<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
DATE OF REPORT JULY 30, 1999
(Date of earliest event reported)
MERCHANTS BANCORP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-14484 36-3182868
(Commission File Number) (I.R.S. Employer Identification Number)
1851 WEST GALENA BOULEVARD, AURORA, ILLINOIS 60507
(Address of principal executive offices) (Zip Code)
(630) 907-9000
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER INFORMATION
On July 29, 1999, Merchants Bancorp., Inc., a Delaware corporation
("Merchants"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Old Kent Financial Corporation, a Michigan corporation ("Old
Kent"), pursuant to which a wholly-owned subsidiary of Old Kent will merge
with and into Merchants (the "Merger"). As a result of the Merger, each
outstanding share of Merchants' common stock, par value $1 per share
("Merchants Common Stock"), will be converted into the right to receive 0.830
shares of common stock of Old Kent, par value $1 per share. The Merger is
conditioned upon, among other things, approval by holders of a majority of
Merchants Common Stock and the receipt of certain regulatory and governmental
approvals. It is intended that the Merger will be treated as a
pooling-of-interests for accounting and financial reporting purposes. The
Merger Agreement is attached as Exhibit 2.1 and its terms are incorporated
herein by reference.
Concurrently with their execution and delivery of the Merger
Agreement, Merchants and Old Kent entered into a stock option agreement (the
"Stock Option Agreement") pursuant to which Merchants granted Old Kent the
right, upon the terms and subject to the conditions set forth in the Stock
Option Agreement, to purchase up to 577,941 shares of Merchants Common Stock
at a price of $27.75 per share, subject to certain adjustments. The Stock
Option Agreement is attached as Exhibit 2.2 and its terms are incorporated
herein by reference.
A copy of a Press Release, dated July 30, 1999, issued by Merchants
and Old Kent relating to the Merger is attached as Exhibit 99.1 and is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
None.
(b) PRO FORMA FINANCIAL INFORMATION.
None.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger, dated as of July 29, 1999,
by and between Old Kent Financial Corporation, Merchants
Acquisition Corporation and Merchants Bancorp, Inc.
2.2 Stock Option Agreement, dated as of July 29, 1999, by and
between Old Kent Financial Corporation and Merchants Bancorp,
Inc.
99.1 Old Kent and Merchants Press Release dated July 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MERCHANTS BANCORP, INC.
Dated: August 5, 1999 By: /s/ Calvin R. Myers
---------------------------------------
Calvin R. Myers
Chairman, President and Chief Executive
Officer
2
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
MERCHANTS BANCORP, INC.,
OLD KENT FINANCIAL CORPORATION
AND
MERCHANTS ACQUISITION CORPORATION
Dated as of July 29, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I - THE TRANSACTION.........................................................................1
1.1 MERGER OF MERGERSUB WITH AND INTO MERCHANTS...........................................1
1.2 THE CLOSING...........................................................................2
1.3 EFFECTIVE TIME OF THE MERGER..........................................................2
1.4 ADDITIONAL ACTIONS....................................................................2
1.5 SURVIVING CORPORATION.................................................................3
1.6 BANK CONSOLIDATION....................................................................3
ARTICLE II - CONVERSION AND EXCHANGE OF SHARES......................................................3
2.1 CONVERSION OF SHARES..................................................................4
2.2 UPSET PROVISION.......................................................................5
2.3 ADJUSTMENTS...........................................................................6
2.4 INCREASE IN OUTSTANDING SHARES OF MERCHANTS COMMON STOCK..............................8
2.5 CESSATION OF STOCKHOLDER STATUS.......................................................8
2.6 DIVIDEND REINVESTMENT PLAN............................................................8
2.7 SURRENDER OF OLD CERTIFICATES AND DISTRIBUTION OF OLD KENT COMMON STOCK...............9
2.8 NO FRACTIONAL SHARES.................................................................10
2.9 STOCK OPTIONS........................................................................10
ARTICLE III - OLD KENT'S REPRESENTATIONS AND WARRANTIES............................................11
3.1 AUTHORIZATION, NO CONFLICTS, ETC.....................................................11
3.2 ORGANIZATION AND GOOD STANDING.......................................................13
3.3 SUBSIDIARIES.........................................................................13
3.4 CAPITAL STOCK........................................................................13
3.5 OLD KENT COMMON STOCK................................................................14
3.6 FINANCIAL STATEMENTS.................................................................14
3.7 ABSENCE OF UNDISCLOSED LIABILITIES...................................................15
3.8 ABSENCE OF MATERIAL ADVERSE CHANGE...................................................15
3.9 ABSENCE OF LITIGATION................................................................15
3.10 REGULATORY FILINGS..................................................................15
3.11 REGISTRATION STATEMENT, ETC.........................................................16
3.12 INVESTMENT BANKERS AND BROKERS......................................................16
3.13 ACCOUNTING AND TAX TREATMENT........................................................16
3.14 AGREEMENTS WITH BANK REGULATORS.....................................................17
3.15 RESERVE FOR LOAN LOSSES.............................................................17
3.16 PUBLIC COMMUNICATIONS; SECURITIES OFFERING..........................................17
3.17 YEAR 2000 COMPLIANCE................................................................17
3.18 TRUE AND COMPLETE INFORMATION.......................................................18
ARTICLE IV - MERCHANTS' REPRESENTATIONS AND WARRANTIES.............................................18
4.1 AUTHORIZATION, NO CONFLICTS, ETC.....................................................18
4.2 ORGANIZATION AND GOOD STANDING.......................................................19
4.3 SUBSIDIARIES.........................................................................20
<PAGE>
4.4 CAPITAL STOCK........................................................................21
4.5 AMENDMENT OF MERCHANTS RIGHTS........................................................22
4.6 FINANCIAL STATEMENTS.................................................................22
4.7 ABSENCE OF UNDISCLOSED LIABILITIES...................................................23
4.8 ABSENCE OF MATERIAL ADVERSE CHANGE...................................................23
4.9 ABSENCE OF LITIGATION................................................................23
4.10 NO INDEMNIFICATION CLAIMS...........................................................23
4.11 CONDUCT OF BUSINESS.................................................................23
4.12 CONTRACTS...........................................................................24
4.13 REGULATORY FILINGS.................................................................24
4.14 REGISTRATION STATEMENT, ETC.........................................................24
4.15 AGREEMENTS WITH BANK REGULATORS.....................................................25
4.16 TAX MATTERS.........................................................................25
4.17 TITLE TO PROPERTIES.................................................................26
4.18 CONDITION OF REAL PROPERTY..........................................................27
4.19 REAL AND PERSONAL PROPERTY LEASES...................................................28
4.20 ASSIGNMENT..........................................................................28
4.21 REQUIRED LICENSES, PERMITS, ETC.....................................................28
4.22 DATA PROCESSING AND OTHER MATERIAL CONTRACTS........................................28
4.23 CERTAIN EMPLOYMENT MATTERS..........................................................29
4.24 EMPLOYEE BENEFIT PLANS..............................................................30
4.25 ENVIRONMENTAL MATTERS...............................................................31
4.26 DUTIES AS FIDUCIARY.................................................................33
4.27 INVESTMENT BANKERS AND BROKERS......................................................33
4.28 FAIRNESS OPINION....................................................................34
4.29 MERCHANTS-RELATED PERSONS...........................................................34
4.30 CHANGE IN BUSINESS RELATIONSHIPS....................................................34
4.31 INSURANCE...........................................................................34
4.32 BOOKS AND RECORDS...................................................................35
4.33 LOAN GUARANTEES.....................................................................35
4.34 EVENTS SINCE DECEMBER 31, 1998......................................................35
4.35 RESERVE FOR LOAN AND LEASE LOSSES...................................................36
4.36 LOAN ORIGINATION AND SERVICING......................................................36
4.37 PUBLIC COMMUNICATIONS; SECURITIES OFFERING..........................................36
4.38 NO INSIDER TRADING..................................................................36
4.39 YEAR 2000 COMPLIANCE................................................................36
4.40 JOINT VENTURES; STRATEGIC ALLIANCES.................................................37
4.41 POLICIES AND PROCEDURES.............................................................37
4.42 ACCOUNTING AND TAX TREATMENT........................................................37
4.43 TRUE AND COMPLETE INFORMATION.......................................................38
ARTICLE V - COVENANTS PENDING CLOSING..............................................................38
5.1 DISCLOSURE STATEMENTS; ADDITIONAL INFORMATION........................................38
5.2 CHANGES AFFECTING REPRESENTATIONS....................................................39
5.3 MERCHANTS' CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME............................39
5.4 APPROVAL OF PLAN OF MERGER BY MERCHANTS STOCKHOLDERS.................................43
<PAGE>
5.5 REGULAR DIVIDENDS....................................................................44
5.6 TECHNOLOGY-RELATED CONTRACTS.........................................................44
5.7 AFFILIATES -- COMPLIANCE WITH ACCOUNTING AND SECURITIES RULES........................45
5.8 INDEMNIFICATION AND INSURANCE........................................................46
5.9 EXCLUSIVE COMMITMENT.................................................................46
5.10 REGISTRATION STATEMENT..............................................................47
5.11 OTHER FILINGS.......................................................................48
5.12 MISCELLANEOUS AGREEMENTS AND CONSENTS...............................................48
5.13 ACCESS AND INVESTIGATION............................................................48
5.14 CONFIDENTIALITY.....................................................................49
5.15 ENVIRONMENTAL INVESTIGATION.........................................................50
5.16 EMPLOYMENT AMENDMENTS...............................................................51
5.17 TERMINATION OF THRIFT PLAN..........................................................51
5.18 ACCOUNTING AND TAX TREATMENT........................................................51
5.19 PUBLIC ANNOUNCEMENTS................................................................51
5.20 YEAR 2000 PREPARATIONS..............................................................51
ARTICLE VI - CONDITIONS PRECEDENT TO OLD KENT'S OBLIGATIONS........................................52
6.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.......................................52
6.2 OPINION OF LEGAL COUNSEL.............................................................52
6.3 REQUIRED REGULATORY APPROVALS........................................................52
6.4 STOCKHOLDER APPROVAL.................................................................52
6.5 ORDER, DECREE, ETC...................................................................52
6.6 PROCEEDINGS..........................................................................53
6.7 TAX MATTERS..........................................................................53
6.8 REGISTRATION STATEMENT...............................................................53
6.9 CERTIFICATE AS TO OUTSTANDING SHARES.................................................53
6.10 CHANGE OF CONTROL WAIVERS...........................................................54
6.11 POOLING ASSURANCES..................................................................54
ARTICLE VII - CONDITIONS PRECEDENT TO MERCHANTS' OBLIGATIONS.......................................54
7.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.......................................54
7.2 OPINION OF LEGAL COUNSEL.............................................................55
7.3 REQUIRED REGULATORY APPROVALS........................................................55
7.4 STOCKHOLDER APPROVAL.................................................................55
7.5 ORDER, DECREE, ETC...................................................................55
7.6 TAX MATTERS..........................................................................55
7.7 REGISTRATION STATEMENT...............................................................56
7.8 FAIRNESS OPINION.....................................................................56
7.9 LISTING OF SHARES....................................................................56
7.10 EXCHANGE AGENT CERTIFICATE..........................................................56
ARTICLE VIII - ABANDONMENT OF MERGER...............................................................56
8.1 MUTUAL ABANDONMENT...................................................................56
8.2 UPSET DATE...........................................................................56
8.3 OLD KENT'S RIGHTS TO TERMINATE.......................................................57
<PAGE>
8.4 MERCHANTS' RIGHTS TO TERMINATE.......................................................57
8.5 EFFECT OF TERMINATION................................................................58
ARTICLE IX - MISCELLANEOUS.........................................................................58
9.1 "MATERIAL ADVERSE EFFECT" DEFINED....................................................58
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS...........................59
9.3 AMENDMENT............................................................................59
9.4 EXPENSES.............................................................................59
9.5 SPECIFIC ENFORCEMENT.................................................................59
9.6 JURISDICTION; VENUE; JURY............................................................59
9.7 WAIVER...............................................................................60
9.8 NOTICES..............................................................................60
9.9 GOVERNING LAW........................................................................61
9.10 ENTIRE AGREEMENT....................................................................61
9.11 THIRD PARTY BENEFICIARIES...........................................................61
9.12 COUNTERPARTS........................................................................61
9.13 FURTHER ASSURANCES; PRIVILEGES......................................................61
9.14 HEADINGS, ETC.......................................................................61
9.15 CALCULATION OF DATES AND DEADLINES..................................................61
9.16 SEVERABILITY........................................................................62
9.17 OLD KENT'S ASSURANCES REGARDING MERGERSUB..........................................62
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEFINITIONS
- -----------
<S> <C>
AMEX................................................................................................5
Bank Consolidation..................................................................................3
Bank Consolidation Agreement........................................................................3
Book Entry Shares...................................................................................9
Business Combination...............................................................................47
Business Day........................................................................................2
Call Reports.......................................................................................23
CERCLA.............................................................................................32
Certificates of Merger..............................................................................2
Closing.............................................................................................2
Constituent Corporation.............................................................................1
Control............................................................................................20
Designated Contracts...............................................................................54
DGCL................................................................................................1
Effective Time......................................................................................2
Employee Benefit Plan..............................................................................30
Employment Amendments..............................................................................51
Employment-Related Payments........................................................................29
Environmental Laws.................................................................................32
Environmental Risk.................................................................................50
ERISA..............................................................................................30
Ex-Date.............................................................................................5
Exchange Act.......................................................................................36
Exchange Agent......................................................................................9
Exchange Ratio......................................................................................4
FDIA...............................................................................................13
FDIC...............................................................................................15
Federal Bank Holding Company Act...................................................................13
Federal Reserve Board..............................................................................13
FIB................................................................................................16
Fiduciary Event....................................................................................44
Final Index Price...................................................................................5
Final Old Kent Price................................................................................5
Floor Old Kent Price................................................................................5
GAAP...............................................................................................14
Hazardous Substance................................................................................31
Illinois Act.......................................................................................21
Index Companies.....................................................................................5
Initial Index Date..................................................................................5
Initial Index Price.................................................................................5
Initial Old Kent Price..............................................................................5
Insurance Amount...................................................................................46
Internal Revenue Code...............................................................................1
<PAGE>
IRS................................................................................................26
Material Adverse Effect............................................................................58
McDonald...........................................................................................33
Merchants...........................................................................................1
Merchants Affiliate Agreements.....................................................................45
Merchants Bank......................................................................................1
Merchants Common Stock..............................................................................3
Merchants Disclosure Statement.....................................................................18
Merchants DRIP......................................................................................8
Merchants Retirement Plan...........................................................................8
Merchants Rights...................................................................................21
Merchants Rights Agreement.........................................................................21
Merchants' Financial Statements....................................................................22
Merchants' Leases..................................................................................28
Merchants' Real Property...........................................................................27
Merchants' Representatives.........................................................................33
Merchants-Related Person...........................................................................34
Merger..............................................................................................1
MergerSub...........................................................................................1
Michigan Act........................................................................................1
Michigan Banking Code...............................................................................3
NASDAQ..............................................................................................5
National Bank Act..................................................................................21
Notifying Party....................................................................................39
NYSE................................................................................................5
OCC................................................................................................16
Old Certificates....................................................................................8
Old Kent............................................................................................1
Old Kent Common Stock...............................................................................4
Old Kent Disclosure Statement......................................................................11
Old Kent DRIP.......................................................................................7
Old Kent Rights....................................................................................13
Old Kent Rights Agreement..........................................................................13
Old Kent's Financial Statements....................................................................14
Option Agreement....................................................................................1
Option Plan.........................................................................................8
PBGC...............................................................................................31
Permitted Issuances.................................................................................8
Phase I............................................................................................50
Phase II and III Work..............................................................................50
Plan of Merger......................................................................................1
Premises...........................................................................................32
Pricing Period......................................................................................5
Proposal...........................................................................................47
Prospectus and Proxy Statement.....................................................................16
Registration Statement.............................................................................16
<PAGE>
SEC................................................................................................15
Securities Act.....................................................................................45
Stay...............................................................................................41
Stock Distribution..................................................................................5
Stockholders' Meeting..............................................................................43
Superior Proposal..................................................................................44
Surviving Corporation...............................................................................1
Tax Returns........................................................................................25
Taxes..............................................................................................25
Technology-Related Contracts.......................................................................45
Transaction Documents..............................................................................16
Unexercised Options................................................................................10
Upset Condition.....................................................................................5
Year 2000 Assets...................................................................................18
Year 2000 Ready....................................................................................18
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C> <C>
A - Form of Stock Option Agreement .....................................................A-1
B - Index Companies ....................................................................B-1
C - Form of Disclosure Statement .......................................................C-1
D - Schedule of Additional Information .................................................D-1
E - Form of Merchants' Affiliate Agreement .............................................E-1
F - Form of Merchants' Counsel's Legal Opinion .........................................F-1
G - Form of Old Kent's Counsel's Legal Opinion .........................................G-1
H - Designated Contracts ...............................................................H-1
</TABLE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "PLAN OF MERGER") is made as
of July 29, 1999, between MERCHANTS BANCORP, INC., a Delaware corporation,
headquartered at 1851 West Galena Boulevard, Aurora, Illinois 60507
("MERCHANTS"), OLD KENT FINANCIAL CORPORATION, a Michigan corporation ("OLD
KENT"), and MERCHANTS ACQUISITION CORPORATION, a Michigan corporation and
wholly owned subsidiary of Old Kent, each headquartered at 111 Lyon Street,
N.W., Grand Rapids, Michigan 49503 ("MERGERSUB").
Old Kent and Merchants desire that Merchants and its subsidiaries
become affiliated with Old Kent. The affiliation would be effected through
the merger of MergerSub with and into Merchants in accordance with this Plan
of Merger and in accordance with the Business Corporation Act of the State of
Michigan, as amended (the "MICHIGAN ACT"), and the Delaware General
Corporation Law, as amended (the "DGCL"). The transactions contemplated by,
and described in, this Plan of Merger are referred to as the "MERGER."
Old Kent has formed MergerSub solely for the purpose of effectuating
the Merger. As soon as reasonably practicable following the consummation of
the Merger, Old Kent intends to cause Merchants to be liquidated and
dissolved, and to cause Merchants' wholly owned
<PAGE>
subsidiary, The Merchants National Bank of Aurora ("MERCHANTS BANK"), to be
consolidated with and into Old Kent's wholly owned subsidiary, Old Kent Bank,
a Michigan banking corporation.
It is intended that, for federal tax purposes, the Merger qualify as
a reorganization under the provisions of Section 368 of the Internal Revenue
Code of 1986, as amended (the "INTERNAL REVENUE CODE"). It is also intended
that, for accounting and financial reporting purposes, the Merger shall be
accounted for as a pooling-of-interests.
As a condition to, and concurrently with the execution of, this Plan
of Merger, Merchants and Old Kent are entering into a Stock Option Agreement
attached as EXHIBIT A (the "OPTION AGREEMENT"). Merchants' execution and
delivery of the Option Agreement is an inducement for Old Kent to enter into
this Plan of Merger.
In consideration of the representations, warranties, and covenants
contained in this Plan of Merger, the parties agree:
ARTICLE I - THE TRANSACTION
Subject to the terms and conditions of this Plan of Merger, the
Merger shall be carried out in the following manner:
1.1 MERGER OF MERGERSUB WITH AND INTO MERCHANTS. At the Effective
Time, MergerSub shall be merged with and into Merchants. Merchants and
MergerSub are each sometimes referred to as a "CONSTITUENT CORPORATION" prior
to the Merger. At the Effective Time, the Constituent Corporations shall
become a single corporation, which shall be Merchants (the "SURVIVING
CORPORATION"). The effect of the Merger upon each of the Constituent
Corporations and the Surviving Corporation shall be as provided in Chapter
Seven of the Michigan Act and Section 252 of the DGCL with respect to the
merger of domestic and foreign corporations, where the surviving corporation
will be subject to the laws of the State of Delaware. In the event of
material changes in applicable federal or state tax laws, rules, regulations,
interpretations, or case law, or in the event that Old Kent is advised by its
independent tax accountants that a different corporate structure for the
transactions contemplated by this Plan of Merger would be more advantageous
to Old Kent from a financial, tax, or accounting perspective, then Merchants
agrees to cooperate with Old Kent to effect a restructuring of these
transactions; PROVIDED, that the Merger continues to qualify as a tax-free
reorganization under the Internal Revenue Code and the Effective Time of the
Merger is not delayed by more than 30 days.
1.2 THE CLOSING. The "CLOSING" for the Merger shall be held at such
time, date, and location as may be mutually agreed by the parties. In the
absence of such agreement, the Closing shall be held at the offices of Warner
Norcross & Judd LLP, 111 Lyon Street, N.W., Grand Rapids, Michigan, commencing
at 11 a.m. on the earliest date specified by either Old Kent or
-9-
<PAGE>
Merchants upon ten Business Days' (defined below) written notice (or at the
election of Old Kent, on the last Business Day of the month) after the last
to occur of the following events: (a) receipt of all consents and approvals
of government regulatory authorities, and the expiration of all related
statutory waiting periods, legally required to consummate the Merger; and (b)
adoption of this Plan of Merger by Merchants' stockholders. Scheduling or
commencing the Closing shall not, however, constitute a waiver of the
conditions precedent of either Old Kent and MergerSub or Merchants as set
forth in Articles VI and VII, respectively. The Closing shall not be convened
prior to the day after Old Kent's dividend record date during the first
quarter of 2000 without Old Kent's express written consent. Upon completion
of the Closing, Merchants and MergerSub shall each execute and file the
certificate of merger as required by the Michigan Act and by the DGCL to
effect the Merger (together, the "CERTIFICATES OF MERGER").
1.3 EFFECTIVE TIME OF THE MERGER. The Merger shall be consummated
following the Closing by filing the Certificates of Merger in the manner
required by law. The "EFFECTIVE TIME" of the Merger shall be as of the time
and date to be elected by Old Kent and specified in the Certificates of
Merger, but not later than five Business Days after the Closing occurs. As
used in this Plan of Merger, the term "BUSINESS DAY" means any day other than
a Saturday, Sunday, or day on which the Federal Reserve Bank of Chicago is
required or authorized by law or executive order to be closed.
1.4 ADDITIONAL ACTIONS. At any time after the Effective Time, the
Surviving Corporation may determine that further assignments or assurances or
any other acts are necessary or desirable to vest, perfect, or confirm, of
record or otherwise, in the Surviving Corporation its rights, title, or
interest in, to, or under any of the rights, properties, or assets of
MergerSub acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger, or to otherwise carry out the purposes
of this Plan of Merger. MergerSub hereby grants to the Surviving Corporation
an irrevocable power of attorney to execute and deliver all such deeds,
assignments, and assurances and to do all acts necessary, proper, or
convenient to accomplish this purpose. This irrevocable power of attorney
shall only be operative following the Effective Time. The proper officers and
directors of the Surviving Corporation shall be fully authorized in the name
of MergerSub to take any and all such action contemplated by this Plan of
Merger.
1.5 SURVIVING CORPORATION. Immediately after the Effective Time, the
Surviving Corporation shall have the following attributes until they are
subsequently changed in the manner provided by law:
1.5.1 NAME. The name of the Surviving Corporation shall be
"Merchants Bancorp, Inc."
1.5.2 CERTIFICATE OF INCORPORATION. The certificate of
incorporation of the Surviving Corporation shall be the certificate of
incorporation of Merchants as in effect immediately prior to the
Effective Time, without change.
-10-
<PAGE>
1.5.3 BYLAWS. The bylaws of the Surviving Corporation shall be
the bylaws of Merchants as in effect immediately prior to the Effective
Time, without change.
1.5.4 DIRECTORS. The directors of the Surviving Corporation
shall be the same as the directors of MergerSub immediately prior to
the Effective Time.
1.5.5 OFFICERS. The officers of the Surviving Corporation
shall be the same as the officers of MergerSub immediately prior to the
Effective Time.
1.6 BANK CONSOLIDATION. After the Effective Time, Old Kent intends to
consolidate Merchants Bank with and into Old Kent Bank resulting in a single
Michigan banking corporation, which shall be Old Kent Bank (the "BANK
CONSOLIDATION"). The Bank Consolidation will be effected pursuant to a
consolidation agreement (the "BANK CONSOLIDATION AGREEMENT"), in the form
required by the Michigan Banking Code of 1969, as amended (the "MICHIGAN BANKING
CODE"), and by other applicable laws, containing terms and conditions not
inconsistent with this Plan of Merger, as determined by Old Kent Bank. The Bank
Consolidation shall only occur if the Merger is consummated, and it shall become
effective immediately after the Effective Time or such later time as may be
determined by Old Kent. To obtain the necessary regulatory approval for the Bank
Consolidation to occur immediately after the Effective Time, Merchants and
Merchants Bank shall approve, adopt, execute, and deliver the Bank Consolidation
Agreement and take other reasonable steps prior to the Effective Time to effect
the Bank Consolidation; PROVIDED that Merchants shall not be required to incur
any material cost or take any irrevocable action in connection with its
obligations under this Section.
ARTICLE II - CONVERSION AND EXCHANGE OF SHARES
Subject to the terms and conditions of this Plan of Merger and as a
result of the Merger, all Common Stock, $1.00 par value per share, of Merchants
("MERCHANTS COMMON STOCK") shall be converted into Common Stock, $1 par value
per share, of Old Kent ("OLD KENT COMMON STOCK") as follows:
2.1 CONVERSION OF SHARES. As of the Effective Time:
2.1.1 CONVERSION OF MERCHANTS COMMON STOCK. Except as provided
in Article II, each share of Merchants Common Stock outstanding
immediately prior to the Effective Time shall be converted into 0.83
(the "EXCHANGE RATIO") shares of validly issued, fully paid, and
nonassessable Old Kent Common Stock.
2.1.2 OLD KENT RIGHTS. Each share of Old Kent Common Stock to
be issued in the Merger shall have attached to it the number of "Old
Kent Rights" issuable pursuant to the "Old Kent Rights Agreement" (as
those terms are defined in Section 3.4.1 (CLASSES AND SHARES -- OLD
KENT)) that are attached to each issued and outstanding share of Old
-11-
<PAGE>
Kent Common Stock at the Effective Time. No Old Kent Rights shall be
attached to Old Kent Common Stock if the Old Kent Rights are then
separately transferable.
