<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 29, 1997
----------------
HOMECORP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-18284 36-3680814
- --------------- ------------------------ --------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
1107 EAST STATE STREET, ROCKFORD, ILLINOIS 61104-2259
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (815) 987-2200
--------------
N/A
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(Former name or former address, if changed since last report.)
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Forward-Looking Statements
--------------------------
Statements contained in Exhibit 99 that are not historical facts may be
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Further,
such statements are subject to important factors that could cause actual
results to differ materially from those in Exhibit 99, including the following:
regional and national economic conditions; changes in levels of market interest
rates; credit risks of real estate, consumer and other lending activities;
regulatory factors (including regulatory approval of the acquisition); and the
ability to achieve synergies in the acquisition.
Item 5. Other Events
------------
On October 29, 1997, HomeCorp, Inc., a Delaware corporation (the
"Company"), issued a press release announcing the execution of an Agreement and
Plan of Merger dated October 29, 1997 by and among Mercantile Bancorporation
Inc., a Missouri corporation ("MBI"), Ameribanc, Inc., a Missouri corporation
("ABI") and the Company (the "Merger Agreement"). The Merger Agreement provides
for the merger of the Company with and into ABI, a wholly owned subsidiary of
MBI, with ABI as the surviving corporation (the "Merger"). After the Merger,
HomeBanc, a Federal Savings Bank, will merge with and into Mercantile Bank of
Northern Illinois.
Under the Merger Agreement, holders of Company common stock will receive
0.4968 of a share of MBI common stock in exchange for each share of Company
common stock held.
Consummation of the Merger is subject to various conditions, including:
(1) receipt of approval by the Company stockholders; (2) receipt of requisite
regulatory approvals; (3) receipt by each of the Company and MBI of an opinion
of counsel as to the tax treatment of certain aspects of the Merger; (4) receipt
by MBI of a letter of its independent auditor opining that the Merger will
qualify for pooling-of-interests accounting treatment; and (5) satisfaction of
certain other conditions.
In connection with the Merger Agreement, the Company and MBI entered
into a Stock Option Agreement, dated October 29, 1997 (the "Stock Option
Agreement"), pursuant to which the Company granted to MBI an option (the
"Option") to purchase, under certain circumstances, up to 424,720 shares of
Company common stock at a price, subject to certain adjustments, of $19.75 per
share. The Stock Option Agreement provides that in no event may the number of
shares for which the Option is exercisable exceed 19.9% of the issued and
outstanding shares of Company common stock. The Option was granted by the
Company as a condition and inducement to MBI to enter into the Merger Agreement.
The Merger Agreement, the Stock Option Agreement and the press release
issued on October 29, 1997 announcing the Merger are filed as exhibits hereto
and are incorporated by reference herein. The foregoing discussion does not
purport to be complete and is qualified in its entirety by reference to such
exhibits.
Item 7. Financial Statements and Exhibits
---------------------------------
(c) Exhibits
2
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2.1 Agreement and Plan of Merger, dated as of October 29, 1997, by and among
Mercantile Bancorporation Inc., Ameribanc, Inc. and HomeCorp, Inc.
2.2 Stock Option Agreement, dated as of October 29, 1997, by and between
Mercantile Bancorporation Inc. and HomeCorp, Inc.
99 Press release, dated October 29, 1997, of Mercantile Bancorporation Inc.
and HomeCorp, Inc.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOMECORP, INC.
Date: November 10, 1997 By: /s/ C. STEVEN SJOGREN
-----------------------------
C. Steven Sjogren
President and Chief Executive
Officer
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HOMECORP, INC.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Merger, dated as of October 29, 1997, by and
among Mercantile Bancorporation Inc., Ameribanc, Inc. and HomeCorp,
Inc.
2.2 Stock Option Agreement, dated as of October 29, 1997, by and between
Mercantile Bancorporation Inc. and HomeCorp, Inc.
99 Press release, dated October 29, 1997, of Mercantile Bancorporation
Inc. and HomeCorp, Inc.
5
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
among
MERCANTILE BANCORPORATION INC.,
a Missouri corporation
and
AMERIBANC, INC.,
a Missouri corporation
and
HOMECORP, INC.,
a Delaware corporation
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October 29, 1997
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TABLE OF CONTENTS
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<TABLE>
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Page
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Recitals.................................................................... 1
ARTICLE I
THE MERGER
1.01 The Merger............................................................. 1
1.02 Closing................................................................ 1
1.03 Effective Time......................................................... 1
1.04 Additional Actions..................................................... 2
1.05 Articles of Incorporation and By-Laws.................................. 2
1.06 Board of Directors and Officers........................................ 2
1.07 Conversion of Securities............................................... 2
1.08 Exchange Procedures.................................................... 3
1.09 No Fractional Shares................................................... 4
1.10 Closing of Stock Transfer Books........................................ 4
1.11 Anti-Dilution.......................................................... 5
1.12 Reservation of Right to Revise Transaction............................. 5
1.13 Material Adverse Effect................................................ 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization and Authority............................................. 6
2.02 Subsidiaries........................................................... 6
2.03 Capitalization......................................................... 7
2.04 Authorization.......................................................... 7
2.05 Seller Financial Statements............................................ 8
2.06 Seller Reports......................................................... 8
2.07 Title to and Condition of Assets....................................... 9
2.08 Real Property.......................................................... 9
2.09 Taxes.................................................................. 10
2.10 Material Adverse Effect................................................ 11
2.11 Loans, Commitments and Contracts....................................... 11
2.12 Absence of Defaults.................................................... 13
</TABLE>
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<TABLE>
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2.13 Litigation and Other Proceedings....................................... 14
2.14 Directors' and Officers' Insurance..................................... 14
2.15 Compliance with Laws................................................... 14
2.16 Labor.................................................................. 16
2.17 Material Interests of Certain Persons.................................. 16
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets; Financial
Assets..................................................................... 16
2.19 Employee Benefit Plans................................................. 18
2.20 Conduct of Seller to Date.............................................. 19
2.21 Absence of Undisclosed Liabilities..................................... 20
2.22 Proxy Statement, Etc................................................... 20
2.23 Registration Obligations............................................... 21
2.24 Tax and Regulatory Matters............................................. 21
2.25 Brokers and Finders.................................................... 21
2.26 Interest Rate Risk Management Instruments.............................. 21
2.27 Accuracy of Information................................................ 21
2.28 Year 2000 Compliant.................................................... 22
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
3.01 Organization and Authority............................................. 22
3.02 Capitalization of Mercantile........................................... 22
3.03 Authorization.......................................................... 23
3.04 Mercantile Financial Statements........................................ 24
3.05 Mercantile Reports..................................................... 24
3.06 Material Adverse Effect................................................ 24
3.07 Registration Statement, Etc............................................ 24
3.08 Taxes.................................................................. 24
3.09 Material Adverse Effect................................................ 25
3.10 Litigation and Other Proceedings....................................... 25
3.11 Compliance with Laws................................................... 25
3.12 Accuracy of Information................................................ 27
3.13 Brokers and Finders.................................................... 27
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time...................... 27
4.02 Forbearances of Seller................................................. 27
4.03 Forbearances of the Buyers............................................. 30
ARTICLE V
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence.................................. 30
5.02 Registration Statement; Regulatory Matters............................. 30
5.03 Stockholder Approval................................................... 31
5.04 Current Information.................................................... 31
5.05 Conforming Entries..................................................... 32
5.06 Environmental Reports.................................................. 33
</TABLE>
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<TABLE>
<S> <C>
5.07 Agreements of Affiliates............................................... 33
5.08 Expenses............................................................... 33
5.09 Miscellaneous Agreements and Consents.................................. 34
5.10 Employee Agreements and Benefits....................................... 34
5.11 Press Releases......................................................... 35
5.12 State Takeover Statutes................................................ 35
5.13 Directors' and Officers' Indemnification............................... 35
5.14 Tax Opinion Certificates............................................... 36
5.15 Employee Stock Options................................................. 36
5.16 Best Efforts to Insure Pooling......................................... 36
ARTICLE VI
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger............. 37
6.02 Conditions to Obligations of Seller.................................... 37
6.03 Conditions to Obligations of the Buyers................................ 38
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination............................................................ 39
7.02 Effect of Termination.................................................. 40
7.03 Amendment.............................................................. 40
7.04 Waiver................................................................. 40
ARTICLE VIII
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements............. 40
8.02 Indemnification........................................................ 40
8.03 No Assignment; Successors and Assigns.................................. 41
8.04 Severability........................................................... 41
8.05 No Implied Waiver...................................................... 41
8.06 Headings............................................................... 41
8.07 Entire Agreement....................................................... 41
8.08 Counterparts........................................................... 42
8.09 Notices................................................................ 42
8.10 Governing Law.......................................................... 43
</TABLE>
Exhibit A - Affiliate Letter (excluded)
Exhibit B - Director/Officer Certificate (excluded)
Exhibit C - Stockholder Certificate (excluded)
Exhibit D - Buyer's Opinion (excluded)
Exhibit E - Seller's Opinion (excluded)
<PAGE>
LIST OF SCHEDULES
Schedule 2.01 Articles/Bylaws/Lists of Stockholder
Schedule 2.02 Subsidiaries/Equity Securities
Schedule 2.03 List of Optionees/Exercise Price/Shares Subject to Options
Schedule 2.04(b) Authorizations
Schedule 2.05(a) Financial Statements
Schedule 2.08(a) Owned Real Property/Leased Real Property
Schedule 2.08(c) Interest in Real Property
Schedule 2.11(a) Deposits/Commitments
Schedule 2.11(b) Contracts
Schedule 2.11(c) Insurance
Schedule 2.11(f) Loans
Schedule 2.13 Litigation
Schedule 2.15 Compliance with Laws
Schedule 2.18(c) Real Estate Acquired through Foreclosure and Repossession
Schedule 2.18(f) Investment Securities
Schedule 2.19(a) Employee Benefit Plans
Schedule 2.19(d) Post-retirement Health and Medical Benefits
Schedule 2.19(f) Change in Control Payments
Schedule 2.20 Conduct of Seller
Schedule 2.26(a) Derivative Securities
Schedule 5.07 Affiliates
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered
into as of October 29, 1997 by and among Mercantile Bancorporation Inc., a
Missouri corporation ("Mercantile"), Ameribanc, Inc., a Missouri corporation
("Merger Sub" and, collectively, with Mercantile, the "Buyers"), and Homecorp,
Inc., a Delaware 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 savings and loan holding company
under the Home Owners' Loan Act of 1933, as amended (the "HOLA"); and
WHEREAS, the respective Boards of Directors of Seller and Merger Sub
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
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Agreement, Seller shall be merged with and into Merger Sub in accordance with
Chapter 351 of the Missouri Revised Statutes (the "Missouri Statute") and the
provisions of the Delaware General Corporation Law (the "DGCL"), 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
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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
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"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 a Certificate of Merger with the Office of the Secretary of State of
the State of Delaware. Unless otherwise mutually agreed in writing by Buyers
and Seller, subject to the terms and
<PAGE>
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 (i) not earlier than the satisfaction
of all conditions set forth in Section 6.01(a) and 6.01(b) (the "Approval Date")
and (ii) 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 Delaware, for filing, Articles of Merger and a Certificate of
Merger, respectively, in such form as required by, and executed and acknowledged
in accordance with, the relevant provisions of the Missouri Statute and the
DGCL.
