<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:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
/X/ 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.:
- ------------------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------------------
(4) Date Filed:
- ------------------------------------------------------------------------------
<PAGE> 2
Mercantile P.O. Box 524 MERCANTILE
Bancorporation St. Louis, MO 63166-0524 LOGO
Inc.
THOMAS H. JACOBSEN
Chairman of the Board, President
and Chief Executive Officer
March 16, 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,
/S/ THOMAS H. JACOBSEN
<PAGE> 3
Notice: Mercantile MERCANTILE
Annual Meeting Bancorporation LOGO
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 16, 1998
3
<PAGE> 4
Proxy Mercantile MERCANTILE
Statement Bancorporation LOGO
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 133,748,539 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.
4
<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>
Mercantile Bank National Association<F2> Sole Voting Power........................... 7,712,354
("Mercantile Bank" or "MBNA") Shared Voting Power........................... 493,123
P.O. Box 387 Sole Investment Power....................... 6,739,685
St. Louis, Missouri 63166 Shared Investment Power..................... 2,138,889
Total.................................. 10,167,541 7.60%
Mr. Frank Lyon, Jr.<F3> Sole Voting Power........................... 6,763,823
One Riverfront Place Shared Voting Power................................. 0
Suite 400 Sole Investment Power....................... 6,763,823
North Little Rock, Arkansas 72114 Shared Investment Power............................. 0
Total................................... 6,763,823 5.06%
<FN>
- -----------
<F1>Based upon 133,748,539 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>Frank Lyon, Jr. is the indirect beneficial owner of 6,762,323 shares
included above which are held by the Lyon 72/95 Limited Partnership
(2,702,853 shares) and the Lyon 87/95 Limited Partnership (4,059,470
shares), and the direct beneficial owner of stock options that are
currently exercisable for 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.
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.
5
<PAGE> 6
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, 50--Director beginning in 1991; Chairman, Chief Executive
Officer and Director of Schnuck Markets, Inc., retail supermarket chain;
Director of 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, construction and scientific
services firm; Director of Aid Association for Lutherans and Laclede Gas
Company.
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, 70--Director beginning in 1997; President and Director,
Flash Oil Corporation and Site Oil Company of Missouri, petroleum product
distributors and, since April 1997, Chairman of Mercantile's St. Louis banking
unit.
PATRICK T. STOKES, 55--Director beginning in 1992; President of
Anheuser-Busch, Inc., brewer of beer and other malt beverages.
6
<PAGE> 7
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 four 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 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.
7
<PAGE> 8
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 10,000 Stock Options and 3,753 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 multiplying
the fractional share interest to which such director would otherwise be
entitled by the then Fair Market Value thereof.
8
<PAGE> 9
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........................................................... 22,210<F3> 0
Harry M. Cornell, Jr........................................................ 4,649<F4> 4,212
Dr. Henry Givens, Jr........................................................ 200 0
William A. Hall............................................................. 8,157<F4>,<F5> 1,862
Thomas H. Hays.............................................................. 10,050<F4>,<F6> 23,510
Thomas H. Jacobsen.......................................................... 1,051,171<F7> 11,464
Frank Lyon, Jr.............................................................. 6,763,823<F4>,<F8> 2,439
Robert W. Murray............................................................ 135,199<F9> 1,300
Harvey Saligman............................................................. 8,532<F4>,<F10> 4,941
Craig D. Schnuck............................................................ 7,875<F4>,<F11> 1,114
Alvin J. Siteman............................................................ 3,364,706<F12> 360
Robert L. Stark............................................................. 4,975<F4>,<F13> 6,285
Patrick T. Stokes........................................................... 2,625<F4> 3,075
John A. Wright.............................................................. 3,624<F4>,<F14> 3,864
W. Randolph Adams........................................................... 131,083<F15> 2,150
John Q. Arnold.............................................................. 141,677<F15> 1,486
Richard C. King............................................................. 353,470<F15>,<F16> 14,893
John W. McClure............................................................. 195,823<F15>,<F17> 8,594
Directors and executive
officers as a group (24 persons).......................................... 13,425,553<F18> 96,815
<FN>
- -----------
<F1>Based on 133,748,539 shares outstanding as of February 27, 1998, director
Frank Lyon, Jr. indirectly beneficially owned 5.06 percent of the
outstanding Common Stock and director Alvin J. Siteman beneficially owned
2.51 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 9.92% 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 retirement plan accounts. Stock Units are
convertible into an equal number of shares of Mercantile's Common Stock.
<F3>Mr. Beumer holds 16,528 shares included above, jointly with his wife. Mr.
Beumer has shared voting and investment power with respect to these
shares. The total set forth in the table above also includes 5,682 shares
which are subject to stock options held by Mr. Beumer that are presently
exercisable or that will be exercisable within 60 days of the Record Date.
<F4>Includes 1,500 shares subject to stock options held by the director that
are presently exercisable.
<F5>Mr. Hall holds 6,657 of the shares included above in the William Austin
Hall Revocable Trust.
