or similar securities to holders of Seller Common Stock, then
each such share of Seller Common Stock shall also represent rights with terms
substantially the same as and at least as favorable to Buyer as those issued
to other holders of Seller Common Stock.
- 7 -
<PAGE> 8
(d) Certificates for Seller Common Stock delivered at any
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and CBT CORPORATION, a copy of which is on file at the principal
office of CBT CORPORATION, and to resale restrictions arising under the
Securities Act of 1933, as amended, and any applicable state securities
laws. A copy of such agreement will be provided to the holder hereof
without charge upon receipt by CBT CORPORATION of a written request
therefor.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificates without such legend if Buyer shall have delivered
to Seller an opinion of counsel, in form and substance reasonably satisfactory
to Seller and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and any applicable state securities laws and
this Option Agreement.
- 8 -
<PAGE> 9
5. Authorization, etc.
------------------
(a) Seller hereby represents and warrants to Buyer that:
(i) Seller has full corporate authority to execute and
deliver this Option Agreement and, subject to Section 11(i), to
consummate the transactions contemplated hereby;
(ii) such execution, delivery and consummation have been
authorized by the Board of Directors of Seller, and no other corporate
proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly
executed and delivered and represents a valid and legally binding
obligation of Seller, enforceable against Seller in accordance with its
terms; and
(iv) Seller has taken all necessary corporate action to
authorize and reserve and, subject to Section 11(i), permit it to issue
and, at all times from the date hereof through the date of the exercise
in full or the expiration or termination of the Option, shall have
reserved for issuance upon exercise of the Option, 1,564,662 shares of
Seller Common Stock, all of which, upon issuance pursuant hereto, shall
be duly authorized, validly issued, fully paid and nonassessable, and
shall be delivered free and clear of all claims, liens, encumbrances,
restrictions
- 9 -
<PAGE> 10
(other than federal and state securities restrictions) and security
interests and not subject to any preemptive rights.
(b) Buyer hereby represents and warrants to Seller that:
(i) Buyer has full corporate authority to execute and
deliver this Option Agreement and, subject to Section 11(i), to
consummate the transactions contemplated hereby;
(ii) such execution, delivery and consummation have been
authorized by all requisite corporate action by Buyer, and no other
corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly
executed and delivered and represents a valid and legally binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms; and
(iv) any Seller Common Stock or other securities acquired
by Buyer upon exercise of the Option will not be taken with a view to
the public distribution thereof and will not be transferred or
otherwise disposed of except in compliance with the Securities Act and
applicable state law.
6. Adjustment Upon Changes in Capitalization. In the event of
-----------------------------------------
any change in Seller Common Stock by reason of stock dividends, split-ups,
- 10 -
<PAGE> 11
recapitalizations or the like, the type and number of shares subject to the
Option, and the Purchase Price per share, as the case may be, shall be
adjusted appropriately. In the event that any additional shares of Seller
Common Stock are issued after the date of this Option Agreement (other than
pursuant to an event described in the preceding sentence or pursuant to this
Option Agreement), the number of shares of Seller Common Stock subject to the
Option shall be adjusted so that, after such issuance, it equals at least
19.9% of the number of shares of Seller Common Stock then issued and
outstanding, without giving effect to any shares of Seller Common Stock
subject to or issued pursuant to the Option.
7. Repurchase.
----------
(a) Subject to the giving of any notices and the receipt of any
approvals as contemplated by Section 11(i), at the request of Buyer at any
time commencing upon the first occurrence of a Purchase Event described in
Section 3(b) hereof and ending 12 months immediately thereafter but not later
than the termination of the Option pursuant to Section 3(a) hereof (the
"Repurchase Period"), Seller (or any successor entity thereof) shall
repurchase the Option from Buyer together with all (but not less than all,
subject to Section 10) shares of Seller Common Stock purchased by Buyer
pursuant hereto with respect to which Buyer then has Beneficial Ownership, at
an aggregate price (per share, the "Per Share Repurchase Price") equal to the
sum of:
- 11 -
<PAGE> 12
(i) The exercise price paid by Buyer for any shares of
Seller Common Stock acquired pursuant to the Option;
(ii) The difference between (A) the "Market/Tender Offer
Price" for shares of Seller Common Stock (defined as the higher (x) of
the highest price per share at which a tender or exchange offer has been
made for shares of Seller Common Stock or (y) the highest closing sales
price per share of Seller Common Stock reported by the Nasdaq National
Market, in each case for any day within that portion of the Repurchase
Period that precedes the date Buyer gives notice of the required
repurchase under this Section 7) and (B) the exercise price as
determined pursuant to Section 2 hereof (subject to adjustment as
provided in Section 6), multiplied by the number of shares of Seller
Common Stock with respect to which the Option has not been exercised,
but only if the Market/Tender Offer Price is greater than such exercise
price; and
(iii) The difference between the Market/Tender Offer Price
and the exercise price paid by Buyer for any shares of Seller Common
Stock purchased pursuant to the exercise of the Option, multiplied by
the number of shares so purchased, but only if the Market/Tender Offer
Price is greater than such exercise price.
