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AGREEMENT AND PLAN OF MERGER
among
MERCANTILE BANCORPORATION INC.,
a Missouri corporation
and
AMERIBANC, INC.,
a Missouri corporation
and
FIRST FINANCIAL BANCORPORATION,
an Iowa corporation
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May 7, 1998
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TABLE OF CONTENTS
Page
Recitals 1
ARTICLE I
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THE MERGER
1.01 The Merger 1
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1.02 Closing 1
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1.03 Effective Time 1
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1.04 Additional Actions 2
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1.05 Articles of Incorporation and By-Laws 2
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1.06 Board of Directors and Officers 2
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1.07 Conversion of Securities 2
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1.08 Exchange Procedures 3
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1.09 No Fractional Shares 4
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1.10 Dissenting Shares 4
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1.11 Closing of Stock Transfer Books 5
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1.12 Anti-Dilution 5
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1.13 Reservation of Right to Revise Transaction 5
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1.14 Material Adverse Effect 6
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1.15 Knowledge 6
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ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization and Authority 6
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2.02 Subsidiaries 6
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2.03 Capitalization 7
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2.04 Authorization 7
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2.05 Seller Financial Statements 9
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2.06 Seller Reports 9
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2.07 Title to and Condition of Assets 9
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2.08 Real Property 10
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2.09 Taxes 11
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2.10 Material Adverse Effect 11
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2.11 Loans, Commitments and Contracts 12
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2.12 Absence of Defaults 14
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2.13 Litigation and Other Proceedings 14
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2.14 Directors' and Officers' Insurance 15
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2.15 Compliance with Laws 15
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2.16 Labor 16
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2.17 Material Interests of Certain Persons 17
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2.18 Allowance for Loan and Lease Losses; Non-Performing Assets; Financial Assets 17
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2.19 Employee Benefit Plans 18
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2.20 Conduct of Seller to Date 20
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2.21 Absence of Undisclosed Liabilities 20
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2.22 Proxy Statement, Etc. 21
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2.23 Registration Obligations 21
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2.24 Tax, Regulatory and Accounting Matters 21
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2.25 Brokers and Finders 21
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2.26 Interest Rate Risk Management Instruments 22
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2.27 Accuracy of Information 22
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2.28 Year 2000 Compliant 22
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ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF THE BUYERS
3.01 Organization and Authority 23
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3.02 Capitalization of Mercantile 23
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3.03 Authorization 24
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3.04 Mercantile Financial Statements 24
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3.05 Mercantile Reports 25
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3.06 Material Adverse Effect 25
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3.07 Registration Statement, Etc. 25
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3.08 Brokers and Finders 25
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3.09 Accuracy of Information 25
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ARTICLE IV
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CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time 26
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4.02 Forbearances of Seller 26
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4.03 Forbearances of the Buyers 28
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ARTICLE V
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ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence 29
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5.02 Registration Statement; Regulatory Matters 29
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5.03 Shareholder Approval 30
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5.04 Current Information 30
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5.05 Conforming Entries 30
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5.06 Environmental Reports 31
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5.07 Agreements of Affiliates 31
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5.08 Expenses 32
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5.09 Miscellaneous Agreements and Consents 32