1.04 Additional Actions. If, at any time after the Effective Time,
------------------
the Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Seller or Merger Sub, or (b) otherwise carry out the
purposes of this Agreement, Seller and its officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments or assurances in law
and to do all acts necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of Seller or
otherwise to take any and all such action.
1.05 Articles of Incorporation and By-Laws. The Articles of
-------------------------------------
Incorporation and By-Laws of Merger Sub in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation following the Merger, unless otherwise repealed or
amended.
1.06 Board of Directors and Officers. At the Effective Time, the
-------------------------------
directors and officers of Merger Sub immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving Corporation
following the Merger, and such directors and officers shall hold office in
accordance with the Surviving Corporation's By-Laws and applicable law. '
1.07 Conversion of Securities. At the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of the Buyers, Seller or the
holder of any of the following securities:
(a) Each share of the common stock, $1.00 par value, of Merger
Sub that is issued and outstanding immediately prior to the Effective
Time shall remain outstanding and shall be unchanged after the Merger
and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation; and
(b) Subject to Sections 1.10 and 1.11 hereof, each share of
common stock, $0.01 par value, of Seller ("Seller Common Stock")
issued and outstanding immediately prior to the Effective Time (other
than any shares 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), which shall be canceled), shall cease to be outstanding
and shall be converted into and become the right to receive 0.4968 of
a share (the "Exchange Ratio") of common stock, $0.01 par value, and
the associated "Rights" under the "Rights Agreement," as those terms
are defined in Section 3.02 hereof, of Mercantile (collectively,
"Mercantile Common Stock"). 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
<PAGE>
hereof) with (B) the total number of shares of Seller Common Stock
that are reserved for issuance pursuant to options relating to Seller
Common Stock and outstanding as of October 3, 1997 (as set forth in
Section 2.03 hereof) and dividing such number of shares of Seller
Common Stock (computed by aggregating (A) and (B) hereof (the "Fully
Diluted Shares")) into (ii) 951,380, the aggregate number of shares of
Mercantile Common Stock to be issued in the Merger. For purposes of
this Agreement, the Exchange Ratio reflects the payment of the three-
for-two Mercantile Common Stock dividend that was paid on October 1,
1997 to shareholders of record of Mercantile as of September 10, 1997
(the "Stock Dividend").
1.08 Exchange Procedures.
-------------------
(a) As soon as practicable following the Effective Time, Mercantile
shall mail or cause to be mailed to holders of record of certificates
formerly representing shares of Seller Common Stock (the
"Certificates"), as identified on the Seller Stockholder List (as
provided pursuant to Section 1.10 hereof), letters advising them of
the effectiveness of the Merger and instructing them to tender such
Certificates to Mercantile or its duly appointed agent as 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 Section 1.10 hereof, after the Effective Time, each
previous holder of a Certificate that surrenders such Certificate or
in lieu thereof, the Required Documentation, to the Exchange Agent,
with a properly completed and executed letter of transmittal with
respect to such Certificate, will be entitled to a certificate or
certificates representing the number of full shares of Mercantile
Common Stock into which the Certificate so surrendered shall have been
converted pursuant to this Agreement, and any distribution theretofore
declared and not yet paid with respect to such shares of Mercantile
Common Stock and any amount due with respect to fractional shares,
without interest (the "Merger Consideration"). Such shares of
Mercantile Common Stock, any amount due with respect to fractional
shares and any distribution shall be delivered by the Exchange Agent
to each such holder as promptly as practicable after such surrender.
(c) Each outstanding Certificate, until duly surrendered to the
Exchange Agent, shall be deemed to evidence ownership of the Merger
Consideration into which the stock previously represented by such
Certificate shall have been converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates shall cease to
have rights with respect to the stock previously represented by such
Certificates, and their sole rights shall be to exchange such
Certificates for the Merger Consideration and any shares of Mercantile
Common Stock to which the stockholder may be entitled pursuant to the
provisions of Section 1.07 hereof. After the closing of the transfer
books as described in Section 1.10 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
<PAGE>
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 declarations
shall be remitted to such person, without interest and less any taxes
that may have been imposed thereon. Certificates surrendered for
exchange by an affiliate shall not be exchanged until Buyers have
received a written agreement from such affiliate as required pursuant
to Section 5.07 hereof. Neither the Exchange Agent nor any party to
this Agreement nor any affiliate thereof shall be liable to any holder
of stock represented by any Certificate for any Merger Consideration
issuable or payable in the Merger that is paid to a public official
pursuant to applicable abandoned property, escheat or similar laws.
1.09 No Fractional Shares. Notwithstanding any other provision of
--------------------
this Agreement, neither certificates nor scrip for fractional shares of
Mercantile Common Stock shall be issued in the Merger. Each holder of shares of
Seller Common Stock who otherwise would have been entitled to a fraction of a
share of Mercantile Common Stock shall receive (by check from the Exchange
Agent, mailed to the stockholder with the certificate(s) for Mercantile Common
Stock which such holder is to receive pursuant to the Merger) in lieu thereof,
and at the time such holder receives the shares of Mercantile Common Stock to
which the holder is entitled, 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 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 as of the closing of said transfer
books, including the names, addresses, certificate numbers and
taxpayer identification numbers of such holders (the "Seller
Stockholder List"). Buyers shall be entitled to rely upon the Seller
Stockholder 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.
<PAGE>
1.11 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 stockholder of Seller shall be entitled to receive such number of
shares of Mercantile Common Stock or other securities as such stockholder 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.
1.12 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
consideration to be received by the stockholders of Seller in the Merger, (B)
adversely affect the tax treatment to Seller stockholders, 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.
1.13 Material Adverse Effect. As used in this Agreement, the term
-----------------------
"Material Adverse Effect" with respect to an entity means any condition, event,
change or occurrence that has or may reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), properties, business
or results of operations, of such entity and its Subsidiaries, taken as a whole
as reflected in the Seller Financial Statements (as defined in Section 2.05(b))
or the Mercantile Financial Statements (as defined in Section 3.04), as the case
may be; it being understood that a Material Adverse Effect shall not include:
(i) a change with respect to, or effect on, such entity and its Subsidiaries
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) in the case of Seller, any financial change resulting from
adjustments taken pursuant to Section 5.05 hereof; (iv) a change disclosed in
the Seller Financial Statements or the Mercantile Financial Statements, as the
case may be; or (v) any charges taken by Mercantile in connection with pending
or completed acquisitions or the disposition of certain businesses or lines of
business.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Buyers as follows:
<PAGE>
2.01 Organization and Authority. Seller is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, except where the failure of Seller to
so qualify would not have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole, and has the corporate power and authority to own
its properties and assets and to carry on its business as it is now being
conducted. Seller is registered as a savings and loan holding company with the
Office of Thrift Supervision (the "OTS") under the HOLA. True and complete
copies of the Certificate of Incorporation and By-Laws of Seller and the Charter
and By-Laws of HomeBanc, a federal savings bank, a wholly owned subsidiary of
Seller ("HomeBanc"), each as in effect on the date of this Agreement, are
attached hereto as Schedule 2.01. Also attached hereto as Schedule 2.01 are true
------------- -------------
and complete lists of the stockholders of record of each of the Seller and
HomeBanc (including directors' qualifying shares), as of a record date for the
most recent annual meeting of Seller.
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, 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 or savings bank duly incorporated or
organized and validly existing under the laws of its jurisdiction of
incorporation or organization, and has corporate power and authority
to own or lease its properties and assets and to carry on its business
as it is now being conducted. Each of the Seller Subsidiaries is duly
qualified to do business in each jurisdiction where its ownership or
leasing of property or the conduct of its business requires it so to
be qualified, except where the failure to so qualify would not have a
Material Adverse Effect on Seller and the Seller Subsidiaries, taken
as a whole. Except as set forth in Schedule 2.02, neither Seller nor
-------------
any Seller Subsidiary owns beneficially, directly or indirectly, any
shares of any class of Equity Securities or similar interests of any
corporation, bank, business trust, association or organization, or any
interest in a partnership or joint venture of any kind, other than
those identified as Seller Subsidiaries in Schedule 2.02 hereof.
-------------
(b) HomeBanc is a federal savings association duly organized and
validly existing under the laws of the United States of America. The
deposits of HomeBanc are insured by the Federal Deposit Insurance
Corporation (the "FDIC") under the Federal Deposit Insurance Act of
1950, as amended (the "FDI Act").
