SECURITIES AND EXCHANGE COMMISSION
WASHING, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 10, 1998
CBT CORPORATION
(exact name of registrant as specified in its charter)
Kentucky 0-16878 61-1030727
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
333 Broadway, Paducah, Kentucky 42001
(Address, including zip code, of principal executive office)
(502) 575-5100
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS.
On January 10, 1998, CBT Corporation a Kentucky
corporation ("CBT"), and Mercantile Bancorporation Inc., a
Missouri corporation ("Mercantile"), entered into an Agreement
and Plan of Merger (the "Merger Agreement"), pursuant to which
CBT will be merged with and into Ameribanc, Inc., a Missouri
corporation and a wholly-owned subsidiary of Mercantile (the
"Merger"). Ameribanc, Inc. will be the surviving entity
resulting from the Merger.
Upon consummation of the Merger, each share of the no
par value common stock of CBT ("CBT Common Stock") issued and
outstanding immediately prior to the effective time of the Merger
(as defined in the Merger Agreement, the ":Effective Time") shall
cease to be outstanding and shall be converted into and become
the right to receive 0.6513 of a share of the $0.01 par value
common stock of Mercantile, together with associated preferred
share purchase rights (collectively, "Mercantile Common Stock")
(the "Exchange Ration").
In addition, at the Effective Time, all rights with
respect to CBT Common Stock pursuant to stock options granted by
CBT under the existing stock plans of CBT which are outstanding
at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to Mercantile
Common Stock on a basis that reflects the Exchange Ration.
The Merger is intended to constitute a tax-free
reorganization under the Internal Revenue Code of 1986, as
amended, and be accounted for as a pooling of interests.
Consummation of the Merger is subject to various
conditions, including: (I) receipt of the approval by the share-
holders of CBT of the Merger Agreement and the Merger; (ii)
receipt of certain regulatory approvals from the Board of
Governors of the Federal Reserve System and other applicable
regulatory authorities,; (iii) receipt of an opinion of counsel
as to the tax treatment of certain aspects of the Merger; (iv)
receipt of a letter from KPMG Peat Marwick, LLP, Mercantile's
independent public accountants, to the effect that the Merger
will qualify for pooling-of-interests accounting treatment; and
(v) satisfaction of certain other conditions.
The Merger Agreement and the Merger will be submitted
for approval at a meeting of the shareholders of CBT. Prior to
the shareholders' meeting, Mercantile will file a registration
statement with the Securities and Exchange Commission registering
under the Securities Act of 1933, as amended, the shares of
Mercantile Common Stock to be issued in exchange for the
outstanding shares of CBT Common Stock in the Merger. Such
shares of Mercantile will be offered to the CBT shareholders
pursuant to a prospectus that will also serve as a proxy
statement for the meeting of the shareholders of CBT to consider
and vote upon the Merger Agreement and the Merger.
Certain directors of CBT who in the aggregate have
voting power over approximately 13.40% of the outstanding shares
of CBT Common Stock as of December 31, 1997, have agreed with
Mercantile pursuant to separate Voting Agreements to vote all
such shares of CBT Common Stock to approve the Merger Agreement
and the Merger.
In connection with executing the Merger Agreement,
Mercantile and CBT entered into a stock option agreement (the
"Stock Option Agreement") pursuant to which CBT granted to
Mercantile an option to purchase up to 1,564,662 authorized and
unused shares of CBT Common Stock (representing 19.9% of the
outstanding shares of CBT Common Stock without giving effect to
the exercise of the option), at a purchase price of $33.25 per
share (the "Option"), upon certain terms and in accordance with
certain conditions. The Option was granted by CBT as a condition
and inducement to Mercantile's willingness to enter into the
Merger Agreement. Under certain Circumstances, CBT may be
required to repurchase the Option or the shares acquired pursuant
to the exercise of the Option.
For additional information regarding the Merger
Agreement the Voting Agreement and the Stock Option Agreement,
please refer to the copies of those documents which are
incorporated herein by reference and included as Exhibits to this
Current Report on Form 8-K. The foregoing discussion is
qualified in its entirety by reference to such documents.
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.
CBT CORPORATION
(Registrant)
By: /S/ JOHN E. SIRCY
John E. Sircy
Executive Vice President and
Chief Operating Officer
Date: January 14, 1998
INDEX TO EXHIBITS
Exhibit
2.1 Agreement and Plan of Merger, dated as of January 10,1998, among CBT
Corporation, Mercantile Bancorporation Inc. and Ameribanc, Inc.
2.2 Stock Option Agreement, dated as of January 10, 1998,issued by CBT
Corporation to Mercantile Bancorporation Inc.
2.3 Form of Voting Agreement, dated as of January 10, 1998, by and
between Mercantile Bancorporation Inc. and certain of the directors of
CBT Corporation
99.1 Text of joint press release, dated January 12, 1998, issued by CBT
Corporation and Mercantile Bancorporation Inc.
AGREEMENT AND PLAN OF MERGER
among
MERCANTILE BANCORPORATION INC.,
a Missouri corporation
and
AMERIBANC, INC.,
a Missouri corporation
and
CBT CORPORATION,
a Kentucky corporation
_________________________________________________
January 10, 1998
TABLE OF CONTENTS
Page
Recitals 1
ARTICLE I
THE MERGER
1.01 The Merger 1
1.02 Closing 1
1.03 Effective Time 2
1.04 Additional Actions 2
1.05 Articles of Incorporation and By-Laws 2
1.06 Board of Directors and Officers 2
1.07 Conversion of Securities 3
1.08 Exchange Procedures. 3
1.09 No Fractional Shares 5
1.10 Dissenting Shares. 5
1.11 Closing of Stock Transfer Books. 5
1.12 Anti-Dilution 6
1.13 Reservation of Right to Revise Transaction 6
1.14 Material Adverse Effect 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization and Authority 7
2.02 Subsidiaries. 8
2.03 Capitalization 8
2.04 Authorization. 9
2.05 Seller Financial Statements. 10
2.06 Seller Reports 11
2.07 Title to and Condition of Assets. 11
2.08 Real Property. 12
2.09 Taxes 13
2.10 Material Adverse Effect 14
2.11 Loans, Commitments and Contracts. 14
2.12 Absence of Defaults 17
2.13 Litigation and Other Proceedings 18
2.14 Directors' and Officers' Insurance 18
2.15 Compliance with Laws 18
2.16 Labor 20
2.17 Material Interests of Certain Persons 20
2.18 Allowance for Loan and Lease Losses;
Non-Performing Assets; Financial Assets. 20
2.19 Employee Benefit Plans. 22
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2.20 Conduct of Seller to Date 24
2.21 Absence of Undisclosed Liabilities. 25
2.22 Proxy Statement, Etc. 25
2.23 Registration Obligations 26
2.24 Tax, Regulatory and Accounting Matters 26
2.25 Brokers and Finders 26
2.26 Interest Rate Risk Management Instruments 27
2.27 Accuracy of Information 27
2.28 Year 2000 Compliant 27
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
3.01 Organization and Authority 28
3.02 Capitalization of Mercantile 28
3.03 Authorization. 29
3.04 Mercantile Financial Statements 30
3.05 Mercantile Reports 30
3.06 Material Adverse Effect. 31
3.07 Registration Statement, etc. 31
3.08 Brokers and Finders. 31
3.09 Accuracy of Information. 31
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time 32
4.02 Forbearances of Seller 32
4.03 Forbearances of the Buyers 35
ARTICLE V
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence 35
5.02 Registration Statement; Regulatory Matters. 36
5.03 Shareholder Approval 37
5.04 Current Information 37
5.05 Conforming Entries. 38
5.06 Environmental Reports 38
5.07 Agreements of Affiliates 39
5.08 Expenses 39
5.09 Miscellaneous Agreements and Consents. 40
5.10 Employee Agreements and Benefits. 40
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5.11 Press Releases 41
5.12 State Takeover Statutes 41
5.13 Directors' and Officers' Indemnification 41
5.14 Tax Opinion Certificates 42
5.15 Employee Stock Options. 42
5.16 Best Efforts to Insure Pooling 43
ARTICLE VI
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger 43
6.02 Conditions to Obligations of Seller 44
6.03 Conditions to Obligations of the Buyers 45
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination 46
7.02 Effect of Termination 47
7.03 Amendment 47
7.04 Waiver 47
ARTICLE VIII
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements 48
8.02 Indemnification 48
8.03 No Assignment; Successors and Assigns 48
8.04 Severability 49
8.05 No Implied Waiver 49
8.06 Headings 49
8.07 Entire Agreement 49
8.08 Counterparts 49
8.09 Notices 49
8.10 Governing Law 51
8.11 Knowledge 51
8.12 Time of Essence 51
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LIST OF EXHIBITS
Exhibit A - Affiliate Letter
Exhibit B - Director/Officer Certificate
Exhibit C - Shareholder Certificate
Exhibit D - Buyer's Opinion
Exhibit E - Seller's Opinion
LIST OF SCHEDULES
Schedule 2.01 Articles/Bylaws
Schedule 2.02 Subsidiaries/Equity Securities
Schedule 2.03 Seller Stock Plans
Schedule 2.04(b) Authorizations
Schedule 2.05(a) Seller Financial Statements
Schedule 2.08(a) Owned Real Property/Leased Real Property
Schedule 2.08(c) Interests in Real Property
Schedule 2.09 Taxes
Schedule 2.11(a) Deposits/Commitments
Schedule 2.11(b) Contracts
Schedule 2.11(c) Insurance
Schedule 2.11(f) Loans
Schedule 2.13 Litigation
Schedule 2.15 Compliance with Laws
Schedule 2.18(c) Real Estate Acquired through Foreclosure and
Repossession
Schedule 2.18(f) Investment Securities
Schedule 2.19(a) Employee Benefit Plans
Schedule 2.19(d) Post-Retirement Health and Medical Benefits
Schedule 2.19(f) Change in Control Payments
Schedule 2.20 Conduct of Seller
Schedule 2.26(a) Derivative Securities
Schedule 4.02 Forbearances of Seller
Schedule 5.07 Affiliates
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"),
made and entered into as of January 10, 1998 by and among
Mercantile Bancorporation Inc., a Missouri corporation
("Mercantile"), Ameribanc, Inc., a Missouri corporation ("Merger
Sub" and, collectively, with Mercantile, the "Buyers"), and CBT
Corporation, a Kentucky corporation ("Seller").
WHEREAS, Merger Sub is a wholly owned subsidiary of
Mercantile, and each of Mercantile and Merger Sub is a registered
bank holding company under the Bank Holding Company Act of 1956,
as amended (the "BHCA"); and
WHEREAS, Seller is registered as a bank holding company
under the BHCA; and
WHEREAS, the respective Boards of Directors of Seller
and Merger Sub and the Executive Committee of the Board of
Directors of Mercantile have approved the merger (the "Merger")
of Seller with and into Merger Sub pursuant to the terms and
subject to the conditions contained in this Agreement; and
WHEREAS, the parties desire to provide certain
undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated by
this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the
parties agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger.
Subject to the terms and conditions of this Agreement, Seller
shall be merged with and into Merger Sub in accordance
with Chapter 351 of the Missouri Revised Statutes (the "Missouri
Statute") and Section 271B.11-070 of the Kentucky Business
Corporation Act (the "KBCA"), and the separate corporate
existence of Seller shall cease. Merger Sub shall be the
surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue to
be governed by the laws of the State of Missouri.
1.02 Closing.
The closing (the "Closing") of the Merger, unless the parties
hereto shall otherwise mutually agree, shall take place at the
offices of Mercantile in St. Louis, Missouri, at 10:00 am, local
time, on the date that the Effective Time (as defined in
Section 1.03) occurs (the "Closing Date").
1.03 Effective Time.
The Merger shall become effective (the "Effective Time") upon the
later of (i) the issuance of a Certificate of Merger by the
Office of the Secretary of State of the State of Missouri and
(ii) the filing of Articles of Merger with the Office of the
Secretary of State of the Commonwealth of Kentucky. Unless
otherwise mutually agreed in writing by Buyers and Seller,
subject to the terms and conditions of this Agreement, the
Effective Time shall occur on such date as Buyers shall notify
Seller in writing (such notice to be at least five business days
in advance of the Effective Time) but (A) not earlier than the
satisfaction of all conditions set forth in Section 6.01(a) and
6.01(b) (the "Approval Date") and (B) not later than the first
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business day of the first full calendar month commencing at least
five business days after the Approval Date. On the Closing Date,
the parties hereto will cause the Merger to be consummated by
delivering to the Secretary of State of the State of Missouri and
the Secretary of State of the Commonwealth of Kentucky, for
filing, Articles of Merger, in such form as required by, and
executed and acknowledged in accordance with, the relevant
provisions of the Missouri Statute and the KBCA.
1.04 Additional Actions.
If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary
or desirable to (a) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets
of Seller or Merger Sub, or (b) otherwise carry out the purposes
of this Agreement, Seller and its officers and directors shall be
deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such
deeds, assignments or assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Surviving
Corporation are authorized in the name of Seller or otherwise to
take any and all such action.
1.05 Articles of Incorporation and By-Laws.
The Articles of Incorporation and By-Laws of Merger Sub in
effect immediately prior to the Effective Time shall be the
Articles of Incorporation and By-Laws of the Surviving
Corporation following the Merger, unless otherwise repealed or
amended.
1.06 Board of Directors and Officers.
At the Effective Time, the directors and officers of Merger
Sub immediately prior to the Effective Time shall be the
directors and officers, respectively, of the Surviving
Corporation following the Merger, and such directors and officers
shall hold office in accordance with the Surviving Corporation's
By-Laws and applicable law.
1.07 Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any
action on the part of the Buyers, Seller or the holder of any of
the following securities:
(a) Each share of the common stock, $1.00 par
value, of Merger Sub that is issued and outstanding
immediately prior to the Effective Time shall remain
outstanding and shall be unchanged after the Merger and
shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation;
and
(b) Subject to Sections 1.09, 1.10 and 1.11
hereof, each share of common stock, no par value, of
Seller ("Seller Common Stock") issued and outstanding
immediately prior to the Effective Time, other than
Dissenting Shares (as defined in Section 1.10 hereof),
shall cease to be outstanding and shall be converted
into and become the right to receive 0.6513 of a share
(the "Exchange Ratio") of common stock, $0.01 par
value, and the associated "Rights" under the "Rights
Agreement," as those terms are defined in Section 3.02
hereof, of Mercantile (collectively, "Mercantile Common
Stock"); provided, however, that any shares of Seller
Common Stock held by Seller, Mercantile or any of their
respective Subsidiaries (as defined in Section 2.02
hereof), in each case other than in a fiduciary
capacity or as a result of debts previously contracted,
shall be canceled and shall not be exchanged for shares
of Mercantile Common Stock. The Exchange Ratio was
computed by (i) aggregating (A) the total number of
shares of Seller Common Stock that were issued and
outstanding on the date of this Agreement (as set forth
in Section 2.03 hereof) with (B) the total number of
shares of Seller Common Stock that are reserved for
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issuance pursuant to options or other rights relating
to Seller Common Stock and outstanding as of
December 31, 1997 (as set forth in Section 2.03 hereof)
and dividing such number of shares of Seller Common
Stock (computed by aggregating (A) and (B) hereof (the
"Fully Diluted Shares")) into (ii) 5,400,000, the
aggregate number of shares of Mercantile Common Stock
to be issued in the Merger.
1.08 Exchange Procedures.
(a) As soon as practicable following the
Effective Time, Mercantile shall mail or cause to be
mailed to holders of record of certificates formerly
representing shares of Seller Common Stock (the
"Certificates"), as identified on the Seller
Shareholder List (as provided pursuant to
Section 1.11(b) hereof), letters advising them of the
effectiveness of the Merger and instructing them to
tender such Certificates to Mercantile's duly appointed
exchange agent (the "Exchange Agent"), or in lieu
thereof, such evidence of lost, stolen or mutilated
Certificates and such surety bond or other security as
the Exchange Agent may reasonably require (the
"Required Documentation").
(b) Subject to Sections 1.09, 1.10 and 1.12
hereof, after the Effective Time, each previous holder
of a Certificate that surrenders such Certificate or in
lieu thereof, the Required Documentation, to the
Exchange Agent, with a properly completed and executed
letter of transmittal with respect to such Certificate,
will be entitled to a certificate or certificates
representing the number of full shares of Mercantile
Common Stock into which the Certificate so surrendered
shall have been converted pursuant to this Agreement,
and any distribution theretofore declared and not yet
paid with respect to such shares of Mercantile Common
Stock and any amount due with respect to fractional
shares, without interest (the "Merger Consideration").
Such shares of Mercantile Common Stock, any amount due
with respect to fractional shares and any distribution
shall be delivered by the Exchange Agent to each such
holder as promptly as practicable after such surrender.
(c) Each outstanding Certificate, until duly
surrendered to the Exchange Agent, shall be deemed to
evidence ownership of the Merger Consideration into
which the stock previously represented by such
Certificate shall have been converted pursuant to this
Agreement.
(d) After the Effective Time, holders of
Certificates shall cease to have rights with respect to
the stock previously represented by such Certificates,
and their sole rights shall be to exchange such
Certificates for the Merger Consideration to which the
shareholder may be entitled pursuant to the provisions
of Section 1.07 hereof. After the closing of the
transfer books as described in Section 1.11 hereof,
there shall be no further transfer on the records of
Seller of Certificates, and if such Certificates are
presented to Seller for transfer, they shall be
canceled against delivery of the Merger Consideration.
Neither Buyers nor the Exchange Agent shall be
obligated to deliver the Merger Consideration until
such holder surrenders the Certificates or furnishes
the Required Documentation as provided herein. No
dividends or distributions declared after the Effective
Time (including any redemption by Mercantile of the
Rights associated therewith) on the Mercantile Common
Stock will be remitted to any person entitled to
receive Mercantile Common Stock under this Agreement
until such person surrenders the Certificate
representing the right to receive such Mercantile
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Common Stock or furnishes the Required Documentation,
at which time such dividends or distributions shall be
remitted to such person, without interest and less any
taxes that may have been imposed thereon. Certificates
surrendered for exchange by an affiliate shall not be
exchanged until Buyers have received a written
agreement from such affiliate as required pursuant to
Section 5.07 hereof. Neither the Exchange Agent nor
any party to this Agreement nor any affiliate thereof
shall be liable to any holder of stock represented by
any Certificate for any Merger Consideration issuable
or payable in the Merger that is paid to a public
official pursuant to applicable abandoned property,
escheat or similar laws.
