FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 25049
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of earliest event reported): May 7, 1998.
First Financial Bancorporation
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(Exact name of registrant as specified in its charter)
Iowa 0-14280 42-1259867
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(State or other jurisdiction (Commission file RS Employer Identification
of incorporation) Number) Number)
204 East Washington Street, Iowa City, Iowa 52244-1880
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (319) 356-9000
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Not applicable
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(Former name or former address, if changed since last report)
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On May 7, 1998, First Financial Bancorporation, a corporation organized and
existing under the laws of the State of Iowa ("First Financial"), and Mercantile
Bancorporation, a corporation organized and existing under the laws of the State
of Missouri ("Mercantile"), and each registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended, entered into an Agreement and
Plan of Merger (the "Merger Agreement"), pursuant to which First Financial will
be merged with Ameribanc, Inc., a Missouri corporation and a wholly owned
subsidiary of Mercantile (the "Merger"). The Board of Directors of First
Financial approved the Merger at its meeting held on May 4, 1998.
In accordance with the terms of the Merger Agreement, (i) each share of
First Financial common stock, par value $1.25 per share ("First Financial Common
Stock"), outstanding immediately prior to the effective time of the Merger (the
"Effective Time") will be converted into the right to receive 0.88 of a share
(the "Exchange Ratio") of Mercantile common stock, par value $5.00 per share
("Mercantile Common Stock"), and the associated preferred share purchase rights
under Mercantile's Rights Agreement, dated May 23, 1988.
The Merger is intended to constitute a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and to be accounted for as a pooling
of interests.
Consummation of the Merger is subject to various conditions, including: (i)
receipt of approval by the shareholders of First Financial of appropriate
matters relating to the Merger Agreement and the Merger; (ii) receipt of
requisite regulatory approvals from the Board of Governors of the Federal
Reserve system and other federal and state regulatory authorities as necessary;
(iii) receipt of an opinion of counsel as to the tax treatment of certain
aspects of the Merger; (iv) registration of the shares of Mercantile Common
Stock to be issued in the Merger under the Securities Act of 1933, as amended
(the "1933 Act"); and (v) satisfaction of certain other conditions. The
directors of First Financial have agreed with Mercantile to vote all shares of
First Financial Common Stock owned by them for the approval of the Merger and
not to sell any of such shares other than pursuant to the Merger without
Mercantile's consent.
The Merger Agreement and the transactions contemplated thereby will be
submitted for approval at a meeting of the shareholders of First Financial.
Prior to such meeting, Mercantile will file a registration statement with the
Securities and Exchange Commission registering under the 1933 Act the Mercantile
stock to be issued in the Merger. Such shares of Mercantile stock will be
offered to First Financial shareholders pursuant to a prospectus that will also
serve as a proxy statement for the shareholder's meeting.
The preceding description of the Merger Agreement is qualified its entirety
by reference to the copy of the Merger Agreement included as Exhibit 2.1 hereto
and which is hereby incorporated herein by reference.
In connection with the Merger Agreement, First Financial and Mercantile
entered into a Stock Option Agreement, dated May 7, 1998 (the "Stock Option
Agreement"), pursuant to which First Financial granted to Mercantile an
irrevocable option to purchase, under certain circumstances, up to 707,189
shares of First Financial Common Stock at a price of $37.75 per share (the
"Mercantile
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Option"). The Mercantile Option, if exercised, would equal, before giving effect
to the exercise of the Mercantile Option, 19.9% of the total number of shares of
First Financial Common Stock issued and outstanding at the time of exercise. The
Mercantile Option was granted by First Financial as a condition and inducement
to Mercantile's willingness to enter into the Merger Agreement. Under certain
circumstances, First Financial may be required to repurchase the Mercantile
Option or the shares acquired pursuant to the exercise of the Mercantile Option.
The preceding description of the Stock Option Agreement is qualified in its
entirety by reference to the copy of the Stock Option Agreement included as
Exhibit 2.2 hereto and which is hereby incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) -- (b) Not applicable.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated as of May 7, 1998, among
Mercantile Bancorporation, Inc., Ameribanc, Inc. and First
Financial Bancorporation.
2.2 Stock Purchase Agreement dated as of May 7, 1998, between
Mercantile Bancorporation, Inc., as grantee, and First
Financial Bancorporation, as issuer.
99.1 Text of press release dated May 8, 1998, issued by First
Financial Bancorporation.
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SIGNATURE
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.
FIRST FINANCIAL BANCORPORATION
Date: May 15, 1998 By:\\Robert M. Sierk
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Robert M. Sierk
President and
Chief Executive Officer
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EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
2.1 Agreement and Plan of Merger dated as of May 7, 12
1998 among Mercantile Bancorporation, Inc.,
Ameribanc, Inc. and First Financial Bancorporation.
2.2 Stock Purchase Agreement dated as of May 7, 1998 among 56
Mercantile Bancorporation, Inc., as grantee, and First
Financial Bancorporation, as issuer.
99.1 Text of press release dated May 8, 1998, issued by First 64
Financial Bancorporation.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
among
MERCANTILE BANCORPORATION INC.,
a Missouri corporation
and
AMERIBANC, INC.,
a Missouri corporation
and
FIRST FINANCIAL BANCORPORATION,
an Iowa corporation
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May 7, 1998
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TABLE OF CONTENTS
Page
Recitals....................................................................12
ARTICLE I
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THE MERGER
1.01 The Merger.......................................................12
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1.02 Closing..........................................................12
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1.03 Effective Time...................................................12
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1.04 Additional Actions...............................................13
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1.05 Articles of Incorporation and By-Laws............................13
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1.06 Board of Directors and Officers..................................13
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1.07 Conversion of Securities.........................................13
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1.08 Exchange Procedures..............................................14
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1.09 No Fractional Shares.............................................15
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1.10 Dissenting Shares................................................15
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1.11 Closing of Stock Transfer Books..................................15
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1.12 Anti-Dilution....................................................16
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1.13 Reservation of Right to Revise Transaction.......................16
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1.14 Material Adverse Effect..........................................16
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1.15 Knowledge........................................................16
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ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization and Authority.......................................17
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2.02 Subsidiaries.....................................................17
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2.03 Capitalization...................................................17
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2.04 Authorization....................................................18
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2.05 Seller Financial Statements......................................19
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2.06 Seller Reports...................................................19
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2.07 Title to and Condition of Assets.................................20
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2.08 Real Property....................................................20
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2.09 Taxes............................................................21
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2.10 Material Adverse Effect..........................................22
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2.11 Loans, Commitments and Contracts.................................22
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2.12 Absence of Defaults..............................................24
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2.13 Litigation and Other Proceedings.................................24
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Page
2.14 Directors' and Officers' Insurance..............................24
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2.15 Compliance with Laws............................................24
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2.16 Labor...........................................................26
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2.17 Material Interests of Certain Persons...........................26
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2.18 Allowance for Loan and Lease Losses;
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Non-Performing Assets; Financial Assets.........................26
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2.19 Employee Benefit Plans..........................................27
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2.20 Conduct of Seller to Date.......................................28
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2.21 Absence of Undisclosed Liabilities..............................29
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2.22 Proxy Statement, Etc............................................29
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2.23 Registration Obligations........................................30
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2.24 Tax, Regulatory and Accounting Matters..........................30
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2.25 Brokers and Finders.............................................30
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2.26 Interest Rate Risk Management Instruments.......................30
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2.27 Accuracy of Information.........................................30
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2.28 Year 2000 Compliant.............................................30
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
3.01 Organization and Authority......................................31
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3.02 Capitalization of Mercantile....................................31
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3.03 Authorization...................................................32
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3.04 Mercantile Financial Statements.................................32
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3.05 Mercantile Reports..............................................33
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3.06 Material Adverse Effect.........................................33
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3.07 Registration Statement, Etc.....................................33
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3.08 Brokers and Finders.............................................33
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3.09 Accuracy of Information.........................................33
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ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time...............33
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4.02 Forbearances of Seller..........................................33
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4.03 Forbearances of the Buyers......................................35
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ARTICLE V
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence...........................36
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Page
5.02 Registration Statement; Regulatory Matters......................36
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5.03 Shareholder Approval............................................37
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5.04 Current Information.............................................37
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5.05 Conforming Entries..............................................37
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5.06 Environmental Reports...........................................38
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5.07 Agreements of Affiliates........................................38
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5.08 Expenses........................................................38
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5.09 Miscellaneous Agreements and Consents...........................39
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5.10 Employee Agreements and Benefits................................39
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5.11 Press Releases..................................................40
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5.12 State Takeover Statutes.........................................40
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5.13 Directors' and Officers' Indemnification........................40
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5.14 Tax Opinion Certificates........................................40
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5.15 Employee Stock Options..........................................40
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5.16 Best Efforts to Insure Pooling..................................41
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ARTICLE VI
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger......41
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6.02 Conditions to Obligations of Seller.............................41
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6.03 Conditions to Obligations of the Buyers.........................41
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination.....................................................43
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7.02 Effect of Termination...........................................43
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7.03 Amendment.......................................................43
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7.04 Waiver..........................................................43
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ARTICLE VIII
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements......44
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8.02 Indemnification.................................................44
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8.03 No Assignment; Successors and Assigns...........................44
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8.04 Severability....................................................44
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8.05 No Implied Waiver...............................................45
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8.06 Headings........................................................45
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8.07 Entire Agreement................................................45
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8.08 Counterparts....................................................45
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8.09 Notices.........................................................45
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8.10 Governing Law...................................................46
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LIST OF EXHIBITS Page
Exhibit A - Affiliate Letter 47
Exhibit B - Director/Officer Certificate 49
Exhibit C - Legal Opinion of Buyers' Counsel 50
Exhibit D - Legal Opinion of Seller's Counsel 53
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(c) 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 2.28 Material Computer Software, Firmware and Hardware --
Schedule 4.02 Forbearances of Seller --
Schedule 5.07 Affiliates --
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered into
as of May 7, 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 First Financial
Bancorporation ("First Financial"), an Iowa corporation ("Seller").