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5.10 Employee Agreements and Benefits 32
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5.11 Press Releases 33
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5.12 State Takeover Statutes 33
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5.13 Directors' and Officers' Indemnification 33
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5.14 Tax Opinion Certificates 34
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5.15 Employee Stock Options 34
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5.16 Best Efforts to Insure Pooling 34
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ARTICLE VI
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CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger 35
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6.02 Conditions to Obligations of Seller 35
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6.03 Conditions to Obligations of the Buyers 36
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ARTICLE VII
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TERMINATION, AMENDMENT AND WAIVER
7.01 Termination 37
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7.02 Effect of Termination 38
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7.03 Amendment 38
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7.04 Waiver 38
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ARTICLE VIII
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GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements 38
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8.02 Indemnification 38
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8.03 No Assignment; Successors and Assigns 39
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8.04 Severability 39
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8.05 No Implied Waiver 39
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8.06 Headings 39
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8.07 Entire Agreement 39
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8.08 Counterparts 40
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8.09 Notices 40
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8.10 Governing Law 41
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LIST OF EXHIBITS
Exhibit A - Affiliate Letter
Exhibit B - Director/Officer Certificate
Exhibit C - Legal Opinion of Buyers' Counsel
Exhibit D - Legal Opinion of Seller's Counsel
LIST OF SCHEDULES
Schedule 2.01 Articles/Bylaws
Schedule 2.02 Subsidiaries/Equity Securities
Schedule 2.03 Seller Stock Plans
Schedule 2.04(b) Authorizations
Schedule 2.05(a) Seller Financial Statements
Schedule 2.08(a) Owned Real Property/Leased Real Property
Schedule 2.08(c) Interests in Real Property
Schedule 2.09 Taxes
Schedule 2.11(a) Deposits/Commitments
Schedule 2.11(b) Contracts
Schedule 2.11(c) Insurance
Schedule 2.11(f) Loans
Schedule 2.13 Litigation
Schedule 2.15(c) Compliance with Laws
Schedule 2.18(c) Real Estate Acquired through Foreclosure and Repossession
Schedule 2.18(f) Investment Securities
Schedule 2.19(a) Employee Benefit Plans
Schedule 2.19(d) Post-Retirement Health and Medical Benefits
Schedule 2.19(f) Change in Control Payments
Schedule 2.20 Conduct of Seller
Schedule 2.26(a) Derivative Securities
Schedule 2.28 Material Computer Software, Firmware and Hardware
Schedule 4.02 Forbearances of Seller
Schedule 5.07 Affiliates
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered
into as of May 7, 1998 by and among Mercantile Bancorporation Inc., a
Missouri corporation ("Mercantile"), Ameribanc, Inc., a Missouri corporation
("Merger Sub" and, collectively, with Mercantile, the "Buyers"), and First
Financial Bancorporation ("First Financial"), an Iowa corporation ("Seller").
WHEREAS, Merger Sub is a wholly owned subsidiary of Mercantile, and
each of Mercantile and Merger Sub is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended (the "BHCA"); and
WHEREAS, Seller is registered as a bank holding company under the BHCA;
and
WHEREAS, the respective Boards of Directors of Seller and Merger Sub
and the Executive Committee of the Board of Directors of Mercantile have
approved the merger (the "Merger") of Seller with and into Merger Sub
pursuant to the terms and subject to the conditions contained in this
Agreement; and
WHEREAS, the parties desire to provide certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties
agree as follows:
ARTICLE I
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THE MERGER
1.01 The Merger. Subject to the terms and conditions of this
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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
Section 490.1106 of the Iowa Business Corporation Act (the "IBCA"), and the
separate corporate existence of Seller shall cease. Merger Sub shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Missouri.
1.02 Closing. The closing (the "Closing") of the Merger, unless the
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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 Articles of Merger with the Office of the Secretary of
State of Iowa. Unless otherwise mutually agreed in writing by Buyers and
Seller, subject to the terms and conditions of
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this Agreement, the Effective Time shall occur on such date as Buyers shall
notify Seller in writing (such notice to be at least five business days in
advance of the Effective Time) but (A) not earlier than the satisfaction of all
conditions set forth in Section 6.01(a) and 6.01(b) (the "Approval Date") and
(B) not later than the first business day of the first full calendar month
commencing at least five business days after the Approval Date. On the Closing
Date, the parties hereto will cause the Merger to be consummated by delivering
to the Secretary of State of the State of Missouri and the Secretary of State of
the State of Iowa, for filing, Articles of Merger, in such form as required by,
and executed and acknowledged in accordance with, the relevant provisions of the
Missouri Statute and the IBCA.