1.09 No Fractional Shares.
Notwithstanding any other provision of this Agreement, neither
certificates nor scrip for fractional shares of Mercantile Common
Stock shall be issued in the Merger. Each holder of shares of
Seller Common Stock who otherwise would have been entitled to a
fraction of a share of Mercantile Common Stock shall receive (by
check from the Exchange Agent, mailed to the shareholder with the
certificate(s) for Mercantile Common Stock which such holder is
to receive pursuant to the Merger) in lieu thereof, cash (without
interest) in an amount determined by multiplying the fractional
share interest to which such holder would otherwise be entitled
by the closing stock price of Mercantile Common Stock on the New
York Stock Exchange (the "NYSE") Composite Tape as reported in
The Wall Street Journal on the Closing Date. No such holder
shall be entitled to dividends, voting rights or any other rights
in respect of any fractional share.
1.10 Dissenting Shares.
(a) "Dissenting Shares" means any shares of
Seller Common Stock held by any holder who becomes
entitled to payment of the fair value of such shares
under Chapter 271B.13 of the KBCA. Any holders of
Dissenting Shares shall be entitled to payment for such
shares only to the extent permitted by and in
accordance with the provisions of the KBCA; provided,
however, that if, in accordance with the KBCA, any
holder of Dissenting Shares shall forfeit such right to
payment of the fair value of such Dissenting Shares,
such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as
of the Effective Time, the right to receive the Merger
Consideration.
(b) Seller shall give to Mercantile (i) prompt
notice of any written objections to the Merger and/or
any written demands for the payment of the fair value
of any shares of Seller Common Stock, withdrawals of
such demands, and any other instruments served pursuant
to Chapter 271B.13 of the KBCA received by Seller, and
(ii) the opportunity to participate in all negotiations
and proceedings with respect to such demands under the
KBCA. Seller shall not voluntarily make any payment
with respect to demands for payment of fair value and
shall not, voluntarily make any payment with respect to
any demands for payment of fair value and shall not,
except with the prior consent of Mercantile, settle or
offer to settle any such demands.
1.11 Closing of Stock Transfer Books.
(a) The stock transfer books of Seller shall be
closed at the end of business on the business day
immediately preceding the Closing Date. In the event
of a transfer of ownership of Seller Common Stock that
is not registered in the transfer records prior to the
closing of such record books, the Merger Consideration
issuable or payable with respect to such stock may be
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delivered to the transferee, if the Certificate or
Certificates representing such stock is presented to
the Exchange Agent accompanied by all documents
required to evidence and effect such transfer and all
applicable stock transfer taxes are paid.
(b) At the Effective Time, Seller shall provide
Buyers with a complete and verified list of registered
holders of Seller Common Stock based upon its stock
transfer books as of the closing of said transfer
books, including the names, addresses, certificate
numbers and taxpayer identification numbers of such
holders (the "Seller Shareholder List"). Buyers shall
be entitled to rely upon the Seller Shareholder List to
establish the identity of those persons entitled to
receive the Merger Consideration, which list shall be
conclusive with respect thereto. In the event of a
dispute with respect to ownership of stock represented
by any Certificate, Buyers shall be entitled to deposit
any Merger Consideration represented thereby in escrow
with an independent third party and thereafter be
relieved with respect to any claims thereto.
1.12 Anti-Dilution.
If between the date of this Agreement and the Effective Time a
share of Mercantile Common Stock shall be changed into a
different number of shares of Mercantile Common Stock or a
different class of shares by reason of reclassification,
recapitalization, split-up, combination, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared
with a record date within such period, then appropriate and
proportionate adjustment or adjustments will be made to the
Exchange Ratio such that each shareholder of Seller shall be
entitled to receive such number of shares of Mercantile Common
Stock or other securities as such shareholder would have received
pursuant to such reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment or as a result of
such stock dividend had the record date therefor been immediately
following the Effective Time.
1.13 Reservation of Right to Revise Transaction.
Buyers may at any time change the method of effecting the
acquisition of Seller by Buyers (including, without limitation,
the provisions of this Article I) if and to the extent Buyers
deem such change to be desirable, including, without limitation,
to provide for (i) a merger of Merger Sub with and into Seller,
in which Seller is the surviving corporation, or (ii) a merger of
Seller directly into Mercantile, in which Mercantile is the
surviving corporation; provided, however, that no such change
shall (A) alter or change the amount or kind of the Merger
Consideration to be received by the shareholders of Seller,
(B) adversely affect the tax treatment to Seller shareholders, as
generally described in Section 6.01(e) hereof, (C) materially
impede or delay receipt of any approvals referred to in
Section 6.01(b) or the consummation of the transactions
contemplated by this Agreement, or (D) prevent or impede the
transactions contemplated hereby from qualifying for pooling-of-
interests accounting treatment unless Buyers first waive Seller's
covenants set forth in Sections 5.02(b) and 5.16 hereof and the
condition to Buyers' obligation to consummate the Merger set
forth in Section 6.03(f) hereof.
1.14 Material Adverse Effect.
As used in this Agreement, the term "Material Adverse Effect" with
respect to an entity means any condition, event, change or occurrence
that has or may reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), properties,
business or results of operations, of such entity and its
Subsidiaries, taken as a whole as reflected in the Seller
Financial Statements (as defined in Section 2.05(b)) or the
Mercantile Financial Statements (as defined in Section 3.04), as
the case may be; it being understood that a Material Adverse Effect
shall not include: (i) a change with respect to, or effect on, such
entity and its Subsidiaries
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<PAGE> 6
resulting from a change in law, rule, regulation, generally
accepted accounting principles or regulatory accounting
principles; (ii) a change with respect to, or effect on, such
entity and its Subsidiaries resulting from any other matter
affecting depository institutions generally including, without
limitation, changes in general economic conditions and changes in
prevailing interest and deposit rates; (iii) a change disclosed
in the Seller Financial Statements or the Mercantile Financial
Statements, as the case may be; (iv) any charges taken by
Mercantile in connection with pending or completed acquisitions
or the disposition of certain businesses or lines of business; or
(v) in the case of Seller, any financial change resulting from
adjustments made pursuant to Section 5.05 or 5.09(b) hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Buyers as follows:
2.01 Organization and Authority.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Kentucky, is duly
qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified, except
where the failure of Seller to so qualify would not have a
Material Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole, and has the corporate power and authority to
own its properties and assets and to carry on its business as it
is now being conducted. Seller is registered as a bank holding
company with the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") under the BHCA. True and complete
copies of the Articles of Incorporation and By-Laws of Seller and
the Articles of Incorporation and By-Laws of Citizens Bank and
Trust Company, a Kentucky state chartered bank and a wholly owned
Subsidiary of Seller ("Citizens"), each as in effect on the date
of this Agreement, are attached hereto as Schedule 2.01.
2.02 Subsidiaries.
(a) Schedule 2.02 sets forth a complete and
correct list of all of Seller's "Subsidiaries" (as
defined in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC");
each a "Seller Subsidiary" and, collectively, the
"Seller Subsidiaries"), and all outstanding Equity
Securities (as defined in Section 2.03) of each Seller
Subsidiary, all of which are owned directly or
indirectly by Seller. Except as disclosed in Schedule
2.02, all of the outstanding shares of capital stock of
the Seller Subsidiaries owned directly or indirectly by
Seller are validly issued, fully paid and nonassessable
and are owned free and clear of any lien, claim,
charge, option, encumbrance, agreement, mortgage,
pledge, security interest or restriction (a "Lien")
with respect thereto. Each of the Seller Subsidiaries
is a corporation, bank or savings bank duly
incorporated or organized and validly existing under
the laws of its jurisdiction of incorporation or
organization, and has corporate power and authority to
own or lease its properties and assets and to carry on
its business as it is now being conducted. Each of the
Seller Subsidiaries is duly qualified to do business in
each jurisdiction where its ownership or leasing of
property or the conduct of its business requires it so
to be qualified, except where the failure to so qualify
would not have a Material Adverse Effect on Seller and
the Seller Subsidiaries, taken as a whole. Except as
set forth in Schedule 2.02, neither Seller nor any
Seller Subsidiary owns beneficially, directly or
indirectly, any shares of any class of Equity
Securities or similar interests of any corporation,
bank, business trust, association or organization, or
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any interest in a partnership or joint venture of any
kind, other than those identified as Seller
Subsidiaries in Schedule 2.02 hereof.
(b) Citizens is a commercial bank duly organized,
validly existing and in good standing under the laws of
the State of Kentucky. The deposits of Citizens are
insured by the Federal Deposit Insurance Corporation
(the "FDIC") under the Federal Deposit Insurance Act of
1950, as amended (the "FDI Act").
2.03 Capitalization.
The authorized capital stock of Seller consists of (i)
12,000,000 shares of Seller Common Stock, of which, as of
December 31, 1997, 7,862,627 shares were issued and outstanding.
As of December 31, 1997, Seller had reserved 645,000 shares of
Seller Common Stock for issuance under Seller's stock option and
incentive plans (including grants reflected in the Board
minutes), a list of which is set forth on Schedule 2.03 (the
"Seller Stock Plans"), pursuant to which options ("Seller
Employee Stock Options") covering 428,118 shares of Seller Common
Stock were outstanding as of December 31, 1997. Since
December 31, 1997, no equity securities of Seller have been
issued, other than shares of Seller Common Stock which may have
been issued upon the exercise of Seller Stock Options. "Equity
Securities" of an issuer means capital stock or other equity
securities of such issuer, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of
any capital stock or other equity securities of such issuer, or
contracts, commitments, understandings or arrangements by which
such issuer is or may become bound to issue additional shares of
its capital stock or other equity securities of such issuer, or
options, warrants, scrip or rights to purchase, acquire,
subscribe to, calls on or commitments for any shares of its
capital stock or other equity securities. Except as set forth
above, there are no other Equity Securities of Seller
outstanding. All of the issued and outstanding shares of Seller
Common Stock are validly issued, fully paid and nonassessable,
and have not been issued in violation of any preemptive right of
any shareholder of Seller. Neither Seller nor any Seller
Subsidiary has taken or agreed to take any action or has any
knowledge of any fact or circumstance and neither Seller nor any
Seller Subsidiary will take any action that would prevent the
Merger from qualifying for pooling-of-interests accounting
treatment.
2.04 Authorization.
(a) Seller has the corporate power and authority
to enter into this Agreement and, subject to the
approval of this Agreement by the shareholders of
Seller and the Regulatory Authorities (as defined in
Section 2.06), to carry out its obligations hereunder.
The only shareholder vote required for Seller to
approve this Agreement is the affirmative vote of the
holders of 67% of the outstanding shares of Seller
Common Stock entitled to vote at a meeting called for
such purpose. The execution, delivery and performance
of this Agreement by Seller and the consummation by
Seller of the transactions contemplated hereby in
accordance with and subject to the terms of this
Agreement have been duly authorized by the Board of
Directors of Seller. Subject to the approval of
Seller's shareholders and subject to the receipt of
such approvals of the Regulatory Authorities as may be
required by statute or regulation, this Agreement is a
valid and binding obligation of Seller enforceable
against Seller in accordance with its terms.
(b) Except as disclosed on Schedule 2.04(b),
neither the execution nor delivery nor performance by
Seller of this Agreement, nor the consummation by
Seller of the transactions contemplated hereby, nor
compliance by Seller with any of the provisions hereof,
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will (i) violate, conflict with, or result in a breach
of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both,
would constitute a default) under, or result in the
termination of, or accelerate the performance required
by, or result in a right of termination or acceleration
of, or result in the creation of, any Lien upon any of
the properties or assets of Seller or any of the Seller
Subsidiaries under any of the terms, conditions or
provisions of (x) its Articles of Incorporation,
charter or By-Laws or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Seller or any
of the Seller Subsidiaries is a party or by which it
may be bound, or to which Seller or any of the Seller
Subsidiaries or any of the properties or assets of
Seller or any of the Seller Subsidiaries may be
subject, other than those as to which any such
violation, conflict, breach, event, termination,
acceleration or creation would not have a Material
Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole, or (ii) subject to compliance with
the statutes and regulations referred to in subsection
(c) of this Section 2.04, violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or
regulation applicable to Seller or any of the Seller
Subsidiaries or any of their respective properties or
assets.
(c) Other than in connection or in compliance
with the provisions of the Missouri Statute, the KBCA,
the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Securities Act"), the
Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"),
the securities or blue sky laws of the various states
or filings, consents, reviews, authorizations,
approvals or exemptions required under the BHCA or the
Hart-Scott Rodino Antitrust Improvements Act of 1976,
as amended, or any required approvals of the Federal
Reserve Board, the Kentucky Department of Financial
Institutions, the FDIC, the Office of Thrift
Supervision ("OTS") or other governmental agencies or
governing boards having regulatory authority over
Seller or any Seller Subsidiary, no notice to, filing
with, exemption or review by, or authorization, consent
or approval of, any public body or authority is
necessary for the consummation by Seller of the
transactions contemplated by this Agreement.
2.05 Seller Financial Statements.
(a) Attached hereto as Schedule 2.05(a) are
copies of the following documents: (i) Seller's Annual
Report to Shareholders for the year ended December 31,
1996; and (ii) Seller's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997
and September 30, 1997.
(b) The financial statements contained in the
documents referenced in Schedule 2.05(a) are referred
to collectively as the "Seller Financial Statements."
The Seller Financial Statements have been prepared in
accordance with generally accepted accounting
principles ("GAAP") during the periods involved, and
present fairly the consolidated financial position of
Seller and the Seller Subsidiaries at the dates thereof
and the consolidated results of operations, changes in
shareholders' equity and cash flows, as applicable, of
Seller and the Seller Subsidiaries for the periods
stated therein.
(c) Seller and the Seller Subsidiaries have each
prepared, kept and maintained through the date hereof
true, correct and complete financial books and records
which fairly reflect their respective financial
conditions, results of operations, changes in
shareholders' equity and cash flows.
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2.06 Seller Reports.
Since January 1, 1995, each of Seller and the Seller
Subsidiaries has timely filed all material reports, registrations
and statements, together with any required amendments thereto,
that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements, (ii) the Federal Reserve Board, (iii) the OTS, (iv)
the FDIC and (iv) any federal, state, municipal or local
government, securities, banking, savings and loan, environmental,
insurance and other governmental or regulatory authority, and the
agencies and staffs thereof (the entities in the foregoing
clauses (i) through (v) being referred to herein collectively as
the "Regulatory Authorities" and individually as a "Regulatory
Authority"), having jurisdiction over the affairs of it. All
such material reports and statements filed with any such
Regulatory Authority are collectively referred to herein as the
"Seller Reports." As of each of their respective dates, the
Seller Reports complied in all material respects with all the
rules and regulations promulgated by the applicable Regulatory
Authority. With respect to Seller Reports filed with the
Regulatory Authorities, there is no material unresolved
violation, criticism or exception by any Regulatory Authority
with respect to any report or statement filed by, or any
examinations of, Seller or any of the Seller Subsidiaries.
2.07 Title to and Condition of Assets.
(a) Except as may be reflected in the Seller
Financial Statements and with the exception of all
"Real Property" (which is the subject of Section 2.08
hereof), Seller and the Seller Subsidiaries have, and
at the Closing Date will have, good and marketable
title to their owned properties and assets, including,
without limitation, those reflected in the Seller
Financial Statements (except those disposed of in the
ordinary course of business since the date thereof),
free and clear of any Lien, except for Liens for
(i) taxes, assessments or other governmental charges
not yet delinquent, (ii) as set forth or described in
the Seller Financial Statements or any subsequent
Seller Financial Statements delivered to Buyers prior
to the Effective Time, and (iii) pledges to secure
deposits and other Liens incurred in the ordinary
course of business.
(b) No material properties or assets that are
reflected as owned by Seller or any of the Seller
Subsidiaries in the Seller Financial Statements as of
September 30, 1997, have been sold, leased,
transferred, assigned or otherwise disposed of since
such date, except in the ordinary course of business.
(c) All furniture, fixtures, vehicles, machinery
and equipment and computer software owned or used by
Seller or the Seller Subsidiaries, including any such
items leased as a lessee (taken as a whole as to each
of the foregoing with no single item deemed to be of
material importance) are in good working order and free
of known defects, subject only to normal wear and tear.
The operation by Seller or the Seller Subsidiaries of
such properties and assets is in compliance in all
material respects with all applicable laws, ordinances
and rules and regulations of any governmental authority
having jurisdiction over such use.
2.08 Real Property.
(a) A list of each parcel of real property owned
by Seller or any of the Seller Subsidiaries (other than
real property acquired in foreclosure or in lieu of
foreclosure in the course of the collection of loans
and being held by Seller or a Seller Subsidiary for
disposition as required by law is set forth in Schedule
2.08(a) under the heading "Owned Real Property" (such
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real property being herein referred to as the "Owned
Real Property"). A list of each parcel of real
property leased by Seller or any of the Seller
Subsidiaries is also set forth in Schedule 2.08(a)
under the heading "Leased Real Property" (such real
property being herein referred to as the "Leased Real
Property"). Seller shall update Schedule 2.08(a) within
ten (10) days of acquiring any Owned Real Property or
leasing any Leased Real Property after the date hereof.
Collectively, the Owned Real Property and the Leased
Real Property are herein referred to as the "Real
Property."
(b) There is no pending action involving Seller
or any of the Seller Subsidiaries as to the title of or
the right to use any of the Real Property.
(c) Except as disclosed on Schedule 2.08(c),
neither Seller nor any of the Seller Subsidiaries has
any interest in any real property other than as
described above in Section 2.08(a) except interests as
a mortgagee, any real property acquired in foreclosure
or in lieu of foreclosure and being held for
disposition as required by law and property held by any
Seller Subsidiary in its capacity as trustee.
(d) To the best knowledge of Seller, none of the
buildings, structures or other improvements located on
the Real Property encroaches upon or over any adjoining
parcel of real estate or any easement or right-of-way
or "setback" line and all such buildings, structures
and improvements are located and constructed in
conformity with all applicable zoning ordinances and
building codes.
(e) None of the buildings, structures or
improvements located on the Owned Real Property are the
subject of any official complaint or notice by any
governmental authority of violation of any applicable
zoning ordinance or building code, and there is no
zoning ordinance, building code, use or occupancy
restriction or condemnation action or proceeding
pending, or, to the best knowledge of Seller,
threatened, with respect to any such building,
structure or improvement. The Owned Real Property is
in generally good condition for its intended purpose,
ordinary wear and tear excepted, and has been
maintained in accordance with reasonable and prudent
business practices applicable to like facilities.