WHEREAS, Merger Sub is a wholly owned subsidiary of Mercantile, and each of
Mercantile and Merger Sub is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA"); and
WHEREAS, Seller is registered as a bank holding company under the BHCA; and
WHEREAS, the respective Boards of Directors of Seller and Merger Sub and
the Executive Committee of the Board of Directors of Mercantile have approved
the merger (the "Merger") of Seller with and into Merger Sub pursuant to the
terms and subject to the conditions contained in this Agreement; and
WHEREAS, the parties desire to provide certain undertakings, conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
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THE MERGER
1.01 The Merger. Subject to the terms and conditions of this Agreement,
Seller shall be merged with and into Merger Sub in accordance with Chapter 351
of the Missouri Revised Statutes (the "Missouri Statute") and Section 490.1106
of the Iowa Business Corporation Act (the "IBCA"), 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 Iowa. Unless
otherwise mutually agreed in writing by Buyers and Seller, subject to the terms
and conditions of this Agreement, the Effective Time shall occur on such date as
Buyers shall notify Seller in writing (such notice to be at least five business
days in advance of the Effective Time) but (A) not earlier than the satisfaction
of all conditions set forth in Section 6.01(a) and 6.01(b) (the "Approval Date")
and (B) not later than the first business day of the first full calendar month
commencing at least five business days after the Approval Date. On the Closing
Date, the parties hereto will cause the Merger to be consummated by delivering
to the Secretary of State of the State of Missouri and the Secretary of State of
the State of Iowa, 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 IBCA.
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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 ByLaws 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 1.12 hereof, each share of
common stock, $1.25 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 0.88 shares
(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 Seller Common Stock held by Seller,
Mercantile or any of their respective Subsidiaries (as defined in Section
2.02 hereof), in each case other than in a fiduciary capacity or as a
result of debts previously contracted, shall be canceled and shall not be
exchanged for shares of Mercantile Common Stock. The Exchange Ratio was
computed by (i) aggregating (A) the total number of shares of Seller Common
Stock that were issued and outstanding on the date of this Agreement (as
set forth in Section 2.03 hereof) with (B) the total number of shares of
Seller Common Stock that are reserved for issuance pursuant to options or
other rights relating to Seller Common Stock and outstanding as of the date
of this Agreement (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) 3,194,844, the aggregate
number of shares of Mercantile Common Stock to be issued in the Merger.
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1.08 Exchange Procedures.
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(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 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
(collectively, 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 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.
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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 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.
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(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 Division XIII of the IBCA. 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 IBCA; provided, however,
that if, in accordance with the IBCA, 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 Division XIII of the
IBCA received by Seller, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands under the IBCA.
Seller shall not voluntarily make any payment with respect to demands for
payment of fair value and shall not, except with the prior consent of
Mercantile, settle or offer to settle any such demands.
1.11 Closing of Stock Transfer Books.
(a) The stock transfer books of Seller shall be closed at the end of
business on the business day immediately preceding the Closing Date. In the
event of a transfer of ownership of Seller Common Stock that is not
registered in the transfer records prior to the closing of such record
books, the Merger Consideration issuable or payable with respect to such
stock may be delivered to the transferee, if the Certificate or
Certificates representing such stock is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such transfer
and all applicable stock transfer taxes are paid.
(b) At the Effective Time, Seller shall provide Buyers with a complete
and verified list of registered holders of Seller Common Stock based upon
its stock transfer books or corporate records 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.
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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 holder of Seller
Common Stock 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 holders of Seller Common Stock, (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 (as defined in
Section 2.02(a)), taken as a whole as reflected in the Seller Financial
Statements (as defined in Section 2.05(b)) or the Mercantile Financial
Statements (as defined in Section 3.04), as the case may be; it being understood
that a Material Adverse Effect shall not include: (i) a change with respect to,
or effect on, such entity and its Subsidiaries resulting from a change in law,
rule, regulation, generally accepted accounting principles or regulatory
accounting principles; (ii) a change with respect to, or effect on, such entity
and its Subsidiaries resulting from any other matter affecting depository
institutions generally including, without limitation, changes in general
economic conditions and changes in prevailing interest and deposit rates; (iii)
a change disclosed in the Seller Financial Statements or the Mercantile
Financial Statements, as the case may be; (iv) any charges taken by Mercantile
in connection with pending or completed acquisitions or the disposition of
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.
1.15 Knowledge. As used in this Agreement, the term "knowledge" or "best
knowledge" shall mean those facts known by the executive officers of Buyers or
Seller, as the case may be.
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ARTICLE II
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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 Iowa, 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 (as defined
in Section 2.02(a)), 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 Association and By-Laws of First National Bank Iowa
("FNBI"), a national banking association and a wholly owned Subsidiary of
Seller, 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 (as defined in Section 2.03) or similar
interests of any corporation, bank, business trust, association or
organization, or any interest in a partnership or joint venture of any
kind, other than those identified as Seller Subsidiaries in Schedule 2.02
hereof.
(b) FNBI is a national banking association duly organized and validly
existing under the laws of the United States of America.
2.03 Capitalization. The authorized capital stock of Seller consists of:
(i) 15,000,000 shares of Seller Common Stock, of which, as of March 31, 1998,
3,553,717 shares were issued and outstanding. As of March 31, 1998, Seller had
reserved 297,738 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 76,788 shares of
Seller Common Stock were outstanding as of March 31, 1998. Since March 31, 1998,
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
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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 ac
counting 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 at least two thirds 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 Sell er enforceable against
Seller in accordance with its terms.
(b) Except as disclosed on Schedule 2.04(b), neither the execution nor
delivery nor performance by Seller of this Agreement, nor the consummation
by Seller of the transactions contemplated hereby, nor compliance by Seller
with any of the provisions hereof, will (i) violate, conflict with, or
result in a breach of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration of, or result in the creation of, any Lien upon any of the
properties or assets of Seller or any of the Seller Subsidiaries under any
of the terms, conditions or provisions of (x) its Certificate or 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 o 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.
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(c) Other than in connection or in compliance with the provisions of
the Missouri Statute, the IBCA, the Securities Act of 1933, as amended, and
the rules and regulations thereunder (collectively, 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 unde the BHCA, or any required approvals
of the Federal Reserve Board, the FDIC 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 Seller's
Annual Report to Shareholders for the year ended December 31, 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 r 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 in all material respects their
respective financial conditions, results of operations, changes in
shareholders' equity and cash flows.
2.06 Seller Reports. Since January 1, 1995, each of Seller and the Seller
Subsidiaries has timely filed any and 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 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 (iv) 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.