2.03 Capitalization. The authorized capital stock of Seller consists
--------------
of (i) 5,000,000 shares of Seller Common Stock, of which, as of October 3, 1997,
1,708,552 shares were issued and outstanding and (ii) 1,000,000 shares of
preferred stock, $0.01 par value, of which, as of September 30, 1997, no shares
were outstanding. As of September 30, 1997, Seller had reserved 270,654 shares
of Seller Common Stock for issuance under Seller's stock option and incentive
plans (including grants reflected in
<PAGE>
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 206,384 shares of Seller Common Stock were outstanding as of October 3,
1997. Since October 3, 1997, no equity securities of Seller have been issued,
other than shares of Seller Common Stock which may have been issued upon the
exercise of Seller Stock Options. "Equity Securities" of an issuer means capital
stock or other equity securities of such issuer, options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of any capital
stock or other equity securities of such issuer, or contracts, commitments,
understandings or arrangements by which such issuer is or may become bound to
issue additional shares of its capital stock or other equity securities of such
issuer, or options, warrants, scrip or rights to purchase, acquire, subscribe
to, calls on or commitments for any shares of its capital stock or other equity
securities. Except as set forth above, there are no other Equity Securities of
Seller outstanding. All of the issued and outstanding shares of Seller Common
Stock are validly issued, fully paid and nonassessable, and have not been issued
in violation of any preemptive right of any stockholder of Seller. Neither
Seller nor any Seller Subsidiary has taken or agreed to take any action or has
any knowledge of any fact or circumstance and neither Seller nor any Seller
Subsidiary will take any action that would prevent the Merger from qualifying
for pooling-of-interests accounting treatment.
2.04 Authorization.
-------------
(a) Seller has the corporate power and authority to enter into this
Agreement and, subject to the approval of this Agreement by the
stockholders of Seller and Regulatory Authorities (as defined in
Section 2.06), to carry out its obligations hereunder. The only
stockholder vote required for Seller to approve this Agreement is the
affirmative vote of the holders of a majority 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 stockholders and subject
to the receipt of such approvals of the Regulatory Authorities as may
be required by statute or regulation, this Agreement is a valid and
binding obligation of Seller enforceable against Seller in accordance
with its terms.
(b) Except as disclosed on Schedule 2.04(b), neither the execution nor
----------------
delivery nor performance by Seller of this Agreement, nor the
consummation by Seller of the transactions contemplated hereby, nor
compliance by Seller with any of the provisions hereof, 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 of Incorporation, charter or By-
Laws or (y) any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to
which Seller or any of the Seller Subsidiaries is a party or by
which it may be bound, or to which Seller or any of the Seller
Subsidiaries or any of the properties or assets of Seller or any of
the Seller Subsidiaries may be subject, 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,
<PAGE>
injunction, decree, statute, rule or regulation applicable to Seller
or any of the Seller Subsidiaries or any of their respective
properties or assets.
(c) Other than in connection or in compliance with the provisions of the
Missouri Statute, the DGCL, the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), the securities or blue
sky laws of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required under the BHCA, or
any required approvals of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the OTS or other
governmental agencies or governing boards having regulatory authority
over Seller or any Seller Subsidiary, no notice to, filing with,
exemption or review by, or authorization, consent or approval of, any
public body or authority is necessary for the consummation by Seller
of the transactions contemplated by this Agreement.
2.05 Seller Financial Statements.
---------------------------
(a) Attached hereto as Schedule 2.05(a) are copies of the following
documents: (i) Seller's Annual Report to Stockholders for the year
ended December 31, 1996; and (ii) Seller's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1997 and June 30, 1997.
(b) The financial statements contained in the documents referenced in
Schedule 2.05(a) are referred to collectively as the "Seller Financial
----------------
Statements." The Seller Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP")
during the periods involved, and present fairly the consolidated
financial position of Seller and the Seller Subsidiaries at the dates
thereof and the consolidated results of operations, changes in
stockholders' equity and cash flows of Seller and the Seller
Subsidiaries for the periods stated therein.
(c) Seller and the Seller Subsidiaries have each prepared, kept and
maintained through the date hereof true, correct and complete
financial books and records which fairly reflect their respective
financial conditions, results of operations, changes in stockholders'
equity and cash flows.
2.06 Seller Reports. Except as set forth in Except as set forth in
--------------
Schedule 2.06, since January 1, 1995, each of Seller and the Seller Subsidiaries
- -------------
has timely filed all material reports, registrations and statements, together
with any required amendments thereto, that it was required to file with (i) the
SEC, including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements, (ii) the OTS, (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, to the best knowledge of Seller, there is no material unresolved
violation, criticism or exception by any
<PAGE>
Regulatory Authority with respect to any report or statement filed by, or any
examinations of, Seller or any of the Seller Subsidiaries.
2.07 Title to and Condition of Assets.
--------------------------------
(a) Except as may be reflected in the Seller Financial Statements and
with the exception of all "Real Property" (which is the subject of
Section 2.08 hereof) Seller and the Seller Subsidiaries have, and at
the Closing Date will have, good and marketable title to their real
and personal property, including, without limitation, those reflected
in the Seller Financial Statements (except those disposed of in the
ordinary course of business since the date thereof), free and clear of
any Lien, except for Liens for (i) taxes, assessments or other
governmental charges not yet delinquent and (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.
(b) No material real or personal property that is reflected as owned by
Seller or any of the Seller Subsidiaries in the Seller Financial
Statements as of June 30, 1997, has 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
and in regular use, 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 and serviceable condition,
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 (such real property being herein
referred to as the "Owned Real Property") and each parcel of real
property leased by Seller or any of the Seller Subsidiaries (such real
property being herein referred to as the "Leased Real Property") is
attached to Schedule 2.08(a). In addition, a copy of the lease for
----------------
each parcel of Leased Real Property is attached to Schedule 2.08(a).
----------------
Seller shall update Schedule 2.08(a) within ten days of acquiring any
----------------
Owned Real Property or leasing any real property after the date
hereof. Collectively, the Owned Real Property and the Leased Real
Property is 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
<PAGE>
2.08(a) except interests as a mortgagee, and except for any real
property acquired in foreclosure or in lieu of foreclosure and being
held for disposition as required by law.
(d) 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, to the
best knowledge of Seller, 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) There are no underground storage tanks located on, in or under any
Owned Real Property. Neither Seller nor any Seller Subsidiaries own
or operate any underground storage tank at any Leased Real Property.
2.09 Taxes. Seller and each Seller Subsidiary have timely filed or
-----
will timely file (including extensions) all 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
(tentatively or definitely) against Seller or any of the Seller Subsidiaries
which 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. 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. There is no deficiency or refund
litigation or, to the best knowledge of Seller, matter in controversy with
respect to Seller Returns. Neither Seller nor any of the Seller Subsidiaries has
extended or waived any statute of limitations on the assessment of any tax due
that is currently in effect.
<PAGE>
2.10 Material Adverse Effect. Since June 30, 1997, there has been no
-----------------------
Material Adverse Effect on Seller and the Seller Subsidiaries, taken as a whole.
2.11 Loans, Commitments and Contracts.
--------------------------------
(a) Schedule 2.11(a) contains a complete and accurate listing as of
----------------
the date hereof of all contracts entered into with respect to deposits
of $250,000 or more, by account, and all loan agreements and
commitments, notes, security agreements, repurchase agreements,
bankers' acceptances, outstanding letters of credit and commitments to
issue letters of credit, participation agreements, and other documents
relating to or involving extensions of credit and other commitments to
extend credit by Seller or any of the Seller Subsidiaries with respect
to any one entity or related group of entities in excess of $500,000
to which Seller or any of the Seller Subsidiaries is a party or by
which it is bound, by account, and, where applicable, such other
information as shall be necessary to identify any related group of
entities.
(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 the
------- ----------------
date hereof 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) franchise or license agreement;
(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) and 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 $50,000;
<PAGE>
(vi) contract containing covenants which limit the ability of
Seller or any of the Seller Subsidiaries to compete in any line
of business or with any person or which involves any restrictions
on the geographical area in which, or method by which, Seller or
any of the Seller Subsidiaries may carry on their respective
businesses (other that as may be required by law or any
applicable Regulatory Authority);
(vii) contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K as
promulgated by the SEC to be performed after the date of this
Agreement that has not been filed or incorporated by reference in
the Seller Reports;
(viii) lease with annual rental payments aggregating $25,000 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 at
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 $100,000 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 $100,000.
(c) Seller and/or the Seller Subsidiaries carry property, liability,
director and officer errors and omissions, 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, insurance policies 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 Sections 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
-------------------------------
<PAGE>
valid, binding and enforceable obligation of the parties sought to be
bound thereby, except as the enforceability thereof against the
parties thereto 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 the date of this Agreement, by account, of
(i) all loans in excess of $100,000 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 $100,000 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 $100,000, 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 commercial
loans (including commercial real estate) in excess of $100,000 all
notification letters and other written communications from Seller or
any of the Seller Subsidiaries to any of their respective borrowers,
customers or other parties during the past twelve months wherein
Seller or any of the Seller Subsidiaries has requested or demanded
that actions be taken to correct existing defaults or facts or
circumstances which may become defaults; (v) each borrower, customer
or other party which has notified Seller or any of the Seller
Subsidiaries during the past twelve months of, or has asserted against
Seller or any of the Seller Subsidiaries, in each case in writing, any
"lender liability" or similar claim, and, to the best knowledge of
Seller, each borrower, customer or other party which has given Seller
or any of the Seller Subsidiaries any oral notification of, or orally
asserted to or against Seller or any of the Seller Subsidiaries, any
such claim; or (vi) all loans in excess of $50,000 (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.
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
<PAGE>
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
stockholder of Seller or any of the Seller Subsidiaries (or any former
stockholder of Seller or any of the Seller Subsidiaries) or involving claims
under the Community Reinvestment Act of 1977, as amended, the Bank Secrecy Act,
the fair lending laws or any other similar laws.
2.14 Directors' and Officers' Insurance. Each of Seller and the
----------------------------------
Seller Subsidiaries has taken or will take all requisite action (including,
without limitation, the making of claims and the giving of notices) pursuant to
its directors' and officers' liability insurance policy or policies in order to
preserve all rights thereunder with respect to all matters (other than matters
arising in connection with this Agreement and the transactions contemplated
hereby) occurring prior to the Effective Time that are known to Seller.
