<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
/ / Definitive Proxy Statement Commission Only
/ / Definitive Additional Materials (as permitted by Rule
/ / Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
Mercantile Bancorporation Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
- ------------------------------------------------------------------------------
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTIONS APPLIES:
- ------------------------------------------------------------------------------
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING
FEE IS CALCULATED AND STATE HOW IT WAS DETERMINED):
- ------------------------------------------------------------------------------
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
- ------------------------------------------------------------------------------
(5) TOTAL FEE PAID:
- ------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
Feb 20, 1998 - Preliminary Copy
-------------------------------
Mercantile P.O. Box 524
Bancorporation St. Louis, MO 63166-0524
Inc.
THOMAS H. JACOBSEN
Chairman of the Board, President
and Chief Executive Officer
March --, 1998
DEAR SHAREHOLDER:
You are cordially invited to attend our Annual Meeting of Shareholders,
which will be held at 10:00 a.m. (Central Daylight Time) on Thursday, April
23, 1998.
The meeting will be held at Cervantes Convention Center at America's
Center, Lecture Hall, 701 Convention Plaza, St. Louis, Missouri. A special
card admitting you to the meeting is attached to the proxy. Please detach
and present it at the door when you arrive. If your shares are currently held
in the name of your broker, bank or other nominee and you wish to attend the
meeting, please provide proof of ownership to obtain an admission ticket
(e.g., a letter from your broker, bank or other nominee indicating that you
are the beneficial owner of MBI stock as of February 27, 1998, the record
date). Please mail the request and proof of ownership to Mercantile
Bancorporation Inc., Attn: Investor Relations, P. O. Box 524, St. Louis,
Missouri 63166.
The Notice of Annual Meeting, proxy statement and proxy card which
accompany this letter outline the matters on which action will be taken at
this meeting. The Board of Directors respectfully requests that you vote in
favor of each such matter.
Whether or not you are able to attend the meeting, we would appreciate
your dating, signing and mailing the enclosed proxy card as promptly as
convenient in the return envelope that is enclosed. If you do attend the
meeting, you may revoke your proxy and vote your shares in person.
Our Annual Report for 1997 accompanies these proxy materials.
Thank you for your continued support.
Sincerely,
<PAGE> 3
Notice: Mercantile
Annual Meeting Bancorporation
of Shareholders Inc.
April 23, 1998
The Annual Meeting of Shareholders of Mercantile Bancorporation Inc.
will be held at Cervantes Convention Center at America's Center, Lecture
Hall, 701 Convention Plaza, St. Louis, Missouri, on Thursday, April 23, 1998,
at 10:00 a.m., Central Daylight Time, for the following purposes:
1. To elect four directors in Class I for terms of three years
expiring in 2001.
2. To consider and vote on a proposal to amend the Restated Articles
of Incorporation of the Corporation ("Mercantile's Restated
Articles") to increase the authorized Mercantile Common Stock,
$0.01 par value per share, from 200,000,000 to 400,000,000
shares;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on February 27,
1998, are entitled to notice of and to vote at the meeting.
THOMAS H. JACOBSEN
Chairman of the Board, President
and Chief Executive Officer
March --, 1998
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<PAGE> 4
Proxy Mercantile
Statement Bancorporation
Inc.
This proxy statement and the form of proxy are furnished in connection
with the solicitation of proxies by the Board of Directors of Mercantile
Bancorporation Inc. ("Mercantile" or the "Corporation") to be voted at the
Annual Meeting of Shareholders to be held on Thursday, April 23, 1998 on the
matters set forth in the accompanying Notice of Annual Meeting. Any
shareholder giving a proxy may revoke it at any time prior to its being
voted. Revocation may be made effective by giving a later dated proxy or
written notice of revocation to the Secretary or to the election inspectors
for the Annual Meeting of Shareholders at any time prior to the time the
proxy is voted. Unless so revoked, all shares represented by proxies in the
enclosed form that are properly executed and received in time for the vote
will be voted.
Mercantile will bear the entire cost of soliciting proxies in the
enclosed form. Solicitation will be by mail. Directors and officers of
Mercantile and its subsidiaries may solicit proxies personally, by telephone
or other means, but such persons will not be specially compensated for such
services. Mercantile has retained Morrow & Co. to assist in the solicitation
of proxies on its behalf for a fee of approximately $7,500 plus expenses.
Only shareholders of record at the close of business on February 27,
1998 (the "Record Date"), are entitled to notice of and to vote at the Annual
Meeting. On that date there were -------------- shares of Mercantile's
Common Stock outstanding, with each share being entitled to one vote. The
election inspectors will treat abstentions as shares that are present and
voting for purposes of determining the presence of a quorum and the approval
of any matter submitted to the shareholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and voting with respect to that matter.
Cumulative voting, as required by Mercantile's By-Laws, is applicable
to all elections of directors. In the election of directors, this means that
a shareholder is entitled to cast as many votes as shall equal the number of
shares of Common Stock of Mercantile owned multiplied by four, the number of
directors to be elected at this Annual Meeting. A shareholder may cast all
votes for a single candidate or may distribute them among two or more
candidates as the shareholder may decide. Each duly executed proxy in the
form enclosed will be voted equally for all nominees as listed on such proxy,
unless otherwise directed in the proxy. If a shareholder gives a proxy in
the form enclosed but withholds authority to vote for one or more of the
nominees listed on the proxy, the number of votes represented by such
shareholder's proxy shall be divided equally, to the extent practicable
without creating fractional votes, among the remaining nominees, unless
otherwise directed in the proxy.
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<PAGE> 5
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth the name and address of each beneficial
owner of five percent or more of Mercantile's Common Stock known to
Mercantile, showing the amount and nature of such beneficial ownership and
percent of class:
<TABLE>
<CAPTION>
PERCENT OF
CLASS OF
COMMON
NAME AND ADDRESS AMOUNT AND NATURE STOCK, $0.01 PAR
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP VALUE<F1>
------------------- ----------------------- ----------------
<S> <C> <C> <C>
Mercantile Bank National Sole Voting Power ---------
Association<F2> Shared Voting Power ---------
("Mercantile Bank" or "MBNA") Sole Investment Power ---------
P.O. Box 387 Shared Investment Power ---------
St. Louis, Missouri 63166 Total --------- ----%
Mr. Frank Lyon, Jr.<F3> Sole Voting Power 6,763,826
One Riverfront Place Shared Voting Power 0
Suite 400 Sole Investment Power 6,763,826
North Little Rock, Arkansas 72114 Shared Investment Power 0
Total 6,763,826 ----%
<FN>
- --------------------
<F1> Based upon ---------- shares outstanding at February 27, 1998.