- 12 -
<PAGE> 13
(b) In the event Buyer exercises its rights under this Section
7, Seller shall, within 10 business days thereafter, pay the required amount
to Buyer by wire transfer of immediately available funds to an account
designated by Buyer and Buyer shall surrender to Seller the Option and the
certificates evidencing the shares of Seller Common Stock purchased thereunder
with respect to which Buyer then has Beneficial Ownership, and Buyer shall
warrant that it has sole record and Beneficial Ownership of such shares and
that the same are free and clear of all liens, claims, charges, restrictions
and encumbrances of any kind whatsoever.
(c) In determining the Market/Tender Offer Price, the value of
any consideration other than cash shall be determined by an independent
nationally recognized investment banking firm selected by Buyer and reasonably
acceptable to Seller.
8. Repurchase at Option of Seller and First Refusal.
------------------------------------------------
(a) Except to the extent that Buyer shall have previously
exercised its rights under Section 7, at the request of Seller during the
six-month period commencing 12 months following the first occurrence of a
Purchase Event, Seller may repurchase from Buyer, and Buyer shall sell the
Option to Seller together with all (but not less than all, subject to Section
10) of the Seller Common Stock acquired by Buyer pursuant hereto and with
respect to which Buyer has Beneficial Ownership at the time of such repurchase
at a price per share equal to the greater of
- 13 -
<PAGE> 14
(i) the Per Share Repurchase Price or (ii) the sum of (A) the aggregate Purchase
Price of the shares so repurchased plus (B) interest on the aggregate Purchase
Price paid for the shares so repurchased from the date of purchase to the date
of repurchase at the highest rate of interest announced by Buyer as its prime or
base lending or reference rate during such period, less any dividends received
on the shares so repurchased. Any repurchase under this Section 8(a) shall be
consummated in accordance with Section 7(b).
(b) If, at any time after the occurrence of a Purchase Event and
prior to the earlier of (i) the expiration of 18 months immediately following
such Purchase Event or (ii) the expiration or termination of the Option, Buyer
shall desire to sell, assign, transfer or otherwise dispose of the Option or
all or any of the shares of Seller Common Stock acquired by it pursuant to the
Option, it shall give Seller written notice of the proposed transaction (an
"Offeror's Notice"), identifying the proposed transferee, and setting forth
the terms of the proposed transaction. An Offeror's Notice shall be deemed an
offer by Buyer to Seller, which may be accepted within 10 business days of the
receipt of such Offeror's Notice, on the same terms and conditions and at the
same price at which Buyer is proposing to transfer the Option or such shares
to a third party. In the event the proposed transaction involves the sale of
the Option or the shares of Seller Common Stock purchased pursuant to the
exercise of the Option for consideration other than cash, the value of such
- 14 -
<PAGE> 15
consideration shall be determined by an independent nationally recognized
investment banking firm selected by Buyer and reasonably acceptable to Seller.
The purchase of the Option or any such shares by Seller shall be closed within
10 business days of the date of the acceptance of the offer and the purchase
price shall be paid to Buyer by wire transfer of immediately available funds
to an account designated by Buyer. In the event of the failure or refusal of
Seller to purchase the Option or all the shares covered by the Offeror's
Notice or if the Federal Reserve Board, OTS or any other Regulatory Authority
disapproves Seller's proposed purchase of the Option or such shares, Buyer
may, within 60 days from the date of the Offeror's Notice, sell all, but not
less than all, of the Option or such shares to such third party at no less
than the price specified and on terms no more favorable to the purchaser than
those set forth in the Offeror's Notice. The requirements of this Section
8(b) shall not apply to (i) any disposition as a result of which the proposed
transferee would Beneficially Own not more than 2% of the voting power of
Seller or (ii) any disposition of Seller Common Stock by a person to whom
Buyer has sold shares of Seller Common Stock issued upon exercise of the
Option.