2.1.3 CONVERSION OF MERGERSUB COMMON STOCK. Each share of
Common Stock of MergerSub issued and outstanding immediately prior to
the Effective Time shall be converted automatically into and become one
fully paid and nonassessable share of common stock, $1.00 par value per
share, of the Surviving Corporation. As a result of the Merger, Old
Kent shall own all of the issued and outstanding shares of the
Surviving Corporation.
2.1.4 NO CONVERSION OF OLD KENT COMMON STOCK. Each share of
Old Kent Common Stock and each Old Kent Right outstanding immediately
prior to the Effective Time shall continue to be outstanding without
any change.
2.1.5 STOCK HELD BY OLD KENT. Each share of Merchants Common
Stock, if any, held by Old Kent or any of its subsidiaries for its own
account, and not in a fiduciary or representative capacity for a person
other than Old Kent or any of its subsidiaries, shall be canceled and
no consideration shall be issuable or payable with respect to any such
share.
2.1.6 TREASURY SHARES. Each share of Merchants Common Stock
held by Merchants as a treasury share, if any, shall be canceled and no
Old Kent Common Stock or other consideration shall be issuable or
payable with respect to any such share.
2.1.7 MERCHANTS COMMON STOCK NO LONGER OUTSTANDING. Each share
of Merchants Common Stock outstanding immediately prior to the
Effective Time shall, as of the Effective Time, no longer be
outstanding and shall represent only the right to receive shares of Old
Kent Common Stock as provided in this Plan of Merger, together with any
dividends and other distributions payable as provided in Section 2.7.4
(DIVIDENDS PENDING SURRENDER), but subject to the payment of cash in
lieu of fractional shares as provided in Section 2.8 (NO FRACTIONAL
SHARES).
2.2 UPSET PROVISION. After a Closing is properly called pursuant to
Section 1.2 (THE CLOSING), Merchants shall have the right to terminate this Plan
of Merger if the "Upset Condition" then exists.
2.2.1 UPSET CONDITION. The "UPSET CONDITION" shall exist if
both of the following conditions then exist:
(a) The Final Old Kent Price (defined below) is less
than $36.4969 (the "FLOOR OLD KENT PRICE"); and
(b) The number determined by dividing the Final Old
Kent Price by $42.9375 (the "INITIAL OLD KENT PRICE") is less
than the number obtained by
-12-
<PAGE>
subtracting (i) 0.15 from (ii) the quotient obtained by
dividing the Final Index Price (defined below) by the
Initial Index Price (defined below).
2.2.2 FINAL OLD KENT PRICE. The "FINAL OLD KENT PRICE" means
the average of the closing prices per share of Old Kent Common Stock
reported on the New York Stock Exchange ("NYSE") for the ten
consecutive full trading days ending on the eleventh Business Day prior
to the date of the Closing (the "PRICING PERIOD"), as reported in the
DOW JONES NEWS/RETRIEVAL system, or other equally reliable means.
2.2.3 INITIAL INDEX PRICE. The "INITIAL INDEX PRICE" means the
average of the closing prices per share of each of the common stocks of
the Index Companies (defined below) as reported on NYSE, The Nasdaq
Stock Market ("NASDAQ"), or the American Stock Exchange ("AMEX") on
July 28, 1999 ("INITIAL INDEX DATE"). The Initial Index Price computed
as of a recent date is presented in EXHIBIT B as an illustration of the
method of computation, but is subject to adjustment as provided in
Sections 2.2.6 (INDEX ADJUSTMENTS).
2.2.4 FINAL INDEX PRICE. The "FINAL INDEX PRICE" means the
average of the average closing prices per share of each of the common
stocks of the Index Companies as reported on NYSE, NASDAQ, or AMEX for
each trading day during the Pricing Period.
2.2.5 INDEX COMPANIES. The term "INDEX COMPANIES" refers to
the companies listed on EXHIBIT B, as the list may be modified under
Section 2.2.7 (INDEX EXCLUSIONS).
2.2.6 INDEX ADJUSTMENTS. If any Index Company declares a stock
dividend, stock split, or stock split-up (any such event being a "STOCK
DISTRIBUTION") of its common stock for which the ex-dividend date,
ex-split date, ex-distribution date or other comparable date (the
"EX-DATE") occurs between the Initial Index Date and the end of the
Pricing Period, then for purposes of the definitions in Section 2.2
(UPSET PROVISION) the closing prices for such common stock as of the
Initial Index Date and each date during the Pricing Period prior to the
Ex-Date shall be adjusted so as to be comparable as of the Initial
Index Date and throughout the Pricing Period in the same manner as is
described in Section 2.3.1(a) (STOCK DIVIDENDS AND DISTRIBUTIONS) for
any Stock Distribution.
2.2.7 INDEX EXCLUSIONS. There shall be excluded from the list
of Index Companies any company as to which, between the Initial Index
Date and the end the Pricing Period, there occurs or there is publicly
announced (a) a proposed merger, acquisition, or business combination
in which that company is not or will not be the survivor, (b) a tender
offer, exchange offer, other transaction involving the acquisition of a
majority of that company's common stock or assets, or (c) a
reclassification, recapitalization, subdivision, spin-off, split-up, or
combination of its common stock; PROVIDED that if eight or more of the
Index Companies are excluded pursuant to this Section, then, unless Old
Kent and Merchants agree otherwise, Old Kent and Merchants shall agree
upon mutually
-13-
<PAGE>
acceptable substitute Index Companies. If a company is excluded from
the list of Index Companies, then the Initial Index Price and the
Final Index Price shall be calculated as if the excluded company
had not originally been included in the list of companies.
2.3 ADJUSTMENTS. The Exchange Ratio, Floor Old Kent Price, Initial Old
Kent Price, and Final Old Kent Price, and the related computations described in
Sections 2.1 (CONVERSION OF SHARES) and 2.2 (UPSET PROVISION) shall be adjusted
in the manner provided in this Section upon the occurrence of any of the
following events:
2.3.1 STOCK DIVIDENDS AND DISTRIBUTIONS. If Old Kent declares
a Stock Distribution of Old Kent Common Stock to its holders prior to
the Effective Time, then:
(a) If the Ex-Date for the Stock Distribution occurs
before the end of the Pricing Period, then the Floor Old Kent
Price and the Initial Old Kent Price (and if the Ex-Date
occurs during the Pricing Period, then the closing price per
share of Old Kent Common Stock for each day during the Pricing
Period prior to the Ex-Date) shall each be adjusted by
multiplying them by that ratio (i) the numerator of which
shall be the total number of shares of Old Kent Common Stock
outstanding immediately prior to the record date for the Stock
Distribution; and (ii) the denominator of which shall be the
total number of shares of Old Kent Common Stock that are
outstanding immediately prior to that record date plus the
additional number of shares to be issued in the Stock
Distribution computed as of that record date; and
(b) If the record date for the Stock Distribution
occurs prior to the Effective Time, then the Exchange Ratio
shall be adjusted by multiplying it by that ratio (i) the
numerator of which shall be the total number of shares of Old
Kent Common Stock that are outstanding as of the record date
for such Stock Distribution plus the additional number of
shares to be issued in the Stock Distribution computed as of
that record date; and (ii) the denominator of which shall be
the total number of shares of Old Kent Common Stock
outstanding as of the Stock Distribution's record date.
2.3.2 OTHER ACTION AFFECTING OLD KENT COMMON STOCK.
(a) If there occurs, other than as described in the
preceding Subsection 2.3.1, any merger, business combination,
recapitalization, reclassification, subdivision, or
combination that would change the number of shares outstanding
by 20 percent or more together with the value of the
outstanding shares of Old Kent Common Stock; a distribution of
warrants or rights with respect to Old Kent Common Stock; or
any other transaction that would have a substantially similar
effect; then the nature or amount of the consideration to be
received by the stockholders of Merchants in exchange for
their shares of Merchants Common
-14-
<PAGE>
Stock and the Exchange Ratio shall be adjusted in such manner
and at such time as shall be equitable under the
circumstances.
(b) In the event of a reclassification of outstanding
shares of Old Kent Common Stock or a consolidation or merger
of Old Kent with or into another corporation, other than a
merger in which Old Kent is the surviving corporation and
which merger does not result in any reclassification of Old
Kent Common Stock, holders of Merchants Common Stock would
receive, in lieu of each share of Old Kent Common Stock to be
issued in exchange for Merchants Common Stock based on the
Exchange Ratio, the kind and amount of shares of Old Kent
stock, other securities, money, and/or property receivable
upon such reclassification, consolidation, or merger by
holders of Old Kent Common Stock with respect to each share of
Old Kent Common Stock outstanding immediately prior to such
reclassification, consolidation, or merger.
2.3.3 EMPLOYEE STOCK OPTIONS, ETC. Notwithstanding any other
provisions of this Section, no adjustment shall be made in the event of
the issuance of additional shares of Old Kent Common Stock pursuant to
the dividend reinvestment plan of Old Kent (the "OLD KENT DRIP"),
pursuant to the exercise of stock options under stock option plans of
Old Kent, or upon the grant or sale of shares or rights to receive
shares to, or for the account of, Old Kent directors or employees
pursuant to restricted stock, deferred stock compensation, thrift,
employee stock purchase, and other compensation or benefit plans of Old
Kent.
2.3.4 AUTHORIZED BUT UNISSUED SHARES. Notwithstanding the
other provisions of this Section, no adjustment shall be made in the
event of the issuance of additional shares of Old Kent Common Stock or
other securities pursuant to a public offering, private placement, or
an acquisition of one or more banks, corporations, or business assets
as authorized by the board of directors of Old Kent or a duly
authorized committee of the board.
2.3.5 CHANGES IN CAPITAL. Subject only to making any
adjustment to the Exchange Ratio and related computations prescribed by
this Section, nothing contained in this Plan of Merger shall preclude
Old Kent from amending its restated articles of incorporation to change
its capital structure or from issuing additional shares of Old Kent
Common Stock, preferred stock, shares of other capital stock, or
securities that are convertible into shares of capital stock.
2.4 INCREASE IN OUTSTANDING SHARES OF MERCHANTS COMMON STOCK. In the
event that the number of shares of Merchants Common Stock outstanding is greater
than 5,199,254 for any reason whatsoever (whether or not such increase
constitutes a breach of this Plan of Merger), other than Permitted Issuances
(defined below); then the Exchange Ratio shall be adjusted by multiplying it by
a fraction (i) the numerator of which shall be 5,199,254 (the total number of
-15-
<PAGE>
shares of Merchants Common Stock outstanding as of the date of this Plan of
Merger); and (ii) the denominator of which shall be the total number of
shares of Merchants Common Stock outstanding as of the Effective Time of the
Merger, excluding Permitted Issuances. "PERMITTED ISSUANCES" include and are
limited to: (i) the issuance of not more than 178,706 shares upon the
exercise of previously awarded and currently outstanding Merchants stock
options identified in Section 4.4 (CAPITAL STOCK); (ii) upon the exercise of
new options awarded pursuant to the Merchants' Bancorp, Inc. 1993 Stock
Incentive Plan (the "OPTION PLAN"), the issuance of not more than the number
of shares determined by the formula prescribed by the Option Plan consistent
in amount, nature and time with Merchants' past practices with respect to
awards made under the Option Plan; (iii) the issuance, grant, or sale of
shares, or the right to receive shares, for the account or benefit of
participants in the Merchants Bancorp, Inc., Thrift Plan (the "MERCHANTS
RETIREMENT PLAN") under the terms of that plan as they exist prior to the
date of this Plan of Merger; and (iv) the issuance of shares of Merchants
Common Stock under the dividend reinvestment plan of Merchants (the
"MERCHANTS DRIP").
2.5 CESSATION OF STOCKHOLDER STATUS. As of the Effective Time, each
record holder of shares of Merchants Common Stock outstanding immediately
prior to the Effective Time shall cease to be a stockholder of Merchants and
shall have no rights as a stockholder of Merchants. Each stock certificate
representing shares of Merchants Common Stock outstanding immediately prior
to the Effective Time ("OLD CERTIFICATES") shall then be considered to
represent shares of Old Kent Common Stock and the right, if any, to receive
cash in lieu of fractional shares, all as provided in this Plan of Merger.
2.6 DIVIDEND REINVESTMENT PLAN. As of the Effective Time, all
participants' accounts under Merchants' DRIP shall be automatically converted
into accounts under Old Kent's DRIP, on the terms and subject to the conditions
of Old Kent's DRIP as then in effect, unless a participant elects in writing to
withdraw Old Kent Common shares from the participant's account in Old Kent's
DRIP. All full and fractional shares of Merchants Common Stock in each
participant's Merchants DRIP account shall be converted into full and fractional
shares of Old Kent Common Stock in the participants Old Kent DRIP account, as
provided in this Plan of Merger. All cash balances in any participant's
Merchants DRIP account shall be transferred to the participant's Old Kent DRIP
account and held as cash payment for supplemental investment in shares of Old
Kent Common Stock under the Old Kent DRIP. Merchants' DRIP shall then be
considered to have terminated without further action or notice.
2.7 SURRENDER OF OLD CERTIFICATES AND DISTRIBUTION OF OLD KENT COMMON
STOCK. After the Effective Time, Old Certificates shall be exchangeable by the
holders thereof for book entry shares registered on Old Kent's stock transfer
records ("BOOK ENTRY SHARES") or new stock certificates representing the number
of shares of Old Kent Common Stock to which such holders shall be entitled in
the following manner:
2.7.1 TRANSMITTAL MATERIALS. As soon as practicable after the
Effective Time, Old Kent shall send or cause to be sent to each record
holder of Merchants Common Stock as
-16-
<PAGE>
of the Effective Time transmittal materials for use in exchanging that
holder's Old Certificates pursuant to the following options: (a)
enrolling in the Old Kent DRIP with credit for all full and fractional
shares received in the Merger; (b) receiving Old Kent Common Stock
certificates; (c) receiving Book Entry Shares (but without enrolling
in the DRIP), and (d) if already enrolled in Merchants' DRIP,
electing to terminate participation in Old Kent's DRIP. The
transmittal materials will contain instructions with respect to
the surrender of Old Certificates and the selection of these exchange
options. In the absence of a selection among these exchange options,
the stockholder shall be deemed to have elected to receive Book
Entry Shares.
2.7.2 EXCHANGE AGENT. On or prior to the Effective Time, Old
Kent will deliver to Old Kent Bank or such other bank or trust company
as Old Kent may designate (the "EXCHANGE AGENT"), written notice of the
number of shares of Old Kent Common Stock issuable in the Merger and a
commitment to pay the amount of cash payable for fractional shares in
the Merger when and as determined. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to
such shares of Old Kent Common Stock, except that it shall receive and
hold all dividends or other distributions paid or distributed with
respect to such shares for the account of the record holders entitled
to such shares.
2.7.3 NEW STOCK REGISTRATIONS. Old Kent shall cause the
Exchange Agent to promptly register the shares of Old Kent Common Stock
issuable to Merchants' holders of record in such manner, in the names,
and to the addresses that appear on Merchants' stock records as of the
Effective Time, or in such other name or to such other address as may
be specified by the holder of record in transmittal documents received
by the Exchange Agent; PROVIDED, that with respect to each Merchants
stockholder, the Exchange Agent shall have received all of the Old
Certificates held by that stockholder, or an affidavit of loss and
indemnity bond for such certificate or certificates, together with
properly executed transmittal materials; and such certificates,
transmittal materials, affidavits, and bonds are in a form and
condition reasonably acceptable to Old Kent and the Exchange Agent.
2.7.4 DIVIDENDS PENDING SURRENDER. Whenever a dividend is
declared by Old Kent on Old Kent Common Stock that is payable to
shareholders of record of Old Kent as of a record date on or after the
Effective Time, the declaration shall include dividends on all shares
issuable under this Plan of Merger. No former stockholder of Merchants
shall be entitled to receive a distribution of any such dividend until
the physical exchange of all of that stockholder's Old Certificates (or
an affidavit of loss and indemnity bond for such certificates) shall
have been effected pursuant to properly submitted transmittal
materials. Upon the physical exchange of that stockholder's Old
Certificates (or an affidavit of loss and indemnity bond for such
certificates), the stockholder shall be entitled to receive from Old
Kent an amount equal to all such dividends (without interest thereon
and less the amount of taxes, if any, that may have been imposed or
paid thereon) declared and paid
-17-
<PAGE>
with respect to the shares of Old Kent Common Stock represented
thereby. If such stockholder elects to enroll in the Old Kent DRIP,
such amount shall be credited as a cash purchase for investment at
the plan's next opportunity.
2.7.5 STOCK TRANSFERS. After the Effective Time, there shall
be no transfers on Merchants' stock transfer books of the shares of
Merchants Common Stock that were issued and outstanding immediately
prior to the Effective Time. If, after the Effective Time, Old
Certificates are properly presented for transfer, then they shall be
canceled and exchanged for shares of Old Kent Common Stock as provided
in this Plan of Merger. After the Effective Time, ownership of such
shares as are represented by any Old Certificates may be transferred
only on the stock transfer records of Old Kent.
2.7.6 EXCHANGE AGENT'S DISCRETION. The Exchange Agent shall
have discretion to determine and apply reasonable rules and procedures
relating to the exchange (or lack thereof) of Old Certificates and the
registration of the shares of Old Kent Common Stock into which shares
of Merchants Common Stock are converted in the Merger and governing the
payment for fractional shares of Merchants Common Stock.
2.8 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article II, no certificates or scrip representing fractional shares of Old Kent
Common Stock shall be issued in the Merger upon the surrender of Old
Certificates. No fractional interest in any share of Old Kent Common Stock
resulting from the Merger shall be entitled to any part of a dividend,
distribution, or stock split with respect to shares of Old Kent Common Stock nor
entitle the record holder to vote or exercise any rights of a stockholder with
respect to that fractional interest. In lieu of issuing any fractional share,
each holder of an Old Certificate who would otherwise have been entitled to a
fractional share of Old Kent Common Stock upon surrender of all Old Certificates
for exchange shall be paid an amount in cash (without interest) equal to such
fraction of a share multiplied by the Final Old Kent Price. If the holder of
record elects to enroll in Old Kent's DRIP, then the cash in lieu of fractional
shares shall be held for reinvestment at the plan's next opportunity.
2.9 STOCK OPTIONS.
2.9.1 PLAN AMENDMENT. Each unexercised stock option
("UNEXERCISED OPTIONS") under the Option Plan shall become, at the
Effective Time, an option to purchase that number of shares of Old Kent
Common Stock equal to the number of shares of Merchants Common Stock
subject to such Unexercised Option multiplied by the Exchange Ratio,
rounded to the nearest whole share.
2.9.2 OPTION EXERCISES. The exercise price per share of Old
Kent Common Stock under each Unexercised Option shall be equal to the
exercise price per share of the Merchants Common Stock that was
purchasable under that option divided by the Exchange Ratio (rounded to
the nearest whole cent). In addition, each Unexercised
-18-
<PAGE>
Option that is an "incentive stock option" as defined in Section 422
of the Internal Revenue Code shall be adjusted as required by
Section 424 of the Internal Revenue Code and the regulations issued
thereunder so as not to constitute a modification, extension or
renewal of that option within the meaning of section 424 of the
Internal Revenue Code.
2.9.3 OPTION PLAN ASSUMPTION. As of the Effective Time of the
Merger, Old Kent shall assume the rights, duties and obligations of
Merchants under the Option Plan, as amended by this Plan of Merger. The
duration and other terms and conditions of the assumed options shall be
the same as the original Merchants options, except that any reference
to Merchants shall be considered to be references to Old Kent. Old Kent
acknowledges and agrees that the Merger will constitute a "change in
control" pursuant to the Option Plan resulting in acceleration of the
vesting of any options that have not yet vested.
2.9.4 REGISTRATION. Old Kent shall use commercially reasonable
efforts to file before or promptly after the Effective Time, and in no
event later than 45 days after the Effective Time, and use commercially
reasonable efforts to maintain the effectiveness of, a registration
statement with the SEC covering such options and the sale of the Old
Kent Common Stock issuable upon exercise of such options so long as
unexercised options remain outstanding.
2.9.5 NO NEW OPTIONS. At the Effective Time, the Option Plan
shall be terminated with respect to the granting of any additional
options or option rights.
2.9.6 NO CASH SURRENDER. In no event and at no time shall
Merchants (including its board of directors or any committee thereof)
permit or allow the holder of any outstanding Unexercised Options
pursuant to the Option Plan to receive cash in exchange for the
cancellation of any Unexercised Option.
ARTICLE III - OLD KENT'S REPRESENTATIONS AND WARRANTIES
Old Kent and MergerSub represent and warrant to Merchants that, except
as otherwise set forth in the disclosure statement previously furnished to
Merchants by Old Kent (the "OLD KENT DISCLOSURE STATEMENT"):
3.1 AUTHORIZATION, NO CONFLICTS, ETC.
3.1.1 AUTHORIZATION OF AGREEMENT. Each of Old Kent and
MergerSub has the requisite corporate power and authority to execute
and deliver this Plan of Merger and to consummate the Merger. This Plan
of Merger has been duly approved and adopted and the consummation of
the Merger has been duly authorized by the boards of directors of Old
Kent and MergerSub and the sole shareholder of MergerSub and no other
corporate
-19-
<PAGE>
proceedings on the part of Old Kent or MergerSub are necessary to
authorize this Plan of Merger or to consummate the Merger. This Plan
of Merger has been duly executed and delivered by, and constitutes
valid and binding obligations of, Old Kent and MergerSub and is
enforceable against Old Kent and MergerSub in accordance with its
terms.
3.1.2 NO CONFLICT, BREACH, VIOLATION, ETC. The execution,
delivery, and performance of this Plan of Merger by Old Kent and
MergerSub, and the consummation of the Merger by Old Kent and
MergerSub, do not and will not violate, conflict with, or result in a
breach of: (a) any provision of Old Kent's restated articles of
incorporation or bylaws or MergerSub's articles of incorporation or
bylaws; or (b) any statute, code, ordinance, rule, regulation,
judgment, order, writ, memorandum of understanding, arbitral award,
decree, or injunction applicable to Old Kent or its subsidiaries,
assuming the timely receipt of each of the approvals referred to in
Section 3.1.4 (REQUIRED APPROVALS).
3.1.3 NO CONTRACTUAL BREACH, DEFAULT, LIABILITY, ETC. The
execution, delivery, and performance of this Plan of Merger by Old Kent
and MergerSub, and the consummation of the Merger by Old Kent and
MergerSub, do not and will not:
(a0 AGREEMENTS, ETC. Violate, conflict with, result
in a breach of, constitute a default under, require any
consent, approval, waiver, extension, amendment,
authorization, notice or filing under, or extinguish any
material contract right of Old Kent or any of its subsidiaries
under any agreement, mortgage, lease, commitment, indenture,
other instrument, or obligation to which Old Kent or any of
its subsidiaries is a party or by which they are bound or
affected, the result of which is reasonably likely to have a
"Material Adverse Effect" (as defined in Section 9.1
("MATERIAL ADVERSE EFFECT" DEFINED)) on Old Kent;
(b0 REGULATORY RESTRICTIONS. Violate, conflict with,
result in a breach of, constitute a default under, or require
any consent, approval, waiver, extension, amendment,
authorization, notice, or filing under, any memorandum of
understanding or similar regulatory consent agreement to which
Old Kent is a party or subject, or by which it is bound or
affected; or
(c0 TORTIOUS INTERFERENCE. Subject Merchants to
material liability for tortious interference with contractual
rights.
3.1.4 REQUIRED APPROVALS. No notice to, filing with,
authorization of, exemption by, or consent or approval of, any public
body or authority is necessary for the consummation of the Merger by
Old Kent and MergerSub other than in connection or compliance with the
provisions of the Michigan Act and the DGCL, compliance with federal
and state securities laws, bylaws and rules of the NYSE, and the
approvals required under the Bank Holding Company Act of 1956, as
amended (the "FEDERAL BANK
-20-
<PAGE>
HOLDING COMPANY ACT"), the Federal Deposit Insurance Act, as amended
(the "FDIA"), and the Michigan Banking Code.
3.2 ORGANIZATION AND GOOD STANDING. Each of Old Kent and MergerSub is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Michigan. Old Kent possesses all requisite corporate power
and authority to own, operate, and lease its properties and to carry on its
business as it is now being conducted in all material respects. Old Kent is a
bank holding company duly registered as such with the Board of Governors of the
Federal Reserve System (the "FEDERAL RESERVE BOARD") under the Federal Bank
Holding Company Act. Old Kent is qualified or admitted to conduct business as a
foreign corporation in each state in which the failure to be so qualified or
admitted is reasonably likely to have a Material Adverse Effect on Old Kent.
3.3 SUBSIDIARIES. Old Kent owns all of the issued and outstanding
shares of capital stock of Old Kent Bank and MergerSub free and clear of all
claims, security interests, pledges, or liens of any kind. Old Kent Bank is duly
organized, validly existing, and in good standing as a banking corporation under
the laws of the State of Michigan.
3.4 CAPITAL STOCK.
3.4.1 CLASSES AND SHARES--OLD KENT. The authorized capital
stock of Old Kent consists of 325,000,000 shares divided into two
classes as follows: (a) 300,000,000 shares of Old Kent Common Stock, of
which, as of July 23, 1999, a total of 113,156,431 shares were validly
issued and outstanding; and (b) 25,000,000 shares of preferred stock,
without par value, of which 3,000,000 shares are designated Series A
Preferred Stock, 500,000 shares are designated Series B Preferred
Stock, and 1,000,000 shares are designated Series C Preferred Stock,
none of which preferred stock was issued and outstanding as of the date
of this Plan of Merger. The 1,000,000 shares of Series C Preferred
Stock are reserved for issuance pursuant to Series C Preferred Stock
Purchase Rights (the "OLD KENT RIGHTS") governed by a Rights Agreement,
dated as of January 20, 1997, as amended, between Old Kent and Old Kent
Bank (the "OLD KENT RIGHTS AGREEMENT").
3.4.2 NO OTHER CAPITAL STOCK. As of the date of the Plan of
Merger: (a) other than Old Kent Common Stock, there is no security or
class of securities issued and outstanding that represents or is
convertible into capital stock of Old Kent; and (b) there is no
outstanding subscription, option, warrant, or right to acquire any
capital stock of Old Kent, or agreement to which Old Kent is a party or
by which it is bound to issue capital stock, except as set forth in, or
as contemplated by, this Plan of Merger, and except (i) the Old Kent
Rights (which as of the date of this Plan of Merger were represented by
and transferable only with shares of Old Kent Common Stock); (ii) stock
options awarded pursuant to stock option plans; (iii) provisions for
the grant or sale of shares or the right to receive shares to, or for
the account of, employees and directors
-21-
<PAGE>
pursuant to restricted stock, deferred stock compensation, stock
purchase and other benefit plans; (iv) shares of Old Kent Common
Stock issuable under agreements entered into in connection with
mergers or acquisitions of direct or indirect subsidiaries or assets
in transactions approved by the Old Kent board of directors or a
committee of such board; and (v) shares of Old Kent Common Stock
issuable under Old Kent's DRIP and employee stock purchase plans.