<F2> Includes shares beneficially owned as of February 27, 1998, by
Mercantile Bank National Association ("Mercantile Bank") and certain
other affiliates of Mercantile. Mercantile has been advised that the
shares held as sole fiduciary by Mercantile Bank and such affiliates
will be voted at the Annual Meeting for each of the persons nominated
by the Board of Directors for election as a director and for the
proposal to amend Mercantile's Restated Articles to increase the number
of authorized shares of Mercantile's Common Stock. Mercantile Bank and
such affiliates will also recommend to all co-trustees and co-executors
that they vote in a similar manner.
<F3> Based upon information contained in a Schedule 13G dated February --,
1998, as amended, and filed with the Securities and Exchange
Commission, Frank Lyon, Jr. is the indirect beneficial owner of such
shares, which are held of record by the Lyon 72/95 Limited Partnership
(2,702,854 shares) and the Lyon 87/95 Limited Partnership (4,059,472
shares), and by Frank Lyon, Jr. in the form of stock options that are
currently exercisable (1,500 shares).
</TABLE>
ITEM 1. ELECTION OF DIRECTORS
One of the purposes of the Annual Meeting is to elect four directors in
Class I to serve for terms of three years expiring in 2001. The persons
named on the enclosed form of proxy intend to vote all duly executed proxies
received "FOR" The election to the Board of Directors of each of the
nominees, except as otherwise directed in any proxy. The four nominees
receiving the highest number of votes in the Class I election will be elected
as Class I directors. Each of the nominees for election as directors in Class
I is currently a director of Mercantile.
In the event any nominee declines or is unable to serve, it is intended
that the proxies for the election of such nominee will be voted for a
successor nominee designated by the Board of Directors. The Board of
Directors has no reason to believe that any nominee will decline or be unable
to serve if elected.
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<PAGE> 6
The name, age as of the date of the Annual Meeting, principal
occupation or position and other directorships with respect to the nominees
and the other directors whose terms of office as directors will continue
after the Annual Meeting are set forth below. Each of the directors has held
the currently listed position or another executive position with the same
employer for more than five years except as set forth beside his or her name.
CLASS I---TO BE ELECTED FOR A TERM OF THREE YEARS
EXPIRING IN 2001
HARRY M. CORNELL, JR., 69 - Director beginning in 1991; Chairman,
Chief Executive Officer and Director of Leggett & Platt, Inc., manufacturer
of components used primarily in the furniture and bedding industry; Director
of Ennis Business Forms, Inc.
FRANK LYON, JR., 56 - Director beginning in 1995; private investor.
Mr. Lyon served as Chairman of Mercantile Bank of Arkansas and its
predecessor holding company, TCBankshares Inc., for more than five years
prior to May 1995.
HARVEY SALIGMAN, 59 - Director beginning in 1982; General Partner
of Cynwyd Investments, real estate investment company, since August 1996;
Director of Ameren Corporation. Mr. Saligman served as Managing Partner of
Cynwyd Investments for more than five years prior to August 1996.
JOHN A. WRIGHT, 55 - Director beginning in 1986; President and
Chief Executive Officer of Woodridge Resources Corporation, natural resources
investment firm, since January 1997. Mr. Wright served as President and
Chief Executive Officer of Big River Mineral Corp. for more than five years
prior to January 1997.
CLASS II---TO CONTINUE IN OFFICE UNTIL 1999
WILLIAM A. HALL, 52 - Director beginning in 1993; Assistant to the
Chairman, Hallmark Cards, Inc., manufacturer of greeting cards and related
products.
DR. HENRY GIVENS, 63 - Director beginning in 1998; President of
Harris-Stowe State College, educational institution; Director of Laclede Gas
Company.
ROBERT W. MURRAY, 63 - Director beginning in 1996; Chairman of the
Board of Mercantile Bank of Western Iowa-Polk County since January 1996. Mr.
Murray served as Chairman and Chief Executive Officer of Hawkeye
Bancorporation from April 1991 to January 1996, and in various other
capacities with Hawkeye Bancorporation prior thereto.
CRAIG D. SCHNUCK, 49 - Director beginning in 1991; Chairman, Chief
Executive Officer and Director of Schnuck Markets, Inc., retail supermarket
chain; Director of Edison Brothers Stores, Inc. and General American Life
Insurance Company.
CLASS III---TO CONTINUE IN OFFICE UNTIL 2000
RICHARD E. BEUMER, 60 - Director beginning in 1997; Chairman and
Chief Executive Officer, Sverdrup Corporation, a design and construction
firm; Director of Aid Association for Lutherans and Laclede Gas Company.
- 5 -
<PAGE> 7
THOMAS H. JACOBSEN, 58 - Director beginning in 1989; Chairman of
the Board, President and Chief Executive Officer of Mercantile; Director of
Trans World Airlines, Inc.
ALVIN J. SITEMAN, 69 - Director beginning in 1997; President and
Director, Flash Oil Corporation, petroleum product distributor and, since
April 1997, Chairman of Mercantile's St. Louis banking unit; Director of
Instituform Technologies, Inc.
PATRICK T. STOKES, 55 - Director beginning in 1992; President of
Anheuser-Busch, Inc., brewer of beer and other malt beverages.
BOARD OF DIRECTORS AND COMMITTEES
During 1997 there were six meetings of the Board of Directors. All of
the directors attended not less than 75% of the aggregate number of meetings
of the Board of Directors and of the committees on which they served during
the year, except Craig D. Schnuck.
The standing committees of the Board of Directors in 1997 included the
Audit Committee, the Business Policy Committee, the Compensation and
Management Development Committee, the Executive Committee and the Nominating
and Board Affairs Committee.
The members of the Audit Committee are Messrs. John A. Wright,
Chairman, Richard E. Beumer and William A. Hall. The Audit Committee met
three times in 1997. The duties of the Audit Committee include meeting with
the independent auditors, management, internal auditors and credit review
personnel periodically to review the work of each and ensure that each is
properly discharging its responsibilities.
The members of the Business Policy Committee are Messrs. Patrick T.
Stokes, Chairman, Robert W. Murray, Craig D. Schnuck, Alvin J. Siteman, and
Robert L. Stark<F1>. The Business Policy Committee met five times in 1997.