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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), fre 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 December 31, 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 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 fiduciary capacity.
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(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 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 ta x due that is currently in effect.
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2.10 Material Adverse Effect. Since December 31, 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
December 31, 1997, of all contracts entered into with respect to deposits
and repurchase agreements of $1,000,000 or more, by account, and, as of
December 31, 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 Subsidiarie 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 December 31,
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; s
(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;
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(viii) lease with annual rental payments aggregating $100,000 or
more;
(ix) loans or other obligations payable or owing to any officer,
director or employee except (A) salaries, wages and directors' fees or
other compensation incurred and accrued in the ordinary course of
business and (B) obligations due in respect of any depository accounts
maintained by any of the foregoing with Seller or any of the Seller
Subsidiaries in the ordinary course of business; or
(x) other agreement, contract, arrangement, understanding or
commitment involving an obligation by Seller or any of the Seller
Subsidiaries of more than $250,000 and extending beyond six months
from the date hereof that cannot be canceled without cost or penalty
upon notice of 30 days or less, other than contracts entered into in
respect of deposits, loan agreements and commitments, notes, security
agreements, repurchase and reverse repurchase agreements, bankers'
acceptances, outstanding letters of credit and commitments to issue
letters of credit, participation agreements and other documents
relating to transactions entered into by Seller or any of the Seller
Subsidiaries in the ordinary course of business and not involving
extensions of credit with respect to any one entity or related group
of entities in excess of $1,000,000.
(c) Seller and/or the Seller Subsidiaries carry property, liability,
director and officer errors and omissions, products liability and other
insurance coverage as set forth in Schedule 2.11(c) under the heading
"Insurance."
(d) True, correct and complete copies of the agreements, contracts,
leases and other documents referred to in Section 2.11(b) have been
included with Schedule 2.11(b) hereto. True, correct and complete copies of
the agreements, contracts, leases, insurance policies and other documents
referred to in Schedules 2.11(a) and (c) have been or shall be furnished or
made available to Buyers.
(e) To the best knowledge of Seller, each of the agreements,
contracts, leases, insurance policies and other documents referred to in
Schedules 2.11 (a), (b) and (c) is a valid, binding and enforceable
obligation of the parties sought to be bound thereby, except as the
enforceability thereof against the parties thereto (other than Seller or
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 December 31, 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
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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 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 no t have a Material Adverse Effect
on Seller and its Subsidiaries, taken as a whole.
2.13 Litigation and Other Proceedings. Except as set forth on Schedule 2.13
or otherwise disclosed in the Seller Financial Statements, neither Seller nor
any of the Seller Subsidiaries is a party to any pending or, to the best
knowledge of Seller, threatened claim, action, suit, investigation or
proceeding, or is subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or reasonably could not be expected to
have, a Material Adverse Effect on Seller and the Seller Subsidiaries, taken as
a whole. Without limiting the generality of the foregoing, there are no actions,
suits or proceedings pending or, to the best knowledge of Seller, threatened
against Seller or any of the Seller Subsidiaries or any of their respective
officers or directors by any shareholder of Seller or any of the Seller
Subsidiaries (or any former shareholder of Seller or any of the Seller
Subsidiaries) or involving claims under the Community Reinvestment Act of 1977,
as amended, the Bank Secrecy A ct, 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 kno wn 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
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
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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 1998 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 December 31, 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 December 31, 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 six months ended December 31, 1997.
(b) The allowances for loan losses contained in the Seller Financial
Statements were established in accordance with the past practices and
experiences of Seller and the Seller Subsidiaries, and the allowance for
loan and lease losses shown on the consolidated balance sheet of Seller and
the Seller Subsidiaries as of December 31, 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 December 31, 1997, the aggregate amount of all
Non-Performing Assets (as defined below) on the books of Seller and the
Seller Subsidiaries did not exceed $3,266,356. "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
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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 lien s, 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 December 31,
1997, except for those sold or redeemed in the ordinary course of business.
A complete and accurate list of such investment securities as of December
31, 1997 is attached as Schedule 2.18(f). Such list shall be updated each
month in writing until the Closing.
2.19 Employee Benefit Plans.
----------------------
(a) Schedule 2.19(a) lists all pension, retirement, supplemental
retirement, stock option, stock purchase, stock ownership, savings, stock
appreciation right, profit sharing, deferred compensation, consulting,
bonus, medical, disability, workers' compensation, vacation, group
insurance, severance and other employee benefit, incentive and welfare
policies, contracts, plans and arrangements, and all trust agreements
related thereto, maintained by or contributed to by Seller or any of the
Seller Subsidiaries in respect of any of the present or former directors,
officers, or other employees of and/or consultants to Seller or any of the
Seller Subsidiaries (collectively, "Seller Employee Plans"). Seller has
furnished Buyers with the following documents with respect to each Seller
Employee Plan: (i) a true and complete copy of all written documents
comprising such Seller Employee Plan (including amendments and individual
agreements relating thereto) or, if there is no such written document, an
accurate and complete description of the Seller Employee Plan; (ii) the
most recently filed Form 5500 or Form 5500-C/R (including all schedules
thereto), if applicable; (iii) the most recent financial statements and
actuarial reports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and (v) the most
recent IRS determination letter, if any.
(b) All Seller Employee Plans have been maintained and operated in all
material respects in accordance with their terms and the material
requirements of all applicable statutes, orders, rules and final
regulations, including, without limitation, to the extent applicable, ERISA
and the Internal Revenue Code of 1986, as amended (the "Code"). All
contributions required to be made to Seller Employee Plans have been made
or reserved.
(c) With respect to each of the Seller Employee Plans which is a
pension plan (as defined in Section 3(2) of ERISA) (the "Pension Plans"):
(i) each Pension Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined to be so
qualified by the IRS and such determination letter may still be relied
upon, and each related trust is exempt from taxation under Section 501(a)
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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, 1990; and (v) no Pension Plan or any
trust created thereunder has incurred any "accumulated funding deficiency,"
as such term is defined in Section 302 of ERISA (whether or not waived). No
Pension Plan is a "multiemployer plan," as that term is defined in Section
3(37) of ERISA.
(d) Except as disclosed in Schedule 2.19(d) or as reflected on the
Seller Financial Statements or the notes thereto, neither Seller nor any of
the Seller Subsidiaries has any liability for any post-retirement health,
medical or similar benefit of any kind whatsoever, except as required by
statute or regulation.
(e) Neither Seller nor any of the Seller Subsidiaries has any material
liability under ERISA or the Code as a result of its being a member of a
group described in Sections 414(b), (c), (m) or (o) of the Code.
(f) Except as disclosed in Schedule 2.19(f), neither the execution nor
delivery of this Agreement, nor the consummation of any of the transactions
contemplated hereby, will (i) result in any payment (including, without
limitation, severance, unemployment compensation or golden parachute
payment) becoming due to any director or employee of Seller or any of the
Seller Subsidiaries from any of such entities, (ii) increase any benefit
otherwise payable under any of the Seller Employee Plans or (iii) result in
the acceleration of the time of payment of any such benefit. Seller shall
use its best efforts to insure that no amounts paid or payable by Seller,
the Seller Subsidiaries or Buyers to or with respect to any employee or
former employee of Seller or any of the Seller Subsidiaries will fail to be
deductible for federal income tax purposes by reason of Section 280G of the
Code.
2.20 Conduct of Seller to Date. From and after December 31, 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
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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.
2.21 Absence of Undisclosed Liabilities.
(a) As of December 31, 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 would be 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 December 31,
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
December 31, 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 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, o 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
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earlier communication with respect to the solicitation of any proxy for such
meeting. All documents which r Seller or any of the Seller Subsidiaries is
responsible for filing with any Regulatory Authority in connection with the
Merger will comply as to form in all material respects with the provisions of
applicable law.
2.23 Registration Obligations. Neither Seller nor any of the Seller
Subsidiaries is under any obligation, contingent or otherwise, which will
survive the Effective Time by reason of any agreement to register any
transaction involving any of its securities under the Securities Act.
2.24 Tax, Regulatory and Accounting Matters. Neither Seller nor any of the
Seller Subsidiaries has taken or agreed to take any action or has any knowledge
of any fact or circumstance that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368 of
the Code, (ii) materially impede or delay receipt of any approval referred to in
Section 6.01(b) or the consummation of the transactions contemplated by this
Agreement or (iii) prevent or impede the transactions contemplated hereby from
qualifying for pooling-of-interests accounting treatment.