1.04 Additional Actions. If, at any time after the Effective Time,
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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
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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
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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
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the Merger and without any action on the part of the Buyers, Seller or the
holder of any of the following securities:
(a) Each share of the common stock, $1.00 par value, of Merger
Sub that is issued and outstanding immediately prior to the Effective
Time shall remain outstanding and shall be unchanged after the Merger
and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation; and
(b) Subject to Sections 1.09, 1.10 and 1.12 hereof, each share
of common stock, $1.25 par value, of Seller ("Seller Common Stock")
issued and outstanding immediately prior to the Effective Time, other
than Dissenting Shares (as defined in Section 1.10 hereof), shall cease
to be outstanding and shall be converted into and become the right to
receive 0.88 shares (the "Exchange Ratio") of common stock, $0.01 par
value, and the associated "Rights" under the "Rights Agreement," as
those terms are defined in Section 3.02 hereof, of Mercantile
(collectively, "Mercantile Common Stock"); provided, however, that any
Seller Common Stock held by Seller, Mercantile or any of their
respective Subsidiaries (as defined in Section 2.02 hereof), in each
case
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other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and shall not be exchanged for shares of
Mercantile Common Stock. The Exchange Ratio was computed by (i)
aggregating (A) the total number of shares of Seller Common Stock that
were issued and outstanding on the date of this Agreement (as set forth in
Section 2.03 hereof) with (B) the total number of shares of Seller Common
Stock that are reserved for issuance pursuant to options or other rights
relating to Seller Common Stock and outstanding as of the date of this
Agreement (as set forth in Section 2.03 hereof) and dividing such number
of shares of Seller Common Stock (computed by aggregating (A) and (B)
hereof (the "Fully Diluted Shares")) into (ii) 3,194,844, the aggregate
number of shares of Mercantile Common Stock to be issued in the Merger.
1.08 Exchange Procedures.
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(a) As soon as practicable following the Effective Time,
Mercantile shall mail or cause to be mailed to holders of record of
certificates formerly representing Seller Common Stock (the
"Certificates"), as identified on the Seller Shareholder List (as
provided pursuant to Section 1.11(b) hereof), letters advising them of
the effectiveness of the Merger and instructing them to tender such
Certificates to Mercantile's duly appointed exchange agent (the
"Exchange Agent"), or in lieu thereof, such evidence of lost, stolen or
mutilated Certificates and such surety bond or other security as the
Exchange Agent may reasonably require (the "Required Documentation").
(b) Subject to Sections 1.09, 1.10 and 1.12 hereof, after the
Effective Time, each previous holder of a Certificate that surrenders
such Certificate or in lieu thereof, the Required Documentation, to the
Exchange Agent, with a properly completed and executed letter of
transmittal with respect to such Certificate, will be entitled to a
certificate or certificates representing the number of full shares of
Mercantile Common Stock into which the Certificate so surrendered shall
have been converted pursuant to this Agreement, and any distribution
theretofore declared and not yet paid with respect to such shares of
Mercantile Common Stock and any amount due with respect to fractional
shares, without interest (collectively, the "Merger Consideration").
Such shares of Mercantile Common Stock, any amount due with respect to
fractional shares and any distribution shall be delivered by the
Exchange Agent to each such holder as promptly as practicable after
such surrender.
(c) Each outstanding Certificate, until duly surrendered to the
Exchange Agent, shall be deemed to evidence ownership of the Merger
Consideration into which the stock previously represented by such
Certificate shall have been converted pursuant to this Agreement.
(d) After the Effective Time, holders of Certificates shall
cease to have rights with respect to the stock previously represented
by such Certificates, and their sole rights shall be to exchange such
Certificates for the Merger Consideration to which the shareholder may
be entitled pursuant to the provisions of Section 1.07 hereof. After
the closing of the transfer books as described in Section 1.11 hereof,
there shall be no further transfer on the records of Seller of
Certificates, and if such Certificates are presented to
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Seller for transfer, they shall be canceled against delivery of the Merger
Consideration. Neither Buyers nor the Exchange Agent shall be obligated
to deliver the Merger Consideration until such holder surrenders the
Certificates or furnishes the Required Documentation as provided herein.