2.15 Compliance with Laws
--------------------
(a) To the best knowledge of Seller, Seller and each of the Seller
Subsidiaries have all permits, licenses, authorizations, orders and
approvals of, and have made all filings, applications and
registrations with, all Regulatory Authorities that are required in
order to permit them to own or lease their respective properties and
assets and to carry on their respective businesses as presently
conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best
knowledge of Seller, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are
current; in each case except for permits, licenses, authorizations,
orders, approvals, filings, applications and registrations the failure
to have (or have made) would not have a Material Adverse Effect on
Seller and the Seller Subsidiaries, taken as a whole.
(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, 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
<PAGE>
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 hazardous, toxic or dangerous
substance, pollutant, waste, gas or material, including, without
limitation, petroleum and petroleum products, asbestos, PCBs,
pesticides, herbicides and any other 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 clean-up
(each, a "Toxic Substance"), 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 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 and, to the best knowledge of
the Seller, no such claim, action, suit or proceeding has been
threatened 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. Except for statutory or
regulatory restrictions of general application, no Regulatory
Authority has placed any restriction on the business of Seller or any
of the Seller Subsidiaries which reasonably could be expected to have
a Material Adverse Effect on Seller and the Seller Subsidiaries, taken
as a whole.
(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 (A) are disclosed on Schedule 2.15 or (B) 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 Federal Deposit Insurance Act, as amended (the
"FDI Act"), (iii) requiring or threatening to require Seller or any of
the Seller Subsidiaries, or indicating that Seller or any of the
Seller Subsidiaries may be required, to enter into a cease and desist
order, agreement or memorandum of understanding or any other agreement
restricting or limiting or purporting to direct, restrict or limit in
any manner the operations of Seller or any of the Seller Subsidiaries,
including, without limitation, any restriction on the payment of
dividends. No such cease and desist order, agreement or memorandum of
understanding or other agreement is currently in effect.
<PAGE>
(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.
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
-------------------------------------
the Seller's Proxy Statement for its 1997 Annual Meeting of Stockholders, to the
best knowledge of the Seller, 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 June 30, 1997 were
acquired in the ordinary course of business and were collectible in
full in the ordinary course of business, except for possible loan and
lease losses that are adequately provided for in the allowance for
loan and lease losses reflected in such Seller Financial Statements,
and the collection experience of Seller and the Seller Subsidiaries
since June 30, 1997 to the date hereof, has not deviated in any
material and adverse manner from the credit and collection experience
of Seller and the Seller Subsidiaries, taken as a whole, for the year
ended December 31, 1996.
(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 June 30, 1997, were adequate
in all material respects under the requirements of GAAP, or regulatory
accounting principles, as the case may be, to provide for possible
losses on loans and leases (including, without limitation, accrued
interest receivable) and credit commitments (including, without
limitation, stand-by letters of credit) as of the date of such balance
sheet.
(c) Schedule 2.18(c) sets forth as of the date of this Agreement all
----------------
assets classified by Seller as real estate acquired through
foreclosure or repossession, including foreclosed assets.
(d) As of September 30, 1997, the aggregate amount of all Non-
Performing Assets (as defined below) on the books of Seller and the
Seller Subsidiaries did not exceed $7,200,000. "Non-Performing Assets"
shall mean (i) all loans (A) that are contractually past due 90 days
or more in the payment of principal and/or interest, (B) that are on
nonaccrual status, (C) that have been classified "doubtful," "loss" or
the equivalent thereof
<PAGE>
by any Regulatory Agency or (D) where the interest rate terms have
been reduced and/or the maturity dates have been extended subsequent
to the agreement under which the loan was originally created due to
concerns regarding the borrower's ability to pay in accordance with
such initial terms, and (ii) all assets classified by Seller as real
estate acquired through foreclosure or in lieu of foreclosure,
including in-substance foreclosures, and all other assets acquired
through foreclosure or in lieu of foreclosure.
(e) All loans receivable (including discounts) and accrued interest
entered on the books of Seller and the Seller Subsidiaries, to the
extent unpaid on the Closing Date, arose out of bona fide arm's-length
transactions, were made for good and valuable consideration in the
ordinary course of Seller's or the appropriate Seller Subsidiary's
respective business, and the notes or other evidences of indebtedness
with respect to such loans or discounts are true and genuine and are
what they purport to be. To the best knowledge of Seller, the loans,
discounts and the accrued interest reflected on the books of Seller
and the Seller Subsidiaries are subject to no defenses, set-offs or
counterclaims (including, without limitation, those afforded by usury
or truth-in-lending laws), except as may be provided by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by
general principles of equity. All such loans are owned by Seller or
the appropriate Seller Subsidiary free and clear of any liens,
restrictions or encumbrances.
(f) The notes and other evidences of indebtedness evidencing the
loans described in (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 their respective Seller Financial Statements and
all securities entered on the books of Seller or the appropriate
Seller Subsidiary subsequent to June 30, 1997, except for those sold
or redeemed in the ordinary course of business. A complete and
accurate list of such investment securities as of September 30, 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, currently 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, or will promptly furnish after the date hereof, 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
<PAGE>
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, to the best knowledge of the
Seller, such determination letter may still be relied upon, and each
related trust is exempt from taxation under Section 501(a) of the
Code; (ii) the actuarial present value of all benefits vested and all
benefits accrued under each Pension Plan which is subject to Title IV
of ERISA, valued using the assumptions in the most recent actuarial
report, 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) to the best knowledge of the Seller, 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 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, 1989; 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), 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, provided that the Seller makes no representation or
warranty herein with respect to the
<PAGE>
Employment Agreements of even date herewith by and between Mercantile
and C. Steven Sjogren and Mercantile and John R. Perkins.
2.20 Conduct of Seller to Date. From and after June 30, 1997 through
-------------------------
the date of this Agreement, except as set forth in the Seller Financial
Statements and the Seller Reports and except as disclosed in Schedule 2.20: (i)
-------------
Seller and the Seller Subsidiaries have conducted their respective businesses in
the ordinary and usual course consistent with past practices; (ii) 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 subjected to Lien any of its assets or properties other than in the
ordinary course of business consistent with past practice; (vi) neither Seller
nor any of the Seller Subsidiaries has discharged or satisfied any Lien or paid
any obligation or liability (absolute or contingent), other than in the ordinary
course of business; (vii) neither Seller nor any of the Seller Subsidiaries has
sold, assigned, transferred, leased, exchanged, or otherwise disposed of any of
its properties or assets other than for a fair consideration in the ordinary
course of business; (viii) except as required by contract or law, neither Seller
nor any of the Seller Subsidiaries has (A) increased the rate of compensation
of, or paid any bonus to, any of its directors, officers, or other employees,
except in accordance with existing policy, (B) entered into any new, or amended
or supplemented any existing, employment, management, consulting, deferred
compensation, severance, or other similar contract, (C) entered into,
terminated, or substantially modified any of the Seller Employee Plans or (D)
agreed to do any of the foregoing; (ix) neither Seller nor any Seller Subsidiary
has suffered any material damage, destruction, or loss, whether as the result of
fire, explosion, earthquake, accident, casualty, labor trouble, requisition, or
taking of property by any Regulatory Authority, flood, windstorm, embargo, riot,
act of God or the enemy, or other casualty or event, and whether or not covered
by insurance; (x) neither Seller nor any of the Seller Subsidiaries has canceled
or compromised any debt, except for debts charged off or compromised in
accordance with the past practice of Seller and the Seller Subsidiaries; and
(xi) neither Seller nor any of the Seller Subsidiaries has entered into any
material transaction, contract or commitment outside the ordinary course of its
business.
2.21 Absence of Undisclosed Liabilities.
----------------------------------
(a) As of the date of this Agreement, neither Seller nor any of the
Seller Subsidiaries has any debts, liabilities or obligations equal to
or exceeding $50,000, individually or $100,000 in the aggregate,
whether accrued, absolute, contingent or otherwise and whether due or
to become due, which are required to be reflected in the Seller
Financial Statements or the notes thereto in accordance with GAAP
except:
(i) debts, liabilities, obligations and contingencies reflected
on the Seller Financial Statements and the notes thereto;
<PAGE>
(ii) operating leases reflected on Schedule 2.11(b); and
----------------
(iii) debts, liabilities or obligations incurred or arising
since June 30, 1997 in the ordinary and usual course of their
respective businesses, none of which are for breach of
contract, breach of warranty, torts, infringements or lawsuits
and none of which have a Material Adverse Effect on Seller and
the Seller Subsidiaries, taken as a whole.
(b) Neither Seller nor any of the Seller Subsidiaries was as of
June 30, 1997, and since such date to the date hereof, has become a
party to, any contract or agreement, excluding deposits, loan
agreements, and commitments, notes, security agreements, repurchase
and reverse repurchase agreements, bankers' acceptances, outstanding
letters of credit and commitments to issue letters of credit,
participation agreements and other documents relating to transactions
entered into by Seller or any of the Seller Subsidiaries in the
ordinary course of business, that had, has or may be reasonably
expected to have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
2.22 Proxy Statement, Etc. None of the information regarding Seller
---------------------
or any of the Seller Subsidiaries to be supplied by Seller for inclusion or
included in (i) the Registration Statement on Form S-4 to be filed with the SEC
by Mercantile for the purpose of registering the shares of Mercantile Common
Stock to be exchanged for shares of Seller Common Stock pursuant to the
provisions of this Agreement (the "Registration Statement"), (ii) the Proxy
Statement to be mailed to Seller's stockholders in connection with the meeting
to be called to consider this Agreement and the Merger (the "Proxy Statement")
or (iii) any other documents to be filed with any Regulatory Authority in
connection with the transactions contemplated hereby will, at the respective
times such documents are filed with any Regulatory Authority and, in the case of
the Registration Statement, when it becomes effective and, with respect to the
Proxy Statement, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the meeting of Seller's
stockholders referred to in Section 5.03, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for such meeting. All documents which Seller or any of the Seller
Subsidiaries is responsible for filing with any Regulatory Authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
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 and Regulatory 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 or (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.