3.4.3 ISSUANCE OF SHARES. Between July 23, 1999, and the date
of this Plan of Merger, no additional shares of capital stock have been
issued by Old Kent, except as described in this Plan of Merger, and
except for shares issued or issuable pursuant to (a) the exercise of
employee stock options under employee stock option plans; (b) the grant
or sale of shares to, or for the account of, employees and directors
pursuant to restricted stock, deferred stock compensation, stock
purchase or other benefit plans; (c) the grant or sale of shares of Old
Kent Common Stock issuable under agreements entered into in connection
with acquisitions of direct or indirect subsidiaries or assets of such
subsidiaries in transactions approved by the Old Kent board of
directors or committee thereof; and (d) Old Kent's DRIP and employee
stock purchase plans.
3.4.4 VOTING RIGHTS. Neither Old Kent nor any of its
subsidiaries (other than MergerSub) has outstanding any security or
issue of securities the holder or holders of which have the right to
vote on the approval of the Merger or this Plan of Merger, or that
entitle the holder or holders to consent to, or withhold consent on,
the Merger or this Plan of Merger.
3.4.5 CLASSES AND SHARES -- MERGERSUB. The authorized capital
stock of MergerSub consists of 60,000 shares of common stock, of which,
as of the execution of this Plan of Merger, a total of 1,000 shares
were validly issued and outstanding.
3.5 OLD KENT COMMON STOCK. The shares of Old Kent Common Stock to be
issued in the Merger in accordance with this Plan of Merger have been duly
authorized and reserved and, when issued as contemplated by this Plan of Merger,
will be validly issued, fully paid, and nonassessable shares.
3.6 FINANCIAL STATEMENTS.
3.6.1 FINANCIAL STATEMENTS. The consolidated financial
statements of Old Kent and its subsidiaries as of and for each of the
three years ended December 31, 1996, 1997, and 1998, as reported on by
Old Kent's independent accountants, and the unaudited consolidated
financial statements of Old Kent and its subsidiaries as of and for the
quarters ended March 31, 1999 and June 30, 1999, including all
schedules and notes relating to such statements (collectively, "OLD
KENT'S FINANCIAL STATEMENTS"), fairly present the financial condition
and the results of operations, changes in shareholders' equity, and
cash flows of Old Kent as of the respective dates of and for the
periods
-22-
<PAGE>
referred to in such financial statements, all in accordance with
generally accepted United States accounting principles ("GAAP")
consistently applied. The unaudited consolidated financial
statements of Old Kent and its subsidiaries as of and for each
quarter ending after the date of this Plan of Merger, until the
Effective Time, including all schedules and notes relating to such
statements, will be correct and complete, in all material respects.
3.6.2 CALL REPORTS. The following reports (including all
related schedules, notes, and exhibits) were prepared and filed in
conformity with applicable regulatory requirements and were correct and
complete in all material respects when filed:
(a0 The consolidated reports of condition and income
of Old Kent Bank (including any amendments) as of and for each
of the years ended December 31, 1996, 1997, and 1998, as filed
with the Federal Deposit Insurance Corporation ("FDIC"); and
(b0 The FR Y-9 and FR Y-6 (including amendments) for
Old Kent as of and for each of the years ended December 31,
1996, 1997, and 1998, as filed with the Federal Reserve Board.
All of such reports required to be filed prior to the Closing by Old
Kent and/or Old Kent Bank will be prepared and filed in conformity with
applicable regulatory requirements applied consistently throughout
their respective periods (except as otherwise noted in such reports)
and will be correct and complete in all material respects when filed.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in Old Kent's Financial Statements as of December
31, 1998, as of such date, neither Old Kent nor any of its subsidiaries had
liabilities or obligations, secured or unsecured (whether accrued, absolute, or
contingent) as to which there is a reasonable probability that they could have a
Material Adverse Effect on Old Kent.
3.8 ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 1998, there
has been no change in the financial condition, income, expenses, assets,
liabilities or business of Old Kent and its subsidiaries (and not the banking
industry as a whole) that had or in the future is reasonably likely to have a
Material Adverse Effect on Old Kent. No facts or circumstances have been
discovered from which it reasonably appears that there is a reasonable
probability that there will occur a change that is reasonably likely to have a
Material Adverse Effect on Old Kent that is not applicable to the banking
industry as a whole.
3.9 ABSENCE OF LITIGATION. There is no action, suit, proceeding, claim,
arbitration, or investigation pending or, to Old Kent's knowledge, threatened by
any person, including without limitation any governmental or regulatory agency,
against Old Kent or any of its subsidiaries, or the assets or business of Old
Kent or any of its subsidiaries, any of which has had or is reasonably likely to
have a Material Adverse Effect on Old Kent.
-23-
<PAGE>
3.10 REGULATORY FILINGS. In the last two years:
3.10.1 SEC FILINGS. Old Kent has filed, and will in the future
continue to file, in a timely manner all required filings with the
Securities and Exchange Commission (the "SEC"), including without
limitation all reports on Form 10-K and Form 10-Q;
3.10.2 REGULATORY FILINGS. Old Kent has filed in a timely
manner all other material filings with other regulatory bodies for
which filings are required; and
3.10.3 COMPLETE AND ACCURATE. All such filings, as of their
respective filing dates, did not contain any untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.11 REGISTRATION STATEMENT, ETC.
3.11.1 "TRANSACTION DOCUMENTS." The term "TRANSACTION
DOCUMENTS" shall collectively mean: (i) the registration statement to
be filed by Old Kent with the SEC (the "REGISTRATION STATEMENT") in
connection with the Old Kent Common Stock to be issued in the Merger;
(ii) the prospectus and proxy statement (the "PROSPECTUS AND PROXY
STATEMENT") to be mailed to Merchants stockholders in connection with
the Stockholders' Meeting (defined below); and (iii) any other
documents to be filed with the SEC, the Federal Reserve Board, the
Michigan Financial Institutions Bureau ("FIB"), the Comptroller of the
Currency ("OCC"), the states of Michigan or Delaware, or any other
regulatory agency in connection with the Merger.
3.11.2 ACCURATE INFORMATION. The information to be supplied by
Old Kent for inclusion or incorporation by reference in any Transaction
Document will not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading (a) at the respective times such
Transaction Documents are filed; (b) with respect to the Registration
Statement, when it becomes effective; and (c) with respect to the
Prospectus and Proxy Statement, when it is mailed and at the time of
the Stockholders' Meeting.
3.11.3 COMPLIANCE OF FILINGS. All documents that Old Kent is
responsible for filing with the SEC or any regulatory agency in
connection with the Merger will comply as to form in all material
respects with the provisions of applicable law and regulation.
3.12 INVESTMENT BANKERS AND BROKERS. Old Kent has not employed any
broker, finder, or investment banker in connection with the Merger. Old Kent has
no express or implied agreement
-24-
<PAGE>
with any other person or company relative to any commission or finder's fee
payable with respect to this Plan of Merger or the transactions contemplated
by it.
3.13 ACCOUNTING AND TAX TREATMENT. Neither Old Kent nor, to its
knowledge, any of its affiliates, has taken or agreed to take any action or
knows of any reason that, with respect to Old Kent and its affiliates, would
prevent Old Kent from accounting for the business combination to be effected by
the Merger as a pooling-of-interests. Old Kent has no knowledge of why the
Merger would fail to qualify as a reorganization under Section 368(a) of the
Internal Revenue Code.
3.14 AGREEMENTS WITH BANK REGULATORS. Neither Old Kent nor any of Old
Kent's subsidiaries is a party to any agreement or memorandum of understanding
with, or a party to any commitment letter, board resolution or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, any governmental authority that
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies or its management, nor has
Old Kent been advised by any governmental authority that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission.
Neither Old Kent nor any of Old Kent's subsidiaries is required by applicable
law to give prior notice to a federal banking agency of the proposed addition of
an individual to its board of directors or the employment of an individual as a
senior or executive officer. As of the date of this Plan of Merger, Old Kent
knows of no reason why the regulatory approvals referred to in Sections 3.1.4
and 4.1.4 (REQUIRED APPROVALS) cannot be obtained or why the process would be
materially impeded.
3.15 RESERVE FOR LOAN LOSSES. The reserve for credit losses as
reflected in Old Kent's Financial Statements as of December 31, 1998 was (a)
adequate in the reasonable opinion of management to meet all reasonably
anticipated credit losses, net of recoveries related to assets previously
charged off as of that date, and (b) consistent with GAAP and safe and sound
banking practices.
3.16 PUBLIC COMMUNICATIONS; SECURITIES OFFERING. Each annual report,
quarterly report, proxy material, press release, or other communication
previously sent or released by Old Kent to Old Kent's shareholders or the public
did not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.17 YEAR 2000 COMPLIANCE. Old Kent has adopted and is implementing
plans and procedures consistent with applicable regulatory requirements and
guidelines and good business practices so that its Year 2000 Assets (defined
below) are and will be timely modified, upgraded or replaced to become Year 2000
Ready (defined below) in all material respects by September 30, 1999.
-25-
<PAGE>
3.17.1 COMPLIANCE COSTS. The remaining cost and process of
achieving Year 2000 readiness for any Year 2000 Assets that are not
Year 2000 Ready do not, and will not, constitute a Material Adverse
Effect with respect to Old Kent.
3.17.2 REGULATORY COMPLIANCE. Old Kent and its subsidiaries
are in material compliance with the requirements, guidelines, and
schedule contained in the Federal Financial Institutions Examination
Council's statements dated May 5, 1997, "YEAR 2000 PROJECT MANAGEMENT
AWARENESS," and December 17, 1997, "SAFETY AND SOUNDNESS GUIDELINES
CONCERNING THE YEAR 2000 BUSINESS RISK," and dated October 15, 1998,
"INTERAGENCY GUIDELINES ESTABLISHING YEAR 2000 STANDARDS FOR SAFETY AND
SOUNDNESS," to the extent applicable. Neither Old Kent nor its
subsidiaries have received any Year 2000 deficiency notification letter
from any regulator having jurisdiction pertaining to Year 2000
readiness.
3.17.3 COMPATIBILITY. Old Kent makes no representation
relating to the compatibility of the technology used by Old Kent or any
of its subsidiaries with that used by Merchants or with respect to the
cost of integrating the technology of Merchants or any of its
subsidiaries with that used by Old Kent.
3.17.4 DEFINITIONS. "YEAR 2000 ASSETS" means all buildings,
physical plants, structures, machinery, equipment, software, hardware,
computer systems and other property owned, leased, licensed or used by
either Old Kent or Merchants, or their respective subsidiaries, which
individually or taken together, are material to the ordinary conduct of
their respective lines of business, services, or operations. "YEAR 2000
READY" means that the Year 2000 Asset accurately processes and handles
date and time data, including but not limited to performing all leap
year calculations and calculating, comparing and sequencing during and
between the years 1999 and 2000 and all other years, and will not
malfunction, cease to function or provide invalid or incorrect results
or data as a result of date or time data, including when a Year 2000
Asset is used in combination with or is interfacing with any other Year
2000 Asset or with any other asset or information technology to the
extent that it is within its control.
3.18 TRUE AND COMPLETE INFORMATION. No schedule, statement, list,
certificate, or other information furnished or to be furnished by Old Kent in
connection with this Plan of Merger, including the Old Kent Disclosure
Statement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE IV - MERCHANTS' REPRESENTATIONS AND WARRANTIES
-26-
<PAGE>
Merchants represents and warrants to Old Kent and MergerSub that,
except as otherwise set forth in the disclosure statement previously furnished
to Old Kent by Merchants (the "MERCHANTS DISCLOSURE STATEMENT"):
4.1 AUTHORIZATION, NO CONFLICTS, ETC.
4.1.1 AUTHORIZATION OF AGREEMENT. Merchants has the requisite
corporate power and authority to execute and deliver this Plan of
Merger and, subject to adoption by Merchants' stockholders, to
consummate the Merger. This Plan of Merger has been duly adopted and
the consummation of the Merger have been duly authorized by the board
of directors of Merchants and no other corporate proceedings on the
part of Merchants are necessary to authorize this Plan of Merger or to
consummate the Merger, subject only to adoption by the stockholders of
Merchants. This Plan of Merger has been duly executed and delivered by,
and constitutes valid and binding obligations of, Merchants and is
enforceable against Merchants in accordance with its terms.
4.1.2 NO CONFLICT, BREACH, VIOLATION, ETC. The execution,
delivery, and performance of this Plan of Merger by Merchants, and the
consummation of the Merger, do not and will not violate, conflict with,
or result in a breach of any provision of: (a) Merchants' or Merchants'
subsidiaries' certificate of incorporation, articles of association,
bylaws, or similar organizational documents; or (b) any statute, code,
ordinance, rule, regulation, judgment, order, writ, memorandum of
understanding, arbitral award, decree, or injunction applicable to
Merchants or any of its subsidiaries, assuming the timely receipt of
each of the approvals referred to in Section 4.1.4 (REQUIRED
APPROVALS).
4.1.3 NO CONTRACTUAL BREACH, DEFAULT, LIABILITY, ETC. The
execution, delivery, and performance of this Plan of Merger by
Merchants, and the consummation of the Merger, do not and will not:
(a0 AGREEMENTS, ETC. Violate, conflict with, result
in a breach of, constitute a default under, require any
consent, approval, waiver, extension, amendment,
authorization, notice or filing under, or extinguish any
material contract right of Merchants or any of its
subsidiaries under any agreement, mortgage, lease, commitment,
indenture, other instrument, or obligation to which Merchants
or any of its subsidiaries is a party or by which they are
bound or affected, the result of which is reasonably likely to
have a Material Adverse Effect on Merchants or any of its
subsidiaries;
(b0 REGULATORY RESTRICTIONS. Violate, conflict with,
result in a breach of, constitute a default under, or require
any consent, approval, waiver, extension, amendment,
authorization, notice, or filing under, any memorandum of
understanding or similar regulatory consent agreement to which
Merchants or any of its subsidiaries is a party or subject, or
by which it is bound or affected; or
-27-
<PAGE>
(c0 TORTIOUS INTERFERENCE. Subject Old Kent or its
subsidiaries to liability for tortious interference with
contractual rights.
4.1.4 REQUIRED APPROVALS. No notice to, filing with,
authorization of, exemption by, or consent or approval of, any public
body or authority is necessary for the consummation of the Merger by
Merchants other than in connection or compliance with the provisions of
the Michigan Act and DGCL, compliance with federal and state securities
laws, and the consents, authorizations, approvals, or exemptions
required under the Federal Bank Holding Company Act, the FDIA, and the
Michigan Banking Code.
4.2 ORGANIZATION AND GOOD STANDING. Merchants is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Merchants possesses all requisite corporate power and authority to
own, operate, and lease its properties and to carry on its business as it is now
being conducted in all material respects. Merchants is a bank holding company
duly registered as such with the Federal Reserve Board under the Federal Bank
Holding Company Act. Merchants is duly qualified and in good standing as a
foreign corporation in the State of Illinois. Merchants is not, and is not
required to be, qualified or admitted to conduct business as a foreign
corporation in any other state, except where such failure would not have a
Material Adverse Effect on Merchants.
4.3 SUBSIDIARIES.
4.3.1 OWNERSHIP. Merchants owns all of the issued and
outstanding shares of capital stock of each of its subsidiaries, free
and clear of any claim, security interest, pledge, or lien of any kind.
Merchants Bank is duly organized, validly existing, and in good
standing as a national banking association under the laws of the United
States of America. Each of Merchants' other subsidiaries (as listed in
the Merchants Disclosure Statement) is duly incorporated, validly
existing, and in good standing in its state of incorporation. Merchants
does not have "CONTROL" (as defined in Section 2(a)(2) of the Federal
Bank Holding Company Act, using 5 percent rather than 25 percent),
either directly or indirectly, of any corporation, general or limited
partnership, limited liability company, trust or other person engaged
in an active trade or business or that holds any significant assets
other than as stated in or disclosed under this Section.
4.3.2 RIGHTS TO CAPITAL STOCK. There is no legally binding and
enforceable subscription, option, warrant, right to acquire, or any
other similar agreement pertaining to the capital stock of any of
Merchants' subsidiaries.
4.3.3 QUALIFICATION AND POWER. Each of Merchants' subsidiaries
is qualified or admitted to conduct business in each state where such
qualification or admission is required except that state or those
states where the failure to be so qualified or admitted would not have
a Material Adverse Effect on Merchants or any of its subsidiaries. Each
-28-
<PAGE>
of Merchants' subsidiaries has full corporate power and authority to
carry on its business as and where now being conducted.
4.3.4 DEPOSIT INSURANCE; OTHER ASSESSMENTS. Merchants Bank
maintains in full force and effect deposit insurance through the Bank
Insurance Fund of the FDIC. Neither Merchants Bank nor its predecessors
have previously consummated a deposit insurance conversion transaction
or a so-called "Oakar" deposit insurance transaction involving a
depository institution whose deposits were insured through the Savings
Association Insurance Fund. Merchants Bank has fully paid to the FDIC
as and when due all assessments with respect to its deposits as are
required to maintain such deposit insurance in full force and effect.
Merchants Bank has paid as and when due all material fees, charges,
assessments, and the like to each and every governmental or regulatory
agency having jurisdiction as required by law, regulation, or rule.
4.3.5 NO ACQUISITION OR MERGER RESTRICTIONS. Merchants Bank
has existed and operated under the National Bank Act, as amended (the
"NATIONAL BANK ACT") for more than five years and qualifies under the
Illinois Bank Holding Company Act (the "ILLINOIS ACT") to be acquired
by an out of state bank holding company, and, immediately thereafter,
to be merged or consolidated with and into an out of state bank.
4.4 CAPITAL STOCK.
4.4.1 CLASSES AND SHARES. The authorized capital stock of
Merchants consists of 6,500,000 shares divided into two classes as
follows: (a) 6,000,000 shares of common stock, $1.00 par value per
share, of which, as of July 28, 1999, a total of 5,199,254 shares were
validly issued and outstanding, 41,321 shares were held as treasury
shares, and 178,706 shares were reserved for issuance under the Option
Plan, all of which were subject to outstanding options as of the date
of this Plan of Merger; and (b) 500,000 shares of preferred stock,
$1.00 par value per share, of which 50,000 shares are designated Series
A Junior Participating Preferred Stock, none of which were issued and
outstanding as of the date of this Plan of Merger. The 50,000 shares of
Series A Junior Participating Preferred Stock are reserved for issuance
pursuant to Series A Junior Participating Preferred Stock Purchase
Rights (the "MERCHANTS RIGHTS") governed by an Amended and Restated
Rights Agreement, dated as of October 23, 1998, between Merchants and
Merchants Bank (the "MERCHANTS RIGHTS AGREEMENT").
4.4.2 NO OTHER CAPITAL STOCK. Except for the Option Agreement,
there is no security or class of securities authorized or issued that
represents or is convertible into capital stock of Merchants. Except
for the Option Agreement and the Permitted Issuances, there is no
outstanding subscription, option, warrant, or right to acquire any
capital stock of Merchants, or agreements to which Merchants is a party
or by which it is bound to issue capital stock. No stock option
agreement issued under the Option Plan requires the payout of cash in
exchange for the cancellation of such Unexercised Option.
-29-
<PAGE>
4.4.3 ISSUANCE OF SHARES. After the date of this Plan of
Merger, the number of issued and outstanding shares of Merchants Common
Stock is not subject to change before the Effective Time except for
Permitted Issuances and issuances under the Option Agreement.
4.4.4 VOTING RIGHTS. Other than the shares of Merchants Common
Stock described in this Section, neither Merchants nor any of
Merchants' subsidiaries has outstanding any security or issue of
securities the holder or holders of which have the right to vote on the
approval of the Merger or this Plan of Merger or that entitle the
holder or holders to consent to, or withhold consent on, the Merger or
this Plan of Merger.
4.4.5 APPRAISAL RIGHTS. No stockholder of Merchants will be
entitled to appraisal rights pursuant to Section 262 of DGCL as a
result of the consummation of the Merger.
4.5 AMENDMENT OF MERCHANTS RIGHTS. Merchants has amended the Merchants
Rights Agreement to exempt the Merger and the award and exercise of the Option
contemplated by the Option Agreement and prevent such events from constituting a
"Flip-In Event" under the Merchants Rights Agreement or otherwise triggering any
other provision under the Merchants Rights Agreement and prevent Old Kent and
MergerSub from becoming "Acquiring Persons" under such agreement. The Merchants
Rights issued to the stockholders of Merchants that are evidenced, as of the
date of this Plan of Merger, by shares of Merchants Common Stock may be redeemed
by Merchants upon a resolution therefor by the Board of Directors of Merchants
at a redemption price of $.01 per Merchants Right in cash. Neither the execution
of this Plan of Merger by Merchants nor any of the provisions of this Plan of
Merger or the Option Agreement will adversely affect in any way the ability of
Merchants to redeem the Merchants Rights as described in this Section 4.5
(REDEMPTION OF MERCHANTS RIGHTS).
4.6 FINANCIAL STATEMENTS.
4.6.1 FINANCIAL STATEMENTS. The consolidated financial
statements of Merchants as of and for the each of three years ended
December 31, 1996, 1997, and 1998, as reported on by Merchants'
independent accountants, and the unaudited consolidated financial
statements of Merchants and its subsidiaries as of and for the quarters
ended March 31, 1999 and June 30, 1999, including all schedules and
notes relating to such statements, as previously delivered to Old Kent
(collectively, "MERCHANTS' FINANCIAL STATEMENTS"), fairly present the
financial condition and the results of operations, changes in
stockholders' equity, and cash flows of Merchants as of the respective
dates of and for the periods referred to in such financial statements,
all in accordance with GAAP, consistently applied. The unaudited
consolidated financial statements of Merchants and its subsidiaries as
of and for each quarter ending after the date of this Plan of Merger
until the Effective Time, including all schedules and notes relating to
such statements, will be correct and complete, in all material
respects. No financial statements of any entity or
-30-
<PAGE>
enterprise other than Merchants Bank and its subsidiary are required
by GAAP to be included in the consolidated financial statements of
Merchants.
4.6.2 CALL REPORTS. The following reports (including all
related schedules, notes, and exhibits) were prepared and filed in
conformity with applicable regulatory requirements and were correct and
complete in all material respects when filed:
(a0 The consolidated reports of condition and income
of Merchants Bank (including any amendments) as of and for
each of the years ended December 31, 1996, 1997, and 1998, as
filed with the FDIC; and
(b0 The FR Y-9 and FR Y-6 (including any amendments)
for Merchants as of and for each of the years ended December
31, 1996, 1997, and 1998, as filed with the Federal Reserve
Board.
All of such reports required to be filed prior to the Closing by
Merchants and/or Merchants Bank will be prepared and filed in
conformity with applicable regulatory requirements applied consistently
throughout their respective periods (except as otherwise noted in such
reports) and will be correct and complete in all material respects when
filed. All of the reports identified in this Section are collectively
referred to as the "CALL REPORTS."
4.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in Merchants' Financial Statements as of December
31, 1998, neither Merchants nor any of Merchants' subsidiaries had, as of such
date, liabilities or obligations, secured or unsecured (whether accrued,
absolute, or contingent) as to which there is a reasonable probability that they
could have a Material Adverse Effect on Merchants.
4.8 ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 1998, there
has been no change in the financial condition, income, expenses, assets,
liabilities or business of Merchants (and not the banking industry as a whole)
that had or in the future is reasonably likely to have a Material Adverse
Effect. No facts or circumstances have been discovered from which it reasonably
appears that there is a reasonable probability that there will occur a change
that is reasonably likely to have a Material Adverse Effect on Merchants that is
not applicable to the banking industry as a whole.
4.9 ABSENCE OF LITIGATION. There is no action, suit, proceeding, claim,
arbitration, or investigation pending or, to the knowledge of Merchants,
threatened by any person, including without limitation any governmental or
regulatory agency, against Merchants or any of its subsidiaries, or the assets
or business of Merchants or any of its subsidiaries, any of which has had or is
reasonably likely to have to have a Material Adverse Effect on Merchants or any
of its subsidiaries. To the knowledge of Merchants, there is no factual basis
that presents a reasonable potential for any such action, suit, proceeding,
claim, arbitration, or investigation.
-31-
<PAGE>
4.10 NO INDEMNIFICATION CLAIMS. To the knowledge of Merchants, there
has been no event, action, or omission by or with respect to any director,
officer, employee, trustee, agent, or other person who may be entitled to
receive indemnification or reimbursement of any claim, loss, or expense under
any agreement, contract, or arrangement providing for corporate indemnification
or reimbursement of any such person, which is reasonably likely, either
individually or in the aggregate, to have a Material Adverse Effect on Merchants
or any of its subsidiaries.
4.11 CONDUCT OF BUSINESS. Merchants and each of Merchants' subsidiaries
have conducted their respective businesses and used their respective properties
in substantial compliance with all federal, state, and local laws, civil or
common, ordinances and regulations, including without limitation applicable
federal and state laws and regulations concerning banking, securities,
truth-in-lending, truth-in-savings, mortgage origination and servicing, usury,
fair credit reporting, consumer protection, occupational safety, civil rights,
employee protection, fair employment practices, fair labor standards, and
insurance; and Environmental Laws (as defined in Section 4.25.2 (ENVIRONMENTAL
LAWS)); except for violations (individually or in the aggregate) that would not
have a Material Adverse Effect on Merchants or any of its subsidiaries.
4.12 CONTRACTS. There is no existing default by Merchants or any of its
subsidiaries or, to the knowledge of Merchants, any other party under any
contract or agreement to which Merchants or any of its subsidiaries is a party,
or by which they are bound, the result of which is reasonably likely to have a
Material Adverse Effect on Merchants or any of its subsidiaries. Excepting any
ordinary and customary banking relationships, there is no material agreement,
contract, mortgage, deed of trust, lease, commitment, indenture, note, or other
instrument of which Merchants has knowledge that another party is in material
default under its obligations to Merchants or any of its subsidiaries. Merchants
is not party to any contract, agreement, arrangement, or understanding (other
than ordinary and customary banking relationships) that would require Merchants
or any of its subsidiaries to make payments or make expenditures in excess of
$200,000 per year or that would require any payment to another party upon
termination in excess of $50,000.