The Business Policy Committee, among other things, reviews bank and non-bank
service and product offerings and regulatory agency-imposed or other legally
required credit and noncredit-related policies, guidelines and procedures.
The members of the Compensation and Management Development Committee are
Messrs. Harry M. Cornell, Jr., Chairman, Thomas A. Hays<F1>, Frank Lyon, Jr.
and Harvey Saligman. The Compensation and Management Development Committee,
which met four times in 1997, reviews and approves the salaries of executive
officers of the Corporation and Mercantile Bank, as well as selected other
senior officers of the Corporation and its affiliates, and authorizes all
other forms of executive compensation. The Compensation and Management
Development Committee administers Mercantile's executive incentive plans.
The members of the Executive Committee are Messrs. Thomas H. Jacobsen,
Chairman, Harry M Cornell, Jr., Thomas A. Hays, Patrick T. Stokes, and John
A. Wright. The Executive Committee may exercise all powers of the Board of
Directors which may lawfully be delegated when the Board of Directors is not
in session. The Executive Committee met three times in 1997.
The members of the Nominating and Board Affairs Committee, which proposes
nominees for election to the Board of Directors, are Messrs. Thomas A. Hays,
Chairman, Harry M. Cornell, Jr. and Thomas H. Jacobsen. The Nominating and
Board Affairs Committee will consider written recommendations of shareholders
with regard to potential nominees. Shareholder recommendations must
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<PAGE> 8
contain certain information regarding the potential nominee and comply with
certain requirements for presentation as set forth in Mercantile's By-Laws. The
Nominating and Board Affairs Committee met four times in 1997.
[FN]
- --------------------
<F1> Messrs. Hays and Stark will be retiring from the Board of
Directors of the Corporation effective as of the date of the Annual Meeting
of Shareholders.
DIRECTORS' FEES
Directors who are not officers of Mercantile or any of its subsidiaries
are paid an annual retainer of $15,000 ($17,000 for Committee Chairmen), as
well as $1,000 for attendance at each meeting of the Board of Directors and
$1,000 for attendance at meetings of its standing committees.
Pursuant to the Mercantile Bancorporation Inc. Amended and Restated
Stock Incentive Plan for Non-Employee Directors (the "Director Plan"), each
director not otherwise employed by Mercantile and its subsidiaries receives,
at the time of the Annual Meeting, as additional consideration for services
rendered or to be rendered to the Corporation, (a) an option to acquire 1,000
shares of Mercantile's Common Stock with an exercise price equal to the "Fair
Market Value" of Mercantile's Common Stock (as defined in the Director Plan)
at the time of the award ("Stock Options"), and (b) stock units ("Stock
Units"), each of which is the equivalent of one share of Mercantile's Common
Stock, equal in amount to 250, or, if less, the number obtained by dividing
Twenty Thousand Dollars by the Fair Market Value of Mercantile's Common Stock
at the time of the award. The Stock Options first become exercisable six
months after the date of the grant (or earlier in the event of a change in
control of Mercantile) and remain exercisable over a term of ten years from
the date of grant or, if earlier, over a term of three years following
termination of service as a director. Stock Units so awarded are credited to
accounts (each a "Stock Unit Account") established by Mercantile for the
benefit of each non-employee director. Quarterly awards of Stock Units are
also made at the time dividends are payable in respect of Mercantile's Common
Stock. The amount of such quarterly awards equals (x) the product of the
per-share dividend payable with respect to Mercantile's Common Stock on the
date of the award, multiplied by the number of Stock Units previously
credited to a director's Stock Unit Account, divided by (y) the Fair Market
Value of a share of Mercantile's Common Stock on that date. During 1997,
non-employee directors received a total of 15,000 Stock Options and 5,630
Stock Units in annual and quarterly awards.
In addition, pursuant to the Director Plan, a non-employee director can
elect to defer until after the termination of services as a director (or
earlier in the event of a change in control of Mercantile) the receipt of all
or a portion of the retainer and/or fees to which such director is entitled
to receive in cash. Amounts so deferred will be credited, at the option of
the electing director, to either (a) an interest-bearing cash account
established by Mercantile for the benefit of such director (each a "Cash
Account") which will be adjusted for gains or losses based upon an investment
index selected by such director, or (b) such director's Stock Unit Account.
Deferred cash amounts credited to a Stock Unit Account will be
contemporaneously converted to Stock Units on a Fair Market Value-equivalent
basis and, thereafter, will be treated as Stock Units in all respects.
The total number of Stock Units in a non-employee director's Stock Unit
Account and funds, if any, credited to such director's Cash Account shall be
distributed to the director in the form of an equivalent number of shares of
Mercantile's Common Stock and in cash, respectively, following the
termination of service of such director (or earlier in the event of a change
in control of Mercantile). In lieu of fractional shares of Mercantile's
Common Stock, each director who otherwise would be entitled to receive
fractional shares in respect of Stock Units will receive cash in an amount
determined by
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<PAGE> 9
multiplying the fractional share interest to which such director would otherwise
be entitled by the then Fair Market Value thereof.
BENEFICIAL OWNERSHIP OF STOCK BY MANAGEMENT
The following information is furnished as of February 27, 1998, to
indicate beneficial ownership of shares of Mercantile's Common Stock by each
director, by each nominee for director and by each executive officer named in
the Summary Compensation Table, individually, and all directors, nominees and
executive officers as a group:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED<F1> STOCK UNITS<F2>
------------------------ ---------------------- ---------------
<S> <C> <C>
Richard E. Beumer ------------- -------------
Harry M. Cornell, Jr. -------------<F3> -------------
Dr. Henry Givens, Jr. ------------- -------------
William A. Hall -------------<F3>,<F4> -------------
Thomas H. Jacobsen -------------<F5> -------------
Frank Lyon, Jr. -------------<F3>,<F6> -------------
Robert W. Murray -------------<F3> -------------
Harvey Saligman -------------<F3>,<F7> -------------
Craig D. Schnuck -------------<F3>,<F8> -------------
Alvin J. Siteman -------------<F9> -------------
Patrick T. Stokes -------------<F3> -------------
John A. Wright -------------<F3>,<F10> -------------
W. Randolph Adams -------------<F11>,<F12> -------------
John Q. Arnold -------------<F12>,<F13> -------------
Richard C. King -------------<F12>,<F14> -------------
John W. McClure -------------<F12> -------------
Directors and executive
officers as a group (-- persons) -------------<F12> -------------
<FN>
- --------------------
<F1> Based on ---------- shares outstanding as of February 27, 1998,
director Frank Lyon, Jr. indirectly beneficially owned ---- percent of
the outstanding Common Stock and director Alvin J. Siteman beneficially
owned ------ percent of the outstanding Common Stock. No other
director or executive officer beneficially owned in excess of one
percent of the outstanding Common Stock. All directors and executive
officers as a group beneficially owned ---% of the outstanding Common
Stock and outstanding options exercisable within 60 days of the Record
Date. Unless otherwise noted, each individual named has sole voting
and investment power with respect to all shares listed as beneficially
owned.