2.25 Brokers and Finders. Except for Keefe Bruyette & Woods, Inc.,
-------------------
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
<PAGE>
finder's fees, and no broker or finder has acted directly or indirectly for
Seller or any of the Seller Subsidiaries in connection with this Agreement or
the transactions contemplated hereby.
2.26 Interest Rate Risk Management Instruments
-----------------------------------------
(a) Set forth on Schedule 2.26(a) is a list as of the date hereof of
----------------
all interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which Seller or any of
the Seller Subsidiaries is a party or by which any of their properties
or assets may be bound.
(b) All such interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which Seller
or any of the Seller Subsidiaries is a party or by which any of their
properties or assets may be bound were entered into in the ordinary
course of business and, to the best knowledge of Seller, in accordance
with prudent banking practice and applicable rules, regulations and
policies of Regulatory Authorities and with counterparties believed to
be financially responsible at the time and are legal, valid and
binding obligations of Seller or a Seller Subsidiary and are in full
force and effect. Seller and each of the Seller Subsidiaries has duly
performed in all material respects all of its obligations thereunder
to the extent that such obligations to perform have accrued, and to
the best knowledge of Seller, there are no material breaches,
violations or defaults or allegations or assertions of such by any
party thereunder.
2.27 Accuracy of Information. The statements contained in this
-----------------------
Agreement, the Schedules and any other written document executed and delivered
by or on behalf of Seller pursuant to the terms of this Agreement are true and
correct as of the date hereof or as of the date delivered in all material
respects, and such statements and documents do not omit any material fact
necessary to make the statements contained therein not misleading.
2.28 Year 2000 Compliant. To the best knowledge of Seller, all
-------------------
computer software and hardware utilized by Seller or any Seller Subsidiary is,
or Seller is taking steps to be, Year 2000 compliant, which, for purposes of
this Agreement, shall mean that the data outside the range 1990-1999 will be
correctly processed in any level of computer hardware or software including, but
not limited to, microcode, firmware, applications programs, files and data
bases. All computer software is, or Seller is taking steps to ensure that all
computer software will be, designed to be used prior to, during and after the
calendar year 2000 A.D., and such software will operate during each such time
period without error relating to date data, specifically including any error
relating to, or the product of, date data that represents or references
different centuries or more than one century.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
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
<PAGE>
property or the conduct of its business requires it to be so qualified and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted, except where the failure to be so
qualified would not have a Material Adverse Effect on Mercantile and its
Subsidiaries, taken as a whole. Each of Mercantile and Merger Sub is registered
as a bank holding company with the Federal Reserve Board under the BHCA.
3.02 Capitalization of Mercantile. The authorized capital stock of
----------------------------
Mercantile consists of (i) 200,000,000 shares of Mercantile Common Stock, of
which, as of September 30, 1997, 86,981,445 shares were issued and 86,877,787
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 September 30, 1997, Mercantile had reserved: (i) 8,747,596
shares of Mercantile Common Stock for issuance under various Mercantile employee
and/or director stock option, incentive and/or benefit plans ("Mercantile
Employee/Director Stock Grants"); and (ii) 2,550,000 shares of Mercantile Common
Stock for issuance upon the acquisition of Horizon Bancorp, Inc. ("Horizon")
pursuant to the Agreement and Plan of Merger dated as of July 31, 1997 by and
between Mercantile and Horizon. From September 30, 1997 through the date of
this Agreement, no shares of Mercantile Common Stock have been issued, excluding
any such shares which may have been issued in connection with Mercantile
Employee/Director Stock Grants and shares issued in connection with the Stock
Dividend.
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 the Merger from qualifying for pooling-of-interests accounting
treatment. Except as set forth above, there are no other Equity Securities of
Mercantile outstanding. All of the issued and outstanding shares of Mercantile
Common Stock are validly issued, fully paid, and nonassessable, and have not
been issued in violation of any preemptive right of any shareholder of
Mercantile. At the Effective Time, the Mercantile Common Stock to be issued in
the Merger will be duly authorized, validly issued, fully paid and
nonassessable, will not be issued in violation of any preemptive right of any
shareholder of Mercantile and will be listed for trading on the NYSE.
3.03 Authorization.
-------------
(a) Mercantile and Merger Sub each have the corporate power and
authority to enter into this Agreement and to carry out their
respective obligations hereunder. The execution, delivery and
performance of this Agreement by Mercantile and Merger Sub and the
consummation by Mercantile and Merger Sub of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action of Mercantile and Merger Sub.
<PAGE>
Subject to the receipt of such approvals of the Regulatory Authorities
as may be required by statute or regulation, this Agreement is a valid
and binding obligation of Mercantile and Merger Sub enforceable
against each in accordance with its terms.
(b) Neither the execution, delivery and performance by Mercantile and
Merger Sub of this Agreement, nor the consummation by Mercantile and
Merger Sub of the transactions contemplated hereby, nor compliance by
Mercantile and Merger Sub with any of the provisions hereof, will (i)
violate, conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any Lien
upon any of the properties or assets of Mercantile or Merger Sub under
any of the terms, conditions or provisions of (x) their respective
Articles of Incorporation or By-Laws, or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Mercantile or Merger Sub is a party
or by which they may be bound, or to which Mercantile or Merger Sub or
any of their respective properties or assets may be subject, or (ii)
subject to compliance with the statutes and regulations referred to in
subsection (c) of this Section 3.03, violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation
applicable to Mercantile or Merger Sub or any of their respective
properties or assets; other than violations, conflicts, breaches,
defaults, terminations, accelerations or Liens which would not have a
Material Adverse Effect on Mercantile and its Subsidiaries, taken as a
whole.
(c) Other than in connection with or in compliance with the
provisions of the Missouri Statute, the DGCL, 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 supplemental consolidated
-------------------------------
balance sheets of Mercantile and its Subsidiaries as of December 31, 1996, 1995
and 1994 and related supplemental consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996, together with the notes thereto, audited by KPMG Peat
Marwick LLP, as filed with the SEC on Form 8-K dated May 13, 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 financial respects and have been maintained in accordance with good
business practices. Neither Mercantile nor any of its Subsidiaries has any
material contingent liabilities that are not described in the Mercantile
Financial Statements.
3.05 Mercantile Reports. Since January 1, 1995, each of Mercantile
------------------
and its Subsidiaries has filed all reports, registrations and statements,
together with any required amendments thereto, that it was required to file
with any Regulatory Authority. All such reports and statements filed
<PAGE>
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 June 30, 1997, there has been no
-----------------------
Material Adverse Effect on Mercantile and its Subsidiaries, taken as a whole.
3.07 Registration Statement, Etc. None of the information regarding
----------------------------
Mercantile or any of its Subsidiaries to be supplied by Buyers for inclusion or
included in (i) the Registration Statement, (ii) the Proxy Statement, or (iii)
any other documents to be filed with any Regulatory Authority in connection with
the transactions contemplated hereby will, at the respective times such
documents are filed with any Regulatory Authority and, in the case of the
Registration Statement, when it becomes effective and, with respect to the Proxy
Statement, when mailed, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the meeting of
shareholders referred to in Section 5.03, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for such meeting. All documents which Mercantile or Merger Sub are
responsible for filing with any Regulatory Authority in connection with the
Merger will comply as to form in all material respects with the provisions of
applicable law.
3.08 Taxes. Mercantile and each of its Subsidiaries have timely filed
-----
or will timely file (including extensions) all tax returns required to be filed
at or prior to the Closing Date ("Buyer Returns"). Mercantile and each of its
Subsidiaries have paid, or set up adequate reserves of the Mercantile Financial
Statements for the payment of, all taxes required to be paid in respect of all
periods up to and including the latest period covered by the Mercantile
Financial Statements. Neither Mercantile nor any of its Subsidiaries has any
material liability for any such taxes in excess of the amounts so paid or
reserves so established, and no deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
definitely) against Mercantile or any of its Subsidiaries which would not be
covered by existing reserves. Neither Mercantile nor any of its 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 been since filed and no
requests for waivers of the time to assess any tax are pending. There is no
deficiency or refund litigation or, to the best knowledge of Mercantile, matter
in controversy with respect to Mercantile Returns. Neither Seller nor any of
the Subsidiaries has extended or waived any statute of limitations on the
assessment of any tax due that is currently in effect.
3.09 Material Adverse Effect. Since June 30, 1997, there has been no
-----------------------
Material Adverse Effect on Mercantile and its Subsidiaries, taken as a whole.
3.10 Litigation and Other Proceedings. Except as otherwise disclosed
--------------------------------
in the Mercantile Financial Statements, neither Mercantile nor any of its
Subsidiaries is a party to any pending or, to the best knowledge of Mercantile,
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 Mercantile and its 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 Mercantile, threatened against Mercantile or any of
its Subsidiaries or any of their
<PAGE>
respective officers or directors by any stockholder of Mercantile or any of its
Subsidiaries (or any former stockholders of Mercantile or any of its
Subsidiaries) or involving claims under the Community Reinvestment Act of 1977,
as amended, the Bank Secrecy Act, the fair lending laws or any other similar
laws.
3.11 Compliance with Laws.
--------------------
(a) To the best knowledge of Mercantile, Mercantile and each of its
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 Mercantile, 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 Mercantile and its Subsidiaries, taken as a
whole.
(b) (i) Each of Mercantile and its Subsidiaries has complied with all
laws, regulations and orders (including, without limitation, zoning
ordinances, building codes, ERISA, and securities, tax, environmental,
civil rights, and occupational health and safety laws and regulations
including, without limitation, in the case of Mercantile or any of its
Subsidiaries that is a bank or savings association, banking
organization, banking corporation or trust company, all statutes,
rules, regulation and policy statements pertaining to the conduct of
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 Mercantile nor
any of its Subsidiaries is in default under, and no event has occurred
which, with the lapse of time or notice or both, could result in a
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 inequity, except in
the case of subparts (i) or (ii), where failure to comply or default
would not have a Material Adverse Effect on Mercantile and its
Subsidiaries, taken as a whole.