4.13 REGULATORY FILINGS. In the last five years:
4.13.1 SEC FILINGS. Merchants has filed, and in the future
will continue to file, in a timely manner all required filings with the
SEC, including without limitation all reports on Form 10-K and Form
10-Q;
4.13.2 REGULATORY FILINGS. Merchants has filed in a timely
manner all other filings with other regulatory bodies for which filings
are required; and
4.13.3 COMPLETE AND ACCURATE. All such filings, as of their
respective filing dates, did not contain any untrue statement of
material fact or omit to state a material fact
-32-
<PAGE>
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All such filings complied in all material respects with
all laws, regulations, forms, and guidelines applicable to such
filings.
4.14 REGISTRATION STATEMENT, ETC.
4.14.1 ACCURATE INFORMATION. The information to be supplied by
Merchants for inclusion or incorporation by reference in any
Transaction Document will not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (a) at the respective times
such Transaction Documents are filed; (b) with respect to the
Registration Statement, when it becomes effective; and (c) with respect
to the Prospectus and Proxy Statement, when it is mailed and at the
time of the Stockholders' Meeting.
4.14.2 COMPLIANCE OF FILINGS. All documents that Merchants is
responsible for filing with the SEC or any regulatory agency in
connection with the Merger will comply as to form in all material
respects with the provisions of applicable law and regulation.
4.15 AGREEMENTS WITH BANK REGULATORS. Neither Merchants nor any of
Merchants' subsidiaries is a party to any agreement or memorandum of
understanding with, or a party to any commitment letter, board resolution or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any governmental
authority that restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies or its
management, nor has Merchants been advised by any governmental authority that it
is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission. Neither Merchants nor any of Merchants' subsidiaries is required by
applicable law to give prior notice to a Federal banking agency of the proposed
addition of an individual to its board of directors or the employment of an
individual as a senior or executive officer. As of the date of this Plan of
Merger, Merchants knows of no reason why the regulatory approvals referred to in
Sections 3.1.4 and 4.1.4 (REQUIRED APPROVALS) cannot be obtained or why the
process would be materially impeded.
4.16 TAX MATTERS.
4.16.1 TAXES DEFINED. "TAXES" means any federal, state,
county, local, or foreign taxes, charges, assessments, levies,
deficiencies, or other governmental fees, charges, or amounts required
to be collected, withheld, or paid to any government, agency, or
political subdivision of any government in respect to any tax or
governmental fee or charge, together with any penalties, additions to
tax or interest, due under any applicable
-33-
<PAGE>
law, regulation, rule, or ordinance to any governmental unit or
agency, including, without limitation, taxes with respect to income,
profits, gross receipts, value added, AD VALOREM, employment,
unemployment, withholding, backup withholding, nonresident alien
withholding, social security, real property, personal property, sales,
use, excise, intangibles, license, franchise, capital stock, and
disability, and payments based on occupation, services rendered, real
property, personal property or transfer.
4.16.2 TAX RETURNS. Merchants and its subsidiaries have each
duly and timely filed or delivered, and if necessary amended, all
material tax returns, information returns, estimates, declarations,
reports, statements and other filings that are required by law,
regulation, rule, or ordinance (collectively, "TAX RETURNS"). Each such
Tax Return, as amended, is correct, complete and complies in all
material respects with all applicable laws, regulations, rules, and
ordinances. Merchants and its subsidiaries have each maintained all
necessary and appropriate accounting records to support the positions
taken on all filed Tax Returns and all exemptions from filing Tax
Returns.
4.16.3 TAX ASSESSMENTS AND PAYMENTS. All material Taxes due
and payable by Merchants and each of Merchants' subsidiaries have been
paid or deposited in full as and when due, including applicable
extension periods. Each of Merchants and Merchants' subsidiaries have
withheld and paid over all material Taxes required to have been
withheld and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or owing
to any employee, creditor, independent contractor or other third
parties. The provisions made for Taxes on Merchants' Financial
Statements as of December 31, 1998, are sufficient for the payment of
all accrued but unpaid Taxes as of the date indicated, whether or not
disputed, with respect to all periods through December 31, 1998. There
is no lien on any of Merchants' or any of its subsidiaries' assets or
properties with respect to Taxes, except for liens for Taxes not yet
due and payable.
4.16.4 TAX AUDITS. None of the Tax Returns of Merchants and
its subsidiaries filed for any tax year after 1989 have been audited by
the Internal Revenue Service (the "IRS") or any state or local taxing
authority. There is no tax audit or legal or administrative proceeding
concerning the accuracy of tax or information returns or the assessment
or collection of Taxes pending or, to Merchants' knowledge, threatened
with respect to Merchants or its subsidiaries. No claim concerning the
calculation, assessment or collection of taxes has been asserted with
respect to Merchants or any of its subsidiaries. No waiver or extension
of any statute of limitations is in effect with respect to Taxes or Tax
Returns of Merchants or any of its subsidiaries.
4.16.5 TAX ACCOUNTING. Neither Merchants nor any of its
subsidiaries have been required to include in income any adjustment
pursuant to Section 481 of the Internal Revenue Code by reason of a
voluntary change in accounting method initiated by
-34-
<PAGE>
Merchants or any of its subsidiaries and the IRS has not initiated or
proposed any such adjustment or change in accounting method. Neither
Merchants nor any of its subsidiaries has entered into a transaction
which is being accounted for as an installment obligation under
Section 453 of the Internal Revenue Code.
4.16.6 EXCESS PARACHUTE PAYMENTS. No compensation that could
be payable (whether in cash, stock, options, or other property or the
vesting of property or other rights) by Merchants, its subsidiaries,
its affiliates, or any of their respective successors under any
employment, option, benefit plan, severance, termination or other
compensation arrangement currently in effect is, or will be, an "excess
parachute payment" (as defined in Section 280G of the Internal Revenue
Code).
4.17 TITLE TO PROPERTIES. Merchants and each of its subsidiaries have
good, sufficient, and marketable title to all of their properties and assets,
whether real, personal, or a combination thereof, reflected in their books and
records as being owned (including those reflected in Merchants' Financial
Statements as of December 31, 1998, except as since disposed of in the ordinary
course of business), free and clear of all liens and encumbrances, except:
4.17.1 REFLECTED ON BALANCE SHEET. As reflected on Merchants'
Financial Statements as of December 31, 1998;
4.17.2 NORMAL TO BUSINESS. Liens for current Taxes not yet
delinquent, and liens or encumbrances that are normal to the business
of Merchants and that would not have a Material Adverse Effect on
Merchants; and
4.17.3 IMMATERIAL IMPERFECTIONS. Such imperfections of title,
easements, restrictions, and encumbrances, if any, as are not material
in character, amount, or extent, and do not materially detract from the
value, or materially interfere with the present use, of the properties
subject thereto or affected thereby.
4.17.4 PUBLIC EASEMENTS; ETC. Such public easements, public
rights of way, and interests of units of government of record, if any,
as are not material in character, amount, or extent, and do not
materially detract from the value, or materially interfere with the
present use, of the properties subject thereto or affected thereby.
4.18 CONDITION OF REAL PROPERTY. With respect to each parcel of real
property owned, legally or beneficially, by Merchants or any of its
subsidiaries, including other real estate owned ("MERCHANTS' REAL PROPERTY"), to
its knowledge:
4.18.1 NO ENCROACHMENTS. Except for those encroachments that
have been insured over by a policy of title insurance, no building or
improvement to Merchants' Real Property encroaches on any easement or
property owned by another person. No building or property owned by
another person encroaches on Merchants' Real Property or
-35-
<PAGE>
on any easement benefitting Merchants' Real Property. None of the
boundaries of Merchants' Real Property deviates substantially from
those shown on the survey of such property, if any, included with the
Merchants Disclosure Statement or from what the boundaries appear to
be through visual inspection. No claim of encroachment has been
asserted by any person with respect to any of Merchants' Real Property.
4.18.2 ZONING. Neither Merchants, any of Merchants'
subsidiaries, nor Merchants' Real Property is in material violation of
any zoning regulation, building restriction, restrictive covenant,
ordinance, or other law, order, regulation, or requirement relating to
any of Merchants' Real Property.
4.18.3 BUILDINGS. All buildings and improvements to Merchants'
Real Property are in good condition (normal wear and tear excepted),
are structurally sound and are not in need of material repairs, are fit
for their intended purposes, and are adequately serviced by all
utilities necessary for the effective operation of business as
presently conducted at that location.
4.18.4 NO CONDEMNATION. None of Merchants' Real Property is
the subject of any condemnation action. There is no proposal under
active consideration by any public or governmental authority or entity
to acquire Merchants' Real Property for any governmental purpose.
4.19 REAL AND PERSONAL PROPERTY LEASES. With respect to each lease and
license pursuant to which Merchants or any of its subsidiaries, as lessee or
licensee, has possession of real or personal property, excluding any personal
property lease with payments of less than $25,000 per year ("MERCHANTS'
LEASES"):
4.19.1 VALID. Each of Merchants' Leases is valid, effective,
and enforceable against the lessor or licensor in accordance with its
terms.
4.19.2 NO DEFAULT. There is no existing default under any of
Merchants' Leases or any event that with notice or passage of time, or
both, would constitute a default with respect to Merchants, any of
Merchants' subsidiaries or, to the knowledge of Merchants, any other
party to the contract, which default is reasonably likely to have a
Material Adverse Effect on Merchants or any of its subsidiaries.
4.20 ASSIGNMENT. None of Merchants' Leases contain a prohibition
against assignment by Merchants or any of its subsidiaries, by operation of law
or otherwise, or any provision that would materially interfere with the
possession, use, or rights with respect to the property by Old Kent or its
subsidiaries for the same purposes and upon the same rental and other terms
following consummation of the Merger as are applicable to Merchants or
Merchants' subsidiaries prior to the Effective Time.
-36-
<PAGE>
4.21 REQUIRED LICENSES, PERMITS, ETC.
4.21.1 LICENSES, PERMITS, ETC. Merchants and each of
Merchants' subsidiaries hold all licenses, certificates, permits,
franchises, and rights from all appropriate federal, state, and other
public authorities necessary for the conduct of its business as
presently conducted, the lack of which would not have a Material
Adverse Effect on Merchants or any of its subsidiaries.
4.21.2 REGULATORY ACTION. Neither Merchants nor any of its
subsidiaries nor any of their directors, officers, or employees has
within the last five years been charged by a regulatory authority with,
or to Merchants' knowledge is under governmental investigation with
respect to, any actual or alleged violation of any statute, ordinance,
rule, regulation, guideline, or standard applicable to Merchants or its
subsidiaries' or their respective businesses. Neither Merchants nor any
of its subsidiaries nor any of their directors, officers, or employees
is the subject of any pending or, to Merchants' knowledge, threatened
proceeding by any regulatory authority having jurisdiction over the
business, properties, or operations of Merchants or any of its
subsidiaries.
4.22 DATA PROCESSING AND OTHER MATERIAL CONTRACTS.
4.22.1 DATA PROCESSING. All material data processing contracts
of Merchants or any of its subsidiaries are cancelable on or before the
Closing, without cost or penalty.
4.22.2 CHANGE OF CONTROL. There is no agreement, contract,
loan, mortgage, deed of trust, lease, commitment, indenture, note, or
other instrument under which (a) a consent or approval is required, (b)
an assignment by operation of law is prohibited, (c) a waiver or loss
of any right could occur or (d) acceleration of any obligation could
occur, as a result of the change of control, merger, consolidation, or
liquidation of Merchants or any of its subsidiaries upon consummation
of the Merger where (w) the failure to obtain such consent or approval,
(x) the violation of prohibition against assignment, (y) the waiver or
loss of any right, or (z) the acceleration of any obligation could
materially interfere with the ordinary course of business by Merchants
or any of its subsidiaries (or Old Kent or any of its subsidiaries as
their successors) or have a Material Adverse Effect on Merchants or any
of its subsidiaries.
4.23 CERTAIN EMPLOYMENT MATTERS.
4.23.1 EMPLOYMENT POLICIES, PROGRAMS, AND PROCEDURES. The
policies, programs, and practices of Merchants and each of its
subsidiaries relating to equal opportunity and affirmative action,
wages, hours of work, employee disabilities, and other terms and
conditions of employment are in compliance in all material respects
with applicable federal, state, and local laws, orders, regulations,
and ordinances governing or relating to employment and employer
practices and facilities.
-37-
<PAGE>
4.23.2 RECORD OF PAYMENTS. There is no existing or outstanding
obligation of Merchants or any of its subsidiaries, whether arising by
operation of law, civil or common, by contract, or by past custom, for
any Employment-Related Payment (as defined in Section 4.23.3
(EMPLOYMENT-RELATED PAYMENTS)) to any trust, fund, company,
governmental agency, or any person that has not been duly recorded on
the books and records of Merchants and paid when due or duly accrued in
the ordinary course of business in accordance with GAAP.
4.23.3 EMPLOYMENT-RELATED PAYMENTS. For purposes of this Plan
of Merger, "EMPLOYMENT-RELATED PAYMENTS" include any payment to be made
with respect to any contract for employment; unemployment compensation
benefits; profit sharing, pension, or retirement benefits; social
security benefits; fringe benefits, including vacation, or holiday pay,
bonuses, and other forms of compensation; or for medical insurance or
medical expenses; any of which are payable with respect to any present
or former director, officer, employee, or agent, or his or her
survivors, heirs, legatees, or legal representatives.
4.23.4 EMPLOYMENT CLAIMS. There is no dispute, claim, or
charge, pending or, to Merchants' knowledge, threatened, alleging
breach of any express or implied employment contract or commitment, or
breach of any applicable law, order, regulation, public policy, or
ordinance relating to employment or terms and conditions of employment.
To the knowledge of Merchants, there is no factual basis for any valid
claim or charge with regard to such employment-related matters.
4.23.5 EMPLOYMENT RELATED AGREEMENTS. There is no written or
oral, express or implied:
(a) Employment contract or agreement, or guarantee of
job security, made with or to any past or present employee of
Merchants or any of its subsidiaries that is not terminable by
Merchants or any of its subsidiaries upon 60 days' or less
notice without penalty or obligation;
(b) Plan, contract, arrangement, understanding, or
practice providing for bonuses, pensions, options, stock
purchases, deferred compensation, retirement payments,
retirement benefits of the type described in Statement of
Financial Accounting Standard No. 106, or profit sharing; or
(c) Plan, agreement, arrangement, or understanding
with respect to payment of medical expenses, insurance (except
insurance continuation limited to that required under
provisions of the Consolidated Omnibus Budget Reconciliation
Act), or other benefits for any former employee or any spouse,
-38-
<PAGE>
child, member of the same household, estate, or survivor of
any employee or former employee.
4.24 EMPLOYEE BENEFIT PLANS. With respect to any "employee welfare
benefit plan," any "employee pension benefit plan," or any "employee benefit
plan" within the respective meanings of Sections 3(1), 3(2), and 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (each
referred to as an "EMPLOYEE BENEFIT PLAN"), maintained by or for the benefit of
Merchants or any of its subsidiaries or their predecessors or to which Merchants
or any of its subsidiaries or their predecessors has made payments or
contributions on behalf of its employees:
4.24.1 ERISA COMPLIANCE. Merchants, each of Merchants'
subsidiaries, each Employee Benefit Plan, and all trusts created
thereunder are in substantial compliance with ERISA, and all other
applicable laws and regulations insofar as such laws and regulations
apply to such plans and trusts.
4.24.2 INTERNAL REVENUE CODE COMPLIANCE. Merchants, each of
Merchants' subsidiaries, each Employee Benefit Plan that is intended to
be a qualified plan under Section 401(a) of the Internal Revenue Code,
and all trusts created thereunder are in substantial compliance with
the applicable provisions of the Internal Revenue Code.
4.24.3 PROHIBITED TRANSACTIONS. No Employee Benefit Plan and
no trust created thereunder has been involved, subsequent to June 30,
1974, in any nonexempt "prohibited transaction" as defined in Section
4975 of the Internal Revenue Code and in Sections 406, 407, and 408 of
ERISA.
4.24.4 PLAN TERMINATION. No Employee Benefit Plan that is a
qualified plan under Section 401(a) of the Internal Revenue Code and no
trust created thereunder has been terminated, partially terminated,
curtailed, discontinued, or merged into another plan or trust after
January 1, 1985, except in compliance with notice and disclosure to the
IRS and the Pension Benefit Guaranty Corporation (the "PBGC"), where
applicable, as required by the Internal Revenue Code and ERISA. With
respect to each plan termination, all termination procedures have been
completed and there is no pending or potential liability to the PBGC,
to any plan, or to any participant under the terminated plan. Each plan
termination, partial termination, curtailment, discontinuance, or
consolidation has been accompanied by the issuance of a current
favorable determination letter by the IRS and, where applicable, has
been accompanied by plan termination proceedings with and through the
PBGC.
4.24.5 MULTIEMPLOYER PLAN. No Employee Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37)(A) of ERISA.
-39-
<PAGE>
4.24.6 DEFINED BENEFIT PLAN. No Employee Benefit Plan in
effect as of the date of this Plan of Merger is a "defined benefit
plan" within the meaning of Section 3(35) of ERISA.
4.24.7 PAYMENT OF CONTRIBUTIONS. Merchants has made when due
all contributions required under each Employee Benefit Plan and under
applicable laws and regulations.
4.24.8 PAYMENT OF BENEFITS. There is no payment that has
become due from any Employee Benefit Plan, any trust created
thereunder, or from Merchants or any of its subsidiaries that has not
been paid through normal administrative procedures to the plan
participants or beneficiaries entitled thereto, except for claims for
benefits for which administrative claims procedures under such plan
have not been exhausted.
4.24.9 ACCUMULATED FUNDING DEFICIENCY. No Employee Benefit
Plan that is intended to be a qualified plan under Section 401(a) of
the Internal Revenue Code and no trust created thereunder has incurred,
subsequent to June 30, 1974, an "accumulated funding deficiency" as
defined in Section 412(a) of the Internal Revenue Code and Section 302
of ERISA (whether or not waived).
4.24.10 FILING OF REPORTS. Merchants and each of Merchants'
subsidiaries has filed or caused to be filed, and will continue to file
or cause to be filed, in a timely manner all filings pertaining to each
Employee Benefit Plan with the IRS, the United States Department of
Labor, and the PBGC as prescribed by the Internal Revenue Code, ERISA,
and the regulations issued thereunder. All such filings, as amended,
were complete and accurate in all material respects as of the dates of
such filings, and there were no material misstatements or omissions in
any such filing.
4.25 ENVIRONMENTAL MATTERS.
4.25.1 HAZARDOUS SUBSTANCES. For purposes of this Plan of
Merger, "HAZARDOUS SUBSTANCE" has the meaning set forth in Section 9601
of the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, 42 U.S.C. ' 9601, ET SEQ. ("CERCLA"), and also
includes any substance now or in the future regulated by or subject to
any Environmental Law (as defined below) and any other pollutant,
contaminant, or waste, including, without limitation, petroleum,
asbestos, radon, and polychlorinated biphenyls.
4.25.2 ENVIRONMENTAL LAWS. For purposes of this Plan of
Merger, "ENVIRONMENTAL LAWS" means all laws (civil or common),
ordinances, rules, regulations, guidelines, and orders that: (a)
regulate the generation, manufacture, release, treatment, containment,
storage, handling, transportation, disposal, or management of Hazardous
Substances; (b) regulate or prescribe standards or requirements for the
protection of air,
-40-
<PAGE>
water, or soil quality; (c) are intended to protect public health or
the environment; or (d) establish liability for the investigation,
removal, or cleanup of, or damage caused by, any Hazardous Substance.
4.25.3 OWNED OR OPERATED PROPERTY. With respect to: (i) the
real estate owned or leased by Merchants or any of its subsidiaries or
used in the conduct of their businesses; and (ii) other real estate
owned by Merchants Bank (collectively referred to as "PREMISES"):
(a) CONSTRUCTION AND CONTENT. To its knowledge, none
of the Premises is constructed of, or contains as a component
part, any material that (either in its present form or as it
may reasonably be expected to change through aging or normal
use) releases or may release any Hazardous Substance in
violation of applicable law. Without limiting the generality
of this Section, the Premises are free of asbestos except to
the extent properly sealed or encapsulated in compliance with
all applicable Environmental Laws and all workplace safety and
health laws and regulations.
(b) USES OF PREMISES. To its knowledge, no part of
the Premises has been used for the generation, manufacture,
handling, containment, treatment, transportation, storage,
disposal, or management of Hazardous Substances.
(c) UNDERGROUND STORAGE TANKS. To its knowledge, the
Premises do not contain, and have never contained, any
underground storage tanks. With respect to any underground
storage tank that is listed in the Merchants Disclosure
Statement as an exception to the foregoing, each such
underground storage tank presently or previously located on
Premises is or has been maintained or removed, as applicable,
in compliance with all applicable Environmental Laws, and has
not been the source of any release of a Hazardous Substance to
the environment that has not been fully remediated.
(d) ABSENCE OF CONTAMINATION. To its knowledge, the
Premises do not contain and are not contaminated by any
reportable quantity, or any quantity or concentration in
excess of applicable cleanup standards, of a Hazardous
Substance from any source.
(e) ENVIRONMENTAL SUITS AND PROCEEDINGS. To its
knowledge, there is no action, suit, investigation, liability,
inquiry, or other proceeding, ruling, order, notice of
potential liability, or citation involving Merchants or any of
its subsidiaries that is pending, threatened, or previously
asserted under, or as a result of any actual or alleged
failure to comply with any requirement of, any Environmental
Law. To its knowledge, there is no basis for any of the
foregoing.
-41-
<PAGE>
(f) NO IRPTA REAL PROPERTY. None of the Premises
constitutes "real property" within the meaning of the Illinois
Responsible Property Transfer Act, as amended.
4.25.4 TRUST PROPERTIES; FORMER PROPERTIES. With respect to
(i) real estate held and administered in trust by Merchants Bank and
(ii) any real estate formerly owned or leased by Merchants or Merchants
Bank, Merchants makes the same representations as set forth in Section
4.25.3 (OWNED OR OPERATED PROPERTY) to the knowledge of its executive
officers, including its senior trust officer, but without any
investigation or inquiry.
4.25.5 LOAN PORTFOLIO. With respect to any real estate
securing any outstanding loan or related security interest and any
owned real estate acquired in full or partial satisfaction of a debt
previously contracted, Merchants and each of Merchants' subsidiaries
has complied in all material respects with their policies (as such
policies may have been in effect from time to time and as disclosed in
the Merchants Disclosure Statement), and all applicable laws and
regulations, concerning the investigation of each such property to
determine whether or not there exists or is reasonably likely to exist
any Hazardous Substance on, in, or under such property and whether or
not a release of a Hazardous Substance has occurred at or from such
property.
4.26 DUTIES AS FIDUCIARY. Merchants Bank has performed all of its
duties in any capacity as trustee, executor, administrator, registrar, guardian,
custodian, escrow agent, receiver, or other fiduciary in a fashion that complies
in all material respects with all applicable laws, regulations, orders,
agreements, wills, instruments, and common law standards. Merchants Bank has not
received notice of any claim, allegation, or complaint from any person that
Merchants Bank failed to perform these fiduciary duties in the required manner.
4.27 INVESTMENT BANKERS AND BROKERS. Merchants has employed McDonald
Investments Inc. ("MCDONALD"), in connection with the Merger. Merchants,
Merchants' subsidiaries, and their respective affiliates, directors, officers,
and agents (collectively, "MERCHANTS' REPRESENTATIVES") have not employed,
engaged, or consulted with any broker, finder, or investment banker other than
McDonald in connection with this Plan of Merger or the Merger. Other than the
fees and expenses payable by Merchants to McDonald in connection with the
Merger, as described in the Merchants Disclosure Statement, there is no
investment banking fee, financial advisory fee, brokerage fee, finder's fee,
commission, or compensation payable by Merchants or any of its subsidiaries to
any person with respect to the Plan of Merger or the consummation of the Merger.
True and complete copies of each agreement, arrangement, and understanding
between Merchants and McDonald are included in the Merchants Disclosure
Statement. Merchants has no express or implied agreement, arrangement, or
understanding with any person other than McDonald relative to the payment of any
investment banking fee, financial advisory fee, brokerage fee, finder's fee,
commission, or compensation with respect to this Plan of Merger or the
consummation of the Merger.
-42-
<PAGE>
4.28 FAIRNESS OPINION. Merchants' board of directors has received the
opinion of McDonald, in its capacity as Merchants' financial advisor,
substantially to the effect that the consideration to be received by the holders
of the Merchants Common Stock in the Merger is fair to the holders of Merchants
Common Stock from a financial point of view. A copy of the fairness opinion has
been provided to Old Kent. Merchants has procured McDonald's consent to include
the fairness opinion in the Registration Statement and Proxy Statement.
4.29 MERCHANTS-RELATED PERSONS. For purposes of this Plan of Merger,
the term "MERCHANTS-RELATED Person" shall mean any director or executive officer
of Merchants or any of its subsidiaries, their spouses and children, any person
who is a member of the same household as such persons, and any corporation,
limited liability company, partnership, proprietorship, trust, or other entity
of which any such persons, alone or together, have Control.
4.29.1 CONTROL OF MATERIAL ASSETS. Other than in a capacity as
a stockholder, director, or executive officer of Merchants or any of
its subsidiaries, no Merchants-Related Person owns or controls any
material assets or properties that are used in the business of
Merchants or any of its subsidiaries.
4.29.2 CONTRACTUAL RELATIONSHIPS. Other than ordinary and
customary banking relationships, no Merchants-Related Person has any
contractual relationship with Merchants or any of its subsidiaries.
4.29.3 LOAN RELATIONSHIPS. No Merchants-Related Person has any
outstanding loan or loan commitment from, or on whose behalf an
irrevocable letter of credit has been issued by, Merchants or any of
its subsidiaries in a principal amount of $60,000 or more.
4.30 CHANGE IN BUSINESS RELATIONSHIPS. No director or executive officer
of Merchants has knowledge, after reasonable inquiry, that: (a) any customer,
agent, representative, or supplier of Merchants or any of its subsidiaries, or
other person with whom Merchants or any of its subsidiaries has a contractual
relationship, intends to discontinue, diminish, or change its relationship with
Merchants or any of its subsidiaries, the effect of which is reasonably likely
to have a Material Adverse Effect on Merchants or any of its subsidiaries; or
(b) any executive officer of Merchants or any of its subsidiaries currently
plans to terminate his or her employment.