No dividends or distributions declared after the Effective Time (including
any redemption by Mercantile of the Rights associated therewith) on the
Mercantile Common Stock will be remitted to any person entitled to receive
Mercantile Common Stock under this Agreement until such person surrenders
the Certificate representing the right to receive such Mercantile Common
Stock or furnishes the Required Documentation, at which time such
dividends or distributions shall be remitted to such person, without
interest and less any taxes that may have been imposed thereon.
Certificates surrendered for exchange by an affiliate shall not be
exchanged until Buyers have received a written agreement from such
affiliate as required pursuant to Section 5.07 hereof. Neither the
Exchange Agent nor any party to this Agreement nor any affiliate thereof
shall be liable to any holder of stock represented by any Certificate for
any Merger Consideration issuable or payable in the Merger that is paid to
a public official pursuant to applicable abandoned property, escheat or
similar laws.
1.09 No Fractional Shares. Notwithstanding any other provision of
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this Agreement, neither certificates nor scrip for fractional shares of
Mercantile Common Stock shall be issued in the Merger. Each holder of Seller
Common Stock who otherwise would have been entitled to a fraction of a share
of Mercantile Common Stock shall receive (by check from the Exchange Agent,
mailed to the shareholder with the certificate(s) for Mercantile Common Stock
which such holder is to receive pursuant to the Merger) in lieu thereof, cash
(without interest) in an amount determined by multiplying the fractional
share interest to which such holder would otherwise be entitled by the
closing stock price of Mercantile Common Stock on the New York Stock Exchange
(the "NYSE") Composite Tape as reported in The Wall Street Journal on the
Closing Date. No such holder shall be entitled to dividends, voting rights
or any other rights in respect of any fractional share.
1.10 Dissenting Shares.
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(a) "Dissenting Shares" means any shares of Seller Common Stock
held by any holder who becomes entitled to payment of the fair value of
such shares under Division XIII of the IBCA. Any holders of Dissenting
Shares shall be entitled to payment for such shares only to the extent
permitted by and in accordance with the provisions of the IBCA;
provided, however, that if, in accordance with the IBCA, any holder of
Dissenting Shares shall forfeit such right to payment of the fair value
of such Dissenting Shares, such shares shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration.
(b) Seller shall give to Mercantile (i) prompt notice of any
written objections to the Merger and/or any written demands for the
payment of the fair value of any shares of Seller Common Stock,
withdrawals of such demands, and any other instruments served pursuant
to Division XIII of the IBCA received by Seller, and (ii) the
opportunity to participate in all negotiations and proceedings with
respect to such demands under the IBCA. Seller shall not voluntarily
make any payment with respect to
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demands for payment of fair value and shall not, except with the prior
consent of Mercantile, settle or offer to settle any such demands.
1.11 Closing of Stock Transfer Books.
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(a) The stock transfer books of Seller shall be closed at the
end of business on the business day immediately preceding the Closing
Date. In the event of a transfer of ownership of Seller Common Stock
that is not registered in the transfer records prior to the closing of
such record books, the Merger Consideration issuable or payable with
respect to such stock may be delivered to the transferee, if the
Certificate or Certificates representing such stock is presented to the
Exchange Agent accompanied by all documents required to evidence and
effect such transfer and all applicable stock transfer taxes are paid.
(b) At the Effective Time, Seller shall provide Buyers with a
complete and verified list of registered holders of Seller Common Stock
based upon its stock transfer books or corporate records as of the
closing of said transfer books, including the names, addresses,
certificate numbers and taxpayer identification numbers of such holders
(the "Seller Shareholder List"). Buyers shall be entitled to rely upon
the Seller Shareholder List to establish the identity of those persons
entitled to receive the Merger Consideration, which list shall be
conclusive with respect thereto. In the event of a dispute with
respect to ownership of stock represented by any Certificate, Buyers
shall be entitled to deposit any Merger Consideration represented
thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
1.12 Anti-Dilution. If between the date of this Agreement and the
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Effective Time a share of Mercantile Common Stock shall be changed into a
different number of shares of Mercantile Common Stock or a different class of
shares by reason of reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or if a stock dividend
thereon shall be declared with a record date within such period, then
appropriate and proportionate adjustment or adjustments will be made to the
Exchange Ratio such that each holder of Seller Common Stock shall be entitled
to receive such number of shares of Mercantile Common Stock or other
securities as such shareholder would have received pursuant to such
reclassification, recapitalization, split-up, combination, exchange of shares
or readjustment or as a result of such stock dividend had the record date
therefor been immediately following the Effective Time.