(f) Except as may be reflected in the Seller
Financial Statements or with respect to such easements,
Liens, defects or encumbrances as do not individually
or in the aggregate materially adversely affect the use
or value of the parcel of Owned Real Property, Seller
and the Seller Subsidiaries have, and at the Closing
Date will have, good and marketable title to their
respective Owned Real Properties.
(g) Neither Seller nor any of the Seller
Subsidiaries has caused or allowed the generation,
treatment, storage, disposal or release at any Real
Property of any Toxic Substance, except in accordance
in all material respects with all applicable federal,
state and local laws and regulations. "Toxic
Substance" means any hazardous, toxic or dangerous
substance, pollutant, waste, gas or material,
including, without limitation, petroleum and petroleum
products, metals liquids, semi-solids or solids, that
are regulated under any federal, state or local
statute, ordinance, rule, regulation or other law
pertaining to environmental protection, contamination,
quality, waste management or cleanup. There are no
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underground storage tanks located on, in or under any
Owned Real Property or Leased Real Property.
2.09 Taxes.
Seller and each Seller Subsidiary have timely filed or will
timely file (including extensions) all material tax returns
required to be filed at or prior to the Closing Date ("Seller
Returns"). Each of Seller and the Seller Subsidiaries has paid,
or set up adequate reserves on the Seller Financial Statements
for the payment of, all taxes required to be paid in respect of
the periods covered by such Seller Returns and has set up
adequate reserves on the most recent Seller Financial Statements
for the payment of all taxes anticipated to be payable in respect
of all periods up to and including the latest period covered by
such Seller Financial Statements. Neither Seller nor any Seller
Subsidiary has any material liability for any such taxes in
excess of the amounts so paid or reserves so established, and no
material deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed in writing
(tentatively or definitely) against Seller or any of the Seller
Subsidiaries which have not been settled or would not be covered
by existing reserves. Neither Seller nor any of the Seller
Subsidiaries is delinquent in the payment of any material tax,
assessment or governmental charge, nor has it requested any
extension of time within which to file any tax returns in respect
of any fiscal year which have not since been filed and no
requests for waivers of the time to assess any tax are pending.
Except as set forth on Schedule 2.09, no federal or state income
tax return of Seller or any Seller Subsidiaries has been audited
by the Internal Revenue Service (the "IRS") or any state tax
authority for the seven most recent full calendar years. Except
as set forth on Schedule 2.09, there is no deficiency or refund
litigation or, to the best knowledge of Seller, matter in
controversy with respect to Seller Returns. Except as set forth
on Schedule 2.09 hereof, neither Seller nor any of the Seller
Subsidiaries has extended or waived any statute of limitations on
the assessment of any tax due that is currently in effect.
2.10 Material Adverse Effect.
Since September 30, 1997, there has been no Material Adverse
Effect on Seller and the Seller Subsidiaries, taken as a whole.
2.11 Loans, Commitments and Contracts.
(a) Schedule 2.11(a) contains a complete and
accurate listing, as of November 30, 1997, of all
contracts entered into with respect to deposits and
repurchase agreements of $1,000,000 or more, by
account, and, as of September 30, 1997, all loan
agreements, notes, security agreements, bankers'
acceptances, outstanding letters of credit,
participation agreements, and other documents relating
to or involving extensions of credit by Seller or any
of the Seller Subsidiaries and, as of December 31,
1997, all loan commitments and commitments to issue
letters of credit and other commitments to extend
credit with respect to any one entity or related group
of entities in excess of $1,000,000 to which Seller or
any of the Seller Subsidiaries is a party or by which
it is bound, by account.
(b) Except for the contracts and agreements
required to be listed on Schedule 2.11(a) and the loans
required to be listed on Schedule 2.11(f), and except
as otherwise listed on Schedule 2.11(b), as of November
30, 1997, neither Seller nor any of the Seller
Subsidiaries is a party to or is bound by any:
(i) agreement, contract, arrangement,
understanding or commitment with any labor union;
(ii) material franchise or license
agreement, excluding software license agreements
entered into in the ordinary course of business;
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(iii) written employment, severance,
termination pay, agency, consulting or similar
agreement or commitment in respect of personal
services;
(iv) material agreement, arrangement or
commitment (A) not made in the ordinary course of
business, and (B) pursuant to which Seller or any
of the Seller Subsidiaries is or may become
obligated to invest in or contribute to any Seller
Subsidiary other than pursuant to Seller Employee
Plans (as that term is defined in Section 2.19
hereof) or agreements relating to joint ventures
or partnerships set forth in Schedule 2.02, true
and complete copies of which have been furnished
to Buyers;
(v) agreement, indenture or other
instrument not disclosed in the Seller Financial
Statements relating to the borrowing of money by
Seller or any of the Seller Subsidiaries or the
guarantee by Seller or any of the Seller
Subsidiaries of any such obligation (other than
trade payables or instruments related to
transactions entered into in the ordinary course
of business by Seller or any of the Seller
Subsidiaries, such as deposits, Federal Home Loan
Bank ("FHLB") and Federal Funds borrowings and
repurchase and reverse repurchase agreements),
other than such agreements, indentures or
instruments providing for annual payments of less
than $200,000;
(vi) contract containing covenants which
limit the ability of Seller or any of the Seller
Subsidiaries to compete in any line of business or
with any person or which involves any restrictions
on the geographical area in which, or method by
which, Seller or any of the Seller Subsidiaries
may carry on their respective businesses (other
that as may be required by law or any applicable
Regulatory Authority);
(vii) contract or agreement which is
a "material contract" within the meaning of Item
601(b)(10) of Regulation S-K as promulgated by the
SEC to be performed after the date of this
Agreement that has not been filed or incorporated
by reference in the Seller Reports;
(viii) lease with annual rental
payments aggregating $100,000 or more;
(ix) loans or other obligations payable
or owing to any officer, director or employee
except (A) salaries, wages and directors' fees or
other compensation incurred and accrued in the
ordinary course of business and (B) obligations
due in respect of any depository accounts
maintained by any of the foregoing with Seller or
any of the Seller Subsidiaries in the ordinary
course of business; or
(x) other agreement, contract,
arrangement, understanding or commitment involving
an obligation by Seller or any of the Seller
Subsidiaries of more than $250,000 and extending
beyond six months from the date hereof that cannot
be canceled without cost or penalty upon notice of
30 days or less, other than contracts entered into
in respect of deposits, loan agreements and
commitments, notes, security agreements,
repurchase and reverse repurchase agreements,
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bankers' acceptances, outstanding letters of
credit and commitments to issue letters of credit,
participation agreements and other documents
relating to transactions entered into by Seller or
any of the Seller Subsidiaries in the ordinary
course of business and not involving extensions of
credit with respect to any one entity or related
group of entities in excess of $1,000,000.
(c) Seller and/or the Seller Subsidiaries carry
property, liability, director and officer errors and
omissions, products liability and other insurance
coverage as set forth in Schedule 2.11(c) under the
heading "Insurance."
(d) True, correct and complete copies of the
agreements, contracts, leases and other documents
referred to in Section 2.11(b) have been included with
Schedule 2.11(b) hereto. True, correct and complete
copies of the agreements, contracts, leases, insurance
policies and other documents referred to in Schedules
2.11(a) and (c) have been or shall be furnished or made
available to Buyers.
(e) To the best knowledge of Seller, each of the
agreements, contracts, leases, insurance policies and
other documents referred to in Schedules 2.11 (a), (b)
and (c) is a valid, binding and enforceable obligation
of the parties sought to be bound thereby, except as
the enforceability thereof against the parties thereto
(other than Seller or any of the Seller Subsidiaries)
may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws now or
hereafter in effect relating to the enforcement of
creditors' rights generally, and except that equitable
principles may limit the right to obtain specific
performance or other equitable remedies.
(f) Schedule 2.11(f) under the heading "Loans"
contains a true, correct and complete listing, as of
November 30, 1997, by account, of (i) all loans in
excess of $500,000 of Seller or any of the Seller
Subsidiaries that have been accelerated during the past
twelve months; (ii) all loan commitments or lines of
credit of Seller or any of the Seller Subsidiaries in
excess of $500,000 which have been terminated by Seller
or any of the Seller Subsidiaries during the past
twelve months by reason of default or adverse
developments in the condition of the borrower or other
events or circumstances affecting the credit of the
borrower; (iii) all loans, lines of credit and loan
commitments in excess of $500,000, as to which Seller
or any of the Seller Subsidiaries has given written
notice of its intent to terminate during the past
twelve months; (iv) with respect to all loans in excess
of $500,000 all notification letters and other written
communications from Seller or any of the Seller
Subsidiaries to any of their respective borrowers,
customers or other parties during the past twelve
months wherein Seller or any of the Seller Subsidiaries
has requested or demanded that actions be taken to
correct existing defaults or facts or circumstances
which may become defaults; (v) each borrower, customer
or other party which has notified Seller or any of the
Seller Subsidiaries during the past twelve months of,
or has asserted against Seller or any of the Seller
Subsidiaries, in each case in writing, any "lender
liability" or similar claim, and, to the best knowledge
of Seller, each borrower, customer or other party which
has given Seller or any of the Seller Subsidiaries any
oral notification of, or orally asserted to or against
Seller or any of the Seller Subsidiaries, any such
claim; or (vi) all loans in excess of $250,000 (A) that
are contractually past due 90 days or more in the
payment of principal and/or interest, (B) that are on
non-accrual status, (C) that have been classified
"doubtful," "loss" or the equivalent thereof by any
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Regulatory Authority, (D) where a reasonable doubt
exists as to the timely future collectibility of
principal and/or interest, whether or not interest is
still accruing or the loan is less than 90 days past
due, (E) the interest rate terms have been reduced
and/or the maturity dates have been extended subsequent
to the agreement under which the loan was originally
created due to concerns regarding the borrower's
ability to pay in accordance with such initial terms,
or (F) where a specific reserve allocation exists in
connection therewith.
2.12 Absence of Defaults.
Neither Seller nor any of the Seller Subsidiaries is in
violation of its charter documents or By-Laws or in default under
any material agreement, commitment, arrangement, lease, insurance
policy or other instrument, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and
there has not occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a default, except
in all cases where such default would not have a Material Adverse
Effect on Seller and its Subsidiaries, taken as a whole.
2.13 Litigation and Other Proceedings.
Except as set forth on Schedule 2.13 or otherwise disclosed in the
Seller Financial Statements, neither Seller nor any of the Seller
Subsidiaries is a party to any pending or, to the best knowledge of
Seller, threatened claim, action, suit, investigation or proceeding,
or is subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or reasonably could not be
expected to have, a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole. Without limiting the generality of
the foregoing, thereare no actions, suits or proceedings pending or,
to the best knowledge of Seller, threatened against Seller or any
of the Seller Subsidiaries or any of their respective officers or
directors by any shareholder of Seller or any of the Seller
Subsidiaries (or any former shareholder of Seller or any of the
Seller Subsidiaries) or involving claims under the Community
Reinvestment Act of 1977, as amended, the Bank Secrecy Act, the
fair lending laws or any other similar laws.
2.14 Directors' and Officers' Insurance.
Each of Seller and the Seller Subsidiaries has taken or will take
all requisite action (including, without limitation, the making
of claims and the giving of notices) pursuant to its directors'
and officers' liability insurance policy or policies in order to
preserve all rights thereunder with respect to all matters
(other than matters arising in connection with this Agreement
and the transactions contemplated hereby) occurring prior to the
Effective Time that are known to Seller.
2.15 Compliance with Laws
(a) To the best knowledge of Seller, Seller and
each of the Seller Subsidiaries have all permits,
licenses, authorizations, orders and approvals of, and
have made all filings, applications and registrations
with, all Regulatory Authorities that are required in
order to permit them to own or lease their respective
properties and assets and to carry on their respective
businesses as presently conducted; all such permits,
licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best
knowledge of Seller, no suspension or cancellation of
any of them is threatened; and all such filings,
applications and registrations are current; in each
case except for permits, licenses, authorizations,
orders, approvals, filings, applications and
registrations the failure to have (or have made) would
not have a Material Adverse Effect on Seller and the
Seller Subsidiaries, taken as a whole.
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(b) (i) Each of Seller and the Seller
Subsidiaries has complied with all laws, regulations
and orders (including, without limitation, zoning
ordinances, building codes, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and
securities, tax, environmental, civil rights, and
occupational health and safety laws and regulations
including, without limitation, in the case of Seller or
any Seller Subsidiary that is a bank or savings
association, banking organization, banking corporation
or trust company, all statutes, rules, regulations and
policy statements pertaining to the conduct of a
banking, deposit-taking, lending or related business,
or to the exercise of trust powers) and governing
instruments applicable to it and to the conduct of its
business, and (ii) neither Seller nor any of the Seller
Subsidiaries is in default under, and no event has
occurred which, with the lapse of time or notice or
both, could result in the default under, the terms of
any judgment, order, writ, decree, permit, or license
of any Regulatory Authority or court, whether federal,
state, municipal or local, and whether at law or in
equity, except in the case of subparts (i) and (ii)
where such failure to comply or default would not have
a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
(c) Except as set forth on Schedule 2.15(c),
neither Seller nor any of the Seller Subsidiaries is
subject to or reasonably likely to incur a liability as
a result of its ownership, operation, or use of any
Property (as defined below) of Seller (whether directly
or, to the best knowledge of Seller, as a consequence
of such Property being acquired in foreclosure or in
lieu of foreclosure or being part of the investment
portfolio of Seller or any of the Seller Subsidiaries)
(A) that is contaminated by or contains any Toxic
Substance (as defined in Section 2.08), including,
without limitation, petroleum and petroleum products,
asbestos, PCBs, pesticides, herbicides and any other
substance or waste that is hazardous to human health or
the environment and regulated by federal, state or
local law, or (B) on which any Toxic Substance has been
stored, disposed of, placed or used at the Property or
in the construction of structures thereon; and which,
in each case, reasonably could be expected to have a
Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole. "Property" shall
include all property (real or personal, tangible or
intangible) owned or controlled by Seller or any of the
Seller Subsidiaries, including, without limitation,
property acquired under foreclosure or in lieu of
foreclosure, property in which any venture capital or
similar unit of Seller or any of the Seller
Subsidiaries has an interest and, to the best knowledge
of Seller, property held by Seller or any of the Seller
Subsidiaries in its capacity as a trustee. No claim,
action, suit or proceeding is pending or, to the best
knowledge of Seller, threatened, and no material claim
has been asserted against Seller or any of the Seller
Subsidiaries relating to Property of Seller or any of
the Seller Subsidiaries before any court or other
Regulatory Authority or arbitration tribunal relating
to Toxic Substances, pollution or the environment, and
there is no outstanding judgment, order, writ,
injunction, decree or award against or affecting Seller
or any of the Seller Subsidiaries with respect to the
same.
(d) Neither Seller nor any of the Seller
Subsidiaries has received any notification or
communication that has not been finally resolved from
any Regulatory Authority (i) asserting that the Seller
or any of the Seller Subsidiaries or any Property is
not in substantial compliance with any of the statutes,
regulations or ordinances that such Regulatory
Authority enforces, except with respect to matters
which reasonably could not be expected to have a
Material Adverse Effect on the Seller and the Seller
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Subsidiaries, taken as a whole, (ii) threatening to
revoke any license, franchise, permit or governmental
authorization that reasonably could be expected to have
a Material Adverse Effect on the Seller and the Seller
Subsidiaries, taken as a whole, including, without
limitation, such company's status as an insured
depository institution under the FDI Act, or
(iii) requiring or threatening to require Seller or any
of the Seller Subsidiaries, or indicating that Seller
or any of the Seller Subsidiaries may be required, to
enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement
restricting or limiting or purporting to direct,
restrict or limit in any manner the operations of
Seller or any of the Seller Subsidiaries, including,
without limitation, any restriction on the payment of
dividends. No such cease and desist order, agreement
or memorandum of understanding or other agreement is
currently in effect.
(e) Neither Seller nor any of the Seller
Subsidiaries is required by Section 32 of the FDI Act
to give prior notice to any federal banking agency of
the proposed addition of an individual to its board of
directors or the employment of an individual as a
senior executive officer.
2.16 Labor.
No work stoppage involving Seller or any of the Seller
Subsidiaries is pending or, to the best knowledge of Seller,
threatened. Except as set forth on Schedule 2.13, neither Seller
nor any of the Seller Subsidiaries is involved in, or, to the
best knowledge of Seller, threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding
that reasonably could be expected to have a Material Adverse
Effect on the Seller and the Seller Subsidiaries, taken as a
whole. None of the employees of Seller or the Seller
Subsidiaries are represented by any labor union or any collective
bargaining organization.
2.17 Material Interests of Certain Persons.
Except as set forth in Seller's proxy statement for its 1997 Annual
Meeting of Shareholders, no officer or director of Seller or any of
the Seller Subsidiaries, or any "associate" (as such term is defined
in Rule 14a-1 under the Exchange Act) of any such officer or director,
has any interest in any contract or property (real or personal,
tangible or intangible), used in, or pertaining to the business
of, Seller or any of the Seller Subsidiaries, which in the case of
Seller and each of the Seller Subsidiaries would be required to be
disclosed by Item 404 of Regulation S-K promulgated by the SEC.
2.18 Allowance for Loan and Lease Losses; Non-
Performing Assets; Financial Assets.
(a) All of the accounts, notes and other
receivables that are reflected in the Seller Financial
Statements as of September 30, 1997 were acquired in
the ordinary course of business and were collectible in
full in the ordinary course of business, except for
possible loan and lease losses that are adequately
provided for in the allowance for loan and lease losses
reflected in such Seller Financial Statements, and the
collection experience of Seller and the Seller
Subsidiaries since September 30, 1997 to the date
hereof, has not deviated in any material and adverse
manner from the credit and collection experience of
Seller and the Seller Subsidiaries, taken as a whole,
for the nine months ended September 30, 1997.
(b) The allowances for loan losses contained in
the Seller Financial Statements were established in
accordance with the past practices and experiences of
Seller and the Seller Subsidiaries, and the allowance
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for loan and lease losses shown on the consolidated
balance sheet of Seller and the Seller Subsidiaries as
of September 30, 1997, were adequate in all material
respects under the requirements of GAAP, or regulatory
accounting principles, as the case may be, to provide
for possible losses on loans and leases (including,
without limitation, accrued interest receivable) and
credit commitments (including, without limitation,
stand-by letters of credit) as of the date of such
balance sheet.