<F6>Mr. Hays holds 8,550 shares included above, in a limited partnership. The
general partner of the partnership is a revocable trust of which Mr. Hays
is grantor, trustee and beneficiary. Mr. Hays is also a limited partner in
the partnership. Mr. Hays shares voting and investment power with respect
to these shares.
<F7>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 150,611 shares included above
in a trust of which Mr. Jacobsen is trustee. The total set forth in the
table above also includes 588,022 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.
9
<PAGE> 10
<F8>Mr. Lyon holds all except 1,500 of the shares included above in two
limited partnerships. The limited partner and sole shareholder of the
corporate general partner of each such limited partnership are trusts of
which Mr. Lyon is the trustee and beneficiary.
<F9>Includes 51,996 shares held by Mr. Murray's wife. Mr. Murray has no voting
or investment power with respect to these shares. Also includes 37,677
shares subject to stock options held by Mr. Murray that are presently
exercisable or which are exercisable within 60 days of the Record Date.
<F10>Mr. Saligman has disclaimed beneficial ownership of 709 shares included
above which are owned by his wife and 2,666 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.
<F11>Mr. Schnuck holds 3,375 of the shares included above jointly with his
wife. Mr. Schnuck has shared voting and investment power with respect to
these shares.
<F12>Mr. Siteman disclaims beneficial ownership of 243,445 shares included
above, 114,240 shares of which are held in his wife's revocable trust, and
129,205 shares of which are held in various trusts of which Mr. Siteman or
affiliates are trustees. Mr. Siteman holds 2,370,895 shares included above
in a revocable trust of which he is grantor, beneficiary and trustee, and
a total of 604,507 shares included above are held by affiliated corpora-
tions; Mr. Siteman has sole voting and investment power with respect to
these shares. The total set forth in the table above also includes 133,873
shares subject to stock options that are either presently exercisable or
exercisable within 60 days of the Record Date.
<F13>Mr. Stark holds 3,475 shares included above in a revocable trust of which
Mr. Stark is grantor, trustee and beneficiary.
<F14>Mr. Wright holds all except 1,500 of the shares included above jointly
with his wife. Mr. Wright has shared voting and investment power with
respect to these shares.
<F15>As of February 27, 1998, Messrs. Adams, Arnold, King and McClure, held
45,000, 55,000, 41,875, and 47,500 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, and 112,875
shares subject to stock options held by Messrs. Adams, Arnold, King and
McClure, respectively, that are either presently exercisable or which are
exercisable within 60 days of the Record Date.
<F16>Mr. King disclaims beneficial ownership of a total of 76,181 shares,
24,718 of which are held by a family trust, 25,732 of which are held in an
irrevocable trust for the benefit of his daughter, and 27,731 of which are
held in an irrevocable trust for the benefit of his son.
<F17>Mr. McClure holds 7,036 shares included above jointly with his wife. He
has shared voting and investment power with respect to these shares. In
addition, this total includes 415 shares held by his wife over which he
has no voting or investment power.
<F18>As of February 27, 1998, all directors and executive officers as a group
held 653,890 shares 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 total set forth in the table also includes 1,625,583 shares subject to
stock options held by all directors and executive officers as a group,
which options are either presently exercisable or which are exercisable
within 60 days of the Record Date.
</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
10
<PAGE> 11
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"), 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 with the other
banks of similar asset size in the KBW 50 Index. The increase is also
reflective of Mercantile's success and Mr. Jacobsen's leadership in achieving
its financial goals for 1996. The actual operating results of the Corporation
for such period were adjusted to exclude pre-assimilation dilution effects of
acquisitions consummated by the Corporation during 1996, one-time acquisition
expenses related to such transactions, and a non-recurring, special assessment
imposed in 1996 generally on all commercial banks by the Federal Deposit
Insurance Corporation. In the aggregate, these adjustments equalled
approximately $56 million on an after-tax basis. With such adjustments, the net
income, return on assets and return on equity measures utilized by the
Committee were $248,486,000, 1.37% and 15.41%, respectively. As so adjusted,
these measures all improved from 1995 to 1996. The Committee believed that
these adjustments were appropriate in view of the substantial value that is
projected to be derived therefrom.
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,
11
<PAGE> 12
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 target incentive
opportunity was based on the Corporation's objectives for return on assets and
earnings per share, adjusted for one-time pre-assimilation dilution effects and
acquisition expenses related to acquisitions consummated by the Corporation and
the sale of the Corporation's co-branded credit card portfolio during 1997. The
adjustments equalled in the aggregate approximately $136 million on an
after-tax basis. As so adjusted, earnings per share in 1997 of $2.79
substantially met targeted performance objectives and exceeded 1996 results.
Adjusted return on assets for 1997 of 1.30% met the target performance
objectives, which reflected the inclusion of entities acquired during 1997.