4.31 INSURANCE. Merchants and each of Merchants' subsidiaries maintain
in full force and effect insurance on their respective assets, properties,
premises, operations, and personnel in such amounts and against such risks and
losses as are customary and adequate for comparable entities engaged in the same
business and industry. There is no unsatisfied claim of $100,000 or more under
such insurance as to which the insurance carrier has denied liability. During
the last five years, no insurance company has canceled or refused to renew a
policy of insurance covering Merchants' or any of Merchants' subsidiaries'
assets, properties, premises, operations, or personnel. Merchants and each of
Merchants' subsidiaries have given adequate and timely notice
-43-
<PAGE>
to each insurance carrier, and have complied with all policy provisions, with
respect to any material known claim for which a defense and/or
indemnification may be available to Merchants or any of its subsidiaries.
4.32 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of Merchants are complete and correct in all
material respects, represent bona fide transactions, and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate internal control system. The corporate minute books of Merchants and
each of Merchants' subsidiaries contain accurate and complete records of all
meetings of, and corporate action taken by, their stockholders, boards, and
committees in all material respects. Since January 1, 1990, the minutes of each
meeting (or corporate action without a meeting) of any such stockholders,
boards, or committees have been duly prepared and are contained in such minute
books. Except for references in minutes relating to the Merger or references in
minutes regarding discussions of possible Business Combinations after March 31,
1999, all such minute books and related exhibits or attachments for all meetings
since January 1, 1996, have been made available for Old Kent's review prior to
the date of this Plan of Merger without material omission or redaction.
4.33 LOAN GUARANTEES. All guarantees of indebtedness owed to Merchants
or any of its subsidiaries, including without limitation those of the Federal
Housing Administration, the Small Business Administration, and other state and
federal agencies, are valid and enforceable.
4.34 EVENTS SINCE DECEMBER 31, 1998. Neither Merchants nor any of
Merchants' subsidiaries has, since December 31, 1998:
4.34.1 BUSINESS IN ORDINARY COURSE. Other than as contemplated
by this Plan of Merger, conducted its business other than in the
ordinary course, or incurred or become subject to any liability or
obligation, except liabilities incurred in the ordinary course of
business, and except for any single liability or for the aggregate of
any group of related liabilities that do not exceed $100,000.
4.34.2 STRIKES OR LABOR TROUBLE. Experienced or, to its
knowledge, been threatened by any strike, work stoppage, organizational
effort, or other labor trouble, or any other event or condition of any
similar character that has had or is reasonably likely to have a
Material Adverse Effect on Merchants or any of its subsidiaries.
4.34.3 DISCHARGE OF OBLIGATIONS. Discharged or satisfied any
lien or encumbrance, or paid any obligation or liability other than
those shown on Merchants' Financial Statements as of December 31, 1998,
or incurred after that date, other than in the ordinary course of
business, except for such liens, encumbrances, liabilities, and
obligations that do not in the aggregate exceed $100,000.
-44-
<PAGE>
4.34.4 MORTGAGE OF ASSETS. Mortgaged, pledged, or subjected to
lien, charge, or other encumbrance any of its assets, or sold or
transferred any such assets, except in the ordinary course of business,
except for such mortgages, pledges, liens, charges, and encumbrances
for indebtedness that do not in the aggregate exceed $100,000.
4.34.5 CONTRACT AMENDMENT OR TERMINATION. Made or permitted
any amendment or early termination of any contract, agreement or
understanding to which it is a party and that is material to the
financial condition, income, expenses, business, properties, or
operations of Merchants, except as may be expressly provided in this
Plan of Merger.
4.35 RESERVE FOR LOAN AND LEASE LOSSES. The allowance for loan and
lease losses as reflected in Merchants' Financial Statements and Call Reports
for the year ended December 31, 1998, was in the reasonable opinion of
management (a) adequate to meet all reasonably anticipated loan and lease
losses, net of recoveries related to loans previously charged off as of those
dates, and (b) consistent with GAAP and safe and sound banking practices.
4.36 LOAN ORIGINATION AND SERVICING. In originating, underwriting,
servicing, purchasing, selling, transferring, and discharging loans, mortgages,
land contracts, and other contractual obligations, either for its own account or
for the account of others, each of Merchants' subsidiaries has complied with all
applicable terms and conditions of such obligations and with all applicable
laws, regulations, rules, contractual requirements, and procedures, except for
incidents of noncompliance that would not, individually or in the aggregate,
have a Material Adverse Effect on Merchants or any of its subsidiaries.
4.37 PUBLIC COMMUNICATIONS; SECURITIES OFFERING. Each annual report,
quarterly report, proxy material, press release, or other communication
previously sent or released by Merchants to Merchants' stockholders or the
public did not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.38 NO INSIDER TRADING. Merchants has reviewed its stock transfer
records since December 31, 1998, and has questioned its directors and executive
officers concerning known stock transfers since that date. Based upon that
investigation, Merchants has not, and to Merchants' knowledge (a) no director or
officer of Merchants, (b) no person related to any such director or officer by
blood or marriage and residing in the same household, and (c) no person who has
been knowingly provided material nonpublic information by any one or more of
these persons, has purchased or sold, or caused to be purchased or sold, any
shares of Merchants Common Stock or other securities issued by Merchants during
any period when Merchants was in possession of material nonpublic information or
in violation of any applicable provision of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT").
4.39 YEAR 2000 COMPLIANCE. Merchants and its subsidiaries have each
adopted and are implementing, as applicable, plans and procedures consistent
with applicable regulatory
-45-
<PAGE>
requirements and guidelines and good business practices so that their Year
2000 Assets are and will be timely modified, upgraded or replaced to become
Year 2000 Ready in all material respects by September 30, 1999.
4.39.1 COMPLIANCE PLAN. The Merchants Disclosure Statement
contains copies of all Year 2000 plans and procedures, together with a
current estimate of anticipated associated compliance costs. Also
included in the Merchants Disclosure Statement are copies of all
material communications between Merchants or its subsidiaries and their
regulators relating to such compliance matters.
4.39.2 COMPLIANCE COSTS. The remaining cost and process of
achieving Year 2000 readiness for any Year 2000 Assets that are not
Year 2000 Ready do not, and will not, constitute a Material Adverse
Effect with respect to Merchants or any of its subsidiaries.
4.39.3 REGULATORY COMPLIANCE. Merchants and its subsidiaries
are in material compliance with the requirements, guidelines, and
schedule contained in the Federal Financial Institutions Examination
Council's statements dated May 5, 1997, "YEAR 2000 PROJECT MANAGEMENT
AWARENESS," and December 17, 1997, "SAFETY AND SOUNDNESS GUIDELINES
CONCERNING THE YEAR 2000 BUSINESS RISK," and dated October 15, 1998,
"INTERAGENCY GUIDELINES ESTABLISHING YEAR 2000 STANDARDS FOR SAFETY AND
SOUNDNESS," to the extent applicable. Neither Merchants nor its
subsidiaries have received any Year 2000 deficiency notification letter
from any regulator having jurisdiction pertaining to Year 2000
readiness.
4.39.4 COMPATIBILITY. Merchants makes no representation
relating to the compatibility of the technology used by Merchants or
any of its subsidiaries with that used by Old Kent or with respect to
the cost of integrating the technology of Merchants or any of its
subsidiaries with that used by Old Kent.
4.40 JOINT VENTURES; STRATEGIC ALLIANCES. Neither Merchants nor any of
its subsidiaries is, directly or indirectly, a party to or bound by any joint
venture, partnership, limited partnership, limited liability company, or
strategic alliance agreement or arrangement with or through any unaffiliated
person providing for their joint or cooperative development, marketing,
referrals, or sales of banking, securities, insurance, or other financial
products or services, or their joint investment in and management of any active
business enterprise.
4.41 POLICIES AND PROCEDURES. Merchants and its subsidiaries have
complied in all material respects with the policies and procedures as formally
adopted and disclosed to Old Kent as applicable to the periods when those
policies and procedures were in effect.
4.42 ACCOUNTING AND TAX TREATMENT. Neither Merchants nor, to its
knowledge, any of its affiliates, has taken or agreed to take any action or
knows of any reason that, with respect to
-46-
<PAGE>
Merchants and its affiliates, would prevent Old Kent from accounting for the
business combination to be effected by the Merger as a pooling-of-interests.
Merchants has no knowledge of why the Merger would fail to qualify as a
reorganization under Section 368(a) of the Internal Revenue Code.
4.43 TRUE AND COMPLETE INFORMATION. No schedule, statement, list,
certificate, or other information furnished or to be furnished by Merchants in
connection with this Plan of Merger, including the Merchants Disclosure
Statement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE V - COVENANTS PENDING CLOSING
Subject to the terms and conditions of this Plan of Merger, Merchants,
Old Kent and MergerSub further agree that:
5.1 DISCLOSURE STATEMENTS; ADDITIONAL INFORMATION.
5.1.1 FORM AND CONTENT. The Old Kent Disclosure Statement and
the Merchants Disclosure Statement have been prepared substantially in
the form contained in EXHIBIT C. Each shall contain appropriate
references and cross-references with respect to each of the
disclosures, and appropriate identifying markings with respect to each
of the documents, that pertain to one or more sections or articles of
this Plan of Merger. Old Kent and Merchants have each prepared and
delivered two complete copies of its Disclosure Statement.
5.1.2 UPDATE. Not less than the six Business Days prior to the
Closing, each of Old Kent and Merchants shall deliver to the other an
update to its Disclosure Statement describing any material changes and
containing any new or amended documents, as specified below, that are
not contained in its Disclosure Statement as initially delivered. This
update shall not cure any breach of a representation or warranty
occurring on the date of this Plan of Merger.
5.1.3 CERTIFICATION. Each of Old Kent's and Merchants'
Disclosure Statement and its update shall be certified on its behalf by
its chief executive officer and its executive vice president (or, in
the case of Old Kent, such other executive officer(s) as may be
appropriate) that such Disclosure Statement contains no untrue
statement of a material fact, or fails to omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not misleading.
5.1.4 MERCHANTS' SCHEDULE OF ADDITIONAL INFORMATION. Merchants
shall prepare and, within 30 days after the date of this Plan of
Merger, deliver to Old Kent two copies
-47-
<PAGE>
of the Schedule of Additional Information attached as EXHIBIT D. The
Schedule of Additional Information shall contain the information
described in EXHIBIT D with appropriate references and
cross-references with respect to each of the disclosures and
appropriate identifying marking with respect to each of the
documents. The Schedule of Additional Information shall include
true, correct and complete copies of each and every document
specified in EXHIBIT D.
5.2 CHANGES AFFECTING REPRESENTATIONS. While this Plan of Merger is in
effect, if either Old Kent or Merchants becomes aware of any facts or of the
occurrence or impending occurrence of any event that (a) would cause one or more
of the representations and warranties it has given in Article III or IV,
respectively, subject to the exceptions contained in the Merchants Disclosure
Statement or the Old Kent Disclosure Statement, respectively, to become untrue
or incomplete in any material respect; or (b) would have caused one or more of
such representations and warranties to be untrue or incomplete in any material
respect had such facts been known or had such event occurred prior to the date
of this Plan of Merger, then such party (the "NOTIFYING PARTY") shall
immediately give detailed written notice of such discovery or change, including
a detailed description of the underlying facts or events, together with all
pertinent documents, to the other party. Unless waived by the other party in
writing, the Notifying Party shall use all reasonable efforts to take remedial
or preventative action, if possible, in order that such representations and
warranties will again be true and complete by the Closing. No remedial action
taken by a Notifying Party shall be deemed to cure a breach of any
representation or warranty given by the Notifying Party in this Plan of Merger,
unless such cure is to the reasonable satisfaction of the other party.
5.3 MERCHANTS' CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME.
Merchants agrees that, until the Effective Time, except as consented to in
writing by Old Kent or as otherwise provided in this Plan of Merger, Merchants
shall, and it shall cause each of its subsidiaries to:
5.3.1 ORDINARY COURSE. Conduct its business, manage its
property and invest its assets only in the usual, regular, and ordinary
course and not otherwise, in substantially the same manner as prior to
the date of this Plan of Merger, and not make any substantial change to
its expenditures or methods of management, operation, or practices in
respect of such business, property or investments.
5.3.2 NO INCONSISTENT ACTIONS. Take no action that would be
inconsistent with or contrary to the representations, warranties, and
covenants made by Merchants in this Plan of Merger, and take no action
that would cause Merchants' representations and warranties to become
untrue in any material respect except as and to the extent required by
applicable laws and regulations or regulatory agencies having
jurisdiction or this Plan of Merger.
5.3.3 COMPLIANCE. Comply in all material respects with all
laws, regulations, agreements, court orders, administrative orders, and
formally adopted internal policies
-48-
<PAGE>
and procedures applicable to the conduct of its business, except to
the extent that the application of any law, regulation, or order is
being contested in good faith and Old Kent has been notified of such
contest.
5.3.4 NO AMENDMENTS. Make no change in its certificate of
incorporation or its bylaws.
5.3.5 BOOKS AND RECORDS. Maintain its books, accounts, and
records in the usual and regular manner, and in material compliance
with all applicable laws, rules, regulations, governmental policy
issuances, accounting standards, and formally adopted internal policies
and procedures.
5.3.6 NO CHANGE IN STOCK. Except as contemplated by this Plan
of Merger or the Option Agreement or as provided under the Merchants
Rights Agreement in effect on the date of this Plan of Merger: (a) make
no change in the number of shares of its capital stock issued and
outstanding other than Permitted Issuances; (b) grant no warrant,
option, or commitment relating to its capital stock, except for new
options awarded pursuant to the Option Plan as determined by the
formula prescribed by the Option Plan consistent in amount, nature and
time with Merchants' past practices with respect to awards made under
the Option Plan; (c) enter into no agreement relating to its capital
stock; and (d) issue no securities convertible into its capital stock.
5.3.7 MAINTENANCE. Use all reasonable efforts to maintain its
property and assets in their present state of repair, order, and
condition, reasonable wear and tear and damage by fire or other
casualty covered by insurance excepted.
5.3.8 PRESERVATION OF GOODWILL. Use all reasonable efforts to
preserve its business organization intact, to keep available the
services of its present officers and employees, and to preserve the
goodwill of its customers and others having business relations with it.
5.3.9 INSURANCE POLICIES. Use all reasonable efforts to
maintain and keep in full force and effect insurance coverage, so long
as such insurance is reasonably available, on its assets, properties,
premises, operations, and personnel in such amounts, against such risks
and losses, and with such self-insurance requirements as are presently
in force.
5.3.10 CHARGE-OFFS. Charge off loans and maintain its
allowance for loan and lease losses, in each case in a manner in
conformity with the prior practices of Merchants and Merchants Bank and
applicable industry, regulatory, and accounting standards.
5.3.11 POLICIES AND PROCEDURES. Make no material change in any
policies and procedures applicable to the conduct of its business,
including without limitation any loan and underwriting policies, loan
loss and charge-off policies, investment policies, and
-49-
<PAGE>
employment policies, except as and to the extent required by law or
regulatory agencies having jurisdiction.
5.3.12 NEW DIRECTORS OR EXECUTIVE OFFICERS. Except to reelect
persons who are then incumbent officers and directors at annual
meetings, not (a) increase the number of directors or fill any vacancy
on the board of directors, except as disclosed in the Disclosure
Statement (b) elect or appoint any person to an executive office, or
(c) hire any person to perform the services of an executive officer.
5.3.13 COMPENSATION AND FRINGE BENEFITS. Take no action to
increase, or agree to increase, the salary, severance, or other
compensation payable to, or fringe benefits of, or pay or agree to pay
any bonus to, any officer or director, or any other class or group of
employees as a class or group without Old Kent's prior written consent,
except that Merchants may pay or agree to pay:
(a) for periods ending on or before the date of the
Effective Time, previously planned or scheduled salary
increases, consistent with past practices, that have been
disclosed in writing to Old Kent prior to the date of this
Plan of Merger;
(b) for periods ending on or before the date of the
Effective Time, existing cash-only incentive awards under: (i)
the plans disclosed in the Merchants Disclosure Statement,
including Merchants' Management Incentive Plan and Merchants'
Senior Management Profit Sharing Plan, based on individual or
departmental performance as provided under those plans for
1999 and pro rated for the year 2000 through the date of the
Effective Time; and (ii) any other Merchants' plans if, and
only to the extent that such payments are consistent in nature
and amount with past practice and Old Kent expressly consents
to such payments in writing, which consent shall not be
unreasonably withheld; each of which awards shall be paid or
become effective, as the case may be, not later than the
Effective Time;
(c) for periods ending on or before the date of the
Effective Time, all amounts payable to each participant under
the terms of Merchants' Director Deferred Fee Plan, a copy of
which is contained in the Merchants Disclosure Statement, as
if the Merger had already been consummated;
(d) stay bonuses up to an aggregate of $500,000 to
induce employees of Merchants and its subsidiaries who are not
covered by any existing employment agreement or change in
control agreement (collectively, STAY BONUSES) to continue
their employment until 30 days after conversion of Merchants'
systems or such earlier date as Old Kent may approve to be
released by their employer, which shall be allocated among
employees according to the relative importance of
-50-
<PAGE>
their services to their employer and not solely on a pro rata
or seniority basis; PROVIDED, further that Merchants shall
consult with Old Kent with respect to the allocation and
individual amounts of the Stay Bonuses;
(e) the 1999 Holiday cash bonus to each employee in
amounts consistent with past practices, which have been
disclosed in writing to Old Kent; and
(f) tuition reimbursements payable to employees for
past or current school semesters under the terms of Merchants'
tuition reimbursement plan, a copy of which is contained in
the Merchants Disclosure Statement; and Merchants may release
such employees from their related obligations to repay
Merchants for any reimbursements they have previously received
from Merchants if their employment is terminated by Old Kent
within one year after the Effective Time.
The payment of any and all such compensation shall be subject to the
limitations prescribed for pooling-of-interests accounting treatment of
the Merger.
5.3.14 BENEFIT PLANS. Take no action to introduce, change, or
agree to introduce or change, any pension, profit-sharing, or employee
benefit plan, fringe benefit program, or other plan or program of any
kind for the benefit of its employees unless required by law or this
Plan of Merger; make no contribution to any employee pension plan other
than employer matching contributions and employer discretionary
contributions to the Merchants Retirement Plan that are consistent in
timing and amounts with the contributions made for 1997 and 1998.
5.3.15 NEW EMPLOYMENT AGREEMENTS. Take no action to enter into
any employment agreement that is not terminable by Merchants or any of
its subsidiaries, as the case may be, without cost or penalty upon 60
days' or less notice, except as contemplated by this Plan of Merger.
5.3.16 BORROWING. Take no action to borrow money except in the
ordinary course of business.
5.3.17 MORTGAGING ASSETS. Take no action to sell, mortgage,
pledge, encumber, or otherwise dispose of, or agree to sell, mortgage,
pledge, encumber, or otherwise dispose of, any of its property or
assets, except in the ordinary course of business, except for property
or assets, or any group of related properties or assets, that have a
fair market value of less than $100,000.
5.3.18 NOTICE OF ACTIONS. Notify Old Kent of the threat or
commencement of any material action, suit, proceeding, claim,
arbitration, or investigation against, relating to, or affecting: (a)
Merchants or any of its subsidiaries; (b) their respective directors,
officers,
-51-
<PAGE>
or employees in their capacities as such; (c) Merchants' or
any of Merchants' subsidiaries' assets, liabilities, businesses, or
operations; or (d) the Merger or this Plan of Merger.
5.3.19 COOPERATION. Take such reasonable actions as may be
necessary to consummate the Merger and the Bank Consolidation.
5.3.20 CHARITABLE CONTRIBUTIONS. Neither make nor renew any
charitable contributions, gifts, commitments, or pledges of cash or
other assets except for contributions that in the aggregate will have a
fair market value not greater than $100,000 in each of the years 1999
and 2000, respectively; PROVIDED, that the aggregate amount that may be
contributed in the year 2000 shall be prorated for the number of days
prior to the Effective Time.
5.3.21 LARGE EXPENDITURES. Take no action to pay, agree to
pay, or incur any liability, excepting such liabilities that have been
accrued on its books as of the date of this Plan of Merger, for the
purchase or lease of any item of real property, fixtures, equipment, or
other capital asset in excess of $50,000 individually or in excess of
$100,000 in the aggregate with respect to Merchants, except pursuant to
prior commitments or plans made by Merchants that are disclosed in the
Merchants Disclosure Statement.
5.3.22 NEW SERVICE ARRANGEMENTS. Take no action to enter into,
or commit to enter into, any agreement for trust, consulting,
professional, or other services to Merchants or any of its subsidiaries
that is not terminable by Merchants without penalty upon 60 days' or
less notice, except for contracts for services under which the
aggregate required payments do not exceed $50,000, except for legal,
accounting, and other ordinary expenses related to this Plan of Merger.
5.3.23 CAPITAL IMPROVEMENTS. Take no action to open, enlarge,
or materially remodel any bank or other facility, and not lease, renew
any lease, purchase, or otherwise acquire use of any real property for
a branch bank, or apply for regulatory approval of any new branch bank,
excepting pursuant to prior commitments or plans made by Merchants or
Merchants Bank that are disclosed in the Merchants Disclosure
Statement.
5.3.24 STRATEGIC ALLIANCES. Take no action to enter into, or
commit to enter into, any joint venture, strategic alliance, or
material relationship with any person to jointly develop, market, or
offer any product or service; or disclose any customer names,
addresses, telephone numbers, or lists to any person not employed by
Merchants or its subsidiaries in connection with their employment.
5.4 APPROVAL OF PLAN OF MERGER BY MERCHANTS STOCKHOLDERS. Merchants,
acting through its board of directors, shall, in accordance with the DGCL and
its certificate of incorporation and bylaws, promptly and duly call, give notice
of, convene, and hold as soon as practicable
-52-
<PAGE>
following the date upon which the Registration Statement becomes effective, a
stockholders meeting for the purpose of adopting this Plan of Merger (the
"STOCKHOLDERS' MEETING").
5.4.1 BOARD RECOMMENDATION. Except while a "Fiduciary Event"
(as defined below) has occurred and continues, at the Stockholders'
Meeting and in any proxy materials used in connection with the meeting,
the board of directors of Merchants shall declare that this Plan of
Merger is advisable and recommend that its stockholders vote for
approval of this Plan of Merger.
5.4.2 SOLICITATION OF PROXIES. Except while a Fiduciary Event
has occurred and continues:
(a) Merchants shall use its best efforts to solicit
from its stockholders proxies to vote on the proposal to
approve this Plan of Merger and to secure a quorum at the
Stockholders' Meeting.
(b) Merchants shall use its best efforts to secure
the vote of stockholders required by the DGCL and Merchants'
certificate of incorporation and bylaws to approve this Plan
of Merger.
5.4.3 FIDUCIARY EVENT. A "FIDUCIARY EVENT" shall have occurred
when the board of directors of Merchants has (a) received in writing a
"Superior Proposal" (defined below), which is then pending, (b)
determined in good faith (based on the advice of legal counsel) that
the failure to so withdraw, modify, or change its recommendation would
cause the board of directors of Merchants to breach its fiduciary
duties to Merchants' stockholders under applicable law, and (c)
determined to accept and recommend the Superior Proposal to the
stockholders of Merchants.
5.4.4 SUPERIOR PROPOSAL. A "SUPERIOR PROPOSAL" means any bona
fide unsolicited Proposal (as defined in Section 5.9.2 (COMMUNICATION
OF OTHER PROPOSALS)) made by a third party on terms that the board of
directors of Merchants determines in its good faith judgment, based
upon the written advice of McDonald or such other financial advisor of
nationally recognized reputation, to be more financially favorable to
Merchants' stockholders than this Plan of Merger.
5.4.5 NOTICE. Merchants agrees that it shall notify Old Kent
at least two Business Days prior to taking any action with respect to
such Superior Proposal or taking any action with respect to the
withdrawal, modification, or change of its recommendation to its
stockholders for adoption of this Plan of Merger. Notwithstanding
anything to the contrary contained in this Plan of Merger, any
withdrawal, modification, or change of recommendation upon a Fiduciary
Event in accordance with the provisions of this Section shall not
constitute a breach of this Plan of Merger by Merchants.
-53-
<PAGE>
5.5 REGULAR DIVIDENDS. Merchants shall not declare, set aside, pay, or
make any dividend or other distribution or payment (whether in cash, stock, or
property) with respect to, or purchase or redeem, any shares of the capital
stock other than regular quarterly cash dividends in an amount not to exceed
$0.12 per share per quarter of Merchants Common Stock payable on the regular
historical payment dates, all in a manner consistent with Merchants' past
dividend practice. Old Kent and Merchants agree that they will cooperate to
assure that, during any calendar quarter, there shall not be a duplication of
payment of dividends to stockholders of Merchants. Notwithstanding the preceding
sentences, if and to the extent that the payment of a dividend in the manner
provided in this Section would, in Old Kent's reasonable judgment, present a
significant risk that under GAAP or the rules, regulations, or interpretations
of the SEC or its staff, the Merger would not qualify for pooling-of-interests
accounting treatment, that dividend shall not be paid, but an equitable
adjustment shall be made to the Exchange Ratio for the amount of the dividend
not paid.
5.6 TECHNOLOGY-RELATED CONTRACTS. Merchants shall advise Old Kent of
all anticipated renewals or extensions of existing data processing service
agreements, data processing software license agreements, data processing
hardware lease agreements, and other material technology-related licensing or
servicing agreements with independent vendors ("TECHNOLOGY-RELATED CONTRACTS")
which will occur between the date of this Plan of Merger and the date of the
Effective Time. Merchants' material Technology-Related Contracts are contained
in the Merchants Disclosure Statement. Notwithstanding any other provision of
this Section, Merchants shall not be obligated to take any irrevocable action,
or irrevocably forego taking any action, with respect to these
Technology-Related Contracts which would cause any such agreement to terminate,
expire, or be materially modified prior to the Effective Time.
5.6.1 CONTRACT NOTICES. Merchants agrees to send to each
vendor, as and when permitted after the date of this Plan of Merger,
such notices of nonrenewal as may be necessary or appropriate under the
terms of these Technology-Related Contracts to prevent them from
automatically renewing for a term extending beyond the Effective Time.