(c) Schedule 2.18(c) sets forth as of the date of
this Agreement all assets classified by Seller as real
estate acquired through foreclosure or repossession,
including foreclosed assets.
(d) As of November 30, 1997, the aggregate amount
of all Non-Performing Assets (as defined below) on the
books of Seller and the Seller Subsidiaries did not
exceed $8,000,000. "Non-Performing Assets" shall mean
(i) all loans (A) that are contractually past due 90
days or more in the payment of principal and/or
interest, (B) that are on nonaccrual status, (C) that
have been classified "doubtful," "loss" or the
equivalent thereof by any Regulatory Agency or
(D) where the interest rate terms have been reduced
and/or the maturity dates have been extended subsequent
to the agreement under which the loan was originally
created due to concerns regarding the borrower's
ability to pay in accordance with such initial terms,
and (ii) all assets classified by Seller as real estate
acquired through foreclosure or in lieu of foreclosure,
including in-substance foreclosures, and all other
assets acquired through foreclosure or in lieu of
foreclosure.
(e) All loans receivable (including discounts)
and accrued interest entered on the books of Seller and
the Seller Subsidiaries, to the extent unpaid on the
Closing Date, arose out of bona fide arm's-length
transactions, were made for good and valuable
consideration in the ordinary course of Seller's or the
appropriate Seller Subsidiary's respective business,
and the notes or other evidences of indebtedness with
respect to such loans or discounts are true and genuine
and are what they purport to be. The loans, discounts
and the accrued interest reflected on the books of
Seller and the Seller Subsidiaries are subject to no
defenses, set-offs or counterclaims (including, without
limitation, those afforded by usury or truth-in-lending
laws), except as may be provided by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally or by general principles of equity. All such
loans are owned by Seller or the appropriate Seller
Subsidiary free and clear of any liens, restrictions or
encumbrances.
(f) The notes and other evidences of indebtedness
evidencing the loans described in Section 2.18(e)
above, and all pledges, mortgages, deeds of trust and
other collateral documents or security instruments
relating thereto are and will be, in all material
respects, valid, true, genuine and enforceable, and
what they purport to be. Seller and each of the Seller
Subsidiaries has good and valid title to the investment
securities shown on the Seller Financial Statements and
all securities entered on the books of Seller or the
appropriate Seller Subsidiary subsequent to
September 30, 1997, except for those sold or redeemed
in the ordinary course of business. A complete and
accurate list of such investment securities as of
December 31, 1997 is attached as Schedule 2.18(f).
Such list shall be updated each month in writing until
the Closing.
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2.19 Employee Benefit Plans.
(a) Schedule 2.19(a) lists all pension,
retirement, supplemental retirement, stock option,
stock purchase, stock ownership, savings, stock
appreciation right, profit sharing, deferred
compensation, consulting, bonus, medical, disability,
workers' compensation, vacation, group insurance,
severance and other employee benefit, incentive and
welfare policies, contracts, plans and arrangements,
and all trust agreements related thereto, maintained by
or contributed to by Seller or any of the Seller
Subsidiaries in respect of any of the present or former
directors, officers, or other employees of and/or
consultants to Seller or any of the Seller Subsidiaries
(collectively, "Seller Employee Plans"). Seller has
furnished Buyers with the following documents with
respect to each Seller Employee Plan: (i) a true and
complete copy of all written documents comprising such
Seller Employee Plan (including amendments and
individual agreements relating thereto) or, if there is
no such written document, an accurate and complete
description of the Seller Employee Plan; (ii) the most
recently filed Form 5500 or Form 5500-C/R (including
all schedules thereto), if applicable; (iii) the most
recent financial statements and actuarial reports, if
any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any;
and (v) the most recent IRS determination letter, if
any.
(b) All Seller Employee Plans have been
maintained and operated in all material respects in
accordance with their terms and the material
requirements of all applicable statutes, orders, rules
and final regulations, including, without limitation,
to the extent applicable, ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"). All
contributions required to be made to Seller Employee
Plans have been made or reserved.
(c) With respect to each of the Seller Employee
Plans which is a pension plan (as defined in
Section 3(2) of ERISA) (the "Pension Plans"): (i) each
Pension Plan which is intended to be "qualified" within
the meaning of Section 401(a) of the Code has been
determined to be so qualified by the IRS and such
determination letter may still be relied upon, and each
related trust is exempt from taxation under
Section 501(a) of the Code; (ii) the present value of
all benefits vested and all benefits accrued under each
Pension Plan which is subject to Title IV of ERISA did
not, in each case, as of the last applicable annual
valuation date (as indicated on Schedule 2.19(a)),
exceed the value of the assets of the Pension Plan
allocable to such vested or accrued benefits;
(iii) there has been no "prohibited transaction," as
such term is defined in Section 4975 of the Code or
Section 406 of ERISA, which could subject any Pension
Plan or associated trust, or Seller or any of the
Seller Subsidiaries, to any material tax or penalty;
(iv) no defined benefit Pension Plan or any trust
created thereunder has been terminated, nor has there
been any "reportable events" with respect to any
Pension Plan, as that term is defined in Section 4043
of ERISA since January 1, 1991; and (v) no Pension Plan
or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is
defined in Section 302 of ERISA (whether or not
waived). No Pension Plan is a "multiemployer plan" as
that term is defined in Section 3(37) of ERISA.
(d) Except as disclosed in Schedule 2.19(d) or as
reflected on the Seller Financial Statements or the
notes thereto, neither Seller nor any of the Seller
Subsidiaries has any liability for any post-retirement
health, medical or similar benefit of any kind
whatsoever, except as required by statute or
regulation.
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(e) Neither Seller nor any of the Seller
Subsidiaries has any material liability under ERISA or
the Code as a result of its being a member of a group
described in Sections 414(b), (c), (m) or (o) of the
Code.
(f) Except as disclosed in Schedule 2.19(f),
neither the execution nor delivery of this Agreement,
nor the consummation of any of the transactions
contemplated hereby, will (i) result in any payment
(including, without limitation, severance, unemployment
compensation or golden parachute payment) becoming due
to any director or employee of Seller or any of the
Seller Subsidiaries from any of such entities,
(ii) increase any benefit otherwise payable under any
of the Seller Employee Plans or (iii) result in the
acceleration of the time of payment of any such
benefit. Seller shall use its best efforts to insure
that no amounts paid or payable by Seller, the Seller
Subsidiaries or Buyers to or with respect to any
employee or former employee of Seller or any of the
Seller Subsidiaries will fail to be deductible for
federal income tax purposes by reason of Section 280G
of the Code.
2.20 Conduct of Seller to Date.
From and after September 30, 1997 through the date of this
Agreement, except as set forth in the Seller Financial Statements
and the Seller Reports: (i) Seller and the Seller Subsidiaries
have conducted their respective businesses in the ordinary and
usual course consistent with past practices; (ii) except upon the
exercise of Seller Stock Options, neither Seller nor any of the
Seller Subsidiaries has issued, sold, granted, conferred or
awarded any of its Equity Securities, or any corporate debt
securities which would be classified under GAAP as long-term debt
on the balance sheets of Seller or the Seller Subsidiaries;
(iii) Seller has not effected any stock split or adjusted,
combined, reclassified or otherwise changed its capitalization;
(iv) Seller has not declared, set aside or paid any dividend
(other than its regular quarterly dividends) or other
distribution in respect of its capital stock, or purchased,
redeemed, retired, repurchased or exchanged, or otherwise
acquired or disposed of, directly or indirectly, any of its
Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise; (v) neither Seller nor any of the Seller
Subsidiaries has incurred any obligation or liability (absolute
or contingent), except liabilities incurred in the ordinary
course of business or in connection with the transactions
contemplated by this Agreement, or subjected to Lien any of its
assets or properties other than in the ordinary course of
business consistent with past practice; (vi) neither Seller nor
any of the Seller Subsidiaries has discharged or satisfied any
Lien or paid any obligation or liability (absolute or
contingent), other than in the ordinary course of business;
(vii) neither Seller nor any of the Seller Subsidiaries has sold,
assigned, transferred, leased, exchanged, or otherwise disposed
of any of its properties or assets other than for a fair
consideration in the ordinary course of business; (viii) except
as required by contract or law, neither Seller nor any of the
Seller Subsidiaries has (A) increased the rate of compensation
of, or paid any bonus to, any of its directors, officers, or
other employees, except in accordance with existing policy,
(B) entered into any new, or amended or supplemented any
existing, employment, management, consulting, deferred
compensation, severance, or other similar contract, (C) entered
into, terminated, or substantially modified any of the Seller
Employee Plans or (D) agreed to do any of the foregoing;
(ix) neither Seller nor any Seller Subsidiary has suffered any
material damage, destruction, or loss, whether as the result of
fire, explosion, earthquake, accident, casualty, labor trouble,
requisition, or taking of property by any Regulatory Authority,
flood, windstorm, embargo, riot, act of God or the enemy, or
other casualty or event, and whether or not covered by insurance;
(x) neither Seller nor any of the Seller Subsidiaries has
canceled or compromised any debt, except for debts charged off or
compromised in accordance with the past practice of Seller and
the Seller Subsidiaries; and (xi) neither Seller nor any of the
Seller Subsidiaries has entered into any material transaction,
contract or commitment outside the ordinary course of its
business, except in connection with the transactions contemplated
by this Agreement.
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2.21 Absence of Undisclosed Liabilities.
(a) As of September 30, 1997, neither Seller nor
any of the Seller Subsidiaries has any debts,
liabilities or obligations equal to or exceeding
$50,000, individually or $100,000 in the aggregate,
whether accrued, absolute, contingent or otherwise and
whether due or to become due, which are required to be
reflected in the Seller Financial Statements or the
notes thereto in accordance with GAAP except:
(i) debts, liabilities or obligations
reflected on the Seller Financial Statements and
the notes thereto;
(ii) operating leases reflected on
Schedule 2.11(b); and
(iii) debts, liabilities or
obligations incurred since September 30, 1997 in
the ordinary and usual course of their respective
businesses, none of which are for breach of
contract, breach of warranty, torts, infringements
or lawsuits and none of which have a Material
Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
(b) Neither Seller nor any of the Seller
Subsidiaries was as of September 30, 1997, or since
such date to the date hereof, a party to any contract
or agreement, excluding deposits, loan agreements, and
commitments, notes, security agreements, repurchase and
reverse repurchase agreements, bankers' acceptances,
outstanding letters of credit and commitments to issue
letters of credit, participation agreements and other
documents relating to transactions entered into by
Seller or any of the Seller Subsidiaries in the
ordinary course of business, that had, has or may be
reasonably expected to have a Material Adverse Effect
on Seller and the Seller Subsidiaries, taken as a
whole.
2.22 Proxy Statement, Etc.
None of the information regarding Seller or any of the Seller
Subsidiaries to be supplied by Seller for inclusion or included
in (i) the Registration Statement on Form S-4 to be filed with
the SEC by Mercantile for the purpose of registering the shares
of Mercantile Common Stock to be exchanged for shares of Seller
Common Stock pursuant to the provisions of this Agreement (the
"Registration Statement"), (ii) the Proxy Statement to be mailed
to Seller's shareholders in connection with the meeting to be
called to consider this Agreement and the Merger (the "Proxy
Statement") or (iii) any other documents to be filed with any
Regulatory Authority in connection with the transactions
contemplated hereby will, at the respective times such documents
are filed with any Regulatory Authority and, in the case of the
Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements
therein not misleading or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the
meeting of Seller's shareholders referred to in Section 5.03, be
false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for such meeting. All documents which Seller or any of the
Seller Subsidiaries is responsible for filing with any Regulatory
Authority in connection with the Merger will comply as to form in
all material respects with the provisions of applicable law.
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2.23 Registration Obligations.
Neither Seller nor any of the Seller Subsidiaries is under any obligation,
contingent or otherwise, which will survive the Effective Time by
reason of any agreement to register any transaction involving any of
its securities under the Securities Act.
2.24 Tax, Regulatory and Accounting Matters.
Neither Seller nor any of the Seller Subsidiaries has taken or agreed to
take any action or has any knowledge of any fact or circumstance that
would (i) prevent the transactions contemplated hereby from qualifying as
a reorganization within the meaning of Section 368 of the Code, (ii)
materially impede or delay receipt of any approval referred to in
Section 6.01(b) or the consummation of the transactions contemplated
by this Agreement or (iii) prevent or impede the transactions contemplated
hereby from qualifying for pooling-of-interests accounting treatment.
2.25 Brokers and Finders.
Except for Morgan Stanley & Co., Incorporated, neither Seller nor any of
the Seller Subsidiaries nor any of their respective officers, directors
or employees has employed any broker or finder or incurred any liability
for any financial advisory fees, brokerage fees, commissions or finder's
fees, and no broker or finder has acted directly or indirectly for Seller
or any of the Seller Subsidiaries in connection with this Agreement or
the transactions contemplated hereby.
2.26 Interest Rate Risk Management Instruments
(a) Set forth on Schedule 2.26(a) is a list as of
the date hereof of all interest rate swaps, caps,
floors and option agreements and other interest rate
risk management arrangements to which Seller or any of
the Seller Subsidiaries is a party or by which any of
their properties or assets may be bound.
(b) All such interest rate swaps, caps, floors
and option agreements and other interest rate risk
management arrangements to which Seller or any of the
Seller Subsidiaries is a party or by which any of their
properties or assets may be bound were entered into in
the ordinary course of business and, to the best
knowledge of Seller, in accordance with prudent banking
practice and applicable rules, regulations and policies
of Regulatory Authorities and with counterparties
believed to be financially responsible at the time and
are legal, valid and binding obligations of Seller or a
Seller Subsidiary and are in full force and effect.
Seller and each of the Seller Subsidiaries has duly
performed in all material respects all of its
obligations thereunder to the extent that such
obligations to perform have accrued, and to the best
knowledge of Seller, there are no material breaches,
violations or defaults or allegations or assertions of
such by any party thereunder.
2.27 Accuracy of Information.
The statements contained in this Agreement, the Schedules and any other
written document executed and delivered by or on behalf of Seller pursuant
to the terms of this Agreement are true and correct as of the date hereof
or as of the date delivered in all material respects, and such statements
and documents do not omit any material fact necessary to make the
statements contained therein not misleading.
2.28 Year 2000 Compliant.
To the best knowledge of Seller, all computer software and
hardware utilized by Seller or any Seller Subsidiary is, or
Seller has taken all required steps to be, Year 2000 compliant,
which, for purposes of this Agreement, shall mean that the data
outside the range 1990-1999 will be correctly processed in any
level of computer hardware or software including, but not limited
to, microcode, firmware, applications programs, files and data
bases. All computer software is, or Seller has taken steps
(including obtaining warranties from the vendors thereof in
respect of compliance) to ensure that all computer software will
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be, designed to be used prior to, during and after the calendar
year 2000 A.D., and such software will operate during each such
time period without error relating to date data, specifically
including any error relating to, or the product of, date data
that represents or references different centuries or more than
one century.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
As an inducement to Seller to enter into and perform
its obligations under this Agreement, and notwithstanding any
examinations, inspections, audits or other investigations made by
Seller, the Buyers hereby represent and warrant to Seller as
follows:
3.01 Organization and Authority.
Mercantile and Merger Sub are each corporations duly organized,
validly existing and in good standing under the laws of the State
of Missouri, are each qualified to do business and are each in good
standing in all jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so
qualified and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being conducted,
except where the failure to be so qualified would not have a Material
Adverse Effect on Mercantile and its Subsidiaries, taken as a whole.
Each of Mercantile and Merger Sub is registered as a bank holding company
with the Federal Reserve Board under the BHCA.
3.02 Capitalization of Mercantile.
The authorized capital stock of Mercantile consists of (i)
200,000,000 shares of Mercantile Common Stock, of which, as of
December 31, 1997, 130,669,990 shares were issued and
130,508,090 were outstanding and (ii) 5,000,000 shares of
preferred stock, no par value ("Mercantile Preferred Stock"),
issuable in series, of which as of the date hereof, no shares
were issued and outstanding. Mercantile has designated 2,000,000
shares of Mercantile Preferred Stock as "Series A Junior
Participating Preferred Stock" and has reserved such shares under
a Rights Agreement dated May 23, 1988 between Mercantile and
Mercantile Bank National Association, as Rights Agent (the
"Rights Agreement" and, the rights to be issued pursuant thereto,
the "Rights"). As of December 31, 1997, Mercantile had reserved:
(i) 14,840,856 shares of Mercantile Common Stock for issuance
under Mercantile's Shareholder Investment Plan (the "Investment
Plan") and various employee and/or director stock option,
incentive and/or benefit plans ("Mercantile Employee/Director
Stock Grants"); (ii) 2,550,000 shares of Mercantile Common Stock
for issuance upon the acquisition of Horizon Bancorp, Inc.
("Horizon") pursuant to the Agreement and Plan of Merger, dated
as of July 31, 1997, by and among Mercantile, Merger Sub and
Horizon; and (iii) 951,380 shares of Mercantile Common Stock for
issuance upon the acquisition of Homecorp, Inc. ("Homecorp")
pursuant to the Agreement and Plan of Merger, dated as of
October 29, 1997, by and among Mercantile, Merger Sub and
Homecorp. From December 31, 1997 through the date of this
Agreement, no shares of Mercantile Common Stock have been issued,
excluding any such shares which may have been issued in
connection with the Investment Plan or Mercantile
Employee/Director Stock Grants.
Mercantile continually evaluates possible acquisitions
and may prior to the Effective Time enter into one or more
agreements providing for, and may consummate, the acquisition by
it of another bank, association, bank holding company, savings
and loan holding company or other company (or the assets thereof)
for consideration that may include Equity Securities. In
addition, prior to the Effective Time, Mercantile may, depending
on market conditions and other factors, otherwise determine to
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issue equity, equity-linked or other securities for financing
purposes or repurchase its outstanding Equity Securities.
Notwithstanding the foregoing, neither Mercantile nor any
Mercantile Subsidiary has taken or agreed to take any action or
has any knowledge of any fact or circumstance and neither
Mercantile nor Merger Sub will take any action that would
(i) prevent the transactions contemplated hereby from qualifying
as a reorganization within the meaning of Section 368 of the
Code, (ii) materially impede or delay receipt of any approval
referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement or (iii) prevent or
impede the Merger from qualifying for pooling-of-interests
accounting treatment. Except as set forth above, there are no
other Equity Securities of Mercantile outstanding. All of the
issued and outstanding shares of Mercantile Common Stock are
validly issued, fully paid, and nonassessable, and have not been
issued in violation of any preemptive right of any shareholder of
Mercantile. At the Effective Time, the Mercantile Common Stock
to be issued in the Merger will be duly authorized, validly
issued, fully paid and nonassessable, will not be issued in
violation of any preemptive right of any shareholder of
Mercantile.