1.13 Reservation of Right to Revise Transaction. Buyers may at any
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time change the method of effecting the acquisition of Seller by Buyers
(including, without limitation, the provisions of this Article I) if and to
the extent Buyers deem such change to be desirable, including, without
limitation, to provide for (i) a merger of Merger Sub with and into Seller,
in which Seller is the surviving corporation, or (ii) a merger of Seller
directly into Mercantile, in which Mercantile is the surviving corporation;
provided, however, that no such change shall (A) alter or change the amount
or kind of the Merger Consideration to be received by the holders of Seller
Common Stock, (B) adversely affect the tax treatment to Seller shareholders,
as generally described in Section 6.01(e) hereof, (C) materially impede or
delay receipt of any approvals referred to in Section 6.01(b) or the
consummation of the transactions contemplated by this Agreement, or (D)
prevent or impede the transactions contemplated hereby from qualifying for
pooling-of-interests accounting treatment unless Buyers first waive Seller's
covenants set
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forth in Sections 5.02(b) and 5.16 hereof and the condition to Buyers'
obligation to consummate the Merger set forth in Section 6.03(f) hereof.
1.14 Material Adverse Effect. As used in this Agreement, the term
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"Material Adverse Effect" with respect to an entity means any condition,
event, change or occurrence that has or may reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
properties, business or results of operations, of such entity and its
Subsidiaries (as defined in Section 2.02(a)), taken as a whole as reflected
in the Seller Financial Statements (as defined in Section 2.05(b)) or the
Mercantile Financial Statements (as defined in Section 3.04), as the case may
be; it being understood that a Material Adverse Effect shall not include: (i)
a change with respect to, or effect on, such entity and its Subsidiaries
resulting from a change in law, rule, regulation, generally accepted
accounting principles or regulatory accounting principles; (ii) a change with
respect to, or effect on, such entity and its Subsidiaries resulting from any
other matter affecting depository institutions generally including, without
limitation, changes in general economic conditions and changes in prevailing
interest and deposit rates; (iii) a change disclosed in the Seller Financial
Statements or the Mercantile Financial Statements, as the case may be; (iv)
any charges taken by Mercantile in connection with pending or completed
acquisitions or the disposition of certain businesses or lines of business;
or (v) in the case of Seller, any financial change resulting from adjustments
made pursuant to Section 5.05 or 5.09(b) hereof.
1.15 Knowledge. As used in this Agreement, the term "knowledge" or
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"best knowledge" shall mean those facts known by the executive officers of
Buyers or Seller, as the case may be.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Buyers as follows:
2.01 Organization and Authority. Seller is a corporation duly
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organized, validly existing and in good standing under the laws of the State
of Iowa, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified, except where the failure of
Seller to so qualify would not have a Material Adverse Effect on Seller and
the Seller Subsidiaries (as defined in Section 2.02(a)), taken as a whole,
and has the corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted. Seller is
registered as a bank holding company with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under the BHCA. True
and complete copies of the Articles of Incorporation and By-Laws of Seller
and the Articles of Association and By-Laws of First National Bank Iowa
("FNBI"), a national banking association and a wholly owned Subsidiary of
Seller, each as in effect on the date of this Agreement, are attached hereto
as Schedule 2.01.
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2.02 Subsidiaries.