2.25 Brokers and Finders. Except for ABN AMRO 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, both Seller and
the Seller Subsidiaries have complied with regulatory bulletins issued through
February 28, 1998 by the Federal Financial Institutions Examination Council on
the subject of Year 2000 Compliance. Seller and the Seller Subsidiaries have
exercised ordinary care in assessing Year 2000 Compliance status of all material
computer software, firmware and hardware used in the ordinary course of business
as set forth o Schedule 2.28, which is a Y2K Inventory & Risk Assessment Matrix.
Seller and the Seller Subsidiaries shall continue to work through Closing with
its vendors to renovate or replace non-compliant computer software, firmware and
hardware in order to ensure that the testing of renovated or replaced items is
substantially underway by December 31, 1998.
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ARTICLE III
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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, except where the
failure to be so qualified would not have a Material Adverse Effect on
Mercantile and its Subsidiaries, taken as a whole, and has corporate power and
authority to own its properties and assets and to carry on its business as it is
now being conducted. 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) 400,000,000 shares of Mercantile Common Stock, of
which, as of April 23, 1998, 134,960,625 shares were issued and [133,115,227]
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 March 31, 1998, Mercantile had reserved: (i) 13,836,802 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 (collectively, "Mercantile
Employee/Director Stock Grants"); (ii) 2,077,000 shares of Mercantile Common
Stock for issuance upon the acquisition of Financial Services Corporation of the
Midwest ("FSCM") pursuant to the Agreement and Plan of Merger, dated as of April
13, 1998, by and among Mercantile, Merger Sub and FSCM; (iii) 5,400,000 shares
of Mercantile Common Stock for issuance upon the acquisition of CBT Corporation
("CBT") pursuant to the Agreement and Plan of Merger, dated as of January 10,
1998, by and among Mercantile, Merger Sub and CBT; and (iv) 13,800,000 shares of
Mercantile Common Stock for issuance upon the acquisition of Firstbank of
Illinois ("Firstbank") pursuant to the Agreement and Plan of Merger, dated as of
January 30, 1998, by and among Mercantile, Merger Sub and Firstbank. From March
31, 1998 through the date of this Agreement, no shares of Mercantile Common
Stock have been issued, excluding any such shares which may have been issued i
connection with the Investm ent 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 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
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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 has 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 f 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 IBCA, the Securities Act, the Exchange Act,
the securities or blue sky laws of the various states or filings, consents,
reviews, authorizations, approvals or exemptions required under the BHCA,
the FDI Act or any required approvals of any other Regulatory Authority, no
notice to, filing with, exemption or review by, or authorization, consent
or approval of, any public body or authority is necessary for the
consummation by Mercantile and Merger Sub of the transactions contemplated
by this Agreement.
3.04 Mercantile Financial Statements. The consolidated balance sheets of
Mercantile and its Subsidiaries as of December 31, 1997, 1996 and 1995 and
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1997,
together with the notes thereto, audited by KPMG Peat Marwick LLP, as filed with
the SEC on Form 10-K for the year ended December 31, 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.
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3.05 Mercantile Reports. Since January 1, 1995, each of Mercantile and its
Subsidiaries has filed any and 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 December 31, 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 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 Mercantile or Merger Sub are
responsible for filing with any Regulatory Authority in connection with the
Merger will comply as to form in all material respects with the provisions of
applicable law.
3.08 Brokers and Finders. Neither Mercantile, Merger Sub nor any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Mercantile or Merger Sub in connection with this Agreement or the
transactions contemplated hereby.
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
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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:
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(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 $0.2725 per share on the Seller
Common Stock; provided, however, that Seller shall not declare or pay a
quarterly dividend for any quarter in whic 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;
(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 FNBI 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 FNBI 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 $50,000;
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(h) directly or indirectly (including through its officers, directors,
employees or other representatives) (i) initiate, solicit or encourage any
discussions, inquiries or proposals with any third party (other than
Buyers) relating to the disposition of any significant portion of the
business or assets of Seller or any of the Seller Subsidiaries or the
acquisition of Equity Securities of Seller or any of the Seller
Subsidiaries or the merger of Seller or any of the Seller Subsidiaries with
any person (other than Buyers) or any similar transaction (each such
transaction being referred to herein as an "Acquisition Transaction"), (ii)
provide any such person with information or assistance or negotiate with
any such person with respect to an Acquisition Transaction, and Seller
shall promptly notify Buyers orally of all the relevant details relating to
all inquiries, indications of interest and proposals which it may receive
with respect to any Acquisition Transaction;
(i) take any action that would (i) prevent or impede the transactions
contemplated hereby from qualifying as a reorganization within the meaning
of Section 368 of the Code, (ii) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Buyers or Seller to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement, or (iii)
prevent or impede the Merger from qualifying for pooling-of-interests
accounting treatment;
(j) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become 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 $1,000,000 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. ss. 371c and 12 U.S.C. ss. 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.
ss. 371c.
4.03 Forbearances of the Buyers. During the period from the date of this
Agreement to the Closing Date, the Buyers shall not, without the prior consent
of Seller, agree in writing or otherwise to engage in any activity, enter into
any transaction or take or omit to take any other action:
(a) that would (i) prevent or impede the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section
368 of the Code, (ii) materially impede or delay the consummation of the
transactions contemplated by this Agreement or the ability of Mercantile or
Seller to obtain any necessary approvals of any Regulatory Authority
required for the transactions contemplated by this Agreement or to perform
its covenants and agreements under this Agreement, or (iii) prevent or
impede the Merger from qualifying for pooling-of-interests accounting
treatment; or
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(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 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 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.
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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.
5.04 Current Information. During the period from the date of this
Agreement to the Closing Date, (i) each party will promptly furnish the
other with copies of all monthly and other interim financial statements as
the same become available and shall cause one or more of its designated
representatives to confer on a regular and frequent basis with
representatives of the other party and (ii) Mercantile shall promptly
furnish to the Seller copies of all filings by Mercantile with each of the
Federal Reserve Board and the SEC. Each party shall promptly notify the
other party of the following events immediately upon learning of the
occurrence thereof, describing the same and, if applicable, the steps being
taken by the affected party with respect thereto: (a) the occurrence of any
event which could cause any representation or warranty of such party or any
schedule, statement, report, notice, certificate or other writing furnished
by such party to be untrue or misleading in any material respect; (b) any
Material Adverse Effect; (c) the issuance or commencement of any
governmental and/or regulatory agency complaint, investigation or hearing
or any communications indicating that the same may be contemplated and, as
to any such matter which shall now or hereafter be in effect, any
communications pertaining thereto; or (d) the institution or the threat of
any material litigation involving such party.
5.05 Conforming Entries.
(a) Notwithstanding that Seller believes that Seller and Seller
Subsidiaries have established all reserves and taken all provisions for
possible loan losses required by GAAP and applicable laws, rules and
regulations, Seller recognizes that Buyers may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). From and after the date of this
Agreement, Seller and Buyers shall consult and cooperate with each other
with respect to conforming the loan, accrual and reserve policies of Seller
and the Seller Subsidiaries to those policies of Buyers, as specified in
each case in writing to Seller, based upon such consultation and as
hereinafter provided.
(b) In addition, from and after the date of this Agreement, Seller and
Buyers shall consult and cooperate with each other with respect to
determining appropriate Seller accruals, reserves and charges to establish
and take in respect of excess equipment write-off or write-down of various
assets and other appropriate charges and accounting adjustments taking into
account the parties' business plans following the Merger, as specified in
each case in writing to Seller, based upon such consultati on 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.
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(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, t exceed the sum of $500,000, 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, Sidley & Austin,
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.
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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 actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the 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 reasonabl request of Buyers,
conform Seller's existing policies and procedures in respect of such
matters to Buyers' policies and procedures or, in the absence of any
existing Seller policy or procedure regarding any such function, introduce
Buyers' policies or procedures in respect thereof, unless to do so would
cause Seller or any of the Seller Subsidiaries to be in violation of any
law, rule or regulation or requirement of any Regulatory Authority having
jurisdiction over Seller and/or the Seller Subsidiary affected thereby.