Such notices may be conditioned upon the consummation of the Merger.
5.6.2 EXTENSIONS AND RENEWALS. Merchants agrees to cooperate
with Old Kent in negotiating with each vendor the length of any new,
extension, or renewal term of these Technology-Related Contracts in
those cases where such extension or term extends beyond the Effective
Time.
5.6.3 NEW AGREEMENTS. Neither Merchants nor any of Merchants'
subsidiaries shall enter into any new Technology-Related Contract,
except with Old Kent's consent (which shall not be unreasonably
withheld or delayed if such agreement is necessary for Merchants or any
of its subsidiaries to conduct business in the ordinary course through
the Effective Time).
5.7 AFFILIATES -- COMPLIANCE WITH ACCOUNTING AND SECURITIES RULES.
-54-
<PAGE>
5.7.1 MERCHANTS' AFFILIATES. Merchants shall use its best
efforts to cause each director, executive officer, and other person who
is an "affiliate" (for purposes of (a) Rule 145 under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), and (b) qualifying the
Merger for pooling-of-interests accounting treatment) of Merchants to
deliver to Old Kent, as soon as practicable after the date of this Plan
of Merger, and prior to the date of the Stockholders' Meeting, a
written agreement, in the form of EXHIBIT E (the "MERCHANTS AFFILIATE
AGREEMENTS"). Merchants shall provide a list of such affiliates within
seven days of the date of this Plan of Merger and shall update such
list as necessary upon the reasonable request of Old Kent.
5.7.2 OLD KENT'S AFFILIATES. Old Kent shall use all reasonable
efforts to cause each director, executive officer, and other person who
is an "affiliate" (for the purpose of qualifying the Merger for
pooling-of-interests accounting treatment) of Old Kent, as soon as
practicable after the date of this Plan of Merger, and prior to the
date of the Stockholders' Meeting, to execute and deliver a written
agreement under which such affiliate agrees not to sell, pledge,
transfer, or otherwise dispose of his or her Old Kent Common Stock
during any period that any such disposition would, under GAAP or the
rules, regulations, or interpretations of the SEC or its staff,
disqualify the Merger for pooling-of-interests accounting treatment.
5.7.3 PUBLISHING OPERATING RESULTS. Old Kent shall use all
reasonable efforts to publish as promptly as reasonably practical but
in no event later than 30 days after the end of the first full month
after the Effective Time in which there are at least 30 days of
post-Merger combined operations (which month may be the month in which
the Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
5.8 INDEMNIFICATION AND INSURANCE.
5.8.1 INDEMNIFICATION. Old Kent shall honor any and all rights
to indemnification and advancement of expenses now existing in favor of
the directors and officers of Merchants and Merchants' subsidiaries
under their certificate of incorporation, articles of association, or
bylaws which, as enforceable contractual rights, shall survive the
Merger and shall, as contractual rights, continue with respect to acts
or omissions occurring before the Effective Time with the same force
and effect as prior to the Effective Time.
5.8.2 INSURANCE. Old Kent shall use all reasonable efforts to
cause the persons serving as officers and directors of Merchants
immediately prior to the Effective Time to be covered for a period of
at least two years from the Effective Time by the directors' and
officers' liability insurance policy maintained by Merchants with
respect to acts or omissions occurring prior to the Effective Time that
were committed by such officers and directors in their capacity as
such. Old Kent may substitute for Merchants' current
-55-
<PAGE>
coverage new coverage under policies offering at least comparable
coverage and amounts containing terms and conditions that are not
materially less advantageous than Merchants' current policy. In no
event shall Old Kent be required to spend, directly or indirectly
through Merchants or its subsidiaries, more than $70,000 per annum
(the "INSURANCE AMOUNT") to either maintain or procure insurance
coverage pursuant to this Plan of Merger. Old Kent and Merchants agree
to cooperate and use reasonable efforts to maximize the insurance
coverage that may be available for the Insurance Amount. If Old Kent
does not advise Merchants in writing prior to the commencement of the
Pricing Period that it has procured such coverage for at least two
years or agrees to do so without regard to the Insurance Amount,
Merchants shall be permitted (after giving Old Kent three Business
Days prior written notice and an additional two Business Day period to
purchase such coverage), in lieu of receiving the foregoing insurance
coverage, to procure tail coverage for past acts and omissions for a
single premium amount not in excess of the Insurance Amount.
5.9 EXCLUSIVE COMMITMENT. Except as provided below, neither Merchants
nor any of Merchants' Representatives, investment bankers, or agents, shall take
any action inconsistent with the intent to consummate the Merger upon the terms
and conditions of this Plan of Merger. Without limiting the foregoing:
5.9.1 NO SOLICITATION. Neither Merchants nor any of Merchants'
Representatives, investment bankers, or agents shall, directly or
indirectly, invite, initiate, solicit, encourage, or unless a Fiduciary
Event has occurred and continues (or a Superior Proposal has been
presented and such Superior Proposal would otherwise give rise to a
Fiduciary Event except that the board of directors of Merchants, at
that time, has yet to determine to accept and recommend the Superior
Proposal to the stockholders of Merchants), negotiate with any other
party, any proposals, offers, or expressions of interest concerning any
tender offer, exchange offer, merger, consolidation, sale of shares,
sale of assets, or assumption of liabilities not in the ordinary
course, or other business combination involving Merchants or any of its
subsidiaries other than the Merger (a "BUSINESS COMBINATION").
5.9.2 COMMUNICATION OF OTHER PROPOSALS. Merchants shall cause
written notice to be delivered to Old Kent promptly upon receipt of any
solicitation, offer, proposal, or expression of interest (a "PROPOSAL")
concerning a Business Combination. Such notice shall contain the
material terms and conditions of the Proposal to which such notice
relates. Within five Business Days after Merchants' receipt of a
Proposal, Merchants shall give notice to Old Kent whether or not a
Fiduciary Event has occurred and, if it has not occurred, Merchants'
notice shall include a copy of Merchants' unequivocal rejection of the
Proposal in the form actually delivered to the person from whom the
Proposal was received. Thereafter, Merchants shall promptly notify Old
Kent of any material changes in the terms, conditions, and status of
any Proposal.
-56-
<PAGE>
5.9.3 FURNISHING INFORMATION. Unless a Fiduciary Event has
occurred and continues (or a Superior Proposal has been presented and
such Superior Proposal would otherwise give rise to a Fiduciary Event
except that the board of directors of Merchants, at that time, has yet
to determine to accept and recommend the Superior Proposal to the
stockholders of Merchants), neither Merchants nor any of Merchants'
Representatives, investment bankers, or agents shall furnish any
nonpublic information concerning Merchants to any person who is not
affiliated or under contract with Merchants or Old Kent, except as
required by applicable law or regulations and prior to furnishing such
information to such person, Merchants shall receive from such person an
executed confidentiality agreement with terms no less favorable to
Merchants than those contained in its confidentiality agreement with
Old Kent and Merchants shall then provide only such information as has
been furnished previously to Old Kent.
5.9.4 CORPORATE LIABILITY FOR INDIVIDUAL'S BREACH. For the
purposes of this Section, any breach of this Section by an executive
officer or director of Merchants in his or her individual capacity
shall be deemed to be a breach by Merchants.
5.10 REGISTRATION STATEMENT. Old Kent agrees to prepare and file with
the SEC under the Securities Act, the Registration Statement and the related
Prospectus and Proxy Statement included as a part thereof covering the issuance
by Old Kent of the shares of Old Kent Common Stock as contemplated by this Plan
of Merger, together with such amendments as may reasonably be required for the
Registration Statement to become effective. Old Kent agrees to provide Merchants
with reasonable opportunities to review and comment upon the Registration
Statement, each amendment to the Registration Statement, and each form of the
Prospectus and Proxy Statement before filing. Old Kent agrees to provide
Merchants, upon request, with copies of all correspondence received from the SEC
with respect to the Registration Statement and its amendments and with all
responsive correspondence to the SEC. Old Kent agrees to notify Merchants of any
stop orders or threatened stop orders with respect to the Registration
Statement. Merchants agrees to provide to Old Kent all necessary information
pertaining to Merchants promptly upon request, and to use all reasonable efforts
to obtain the cooperation of Merchants' independent accountants, attorneys and
investment bankers in connection with the preparation of the Registration
Statement.
5.11 OTHER FILINGS. Old Kent agrees to prepare and file with the
Federal Reserve Board and each other regulatory agency having jurisdiction all
documents reasonably required to obtain each necessary approval of or consent to
consummate the Merger. Old Kent agrees to provide Merchants with reasonable
opportunities to review and comment upon such documents before filing and to
make such amendments and file such supplements thereto as Merchants may
reasonably request. Old Kent shall provide Merchants with copies of all material
correspondence received from these agencies and all material responsive
correspondence sent to these agencies.
5.12 MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms and
conditions of this Plan of Merger, each of the parties agrees to use all
reasonable efforts to take, or cause to be
-57-
<PAGE>
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable laws and regulations to consummate and
make effective the Merger. Old Kent and Merchants will use all reasonable
efforts to obtain consents of all third parties and governmental bodies
necessary or desirable for the consummation of the Merger.
5.13 ACCESS AND INVESTIGATION. For the purpose of permitting an
examination of one party by the other's officers, attorneys, accountants, and
representatives, each party shall:
5.13.1 ACCESS. Permit, and shall cause each of their
respective subsidiaries to permit, full access to their respective
properties, books, and records at reasonable times.
5.13.2 COOPERATION. Use reasonable efforts to cause its and
each of their respective subsidiaries' officers, directors, employees,
accountants, and attorneys to cooperate fully, for the purpose of
permitting a complete and detailed examination of such matters by the
other party's officers, attorneys, accountants, and representatives.
5.13.3 INFORMATION. Furnish to the other, upon reasonable
request, any information reasonably requested respecting its and each
of its subsidiaries' properties, assets, business, and affairs;
PROVIDED, that the furnishing of such information will not result in
the waiver of an attorney-client or other privilege and Old Kent is
advised that the information is not being furnished for that reason.
5.13.4 CONSENTS. Each of Old Kent and Merchants acknowledges
that certain information may not be disclosed by the other without the
prior written consent of persons not affiliated with that party. If
such information is requested, then the other party shall use
reasonable efforts to obtain such prior consent and shall not be
required to disclose such information unless and until such prior
consent has been obtained.
5.13.5 RETURN AND RETENTION. In the event of termination of
this Plan of Merger, Old Kent and Merchants each agree to promptly
return to the other party or to destroy all written materials furnished
to it by the other party and the other party's subsidiaries, and all
copies, notes, and summaries of such written materials. Old Kent and
Merchants each agree to preserve intact all such materials that are
returned to them and to make such materials reasonably available upon
reasonable request or subpoena for a period of not less than six years
from the termination of this Plan of Merger.
5.14 CONFIDENTIALITY. Except as provided below, Old Kent, MergerSub and
Merchants each agree:
5.14.1 TREATMENT; RESTRICTED ACCESS. All information furnished
to the other party pursuant to this Plan of Merger shall be treated as
strictly confidential and shall not be disclosed to any other person,
natural or corporate, except for its employees, attorneys,
-58-
<PAGE>
accountants, regulators, and financial advisers who are reasonably
believed to have a need for such information in connection with the
Merger.
5.14.2 NO OTHER USE. No party shall make any use, other than
related to the Merger, of any information it may come to know as a
direct result of a disclosure by the other party, its subsidiaries,
directors, officers, employees, attorneys, accountants, or advisers or
that may come into its possession from any other confidential source
during the course of its investigation.
5.14.3 EXCEPTED INFORMATION. The provisions of this Section
shall not preclude Old Kent or Merchants, or their respective
subsidiaries, from using or disclosing information that is readily
ascertainable from public information or trade sources, known by it
before the commencement of discussions between the parties or
subsequently developed by it or its subsidiaries independent of any
investigation under this Plan of Merger, received from any other person
who is not affiliated with a party and who is not under any obligation
to keep such information confidential, or reasonably required to be
included in any filing or application required by any governmental or
regulatory agency.
5.14.4 PROHIBIT INSIDER TRADING. Old Kent and Merchants shall
each take responsible steps to assure that any person who receives
nonpublic information concerning the Merger or the other party will
treat the information confidentially as provided in this Section and
not directly or indirectly buy or sell, or advise or encourage other
persons to buy or sell, the other party's stock until such information
is properly disclosed to the public.
5.15 ENVIRONMENTAL INVESTIGATION. Old Kent shall be permitted to
conduct an environmental assessment of each parcel of Merchants' Real Property
and Premises and, at Old Kent's option, (a) any other real estate formerly owned
by Merchants or any of its subsidiaries, and (b) any other real estate acquired
by any of Merchants' subsidiaries in satisfaction of a debt previously
contracted. As to each such property:
5.15.1 PRELIMINARY ENVIRONMENTAL ASSESSMENTS. Old Kent may, at
its expense, engage an environmental consultant to conduct a
preliminary ("PHASE I") assessment of the property. Merchants and
Merchants' subsidiaries shall provide reasonable assistance, including
site access, a knowledgeable contact person, and documentation relating
to the real estate and any prior environmental investigations or
reports, to the consultant for purposes of conducting the Phase I
assessments.
5.15.2 ENVIRONMENTAL RISKS. If there are any facts or
conditions identified in a Phase I assessment that Old Kent reasonably
believes could pose a current or future risk of a liability,
interference with use, or diminution of value of the property that
could be material, then Old Kent shall identify that risk to Merchants,
identify the facts or
-59-
<PAGE>
conditions underlying that risk, and provide Merchants with a copy of
the Phase I assessment for that property (an "ENVIRONMENTAL RISK").
5.15.3 PHASE II AND III WORK. Old Kent may obtain one or more
estimates of the proposed scope of work and cost of any further
environmental investigation, remediation, or other follow-up work it
reasonably considers necessary or appropriate to assess and, if
necessary or appropriate, remediate an Environmental Risk ("PHASE II
AND III WORK"). Old Kent shall provide copies of those estimates to
Merchants. The fees and expenses of any Phase II and III Work shall be
paid by Merchants. Old Kent and Merchants shall cooperate in the
review, approval, and implementation of all work plans for Phase II and
III Work. All work plans for any Phase II and III Work shall be
mutually satisfactory to Old Kent and Merchants. Mutually agreed upon
Phase II and III Work shall be undertaken and completed as quickly as
possible and shall be completed prior to the Closing. If the proposed
work plans or removal or remediation actions would entail a material
cost to complete, Old Kent and Merchants shall discuss a mutually
acceptable modification to this Plan of Merger.
5.15.4 OLD KENT'S TERMINATION RIGHTS. If (a) Old Kent and
Merchants are unable to agree upon a course of action to complete any
Phase II and III Work and/or a mutually acceptable modification to this
Plan of Merger, and (b) Old Kent cannot be reasonably assured that the
after-tax cost of the sum of (i) the actual cost of all investigative
and remedial or other corrective actions or measures taken pursuant to
Section 5.15.3 (PHASE II AND III WORK); (ii) the estimated cost of all
investigative actions and remedial or other corrective actions or
measures not undertaken but required by Environmental Laws, or
necessary to avoid future exposure to material liability under
Environmental Laws; and (iii) all diminutions of the value of such
properties; in the aggregate will not exceed $1,000,000, then Old Kent
may terminate this Plan of Merger as provided in Section 8.3.2
(ENVIRONMENTAL RISKS).
5.16 EMPLOYMENT AMENDMENTS. Merchants shall use its best efforts to
cause Merchants Bank, prior to execution of this Plan of Merger, to obtain
executed implementation agreements (in the form previously agreed to by Old Kent
and Merchants) to the existing employment agreement and change of control
agreements providing for, among other things, mutually agreeable interpretations
of such agreements, procedures for implementing such agreements, and a provision
for a general release, which shall only become effective upon consummation of
the Merger at the Effective Time (the "EMPLOYMENT AMENDMENTS").
5.17 TERMINATION OF THRIFT PLAN. Merchants covenants and agrees not to
terminate the Merchants Retirement Plan prior to the Effective Time. Merchants
further covenants and agrees to provide Old Kent with reasonable assistance,
approve and adopt all resolutions, and take all other actions that are necessary
and appropriate in the judgment of Old Kent to effectuate the termination of the
Merchants Retirement Plan as soon as practicable after the Effective Time.
-60-
<PAGE>
Old Kent covenants and agrees to terminate the Merchants Retirement Plan as soon
as practicable after the Effective Time.
5.18 ACCOUNTING AND TAX TREATMENT. During the term of this Plan of
Merger, Old Kent, MergerSub, and Merchants each agree not to take any action
that would prevent Old Kent from qualifying, or materially increase the risk of
disqualifying, the Merger as a pooling-of-interests for accounting purposes or
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code; PROVIDED, that nothing in this Plan of Merger shall limit Old
Kent's ability to exercise its rights under the Option Agreement. Old Kent and
Merchants each agree to take such actions as may be reasonably required to
negate the impact of any past or future actions taken prior to the Effective
Time that might adversely impact the ability of Old Kent to treat the Merger as
a pooling-of-interests.
5.19 PUBLIC ANNOUNCEMENTS. Old Kent, MergerSub, and Merchants shall
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this Plan of
Merger, except as may be otherwise required by law, and neither Old Kent,
MergerSub, nor Merchants shall issue any news releases with respect to this Plan
of Merger or the Merger unless such news releases have been mutually agreed upon
by the parties, except as required by law.
5.20 YEAR 2000 PREPARATIONS. Old Kent, Merchants, and Merchants'
subsidiaries shall each continue to use commercially reasonable efforts to
implement their respective Year 2000 plans in accordance with applicable laws,
regulations, guidelines, and issuances from regulators having jurisdiction,
whether now or later in effect. Old Kent, Merchants, and Merchants' subsidiaries
shall coordinate any remaining planning and implementation of their respective
Year 2000 plans. Merchants and its subsidiaries shall consult with Old Kent
before purchasing or installing, for the purpose of becoming Year 2000 Ready,
any new Year 2000 Assets having an individual or aggregate purchase price of
$100,000 or more.
ARTICLE VI - CONDITIONS PRECEDENT TO OLD KENT'S OBLIGATIONS
All obligations of Old Kent and MergerSub under this Plan of Merger are
subject to the fulfillment (or waiver in writing by a duly authorized officer of
Old Kent), prior to or at the Closing, of each of the following conditions:
6.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.
6.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Merchants contained in this Plan of Merger shall be true,
correct and complete when made and as of the Closing as if made at and
as of such time, except (a) as expressly contemplated or permitted by
this Plan of Merger; (b) for representations and warranties relating to
a time or times other than the Closing that were or will be true,
correct and
-61-
<PAGE>
complete at such time or times; and (c) where the failure
or failures of such representations and warranties to be so true,
correct, and complete individually or in the aggregate, does not result
or would not result in a Material Adverse Effect.
6.1.2 COMPLIANCE WITH AGREEMENTS. Merchants shall have
performed and complied with all agreements, conditions, and covenants
required by this Plan of Merger to be performed or complied with by
Merchants prior to or at the Closing in all material respects.
6.1.3 CERTIFICATES. Compliance with Sections 6.1.1
(REPRESENTATIONS AND WARRANTIES) and 6.1.2 (COMPLIANCE WITH AGREEMENTS)
shall be evidenced by one or more certificates signed by appropriate
officers of Merchants, dated as of the date of the Closing, certifying
the foregoing in such detail as Old Kent may reasonably request.
6.2 OPINION OF LEGAL COUNSEL. Merchants shall have delivered to Old
Kent an opinion of Barack Ferrazzano Kirschbaum Perlman & Nagelberg, counsel
for Merchants, dated as of the date of the Closing and substantially in the
form contained in EXHIBIT F, with only such changes as may be reasonably
satisfactory to counsel for Old Kent.
6.3 REQUIRED REGULATORY APPROVALS. Old Kent shall have received all
such approvals, consents, authorizations, and licenses of all regulatory and
other governmental and self-regulatory authorities having jurisdiction as may
be required to permit the performance by Merchants, Old Kent, and MergerSub
of their respective obligations under this Plan of Merger and the
consummation of the Merger, without the regulating authority's imposition of
non-standard conditions on approval that are not reasonably acceptable to Old
Kent.
6.4 STOCKHOLDER APPROVAL. The stockholders of Merchants shall have
approved this Plan of Merger.
6.5 ORDER, DECREE, ETC. Neither Old Kent, MergerSub, nor Merchants
shall be subject to any order, decree, or injunction of a court or agency of
competent jurisdiction that enjoins or prohibits the consummation of the Merger.
6.6 PROCEEDINGS. There shall not be any action, suit, proceeding,
claim, arbitration, or investigation pending or threatened against or
relating to Merchants, any of Merchants' subsidiaries, or its or their
respective directors and officers (in the capacity as such), properties, or
businesses that may result in any liability that is reasonably likely to have
a Material Adverse Effect on Merchants or any of its subsidiaries.
6.7 TAX MATTERS. Old Kent shall have received a tax opinion from its
counsel, reasonably satisfactory in form and substance to Old Kent,
substantially to the effect that:
6.7.1 REORGANIZATION. The acquisition of substantially all of
the assets of Merchants by Old Kent solely in exchange for Old Kent
Common Stock and the
-62-
<PAGE>
assumption by Old Kent of liabilities of Merchants will constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, and Old Kent and Merchants will each be a "party to
a reorganization" within the meaning of Section 368(b) of the
Internal Revenue Code.
6.7.2 ASSETS' TAX BASIS. The basis of the Merchants assets in
the hands of Old Kent will be the same as the basis of those assets in
the hands of Merchants immediately prior to the Merger.
6.7.3 NO GAIN OR LOSS. No gain or loss will be recognized by
Old Kent on the constructive acquisition by Old Kent of substantially
all of the assets of Merchants in exchange for Old Kent Common Stock
and the assumption by Old Kent of the liabilities of Merchants.
6.7.4 HOLDING PERIOD. The holding period of the assets of
Merchants in the hands of Old Kent will include the holding period
during which such assets were held by Merchants.
The tax opinion shall be supported by one or more fact certificates or
affidavits in such form and content as may be reasonably requested by Old Kent's
counsel from Merchants and its subsidiaries.
6.8 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and shall not be subject to a stop order or any
threatened stop order.
6.9 CERTIFICATE AS TO OUTSTANDING SHARES. Old Kent shall have
received one or more certificates dated as of the Closing date and signed by
the secretary of Merchants on behalf of Merchants, and by the transfer agent
for Merchants Common Stock, certifying (a) the total number of shares of
capital stock of Merchants issued and outstanding as of the close of business
on the day immediately preceding the Closing; and (b) with respect to the
secretary's certification, the number of shares of Merchants Common Stock, if
any, that are issuable on or after that date, all in such form as Old Kent
may reasonably request.
6.10 CHANGE OF CONTROL WAIVERS. Old Kent shall have received
evidence of the consents or other waivers of any material rights and the
waiver of the loss of any material rights that may be triggered by the change
of control of Merchants upon consummation of the Merger under (a) any
agreement, contract, mortgage, deed of trust, lease, commitment, indenture,
note, or other instrument, under which the failure to obtain such consent or
waiver is reasonably likely to have a Material Adverse Effect on Merchants;
and (b) each contract identified in EXHIBIT H (collectively, the "DESIGNATED
CONTRACTS"); all in form and substance reasonably satisfactory to Old Kent.
-63-
<PAGE>
6.11 POOLING ASSURANCES. Old Kent shall have received a letter
addressed to Old Kent and Merchants, from Merchants' independent accountants, as
of a date reasonably approximate to the date of the Closing, to the effect that,
as of such date, Merchants is eligible to participate in a pooling-of-interests
combination and a letter from Old Kent's independent accountants, satisfactory
in form and substance, to the effect that (based in part on the letter from
Merchants' independent accountants) the Merger should be treated as a
pooling-of-interests for accounting and financial reporting purposes, subject to
satisfaction of post-Merger conditions. Merchants and Old Kent agree to provide
their respective independent public accountants with such information and
documentation as may be reasonably requested for this purpose.
ARTICLE VII - CONDITIONS PRECEDENT TO MERCHANTS' OBLIGATIONS
All obligations of Merchants under this Plan of Merger are subject to
the fulfillment (or waiver in writing by a duly authorized officer of
Merchants), prior to or at the Closing, of each of the following conditions:
7.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.
7.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Old Kent and MergerSub contained in this Plan of Merger
shall be true, correct, and complete when made and as of the Closing as
if made at and as of such time, except (a) as expressly contemplated or
permitted by this Plan of Merger; (b) for representations and
warranties relating to a time or times other than the Effective Time
that were or will be true, correct, and complete at such time or times;
and (c) where the failure or failures of such representations and
warranties to be so true, correct, and complete individually or in the
aggregate, does not result or would not result in a Material Adverse
Effect.
7.1.2 COMPLIANCE WITH AGREEMENTS. Old Kent and MergerSub shall
have performed and complied with all agreements, conditions, and
covenants required by this Plan of Merger to be performed or complied
with by Old Kent and MergerSub prior to or at the Closing in all
material respects.
7.1.3 CERTIFICATES. Compliance with Sections 7.1.1
(REPRESENTATIONS AND WARRANTIES) and 7.1.2 (COMPLIANCE WITH AGREEMENTS)
shall be evidenced by one or more certificates signed by appropriate
officers of Old Kent and MergerSub, dated as of the date of the
Closing, certifying the foregoing in such detail as Merchants may
reasonably request.
7.2 OPINION OF LEGAL COUNSEL. Old Kent shall have delivered to
Merchants an opinion of Warner Norcross & Judd LLP, counsel for Old Kent,
dated as of the date of the Closing and substantially in the form contained
in EXHIBIT G, with only such changes as may be reasonably satisfactory to
counsel for Merchants.
-64-
<PAGE>
7.3 REQUIRED REGULATORY APPROVALS. Merchants, Old Kent, and MergerSub
shall have received all such approvals, consents, authorizations, and licenses
of all regulatory and other governmental authorities having jurisdiction as may
be required to permit the performance by Merchants, Old Kent and MergerSub of
their respective obligations under this Plan of Merger and the consummation of
the Merger.
7.4 STOCKHOLDER APPROVAL. Merchants shall have received the requisite
approval of the stockholders of Merchants of this Plan of Merger.
7.5 ORDER, DECREE, ETC. Neither Old Kent, MergerSub, nor Merchants
shall be subject to any applicable order, decree, or injunction of a court or
agency of competent jurisdiction that enjoins or prohibits the consummation of
the Merger.