3.03 Authorization.
(a) Mercantile and Merger Sub each have the
corporate power and authority to enter into this
Agreement and to carry out their respective obligations
hereunder. The execution, delivery and performance of
this Agreement by Mercantile and Merger Sub and the
consummation by Mercantile and Merger Sub of the
transactions contemplated hereby have been duly
authorized by all requisite corporate action of
Mercantile and Merger Sub. Subject to the receipt of
such approvals of the Regulatory Authorities as may be
required by statute or regulation, this Agreement is a
valid and binding obligation of Mercantile and Merger
Sub enforceable against each in accordance with its
terms.
(b) Neither the execution, delivery and
performance by Mercantile and Merger Sub of this
Agreement, nor the consummation by Mercantile and
Merger Sub of the transactions contemplated hereby, nor
compliance by Mercantile and Merger Sub with any of the
provisions hereof, will (i) violate, conflict with or
result in a breach of any provisions of, or constitute
a default (or an event which, with notice or lapse of
time or both, would constitute a default) or result in
the termination of, or accelerate the performance
required by, or result in a right of termination or
acceleration of, or result in the creation of, any Lien
upon any of the properties or assets of Mercantile or
Merger Sub under any of the terms, conditions or
provisions of (x) their respective Articles of
Incorporation or By-Laws, or (y) any note, bond,
mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which
Mercantile or Merger Sub is a party or by which they
may be bound, or to which Mercantile or Merger Sub or
any of their respective properties or assets may be
subject, or (ii) subject to compliance with the
statutes and regulations referred to in subsection (c)
of this Section 3.03, violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or
regulation applicable to Mercantile or Merger Sub or
any of their respective properties or assets; other
than violations, conflicts, breaches, defaults,
terminations, accelerations or Liens which would not
have a Material Adverse Effect on Mercantile and its
Subsidiaries, taken as a whole.
(c) Other than in connection with or in
compliance with the provisions of the Missouri Statute,
the KBCA, the Securities Act, the Exchange Act, the
securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals
or exemptions required under the BHCA, the FDI Act or
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any required approvals of any other Regulatory
Authority, no notice to, filing with, exemption or
review by, or authorization, consent or approval of,
any public body or authority is necessary for the
consummation by Mercantile and Merger Sub of the
transactions contemplated by this Agreement.
3.04 Mercantile Financial Statements.
The supplemental consolidated balance sheets of Mercantile and its
Subsidiaries as of December 31, 1996, 1995 and 1994 and related
supplemental consolidated statements of income, changes in
shareholders'equity and cash flows for each of the three years
in the period ended December 31, 1996, together with the notes
thereto, audited by KPMG Peat Marwick LLP, as filed with the
EC on Form 8-K dated May 13, 1997 and the consolidated balance
sheets and related statements of income, changes in shareholders'
equity and cash flows as of, and for each of the nine month periods
ended, September 30, 1997 and 1996, as filed with the SEC on Form
10-Q for the quarter ended September 30,1997 (collectively, the
"Mercantile Financial Statements"), have been prepared in accordance
with GAAP, present fairly the consolidated financial position
of Mercantile and its Subsidiaries at the dates thereof and the
consolidated results of operations, changes in shareholders' equity
and cash flows of Mercantile and its Subsidiaries for the periods
stated therein and are derived from the books and records of Mercantile
and its Subsidiaries, which are complete and accurate in all material
respects and have been maintained in accordance with good
business practices. Neither Mercantile nor any of its
Subsidiaries has any material contingent liabilities that are not
described in the Mercantile Financial Statements.
3.05 Mercantile Reports.
Since January 1, 1995, each of Mercantile and its Subsidiaries has
filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to
file with any Regulatory Authority. All such reports and
statements filed with any such Regulatory Authority are
collectively referred to herein as the "Mercantile Reports." As
of its respective date, each Mercantile Report complied in all
material respects with all the rules and regulations promulgated
by the applicable Regulatory Authority and did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
3.06 Material Adverse Effect.
Since September 30, 1997, there has been no Material Adverse
Effect on Mercantile and its Subsidiaries, taken as a whole.
3.07 Registration Statement, Etc.
None of the information regarding Mercantile or any of its
Subsidiaries to be supplied by Buyers for inclusion or included
in (i) the Registration Statement, (ii) the Proxy Statement, or
(iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby
will, at the respective times such documents are filed with any
Regulatory Authority and, in the case of the Registration
Statement, when it becomes effective and, with respect to the
Proxy Statement, when mailed, be false or misleading with respect
to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the meeting of shareholders
referred to in Section 5.03, be false or misleading with respect
to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for such meeting.
All documents which Mercantile or Merger Sub are responsible for
filing with any Regulatory Authority in connection with the
Merger will comply as to form in all material respects with the
provisions of applicable law.
3.08 Brokers and Finders.
Neither Mercantile, Merger Sub nor any of their respective
officers, directors or employees has employed
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any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and
no broker or finder has acted directly or indirectly for Mercantile
or Merger Sub in connection with this Agreement or the transactions
contemplated hereby.
3.09 Accuracy of Information.
The statements contained in this Agreement and any other
written document executed and delivered by or on behalf of Buyers
pursuant to the terms of this Agreement are true and correct as
of the date hereof in all material respects, and such statements
and documents do not omit any material fact necessary to make the
statements contained therein not misleading.
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time.
During the period from the date of this Agreement to the
Effective Time, Seller and each of the Seller Subsidiaries shall
conduct their businesses according to the ordinary and usual
course consistent with past and current practices and shall use
their best efforts to maintain and preserve their business
organization, employees and advantageous business relationships
and retain the services of their officers and key employees.
4.02 Forbearances of Seller.
Except as set forth in Schedule 4.02, and except to the extent
required by law, regulation or Regulatory Authority, or with
the prior written consent of Buyers (unless otherwise
specifically noted in this Section 4.02), during the period
from the date of this Agreement to the Effective Time, Seller shall
not and shall not permit any of the Seller Subsidiaries to:
(a) declare, set aside or pay any dividends or
other distributions, directly or indirectly, in respect
of its capital stock (other than dividends from any of
the Seller Subsidiaries to Seller or to another of the
Seller Subsidiaries), except that Seller may declare
and pay regular quarterly cash dividends of not more
than $0.14 per share on the Seller Common Stock;
provided, however, that Seller shall not declare or pay
a quarterly dividend for any quarter in which Seller
shareholders will be entitled to receive a regular
quarterly dividend on the shares of Mercantile Common
Stock to be issued in the Merger;
(b) enter into or amend any employment, severance
or similar agreement or arrangement with any director,
officer or employee, or materially modify any of the
Seller Employee Plans or grant any salary or wage
increase or materially increase any employee benefit
(including incentive or bonus payments), except
(i) normal individual increases in compensation to
employees consistent with past practice, (ii) as
required by law or contract, (iii) such increases of
which Seller notifies Buyers in writing and which
Buyers do not disapprove within 10 days of the receipt
of such notice and (iv) pursuant to the provisions of
Section 5.10 hereof;
(c) authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter
into an agreement in principle with respect to, any
merger, consolidation or business combination (other
than the Merger), any acquisition of a material amount
of assets or securities, any disposition of a material
amount of assets or securities or any release or
relinquishment of any material contract rights;
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(d) propose or adopt any amendments to its
Articles of Incorporation or other charter document or
By-Laws;
(e) issue, sell, grant, confer or award any of
its Equity Securities, except that the Seller may issue
shares of Seller Common Stock upon exercise of the
Seller Stock Options outstanding on the date of this
Agreement and pursuant to the option granted to
Mercantile in connection with the transaction
contemplated by this Agreement, or effect any stock
split or adjust, combine, reclassify or otherwise
change its capitalization as it existed on the date of
this Agreement;
(f) purchase, redeem, retire, repurchase or
exchange, or otherwise acquire or dispose of, directly
or indirectly, any of its Equity Securities, whether
pursuant to the terms of such Equity Securities or
otherwise;
(g) without first consulting with and obtaining
the written consent of Mercantile, cause or permit
Citizens to enter into, renew or increase any loan or
credit commitment (including stand-by letters of
credit) to, or invest or agree to invest in any person
or entity or modify any of the material provisions or
renew or otherwise extend the maturity date of any
existing loan or credit commitment (collectively, "Lend
to") in an amount equal to or in excess of $1,000,000
or in any amount which, when aggregated with any and
all loans or credit commitments of Seller and the
Seller Subsidiaries to such person or entity, would be
equal to or in excess of $1,000,000; provided, however,
that Seller or any of the Seller Subsidiaries may make
any such loan or credit commitment in the event
(A) Seller or any Seller Subsidiary has delivered to
Buyers or their designated representative a notice of
its intention to make such loan and such information as
Buyers or their designated representative may
reasonably require in respect thereof and (B) Buyers or
their designated representative shall not have
reasonably objected to such loan by giving written or
facsimile notice of such objection within two
(2) business days following the delivery to Buyers or
their designated representative of the notice of
intention and information as aforesaid; provided
further, however, that nothing in this paragraph shall
prohibit Seller or any Seller Subsidiary from honoring
any contractual obligation in existence on the date of
this Agreement. Notwithstanding this Section 4.02(g),
Seller shall be authorized without first consulting
with Buyers or obtaining Buyers' prior written consent,
to cause or permit Citizens to increase the aggregate
amount of any credit facilities theretofore established
in favor of any person or entity (each a "Pre-Existing
Facility"), provided that the aggregate amount of any
and all such increases shall not be in excess of the
lesser of 10% of such Pre-Existing Facilities or
$25,000;
(h) directly or indirectly (including through its
officers, directors, employees or other
representatives) (i) initiate, solicit or encourage any
discussions, inquiries or proposals with any third
party (other than Buyers) relating to the disposition
of any significant portion of the business or assets of
Seller or any of the Seller Subsidiaries or the
acquisition of Equity Securities of Seller or any of
the Seller Subsidiaries or the merger of Seller or any
of the Seller Subsidiaries with any person (other than
Buyers) or any similar transaction (each such
transaction being referred to herein as an "Acquisition
Transaction"), (ii) provide any such person with
information or assistance or negotiate with any such
person with respect to an Acquisition Transaction, and
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Seller shall promptly notify Buyers orally of all the
relevant details relating to all inquiries, indications
of interest and proposals which it may receive with
respect to any Acquisition Transaction;
(i) take any action that would (i) prevent or
impede the transactions contemplated hereby from
qualifying as a reorganization within the meaning of
Section 368 of the Code, (ii) materially impede or
delay the consummation of the transactions contemplated
by this Agreement or the ability of Buyers or Seller to
obtain any approval of any Regulatory Authority
required for the transactions contemplated by this
Agreement or to perform its covenants and agreements
under this Agreement, or (iii) prevent or impede the
Merger from qualifying for pooling-of-interests
accounting treatment;
(j) other than in the ordinary course of business
consistent with past practice, incur any indebtedness
for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible or
liable for the obligations of any other individual,
corporation or other entity;
(k) materially restructure or change its
investment securities portfolio, through purchases,
sales or otherwise, or the manner in which the
portfolio is classified or reported, or execute
individual investment transactions for its own account
of greater than $2,000,000 for U.S. Treasury or Federal
Agency Securities and $250,000 for all other investment
instruments;
(l) agree in writing or otherwise to take any of
the foregoing actions or engage in any activity, enter
into any transaction or intentionally take or omit to
take any other act which would make any of the
representations and warranties in Article II of this
Agreement untrue or incorrect in any material respect
if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other
act; or
(m) enter into, increase or renew any loan or
credit commitment (including standby letters of credit)
to any executive officer or director of Seller or any
of the Seller Subsidiaries, any holder of 10% or more
of the outstanding shares of Seller Common Stock, or
any entity controlled, directly or indirectly, by any
of the foregoing or engage in any transaction with any
of the foregoing which is of the type or nature sought
to be regulated in 12 U.S.C. 371c and 12 U.S.C.
371c-1, without first obtaining the prior written
consent of Buyers, which consent shall not be
unreasonably withheld. For purposes of this subsection
(m), "control" shall have the meaning associated with
that term under 12 U.S.C. 371c.
4.03 Forbearances of the Buyers.
During the period from the date of this Agreement to the
Closing Date, the Buyers shall not, without the prior consent of
Seller, agree in writing or otherwise to engage in any activity,
enter into any transaction or take or omit to take any other
action:
(a) that would (i) prevent or impede the
transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the
Code, (ii) materially impede or delay the consummation
of the transactions contemplated by this Agreement or
the ability of Mercantile or Seller to obtain any
necessary approvals of any Regulatory Authority
required for the transactions contemplated by this
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Agreement or to perform its covenants and agreements
under this Agreement, or (iii) prevent or impede the
Merger from qualifying for pooling-of-interests
accounting treatment; or
(b) which would make any of the representations
and warranties of Article III of this Agreement untrue
or incorrect in any material respect if made anew after
engaging in such activity, entering into such
transaction, or taking or omitting such other action.
ARTICLE V
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence.
Buyers and Seller shall each afford to the other, and to the
other's accountants, counsel and other representatives, full
access during normal business hours, during the period prior to
the Effective Time, to all their respective properties, books,
contracts, commitments and records and, during such period, each
shall furnish promptly to the other (i) a copy of each report,
schedule and other document filed or received by it during such
period pursuant to the requirements of federal and state
securities laws and (ii) all other information concerning its
business, properties and personnel as the other may reasonably
request. Each party shall, and shall cause its advisors and
representatives to, (A) hold confidential all information
obtained in connection with any transaction contemplated hereby
with respect to the other party and its Subsidiaries which is not
otherwise public knowledge, (B) in the event of a termination of
this Agreement, return all documents (including copies thereof)
obtained hereunder from the other party or any of its
Subsidiaries to such other party or its Subsidiaries and (C) use
its best efforts to cause all information obtained pursuant to
this Agreement or in connection with the negotiation of this
Agreement to be treated as confidential and not use, or knowingly
permit others to use, any such information unless such
information becomes generally available to the public.
5.02 Registration Statement; Regulatory Matters.
(a) Mercantile shall prepare and, subject to the
review and consent of Seller with respect to matters
relating to Seller, file with the SEC as soon as is
reasonably practicable the Registration Statement (or
the equivalent in the form of preliminary proxy
materials) with respect to the shares of Mercantile
Common Stock to be issued in the Merger and the
exercise of the Seller Stock Options after the
Effective Time. Mercantile shall promptly prepare and,
subject to the review and consent of Seller with
respect to matters relating to Seller, use its best
efforts to file as soon as is reasonably practicable an
application for approval of the Merger with the Federal
Reserve Board, and such additional regulatory
authorities as may require an application, and shall
use its best efforts to cause the Registration
Statement to become effective. Mercantile shall also
take any action required to be taken under any
applicable state blue sky or securities laws in
connection with the issuance of such shares and the
exercise of such options, and Seller and the Seller
Subsidiaries shall furnish Mercantile all information
concerning Seller and the Seller Subsidiaries and the
shareholders thereof as Mercantile may reasonably
request in connection with any such action.
(b) Seller and Buyers shall cooperate and use
their respective best efforts to prepare all
documentation, to effect all filings and to obtain all
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permits, consents, approvals and authorizations of all
third parties and Regulatory Authorities necessary to
consummate the transactions contemplated by this
Agreement and, as and if directed by Mercantile, to
consummate such other transactions by and among
Mercantile's Subsidiaries and the Seller Subsidiaries
concurrently with or following the Effective Time,
provided, however, that such actions do not: (i)
prevent or impede the transactions contemplated hereby
from qualifying as a reorganization within the meaning
of Section 368 of the Code; (ii) materially impede or
delay the receipt of any approval referred to in
Section 6.01(b); (iii) prevent or impede the
transactions contemplated hereby from qualifying for
pooling-of-interests accounting treatment unless Buyers
first waive Seller's covenants in Sections 5.02(b) and
5.16 hereof and the condition to Buyers' obligation to
consummate the Merger set forth in Section 6.03(f)
hereof; or (iv) materially impede or delay the
consummation of the transactions contemplated by this
Agreement.
5.03 Shareholder Approval.
Seller shall call a special meeting of its shareholders to be
held as soon as is reasonably possible for the purpose of voting
upon this Agreement and the Merger and related matters. In
connection with such meeting, Mercantile shall prepare, subject
to the review and consent of Seller, the Proxy Statement (which
shall be part of the Registration Statement to be filed with the
SEC by Mercantile) and mail the same to the shareholders of
Seller. The Board of Directors of Seller shall submit for
approval of Seller's shareholders the matters to be voted upon at
such meeting. The Board of Directors of Seller hereby does and,
subject to the fiduciary duties of the Seller's Board of
Directors, as advised by outside legal counsel, will recommend
this Agreement and the transactions contemplated hereby to the
shareholders of Seller and use its reasonable best efforts to
obtain any vote of Seller's shareholders necessary for the
approval of this Agreement. Buyers and Seller agree that the
special meeting of Seller's shareholders shall be scheduled as of
a date which is mutually acceptable to Buyers and Seller and,
subject to Section 1.03 hereof, as close as practicable to the
Closing Date.
5.04 Current Information.
During the period from the date of this Agreement to the
Closing Date, (i) each party will promptly furnish the other with
copies of all monthly and other interim financial statements as
the same become available and shall cause one or more of its
designated representatives to confer on a regular and frequent
basis with representatives of the other party and (ii) Mercantile
shall promptly furnish to the Seller copies of all filings by
Mercantile with each of the Federal Reserve Board and the SEC.
Each party shall promptly notify the other party of the following
events immediately upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken by
the affected party with respect thereto: (a) the occurrence of
any event which could cause any representation or warranty of
such party or any schedule, statement, report, notice,
certificate or other writing furnished by such party to be untrue
or misleading in any material respect; (b) any Material Adverse
Effect; (c) the issuance or commencement of any governmental
and/or regulatory agency complaint, investigation or hearing or
any communications indicating that the same may be contemplated
and, as to any such matter which shall now or hereafter be in
effect, any communications pertaining thereto; or (d) the
institution or the threat of any material litigation involving
such party.
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5.05 Conforming Entries.