5.10 Employee Agreements and Benefits.
(a) Following the Effective Time, Buyers shall cause the Surviving
Corporation to honor in accordance with their terms all employment,
severance and other compensation contracts set forth on Schedule 2.11(b)
between Seller, any of the Seller Subsidiaries, and any current or former
director, officer, employee or agent thereof, and all provisions for vested
benefits or other vested amounts earned or accrued through the Effective
Time under the Seller Employee Plans.
(b) Subject to Section 5.15, the provisions of the Seller Stock Plans
and any other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the Equity Securities of Seller
or any of the Seller Subsidiaries shall be deleted and terminated as of the
Effective Time.
(c) Except as set forth in Section 5.10(b) hereof, the Seller Employee
Plans shall not be terminated by reason of the Merger but shall continue
thereafter as plans of the Surviving Corporation until such time as the
employees of Seller and the Seller Subsidiaries are integrated into
Mercantile's employee benefit plans that are available to other employees
of Mercantile and its Subsidiaries, subject to the terms and 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.
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5.11 Press Releases. Except to the extent disclosure may be required by
applicable law, Seller and the Buyers shall consult with each other as to the
form and substance of any proposed press release or other proposed public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby.
5.12 State Takeover Statutes. Seller will take all steps necessary to
exempt the transactions contemplated by this Agreement and any agreement
contemplated hereby from, and if necessary challenge the validity of, any
applicable state takeover law.
5.13 Directors' and Officers' Indemnification. Mercantile agrees that the
Merger shall not affect or diminish any of the duties and obligations of
indemnification of Seller or any of the Seller Subsidiaries existing as of the
Effective Time in favor of employees, agents, directors or officers of Seller or
any of the Seller Subsidiaries arising by virtue of its Articles of
Incorporation, Charter or By-Laws in the form in effect at the date of this
Agreement or arising by operation of law or arising by virtue of any contract,
resolution or other agreement or document existing at the date of this
Agreement, and Mercantile shall continue such duties and obligations in full
force and effect for so long as they would (but for the Merger) otherwise
survive and continue in full force and effect. To the extent that Seller's
existing directors' and officers' liability insurance policy would provide
coverage for any action or omission occurring prior to the Effective Time,
Seller agrees to give proper notice to the insurance carrier and to Mercantile
of any potential claim thereunder so as to preserve Seller's rights to such
insurance coverage. Mercantile represents that the directors' and officers'
liability insurance policy maintained by it provides for coverage of "prior
acts" for directors and officers of entities acquired by Mercantile including
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 and directors as may be reasonably requested by Thompson Coburn to
timely execute and deliver to Thompson Coburn a certificate substantially in the
form of Exhibit B hereto.
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 adjuste 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 d not
constitute a "modification" as defined in the Code, as to any Seller Stock
Option that is an "incentive stock option" as defined under the Code.
(b) The shares of Mercantile Common Stock covered by the Seller Stock
Options shall be covered by an effective registration statement filed on
Form S-8 with the SEC and shall be duly authorized, validly issued and in
compliance with all applicable federal and state securities laws, fully
paid and nonassessable and not subject to or in violation of any preemptive
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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
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 the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, and to the
effect that, as a result of the Merger, except with respect to fractional
share interests and assuming that such Seller Common Stock is a capital
asset in the hands of the holder thereof at the Effective Time, (i) 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, (ii) the basis of such Mercantile Common Stock will
equal the basis of the Seller Common Stock for which it is exchanged, and
(iii) 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
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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 C to
this Agreement.
6.03 Conditions to Obligations of the Buyers. The obligations of the Buyers
to effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of Seller set forth in Article II of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time (as though made on and as of the Effective Time, except
(i) to the extent such representations and warranties are by their express
provisions made as of a specific date or period, (ii) where the facts which
caused the failure of any representation or warranty to be so true and
correct have not resulted, and are not likely to result, in a Material
Adverse Effect on Seller and its Subsidiaries, taken as a whole, and (iii)
for the effect of transactions contemplated by this Agreement) and Buyers
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of Seller, signing solely in their capacities as officers
of Seller, to such effect.
(b) Performance of Obligations. Seller shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Buyers shall have received a
certificate of the Chief Executive Officer and Chief Financial 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 D to
this Agreement.
(f) Pooling Letter. The Buyers shall have received as soon as
practicable after the date of this Agreement a letter 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 letter shall have not been withdrawn.
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ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval by the shareholders of Seller:
(a) by mutual consent by the Executive Committee of the Board of
Directors of Mercantile and by the Board of Directors of Seller;
(b) by the Executive Committee of the Board of Directors of Mercantile
or the Board of Directors of Seller at any time after May 1, 1999 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 holders of Seller Common Stock 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
stockholders, 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 therefor and supplement 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 therefor and supplement thereof, or in the Proxy Statement, or in any
amendment therefor or supplement thereof, 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 therefor and
supplement thereof, or in the Proxy Statement, or in any amendment therefor and
supplement 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. Nothing in this Agreement shall be construed to require
any party (or any subsidiary of a party) to take any action or fail to take any
action in violation of any applicable law, rule or regulation. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remaining provisions of this Agreement.
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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 and 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 facsimile 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
Facsimile: (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
Facsimile: (314) 425-1386
and
Robert M. LaRose, Esq.
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Facsimile: (314) 552-7000
(ii) if to Seller:
First Financial Bancorporation
204 East Washington Street
Iowa City, IA 52240
Attention: Robert M. Sierk
President and Chief Executive Officer
Facsimile: (319) 337-7299
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Copy to:
Richard G. Clemens, Esq.
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Facsimile: (312) 853-7036
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be affixed hereto, all as of the date first
written above.
Attest: MERCANTILE BANCORPORATION INC.
/s/ David W. Grant By:/s/ John W. Rowe
- ------------------------------------ ------------------------------------
David W. Grant John W. Rowe
Executive Vice President,
Mercantile Bank National Association,
Authorized Officer
Attest: AMERIBANC, INC.
/s/ David W. Grant By:/s/ John W. Rowe
- ------------------------------------ ------------------------------------
David W. Grant John W. Rowe
Vice President
Attest: FIRST FINANCIAL BANCORPORATION
/s/ Larry D. Ward By:/s/ Robert M. Sierk
- ------------------------------------ ------------------------------------
Larry D. Ward Robert M Sierk
President and Chief Executive Officer
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EXHIBIT A
---------
AFFILIATE LETTER
________________, 1998
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, Missouri 63166-0524
Gentlemen:
I have been advised that as of the date hereof I may be deemed an
"affiliate" ("Affiliate") of First Financial Bancorporation, an Iowa corporation
("Seller"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "Rules and Regulations") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger among Mercantile Bancorporation Inc., a Missouri
corporation ("Mercantile"), Ameribanc, Inc., a Missouri corporation
("Ameribanc"), and Seller (the "Merger Agreement"), Seller will be merged with
and into Ameribanc (the "Merger"), and as a result of the Merger, I will receive
shares of common stock of Mercantile, $0.01 par value ("Mercantile Common
Stock").
In connection with the above transactions, I represent and warrant to
Mercantile and agree that:
A. I will not make any sale, transfer or other disposition of the shares of
Mercantile Common Stock in violation of the Act or the Rules and Regulations.
B. I have no present plan or intent to dispose of the Mercantile Common
Stock acquired by me pursuant to the Merger.
C. I have been advised that the offering, sale and delivery of the shares
of Mercantile Common Stock to me pursuant to the Merger will be registered under
the Act on a Registration Statement on Form S-4. I have also been advised,
however, that, since I may be deemed to be an Affiliate of Seller at the time
the Merger Agreement is submitted for a vote of the shareholders of Seller, the
shares of Mercantile Common Stock must be held by me indefinitely, unless (i)
such shares of Mercantile Common Stock have been registered for distribution
under the Act, (ii) a sale of the shares of Mercantile Common Stock is made in
conformity with the volume and other applicable limitations of Rule 145, or
(iii) in the opinion of counsel reasonably acceptable to Mercantile, some other
exemption from registration under the Act is available with respect to any such
proposed sale, transfer or other disposition of the shares of Mercantile Common
Stock.
D. I have carefully read this letter and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of the shares of Mercantile Common Stock, to
the extent I felt necessary, with my counsel or counsel for Seller.
E. I understand that Mercantile is under no obligation to register the
sale, transfer or other disposition of the shares of Mercantile Common Stock for
sale, transfer or other disposition by me to make compliance with an exemption
from registration available.