- 15 -
<PAGE> 16
9. Registration Rights. At any time after the exercise of the
-------------------
Option by Buyer for an aggregate of at least 50% of the shares subject
thereto, Seller shall, subject to the conditions set forth herein, if
requested by Buyer, as expeditiously as practicable file a registration
statement on a form for general use under the Securities Act if necessary in
order to permit the sale or other disposition of the shares of Seller Common
Stock that have been acquired upon exercise of the Option in accordance with
the intended method of sale or other disposition requested by Buyer (it being
understood and agreed that any such sale or other disposition shall be
effected on a widely distributed basis so that, upon consummation thereof, no
purchaser or transferee shall Beneficially Own more than 2% of the shares of
Seller Common Stock then outstanding). Buyer shall provide all information
reasonably requested by Seller for inclusion in any registration statement to
be filed hereunder. Seller shall use its reasonable best efforts to cause
such registration statement first to become effective and then to remain
effective for such period not in excess of 90 days from the day such
registration statement first becomes effective as may be reasonably necessary
to effect such sales or other dispositions. The registration effected under
this Section 9 shall be at Seller's expense except for underwriting discounts
and commissions and the fees and disbursements of Buyer's counsel attributable
to the registration of such Seller Common Stock. In no event shall Seller be
required to effect more than one registration hereunder. The filing of the
- 16 -
<PAGE> 17
registration statement hereunder may be delayed for such period of time as may
reasonably be required to facilitate any public distribution by Seller of
Seller Common Stock or if a special audit of Seller would otherwise be
required in connection therewith. If requested by Buyer in connection with
such registration, Seller shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements for parties
similarly situated.
10. Severability. Any term, provision, covenant or restriction
------------
contained in this Option Agreement held by a court or a Regulatory Authority
of competent jurisdiction to be invalid, void or unenforceable, shall be
ineffective to the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or restrictions
contained in this Option Agreement nor the validity or enforceability thereof
in any other jurisdiction shall be affected or impaired thereby. Any term,
provision, covenant or restriction contained in this Option Agreement that is
so found to be so broad as to be unenforceable shall be interpreted to be as
broad as is enforceable. If for any reason such court or Regulatory Authority
determines that applicable law will not permit Buyer or any other person to
acquire, or Seller to repurchase or purchase, the full number of shares of
Seller Common Stock provided in Section 2 hereof (as adjusted pursuant to
Section 6
- 17 -
<PAGE> 18
hereof), it is the express intention of the parties hereto to allow
Buyer or such other person to acquire, or Seller to repurchase or purchase,
such lesser number of shares as may be permissible, without any amendment or
modification hereof.
11. Miscellaneous.
-------------
(a) Expenses. Each of the parties hereto shall pay all costs
--------
and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel, except as
otherwise provided herein.
(b) Entire Agreement. Except as otherwise expressly provided
----------------
herein, this Option Agreement and the Merger Agreement contain the entire
agreement between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral.
(c) Successors; No Third Party Beneficiaries. The terms and
----------------------------------------
conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Option Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Option Agreement, except as expressly provided herein.
- 18 -
<PAGE> 19
(d) Assignment. Other than as provided in Section 8 hereof,
----------
neither of the parties hereto may sell, transfer, assign or otherwise dispose
of any of its rights or obligations under this Option Agreement or the Option
created hereunder to any other person (whether by operation of law or
otherwise), without the express written consent of the other party.
(e) Notices. All notices or other communications that are
-------
required or permitted hereunder shall be in writing and sufficient if
delivered in accordance with Section 8.08 of the Merger Agreement (which is
incorporated herein by reference).
(f) Counterparts. This Option Agreement may be executed in
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but both such counterparts together shall constitute but one
agreement.
(g) Specific Performance. The parties hereto agree that if for
--------------------
any reason Buyer or Seller shall have failed to perform its obligations under
this Option Agreement, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties hereto
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to
- 19 -
<PAGE> 20
any other rights that either party hereto may have against the other party
hereto for any failure to perform its obligations under this Option Agreement.
(h) Governing Law. This Option Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of Missouri applicable
to agreements made and entirely to be performed within such state.