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(a) Schedule 2.02 sets forth a complete and correct list of all
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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)
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of each Seller Subsidiary, all of which are owned directly or indirectly
by Seller. Except as disclosed in Schedule 2.02, all of the
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outstanding shares of capital stock of the Seller Subsidiaries owned
directly or indirectly by Seller are validly issued, fully paid and
nonassessable and are owned free and clear of any lien, claim, charge,
option, encumbrance, agreement, mortgage, pledge, security interest or
restriction (a "Lien") with respect thereto. Each of the Seller
Subsidiaries is a corporation, bank or savings bank duly incorporated
or organized and validly existing under the laws of its jurisdiction of
incorporation or organization, and has corporate power and authority to
own or lease its properties and assets and to carry on its business as
it is now being conducted. Each of the Seller Subsidiaries is duly
qualified to do business in each jurisdiction where its ownership or
leasing of property or the conduct of its business requires it so to be
qualified, except where the failure to so qualify would not have a
Material Adverse Effect on Seller and the Seller Subsidiaries, taken as
a whole. Except as set forth in Schedule 2.02, neither Seller nor any
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Seller Subsidiary owns beneficially, directly or indirectly, any shares
of any class of Equity Securities (as defined in Section 2.03) or
similar interests of any corporation, bank, business trust, association
or organization, or any interest in a partnership or joint venture of
any kind, other than those identified as Seller Subsidiaries in
Schedule 2.02 hereof.
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(b) FNBI is a national banking association duly organized and
validly existing under the laws of the United States of America.
2.03 Capitalization. The authorized capital stock of Seller consists
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of: (i) 15,000,000 shares of Seller Common Stock, of which, as of March 31,
1998, 3,553,717 shares were issued and outstanding. As of March 31, 1998,
Seller had reserved 297,738 shares of Seller Common Stock for issuance under
Seller's stock option and incentive plans (including grants reflected in the
Board minutes), a list of which is set forth on Schedule 2.03 (the "Seller
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Stock Plans"), pursuant to which options ("Seller Employee Stock Options")
covering 76,788 shares of Seller Common Stock were outstanding as of March
31, 1998. Since March 31, 1998, no Equity Securities of Seller have been
issued, other than shares of Seller Common Stock which may have been issued
upon the exercise of Seller Stock Options. "Equity Securities" of an issuer
means capital stock or other equity securities of such issuer, options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of any capital stock or other equity securities of such issuer, or
contracts, commitments, understandings or arrangements by which such issuer
is or may become bound to issue additional shares of its capital stock or
other equity securities of such issuer, or options, warrants, scrip or rights
to purchase, acquire, subscribe to, calls on or commitments for any shares of
its capital stock or other equity securities. Except as set forth above,
there are no other Equity Securities of Seller outstanding. All of the
issued and outstanding shares of Seller Common Stock are validly issued,
fully paid and nonassessable, and have not been issued in violation of any
preemptive right of any shareholder of Seller. Neither Seller nor any Seller
Subsidiary has taken or agreed to take any action or has any knowledge of any
fact or circumstance and neither Seller nor any Seller Subsidiary will take
any action that would prevent the Merger from qualifying for
pooling-of-interests accounting treatment.
2.04 Authorization.
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(a) Seller has the corporate power and authority to enter into
this Agreement and, subject to the approval of this Agreement by the
shareholders of Seller and the
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Regulatory Authorities (as defined in Section 2.06), to carry out its
obligations hereunder. The only shareholder vote required for Seller to
approve this Agreement is the affirmative vote of the holders of at least
two thirds of the outstanding shares of Seller Common Stock entitled to
vote at a meeting called for such purpose. The execution, delivery and
performance of this Agreement by Seller and the consummation by Seller of
the transactions contemplated hereby in accordance with and subject to the
terms of this Agreement have been duly authorized by the Board of
Directors of Seller. Subject to the approval of Seller's shareholders
and subject to the receipt of such approvals of the Regulatory
Authorities as may be required by statute or regulation, this Agreement
is a valid and binding obligation of 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 or Articles of Incorporation, charter
or By-Laws or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
Seller or any of the Seller Subsidiaries is a party or by which it may
be bound, or to which Seller or any of the Seller Subsidiaries or any
of the properties or assets of Seller or any of the Seller Subsidiaries
may be subject, other than those as to which any such violation,
conflict, breach, event, termination, acceleration or creation would
not have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole, or (ii) subject to compliance with the
statutes and regulations referred to in subsection (c) of this Section
2.04, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Seller or any of the Seller
Subsidiaries or any of their respective properties or assets.