F. Notwithstanding the other provisions hereof, I agree not to sell,
pledge, transfer or otherwise dispose of, or reduce my risk relative to, shares
of Mercantile Common Stock or shares of the common stock, par value $1.25 per
share, of Seller during the period 30 days prior to consummation of the Merger,
and will not sell, pledge, transfer or otherwise dispose of, or reduce my risk
relative to, shares of Mercantile Common Stock during the period from the
consummation of the Merger until such time as financial results covering at
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least 30 days of combined operations of the parties to the Merger have been
published within the meaning of Section 201.01 of the Securities and Exchange
Commission's Codification of Financial Reporting Policies. Mercantile agrees
that it will publish such financial results within 45 days after the end of the
first fiscal quarter of Mercantile containing the required period of post-Merger
combined operations.
G. I understand that stop transfer instructions will be given to the
registrar of the certificates for the shares of Mercantile Common Stock and that
there will be placed on the certificates for the shares of Mercantile Common
Stock, or any substitutions therefore, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction (the acquisition of First Financial Bancorporation) to
which Rule 145 promulgated under the Securities Act of 1933, as
amended (the "Act"), applies and may be sold or otherwise transferred
only in compliance with the limitations of such Rule 145, or upon
receipt by Mercantile Bancorporation Inc. of an opinion of counsel
acceptable to it that some other exemption from registration under the
Act is available, or pursuant to a registration statement under the
Act. The shares represented by this certificate may not be sold or
otherwise transferred prior to the publication by Mercantile
Bancorporation Inc. of financial results covering at least 30 days of
combined operations subsequent to [the effective date of the Merger]."
H. I hereby agree that, for a period of one (1) year following the
effective date of the Merger, I will obtain an agreement similar to this
agreement from each transferee of the shares of Mercantile Common Stock sold or
otherwise transferred by me, but only if such transfer is effected other than in
a transaction involving a registered public offering or as a sale pursuant to
Rule 145.
I. Mercantile agrees, for a period of two years after the Effective Time of
the Merger, to file on a timely basis all reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, so
that the public information provisions of Rule 145 as the same are presently in
effect will be available to me in the event that I desire to transfer any shares
of Mercantile Common Stock issued to me pursuant to the Merger.
It is understood and agreed that this Agreement will terminate and be of no
further force and effect and the legend set forth in Paragraph G above will be
removed by delivery of substitute certificates without such legend, and the
related transfer restrictions shall be lifted forthwith, if the period of time
specified in Paragraph F of this Agreement has passed and (i) my shares of
Mercantile Common Stock shall have been registered under the Act for sale,
transfer or other disposition by me or on my behalf, (ii) I am not at the time
an Affiliate of Mercantile and have held the shares of Mercantile Common Stock
for at least one (1) year (or such other period as may be prescribed by the Act
and the Rules and Regulations) and Mercantile has filed with the Securities and
Exchange Commission ("SEC") all of the reports it is required to file under the
Securities Exchange Act of 1934, as amended, during the preceding twelve (12)
months, (iii) I am not and have not been for at least three (3) months an
Affiliate of Mercantile and I have held the shares of Mercantile Common Stock
for at least two (2) years, (iv) Mercantile shall have received a letter from
the staff of the SEC, or an opinion of Mercantile's General Counsel or other
counsel acceptable to Mercantile, to the effect that the stock transfer
restrictions and the legend are not required, or (v) if the provisions of Rule
145 are amended to eliminate all restrictions applicable to the Mercantile
Common Stock received by me pursuant to the Merger.
This Agreement shall be binding on my heirs, legal representatives and
successors.
Very truly yours,
__________________________________
Accepted as of the _______ day of ________________, 1998.
MERCANTILE BANCORPORATION INC.
By:__________________________________
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EXHIBIT B
---------
DIRECTOR/OFFICER CERTIFICATE
49
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______________, 1998
Page 1
EXHIBIT C
---------
LEGAL OPINION OF BUYERS' COUNSEL
______________, 1998
First Financial Bancorporation
204 East Washington Street
Iowa City, IA 52240
Re: Mercantile Bancorporation Inc.
Ladies and Gentlemen:
We have acted as counsel to MERCANTILE BANCORPORATION INC., a Missouri
corporation ("Mercantile"), and AMERIBANC, INC., a Missouri corporation and
wholly owned subsidiary of Mercantile ("Merger Sub"), in connection with the
acquisition (the "Acquisition") by Mercantile of FIRST FINANCIAL BANCORPORATION,
an Iowa corporation ("Seller"), pursuant to the Agreement and Plan of Merger,
dated as of _________, 1998 (the "Agreement"), by and among Mercantile, Merger
Sub and Seller. We are rendering this opinion to you pursuant to Section 6.02(e)
of the Agreement.
In rendering the opinions set forth herein, we have examined originals or
copies of such corporate records of Mercantile and Merger Sub, such laws and the
originals or copies of such other records, agreements, instruments, certificates
and documents as we have deemed necessary as a basis for the opinions
hereinafter expressed. We have assumed the genuineness of all signatures; the
authenticity of all documents submitted to us as originals; the conformity to
the originals of all document submitted to us as certified, photostatic or
conformed copies; the authenticity of the originals of all such latter
documents; and the correctness of certificates submitted to us by officers and
representatives of Mercantile and Merger Sub. In addition, with respect to the
opinions as to the due execution and binding nature of the Agreement, we have
assumed the due execution and delivery of such agreements by all parties thereto
other than Mercantile and Merger Sub. In rendering our opinion, we have relied
upon certificates of corporate officers of Mercantile and Merger Sub as to
certain factual matters material to such opinion, and upon certificates of
public officials, all of which certificates have been furnished or made
available to you. Capitalized terms not defined herein shall be defined as in
the Agreement. Whenever our opinion with respect to the existence or absence of
facts is indicated to be based upon our knowledge, we are referring to the
actual knowledge of the Thompson Coburn attorneys who have represented
Mercantile and Merger Sub in matters that are the subject of this opinion.
Except to the extent expressly set forth herein, we have not undertaken any
independent investigation to determine the existence or absence of such facts
and no inference as to our knowledge of the existence or absence of such facts
should be drawn from our representation of Mercantile.
Based upon and subject to the foregoing, we are of the opinion that:
(a) 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
duly qualified to do business and are each in good standing in all jurisdictions
where the ownership or leasing of their respective properties or the conduct of
their respective businesses require Mercantile or Merger Sub, as the case may
be, to be so qualified. Mercantile and Merger Sub are each registered as bank
holding companies with the Board of Governors of the Federal Reserve System
under the Bank Holding Company Act of 1956, as amended.
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(b) Mercantile and Merger Sub possess all corporate power to own and
operate their respective properties and to carry out their respective businesses
as and where the same are now being conducted.
(c) Mercantile and Merger Sub each have the corporate power and authority
to enter into and deliver the Agreement and to carry out their respective
obligations thereunder.
(d) The Agreement has been duly authorized by all necessary corporate
action of the Board of Directors (or a duly authorized committee of the Board)
of Mercantile and Merger Sub, respectively, and such Agreement constitutes a
valid and binding obligation of Mercantile and Merger Sub that is enforceable
against Mercantile and Merger Sub, as the case may be, in accordance with its
terms, except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally, or
the exercise of judicial discretion in accordance with general principles
applicable to equitable and similar remedies.
(e) The execution, delivery and performance by Mercantile and Merger Sub of
the Agreement, or the consummation of the Acquisition, or compliance by
Mercantile or Merger Sub with any of the provisions of the Agreement will not
(i) violate, conflict with or result in a breach of any of the provisions of, or
constitute a default (or event which, with notice or the lapse of time, or both,
would constitute a default) under, or result in the termination of, or result in
the right to termination or acceleration of, or result in the creation of, any
lien, security interest, charge or encumbrance upon any of the respective
properties of Mercantile or Merger Sub under any of the terms, conditions or
provisions of (A) the respective Articles of Incorporation or By-laws of
Mercantile or Merger Sub, or (B) any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Mercantile or Merger Sub or any of their respective properties or assets may be
subject, or (ii) to the best of our knowledge, 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.
(f) Except as received prior to the date hereof, 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 or Merger Sub of
the Acquisition as contemplated by the Agreement, other than the filing and
approval, as the case may be, of certificates of merger by the Secretaries of
State of the States of Missouri and Iowa.