(a) Notwithstanding that Seller believes that
Seller and Seller Subsidiaries have established all
reserves and taken all provisions for possible loan
losses required by GAAP and applicable laws, rules and
regulations, Seller recognizes that Buyers may have
adopted different loan, accrual and reserve policies
(including loan classifications and levels of reserves
for possible loan losses). From and after the date of
this Agreement, Seller and Buyers shall consult and
cooperate with each other with respect to conforming
the loan, accrual and reserve policies of Seller and
the Seller Subsidiaries to those policies of Buyers, as
specified in each case in writing to Seller, based upon
such consultation and as hereinafter provided.
(b) In addition, from and after the date of this
Agreement, Seller and Buyers shall consult and
cooperate with each other with respect to determining
appropriate Seller accruals, reserves and charges to
establish and take in respect of excess equipment write-
off or write-down of various assets and other
appropriate charges and accounting adjustments taking
into account the parties' business plans following the
Merger, as specified in each case in writing to Seller,
based upon such consultation and as hereinafter
provided.
(c) Seller and Buyers shall consult and cooperate
with each other with respect to determining the amount
and the timing for recognizing for financial accounting
purposes Seller's expenses of the Merger and the
restructuring charges, if any, related to or to be
incurred in connection with the Merger.
(d) With respect to clauses (a) through (c) of
this Section 5.05, it is the objective of Mercantile
and Seller that such reserves, accruals, charges and
divestitures, if any, to be taken shall be consistent
with GAAP.
5.06 Environmental Reports.
Buyers may perform, as soon as reasonably practicable, but not
later than ninety (90) days after the date hereof, a phase one
environmental investigation and/or asbestos survey by
Environmental Operations, Inc. or any other firm designated by
Buyers, or any of them, on all real property owned, leased or
operated by Seller or any of the Seller Subsidiaries as of the
date hereof (but excluding space in retail and similar
establishments leased by Seller for automatic teller machines or
leased bank branch facilities where the space leased comprises
less than 20% of the total space leased to all tenants of such
property) and within fifteen (15) days after being notified by
Sellers of the acquisition or lease of any real property acquired
or leased by Seller or any of the Seller Subsidiaries after the
date hereof (but excluding space in retail and similar
establishments leased by Seller for automatic teller machines or
leased bank facilities where the space leased comprises less than
20% of the total space leased to all tenants of such property).
If the results of the phase one investigation indicate, in
Buyers' reasonable opinion, that additional investigation is
warranted, Buyers may perform, at Buyers' expense, a phase two
subsurface investigation or investigations by Environmental
Operations, Inc. on properties deemed to warrant such additional
study. Buyers shall perform any such phase two investigation as
soon as reasonably practicable after receipt of the phase one
report(s) for such properties and, in any event, shall notify
Seller and Environmental Operations, Inc. within fifteen (15)
days after receipt of the phase one report that Environmental
Operations, Inc. should promptly commence any such phase two
investigation. Should the cost of taking all remedial or other
corrective actions and measures (i) required by applicable law or
(ii) recommended by Environmental Operations, Inc. in such phase
one or two report or reports, in the aggregate, exceed the sum of
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$1,000,000, as reasonably estimated by Environmental Operations,
Inc., or if the cost of such actions or measures cannot be so
reasonably estimated by Environmental Operations, Inc. to be such
amounts or less with any reasonable degree of certainty, Buyers
shall have the right pursuant to Section 7.01(e) hereof, for a
period of fifteen (15) business days following receipt from
Environmental Operations, Inc. of such estimate or indication
that the cost of such actions and measures cannot be so
reasonably estimated, to terminate this Agreement.
5.07 Agreements of Affiliates.
Set forth as Schedule 5.07 is a list (which includes all
individual and beneficial ownership and also identifies how all
such beneficially owned shares are registered on the stock record
book of Seller) of all persons whom Seller believes to be
"affiliates" of Seller for purposes of Rule 145 under the
Securities Act and for pooling-of-interests accounting treatment.
Seller shall use its best efforts to cause each person who is
identified as an "affiliate" to deliver to Mercantile, as of the
date hereof, or as soon as practicable hereafter, a written
agreement in substantially the form set forth as Exhibit A to
this Agreement providing that each such person will agree not to
sell, pledge, transfer or otherwise dispose of the shares of
Mercantile Common Stock to be received by such person in the
Merger during the period designated in such letter and thereafter
in compliance with the applicable provisions of the Securities
Act. Prior to the Closing Date, and via letter, Seller shall
amend and supplement Schedule 5.07 and use its best efforts to
cause each additional person who is identified as an "affiliate"
to execute a written agreement as provided in this Section 5.07.
5.08 Expenses.
Each party hereto shall bear its own expenses incident to
preparing, entering into and carrying out this Agreement and to
consummating the Merger; provided, however, that any and all fees
(excluding reasonable out-of-pocket expenses) paid by Seller to
its legal counsel, Wyatt, Tarrant & Combs, related to the
preparation of this Agreement and all other agreements and
documentation in connection with the consummation of the
transactions contemplated herein, shall not exceed $100,000;
provided further, however, that Buyers shall pay all printing
expenses and filing fees incurred in connection with this
Agreement, the Registration Statement and the Proxy Statement.
5.09 Miscellaneous Agreements and Consents.
(a) Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its
respective best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the
transactions contemplated by this Agreement as
expeditiously as possible, including, without
limitation, using its respective best efforts to lift
or rescind any injunction or restraining order or other
order adversely affecting the ability of the parties to
consummate the transactions contemplated hereby. Each
party shall, and shall cause each of its respective
Subsidiaries to, use its best efforts to obtain
consents of all third parties and Regulatory
Authorities necessary or, in the opinion of Buyers,
desirable for the consummation of the transactions
contemplated by this Agreement.
(b) Seller, prior to the Effective Time, shall
(i) consult and cooperate with Buyers regarding the
implementation of those policies and procedures
established by Buyers for its governance and that of
its Subsidiaries and not otherwise referenced in
Section 5.05 hereof, including, without limitation,
policies and procedures pertaining to the accounting,
asset/liability management, audit, credit, human
resources, treasury and legal functions, and (ii) at
the reasonable request of Buyers, conform Seller's
existing policies and procedures in respect of such
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matters to Buyers' policies and procedures or, in the
absence of any existing Seller policy or procedure
regarding any such function, introduce Buyers' policies
or procedures in respect thereof, unless to do so would
cause Seller or any of the Seller Subsidiaries to be in
violation of any law, rule or regulation or requirement
of any Regulatory Authority having jurisdiction over
Seller and/or the Seller Subsidiary affected thereby.
5.10 Employee Agreements and Benefits.
(a) Following the Effective Time, Buyers shall
cause the Surviving Corporation to honor in accordance
with their terms all employment, severance and other
compensation contracts set forth on Schedule 2.11(b)
between Seller, any of the Seller Subsidiaries, and any
current or former director, officer, employee or agent
thereof, and all provisions for vested benefits or
other vested amounts earned or accrued through the
Effective Time under the Seller Employee Plans.
(b) Subject to Section 5.15, the provisions of
the Seller Stock Plans and any other plan, program or
arrangement providing for the issuance or grant of any
other interest in respect of the Equity Securities of
Seller or any of the Seller Subsidiaries shall be
deleted and terminated as of the Effective Time.
(c) Except as set forth in Section 5.10(b)
hereof, the Seller Employee Plans shall not be
terminated by reason of the Merger but shall continue
thereafter as plans of the Surviving Corporation until
such time as the employees of Seller and the Seller
Subsidiaries are integrated into Mercantile's employee
benefit plans that are available to other employees of
Mercantile and its Subsidiaries, subject to the terms
and conditions specified in such plans and to such
changes therein as may be necessary to reflect the
consummation of the Merger. Mercantile shall take such
steps as are necessary or required to integrate the
employees of Seller and the Seller Subsidiaries into
Mercantile's employee benefit plans available to other
employees of Mercantile and its Subsidiaries as soon as
practicable after the Effective Time, with (i) full
credit for prior service with Seller or any of the
Seller Subsidiaries for purposes of vesting and
eligibility for participation and benefit allocation
(but not benefit accruals under any defined benefit
plan), and co-payments and deductibles, (ii) waiver of
all waiting periods, evidence of insurability and pre-
existing condition exclusions or penalties, and (iii)
full credit for claims arising prior to the Effective
Time for purposes of deductibles, out-of-pocket
maximums, benefit maximums and all other similar
limitations for the applicable plan year in which the
Merger is consummated.
5.11 Press Releases.
Seller and the Buyers shall consult with each other as to the
form and substance of any proposed press release or other
proposed public disclosure of matters related to this Agreement
or any of the transactions contemplated hereby.
5.12 State Takeover Statutes.
Seller will take all steps necessary to exempt the
transactions contemplated by this Agreement and any agreement
contemplated hereby from, and if necessary challenge the validity
of, any applicable state takeover law.
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5.13 Directors' and Officers' Indemnification.
Mercantile agrees that the Merger shall not affect or diminish
any of the duties and obligations of indemnification of Seller or
any of the Seller Subsidiaries existing as of the Effective Time
in favor of employees, agents, directors or officers of Seller or
any of the Seller Subsidiaries arising by virtue of its Articles
of Incorporation, Charter or By-Laws in the form in effect at the
date of this Agreement or arising by operation of law or arising
by virtue of any contract, resolution or other agreement or
document existing at the date of this Agreement, and Mercantile
shall continue such duties and obligations in full force and
effect for so long as they would (but for the Merger) otherwise
survive and continue in full force and effect. To the extent
that Seller's existing directors' and officers' liability
insurance policy would provide coverage for any action or
omission occurring prior to the Effective Time, Seller agrees to
give proper notice to the insurance carrier and to Mercantile of
any potential claim thereunder so as to preserve Seller's rights
to such insurance coverage. Mercantile represents that the
directors' and officers' liability insurance policy maintained by
it provides for coverage of "prior acts" for directors and
officers of entities acquired by Mercantile including Seller and
the Seller Subsidiaries on and after the Effective Time. After
the Effective Time, Mercantile will provide, or cause to be
provided, such coverage to the officers and directors of Seller
to the same extent as provided to officer and directors of
Mercantile's other Subsidiaries.
5.14 Tax Opinion Certificates.
Seller shall cause such of its executive officers, directors
and/or holders of one percent (1%) or more of the Seller Common
Stock (including shares beneficially held or constructively
owned) as may be reasonably requested by Thompson Coburn to
timely execute and deliver to Thompson Coburn certificates
substantially in the form of Exhibit B or Exhibit C hereto, as
the case may be.
5.15 Employee Stock Options.
(a) At the Effective Time, all rights with
respect to Seller Common Stock pursuant to Seller Stock
Options that are outstanding at the Effective Time,
whether or not then exercisable, shall be converted
into and become rights with respect to Mercantile
Common Stock, and Mercantile shall assume all Seller
Stock Options in accordance with the terms of the
Seller Stock Plan under which it was issued and the
Seller Stock Option Agreement by which it is evidenced.
From and after the Effective Time, (i) each Seller
Stock Option assumed by Mercantile shall be exercised
solely for shares of Mercantile Common Stock, (ii) the
number of shares of Mercantile Common Stock subject to
each Seller Stock Option shall be equal to the number
of shares of Seller Common Stock subject to such Seller
Stock Option immediately prior to the Effective Time
multiplied by the Exchange Ratio and (iii) the per
share exercise price under each Seller Stock Option
shall be adjusted by dividing the per share exercise
price under such Seller Stock Option by the Exchange
Ratio and rounding down to the nearest cent; provided,
however, that the terms of each Seller Stock Option
shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other
similar transaction subsequent to the Effective Time.
It is intended that the foregoing assumption shall be
undertaken in a manner that will not constitute a
"modification" as defined in the Code, as to any Seller
Stock Option that is an "incentive stock option" as
defined under the Code.
(b) The shares of Mercantile Common Stock covered
by the Seller Stock Options shall be covered by an
effective registration statement filed on Form S-8 with
the SEC and shall be duly authorized, validly issued
and in compliance with all applicable federal and state
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securities laws, fully paid and nonassessable and not
subject to or in violation of any preemptive rights.
Mercantile shall maintain the effectiveness of such
registration statement (and maintain current status of
the prospectus contained therein) for as long as such
options remain outstanding. Mercantile shall at and
after the Effective Time have reserved sufficient
shares of Mercantile Common Stock for issuance with
respect to such options. Mercantile shall also take
any action required to be taken under any applicable
state blue sky or securities laws in connection with
the issuance of such shares.
5.16 Best Efforts to Insure Pooling.
Each of Mercantile and Seller undertakes and agrees to use its
best efforts to cause the Merger to qualify for pooling-of-
interests accounting treatment.
ARTICLE VI
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment or waiver at or prior to the
Effective Time of the following conditions:
(a) Shareholder Approval. The approval of this
Agreement and the Merger shall have received the
requisite vote of shareholders of Seller at the special
meeting of shareholders called pursuant to Section 5.03
hereof.
(b) Regulatory Approval. This Agreement and the
transactions contemplated hereby shall have been
approved by the Federal Reserve Board, the Kentucky
Department of Financial Institutions and any other
federal and/or state regulatory agencies whose approval
is required for consummation of the transactions
contemplated hereby and all requisite waiting periods
imposed by the foregoing shall have expired.
(c) Effectiveness of Registration Statement. The
Registration Statement shall have been declared
effective and shall not be subject to a stop order or
any threatened stop order.
(d) No Judicial Prohibition. Neither Seller,
Mercantile nor Merger Sub shall be subject to any
order, decree or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(e) Tax Opinion. Each of Buyers and Seller shall
have received from Thompson Coburn an opinion (which
opinion shall not have been withdrawn at or prior to
the Effective Time) reasonably satisfactory in form and
substance to it to the effect that (i) the Merger will
constitute a reorganization within the meaning of
Section 368 of the Code, (ii) each of the Buyers and
Seller will constitute a "party to the reorganization"
within the meaning of Section 368(b) of the Code, and
(iii) consequently, Code Sections 361, 362 and 1032
will apply to the parties to the reorganization as
appropriate, subject to any applicable statutory,
regulatory or judicial limitations, and, to the effect
that, as a result of the Merger, except with respect to
fractional share interests and assuming that such
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Seller Common Stock is a capital asset in the hands of
the holder thereof at the Effective Time, (A) holders
of Seller Common Stock who receive Mercantile Common
Stock in the Merger will not recognize gain or loss for
federal income tax purposes on the receipt of such
stock, (B) the basis of such Mercantile Common Stock
will equal the basis of the Seller Common Stock for
which it is exchanged, and (C) and the holding period
of such Mercantile Common Stock will include the
holding period of the Seller Common Stock for which it
is exchanged.
6.02 Conditions to Obligations of Seller.
The obligations of Seller to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the Effective
Time of the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Buyers set forth in
Article III of this Agreement shall be true and correct
in all material respects as of the date of this
Agreement and as of the Effective Time (as though made
on and as of the Effective Time, except (i) to the
extent such representations and warranties are by their
express provisions made as of a specified date or
period, (ii) where the facts which caused the failure
of any representation or warranty to be so true and
correct have not resulted, and are not likely to
result, in a Material Adverse Effect on Mercantile and
its Subsidiaries, taken as a whole, and (iii) for the
effect of transactions contemplated by this Agreement),
and Seller shall have received a certificate of any
Executive Vice President of Mercantile, signing solely
in his capacity as an officer of Mercantile, to such
effect.
(b) Performance of Obligations. Buyers shall
have performed in all material respects all obligations
required to be performed by it under this Agreement
prior to the Effective Time, and Seller shall have
received a certificate of any Executive Vice President
of Mercantile, signing solely in his capacity as an
officer of Mercantile, to that effect.
(c) Permits, Authorizations, etc. Buyers shall
have obtained any and all material permits,
authorizations, consents, waivers and approvals
required for the lawful consummation of the Merger.
(d) No Material Adverse Effect. Since the date
of this Agreement, there shall have been no Material
Adverse Effect on Mercantile and its Subsidiaries,
taken as a whole.
(e) Opinion of Counsel. Mercantile shall have
delivered to Seller an opinion of Mercantile's counsel
dated as of the Closing Date or a mutually agreeable
earlier date in substantially the form set forth as
Exhibit D to this Agreement.
(f) Listing Approval. The shares of Mercantile
Common Stock issuable pursuant to the Merger shall have
been approved for listing on the NYSE, subject to
official notice of issuance.
6.03 Conditions to Obligations of the Buyers.
The obligations of the Buyers to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:
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(a) Representations and Warranties. The
representations and warranties of Seller set forth in
Article II of this Agreement shall be true and correct
in all material respects as of the date of this
Agreement and as of the Effective Time (as though made
on and as of the Effective Time, except (i) to the
extent such representations and warranties are by their
express provisions made as of a specific date or
period, (ii) where the facts which caused the failure
of any representation or warranty to be so true and
correct have not resulted, and are not likely to
result, in a Material Adverse Effect on Seller and its
Subsidiaries, taken as a whole, and (iii) for the
effect of transactions contemplated by this Agreement)
and Buyers shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of
Seller, signing solely in their capacities as officers
of Seller, to such effect.
(b) Performance of Obligations. Seller shall
have performed in all material respects all obligations
required to be performed by it under this Agreement
prior to the Effective Time, and Buyers shall have
received a certificate of the Chief Executive Officer
and Chief Financial Officer, signing solely in their
capacities as officers of Seller, to that effect.
(c) Permits, Authorizations, etc. Seller shall
have obtained any and all material permits,
authorizations, consents, waivers and approvals
required for the lawful consummation by it of the
Merger.
(d) No Material Adverse Effect. Since the date
of this Agreement, there shall have been no Material
Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole.
(e) Opinion of Counsel. Seller shall have
delivered to Buyers an opinion of Seller's counsel
dated as of the Closing Date or a mutually agreeable
earlier date in substantially the form set forth as
Exhibit E to this Agreement.
(f) Pooling Letter. The Buyers shall have
received as soon as practicable after the date of this
Agreement an opinion of KPMG Peat Marwick LLP,
reasonably satisfactory in form and substance to the
Buyers, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment, which
opinion shall have not been withdrawn.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination.