7.6 TAX MATTERS. Merchants shall have received a tax opinion from Old
Kent's counsel, reasonably satisfactory in form and substance to Merchants,
substantially to the effect that:
7.6.1 REORGANIZATION. The acquisition of substantially all of
the assets of Merchants by Old Kent solely in exchange for Old Kent
Common Stock and the assumption by Old Kent of liabilities of Merchants
will constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, and Old Kent and Merchants will each be a
"party to a reorganization" within the meaning of Section 368(b) of the
Internal Revenue Code.
7.6.2 NO GAIN OR LOSS. No gain or loss will be recognized by
the stockholders of Merchants upon the receipt of Old Kent Common Stock
in exchange for all of their shares of Merchants Common Stock, except
to the extent of any cash received in lieu of a fractional share of Old
Kent Common Stock.
7.6.3 STOCK TAX BASIS. The basis of the Old Kent Common Stock
to be received by stockholders of Merchants will, in each instance, be
the same as the basis of the respective shares of Merchants Common
Stock surrendered in exchange therefor.
7.6.4 HOLDING PERIOD. The holding period of the Old Kent
Common Stock received by stockholders of Merchants will, in each
instance, include the period during which the Merchants Common Stock
surrendered in exchange therefor was held, PROVIDED, that the Merchants
Common Stock was, in each instance, held as a capital asset in the
hands of the stockholder of Merchants at the Effective Time.
The tax opinion shall be supported by one or more fact certificates or
affidavits in such form and content as may be reasonably requested by Old Kent's
counsel from Old Kent and its subsidiaries.
-65-
<PAGE>
7.7 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC and shall not be subject to a stop order
or any threatened stop order.
7.8 FAIRNESS OPINION. Merchants shall have received an opinion from
McDonald reasonably acceptable to Old Kent, dated as of the date of this Plan
of Merger and renewed as of a date approximately the date of the Prospectus
and Proxy Statement, to the effect that the terms of the Merger are fair to
Merchants' stockholders from a financial point of view as of that date and
such opinion shall not have been subsequently withdrawn; PROVIDED, that
Merchants shall have used all reasonable efforts to obtain such a fairness
opinion.
7.9 LISTING OF SHARES. The shares of Old Kent Common Stock that
shall be issued to the stockholders of Merchants upon consummation of the
Merger shall have been authorized for listing on the NYSE upon official
notice of issuance.
7.10 EXCHANGE AGENT CERTIFICATE. Merchants shall have received a
certificate from the Exchange Agent certifying to receipt of shares of Old
Kent Common Stock to be issued and sufficient cash to make payments in lieu
of fractional shares as contemplated by this Plan of Merger.
ARTICLE VIII - ABANDONMENT OF MERGER
This Plan of Merger may be terminated and the Merger abandoned at any
time prior to the Effective Time (notwithstanding that approval of this Plan of
Merger by the stockholders of Merchants may have previously been obtained) as
follows:
8.1 MUTUAL ABANDONMENT. By mutual consent of the boards of directors,
or duly authorized committees thereof, of Old Kent and Merchants.
8.2 UPSET DATE. By either Old Kent or Merchants if the Merger shall not
have been consummated on or before February 29, 2000.
8.3 OLD KENT'S RIGHTS TO TERMINATE. By Old Kent under any of the
following circumstances:
8.3.1 FAILURE TO SATISFY CLOSING CONDITIONS. If any of the
conditions specified in Article VI have not been met or waived by Old
Kent, at such time as such condition can no longer be satisfied
notwithstanding Old Kent's best efforts to comply with those covenants
given by Old Kent in this Plan of Merger.
8.3.2 ENVIRONMENTAL RISKS. If Old Kent has given Merchants
notice of an unacceptable Environmental Risk as provided in Section
5.15.4 (OLD KENT'S TERMINATION RIGHTS).
-66-
<PAGE>
8.3.3 POOLING QUALIFICATION. At any time after Old Kent's
independent accountants have advised Old Kent that they are not of the
opinion that the Merger is likely to qualify for treatment as a
pooling-of-interests for accounting and financial reporting purposes;
PROVIDED, that Old Kent shall not have wilfully taken any action to
disqualify the Merger as a pooling-of-interests for accounting and
financial reporting purposes; PROVIDED FURTHER, that Merchants shall
have a period of 30 days after notification by Old Kent to cure any
condition that would prevent the Merger from qualifying for treatment
as a pooling-of-interests for accounting and financial reporting
purposes.
8.3.4 APPROVAL OF MERCHANTS' STOCKHOLDERS. This Plan of Merger
is not approved by the requisite vote of Merchants' stockholders at the
Stockholders' Meeting.
8.3.5 OCCURRENCE OF A FIDUCIARY EVENT. At any time after there
has occurred a Fiduciary Event.
8.3.6 MATERIAL ADVERSE EVENT. If there shall have occurred one
or more events that shall have caused or are reasonably likely to cause
a Material Adverse Effect on Merchants.
8.3.7 MERCHANTS RIGHTS AGREEMENT. If there shall have occurred
any event triggering the distribution of Merchants Rights to
stockholders under the Merchants Rights Agreement.
8.3.8 YEAR 2000 FAILURE. In the event of a material breach of
Merchants' representations or warranties contained in Section 4.39
(YEAR 2000 COMPLIANCE); or if Merchants' or its subsidiaries' Year 2000
Assets fail to be Year 2000 Ready and such failure causes material
errors or disruptions in their respective businesses or customer
service.
8.4 MERCHANTS' RIGHTS TO TERMINATE. By the board of directors, or a
duly authorized committee thereof, of Merchants under any of the following
circumstances:
8.4.1 UPSET CONDITION. If the Upset Condition exists in
accordance with Section 2.2 (UPSET PROVISION) during the time period
provided for in such Section.
8.4.2 FAILURE TO SATISFY CLOSING CONDITIONS. If any of the
conditions specified in Article VII have not been met or waived by
Merchants at such time as such condition can no longer be satisfied
notwithstanding Merchants' best efforts to comply with those covenants
given by Merchants in this Plan of Merger.
-67-
<PAGE>
8.4.3 APPROVAL OF MERCHANTS' STOCKHOLDERS. This Plan of Merger
is not approved by the requisite vote of Merchants' stockholders at the
Stockholders' Meeting and Merchants' board of directors has advised Old
Kent that it does not believe that such vote can be obtained through
reasonable further efforts.
8.4.4 MATERIAL ADVERSE EVENT. If there shall have occurred one
or more events that shall have caused or are reasonably likely to cause
a Material Adverse Effect on Old Kent.
8.4.5 YEAR 2000 FAILURE. In the event of a material breach of
Old Kent's representations or warranties contained in Section 3.17
(YEAR 2000 COMPLIANCE); or if Old Kent's or its subsidiaries' Year 2000
Assets fail to be Year 2000 Ready and such failure causes material
errors or disruptions in their respective businesses or customer
service.
8.5 EFFECT OF TERMINATION. In the event of termination of this Plan
of Merger by either Merchants or Old Kent as provided in this Article, this
Plan of Merger shall forthwith become void and have no effect, and none of
Merchants', Old Kent's, any of their respective subsidiaries, or any of their
respective directors, officers, or employees shall have any liability of any
nature whatsoever under this Plan of Merger, or in connection with the
transactions contemplated by this Plan of Merger (other than the Option
Agreement), except that (a) the Option Agreement and Sections 5.14
(CONFIDENTIALITY), 8.5 (EFFECT OF TERMINATION), 9.2 (NONSURVIVAL OF
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS), and 9.4 (EXPENSES), shall
survive any termination of this Plan of Merger, and (b) notwithstanding
anything to the contrary contained in this Plan of Merger, neither Merchants,
Old Kent, nor MergerSub shall be relieved or released from any liabilities or
damages arising out of its breach of any provision of this Plan of Merger.
ARTICLE IX - MISCELLANEOUS
Subject to the terms and conditions of this Plan of Merger, Old Kent,
MergerSub, and Merchants further agree as follows:
9.1 "MATERIAL ADVERSE EFFECT" DEFINED. As used in this Plan of
Merger, the term "MATERIAL ADVERSE EFFECT" means any change or effect that,
individually or when taken together with all other such changes or effects
that have occurred prior to the date of determination of the occurrence of
the Material Adverse Effect, has or is reasonably likely to have a material
negative impact on (a) the business, assets, financial condition, results of
operations, or value of Old Kent and its subsidiaries, taken as a whole, or,
as the case may be, Merchants or its subsidiaries, taken as a whole; or (b)
the ability of Old Kent or Merchants, as the case may be, to satisfy the
applicable closing conditions or consummate the Merger or perform its
obligations under the Option Agreement. Notwithstanding the above, the impact
of the following shall not be included in any determination of a Material
Adverse Effect: (a) changes in GAAP, generally applicable to
-68-
<PAGE>
financial institutions and their holding companies, however, excluding from
this exception any material change to pooling-of-interests accounting rules;
(b) actions and omissions of a party (or any of its subsidiaries) taken with
the prior written consent of the other party; (c) changes in economic
conditions (including changes in the level of interest rates) generally
affecting financial institutions; (d) fees and expenses reasonably related to
this transaction (such as any additional insurance coverages, employment and
consulting services, legal, accounting, and investment banking fees and
expenses, and severance and retention provisions); and (e) the failure of
public utilities, multi-user data transmission networks, interchanges,
switches, and other problems related to the Year 2000 Problem affecting the
banking industry as a whole.
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. None of
the representations, warranties, covenants, and agreements in this Plan of
Merger or in any other agreement or instrument delivered pursuant to this Plan
of Merger, including any rights arising out of any breach of such
representations, warranties, covenants, and agreements, shall survive the
Effective Time, except for the Option Agreement, Merchants Affiliate Agreements,
Employment Amendments, and those covenants and agreements contained herein and
therein that, by their terms, apply or are to be performed in whole or in part
after the Effective Time.
9.3 AMENDMENT. Subject to applicable law, this Plan of Merger may be
amended, modified, or supplemented by, and only by, written agreement of Old
Kent, MergerSub, and Merchants, or by the respective officers thereunto duly
authorized, at any time prior to the Effective Time.
9.4 EXPENSES. Except as otherwise provided in this Plan of Merger,
Merchants and Old Kent shall each pay its own expenses incident to preparing
for, entering into, and carrying out this Plan of Merger, and incident to the
consummation of the Merger. Each party shall pay the fees and expenses of any
investment banker engaged by that party. The costs of all filing fees pertaining
to the Registration Statement shall be paid by Old Kent. The costs of printing
and mailing the Prospectus and Proxy Statement shall be paid by Merchants.
9.5 SPECIFIC ENFORCEMENT. The parties each agree that, consistent with
the terms and conditions of this Plan of Merger, in the event of a breach by a
party to this Plan of Merger, money damages will be inadequate and not
susceptible of computation because of the unique nature of Merchants, Merchants
Bank, and the Merger. Therefore, the parties each agree that a federal or state
court of competent jurisdiction shall have authority, subject to the rules of
law and equity, to specifically enforce the provisions of this Plan of Merger by
injunctive order or such other equitable means as may be determined in the
court's discretion.
9.6 JURISDICTION; VENUE; JURY. The parties acknowledge that
jurisdiction and venue may be permissible in more than one jurisdiction or court
district. For the convenience of the parties and to expedite the resolution of
any dispute that may arise between them, Old Kent, MergerSub, and Merchants each
agree to the jurisdiction and venue of any state or federal court located in
-69-
<PAGE>
Kent County, Michigan. Old Kent, MergerSub, and Merchants each hereby agree
not to assert any defense of improper jurisdiction or venue and each waive
their right to a trial by jury.
9.7 WAIVER. Any of the terms or conditions of this Plan of Merger
may be waived in writing at any time by action taken by the board of
directors of a party, a duly authorized committee thereof, or a duly
authorized officer of such party. The failure of any party at any time or
times to require performance of any provision of this Plan of Merger shall in
no manner affect such party's right at a later time to enforce the same
provision. No waiver by any party of any condition, or of the breach of any
term, covenant, representation, or warranty contained in this Plan of Merger,
whether by conduct or otherwise, in any one or more instances shall be deemed
to be or construed as a further or continuing waiver of any such condition or
breach, or as a waiver of any other condition or of the breach of any other
term, covenant, representation, or warranty.
9.8 NOTICES. All notices, requests, demands, and other communications
under this Plan of Merger shall be in writing and shall be deemed to have been
duly given and effective immediately if delivered or sent and received by a fax
transmission (if receipt by the intended recipient is confirmed by telephone and
if hard copy is delivered by overnight delivery service the next day), a hand
delivery, or a nationwide overnight delivery service (all fees prepaid) to the
following addresses:
IF TO OLD KENT OR MERGERSUB: WITH A COPY TO:
Old Kent Financial Corporation Warner Norcross & Judd LLP
Attention: Mary E. Tuuk, Senior Vice Attention: Mr. Gordon R. Lewis
President and Legal Coordinator 900 Old Kent Building
111 Lyon Street, N.W., Suite 100 111 Lyon Street, N.W.
Grand Rapids, Michigan 49503 Grand Rapids, Michigan 49503-2489
Facsimile: (616) 771-4698 Facsimile: (616) 752-2500
Telephone: (616) 771-5272 Telephone: (616) 752-2000
IF TO MERCHANTS: WITH A COPY TO:
Merchants Bancorp, Inc. Barack Ferrazzano Kirschbaum
Attention: Mr. Calvin R. Myers Perlman & Nagelberg
1851 West Galena Boulevard Attention: Mr. John E. Freechack
Aurora, Illinois 60507 333 West Wacker Drive, Suite 2700
Chicago, Illinois 60606
Facsimile: (630) 801-2882
Telephone: (630) 859-7860 Facsimile: (312) 984-3150
Telephone: (312) 984-3100
-70-
<PAGE>
9.9 GOVERNING LAW. This Plan of Merger shall be governed, construed,
and enforced in accordance with the laws of the State of Michigan, without
regard to principles of conflicts of laws.
9.10 ENTIRE AGREEMENT. This Plan of Merger (including all exhibits
and ancillary agreements described in this Plan of Merger) supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the agreements and documents referred to in this Plan
of Merger) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter; except for matters
set forth in any written instrument concurrently or contemporaneously
executed by the parties. No party may assign any of its rights or obligations
under this Plan of Merger to any other person.
9.11 THIRD PARTY BENEFICIARIES. The terms and conditions of this
Plan of Merger shall inure to the benefit of and be binding upon Old Kent,
MergerSub, and Merchants and their respective successors. Except to the
extent provided in Section 5.8 (INDEMNIFICATION AND INSURANCE) and Section
5.17 (TERMINATION OF THRIFT PLAN), nothing in this Plan of Merger, express or
implied, is intended to confer upon any person other than Old Kent,
MergerSub, and Merchants any rights, remedies, obligations, or liabilities
under or by reason of this Plan of Merger.
9.12 COUNTERPARTS. This Plan of Merger may be executed in one or more
counterparts, which taken together shall constitute one and the same instrument.
Executed counterparts of this Plan of Merger shall be deemed to have been fully
delivered and shall become legally binding if and when executed signature pages
are received by fax from a party. If so delivered by fax, the parties agree to
promptly send original, manually executed copies by nationwide overnight
delivery service.
9.13 FURTHER ASSURANCES; PRIVILEGES. Each of Old Kent and Merchants
shall, at the request of the other, execute and deliver such additional
documents and instruments and take such other actions as may be reasonably
requested to carry out the terms and provisions of this Plan of Merger.
9.14 HEADINGS, ETC. The article headings and section headings contained
in this Plan of Merger are inserted for convenience only and shall not affect in
any way the meaning or interpretation of this Plan of Merger. With respect to
any term, references to the singular form of the word include its plural form
and references to the plural form of the word include its singular form.
9.15 CALCULATION OF DATES AND DEADLINES. Unless otherwise specified,
any period of time to be determined under this Plan of Merger shall be deemed to
commence at 12:01 a.m. on the first full day after the specified starting date,
event, or occurrence. Any deadline, due date, expiration date, or period-end to
be calculated under this Plan of Merger shall be deemed to end
-71-
<PAGE>
at 5 p.m. on the last day of the specified period. The time of day shall be
determined with reference to the then current local time in Grand Rapids,
Michigan.
9.16 SEVERABILITY. If any term, provision, covenant, or restriction
contained in this Plan of Merger is held by a final and unappealable order of
a court of competent jurisdiction to be invalid, void, or unenforceable, then
the remainder of the terms, provisions, covenants, and restrictions contained
in this Plan of Merger shall remain in full force and effect, and shall in no
way be affected, impaired, or invalidated unless the effect would be to cause
this Plan of Merger to not achieve its essential purposes.
9.17 OLD KENT'S ASSURANCES REGARDING MERGERSUB. In consideration of
Merchants' execution and delivery of this Plan of Merger, Old Kent
absolutely, unconditionally and irrevocably guarantees prompt payment when
due of any and all amounts due from MergerSub to Merchants under this Plan of
Merger and prompt performance of all of MergerSub's other obligations under
this Plan of Merger; subject, however, to all of MergerSub's rights and
defenses under this Plan of Merger. Old Kent, as sole shareholder of
MergerSub, agrees that it shall vote all of the outstanding capital stock of
MergerSub in favor of approval of this Plan of Merger and the Merger.
IN WITNESS WHEREOF, the undersigned parties have duly executed
and acknowledged this Plan of Merger as of the date first written above.
OLD KENT FINANCIAL CORPORATION
By /s/ Mark F. Furlong
------------------------------------------------
Mark F. Furlong, Executive Vice President and
Chief Financial Officer
MERCHANTS ACQUISITION CORPORATION
By /s/ Mark F. Furlong
------------------------------------------------
Mark F. Furlong, President
[BALANCE OF THIS PAGE INTENTIONALLY BLANK]
-72-
<PAGE>
IN WITNESS WHEREOF, the undersigned party has duly executed
and acknowledged this Plan of Merger as of the date first written above.
MERCHANTS BANCORP, INC.
By /s/ Calvin R. Myers
------------------------------------
Calvin R. Myers, Chairman, President and
Chief Executive Officer
- 73 -
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "AGREEMENT") is made as of
July 29, 1999, by and between OLD KENT FINANCIAL CORPORATION, a Michigan
corporation ("GRANTEE"), and MERCHANTS BANCORP, INC., a Delaware corporation
("ISSUER").
As a condition to, and contemporaneous with, the execution of
this Agreement, the parties are entering into an Agreement and Plan of Merger
dated July 29, 1999 (the "PLAN OF MERGER"). In consideration therefor, and as an
inducement to Grantee to pursue the transactions contemplated by the Plan of
Merger, Issuer has agreed to grant Grantee the Option (as defined below). The
board of directors of Issuer has approved the grant of the Option and the Plan
of Merger. Capitalized terms used but not defined in this Agreement shall have
the meanings given to those terms in the Plan of Merger.
In consideration of the foregoing, and the mutual covenants
and agreements set forth in this Agreement and in the Plan of Merger, the
parties agree:
1. GRANT OF OPTION.
(a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "OPTION") to purchase, subject to the terms of this
Agreement, up to 577,941 fully paid and nonassessable shares of Issuer Common
Stock, par value $1.00 ("COMMON STOCK"), at a price per share equal to $27.75;
PROVIDED that in the event Issuer issues or agrees to issue any shares of Common
Stock at a price per share less than $27.75 (as adjusted pursuant to Section
5(b)) (other than as permitted under the Plan of Merger), such price shall be
equal to such lesser price (as adjusted, if applicable, the "OPTION PRICE");
FURTHER PROVIDED, that in no event shall the number of shares for which this
Option is exercisable, together with the number of shares owned by Grantee other
than shares held by Grantee in a fiduciary capacity for a customer as to which
it has no beneficial interest ("FIDUCIARY SHARES"), exceed 19.99% of the
Issuer's issued and outstanding shares of Common Stock.
(b) The number of shares of Common Stock subject to the
Option shall be increased or decreased, as appropriate, in the event that any
additional shares of Common Stock are issued or otherwise become outstanding
(other than pursuant to this Agreement or pursuant to an event described in
Section 5(a) of this Agreement) or existing shares are redeemed, retired or
otherwise become no longer outstanding after the date of this Agreement so that,
after any such issuance, redemption or retirement, together with the number of
shares previously issued pursuant to this Agreement or otherwise owned by
Grantee other than Fiduciary Shares, the number of shares of Common Stock
subject to the Option equals 10.65% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be considered to authorize Issuer to issue shares in breach
of any provision of the Plan of Merger.
-1-
<PAGE>
2. EXERCISE OF OPTION.
(a) The holder or holders of the Option (the "HOLDER")
may exercise the Option, in whole or part, if and when at any time both an
Initial Triggering Event (as defined below) and a Subsequent Triggering Event
(as defined below) shall have occurred prior to the occurrence of an Exercise
Termination Event (as defined below), PROVIDED that the Holder shall have sent
notice of such exercise (as required by Section 2(f)) within six months
following such Subsequent Triggering Event (or such later date as provided in
Section 10).
(b) Each of the following shall be an "EXERCISE
TERMINATION EVENT:" (i) consummation of the Merger at the Effective Time of the
Merger; (ii) termination of the Plan of Merger in accordance with the provisions
thereof if such termination occurs before the occurrence of an Initial
Triggering Event; and (iii) the passage of 18 months (or such longer period as
provided in Section 10) after termination of the Plan of Merger if such
termination follows the occurrence of an Initial Triggering Event.
Notwithstanding anything to the contrary in this Agreement: (i) the Option may
not be exercised at any time when Grantee shall be in material breach of any of
its covenants or agreements contained in the Plan of Merger such that Issuer
shall be entitled to terminate the Plan of Merger as a result of such material
breach; and (ii) this Agreement shall automatically terminate upon the proper
termination of the Plan of Merger (x) by Issuer as a result of the material
breach by Grantee of its covenants or agreements contained in the Plan of
Merger, or (y) by Issuer or Grantee if the approval by any federal or state
governmental authority or regulatory or administrative agency or commission
(each a "GOVERNMENTAL ENTITY") necessary to consummate the Merger and the other
transactions contemplated by the Plan of Merger shall have been denied by final
nonappealable action of such agency or authority.
(c) The term "INITIAL TRIGGERING EVENT" shall mean any of
the following events or transactions occurring on or after the date of this
Agreement:
(i) Issuer or any of its subsidiaries (an
"ISSUER SUBSIDIARY"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined below) with any person (for
purposes of this Agreement, the term "person" has the meaning given
that term in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and
regulations thereunder) other than Grantee or any of its subsidiaries
(a "GRANTEE SUBSIDIARY");
(ii) the board of directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction other than the Merger;
(iii) any person other than Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the outstanding shares
of Common Stock (for purposes of this Agreement, the
-2-
<PAGE>
term "beneficial ownership" has the meaning given that term in
Section 13(d) of the Exchange Act and the rules and regulations
thereunder);
(iv) the stockholders of Issuer shall have voted
and failed to approve the Plan of Merger and the Merger at a meeting
that was held for that purpose or any adjournment or postponement
thereof, or such meeting shall not have been held in violation of the
Plan of Merger or shall have been canceled prior to termination of the
Plan of Merger if, prior to such meeting (or if such meeting shall not
have been held or shall have been canceled, prior to such termination),
it shall have been publicly announced or the stockholders of Issuer
shall have been advised that any person (other than Grantee or any
Grantee Subsidiary) shall have made, or shall have an intention to
make, a proposal to engage in an Acquisition Transaction;
(v) the board of directors of Issuer shall not
have recommended, or shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in
any respect to Grantee, its recommendation that the stockholders of
Issuer approve the transactions contemplated by the Plan of Merger at
any meeting that was held for that purpose, in anticipation of engaging
in an Acquisition Transaction (other than with Grantee or any Grantee
Subsidiary) or following a proposal to Issuer to engage in an
Acquisition Transaction, or Issuer or any Issuer Subsidiary shall have
authorized, recommended or proposed (or publicly announced or advised
its stockholders of its intention to authorize, recommend or propose)
an agreement to engage in an Acquisition Transaction with any person
other than Grantee or any Grantee Subsidiary;
(vi) any person other than Grantee or any Grantee
Subsidiary shall have filed with the Securities and Exchange Commission
("SEC") a registration statement or tender offer materials with respect
to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its stockholders to approve
the issuance of shares to be offered in such an exchange or tender
offer);
(vii) Issuer shall have willfully breached any
covenant or obligation contained in the Plan of Merger in anticipation
of engaging in an Acquisition Transaction (other than with Grantee or
any Grantee Subsidiary), and following such breach Grantee would be
entitled to terminate the Plan of Merger (whether immediately or after
the giving of notice or passage of time, or both);
(xiii) any person other than Grantee or any Grantee
Subsidiary shall have filed an application or notice with the
applicable Governmental Entity under the Bank Holding Company Act of
1956, the Federal Deposit Insurance Act, or applicable state banking
laws and regulations, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction; or
(xiv) a Fiduciary Event shall have occurred under
the Plan of Merger.
-3-
<PAGE>
For purposes of this Agreement, "ACQUISITION TRANSACTION" means: (a) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary (other than mergers, consolidations or similar transactions (i)
involving solely Issuer and/or one or more wholly-owned (except for directors'
qualifying shares) Issuer Subsidiary, PROVIDED, any such transaction is not
entered into in violation of the terms of the Plan of Merger or (ii) in which
the stockholders of Issuer immediately prior to the completion of such
transaction own at least 50% of the Common Stock of Issuer (or the resulting or
surviving entity in such transaction) immediately after completion of such
transaction, PROVIDED, any such transaction is not entered into in violation of
the terms of the Plan of Merger); (b) a purchase, lease or other acquisition of
all or a substantial part of the assets or deposits of Issuer or Issuer
Subsidiary; (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 15% or
more of the voting power of Issuer or any Issuer Subsidiary; or (d) any
substantially similar transaction. For purposes of this Agreement, "subsidiary"
has the meaning given that term in Rule 12b-2 under the Exchange Act. In this
Agreement, the phrase "in anticipation of engaging in an Acquisition
Transaction" shall include, without limitation, any action taken by Issuer's
officers or board of directors after any written or oral, authorized or
unauthorized, proposal or expression of interest has been communicated to any
member of Issuer's management or board of directors concerning an Acquisition
Transaction that in any way would involve Issuer and such proposal or expression
of interest has not been withdrawn or rejected at the time of the action.