Stretch incentives were paid for the superior 1997 growth of 84% in total
shareholder return, which was top quartile performance among the KBW 50 banks,
and for exceeding planned 1997 expense synergies of $20 million related to the
successful integration of the Mark Twain Bancshares and Roosevelt Financial
Group acquisitions.
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 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. This grant, which covered 1997 and
1998 as indicated above, is competitive with the long-term incentive practices
of the KBW 50 banks at the 75th percentile. 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.
12
<PAGE> 13
DEDUCTIBILITY OF EXECUTIVE OFFICER COMPENSATION
The Committee's policy with respect to the tax deductibility of executive
compensation in excess of $1 million is to structure benefit plans in such a
manner that permits the deductibility of such compensation under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code") when Mercantile
can do so without material change to its overall compensation program.
THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
HARRY M. CORNELL, JR.
(CHAIRMAN)
THOMAS A. HAYS FRANK LYON, JR. HARVEY SALIGMAN
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for each of the last three years:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------------------------------------------ ALL
RESTRICTED SECURITIES OTHER
OTHER ANNUAL STOCK UNDERLYING COMPEN-
SALARY BONUS COMPENSATION AWARDS<F1> OPTIONS PAYOUTS<F2> SATION<F3>
NAME & PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------- ---- ------ ----- ------------ ---------- ---------- ----------- ----------
<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 and Chief 1995 268,763 147,819 13,024 855,000 0 0 40,356
Administrative Officer
John Q. Arnold 1997 312,000 240,714 23,107 0 75,000 0 42,061
Vice Chairman and 1996 249,600 120,998 16,027 0 0 142,141 37,640
Chief 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, 1996 337,800 211,455 18,629 0 0 184,795 47,392
Financial Advisory 1995 268,763 161,257 14,778 855,000 0 0 37,663
Services
<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, King and McClure 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, $26,801, $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 $17,068 paid by
Mercantile on non-split dollar life insurance policies for such officers,
respectively, under Mercantile's Management Life Insurance Plan.
</TABLE>
13
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option grants
made in the fiscal year ended December 31, 1997 to the individuals named in the
Summary Compensation Table:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARS GRANT DATE
OPTIONS/SARS GRANTED EXERCISE OR PRESENT
GRANTED<F1> EMPLOYEES IN BASE PRICE EXPIRATION VALUE<F2>
NAME (#) FISCAL YEAR ($/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 4.29 34.92 1/20/07 680,668
15,401<F3> .88 58.31 1/20/03
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 average 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) an 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>
14
<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>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL YEAR-END<F1>
FISCAL YEAR-END (#) ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) 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>
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.
15
<PAGE> 16
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
<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.
16
<PAGE> 17
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]
<TABLE>
<CAPTION>
PERIOD ENDED
--------------------------------------------------------------------------
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>
17
<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, 133,748,539 shares of Mercantile's Common Stock were
issued and outstanding. Approximately 951,400 shares of Common Stock were
issued or reserved for issuance in connection with the acquisition of HomeCorp,
Inc., consummated on March 2, 1998, and approximately 19,200,000 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 14,550,000 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 31,550,000 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.
Shareholders have no preemptive rights to acquire shares issued by the
Corporation under its existing Restated Articles, and shareholders would not
acquire any such rights with respect to the additional shares under the
proposed amendment to the Restated Articles. Under some circumstances, issuance
of additional shares of Common Stock could dilute voting rights, equity and
earnings per share of existing shareholders. The authorization or issuance of
the additional shares would not otherwise affect the legal rights of the
shareholders of the outstanding shares of Common Stock.
The increase in authorized but unissued Common Stock could be considered an
anti-takeover measure because the additional authorized but unissued shares of
Common Stock could be used by the Board of Directors to make a change in
control of the Corporation more difficult. The Board of Directors' purpose in
recommending this proposal is not as an anti-takeover measure, but for the
reasons discussed above.
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.
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
18
<PAGE> 19
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 16, 1998, in order to be
considered for inclusion in Mercantile's proxy statement and proxy for the 1999
Annual Meeting.
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 16, 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> 20
APPENDIX A
RESOLUTION TO AMEND RESTATED ARTICLES OF INCORPORATION
MERCANTILE BANCORPORATION INC.
The following amendment to the Restated Articles of Incorporation of
Mercantile Bancorporation Inc. (the "Company") shall be put to a vote of the
shareholders of the Company at the Annual Meeting of Shareholders to be held
April 23, 1998.
RESOLVED, that Article 3 of the Restated Articles of Incorporation of the
Company shall be amended to increase the aggregate number of shares of Common
Stock of the Company authorized for issuance, from 200,000,000 to 400,000,000.
20
<PAGE> 21
PROXY 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. JACOBSON, 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.
<PAGE> 22
1. Election of Class I Directors (see reverse).
/ / FOR ALL / / 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 you will attend the meeting.
5. Check here if address change is noted. / /
----------------------------------------
----------------------------------------
Dated:_______________, 1998
Signature(s):__________________________________________________________________
_______________________________________________________________________________
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 17 of the printed proxy is depicted in
the table immediately following the graph.