(c) Neither Mercantile nor any of its Subsidiaries is subject to or
reasonably likely to incur a liability as a result of its ownership,
operation, or use of any Property of Mercantile (whether directly or,
to the best knowledge of Mercantile, as a consequence of such Property
being acquired in foreclosure or in lieu of foreclosure or being a
part of the investment portfolio of Mercantile or any of its
Subsidiaries) (A) that is contaminated by or contains any Toxic
Substances, including, without limitation, petroleum, 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
Mercantile and its Subsidiaries, taken as a whole. "Property" shall
include all property (real or personal, tangible or intangible) owned
or
<PAGE>
controlled by Mercantile or any of its Subsidiaries, including without
limitation, property acquired under foreclosure or in lieu of
foreclosure, property in which any venture capital or similar unit of
Mercantile or any of its Subsidiaries has an interest and, to the best
knowledge of Mercantile, property held by Mercantile or any of its
Subsidiaries in its capacity as a trustee. No claim, action, suit or
proceeding is pending and no material claim has been asserted against
Mercantile or any of its Subsidiaries relating to the Property of
Mercantile or any of its Subsidiaries, and, to the best knowledge of
Mercantile, no such claim, action, suit or proceeding has been
threatened, 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 Mercantile or any of
its Subsidiaries with respect to the same. Except for statutory or
regulatory restrictions of general application, no Regulatory
Authority has placed any restriction on the business of Mercantile or
any of its Subsidiaries which reasonably could be expected to have a
Material Adverse Effect on Mercantile and its Subsidiaries, taken as a
whole.
(d) Neither Mercantile nor any of its Subsidiaries has receive any
notification or communication that has not been finally resolved from
any Regulatory Authority (i) asserting that Mercantile or any of its
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 Mercantile
and its 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
Mercantile and its Subsidiaries, taken as a whole, including, without
limitation, such company's status as an insured depository institution
under the FDI Act, (iii) requiring or threatening to require
Mercantile or any of its Subsidiaries, or indicating that Mercantile
or any of its Subsidiaries may be required, to enter into a cease and
desist order, agreement or memorandum of understanding or any other
agreement restricting or limiting of purporting to direct, restrict or
limit in any manner the operation of Mercantile or any of its
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 Mercantile nor any of its Subsidiaries is required by
Section 32 of the FDI Act to give prior notice to any federal banking
agency of the proposed addition of any individual to its board of
directors or the employment of an individual as a senior executive
officer.
3.12 Accuracy of Information. The statements contained in this Agreement,
-----------------------
the Schedules and any other written document executed and delivered by or on
behalf of the Buyers 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.
3.13 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
<PAGE>
directly or indirectly for Mercantile or Merger Sub in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time. During the
-------------------------------------------------
period from the date of this Agreement to the Effective Time, Seller shall and
shall cause each of the Seller Subsidiaries to, 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 otherwise contemplated by this
----------------------
Agreement, and except to the extent required by law, regulation or Regulatory
Authority, or with the prior written consent of Buyers (unless otherwise
specifically noted in this Section 4.02), during the period from the date of
this Agreement to the Effective Time, Seller shall not and shall not permit any
of the Seller Subsidiaries to:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from any of the Seller Subsidiaries to Seller or to another
of the Seller Subsidiaries);
(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 Certificate 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
<PAGE>
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 HomeBanc 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 $300,000 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 $500,000; 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 HomeBanc
to increase the aggregate amount of any credit facilities theretofore
established in favor of any person or entity (each a "Pre-Existing
Facility"), provided that the aggregate amount of any and all such
increases shall not be in excess of the lesser of 10% of such Pre-
Existing Facilities or $25,000;
(h) directly or indirectly (including through its officers, directors,
employees or other representatives) (i) initiate, solicit or encourage
any discussions, inquiries or proposals with any third party (other
than Buyers) relating to the disposition of any significant portion of
the business or assets of Seller or any of the Seller Subsidiaries or
the acquisition of Equity Securities of Seller or any of the Seller
Subsidiaries or the merger of Seller or any of the Seller Subsidiaries
with any person (other than Buyers) or any similar transaction (each
such transaction being referred to herein as an "Acquisition
Transaction"), or (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 (A) 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, (B)
prevent or impede the transactions contemplated hereby from qualifying
as a reorganiza-
<PAGE>
tion within the meaning of Section 368 of the Code or (C) prevent 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 of greater than $2,000,000 for U.S. Treasury
or Federal Agency Securities and $250,000 for all other investment
instruments;
(l) agree in writing or otherwise to take any of the foregoing actions
or engage in any activity, enter into any transaction or intentionally
take or omit to take any other act which would make any of the
representations and warranties in Article II of this Agreement untrue
or incorrect in any material respect if made anew after engaging in
such activity, entering into such transaction, or taking or omitting
such other act; or
(m) enter into, increase or renew any loan or credit commitment
(including standby letters of credit) to any executive officer or
director of Seller or any of the Seller Subsidiaries, any holder of
10% or more of the outstanding shares of Seller Common Stock, or any
entity controlled, directly or indirectly, by any of the foregoing or
engage in any transaction with any of the foregoing which is of the
type or nature sought to be regulated in 12 U.S.C. (S) 371c and 12
U.S.C. (S) 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. (S) 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) 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, (ii) prevent or impede the transactions contemplated hereby
from qualifying as a reorganization within the meaning of Section 368
of the Code or (iii) prevent the Merger from qualifying for pooling-
of-interests accounting treatment; or
(b) which would make any of the representations and warranties of
Article III of this Agreement untrue or incorrect in any material
respect if made anew after engaging in such activity, entering into
such transaction, or taking or omitting such other action.
ARTICLE V
---------
<PAGE>
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 of its
Subsidiaries and (C) use its best efforts to cause all information obtained
pursuant to this Agreement or in connection with the negotiation of this
Agreement to be treated as confidential and not use, or knowingly permit others
to use, any such information unless such information becomes generally available
to the public.
5.02 Registration Statement; Regulatory Matters.
------------------------------------------
(a) Mercantile shall prepare and, subject to the review and consent of
Seller with respect to matters relating to Seller, file with the SEC
as soon as is reasonably practicable the Registration Statement (or
the equivalent in the form of preliminary proxy materials) with
respect to the shares of Mercantile Common Stock to be issued in the
Merger and the exercise of the Seller Stock Options after the
Effective Time. Mercantile shall 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 that such actions do
not: (i) materially impede or delay the receipt of any approval
referred to in Section 6.01(b); (ii) prevent or impede the
transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code; (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
<PAGE>
5.16 hereof and the condition to Buyers' obligations to consummate the
Merger set forth in Section 6.03(f) hereof; or (iv) materially impede
or delay the consummation of the transactions contemplated by this
Agreement.
5.03 Stockholder Approval. Seller shall call a special meeting of its
--------------------
stockholders 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
stockholders of Seller. The Board of Directors of Seller shall submit for
approval of Seller's stockholders 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
stockholders of Seller and use its reasonable best efforts to obtain any vote of
Seller's stockholders 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 against
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).
Subject to applicable laws, regulations and other requirements of
Regulatory Authorities, from and after the date of this Agreement to
the Effective Time, 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) Subject to applicable laws, regulations and other requirements of
Regulatory Authorities, in addition, from and after the date of this
Agreement to the Effective Time, 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
<PAGE>
equipment write-off or write-down of various assets and other
appropriate charges and accounting adjustments taking into account the
parties' business plans following the Merger, as specified in each
case in writing to Seller, based upon such consultation and as
hereinafter provided.
(c) Subject to applicable laws, regulations and other requirements of
Regulatory Authorities, Seller and Buyers shall consult and cooperate
with each other with respect to determining the amount and the timing
for recognizing for financial accounting purposes Seller's expenses of
the Merger and the restructuring charges, if any, related to or to be
incurred in connection with the Merger.
(d) Subject to applicable laws, regulations and other requirements of
Regulatory Authorities, Seller shall (i) establish and take such
reserves and accruals to conform Seller's loan, accrual and reserve
policies to Mercantile's policies, (ii) establish and take such
accruals, reserves and charges in order to implement such policies in
respect of excess facilities and equipment capacity, severance costs,
litigation matters, write-off or write-down of various assets and
other appropriate accounting adjustments, and to recognize for various
accounting purposes such expenses of the Merger and restructuring
charges related to or to be incurred in connection with the Merger,
and (iii) effect such divestitures or otherwise implement such
restructuring in respect of its investment securities portfolio to
conform Seller's investment securities portfolio policies to
Mercantile's policies, in the case of each of the foregoing at such
times as are requested by Mercantile in a written notice to Seller;
provided, however, that on the date such reserves, accruals and
charges are to be taken, Mercantile shall certify to Seller that all
conditions to the Closing have been satisfied or waived (except to the
extent that any waiting period associated therewith may then have
commenced but not expired) and that Mercantile is otherwise in
compliance with this Agreement.
(e) No reserves, accruals or charges taken in accordance with Section
5.05(d) above may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein.
5.06 Environmental Reports.
---------------------
Buyer may perform, at Buyers' expense, 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. on all
real property owned, leased or operated by Seller or any of the Seller
Subsidiaries as of the date hereof (but excluding property held in trust or in a
fiduciary capacity and 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 property
held in trust or in a fiduciary capacity and 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. 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.
<PAGE>
in such phase one or two report or reports, in the aggregate, exceed the sum of
$750,000, 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 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, Silver, Freedman &
Taff, L.L.P, related to the preparation of this Agreement and all other related
agreements and documentation in connection with the consummation of the
transactions contemplated herein, shall not exceed $250,000; provided further,
however, that the Buyers shall pay all printing expenses and filing fees
incurred in connection with this Agreement, the Registration Statement and the
Proxy Statement.
5.09 Miscellaneous Agreements and Consents.
-------------------------------------
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its respective best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible,
including, without limitation, using its respective best efforts to
lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the
transactions contemplated hereby. Each party shall, and shall cause
each of its respective Subsidiaries to, use its best efforts to obtain
consents of all third parties and Regulatory Authorities necessary or,
in the opinion of Buyers, desirable for the consummation of the
transactions contemplated by this Agreement.