This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval by the
shareholders of Seller:
(a) by mutual consent by the Executive Committee
of the Board of Directors of Mercantile and by the
Board of Directors of Seller;
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(b) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of
Seller at any time after December 31, 1998 if the
Merger shall not theretofore have been consummated
(provided that the terminating party is not then in
material breach of any representation, warranty,
covenant or other agreement contained herein);
(c) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of
Seller if (i) the Federal Reserve Board or any other
federal and/or state regulatory agency whose approval
is required for the consummation of the transactions
contemplated hereby has denied approval of the Merger
and such denial has become final and nonappealable or
(ii) the shareholders of Seller shall not have approved
this Agreement at the meeting referred to in
Section 5.03;
(d) by the Executive Committee of the Board of
Directors of Mercantile, on the one hand, or by the
Board of Directors of Seller, on the other hand, in the
event of a material volitional breach by the other
party to this Agreement of any representation,
warranty, covenant or agreement contained herein, which
breach is not cured within 30 days after written notice
thereof is given to the breaching party by the non-
breaching party or is not waived by the non-breaching
party during such period; or
(e) by the Executive Committee of the Board of
Directors of Mercantile pursuant to and in accordance
with the provisions of Section 5.06 hereof.
7.02 Effect of Termination.
In the event of termination of this Agreement as provided in
Section 7.01 above, this Agreement shall forthwith become void
and there shall be no liability on the part of Buyers or Seller
or their respective officers or directors except as set forth in
the second sentence of Section 5.01 and in Sections 5.08 and
8.02, and except that no termination of this Agreement pursuant
to Section 7.01(d) shall relieve the breaching party of any
liability to the non-breaching party hereto arising from the
intentional, deliberate or willful breach of any representation,
warranty, covenant or agreement contained herein, after giving
notice to such breaching party and an opportunity to cure as set
forth in Section 7.01(d).
7.03 Amendment.
This Agreement, the Exhibits and the Schedules hereto may be
amended by the parties hereto, by action taken by or on behalf of
the Executive Committee of the Board of Directors of Mercantile
and the respective Boards of Directors of Merger Sub or Seller,
at any time before or after approval of this Agreement by the
shareholders of Seller; provided, however, that after any such
approval by the shareholders of Seller no such modification shall
(A) alter or change the amount or kind of Merger Consideration to
be received by holders of Seller Common Stock as provided in this
Agreement or (B) adversely affect the tax treatment to Seller
shareholders as a result of the receipt of the Merger
Consideration. This Agreement, the Exhibits and the Schedules
hereto may not be amended except by an instrument in writing
signed on behalf of each of Buyers and Seller.
7.04 Waiver.
Any term, condition or provision of this Agreement may be
waived in writing at any time by the party which is, or whose
shareholders or shareholders, as the case may be, are, entitled
to the benefits thereof.
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ARTICLE VIII
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements.
No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the
parties which are contained herein and each such representation
and warranty shall survive such investigation. Except as set
forth below in this Section 8.01, all representations, warranties
and agreements in this Agreement of Buyers and Seller or in any
instrument delivered by Buyers or Seller pursuant to or in
connection with this Agreement shall expire at the Effective Time
or upon termination of this Agreement in accordance with its
terms. In the event of consummation of the Merger, the
agreements contained in or referred to in Sections 1.05-1.11,
5.02(b), 5.08, 5.10, 5.13 and 5.15 shall survive the Effective
Time. In the event of termination of this Agreement in
accordance with its terms, the agreements contained in or
referred to in the second sentence of Section 5.01 and Sections
5.08, 7.02 and 8.02 shall survive such termination.
8.02 Indemnification.
Buyers and Seller (hereinafter, in such capacity being
referred to as the "Indemnifying Party") agree to indemnify and
hold harmless each other and their officers, directors and
controlling persons (each such other party being hereinafter
referred to, individually and/or collectively, as the
"Indemnified Party") against any and all losses, claims, damages
or liabilities, joint or several, to which the Indemnified Party
may become subject under the Securities Act, the Exchange Act or
other federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof): (a) arise primarily out of any
information furnished to the Indemnified Party by the
Indemnifying Party and included in the Registration Statement as
originally filed or in any amendment thereof, or in the Proxy
Statement, or in any amendment therefor or supplement thereof, or
are based primarily upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement as originally filed or in any amendment thereof, or in
the Proxy Statement, or in any amendment thereof or supplement
thereto, and provided for inclusion thereof by the Indemnifying
Party or (b) arise primarily out of or are based primarily upon
the omission or alleged omission by the Indemnifying Party to
state in the Registration Statement as originally filed or in any
amendment thereof, or in the Proxy Statement, or in any amendment
thereof, a material fact required to be stated therein or
necessary to make the statements made therein not misleading, and
agrees to reimburse each such Indemnified Party, as incurred, for
any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability or action.
8.03 No Assignment; Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors (including
any corporation deemed to be a successor corporation of any of
the parties by operation of law) and assigns, but neither this
Agreement nor any right or obligation set forth in any provision
hereof may be transferred or assigned (except by operation of
law) by any party hereto without the prior written consent of all
other parties, and any purported transfer or assignment in
violation of this Section 8.03 shall be void and of no effect.
There shall not be any third party beneficiaries of any
provisions hereof except for Sections 1.09, 1.10, 1.11, 5.10,
5.13, 5.15 and 8.02 which may be enforced against Mercantile or
Seller, as the case may be, by the parties therein identified or
described.
8.04 Severability.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
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held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remaining
provisions of this Agreement.
8.05 No Implied Waiver.
No failure or delay on the part of any party hereto to
exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor
shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
8.06 Headings.
Article, section, subsection and paragraph titles, captions
and headings herein are inserted only as a matter of convenience
and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any
provision hereof.
8.07 Entire Agreement.
This Agreement and the Schedules and Exhibits hereto
constitute the entire agreement between the parties with respect
to the subject matter hereof, supersede all prior negotiations,
representations, warranties, commitments, offers, letters of
interest or intent, proposal letters, contracts, writings or
other agreements or understandings with respect thereto. No
waiver, and no modification or amendment, of any provision of
this Agreement, shall be effective unless specifically made in
writing and duly signed by all parties thereto.
8.08 Counterparts.
This Agreement may be executed in one or more counterparts,
and any party to this Agreement may execute and deliver this
Agreement by executing and delivering any of such counterparts,
each of which when executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one
and the same instrument.
8.09 Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed to be duly received (a) on the date
given if delivered personally or by cable, telegram, telex or
telecopy or (b) on the date received if mailed by registered or
certified mail (return receipt requested), to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to the Buyers:
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Attention: John W. Rowe
Executive Vice President
Telecopy: (314) 425-2752
Copy to:
Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Telecopy: (314) 425-1386
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and
Robert M. LaRose, Esq.
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Telecopy: (314) 552-7000
(ii) if to Seller:
CBT Corporation
333 Broadway
Paducah, Kentucky 42001
Attention: William J. Jones
President and Chief Executive Officer
Telecopy: (502) 575-5113
Copy to:
Stewart E. Conner, Esq.
Wyatt, Tarrant & Combs
Citizens Plaza
Louisville, Kentucky 40202-2898
Telecopy: (502) 589-0309
8.10 Governing Law.
This Agreement shall be governed by and controlled as to
validity, enforcement, interpretation, effect and in all other
respects by the internal laws of the State of Missouri applicable
to contracts made in that state.
8.11 Knowledge.
"Knowledge" or `best knowledge" when used with respect to a
person shall mean those facts that are known by the executive
officers of such person.
8.12 Time of Essence.
Time is of the essence to the performance of the obligations
set forth in this Agreement.
[the remainder of this page is left intentionally blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto
duly authorized and their respective corporate seals to be
affixed hereto, all as of the date first written above.
Attest: MERCANTILE BANCORPORATION INC.
By:
David W. Grant John W. Rowe
Executive Vice
President, Mercantile Bank National
Association, Authorized Officer
Attest: AMERIBANC, INC.
By:
David W. Grant John W. Rowe
Vice President
Attest: CBT CORPORATION
By:
John E. Sircy William J. Jones
President and Chief Executive Officer
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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated as of
January 10, 1998, by and between MERCANTILE BANCORPORATION INC.
("Buyer"), a Missouri corporation registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended
(the "Holding Company Act"), and CBT CORPORATION ("Seller"), a
Kentucky corporation registered as a bank holding company under
the Holding Company Act.
W I T N E S S E T H:
WHEREAS, Buyer and Seller are prepared to execute and
deliver an Agreement and Plan of Merger dated as of even date
herewith (the "Merger Agreement") providing for the merger of
Seller with and into a wholly owned subsidiary of Buyer; and
WHEREAS, as a condition to Buyer's entering into the
Merger Agreement, Buyer has required that Seller agree, and
Seller has agreed, to grant to Buyer the option set forth herein
to purchase authorized but unissued shares of the common stock,
no par value, of Seller ("Seller Common Stock").
NOW, THEREFORE, in consideration of the premises herein
contained, the parties agree as follows:
1. Definitions. Capitalized terms used but not
defined herein shall have the same meanings as in the Merger
Agreement.
2. Grant of Option. Subject to the terms and
conditions set forth herein, Seller hereby grants to Buyer
an option (the "Option") to purchase up to 1,564,662 shares
of Seller Common Stock (representing approximately 19.9% of
the issued and outstanding shares of Seller Common Stock) at
a price per share equal to $33.25 (the "Purchase Price")
payable in cash as provided in Section 4 hereof. In no
event shall shares of Seller Common Stock for which the
Option is exercisable exceed 19.9% of the issued and
-1-
outstanding shares of Seller Common Stock, without giving
effect to any shares subject to or issued pursuant to the
Option.
3. Exercise of Option.
(a) If not then in material breach of the
Merger Agreement, Buyer may exercise the Option, in whole or
in part, at any time or from time to time if a Purchase
Event (as defined below) shall have occurred; provided,
however, that: (i) to the extent the Option shall not have
been exercised, it shall terminate and be of no further
force and effect upon the earlier to occur of (A) the
Effective Time of the Merger and (B) the termination of the
Merger Agreement in accordance with Article VII thereof,
provided that in the case of a termination by Buyer pursuant
to Section 7.01(d) arising from the volitional breach by
Seller of any of its representations, warranties or
covenants in the Merger Agreement, the Option shall not
terminate until the date that is 12 months following such
termination; (ii) if the Option cannot be exercised on such
day because of any injunction, order or similar restraint
issued by a court of competent jurisdiction, the Option
shall expire on the 30th business day after such injunction,
order or restraint shall have been dissolved or when such
injunction, order or restraint shall have become permanent
and no longer subject to appeal, as the case may be; and
(iii) that any such exercise shall be subject to compliance
with applicable law, including the Holding Company Act.
(b) As used herein, a "Purchase Event" shall
mean any of the following events:
(i) Seller or any of its Subsidiaries,
without having received prior written consent from
Buyer, shall have entered into, authorized,
recommended, proposed or publicly announced its
intention to enter into, authorize, recommend or
propose, an agreement, arrangement or
understanding with any person (other than Buyer or
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any of its Subsidiaries) to (A) effect a merger or
consolidation or similar transaction involving the
acquisition of Seller or any of its Subsidiaries,
(B) purchase, lease or otherwise acquire 15% or
more of the assets of Seller or any of its
Subsidiaries or (C) purchase or otherwise acquire
(including by way of merger, consolidation, share
exchange or similar transaction) Beneficial
Ownership of securities representing 15% or more
of the voting power of Seller or any of its
Subsidiaries (in each case, other than any such
merger, consolidation, purchase, lease, share
exchange or similar transaction between or among
any two or more Seller Subsidiaries);
(ii) any person (other than Buyer or
any Subsidiary of Buyer, or Seller or any
Subsidiary of Seller in a fiduciary capacity)
shall have acquired Beneficial Ownership or the
right to acquire Beneficial Ownership of 15% or
more of the voting power of Seller; or
(iii) the holders of Seller Common
Stock shall not have approved the Merger Agreement
at the meeting of such shareholders held for the
purpose of voting on the Merger Agreement, such
meeting shall not have been held or shall have
been canceled prior to termination of the Merger
Agreement in accordance with its terms or Seller's
Board of Directors shall have withdrawn or
modified in a manner adverse to Buyer the
recommendation of Seller's Board of Directors with
respect to the Merger Agreement, in each case
after an Extension Event.
(c) As used herein, the term "Extension
Event" shall mean any of the following events:
(i) a Purchase Event described in
Section 3(b)(i) or (ii) hereof;
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(ii) any person (other than Buyer or any
of its Subsidiaries) shall have "commenced" (as
such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration
statement under the Securities Act with respect
to, a tender offer or exchange offer to purchase
shares of Seller Common Stock such that, upon
consummation of such offer, such person would have
Beneficial Ownership (as defined below) or the
right to acquire Beneficial Ownership of 15% or
more of the voting power of Seller; or
(iii) any person (other than Buyer
or any Subsidiary of Buyer, or Seller or any
Subsidiary of Seller in a fiduciary capacity)
shall have publicly announced its willingness, or
shall have publicly announced a proposal, or
publicly disclosed an intention to make a
proposal, (x) to make an offer described in clause
(ii) above, or (y) to engage in a transaction
described in clause (i) above.
(d) As used herein, the terms "Beneficial
Ownership" and "Beneficially Own" shall have the meanings
ascribed to them in Rule 13d-3 under the Exchange Act.
(e) In the event Buyer wishes to exercise
the Option, it shall deliver to Seller a written notice (the
date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it intends to
purchase pursuant to such exercise and (ii) a place and date
not earlier than ten business days nor later than 30
calendar days from the Notice Date for the closing of such
purchase (the "Closing Date").
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4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3
hereof, Buyer shall pay to Seller the aggregate Purchase
Price for the shares of Seller Common Stock purchased
pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account
designated by Seller.
(b) At such closing, simultaneously with the
delivery of cash as provided in Section 4(a), Seller shall
deliver to Buyer a certificate or certificates representing
the number of shares of Seller Common Stock purchased by
Buyer, registered in the name of Buyer or a nominee
designated in writing by Buyer, and Buyer shall deliver to
Seller a letter agreeing that Buyer shall not offer to sell,
pledge or otherwise dispose of such shares in violation of
applicable law or the provisions of this Option Agreement.
(c) If at the time of issuance of any Seller
Common Stock pursuant to any exercise of the Option, Seller
shall have issued any share purchase rights or similar
securities to holders of Seller Common Stock, then each such
share of Seller Common Stock shall also represent rights
with terms substantially the same as and at least as
favorable to Buyer as those issued to other holders of
Seller Common Stock.
(d) Certificates for Seller Common Stock
delivered at any closing hereunder shall be endorsed with a
restrictive legend which shall read substantially as
follows:
The transfer of the shares represented by
this certificate is subject to certain
provisions of an agreement between the
registered holder hereof and CBT CORPORATION,
a copy of which is on file at the principal
office of CBT CORPORATION, and to resale
restrictions arising under the Securities Act
of 1933, as amended, and any applicable state
securities laws. A copy of such agreement
-5-
will be provided to the holder hereof without
charge upon receipt by CBT CORPORATION of a
written request therefor.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificates without such
legend if Buyer shall have delivered to Seller an opinion of
counsel, in form and substance reasonably satisfactory to
Seller and its counsel, to the effect that such legend is
not required for purposes of the Securities Act and any
applicable state securities laws and this Option Agreement.
5. Authorization, etc.
(a) Seller hereby represents and warrants to
Buyer that:
(i) Seller has full corporate authority
to execute and deliver this Option Agreement and,
subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and
consummation have been authorized by the Board of
Directors of Seller, and no other corporate
proceedings are necessary therefor;
(iii) this Option Agreement has been
duly and validly executed and delivered and
represents a valid and legally binding obligation
of Seller, enforceable against Seller in
accordance with its terms; and
(iv) Seller has taken all necessary
corporate action to authorize and reserve and,
subject to Section 11(i), permit it to issue and,
at all times from the date hereof through the date
of the exercise in full or the expiration or
termination of the Option, shall have reserved for
issuance upon exercise of the Option, 1,564,662
shares of Seller Common Stock, all of which, upon
issuance pursuant hereto, shall be duly
-6-
authorized, validly issued, fully paid and
nonassessable, and shall be delivered free and
clear of all claims, liens, encumbrances,
restrictions (other than federal and state
securities restrictions) and security interests
and not subject to any preemptive rights.
(b) Buyer hereby represents and warrants to
Seller that:
(i) Buyer has full corporate authority
to execute and deliver this Option Agreement and,
subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and
consummation have been authorized by all requisite
corporate action by Buyer, and no other corporate
proceedings are necessary therefor;
(iii) this Option Agreement has been
duly and validly executed and delivered and
represents a valid and legally binding obligation
of Buyer, enforceable against Buyer in accordance
with its terms; and
(iv) any Seller Common Stock or other
securities acquired by Buyer upon exercise of the
Option will not be taken with a view to the public
distribution thereof and will not be transferred
or otherwise disposed of except in compliance with
the Securities Act and applicable state law.
6. Adjustment Upon Changes in Capitalization.
In the event of any change in Seller Common Stock by reason
of stock dividends, split-ups, recapitalizations or the
like, the type and number of shares subject to the Option,
and the Purchase Price per share, as the case may be, shall
be adjusted appropriately. In the event that any additional
shares of Seller Common Stock are issued after the date of
this Option Agreement (other than pursuant to an event
described in the preceding sentence or pursuant to this
-7-
Option Agreement), the number of shares of Seller Common
Stock subject to the Option shall be adjusted so that, after
such issuance, it equals at least 19.9% of the number of
shares of Seller Common Stock then issued and outstanding,
without giving effect to any shares of Seller Common Stock
subject to or issued pursuant to the Option.
7. Repurchase.
(a) Subject to the giving of any notices and
the receipt of any approvals as contemplated by Section
11(i), at the request of Buyer at any time commencing upon
the first occurrence of a Purchase Event described in
Section 3(b) hereof and ending 12 months immediately
thereafter but not later than the termination of the Option
pursuant to Section 3(a) hereof (the "Repurchase Period"),
Seller (or any successor entity thereof) shall repurchase
the Option from Buyer together with all (but not less than
all, subject to Section 10) shares of Seller Common Stock
purchased by Buyer pursuant hereto with respect to which
Buyer then has Beneficial Ownership, at an aggregate price
(per share, the "Per Share Repurchase Price") equal to the
sum of:
(i) The exercise price paid by Buyer
for any shares of Seller Common Stock acquired
pursuant to the Option;
(ii) The difference between (A) the
"Market/Tender Offer Price" for shares of Seller
Common Stock (defined as the higher (x) of the
highest price per share at which a tender or
exchange offer has been made for shares of Seller
Common Stock or (y) the highest closing sales
price per share of Seller Common Stock reported by
the Nasdaq National Market, in each case for any
day within that portion of the Repurchase Period
that precedes the date Buyer gives notice of the
required repurchase under this Section 7) and (B)
the exercise price as determined pursuant to
Section 2 hereof (subject to adjustment as
-8-
provided in Section 6), multiplied by the number
of shares of Seller Common Stock with respect to
which the Option has not been exercised, but only
if the Market/Tender Offer Price is greater than
such exercise price; and
(iii) The difference between the
Market/Tender Offer Price and the exercise price
paid by Buyer for any shares of Seller Common
Stock purchased pursuant to the exercise of the
Option, multiplied by the number of shares so
purchased, but only if the Market/Tender Offer
Price is greater than such exercise price.