<F2> Includes Stock Units held in deferred compensation accounts and, where
applicable, in Supplemental Employee Retirement Plan accounts. Stock
Units are convertible into an equal number of shares of Mercantile's
Common Stock.
<F3> The total set forth in the table above also includes 1,500 shares
subject to stock options held by the director that are presently
exercisable.
<F4> Mr. Hall holds all of the shares included above in the William Austin
Hall Revocable Trust.
<F5> Mr. Jacobsen holds 299,850 shares included above that are restricted
shares subject to forfeiture and reversion back to Mercantile in the
event that Mr. Jacobsen terminates his employment with Mercantile
during specified time periods. Mr. Jacobsen holds ------- shares
included above in a trust of which Mr. Jacobsen is trustee. The total
set forth in the table above also includes 630,074
- 8 -
<PAGE> 10
shares subject to stock options held by Mr. Jacobsen that are either
presently exercisable or which are exercisable within 60 days of the
Record Date.
<F6> Mr. Lyon holds all of the shares included above in two limited
partnerships, the limited partner and sole shareholder of the corporate
general partner of each being revocable trusts of which Mr. Lyon is the
grantor, trustee, and beneficiary.
<F7> Mr. Saligman has disclaimed beneficial ownership of ---------- shares
included above which are owned by his wife and ---------- shares
included above which are owned by his wife as custodian for three
children. Mr. Saligman has no voting or investment power with respect
to these shares.
<F8> Mr. Schnuck holds all of the shares included above jointly with his
wife. Mr. Schnuck has shared voting and investment power with respect
to these shares.
<F9> Mr. Siteman------------------------------------------------------------.
<F10> Mr. Wright holds all of the shares included above jointly with his
wife. Mr. Wright has shared voting and investment power with respect to
these shares.
<F11> Mr. Adams holds shares included above jointly with his wife. Mr.
Adams has shared voting and investment power with respect to these
shares.
<F12> As of February 27, 1998, Messrs. Adams, Arnold, King and McClure, and
all directors and executive officers as a group held 45,000, 55,000,
41,875, 47,500 and 679,765 shares, respectively, included above that
are restricted shares subject to forfeiture by and reversion back to
Mercantile in the event that the executive officer terminates his
employment with Mercantile during specified time periods. The totals
set forth in the table above also include 54,551, 71,025, 59,775,
112,875 and 1,533,103 shares subject to stock options held by Messrs.
Adams, Arnold, King and McClure, and all directors, and executive
officers as a group, respectively, that are either presently
exercisable or which are exercisable within 60 days of the Record Date.
<F13> Mr. Arnold -------------------------------------------.
<F14> Mr. King disclaims beneficial ownership of a total of ----------
shares, ---------- of which are held by a family trust, ---------- of
which are held by his wife as custodian for his daughter, and
---------- of which are held in an irrevocable trust for the benefit of
his son.
</TABLE>
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT TO SHAREHOLDERS REGARDING EXECUTIVE COMPENSATION
OVERALL POLICY
The design of Mercantile's executive compensation program links the
compensation of its executives directly to achievement of specific corporate
and/or business unit performance goals and returns to shareholders. The
overall objectives in this strategy are to attract and retain the best
possible executive talent, to motivate these executives to achieve the goals
contained in Mercantile's business strategy, to link executive and
shareholder interests through equity-based plans and to provide a
compensation package that recognizes and rewards individual contributions,
including job performance, as well as overall business results. While the
strongest competitors for executive talent are believed to be regional bank
holding companies with assets of greater than $30 billion located throughout
the United States, competitor companies for certain executive positions may
be non-banking companies.
During 1997, the Compensation and Management Development Committee (the
"Committee") conducted a comprehensive review of Mercantile's executive
compensation program. This review included an assessment of the market
competitiveness of base salaries, annual cash incentives and long-term
equity-based compensation of its executives and a relative comparison of
corporate performance and total return to shareholders to the bank holding
companies included in the Keefe, Bruyette & Woods 50 Index (the "KBW 50
Index"), which consists of 50 of the larger United States bank holding
companies.
The Committee determines the compensation of all of the executive
officers who report to Mr. Jacobsen and serve on Mercantile's Management
Executive Committee ("senior management officers"),
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<PAGE> 11
including the named executive officers whose compensation is detailed in this
proxy statement. The Committee also approves the design of compensation policies
for approximately 285 other officers, who are the next most highly compensated
officers of Mercantile and its subsidiaries. In reviewing the individual
performance of the officers whose compensation is detailed in this proxy
statement (other than Mr. Jacobsen), the Committee takes into account the views
of Mr. Jacobsen.
The key elements of Mercantile's executive compensation program consist
of base salary, annual performance-based cash incentives and stock-based
incentives, such as stock options, restricted performance units and
restricted stock. While the elements of compensation are considered
separately, the Committee's policies take into account the total compensation
package of each senior management officer, including pension benefits,
supplemental retirement benefits, insurance and other benefits. The
Committee's policies with respect to each element of executive compensation
are discussed below.
BASE SALARIES
Base salaries for senior management officers are initially determined
by evaluating the responsibilities of the position held and the skills,
knowledge and experience of the individual, and by referring to the
competitive marketplace for executive talent, including a comparison of base
salaries for comparable positions at other companies deemed to be competitors
of Mercantile in the hiring and retention of comparable executive officers.
Since there is a positive correlation between the asset size of banking
institutions and the salaries of senior management officers, Mercantile
targets base salary levels for senior management officers by comparison to
average salaries paid for comparable positions with banks included in the KBW
50 Index on an asset-size adjusted basis.
Individual salary adjustments for senior management officers are
determined annually by evaluating the performance of each officer and the
performance of the business unit for which he/she is responsible (e.g. annual
and long-term net income, overhead, expense-to-assets ratio, return on assets
and return on equity goals) during the preceding year and, when applicable,
taking into account new responsibilities assigned to the officer during the
year. For 1997, senior management officers excluding Mr. Jacobsen received
average base salary increases of 8.7% over their prior base salary levels.