(i) Regulatory Approvals; Section 16(b). If, in connection with
-----------------------------------
(A) the exercise of the Option under Section 3 or a sale by Buyer to a third
party under Section 8, (B) a repurchase by Seller under Section 7 or a
repurchase or purchase by Seller under Section 8, prior notification to or
approval of the Federal Reserve Board, or any other Regulatory Authority is
required, then the required notice or application for approval shall be
promptly filed and expeditiously processed and periods of time that otherwise
would run pursuant to such Sections shall run instead from the date on which
any such required notification period has expired or been terminated or such
approval has been obtained, and in either event, any requisite waiting period
shall have passed. In the case of clause (A) of this subsection (i), such
filing shall be made by Buyer, and in the case of clause (B) of this
subsection (i), such filing shall be made by Seller, provided that each of
Buyer and Seller shall use its best efforts to make all filings with, and to
obtain consents of, all third parties and Regulatory Authorities necessary to
the consummation of the transactions contemplated hereby, including, without
limitation, applying to the Federal Reserve
- 20 -
<PAGE> 21
Board under the Holding Company Act for approval to acquire the shares issuable
hereunder. Periods of time that otherwise would run pursuant to Sections 3, 7
or 8 shall also be extended to the extent necessary to avoid liability under
Section 16(b) of the Exchange Act.
(j) No Breach of Merger Agreement Authorized. Nothing contained
----------------------------------------
in this Option Agreement shall be deemed to authorize Seller to issue any
shares of Seller Common Stock in breach of, or otherwise breach any of, the
provisions of the Merger Agreement nor shall any action taken hereunder by
Seller constitute a breach of any of the provisions of the Merger Agreement.
(k) Waiver and Amendment. Any provision of this Option
--------------------
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Option Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
[the remainder of this page is left intentionally blank]
- 21 -
<PAGE> 22
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
MERCANTILE BANCORPORATION INC.
By: /s/ John W. Rowe
-----------------------------------------------
John W. Rowe
Executive Vice President, Mercantile Bank
National Association, Authorized Officer
CBT CORPORATION
By: /s/ William J. Jones
-----------------------------------------------
William J. Jones
President and Chief Executive Officer
- 22 -
<PAGE> 1
Exhibit 99.1
------------
FOR IMMEDIATE RELEASE: January 12, 1998
Contact: Nadine Z. Genet Mary K. Granberg William J. Jones
Public Affairs Investor Relations President and CEO
(314) 425-8174 (314) 425-8237 CBT Corporation
(502) 575-5139
NYSE Symbol: MTL
In newspaper stock tables generally MercBc or MercBcpMO
MERCANTILE ANNOUNCES PLANS TO MERGE WITH
CBT CORPORATION OF PADUCAH, KENTUCKY
ST. LOUIS -- Mercantile Bancorporation Inc. (NYSE: MTL), the St.
Louis-based $30 billion bank holding company, today announced plans to merge
with CBT Corporation (Nasdaq: CBTC), a $1 billion multi-bank holding company
headquartered in Paducah, Kentucky. CBT's subsidiaries, which serve the
attractive western Kentucky Lake region, include four banks, a Federal Savings
Bank and an established consumer finance company, Fidelity Credit Corporation.
A leader in the Paducah market, CBT has additional banking offices in
McCracken, Calloway, Marshall and Graves counties, and the Hopkinsville-
Clarksville metropolitan area.
"The merger with CBT complements Mercantile's existing southern Illinois
and southeastern Missouri franchises," said W. Randolph Adams, senior
executive vice president and chief administrative officer of Mercantile
Bancorporation Inc. "As we strengthen our geographic presence, we also are
enhancing Mercantile's future earnings potential."
"In choosing Mercantile as our partner, we are aligning with one of the
strongest performing financial services organizations in the United States,"
said William J. Jones, president and chief executive officer of CBT
Corporation. "We will be able to maintain our community-oriented banking
philosophy while we expand the array of products and services we offer our
customers."
Based upon Mercantile's closing stock price on January 9, 1998, of
$52.75, the transaction is valued at approximately $285 million. CBT
shareholders will receive .6513 shares of Mercantile common stock for each
share of CBT common stock. The merger will be accounted for as a pooling of
interests, and is expected to close in the third quarter of 1998. As part of
its agreement with Mercantile, CBT granted Mercantile an option to acquire
19.9 percent of issued and outstanding shares of common stock, exercisable
under certain circumstances. In addition, Mercantile may repurchase up to 10
percent of the shares issued in the transaction. The merger is subject to the
approval of CBT shareholders and various regulatory authorities.
Mercantile Bancorporation Inc., a $30 billion asset multi-bank holding
company headquartered in St. Louis, operates offices in more than 500
locations throughout Missouri, Iowa, Kansas, Illinois and Arkansas. Mercantile
currently has acquisitions pending with Horizon Bancorp, Inc., headquartered
in Arkadelphia, Arkansas, and HomeCorp, Inc., headquartered in Rockford,
Illinois. Mercantile's non-banking subsidiaries include companies providing
brokerage services, asset-based lending,
<PAGE> 2
investment advisory services, leasing services and credit life and other
insurance products as agent.