(b) In the event Buyer exercises its rights
under this Section 7, Seller shall, within 10 business days
thereafter, pay the required amount to Buyer by wire
transfer of immediately available funds to an account
designated by Buyer and Buyer shall surrender to Seller the
Option and the certificates evidencing the shares of Seller
Common Stock purchased thereunder with respect to which
Buyer then has Beneficial Ownership, and Buyer shall warrant
that it has sole record and Beneficial Ownership of such
shares and that the same are free and clear of all liens,
claims, charges, restrictions and encumbrances of any kind
whatsoever.
(c) In determining the Market/Tender Offer
Price, the value of any consideration other than cash shall
be determined by an independent nationally recognized
investment banking firm selected by Buyer and reasonably
acceptable to Seller.
8. Repurchase at Option of Seller and First
Refusal.
(a) Except to the extent that Buyer shall
have previously exercised its rights under Section 7, at the
request of Seller during the six-month period commencing 12
months following the first occurrence of a Purchase Event,
Seller may repurchase from Buyer, and Buyer shall sell the
Option to Seller together with all (but not less than all,
subject to Section 10) of the Seller Common Stock acquired
-9-
by Buyer pursuant hereto and with respect to which Buyer has
Beneficial Ownership at the time of such repurchase at a
price per share equal to the greater of (i) the Per Share
Repurchase Price or (ii) the sum of (A) the aggregate
Purchase Price of the shares so repurchased plus (B)
interest on the aggregate Purchase Price paid for the shares
so repurchased from the date of purchase to the date of
repurchase at the highest rate of interest announced by
Buyer as its prime or base lending or reference rate during
such period, less any dividends received on the shares so
repurchased. Any repurchase under this Section 8(a) shall
be consummated in accordance with Section 7(b).
(b) If, at any time after the occurrence of
a Purchase Event and prior to the earlier of (i) the
expiration of 18 months immediately following such Purchase
Event or (ii) the expiration or termination of the Option,
Buyer shall desire to sell, assign, transfer or otherwise
dispose of the Option or all or any of the shares of Seller
Common Stock acquired by it pursuant to the Option, it shall
give Seller written notice of the proposed transaction (an
"Offeror's Notice"), identifying the proposed transferee,
and setting forth the terms of the proposed transaction. An
Offeror's Notice shall be deemed an offer by Buyer to
Seller, which may be accepted within 10 business days of the
receipt of such Offeror's Notice, on the same terms and
conditions and at the same price at which Buyer is proposing
to transfer the Option or such shares to a third party. In
the event the proposed transaction involves the sale of the
Option or the shares of Seller Common Stock purchased
pursuant to the exercise of the Option for consideration
other than cash, the value of such consideration shall be
determined by an independent nationally recognized
investment banking firm selected by Buyer and reasonably
acceptable to Seller. The purchase of the Option or any
such shares by Seller shall be closed within 10 business
days of the date of the acceptance of the offer and the
purchase price shall be paid to Buyer by wire transfer of
immediately available funds to an account designated by
Buyer. In the event of the failure or refusal of Seller to
-10-
purchase the Option or all the shares covered by the
Offeror's Notice or if the Federal Reserve Board, OTS or any
other Regulatory Authority disapproves Seller's proposed
purchase of the Option or such shares, Buyer may, within 60
days from the date of the Offeror's Notice, sell all, but
not less than all, of the Option or such shares to such
third party at no less than the price specified and on terms
no more favorable to the purchaser than those set forth in
the Offeror's Notice. The requirements of this Section 8(b)
shall not apply to (i) any disposition as a result of which
the proposed transferee would Beneficially Own not more than
2% of the voting power of Seller or (ii) any disposition of
Seller Common Stock by a person to whom Buyer has sold
shares of Seller Common Stock issued upon exercise of the
Option.
-11-
9. Registration Rights. At any time after
the exercise of the Option by Buyer for an aggregate of at
least 50% of the shares subject thereto, Seller shall,
subject to the conditions set forth herein, if requested by
Buyer, as expeditiously as practicable file a registration
statement on a form for general use under the Securities Act
if necessary in order to permit the sale or other
disposition of the shares of Seller Common Stock that have
been acquired upon exercise of the Option in accordance with
the intended method of sale or other disposition requested
by Buyer (it being understood and agreed that any such sale
or other disposition shall be effected on a widely
distributed basis so that, upon consummation thereof, no
purchaser or transferee shall Beneficially Own more than 2%
of the shares of Seller Common Stock then outstanding).
Buyer shall provide all information reasonably requested by
Seller for inclusion in any registration statement to be
filed hereunder. Seller shall use its reasonable best
efforts to cause such registration statement first to become
effective and then to remain effective for such period not
in excess of 90 days from the day such registration
statement first becomes effective as may be reasonably
necessary to effect such sales or other dispositions. The
registration effected under this Section 9 shall be at
Seller's expense except for underwriting discounts and
commissions and the fees and disbursements of Buyer's
counsel attributable to the registration of such Seller
Common Stock. In no event shall Seller be required to
effect more than one registration hereunder. The filing of
the registration statement hereunder may be delayed for such
period of time as may reasonably be required to facilitate
any public distribution by Seller of Seller Common Stock or
if a special audit of Seller would otherwise be required in
connection therewith. If requested by Buyer in connection
with such registration, Seller shall become a party to any
underwriting agreement relating to the sale of such shares,
but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other
agreements customarily included in such underwriting
agreements for parties similarly situated.
-12-
10. Severability. Any term, provision, covenant
or restriction contained in this Option Agreement held by a
court or a Regulatory Authority of competent jurisdiction to
be invalid, void or unenforceable, shall be ineffective to
the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or
restrictions contained in this Option Agreement nor the
validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Option Agreement
that is so found to be so broad as to be unenforceable shall
be interpreted to be as broad as is enforceable. If for any
reason such court or Regulatory Authority determines that
applicable law will not permit Buyer or any other person to
acquire, or Seller to repurchase or purchase, the full
number of shares of Seller Common Stock provided in Section
2 hereof (as adjusted pursuant to Section 6 hereof), it is
the express intention of the parties hereto to allow Buyer
or such other person to acquire, or Seller to repurchase or
purchase, such lesser number of shares as may be
permissible, without any amendment or modification hereof.
11. Miscellaneous.
(a) Expenses. Each of the parties hereto
shall pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel,
except as otherwise provided herein.
(b) Entire Agreement. Except as otherwise
expressly provided herein, this Option Agreement and the
Merger Agreement contain the entire agreement between the
parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral.
-13-
(c) Successors; No Third Party
Beneficiaries. The terms and conditions of this Option
Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and
permitted assigns. Nothing in this Option Agreement,
expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Option Agreement,
except as expressly provided herein.
(d) Assignment. Other than as provided in
Section 8 hereof, neither of the parties hereto may sell,
transfer, assign or otherwise dispose of any of its rights
or obligations under this Option Agreement or the Option
created hereunder to any other person (whether by operation
of law or otherwise), without the express written consent of
the other party.
(e) Notices. All notices or other
communications that are required or permitted hereunder
shall be in writing and sufficient if delivered in
accordance with Section 8.08 of the Merger Agreement (which
is incorporated herein by reference).
(f) Counterparts. This Option Agreement may
be executed in counterparts, and each such counterpart shall
be deemed to be an original instrument, but both such
counterparts together shall constitute but one agreement.
(g) Specific Performance. The parties
hereto agree that if for any reason Buyer or Seller shall
have failed to perform its obligations under this Option
Agreement, then either party hereto seeking to enforce this
Option Agreement against such non-performing party shall be
entitled to specific performance and injunctive and other
equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive
or other equitable relief. This provision is without
-14-
prejudice to any other rights that either party hereto may
have against the other party hereto for any failure to
perform its obligations under this Option Agreement.
(h) Governing Law. This Option Agreement
shall be governed by and construed in accordance with the
laws of the State of Missouri applicable to agreements made
and entirely to be performed within such state.
(i) Regulatory Approvals; Section 16(b).
If, in connection with (A) the exercise of the Option under
Section 3 or a sale by Buyer to a third party under Section
8, (B) a repurchase by Seller under Section 7 or a
repurchase or purchase by Seller under Section 8, prior
notification to or approval of the Federal Reserve Board, or
any other Regulatory Authority is required, then the
required notice or application for approval shall be
promptly filed and expeditiously processed and periods of
time that otherwise would run pursuant to such Sections
shall run instead from the date on which any such required
notification period has expired or been terminated or such
approval has been obtained, and in either event, any
requisite waiting period shall have passed. In the case of
clause (A) of this subsection (i), such filing shall be made
by Buyer, and in the case of clause (B) of this subsection
(i), such filing shall be made by Seller, provided that each
of Buyer and Seller shall use its best efforts to make all
filings with, and to obtain consents of, all third parties
and Regulatory Authorities necessary to the consummation of
the transactions contemplated hereby, including, without
limitation, applying to the Federal Reserve Board under the
Holding Company Act for approval to acquire the shares
issuable hereunder. Periods of time that otherwise would
run pursuant to Sections 3, 7 or 8 shall also be extended to
the extent necessary to avoid liability under Section 16(b)
of the Exchange Act.
(j) No Breach of Merger Agreement
Authorized. Nothing contained in this Option Agreement
shall be deemed to authorize Seller to issue any shares of
Seller Common Stock in breach of, or otherwise breach any
-15-
of, the provisions of the Merger Agreement nor shall any
action taken hereunder by Seller constitute a breach of any
of the provisions of the Merger Agreement.
(k) Waiver and Amendment. Any provision of
this Option Agreement may be waived at any time by the party
that is entitled to the benefits of such provision. This
Option Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
[the remainder of this page is left intentionally blank]
-16-
IN WITNESS WHEREOF, each of the parties hereto has
executed this Option Agreement as of the date first written
above.
MERCANTILE BANCORPORATION INC.
By:
John W. Rowe
Executive Vice President, Mercantile Bank
National Association, Authorized Officer
Authorized Officer
CBT CORPORATION
By:
William J. Jones
President and Chief Executive Officer
-17-
Exhibit 99.1
MERCANTILE ANNOUNCES PLANS TO MERGE WITH
CBT CORPORATION OF PADUCAH, KENTUCKY
ST. LOUIS, Jan. 12 /PRNewswire/ -- Mercantile
Bancorporation Inc. (NYSE: MTL), the St. Louis-based $30
billion bank holding company, today announced plans to merge
with CBT Corporation (Nasdaq: CBTC), a $1 billion multi-bank
holding company headquartered in Paducah, Kentucky.
CBT's subsidiaries, which serve the attractive western
Kentucky Lake region, include four banks, a Federal Savings
Bank and an established consumer finance company, Fidelity
Credit Corporation. A leader in the Paducah market, CBT has
additional banking offices in McCracken, Calloway, Marshall
and Graves counties, and the Hopkinsville-Clarksville
metropolitan area.
"The merger with CBT complements Mercantile's existing
southern Illinois and southeastern Missouri franchises,"
said W. Randolph Adams, senior executive vice president and
chief administrative officer of Mercantile Bancorporation
Inc. "As we strengthen our geographic presence, we also are
enhancing Mercantile's future earnings potential."
"In choosing Mercantile as our partner, we are aligning
with one of the strongest performing financial services
organizations in the United States," said William J. Jones,
president and chief executive officer of CBT Corporation.
"We will be able to maintain our community-oriented banking
philosophy while we expand the array of products and
services we offer our customers."
Based upon Mercantile's closing stock price on January
9, 1998, of $52.75, the transaction is valued at
approximately $285 million. CBT shareholders will receive
.6513 shares of Mercantile common stock for each share of
CBT common stock. The merger will be accounted for as a
pooling of interests, and is expected to close in the third
quarter of 1998. As part of its agreement with Mercantile,
CBT granted Mercantile an option to acquire 19.9 percent of
issued and outstanding shares of common stock, exercisable
under certain circumstances. In addition, Mercantile may
repurchase up to 10 percent of the shares issued in the
transaction. The merger is subject to the approval of CBT
shareholders and various regulatory authorities.
Mercantile Bancorporation Inc., a $30 billion asset
multi-bank holding company headquartered in St. Louis,
operates offices in more than 500 locations throughout
Missouri, Iowa, Kansas, Illinois and Arkansas. Mercantile
currently has acquisitions pending with Horizon Bancorp,
Inc., headquartered in Arkadelphia, Arkansas, and HomeCorp,
Inc., headquartered in Rockford, Illinois. Mercantile's non-
banking subsidiaries include companies providing brokerage
services, asset-based lending, investment advisory services,
leasing services and credit life and other insurance
products as
agent.
850292 - 4 -
VOTING AGREEMENT
This Voting Agreement dated as of January 10, 1998, is
entered into between Mercantile Bancorporation Inc.
("Mercantile"), and the undersigned director and shareholder
("Shareholder") of CBT Corporation ("CBT").
WHEREAS, CBT, Mercantile and Ameribanc, Inc., a wholly
owned subsidiary of Mercantile ("Ameribanc"), have proposed to
enter into an Agreement and Plan of Merger (the "Agreement"),
dated as of today, which contemplates the acquisition by
Mercantile of 100% of the capital stock of CBT (collectively, the
"CBT Stock") by means of a merger between CBT and Ameribanc; and
WHEREAS, Mercantile is willing to expend the
substantial time, effort and expense necessary to implement the
Merger, only if Shareholder enters into this Voting Agreement;
and
WHEREAS, the undersigned shareholder of CBT believes
that the Merger is in his best interest and the best interest of
CBT.
NOW, THEREFORE, in consideration of the premises,
Shareholder hereby agrees as follows:
1. Voting Agreement. Shareholder shall vote all
of the shares of CBT Stock he now owns of record or has voting
control with respect to or hereafter acquires, in favor of the
Merger at the meeting of shareholders of CBT to be called for the
purpose of approving the Merger (the "Meeting").
2. No Competing Transaction. Shareholder shall
not vote any of his shares of CBT Stock in favor of any other
merger or sale of all or substantially all the assets of CBT to
any person other than Mercantile or its affiliates until the
Effective Time of the Merger, termination of the Agreement or
abandonment of the Merger by the mutual agreement of CBT and
Mercantile, whichever comes first.
3. Transfers Subject to Agreement. Shareholder
shall not transfer his shares of CBT Stock unless the transferee,
prior to such transfer, executes a voting agreement with respect
to the transferred shares substantially to the effect of this
Voting Agreement and satisfactory to Mercantile.
4. No Ownership Interest. Nothing contained in
this Voting Agreement shall be deemed to vest in Mercantile any
direct or indirect ownership or incidence of ownership of or with
respect to any shares of CBT Stock. All rights, ownership and
economic benefits of and relating to the shares of CBT Stock
shall remain and belong to Shareholder and Mercantile shall have
no authority to manage, direct, superintend, restrict, regulate,
govern or administer any of the policies or operations of CBT or
exercise any power or authority to direct Shareholder in the
voting of any of his shares of CBT Stock, except as otherwise
expressly provided herein, or the performance of his duties or
responsibilities as a director of CBT.
5. Evaluation of Investment. Shareholder, by
reason of his knowledge and experience in financial and business
matters and in his capacity as a director of a financial
institution, believes himself capable of evaluating the merits
and risks of the potential investment in common stock of
Mercantile, $0.01 par value ("Mercantile Common Stock"),
contemplated by the Agreement.
6. Documents Delivered. Shareholder
acknowledges having reviewed the Agreement and its attachments
and that reports, proxy statements and other information with
respect to Mercantile filed with the Securities and Exchange
Commission (the "Commission") were, prior to his execution of
this Voting Agreement, available for inspection and copying at
the Offices of the Commission and that Mercantile delivered the
following such documents to CBT:
(a) Mercantile's Annual
Report on Form 10-K for the year
ended December 31, 1996, as amended
by Form 10-K/A;
(b) Mercantile's Quarterly
Reports on Form 10-Q for the
quarters ended March 31, 1997,
June 30, 1997 and September 30,
1997; and
(c) Mercantile's Current
Reports on Form 8-K dated April 25,
1997, May 13, 1997, July 1, 1997,
two dated September 25, 1997 and
Current Report on Form 8-K/A dated
May 22, 1997.
7. Amendment and Modification. This Voting
Agreement may be amended, modified or supplemented at any time by
the written approval of such amendment, modification or
supplement by Shareholder and Mercantile.
8. Entire Agreement. This Voting Agreement
evidences the entire agreement among the parties hereto with
respect to the matters provided for herein and there are no
agreements, representations or warranties with respect to the
matters provided for herein other than those set forth herein and
in the Agreement.
9. Severability. The parties agree that if any
provision of this Voting Agreement shall under any circumstances
be deemed invalid or inoperative, this Voting Agreement shall be
construed with the invalid or inoperative provisions deleted and
the rights and obligations of the parties shall be construed and
enforced accordingly.
10. Counterparts. This Voting Agreement may be
executed in two counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
11. Governing Law. The validity, construction,
enforcement and effect of this Voting Agreement shall be governed
by the internal laws of the State of Missouri, without regard to
its conflict of laws principles.
12. Headings. The headings for the paragraphs of
this Voting Agreement are inserted for convenience only and shall
not constitute a part hereof or affect the meaning or
interpretation of this Voting Agreement.
13. Termination. This Voting Agreement shall
terminate upon the consummation of the Merger or upon termination
of the Agreement, whichever comes first.
14. Successors. This Voting Agreement shall be
binding upon and inure to the benefit of Mercantile and its
successors, and Shareholder and Shareholder's spouse and their
respective executors, personal representatives, administrators,
heirs, legatees, guardians and other legal representatives. This
Voting Agreement shall survive the death or incapacity of
Shareholder. This Agreement may be assigned by Mercantile only
to an affiliate of Mercantile.
MERCANTILE BANCORPORATION INC.
By:
John W. Rowe, Executive
Vice President
Mercantile Bank National Association
Authorized Officer
SHAREHOLDER