The assets of Mercantile grew by 50% during the two-year period ended
December 31, 1996. The base salary paid to Mr. Jacobsen in 1997 was
increased by 15% over 1996 to ensure a base salary which is competitive in
the external marketplace on an asset-size adjusted basis. The increase is
also reflective of Mercantile's success in meeting its financial goals in
1996 and the Committee's assessment of Mr. Jacobsen's individual performance.
ANNUAL INCENTIVES
Each senior management officer is eligible for an annual cash incentive
award. This cash award is designed to provide an incentive for the
participating senior management officers to achieve annual performance goals
which are based on individual, business unit and corporate measures. For
1997, the target opportunities for such officers, expressed as a percent of
base salary, were based upon the median of incentive opportunities for
similar positions at the companies included in the KBW 50 Index. Performance
objectives for the funding of the annual incentive target opportunities were
based on achievement of earnings per share and return on asset goals set by
the Committee during the first quarter of 1997. Additionally, each officer
was given specific objectives with respect to the Corporation, business unit
and individual performance, including, but not limited to, return on equity,
asset growth, asset quality, deposit growth and productivity improvement.
Incentive awards reflect the degree to which 1997 objectives were met. Mr.
Jacobsen participates in Mercantile's Amended and Restated Executive
Incentive Compensation Plan, which was approved by the shareholders at the
1997 Annual Meeting of Shareholders. For 1997, Mr. Jacobsen's incentive
target was based on the Corporation's achievement of strategic objectives for
earnings per share, return on assets, productivity improvement, net interest
margin, and total shareholder return. His incentive award reflects the
degree to which the objectives were met.
STOCK-BASED INCENTIVES
Under Mercantile's Amended and Restated Stock Incentive Plan, approved
by the shareholders at the 1997 Annual Meeting of Shareholders, stock
options, restricted performance units and restricted
- 10 -
<PAGE> 12
stock may be granted to senior management officers. The Committee sets
guidelines for the size of stock option, restricted performance unit and
restricted stock awards based on the responsibilities of the position held, the
skills, knowledge and experience of the senior management officer, competitive
compensation data from the peer group and the Corporation's financial
performance. Stock-based, long-term incentives are targeted to the 75th
percentile practices of the companies included in the KBW 50 Index. While such
stock-based incentives primarily reflect competitive practices, past incentive
awards are also considered.
Stock options, restricted performance units and restricted stock are
designed to align the interests of senior management officers with those of
the shareholders. Stock options are granted with an exercise price equal to
the market price of the Common Stock on the date of grant and generally vest
over four or five years beginning one year following the date of grant. The
stock option grants in 1997 for Mr. Jacobsen and other senior management
officers were two-year front loaded grants. These options will vest over a
five-year period. Options granted under the current and certain prior stock
incentive plans of the Corporation are eligible for reload grants. A reload
is a new stock option granted, on a one-for-one basis, when currently-owned
shares of Common Stock are tendered to fund stock option exercises. Reload
options have an exercise price equal to the market price of the Common Stock
on the date of grant, vest one year from such date and have a term equal to
the remaining life of the option to which they relate. Restricted
performance units and/or restricted stock are generally awarded to a senior
management officer in recognition of his or her value to the Corporation and
as a means to ensure his or her continued service. Restricted performance
units typically vest over a period of at least three years, while restricted
stock awards typically vest over a period of at least five years. This
approach is designed to focus the executives on the creation of shareholder
value over the long term since the full benefit of the compensation package
cannot be realized unless stock price appreciation occurs over a number of
years.
In 1997, Mr. Jacobsen was awarded options to purchase 240,000 shares
with an exercise price of $34.9167 per share. Mr. Jacobsen received no
restricted performance unit or restricted stock awards in 1997.
EXECUTIVE STOCK OWNERSHIP GUIDELINES
In 1994, Mercantile adopted stock ownership guidelines for senior
management officers. Officers as of January 1, 1994, have until December 31,
1998, to acquire the specified number of shares of Mercantile's Common Stock.
Those who become senior management officers after that date have five years
thereafter to acquire the specified number of shares. The guidelines for Mr.
Jacobsen and line and staff senior management officers are 118,125; 29,700;
and 16,200 shares, respectively.
DEDUCTIBILITY OF EXECUTIVE OFFICER COMPENSATION
The Committee's policy with respect to the tax deductibility of
executive compensation in excess of $1 million is to structure benefit plans
in such a manner that permits the deductibility of such compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")
when Mercantile can do so without material change to its overall compensation
program.
THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
HARRY M. CORNELL, JR.
(CHAIRMAN)
THOMAS A. HAYS FRANK LYON, JR. HARVEY SALIGMAN
- 11 -
<PAGE> 13
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for each of the last three years:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- ---------------------------------
RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING PAY- COMPEN-
SALARY BONUS COMPENSATION AWARDS<F1> OPTIONS OUTS<F2> SATION<F3>
NAME & PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------- ---- ------ ----- ------------ ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas H. Jacobsen......... 1997 728,000 863,226 79,092 0 240,000 0 121,592
Chairman of the Board, 1996 633,000 554,318 79,126 0 0 568,506 121,700
President and Chief 1995 573,600 516,240 68,835 2,737,500 0 0 118,330
Executive Officer
W. Randolph Adams......... 1997 354,700 289,081 17,645 0 90,401 0 39,976
Senior Executive Vice 1996 337,800 87,828 21,265 0 0 184,795 47,880
President - Administration 1995 268,763 147,819 13,024 855,000 0 0 40,356
John Q. Arnold............ 1997 312,000 240,714 23,107 0 75,000 0 41,423
Vice Chairman and Chief 1996 249,600 120,998 16,027 0 0 142,141 37,640
Financial Officer 1995 219,175 119,855 12,654 855,000 0 0 32,187
Richard C. King.............. 1997 326,600 302,105 12,147 0 75,000 0 46,785
President - Mercantile Bank 1996 284,000 142,000 11,414 0 0 142,141 47,765
1995 273,000 163,800 8,294 641,250 0 0 44,579
John W. McClure............. 1997 371,600 230,226 21,144 0 75,000 0 52,300
Vice Chairman, Financial 1996 337,800 211,455 18,629 0 0 184,795 47,392
Advisory Services 1995 268,763 161,257 14,778 855,000 0 0 37,663
<FN>
- --------------------
<F1> Restricted stock awarded to Mr. Jacobsen vests at the rate of 25% of
total shares each year, commencing forty-three months from the date of
issuance. Restricted stock awarded to Messrs. Adams, Arnold, McClure
and King vests at the rate of 25% of total shares each year, commencing
three years from the date of issuance in the case of Messrs. Adams and
Arnold and two years from the date of issuance in the case of King and
McClure. As of December 31,1997, Messrs. Jacobsen, Adams, Arnold, King
and McClure held an aggregate of 149,850, 30,000, 30,000, 16,875, and
22,500 shares of restricted stock, respectively (including the
restricted stock awards referred to in the table), having an aggregate
value on such date of $9,215,775, $1,845,000, $1,845,000, $1,037,813
and $1,383,750, respectively. Holders of shares of restricted stock
will receive dividends on such shares during the period of restriction.