(b) Subject to applicable laws, regulations and other requirements of
Regulatory Authorities, 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,
<PAGE>
asset/liability management, audit, credit, human resources, treasury
and legal functions, and (ii) at the reasonable request of Buyers,
conform Seller's existing policies and procedures in respect of such
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 of any Regulatory Authority
having jurisdiction over Seller and/or the Seller Subsidiary affected
thereby; provided, however, that on the date such reserves, accruals
and charges are to be taken, Mercantile shall certify to the Seller
that all conditions to the Closing have been satisfied or waived
(except to the extent that any waiting period associated therewith may
then have commenced but not expired) and that Mercantile is otherwise
in compliance with this Agreement.
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 and policies (including, without
limitation, vacation and sick leave policies) 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,
eligibility for participation and benefit accruals (but not benefit
accruals under any defined benefit plan), and co-payments and
deductibles, and (ii) waiver of all waiting periods and pre-existing
condition exclusions or penalties.
(d) Buyers shall cause the Surviving Corporation to provide to the
employees of Seller and the Seller Subsidiaries full credit for prior
service with Seller and with the Seller Subsidiaries for purposes of
severance benefits under Buyer's guidelines in respect of such
matters, which guidelines currently provide a severance benefit
equivalent to two weeks salary for the first year of service and one
additional week of salary for each additional
<PAGE>
year of service thereafter, with a maximum aggregate entitlement equal
to 26 weeks of salary.
5.11 Press Releases. Except as may be required by 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 such duties and obligations shall continue 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 a 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.
5.14 Tax Opinion Certificates. Seller shall use its reasonable best
------------------------
efforts to cause such of its executive officers, directors and/or holders of one
percent (1%) or more of the Seller Common Stock (including shares beneficially
held or constructively owned) as may be reasonably requested by Thompson Coburn
to timely execute and deliver to Thompson Coburn certificates substantially in
the form of Exhibit B or Exhibit C hereto, as the case may be.
--------- ---------
5.15 Employee Stock Options.
----------------------
(a) At the Effective Time, all rights with respect to Seller Common
Stock pursuant to Seller Stock Options that are outstanding at the
Effective Time, whether or not then exercisable, shall be converted
into and become rights with respect to Mercantile Common Stock, and
Mercantile shall assume all Seller Stock Options in accordance with
the terms of the Seller Stock Plan under which it was issued and the
Seller Stock Option Agreement by which it is evidenced. From and after
the Effective Time, (i) each Seller Stock Option assumed by Mercantile
shall be exercised solely for shares of Mercantile Common Stock, (ii)
the number of shares of Mercantile Common Stock subject to each Seller
Stock Option shall be equal to the number of shares of Seller Common
Stock subject to such Seller Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio and (iii) the per
share exercise price under each Seller Stock Option shall be adjusted
by dividing the per share exercise price under such Seller Stock
Option by the Exchange Ratio and rounding down to the nearest cent;
provided, however, that the terms of each Seller
<PAGE>
Stock Option shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, stock
dividend, recapitalization or other similar transaction subsequent to
the Effective Time. It is intended that the foregoing assumption shall
be undertaken in a manner that will not constitute a "modification" as
defined in the Code, as to any Seller Stock Option that is an
"incentive stock option" as defined under the Code.
(b) The shares of Mercantile Common Stock covered by the stock options
to be issued pursuant to Section 5.15(a) 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
rights. Mercantile shall use its best efforts to maintain the
effectiveness of such registration statement (and maintain current
status of the prospectus contained therein) for as long as such
options remain out-standing. 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) Stockholder Approval. The approval of this Agreement and the Merger
--------------------
shall have received the requisite vote of stockholders of Seller at
the special meeting of stockholders 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.
<PAGE>
(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) the holding
period of such Mercantile Common Stock will include the holding period
of the Seller Common Stock for which it is exchanged.
6.02 Conditions to Obligations of Seller. The obligations of Seller
------------------------------------
to effect the Merger shall be subject to the fulfillment or waiver at or prior
to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyers set forth in Article III of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
as of the Effective Time (as though made on and as of the Effective
Time, except (i) to the extent such representations and warranties are
by their express provisions made as of a specified date or period,
(ii) where the facts which caused the failure of any representation or
warranty to be so true and correct have not resulted, and are not
likely to result, in a Material Adverse Effect on Mercantile and its
Subsidiaries, taken as a whole, and (iii) for the effect of
transactions contemplated by this Agreement, and Seller shall have
received a certificate of any Executive Vice President of Mercantile,
signing solely in his capacity as an officer of Mercantile, to such
effect.
(b) Performance of Obligations. Buyers shall have performed in all
--------------------------
material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and Seller shall have
received a certificate of any Executive Vice President of Mercantile,
signing solely in his capacity as an officer of Mercantile, to that
effect.
(c) Permits, Authorizations, etc. Buyers shall have obtained any and
-----------------------------
all material permits, authorizations, consents, waivers and approvals
required for the lawful consummation of the Merger.
(d) No Material Adverse Effect. Since the date of this Agreement, there
--------------------------
shall have been no Material Adverse Effect on Mercantile and its
Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Mercantile shall have delivered to Seller an
------------------
opinion of Mercantile's counsel dated as of the Closing Date or a
mutually agreeable earlier date in substantially the form set forth as
Exhibit D to this Agreement.
---------
<PAGE>
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 Chairman and the President 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 Chairman and the President of Seller
signing solely in their capacities as officers of Seller, to that
effect.
(c) Permits, Authorizations, etc. Seller shall have obtained any and
-----------------------------
all material permits, authorizations, consents, waivers and approvals
required for the lawful consummation by it of the Merger.
(d) No Material Adverse Effect. Since the date of this Agreement, there
--------------------------
shall have been no Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Seller shall have delivered to Buyers an
------------------
opinion of Seller's counsel dated as of the Closing Date or a mutually
agreeable earlier date in substantially the form set forth as Exhibit
-------
E to this Agreement.
-
(f) Pooling Letter. The Buyers shall have received as soon as
--------------
practicable after the date of this Agreement an opinion of KPMG Peat
Marwick LLP, satisfactory in form and substance to the Buyers, to the
effect that the Merger will qualify for pooling-of-interests
accounting treatment, which opinion shall have not been withdrawn;
provided, however, that this condition of Closing shall be deemed
waived by Mercantile to the extent that (i) the failure of KPMG Peat
Marwick LLP to deliver such an opinion or (ii) the withdrawal by KPMG
Peat Marwick LLP of such an opinion, is due solely to the actions of
Mercantile's affiliates with respect to their shares of Mercantile
Common Stock or Seller's Common Stock.
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 stockholders of
Seller:
<PAGE>
(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 September 30,
1998 if the Merger shall not theretofore have been consummated
(provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained
herein);
(c) by the Executive Committee of the Board of Directors of Mercantile
or the Board of Directors of Seller if (i) the Federal Reserve Board
or any other federal and/or state regulatory agency whose approval is
required for the consummation of the transactions contemplated hereby
has denied approval of the Merger and such denial has become final and
nonappealable or (ii) the stockholders 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
proper 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 stockholders of Seller; provided, however,
that after any such approval by the stockholders of Seller no such modification
shall (A) alter or change the amount or kind of Merger Consideration to be
received by holders of Seller Common Stock as provided in this Agreement or (B)
adversely affect the tax treatment to Seller stockholders 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.
<PAGE>
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.
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 1.05-1.10, 5.02(b), 5.08, 5.10, 5.13 and
5.15 shall survive the Effective Time. In the event of termination of this
Agreement in accordance with its terms, the agreements contained in or referred
to in the second sentence of Section 5.01 and Sections 5.08, 7.02 and 8.02 shall
survive such termination.
8.02 Indemnification. Buyers and Seller (hereinafter, in such
---------------
capacity being referred to as the "Indemnifying Party") agree to indemnify and
hold harmless each other and their officers, directors and controlling persons
(each such other party being hereinafter referred to, individually and/or
collectively, as the "Indemnified Party") against any and all losses, claims,
damages or liabilities, joint or several, to which the Indemnified Party may
become subject under the Securities Act, the Exchange Act or other federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof): (a) arise
primarily out of any information furnished to the Indemnified Party by the
Indemnifying Party and included in the Registration Statement as originally
filed or in any amendment thereof, or in the Proxy Statement, or in any
amendment therefor or supplement thereof, or are based primarily upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment thereof, or in
the Proxy Statement, or in any amendment thereof or supplement thereto, and
provided for inclusion thereof by the Indemnifying Party or (b) arise primarily
out of or are based primarily upon the omission or alleged omission by the
Indemnifying Party to state in the Registration Statement as originally filed or
in any amendment thereof, or in the Proxy Statement, or in any amendment
thereof, a material fact required to be stated therein or necessary to make the
statements made therein not misleading, and agrees to reimburse each such
Indemnified Party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
8.03 No Assignment; Successors and Assigns. This Agreement shall be
-------------------------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors (including any corporation deemed to be a successor corporation of
any of the parties by operation of law) and assigns, but neither this Agreement
nor any right or obligation set forth in any provision hereof may be transferred
or assigned (except by operation of law) by any party hereto without the prior
written consent of all other parties, and any purported transfer or assignment
in violation of this Section 8.03 shall be void and of no effect. There shall
not be any third party beneficiaries of any provisions hereof except for
Sections 1.07, 1.09, 1.10, 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.
<PAGE>
8.04 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part of any party
-----------------
hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.
8.06 Headings. Article, section, subsection and paragraph titles,
--------
captions and headings herein are inserted only as a matter of convenience and
for reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
8.07 Entire Agreement. This Agreement and the Schedules and Exhibits
----------------
hereto constitute the entire agreement between the parties with respect to the
subject matter hereof, supersede all prior negotiations, representations,
warranties, commitments, offers, letters of interest or intent, proposal
letters, contracts, writings or other agreements or understandings with respect
thereto. No waiver, and no modification or amendment, of any provision of this
Agreement, shall be effective unless specifically made in writing and duly
signed by all parties thereto.