(g) To the best of our knowledge, the authorized and issued capital of
Mercantile consists of (i) 400,000,000 shares, $0.01 par value of Mercantile
common stock ("Mercantile Common Stock"), of which, as of [the last day of the
most recently ended fiscal quarter], ____________ shares were issued and
____________ shares were outstanding, and (ii) 5,000,000 shares of preferred
stock, no par value ("Mercantile Preferred Stock"), of which no shares were
issued and outstanding. Mercantil has designated [4,000,000] shares of
Mercantile Preferred Stock as "[Series B] Junior Participating Preferred Stock"
and has reserved such shares under a Rights Agreement dated May __, 1998 between
Mercantile and Mercantile Bank National Association, as rights agent. As of
____________, 1998, Mercantile had reserved (i) _____________ shares of
Mercantile Common Stock for issuance under the Mercantile stock option and
incentive plans; and (ii) [pending acquisitions]. To the best of our knowledge,
from [last day of last quarterly period] through the date hereof, no Equity
Securities of Mercantile have been issued, excluding any shares of Mercantile
Common Stock which may have been issued (i) under the Mercantile stock option
and incentive plans or (ii) upon consummation of the acquisition of
_____________. To the best of our knowledge, and except as set forth above,
there are no 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 of Mercantile, or contracts,
commitments, understandings or arrangements by which Mercantile is or may become
bound to issue additional shares of capital stock, or options, warrants or
rights to purchase or acquire any additional shares of capital stock of
Mercantile. To the best of our knowledge, all of the issued and outstanding
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shares of Mercantile Common Stock are validly issued, fully paid and
nonassessable by Mercantile and none of such shares have been issued in
violation of any preemptive or similar right of any shareholder of Mercantile.
The shares of Mercantile Common Stock issued pursuant to the Merger Agreement
are duly authorized, validly issued, fully paid and nonassessable by Mercantile,
and none of such shares are subject to preemptive or other similar rights.
(h) To the best of our knowledge, neither Mercantile nor Merger Sub is the
subject of any order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the Acquisition.
(i) There is no litigation, proceeding or controversy before any court or
governmental agency, whether federal, state or local, pending or, to the best of
our knowledge, threatened, that is likely to have a Material Adverse Effect on
Mercantile and its Subsidiaries, taken as a whole.
The opinions expressed herein by the undersigned are expressly limited to
the laws of the State of Missouri and of the United States of America and the
corporate laws of the State of Iowa. We assume no responsibility as to the
applicability or the effect of the laws of any other domestic or foreign
jurisdiction on the subject transactions.
This opinion is being rendered solely for the benefit of the addressees
hereof and is not to be used or relied upon by any other person without our
prior written consent. We expressly disavow any obligation to update this letter
in the future.
Very truly yours,
52
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______________, 1998
Page 1
EXHIBIT D
---------
LEGAL OPINION OF SELLER'S COUNSEL
_______________, 1998
Mercantile Bancorporation Inc.
One Mercantile Center
St. Louis, Missouri 63101
Re: First Financial Bancorporation
Ladies and Gentlemen:
We have acted as counsel to FIRST FINANCIAL BANCORPORATION, an Iowa
corporation ("Seller"), in connection with the acquisition (the "Acquisition")
by MERCANTILE BANCORPORATION INC., a Missouri corporation ("Mercantile"), of
Seller pursuant to the Agreement and Plan of Merger, dated as of _________, 1998
(the "Agreement"), by and among Mercantile, AMERIBANC, INC., a Missouri
corporation and wholly owned subsidiary of Mercantile ("Merger Sub"), and
Seller. We are rendering this opinion to you pursuant to Section 6.03(e) of the
Agreement.
In rendering the opinions set forth herein, we have examined originals or
copies of such corporate records of Seller and First National Bank Iowa, a
national banking association and a subsidiary of Seller ("Bank"), such laws and
the originals or copies of such other records, agreements, instruments,
certificates and documents as we have deemed necessary as a basis for the
opinions hereinafter expressed. We have assumed the genuineness of all
signatures; the legal capacity of all natural persons; the authenticity of all
documents submitted to us as originals; the conformity to the originals of all
documents submitted to us as certified, photostatic or conformed copies; the
authenticity of the originals of all such documents; and the correctness of
certificates submitted to us by officers and representatives of Seller and the
Bank. In addition, with respect to the opinions as to the due execution and
binding nature of the Agreement, we have assumed the due execution and delivery
of the Agreement by all parties thereto other than Seller. In rendering such
opinions, we have relied upon the above-described certificates, as to factual
matters material to such opinions, and upon certificates of public officials,
all of which certificates have been furnished or made available to you.
Capitalized terms not defined herein have the meanings specified in the
Agreement. Whenever our opinion with respect to the existence or absence of
facts is indicated to be based on our knowledge, we are referring to the actual
conscious knowledge of the Sidley & Austin attorneys who have represented Seller
in the matters that are the subject of this letter. Except to the extent
expressly set forth herein, we have not undertaken any independent investigation
to determine the existence or absence of such facts and no inference as to our
knowledge of the existence or absence of such facts should be drawn from our
representation of Seller or the Bank, or any of their respective subsidiaries.
Based upon and subject to the foregoing, we are of the opinion that:
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa. Seller is registered as a bank
holding company with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended.
(b) The Bank is a national banking association duly incorporated, validly
existing and in good standing under the laws of the United States of America.
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(c) Seller and each of the Seller's Subsidiaries possess all necessary
corporate power to own and operate their respective properties and to carry on
their respective businesses as and where the same are now being conducted, all
as described in Seller's most recent 10-K filed with the Securities and Exchange
Commission.
(d) Seller has the necessary corporate power and authority to enter into
and deliver the Agreement and to carry out its obligations thereunder.
(e) The Agreement has been duly authorized by all necessary corporate
action of the Board of Directors and the shareholders of Seller, and such
Agreement constitutes a valid and binding obligation of Seller that is
enforceable against Seller in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent
transfer or similar laws affecting the rights of creditors generally, or the
exercise of judicial discretion in accordance with general principles applicable
to equitable and similar remedies.
(f) To our knowledge, neither the execution, delivery and performance by
Seller of the Agreement nor the consummation of the Acquisition or compliance by
Seller or any Seller Subsidiary with any of the provisions of the Agreement will
(i) violate or result in a breach of any of the provisions of, or constitute a
default (or event which, with notice or the lapse of time, or both, would
constitute a default) under, or result in the termination of, or result in the
right of termination or acceleration of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the respective properties
of Seller or any Seller Subsidiary under any of the terms, conditions or
provisions of (A) the Articles or Certificate of Incorporation, as the case may
be, or By-Laws of Seller or any Seller Subsidiary, or (B) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Seller or any Seller Subsidiary or any o their
respective properties or assets may be subject, or (ii) violate any judgment,
ruling, order, writ, injunction or decree in which the Seller or any Seller
Subsidiary is named or to which any of them is a party, or any statute, rule or
regulation applicable to Seller or any Seller Subsidiary 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 Seller and its Subsidiaries, taken as a whole.
(g) Except as received prior to the date hereof, 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 Acquisition as
contemplated by the Agreement, other than the filing and approval, as the case
may be, of certificates of merger by the Secretary of State of the States of
Missouri and Iowa.
(h) The authorized capital stock of Seller consists of: (i) [15,000,000]
shares of common stock ("Seller Common Stock"); and nothing has come to our
attention that causes us to believe that, as of the date hereof, Seller did not
have ________ shares of Seller Common Stock issued and outstanding. Nothing has
come to our attention that causes us to believe that, as of the date hereof,
options to purchase ________ shares of Seller Common Stock under Seller stock
option and incentive plans were not outstanding. Other than as described above,
to our knowledge, there are no 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 of Seller, or contracts,
commitments, understandings or arrangements by which Seller is or may become
bound to issue additional shares of capital stock of Seller, or options,
warrants or rights to purchase or acquire any additional share of capital stock
of Seller. Nothing has come to our attention that causes us to believe that all
of the issued and outstanding shares of Seller Common Stock have not been
validly issued, or are not fully paid and nonassessable, or have been issued in
violation of any preemptive or similar right of any shareholder of Seller.