<F2> No Restricted Performance Unit payouts were made in 1997.
<F3> Included in the totals set forth in this column in respect of Messrs.
Jacobsen, Adams, Arnold, King and McClure are the profit sharing and/or
matching contributions of $80,619, $26,794, $26,163, $31,605 and
$35,232, for their respective accounts under Mercantile's Horizon
Savings and Incentive Plan, Supplemental Savings Plan and Stock
Purchase Plan, and premiums of $40,973, $13,182, $15,260, $15,180, and
$17,068 paid by Mercantile on non-split dollar life insurance policies
for such officers, respectively, under Mercantile's Management Life
Insurance Plan.
</TABLE>
- 12 -
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option
grants made in the fiscal year ended December 31, 1997 to the individuals
named in the Summary Compensation Table:
<TABLE>
<CAPTION>
INDIVIDUAL GRANT VALUES
GRANT DATE
PERCENT OF VALUE
NUMBER OF TOTAL ----------
SECURITIES OPTIONS/SARs GRANT DATE
UNDERLYING GRANTED EXERCISE OR PRESENT
OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION VALUE<F2>
NAME GRANTED<F1> (#) FISCAL YEAR ($/SH) DATE (&)
---- --------------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Thomas H. Jacobsen 240,000 13.72 $34.92 1/20/07 2,178,135
W. Randolph Adams 75,000 4.32 34.92 1/20/07 680,668
15,401<F3> .88 58.31 1/20/03 178,498
John Q. Arnold 75,000 4.29 34.92 1/20/07 680,668
Richard C. King 75,000 4.29 34.92 1/20/07 680,668
John W. McClure 75,000 4.29 34.92 1/20/07 680,668
<FN>
- --------------------
<F1> The exercise price may be paid in cash or by such other method
permitted by the Committee, including (a) tendering (either actually or
by attestation) shares of Mercantile's Common Stock already owned
having a fair market value equal to the cash exercise price of the
option being exercised, (b) surrendering another Mercantile stock award
having a fair market value on the date of exercise equal to the cash
exercise price of the option being exercised, or (c) any combination of
the foregoing. Options generally terminate on the earlier of: ten
years after grant; immediately on involuntary termination of employment
for cause or voluntary termination of employment without written
consent of Mercantile; twelve months after termination of employment
for disability; eighteen months after termination by reason of death;
thirty-six months after termination by reason of retirement; or three
months after termination for any other reason. Upon a change in
control of Mercantile, all options become fully exercisable and include
optional SARs for six months and one week following the change in
control, whereby the optionee may elect to receive in cash the spread
between the exercise price of the optionee's option and the higher of
the fair market value of Mercantile's Common Stock (or the equivalent
securities of the acquiring company) on the date of surrender, or, in
certain circumstances, the highest price per share paid for Mercantile
Common Stock in the change in control transaction or transactions.
<F2> Option values are based upon the Black-Scholes option pricing model.
Such model assumes: (a) an option term of 10 years; (b) an expected
risk-free rate of 6.13%; (c) a time weighted volatility of .2980,
calculated using daily stock prices for the 5 calendar years prior to
the grant date; (d) a time weighted dividend yield of 2.85%, also based
on the five-year quarterly data prior to the grant; and (e) the expected
option life of 1.4 years from the vesting date.
<F3> Represents reload stock options granted in 1997 in amount equal to the
number of shares of Common Stock tendered to fund stock option
exercises effected by such option holder during such period.
</TABLE>
- 13 -
<PAGE> 15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
The following table sets forth information concerning option exercises
in the fiscal year ended December 31, 1997, and options remaining unexercised
at December 31, 1997, by the individuals named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTIONS/SARs AT
FISCAL YEAR-END (#) FISCAL YEAR-END<F1> ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Thomas H. Jacobsen 0 $ 0 549,674/ $24,194,951/
337,200 10,251,789
W. Randolph Adams 41,450 1,518,968 29,426/ 1,228,395/
120,776 3,252,775
John Q. Arnold 0 0 48,600/ 2,048,398/
97,275 2,881,034
Richard C. King 0 0 37,350/ 1,487,774/
97,275 2,881,034
John W. McClure 0 0 95,625/ 4,071,810/
105,375 3,203,684
<FN>
- --------------------
<F1> Based on a price per share of $61.50, being the closing price on the
New York Stock Exchange on December 31, 1997 (1997 fiscal year end) as
reported in the Wall Street Journal.
</TABLE>
- 14 -
<PAGE> 16
EMPLOYMENT ARRANGEMENTS
None of the senior management officers of Mercantile, including those
named in the Summary Compensation Tables, are parties to any employment
agreements with the Corporation, except Mr. Jacobsen, Stanley J. Bradshaw,
Group President-Retail, and John P. Dubinsky, Chairman, Mercantile Bank. The
agreements pertaining to Messrs. Jacobsen, Bradshaw and Dubinsky provide that
if the named officer's employment is terminated prior to the end of the term
of such officer's agreement by such officer for specified reasons or by
Mercantile for any reason other than death, disability or cause, Mercantile
will be obligated, among other things, to pay the then-current base salary
and bonus of such officer and all benefits for the remaining term of the
agreement or, in the case of Mr. Dubinsky, an amount equivalent to
approximately two years base salary and bonus, except that in the case of
termination of Mr. Jacobsen's employment by Mercantile as a result of certain
specified non-performance events, Mr. Jacobsen will receive an amount
equivalent to his then-current base salary and bonus for a period of three
years or the remaining term of the employment agreement (October 31, 2004),
whichever is less.