8.08 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and any party to this Agreement may execute and deliver this
Agreement by executing and delivering any of such counterparts, each of which
when executed and delivered shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
8.09 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to be duly received (a) on the date given if
delivered personally or by cable, telegram, telex or telecopy or (b) on the date
received if mailed by registered or certified mail (return receipt requested),
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(i) if to the Buyers:
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Attention: John W. Rowe
Executive Vice President
Telecopy: (314) 425-2752
<PAGE>
Copy to:
Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
Telecopy: (314) 425-1386
and
Robert M. LaRose, Esq.
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Telecopy: (314) 552-7000
(ii) if to Seller:
Homecorp, Inc.
1107 East State Street
Rockford, Illinois 61110
Attention: C. Steven Sjogren
President and Chief Executive Officer
Telecopy: (815) 987-2227
Copy to:
Christopher R. Kelly, Esq.
Silver, Freedman & Taff L.L.P.
1100 New York Avenue, Suite 700
Washington, D.C. 20005
Telecopy: (202) 682-0354
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.
<PAGE>
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: HOMECORP, INC.
/s/ John R. Perkins By: /s/ C. Steven Sjogren
- -------------------------------- ---------------------------------
John R. Perkins C. Steven Sjogren
President and Chief Executive Officer
<PAGE>
Document Name: Agreement and Plan of Merger
Author/Owner: Morris, David
Revisions Requested by: _________________________________________
Client #: 280
Client Name: Mercantile Bank National Assoc
Matter #: 7821
Matter Name: Homecorp
PCDocs #: 784335
Version #: 10
Typist/User Name: dderouen
Application: MS Word
Today's Date: October 28, 1997
Abstract: Acquisition of Horizon Bancorp, Inc.
Version 2 to Mike Marshall 10/2/97
Version 3 incorporates comments of D. Grant re Escrow
Version 4 eliminates escrow; distributed to Seller on
10/14/97
Version 5 revised per hard copy
Version 7(?) converted to Word and revisions made
Version 8 conversion to Word cleaned up and reformatted
Version 10 to distribution 10/28/97
NOTE: The automatic numbering for the ARTICLES
were entered by clicking on the ONE button on the new
TC numbering toolbar and then pressing ALT+F9 to reveal
the codes, and replacing only the word CARDTEXT with
the word ROMAN. Then the code was highlighted F9 was
used to update it.
DO NOT DISCARD THIS PAGE
<PAGE>
Exhibit 2.2
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT ("Option Agreement") dated as of October 29,
1997, 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 HOMECORP, INC.
("Seller"), a Delaware corporation registered as a savings and loan holding
company under the Home Owners' Loan Act of 1933, as amended (the "HOLA").
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, $0.01 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 424,470 shares of
Seller Common Stock at a price per share equal to $19.75 (the "Purchase Price")
payable in cash as provided in Section 4 hereof.
3. Exercise of Option.
------------------
<PAGE>
(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 and the
HOLA.
(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;
<PAGE>
(ii) any person (other than Buyer or any Subsidiary of
Buyer, or Seller or any Subsidiary of Seller in a fiduciary capacity)
shall have acquired Beneficial Ownership or the right to acquire
Beneficial Ownership of 15% or more of the voting power of Seller; or
(iii) the holders of Seller Common Stock shall not have
approved the Merger Agreement at the meeting of such stockholders held
for the purpose of voting on the Merger Agreement, such meeting shall
not have been held or shall have been canceled prior to termination of
the Merger Agreement in accordance with its terms or Seller's Board of
Directors shall have withdrawn or modified in a manner adverse to
Buyer the recommendation of Seller's Board of Directors with respect
to the Merger Agreement, in each case after an Extension Event.
(c) As used herein, the term "Extension Event" shall mean any of
the following events:
(i) a Purchase Event;
(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.
<PAGE>
(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").
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:
<PAGE>
The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and HOMECORP, INC., a copy of which is
on file at the principal office of HOMECORP, INC., 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 HOMECORP, INC. 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
<PAGE>
have reserved for issuance upon exercise of the Option, 424,470 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.
(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
<PAGE>
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.
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 13 months immediately thereafter (the "Repurchase
Period"), Seller (or any successor entity thereof) shall repurchase the Option
but not later than the termination of the Option pursuant to Section 3(a) hereof
from Buyer together with all (but not less than all, subject to Section 10)
shares of Seller Common Stock purchased by Buyer pursuant hereto with respect to
which Buyer then has Beneficial Ownership, at an aggregate price (per share, the
"Per Share Repurchase Price") equal to the sum of:
(i) The exercise price paid by Buyer for any shares of
Seller Common Stock acquired pursuant to the Option;
(ii) The difference between (A) the "Market/Tender Offer
Price" for shares of Seller Common Stock (defined as the higher (x) of
the highest price per share at which a tender or exchange offer has
been made for shares of Seller Common Stock or (y) the highest closing
mean of the "bid" and the "ask" price per share of Seller Common Stock
reported by the Nasdaq National Market, in each case for any day
within that portion of the Repurchase Period that precedes the date
Buyer gives notice of the required repurchase under this Section 7)
and (B) the exercise price as determined pursuant to Section 2 hereof
(subject to adjustment as 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
<PAGE>
(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.
<PAGE>
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 13 months following the first occurrence of a Purchase
Event, Seller may repurchase from Buyer, and Buyer shall sell to Seller, 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
<PAGE>
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.
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, if requested by
Buyer, as expeditiously as practicable file a registration statement on a form
for general use under the Securities Act if necessary in order to permit the
sale or other disposition of the shares of Seller Common Stock that have been
acquired upon exercise of the Option in accordance with the intended method of
sale or other disposition requested by Buyer (it being understood and agreed
that any such sale or other disposition shall be effected on a widely
distributed basis so that, upon consummation thereof, no purchaser or transferee
shall Beneficially Own more than 2% of the shares of Seller Common Stock then
outstanding). Buyer shall provide all information reasonably requested by
Seller for inclusion in any registration statement to be filed hereunder.
Seller shall use its reasonable best efforts to cause such registration
statement first to become effective and then to remain effective for such period
not in excess of 90 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sales or other
dispositions. The registration effected under this Section 9 shall be at
Seller's expense except for underwriting discounts and commissions and the fees
and disbursements of Buyer's counsel attributable to the registration of such
Seller Common Stock. In no event shall Seller be
<PAGE>
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
<PAGE>
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.
(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
<PAGE>
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, the OTS 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.
<PAGE>
(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.
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
HOMECORP, INC.
By: /s/ C. Steven Sjogren
-------------------------------
C. Steven Sjogren
President and Chief Executive Officer
<PAGE>
Exhibit 99
[MERCANTILE BANCORPORATION, INC. LETTERHEAD]
PRESS RELEASE
FOR IMMEDIATE RELEASE: October 29, 1997
Contact: Nadine Z. Genet Mary J. Lehman C. Steven Sjogren
Public Affairs Investor Relations President-HomeCorp, Inc.
(314) 418-8554 (314) 425-2298 (815) 987-2200
NYSE Symbol: MTL
In newspaper stock tables generally MercBc or MercBcpMO
MERCANTILE ANNOUNCES PLANS TO MERGE WITH
HOMECORP, INC. OF NORTHWESTERN ILLINOIS
ST. LOUIS -- Mercantile Bancorporation Inc. (NYSE: MTL), the St. Louis-
based $30 billion bank holding company, today announced plans to merge with
HomeCorp, Inc. (NASDAQ: HMCI), headquartered in Rockford, Illinois.
HomeCorp, Inc. is the $327 million thrift holding company for HomeBanc,
which operates ten offices in Rockford, Freeport, Loves Park and Dixon,
Illinois. The acquisition will significantly strengthen Mercantile's presence
in the highly attractive and rapidly growing Rockford market, as well as
increase the company's leading position in Freeport. In addition, the
acquisition allows Mercantile to expand into the nearby communities of Loves
Park and Dixon.
"The merger with HomeCorp is a natural extension of our franchise in
northwestern Illinois," said Dan Heine, Chairman and Chief Executive Officer
of Mercantile Bank of Northern Illinois. "We're pleased to have the opportunity
to reach further into these markets and serve even more customers in
northwestern Illinois."
"By partnering with Mercantile, we are offering our customers, employees
and shareholders the benefits that come from being part of a larger company,
while maintaining our commitment to the local community," said C. Steven
Sjogren, president and chief executive officer of HomeCorp, Inc. Sjogren will
become president of Mercantile Bank/Winnebago County, which includes Rockford,
Loves Park, Winnebago and Pecatonica. He also will be appointed to the Board of
Directors of Mercantile Bank of Northern Illinois.
HomeCorp shareholders will receive .4968 shares of Mercantile common stock
for each share
<PAGE>
of HomeCorp common stock. In the aggregate, Mercantile will issue 951,380 shares
of common stock in exchange for the outstanding stock of HomeCorp. The merger is
structured as a tax-free exchange and will be accounted for as a pooling of
interests. In connection with the merger agreement, HomeCorp also granted
Mercantile an option to acquire a number of shares equal to 19.9 percent of the
outstanding stock of HomeCorp, exercisable under certain circumstances relating
to the transaction. In addition, Mercantile may repurchase up to 10 percent of
the shares issued in the transaction. The merger is subject to the approval of
HomeCorp shareholders and all appropriate regulatory authorities, and is
expected to close in the second quarter of 1998.
Mercantile Bancorporation Inc., a $30 billion asset multi-bank holding company
headquartered in St. Louis, operates offices in more than 500 locations
throughout Missouri, Iowa, Kansas, Illinois and Arkansas. Mercantile currently
has one additional acquisition pending with Horizon Bancorp, Inc., headquartered
in Arkadelphia, Arkansas. Mercantile's non-banking subsidiaries include
companies providing brokerage services, asset-based lending, investment advisory
services, leasing services and credit life insurance.