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(i) Seller is the owner of record of all of the issued and outstanding
shares of capital stock of each of the Seller Subsidiaries. To our knowledge,
except as set forth above, there are no 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 of any of the
Seller Subsidiaries, or contracts, commitments, understandings or arrangements
by which any of the Seller Subsidiaries is or may become bound to issue
additional shares of its capital stock, or options, warrants or rights to
purchase or acquire additional shares of its capital stock. Nothing has come to
our attention that cause us to believe that all of the issued and outstanding
shares of capital stock of each of the Seller Subsidiaries have not been validly
issued, or are not fully paid and nonassessable, or have been issued in
violation of any preemptive or similar right of any shareholder of such entity.
(j) To our knowledge, neither Seller nor any Seller Subsidiary is the
subject of any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Acquisition.
This opinion is limited to the laws of the State of Illinois and the
federal laws of the United States of America. Seller is incorporated under the
laws of Iowa. The Agreement provides that it is to be governed by the laws of
the State of Missouri. Notwithstanding such factors, we have assumed, with your
approval, that the laws of the States of Iowa and Missouri are the same as the
laws of the State of Illinois in all respects relevant to our opinions set forth
herein. Your counsel has acknowledged to us, on your behalf, that you understand
that there may be substantial differences between the laws of the States of Iowa
and Missouri and the laws of the State of Illinois, and that no assurance can be
given that the laws of the State of Illinois would be applied in interpreting
and enforcing the Agreement by any court, including a court located within the
State of Illinois or that the Illinois Business Corporation Act is similar to
the Iowa Business Corporation Act. Accordingly, we express no opinion and make
no representation as to the appropriateness of such assumption for your
purposes.
This opinion is being rendered solely for the benefit of the addressee
hereof and is not to be used or relied upon by any other person without our
prior written consent. We expressly disavow any obligation to update this letter
in the future.
Very truly yours,
55
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EXHIBIT 2.2
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT ("Option Agreement") dated as of May 7, 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 FIRST FINANCIAL BANCORPORATION
("Seller"), an Iowa 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, $1.25 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 707,189
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
$37.75 (the "Purchase Price") payable in cash as provided in Section 4 hereof.
In no event shall shares of Seller Common Stock for which the Option is
exercisable exceed 19.9% of the issued and outstanding shares of Seller Common
Stock, without giving effect to any shares subject to or issued pursuant to the
Option.
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.
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(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 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) (1) 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, (2) such meeting shall not have
been held, (3) such meeting shall have been canceled prior to termination
of the Merger Agreement in accordance with its terms or (4) Seller's Board
of Directors shall have withdrawn or modified in a manner adverse to Buyer
the recommendation of Selle s Board of Directors with respect to the Merger
Agreement; in the case of each of (1), (2), (3) and (4) above, after an
Extension Event.
(c) As used herein, the term "Extension Event" shall mean any of the
following events:
(i) a Purchase Event described in Section 3(b)(i) or (ii) hereof;
(ii) any person (other than Buyer or any of its Subsidiaries) shall
have "commenced" (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase shares of
Seller Common Stock such that, upon consummation of such offer, such person
would have Beneficial Ownership (as defined below) or the right to acquire
Beneficial Ownership of 15% or more of the voting power of Seller; or
(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 FIRST FINANCIAL BANCORPORATION, a copy of which is on file
at the principal office of FIRST FINANCIAL BANCORPORATION, and to
resale restrictions arising under the Securities Act of 1933, as
amended, and any applicable state securities laws. A copy of such
agreement will be provided to the holder hereof without charge upon
receipt by FIRST FINANCIAL BANCORPORATION 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, _________ shares of
Seller Common Stock, all of which, upon issuance pursuant hereto,
shall be duly authorized, validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all claims,
liens, encumbrances, restrictions (other than federal and state
securities restrictions) and security interests and not subject to any
preemptive rights.
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(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 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 wit 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 notic of the required repurchase under this
Section 7) and (B) the exercise price as determined pursuant to Section 2
hereof (subject to adjustment as provided in Section 6), multiplied by the
number of shares of Seller Common Stock with respect to which the Option
has not been exercised, but only if the Market/Tender Offer Price is
greater than such exercise price; and
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(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 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 purchase the
Option or all the shares covered by the Offeror's Notice or if the Federal
Reserve Board 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.
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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. Selle 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.
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.
(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.
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(d) Assignment. Other than as provided in Section 8 hereof, neither of the
parties hereto may sell, transfer, assign or otherwise dispose of any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person (whether by operation of law or otherwise),
without the express written consent of the other party.
(e) Notices. All notices or other communications that are required or
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 8.08 of the Merger Agreement (which is incorporated
herein by reference).
(f) Counterparts. This Option Agreement may be executed in counterparts,
and each such counterpart shall be deemed to be an original instrument, but both
such counterparts together shall constitute but one agreement.
(g) Specific Performance. The parties hereto agree that if for any reason
Buyer or Seller shall have failed to perform its obligations under this Option
Agreement, then either party hereto seeking to enforce this Option Agreement
against such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief. This provision
is without prejudice to 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 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.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
MERCANTILE BANCORPORATION INC.
By: /s/ John W. Rowe
-----------------------------------
John W. Rowe
Executive Vice President,
Mercantile Bank National Association,
Authorized Officer
FIRST FINANCIAL BANCORPORATION
By: /s/ Robert M. Sierk
-----------------------------------
Robert M. Sierk
President and Chief Executive Officer
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EXHIBIT 99.1
FIRST FINANCIAL BANCORPORATION
NEWS RELEASE - FOR IMMEDIATE USE
Date: May 8, 1998 Contacts: Robert M. Sierk, President & CEO
(319) 356-9024
To: Media Name A. Russell Schmeiser, EVP & COO
Attention: Contact Name (319) 356-9038
Mailing Address
City, State 00000
FIRST FINANCIAL BANCORPORATION ANNOUNCES PLANS TO MERGE WITH
MERCANTILE
Iowa City - First Financial Bancorporation today announced plans to merge with
Mercantile Bancorporation Inc. (NYSE:MTL), the St. Louis-based $32 billion bank
holding company. First Financial Bancorporation, headquartered in Iowa City,
Iowa, is the $550 million one-bank holding company for First National Bank Iowa,
which operates in ten locations in the Iowa City/Cedar Rapids Corridor.
First Financial's merger with Mercantile will substantially strengthen
Mercantile's market share position in Iowa, moving it to the unrivaled number
two position in the state. The acquisition also will allow Mercantile to enter
the rapidly growing Iowa City/Cedar Rapids Corridor, garnering a strong market
share position in Iowa City and enhancing the company's presence in Cedar
Rapids. In addition to improving Mercantile's market position in the state,
First Financial operates one of the largest trust departments in Iowa, with
nearly $780 million in assets.
"The merger with First Financial, in conjunction with the recently announced
Financial Services Corporation of Rock Island, Illinois, merger, complements
Mercantile's existing franchises in east and east central Iowa," said W.
Randolph Adams, Senior Executive Vice President and Chief Administrative Officer
of Mercantile Bancorporation Inc. "We now have a prominent Iowa market presence,
reaching from the Mississippi River to the state's western border."
"The opportunity to affiliate with Mercantile provides us with an exceptional
financial partner who shares our same community banking philosophy," said Robert
M. Sierk, President and Chief Executive Officer of First Financial
Bancorporation. "Since Mercantile entered the Iowa market in 1993, we have
watched their growth and progress, as well as their commitment to the
communities they serve." Following the merger, Sierk will serve as Chief
Executive Officer for the organization's Iowa City banking franchise.
Based upon Mercantile's closing stock price of $52.8125 on May 7, 1998, the
transaction is valued at approximately $169 million. First Financial
Bancorporation shareholders will receive 0.88 shares of Mercantile common stock
for each share or share equivalent of First Financial Bancorporation common
stock. The merger is structured as a tax-free exchange, 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, First Financial granted Mercantile an
option to acquire 19.9 percent of its issued and outstanding shares of common
stock, exercisable under certain circumstances. In addition, Mercantile may
repurchase up to ten percent of the shares issued in the transaction. The merger
is subject to the approval of First Financial Bancorporation shareholders and
various regulatory authorities, and is projected to be accretive during the
first year.
Mercantile Bancorporation, Inc., a $32 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 CBT Corporation, headquartered in Paducah,
Kentucky; Firstbank of Illinois Co., headquartered in Springfield, Illinois; and
Financial Services Corporation of the Midwest, headquartered in Rock Island,
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.
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