Each of the officers named in the Summary Compensation Table and
certain other senior management officers are protected by substantively
similar contractual provisions from a decrease in compensation, benefits,
title or duties following a change in control of Mercantile. Under such
provisions, each such officer will be entitled to receive an amount equal to
such officer's then-current annual base salary and annual bonus in the event
that such officer remains employed with Mercantile through the first
anniversary of the change in control. Such agreements additionally provide
that if there is a decrease in compensation or responsibilities of such
officer or if such officer's employment is terminated for any reason other
than for "cause" (as defined in the respective agreements) or if such officer
resigns for good reason (or in the case of Mr. Jacobsen, if Mr. Jacobsen
resigns for any reason within 13 months) after a change in control,
Mercantile will be obligated to pay a lump-sum amount equal to twice such
officer's then-current annual base salary and annual bonus (or in the case of
Mr. Jacobsen, a lump-sum payment equal to his annual base salary and bonus
for the remaining term of the employment agreement or for two years,
whichever is greater), plus the value of certain other retirement benefits
and other payments foregone due to the termination, and to continue all
employee benefits through the remaining term of the agreement. If it is
determined that any payments made to an officer pursuant to this agreement
would subject such officer to an excise tax pursuant to Section 4999 of the
Code, Mercantile will also be obligated to pay to such officer an additional
amount sufficient to put the officer in the same after-tax position as he
would have been in had no excise tax been imposed on such payment.
RETIREMENT PLANS
The following table shows the estimated annual pension benefit payable
to a covered participant at normal retirement age (65) under Mercantile's
qualified Retirement Plan and Trust (the "Retirement Plan") as well as
Mercantile's nonqualified Supplemental Retirement Plan (the "Supplemental
Plan"). The Supplemental Plan provides benefits to certain participants that
would otherwise not be available to them by reason of certain Code
limitations on Retirement Plan benefits.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
YEARS OF SERVICE<F1><F2>
FINAL AVERAGE ----------------------------------------------------------------------------------
SALARY 10 15 20 25 30
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 450,000 $ 73,974 $110,961 $147,948 $184,936 $221,923
750,000 124,224 186,336 248,448 310,561 372,673
1,050,000 174,474 261,711 348,948 436,186 523,423
1,350,000 224,724 337,086 449,448 561,811 674,173
1,650,000 274,974 412,461 549,948 687,436 824,923
1,950,000 325,224 487,836 650,448 813,061 975,673
- 15 -
<PAGE> 17
<FN>
- --------------------
<F1> The credited years of service for the five individuals listed in the
Summary Compensation Table have been determined to be 18 for Mr.
Jacobsen, 6 for Mr. Adams, 6 for Mr. Arnold 5 for Mr. King, and 25 for
Mr. McClure.
<F2> The maximum amount payable under the Retirement Plan is limited by the
Code to $130,000 annually, subject to cost of living increases after
1998, certain transition rules applicable to benefits accrued before
July 1, 1982 and reduction by reason of contributions under
tax-qualified defined contribution plans maintained by Mercantile. To
the extent benefits under the Retirement Plan are limited by the Code,
they will be paid under the Supplemental Plan.
</TABLE>
Under these plans, eligible employees receive annual retirement
benefits based upon the highest "Average Annual Salary" received for any
period of 60 consecutive months preceding the date of termination of
employment (the "Final Average Annual Salary"). "Average Annual Salary" is
defined as all compensation received by a participant for personal services
performed for Mercantile or a subsidiary as an employee (other than
compensation pursuant to plans, which is specifically excluded by the terms
of the Retirement Plan and the Supplemental Plan). The compensation covered
by the definition of "Average Annual Salary" for each of the five individuals
named in the Summary Compensation Table is equal to the sum of the "Salary"
and "Bonus" columns of the Summary Compensation Table with respect to each
individual. The table above presents annual retirement benefits payable as a
single life annuity under both plans combined. Such retirement benefits are
not subject to reductions for social security benefits or other offset
amounts.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG MERCANTILE, S&P 500 AND KBW 50 INDICES
The following graph compares quarterly cumulative five-year shareholder
returns (including reinvestment of dividends) on an indexed basis with the
S&P 500 Stock Index and the Keefe, Bruyette & Woods 50 Index, which is
composed of 50 of the nation's larger banking companies, including all
money-center and most major regional banks:
[GRAPH INSERT]
--------------
<TABLE>
<CAPTION
PERIOD ENDING
--------------------------------------------------------------------
INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mercantile Bancorporation Inc. 100.00 96.45 103.56 157.29 181.72 334.69
S&P 500 100.00 110.08 111.53 153.44 188.52 251.44
KBW 50 100.00 105.54 100.16 160.41 227.85 331.73
</TABLE>
- 16 -
<PAGE> 18
ITEM 2. PROPOSAL TO AMEND THE RESTATED ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Board of Directors of the Corporation has approved a proposal to
amend Article 3 of Mercantile's Restated Articles to increase the number of
shares of Mercantile's Common Stock authorized thereunder from 200,000,000 to
400,000,000 and has directed that the proposal be submitted to the vote of
the shareholders at the Annual Meeting. Mercantile also has a class of
Preferred Stock authorized pursuant to Article 3 of its Restated Articles.
No change to the number of shares of Preferred Stock presently authorized is
being made pursuant to this proposed amendment.
On the Record Date, ------------------ shares of Mercantile's Common
Stock were issued and outstanding. Approximately ----------------- shares of
Common Stock were issued or reserved for issuance in connection with the
acquisition of HomeCorp, Inc., consummated on March 2, 1998. In addition,
approximately -------- shares of Common Stock will be issued or reserved for
issuance upon consummation of the pending acquisitions by Mercantile of CBT
Corporation and Firstbank of Illinois Co. Consummation of these acquisitions
is expected to occur, subject to receipt of all necessary regulatory and
shareholder approvals, later this year. In addition, approximately
- ------------- shares of Mercantile's Common Stock will be required to satisfy
Mercantile's potential obligations under its stock-based benefit plans.
Except as set forth above or in other acquisition transactions that may be in
the process of negotiation but not yet publicly announced, there are no
options, warrants, script, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible
into, shares of any Common Stock, or contracts, commitments, understandings
or arrangements by which the Corporation is or may become bound to issue
additional shares of Common Stock, or options, warrants or rights to purchase
or acquire any additional shares of Common Stock. Accordingly, without the
proposed amendment, the Corporation has approximately -----------------
authorized shares of its Common Stock that were not issued, reserved or
designated for issuance as disclosed above.