(d) The term "SUBSEQUENT TRIGGERING EVENT" shall mean
either of the following events or transactions occurring after the date of this
Agreement:
(i) the acquisition by any person (other than
Grantee or any Grantee Subsidiary) of beneficial ownership of 25% or
more of the then outstanding Common Stock; or
(ii) occurrence of the Initial Triggering Event
described in clause (i) of Section 2(c), except that the percentage
referred to for purposes of defining "Acquisition Transaction" in
clause (c) of that definition shall be 25%.
(e) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event or Subsequent Triggering Event
(collectively, "TRIGGERING EVENTS"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of Holder to exercise the
Option.
(f) If Holder is entitled and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of such notice is referred to as the "NOTICE DATE") specifying: (i) the
total number of shares it will purchase pursuant to such exercise; and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "CLOSING DATE");
PROVIDED, that if prior notification to or approval of any Governmental Entity
is required in connection with such purchase, Holder shall promptly file the
required notice or application for approval, shall notify Issuer of such filing,
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
-4-
<PAGE>
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be considered to occur on the Notice
Date relating thereto.
(g) At the closing referred to in Section 2(f), Holder
shall (i) pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer and (ii) present
and surrender this Agreement to Issuer at its principal executive offices;
PROVIDED, that failure or refusal of Issuer to designate such a bank account or
accept surrender of this Agreement shall not preclude Holder from exercising the
Option.
(h) At the closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(g), Issuer shall deliver to
Holder a certificate or certificates representing the number of shares of Common
Stock purchased by Holder and, if the Option should be exercised in part only, a
new Option evidencing the rights of Holder to purchase the balance of the shares
subject to this Option.
(i) Certificates for Common Stock delivered at a closing
under this Agreement may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement, dated as of July 29, 1999,
between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A
copy of such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if Holder shall have delivered to Issuer a copy of a letter from the
staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the
reasonable opinion of counsel to Holder; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(j) Upon the giving by Holder to Issuer of the written
notice of exercise of the Option provided for under Section 2(f) and the tender
of the applicable purchase price in immediately available funds, Holder shall be
considered, subject to the receipt of any necessary regulatory approvals, to be
the holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Common Stock shall not then be
actually delivered to
-5-
<PAGE>
Holder. Issuer shall pay all expenses, and any and all federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2
in the name of Holder or its assignee, transferee or designee.
3. COVENANTS OF ISSUER. Issuer agrees: (i) that it shall at all
times maintain, free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed under this
Agreement by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all applicable premerger notification,
reporting and waiting period requirements and (y) if, under the applicable
federal or state regulatory requirements or any state or federal banking law,
prior approval of or notice to any Governmental Entity is necessary before the
Option may be exercised, cooperating fully with Holder in preparing such
applications or notices and providing such information to each such Governmental
Entity as they may require to permit Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant to this Agreement;
and (iv) promptly to take all action provided in this Agreement to protect the
rights of Holder against dilution.
4. EXCHANGE OF OPTION. This Agreement (and the Option granted by
this Agreement) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
Holder to purchase, on the same terms and subject to the same conditions as are
set forth in this Agreement, in the aggregate the same number of shares of
Common Stock subject to this Option. The terms "Agreement" and "Option" as used
in this Agreement include any stock option agreements and related options for
which this Agreement (and the Option granted by this Agreement) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. ADJUSTMENTS. In addition to the adjustment in the number of
shares of Common Stock that are subject to the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock subject to the Option and
the Option Price shall be subject to adjustment from time to time as provided in
this Section 5.
(a) In the event of any change in, or distributions in
respect of, Common Stock by reason of stock dividends, stock splits, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock subject to the Option
shall be appropriately adjusted and proper provision shall
-6-
<PAGE>
be made so that, if any additional shares of Common Stock are to be issued or
otherwise become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of Common Stock
that remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant
to the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), such number equals 10.65% of the number of
shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock subject
to the Option is adjusted as provided in this Section 5, the Option Price shall
be adjusted by multiplying the Option Price by a fraction, the numerator of
which shall be equal to the number of shares of Common Stock subject to the
Option prior to the adjustment and the denominator of which shall be equal to
the number of shares of Common Stock subject to the Option after the adjustment.
6. REGISTRATION RIGHTS. Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within 12 months (or such later
period as provided in Section 10) of such Subsequent Triggering Event (whether
on its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or owner of any of the shares of Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement under the
Securities Act covering any shares issued and/or issuable pursuant to this
Option and shall use its best efforts to cause such registration statement to
become effective and remain current to permit the sale or other disposition of
any shares of Common Stock issued upon total or partial exercise of this Option
("OPTION SHARES") in accordance with any plan of disposition requested by
Grantee. Issuer will use its best efforts to cause such registration statement
promptly to become effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect such
sales or other dispositions. Grantee shall have the right to demand two such
registrations. Issuer shall bear the costs of both of such registrations
(including, without limitation, Issuer's attorneys' fees, printing costs and
filing fees, except for underwriting discounts or commissions, brokers' fees and
the fees and disbursements of Grantee's counsel related thereto).
Notwithstanding the above, if, at the time of any request by Grantee for
registration of Option Shares as provided above, Issuer is in the process of
registration with respect to an underwritten public offering by Issuer of shares
of Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters (or, if none, the sole underwriter or underwriters) of
such offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated by this Section 6 may be reduced; PROVIDED, that, after any such
required reduction, the number of Option Shares included in such offering for
the account of Holder shall constitute at least 25% of the total number of
shares to be sold by Holder and Issuer in the aggregate; PROVIDED FURTHER, that
if such reduction occurs, then Issuer shall file a registration statement for
the balance of the Option Shares subject to the registration demand as promptly
as practical as to which no reduction pursuant to this Section 6 shall be
permitted or occur and the Holder shall thereafter be entitled to one additional
registration and the 12 month period referred to in the first sentence of this
Section shall be increased to 24 months. Each such Holder shall provide all
information reasonably
-7-
<PAGE>
requested by Issuer for inclusion in any registration statement to be filed
to register Option Shares. If requested by any such Holder in connection with
such registration, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements for an
issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer to
be entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary in this Agreement, in no event shall the number of registrations
that Issuer is obligated to effect be increased by reason of the fact that
there shall be more than one Holder as a result of any assignment or division
of this Agreement.
7. REPURCHASE OF OPTION.
(a) At any time after the occurrence of a Repurchase
Event (defined below): (i) at the request of Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer (or any successor to Issuer) shall repurchase the Option from Holder at a
price (the "OPTION REPURCHASE PRICE") equal to the amount by which (x) the
market/offer price (as defined below) exceeds (y) the Option Price, multiplied
by the number of shares for which this Option may then be exercised; and (ii) at
the request of the owner of Option Shares from time to time (the "OWNER"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor to Issuer) shall repurchase
such number of the Option Shares from Owner as Owner shall designate at a price
(the "OPTION SHARE REPURCHASE PRICE") equal to the market/offer price multiplied
by the number of Option Shares so designated. The term "MARKET/OFFER PRICE"
shall mean the highest of: (i) the price per share of Common Stock at which a
tender or exchange offer therefor has been made; (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with Issuer;
(iii) the highest sale price for shares of Common Stock within the six-month
period immediately preceding the date Holder gives notice of the required
repurchase of this Option or Owner gives notice of the required repurchase of
Option Shares, as the case may be; or (iv) in the event of a sale of all or any
substantial part of Issuer's assets or deposits, the sum of the net price paid
in such sale for such assets or deposits and the current market value of the
remaining assets of Issuer as determined by a nationally recognized investment
banking firm selected by Holder or Owner, as the case may be, and reasonably
acceptable to Issuer, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the market/offer price, the
value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by Holder or Owner, as the case may
be, and reasonably acceptable to Issuer.
(b) Holder or Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Holder or
Owner, as the case may be, elects to require Issuer to repurchase this Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing
-8-
<PAGE>
Option Shares and the receipt of such notice or notices relating thereto,
Issuer shall deliver or cause to be delivered to Holder the Option Repurchase
Price and/or to Owner the Option Share Repurchase Price therefor or the
portion thereof that Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Holder and/or Owner and thereafter deliver or cause to be
delivered, from time to time, to Holder and/or Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
PROVIDED, that if Issuer at any time after delivery of a notice of repurchase
pursuant to Section 7(b) is prohibited under applicable law or regulation, or as
a consequence of administrative policy, from delivering to Holder and/or Owner,
as appropriate, the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in full (and Issuer hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish such
repurchase), Holder or Owner may revoke its notice of repurchase of the Option
or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly: (i) deliver to Holder
and/or Owner, as appropriate, that portion of the Option Repurchase Price or the
Option Share Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to Holder, a new Agreement evidencing
the right of Holder to purchase that number of shares of Common Stock obtained
by multiplying the number of shares of Common Stock for which the surrendered
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion of the Option Repurchase Price previously delivered to Holder and the
denominator of which is the Option Repurchase Price, and/or (B) to Owner, a
certificate for the Option Shares it is then so prohibited from repurchasing. If
an Exercise Termination Event shall have occurred prior to the date of the
notice by Issuer described in the first sentence of this Section 7(c), or shall
be scheduled to occur at any time before the expiration of a period ending on
the thirtieth day after such date, Holder shall nonetheless have the right to
exercise the Option until the expiration of such 30-day period.
(d) For purposes of this Section 7, a "REPURCHASE EVENT"
shall be considered to have occurred upon the occurrence of any of the following
events or transactions after the date of this Agreement:
(i) the acquisition by any person (other than
Grantee or any Grantee Subsidiary) of beneficial ownership of 50% or
more of the then outstanding Common Stock; or
(ii) the consummation of any Acquisition
Transaction described in Section 2(c)(i), except that the percentage
referred to for purposes of defining "Acquisition Transaction" in
clause (c) shall be 50%.
-9-
<PAGE>
8. SUBSTITUTE OPTION.
(a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement to (i) consolidate with or merge
into any person, other than Grantee or any Grantee Subsidiary, or engage in a
plan of exchange with any person, other than Grantee or any Grantee Subsidiary
and Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquiror in such plan of exchange, (ii) permit
any person, other than Grantee or any Grantee Subsidiary, to merge into Issuer
or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger or plan
of exchange, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger or plan of exchange represent less than 50% of the outstanding shares and
share equivalents of the merged or acquiring company, or (iii) sell or otherwise
transfer all or a substantial part of its or any Issuer Subsidiary's assets or
deposits to any person, other than Grantee or any Grantee Subsidiary, then, and
in each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth in this Agreement, be
converted into, or exchanged for, an option (the "SUBSTITUTE OPTION"), at the
election of Holder, to acquire capital stock of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the following meanings:
(i) "ACQUIRING CORPORATION" means: (i) the
continuing or surviving person of a consolidation or merger
with Issuer (if other than Issuer); (ii) the acquiring person
in a plan of exchange in which Issuer is acquired; (iii)
Issuer in a merger or plan of exchange in which Issuer is the
continuing or surviving or acquiring person; and (iv) the
transferee of all or a substantial part of Issuer's assets or
deposits (or the assets or deposits of any Issuer Subsidiary).
(ii) "SUBSTITUTE COMMON STOCK" means the voting
common stock to be issued by the issuer of the Substitute
Option upon exercise of the Substitute Option.
(iii) "ASSIGNED VALUE" means the market/offer
price, as defined in Section 7.
(iv) "AVERAGE PRICE" means the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; PROVIDED, that if Issuer
is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock
issued by the person
-10-
<PAGE>
merging into Issuer or by any company which controls or is
controlled by such person, as Holder may elect.
(c) The Substitute Option shall have the same terms as
the Option; PROVIDED, that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Holder. The issuer of the
Substitute Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section 9),
which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a), divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option was exercisable immediately prior to
the event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the subsections
above, shall the Substitute Option be exercisable for a number of shares that,
together with the number of shares owned by Grantee other than Fiduciary Shares,
is more than 19.99% of the shares of Substitute Common Stock outstanding prior
to exercise of the Substitute Option. In the event that the Substitute Option
would be exercisable for more than 19.99% of the shares of Substitute Common
Stock outstanding prior to exercise but for this Section 8(e), the issuer of the
Substitute Option (the "SUBSTITUTE OPTION ISSUER") shall make a cash payment to
Holder equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this Section 8(e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this Section 8(e).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by Holder and reasonably acceptable to
Substitute Option Issuer.
(f) Issuer shall not enter into any transaction described
in Section 8(a) unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer under
this Agreement.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) At the request of a holder of the Substitute Option
(a "SUBSTITUTE OPTION HOLDER"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"SUBSTITUTE OPTION REPURCHASE PRICE") equal to the amount by which (i) the
Highest Closing Price (as defined below) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised. In addition, at the
request of the owner (the "SUBSTITUTE SHARE OWNER") of shares of Substitute
Common Stock, the Substitute Option
-11-
<PAGE>
Issuer shall repurchase the Substitute Common Stock at a price (the
"SUBSTITUTE SHARE REPURCHASE PRICE") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term
"HIGHEST CLOSING PRICE" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of
the Substitute Option or the Substitute Share Owner gives notice of the
required repurchase of the Substitute Common Stock, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise their respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the Substitute
Common Stock pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Common Stock accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Common Stock in
accordance with the provisions of this Section 9. As promptly as practicable,
and in any event within five business days after the surrender of the Substitute
Option and/or certificates representing Substitute Common Stock and the receipt
of such notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the Substitute
Share Repurchase Price therefor or the portion thereof that the Substitute
Option Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or the
Substitute Common Stock in part or in full, the Substitute Option Issuer shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; PROVIDED, that if the Substitute
Option Issuer is at any time after delivery of a notice of repurchase pursuant
to Section 9(b) prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals as promptly as practicable to accomplish
such repurchase), the Substitute Option Holder or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Common Stock either in whole or to the extent of the prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly: (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (x) to the Substitute Option
-12-
<PAGE>
Holder, a new Substitute Option evidencing the right of the Substitute Option
Holder to purchase that number of shares of Substitute Common Stock obtained
by multiplying the number of shares of Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion of the Substitute Option Repurchase
Price previously delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price, and/or (y) to
the Substitute Share Owner, a certificate for the Substitute Common Stock it
is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by the Substitute Option
Issuer described in the first sentence of Section 9(c), or shall be scheduled
to occur at any time before the expiration of a period ending on the
thirtieth day after such date, the Substitute Option Holder shall
nevertheless have the right to exercise the Substitute Option until the
expiration of such 30-day period
10. EXTENSION OF EXERCISE PROVISIONS. The 30-day, six-month,
12-month, 18-month or 24-month time periods for the exercise of certain rights
under Sections 2, 6, 7, 9, 12 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights
(for so long as the Holder, Owner, Substitute Option Holder or Substitute Share
Owner, as the case may be, is using commercially reasonable efforts to obtain
such regulatory approvals), and for the expiration of all statutory waiting
periods; and (ii) to the extent necessary to avoid liability under Section 16(b)
of the Exchange Act by reason of such exercise.
11. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly and validly authorized by the board of directors of Issuer prior to the
date of this Agreement and no other corporate proceedings on the part of Issuer
are necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Issuer. This Agreement is the valid and legally binding obligation of Issuer.
(b) Issuer has taken all necessary corporate action to
authorize, reserve and permit it to issue, and at all times from the date of
this Agreement through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable under this Agreement, and all
such shares, upon issuance pursuant to this Agreement, will be duly authorized,
validly issued, fully paid, nonassessable and will be delivered free and clear
of all claims, liens, encumbrances and security interests and not subject to any
preemptive rights.
12. ASSIGNMENT. Neither party to this Agreement may assign any of
its rights or obligations under this Agreement or the Option created under this
Agreement to any other person without the express written consent of the other
party, except that if a Subsequent Triggering
-13-
<PAGE>
Event shall have occurred prior to an Exercise Termination Event, Grantee,
subject to the express provisions of this Agreement, may assign in whole or
in part its rights and obligations under this Agreement; PROVIDED, that until
the date 15 days following the date on which the last of all applicable
Governmental Entities has approved an application by Grantee to acquire the
shares of Common Stock subject to the Option, Grantee may not assign its
rights under the Option except in: (i) a widely dispersed public
distribution; (ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of Issuer; (iii) an
assignment to a single party (such as a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's
behalf; or (iv) any other manner approved by all applicable Governmental
Entities.
13. COOPERATION. Grantee and Issuer each will use its best efforts
to make all filings with, and to obtain consents of, all third parties and
Governmental Entities necessary to the consummation of the transactions
contemplated by this Agreement, but Grantee shall not be obligated to apply to
state banking authorities for approval to acquire the shares of Common Stock
issuable under this Agreement until such time, if ever, as it considers
appropriate to do so.
14. MINIMUM REPURCHASE PROCEEDS.
(a) Grantee may, at any time following a Repurchase Event
which occurs prior to the occurrence of an Exercise Termination Event (or such
later period as provided in Section 10), relinquish the Option (together with
any Option Shares issued to and then owned by Grantee) to Issuer in exchange for
a cash fee equal to the Surrender Price; PROVIDED, that Grantee may not exercise
its rights pursuant to this Section 14 if Issuer has repurchased the Option (or
any portion thereof) or any Option Shares pursuant to Section 7. The "SURRENDER
PRICE" shall be equal to $8,500,000 (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares and (ii) minus, if applicable, the
excess of (A) the net cash amounts, if any, received by Grantee pursuant to the
arms' length sale of Option Shares (or any other securities into which such
Option Shares were converted or exchanged) to any unaffiliated party, over (B)
the Option Price.
(b) Grantee may exercise its right to relinquish the
Option and any Option Shares pursuant to this Section 14 by surrendering to
Issuer, at its principal office, a copy of this Agreement together with
certificates for Option Shares, if any, accompanied by a written notice stating
(i) that Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 14 and (ii) the Surrender Price.
The Surrender Price shall be payable in immediately available funds on or before
the second business day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
paying the Surrender Price to Grantee in full, Issuer shall immediately so
notify Grantee and thereafter deliver or cause to be delivered, from time to
time, to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, within five business days after the date on which Issuer
is no longer so prohibited; PROVIDED, that if Issuer at any time after delivery
of a notice of surrender pursuant to Section 14(b) is prohibited under
applicable law or regulation, or as a consequence of administrative
-14-
<PAGE>
policy, from paying to Grantee the Surrender Price in full: (i) Issuer shall
(A) use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to make such payments, (B) within five days of the submission or
receipt of any documents relating to any such regulatory and legal approvals,
provide Grantee with copies of the same, and (c) keep Grantee advised of both
the status of any such request for regulatory and legal approvals, as well as
any discussions with any relevant regulatory or other third party reasonably
related to the same; and (ii) Grantee may revoke such notice of surrender by
delivery of a notice of revocation to Issuer and, upon delivery of such
notice of revocation, the date of the Exercise Termination Event shall be
extended to a date six months from the date on which the Exercise Termination
Event would have occurred if not for the provisions of this Section 14(c)
(during which period Grantee may exercise any of its rights under this
Agreement, including any and all rights pursuant to this Section 14).
15. REMEDIES. The parties acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party and that the
obligations of the parties shall be enforceable by either party through
injunctive or other equitable relief. In connection therewith, the parties waive
the posting of any bond or similar requirement.
16. SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions contained in this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. If for any reason such court or regulatory agency
determines that Holder is not permitted to acquire, or Issuer is not permitted
to repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) (as adjusted pursuant to Sections 1(b) or 5), it is the
express intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification of this Agreement.
17. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be considered
to have been duly given if delivered or sent and received by a fax transmission
(if receipt by the intended recipient is confirmed by telephone and if hard copy
is delivered by overnight delivery service the next day), by hand delivery, or
by a nationwide overnight delivery service (all fees prepaid) to the respective
addresses of the parties set forth in the Plan of Merger.
18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be considered to be an original, but all of
which shall constitute one and the same agreement.
20. FEES AND EXPENSES. Except as otherwise expressly provided in
this Agreement, each party shall bear and pay all costs and expenses incurred by
it or on its behalf in connection
-15-
<PAGE>
with the transactions contemplated under this Agreement, including fees and
expenses of its own financial consultants, investment bankers, accountants
and counsel.
21. ENTIRE AGREEMENT. Except as otherwise expressly provided in
this Agreement or in the Plan of Merger, this Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
under this Agreement and supersedes all prior arrangements or understandings
with respect thereto, written or oral. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties to this
Agreement and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties to this Agreement, and their respective successors and permitted
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.
IN WITNESS WHEREOF, the parties have caused this Stock Option
Agreement to be executed by their officers, thereunto duly authorized, as of the
date first written above.
OLD KENT FINANCIAL CORPORATION
By: /s/ MARK F. FURLONG
------------------------------------------------
Mark F. Furlong, Executive Vice President and
Chief Financial Officer
[BALANCE OF THIS PAGE INTENTIONALLY BLANK]
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Stock Option
Agreement to be executed by their officers, thereunto duly authorized, as of the
date first written above.
MERCHANTS BANCORP, INC.
By: /s/ CALVIN R. MYERS
------------------------------------------------
Calvin R. Myers, Chairman, President and
Chief Executive Officer
-17-
<PAGE>
OLD KENT
Old Kent Financial Corporation
111 Lyon Street NW
Grand Rapids, MI 49503-2406
NEWS RELEASE
NYSE: OK
NASDAQ-NMS: MBIA
FOR RELEASE: 8:00 A.M.
DATE: JULY 30, 1999
CONTACTS: OLD KENT FINANCIAL CORPORATION
INVESTOR: ALBERT T. POTAS (616) 771-1931
MEDIA: TANYA BERG (616) 771-4364
MERCHANTS BANCORP, INC.
CALVIN R. MYERS (630) 907-9000
OLD KENT TO ACQUIRE MERCHANTS BANCORP, INC.
-Old Kent will expand its Chicago area franchise and have the
6th largest deposit market share in Illinois-
GRAND RAPIDS, MICHIGAN -- David J. Wagner, Chairman, President and CEO of
Old Kent Financial Corporation, and Calvin R. Myers, Chairman, President and
CEO of Merchants Bancorp, Inc., announced today that they have signed a
definitive agreement for the merger of Merchants Bancorp into Old Kent.
Merchants Bancorp, Inc., is a bank holding company headquartered in the
Chicago suburb of Aurora, Illinois, with assets of $921 million and deposits of
$778 million at June 30, 1999. Merchants Bancorp serves Kane County from 12
suburban Chicago locations in Aurora, Geneva, Hinckley, St. Charles and Sugar
Grove, and also operates two banking sites in Dekalb and Kendall Counties.
Kane County ranks 5th in total population and projected population growth,
and 6th in median income, for all Illinois counties.
Mr. Wagner stated, "Healthy, growing markets have always been a key to
Old Kent's success and Merchants Bancorp is located in one of the most
desirable and fastest growing counties in Illinois. Merchant's strong
franchise is a very attractive addition to Old Kent's recent expansion in
Chicagoland."
Mr. Myers said, "We view the transaction as being favorable to Merchant's
customers and shareholders. Old Kent is big enough to provide a broader array
of products and services, yet small enough to stay close to our customers and
communities. From a shareholder perspective, Old Kent is focused on
delivering superior shareholder value as evidenced by its ten year total
annual return to shareholders of 26%."
The merger is subject to the customary approvals by Merchants Bancorp,
Inc. shareholders and by regulatory authorities. This transaction is expected
to be completed in early 2000. Old Kent's management believes that the
acquisition will be accretive to earnings in the year 2000 without factoring
in anticipated revenue enhancements.
-more-
<PAGE>
The merger is intended to be structured as a "pooling-of-interest" for
accounting purposes and as a tax free exchange of shares. Merchants Bancorp,
Inc. shareholders will receive 4.5 million shares of Old Kent stock, using an
exchange ratio of 0.830 for each share of Merchants Bancorp, Inc. ($35.12 per
share based on Old Kent's closing price on July 29, 1999). Old Kent
anticipates approximately $20 million (pre-tax) of one-time merger related
charges. The total value of the transaction would be $189 million. Old Kent
expects annual cost savings of $9 million (pre-tax), about 30% of Merchant's
expense base, to result from the merger. The combined company is expected to
have a market capitalization of $5.4 billion.
Old Kent also noted that its recently announced stock repurchase program
would be unaffected by this proposed transaction. The program was authorized
in June 1999 and allows for the repurchase of up to 3 million shares of Old
Kent Common Stock.
On July 9, 1999, Old Kent completed its acquisition of CFSB Bancorp,
Inc., a $900 million banking organization headquartered in Lansing, Michigan.
Old Kent expects to complete its pending acquisition of Pinnacle Banc Group,
Inc., a $1 billion banking organization headquartered in Oakbrook, Illinois,
in early September 1999.
Old Kent is a financial services company headquartered in Grand Rapids,
Michigan, with a 40 year history of consecutive increases in annual per share
earnings and dividends. It operates 246 banking offices in Michigan, Illinois
and Indiana as well as 167 mortgage lending sites throughout the United
States. At July 14, 1999, Old Kent had total assets of approximately $17
billion.
# # #
The following Summary Financial Data is part of the press release.
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
Old Kent Merchants
-------- ---------
YTD June 30, 1999 YTD June 30, 1999
----------------- ------------------
<S> <C> <C>
Earnings Summary:
Basic Earnings Per Share $1.11 $.93
Diluted Earnings Per Share $1.10 $.92
Net Income $120,644,000 $4,815,000
Balance Sheet Data (in millions):
Total Loans $ 9,823 $631
Total Deposits 12,363 778
Total Assets 15,929 921
Shareholders' Equity 1,072 72
</TABLE>
#########################################
FORWARD LOOKING STATEMENTS
This news release contains certain estimates and projections for Old Kent
Financial Corporation, Merchants Bancorp, Inc. and the combined company
following the merger, including estimates and projections related to cost
savings, revenue enhancements and accretion that may be realized from the
merger, and certain merger-related charges expected to be incurred in
connection with the transaction. These estimates and projections constitute
forward-looking statements which involve significant risks and uncertainties.
Actual results may differ materially from the results discussed in these
forward-looking statements. Internal and external factors that might cause
such a difference include, but are not limited to: (1) expected cost savings
from the merger might not be fully realized or realized within the expected
time frame; (2) revenues following the merger may be lower than expected; (3)
competitive pressures among depository institutions may increase
significantly; (4) costs or difficulties related to the integration of the
business may be encountered; (5) changes in the interest rate environment may
reduce net interest income; (6) general economic conditions may deteriorate,
either nationally or in the states in which the combined company will be
doing business; and (7) legislation or regulatory changes any adversely affect
the businesses in which the combined company would be engaged.