The additional shares of Common Stock for which authorization is sought
herein would be identical to the shares of Common Stock now authorized under
the Restated Articles. The authorized shares will be used from time to time
in connection with future acquisitions, stock dividends or split-ups, capital
raising, stock-based employee benefit plans and other stock requirements of
the Corporation. The proposed amendment could result in increasing the
number of shares that would have to be acquired by a party seeking to obtain
control of the Corporation, but would not otherwise affect the legal rights
of the shareholders of the outstanding shares of Common Stock.
The Board of Directors believes that it is in the best interests of the
Corporation and its shareholders to increase the number of authorized but
unissued shares of its Common Stock. The increase will provide a reserve of
shares available for issuance upon sole authorization of the Board of
Directors for any general corporate purpose.
The complete text of the proposed amendment to the Restated Articles is
set forth in Annex A to this Proxy Statement.
Adoption of the proposed amendment to Article 3 of the Restated
Articles will require the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT TO ARTICLE 3 OF THE
RESTATED ARTICLES.
- 17 -
<PAGE> 19
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The officers and directors of Mercantile are at present, as in the
past, customers of one or more of Mercantile's subsidiary banks and have had
and expect to have transactions with such banks in the ordinary course of
business. In addition, certain of the officers and directors of Mercantile
are at present, as in the past, also executive officers or principal
shareholders of corporations which are customers of such banks and which have
had and expect to have transactions with such banks in the ordinary course of
business. All such transactions were made in the ordinary course of
business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons, and did not involve more than normal risk of
collectibility or present other unfavorable or unusual features.
Frank Lyon, Jr., a director of Mercantile, held interests in entities
that leased at various times in 1997, seven office facilities to subsidiary
banks of Mercantile. Aggregate lease payments of approximately $405,332 were
paid in 1997 to such entities. Mercantile exercised options to purchase five
of these office facilities with the purchase price for each such facility
determined by separate fair market value appraisals. The purchases of the
properties were consummated in March and November 1997. The lease on one of
the facilities expired without renewal. Under the terms of the lease agreements
in respect of the remaining facility, aggregate lease payments for 1997 were
$264,263.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
Mercantile's directors and executive officers ("Reporting Persons") to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of Mercantile. To Mercantile's knowledge, based solely on its review of the
copies of such reports furnished to Mercantile and written representations by
such directors, nominees and executive officers that no other reports were
required, during the year ended December 31, 1997, all Section 16(a) filing
requirements applicable to Reporting Persons were timely met.
INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP has been selected as Mercantile's
independent auditor for 1998. Such firm was also Mercantile's independent
auditor for 1997. A representative of KPMG Peat Marwick LLP is expected to
be present at the Annual Meeting of Shareholders. The representative shall
have an opportunity to make a statement, if such representative desires to do
so, and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
All proposals of shareholders, including nominations of directors,
intended to be presented at the 1999 Annual Meeting of Shareholders must be
received in writing by the Corporate Secretary at Mercantile Bancorporation
Inc., P.O. Box 524, St. Louis, Missouri 63166-0524, by November -------,
1998, in order to be considered for inclusion in Mercantile's proxy statement
and proxy for the 1999 Annual Meeting.
- 18 -
<PAGE> 20
DISCRETIONARY AUTHORITY
The Board of Directors does not intend to present at the Annual Meeting
of Shareholders any business other than that referred to in the accompanying
Notice of Annual Meeting. It was not aware, as of a reasonable time before
this solicitation of proxies, of any other matters which may properly be
presented for action at the Annual Meeting. If any other matters should
properly come before the Annual Meeting, the persons named in the enclosed
form of proxy will have discretionary authority to vote the proxies in
accordance with their best judgment in the interest of Mercantile.
March -----, 1998
- --------------------------------------------------------------------------------
A COPY OF THE 1997 ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION BY MERCANTILE MAY BE OBTAINED BY ANY SHAREHOLDER, WITHOUT
CHARGE, UPON WRITTEN REQUEST TO JON W. BILSTROM, GENERAL COUNSEL AND SECRETARY,
MERCANTILE BANCORPORATION INC., P.O. BOX 524, ST. LOUIS, MISSOURI 63166-0524.
- --------------------------------------------------------------------------------
- 19 -
<PAGE> 21
February 19, 1998 - Preliminary Copy
------------------------------------
MERCANTILE BANCORPORATION INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) T.H. Jacobsen, J.Q. Arnold and J.W.
Bilstrom, and each of them, with or without the others, proxies, with full
power of substitution, to vote on the following matters as directed hereon
and in their discretion upon such other business as may properly come before
the meeting, all shares of stock of Mercantile Bancorporation Inc. (the
"Corporation") that the undersigned is entitled to vote at the Annual Meeting
of Shareholders of the Corporation to be held at the Cervantes Convention
Center at America's Center, Lecture Hall, 701 Convention Plaza, St. Louis,
Missouri, on Thursday, April 23, 1998, at 10:00 a.m., local time, and all
adjournments thereof, all in accordance with and as more fully described in
the Notice and accompanying Proxy Statement for such meeting, receipt of
which is hereby acknowledged.
1. Election of Class I Directors
Election of four Class I Directors to hold office for terms of three
years expiring in 2001 or until their successors shall have been duly
elected and qualified.
NOMINEES: HARRY M. CORNELL, JR., FRANK LYON, JR., HARVEY SALIGMAN AND
JOHN A. WRIGHT
2. Amendment to Increase Authorized Shares
Adoption of an amendment to the Mercantile Bancorporation Inc. Restated
Articles of Incorporation to increase the authorized number of shares
of common stock from 200,000,000 to 400,000,000.
3. In their discretion, upon any other business, including adjournments of
the meeting, which may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES AND THE PROPOSALS
LISTED. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
SEE REVERSE SIDE
<PAGE> 22
1. Election of Class I Directors (see reverse).
/ / FOR / / WITHHOLD ALL / / FOR ALL EXCEPT
For, except vote withheld from the following nominee(s):
- -----------------------------------------------------------------------
2. Amendment to Increase Authorized Shares (see reverse).
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, upon any other business which may properly come
before the meeting
/ / FOR / / AGAINST / / ABSTAIN
4. / / Check here if address change is noted.
----------------------------------------
----------------------------------------
----------------------------------------
5. / / Check here if you will attend the meeting.
Signature(s):___________________________________ Dated:_______________, 1998
_______________________________________________________________________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE> 23
APPENDIX
The information contained in the Comparison of Five-Year Cumulative Total
Return graph which appears on page 16 of the printed proxy is depicted in
the table immediately following the graph.