(c) Other than in connection or in compliance with the
provisions of the Missouri Statute, the IBCA, the Securities Act of
1933, as amended, and the rules and regulations thereunder
(collectively, the "Securities Act"), the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), the securities or blue sky laws of the various states
or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA, or any required approvals of the Federal
Reserve Board, the FDIC or other governmental agencies or governing
boards having regulatory authority over Seller or any Seller
Subsidiary, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Seller of the transactions
contemplated by this Agreement.
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2.05 Seller Financial Statements.
---------------------------
(a) Attached hereto as Schedule 2.05(a) are copies of the
----------------
Seller's Annual Report to Shareholders for the year ended December 31,
1997.
(b) The financial statements contained in the documents
referenced in Schedule 2.05(a) are referred to collectively as the
----------------
"Seller Financial Statements." The Seller Financial Statements have
been prepared in accordance with generally accepted accounting
principles ("GAAP") during the periods involved, and present fairly the
consolidated financial position of Seller and the Seller Subsidiaries
at the dates thereof and the consolidated results of operations,
changes in shareholders' equity and cash flows, as applicable, of
Seller and the Seller Subsidiaries for the periods stated therein.
(c) Seller and the Seller Subsidiaries have each prepared, kept
and maintained through the date hereof true, correct and complete
financial books and records which fairly reflect in all material
respects their respective financial conditions, results of operations,
changes in shareholders' equity and cash flows.
2.06 Seller Reports. Since January 1, 1995, each of Seller and the
--------------
Seller Subsidiaries has timely filed any and all material reports,
registrations and statements, together with any required amendments thereto,
that it was required to file with (i) the SEC, including, but not limited to,
Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements, (ii) the Federal
Reserve Board, (iii) the FDIC and (iv) any federal, state, municipal or local
government, securities, banking, savings and loan, environmental, insurance
and other governmental or regulatory authority, and the agencies and staffs
thereof (the entities in the foregoing clauses (i) through (iv) being
referred to herein collectively as the "Regulatory Authorities" and
individually as a "Regulatory Authority"), having jurisdiction over the
affairs of it. All such material reports and statements filed with any such
Regulatory Authority are collectively referred to herein as the "Seller
Reports." As of each of their respective dates, the Seller Reports complied
in all material respects with all the rules and regulations promulgated by
the applicable Regulatory Authority. With respect to Seller Reports filed
with the Regulatory Authorities, there is no material unresolved violation,
criticism or exception by any Regulatory Authority with respect to any report
or statement filed by, or any examinations of, Seller or any of the Seller
Subsidiaries.
2.07 Title to and Condition of Assets.
--------------------------------
(a) Except as may be reflected in the Seller Financial
Statements and with the exception of all "Real Property" (which is the
subject of Section 2.08 hereof), Seller and the Seller Subsidiaries
have, and at the Closing Date will have, good and marketable title to
their owned properties and assets, including, without limitation, those
reflected in the Seller Financial Statements (except those disposed of
in the ordinary course of business since the date thereof), free and
clear of any Lien, except for Liens for (i) taxes, assessments or other
governmental charges not yet delinquent, (ii) as set forth or described
in the Seller Financial Statements or any subsequent Seller Financial
Statements delivered to Buyers prior to the Effective Time, and (iii)
pledges to secure deposits and other Liens incurred in the ordinary
course of business.
(b) No material properties or assets that are reflected as
owned by Seller or any of the Seller Subsidiaries in the Seller
Financial Statements as of December 31,
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15
1997, have been sold, leased, transferred, assigned or otherwise disposed
of since such date, except in the ordinary course of business.
(c) All furniture, fixtures, vehicles, machinery and equipment
and computer software owned or used by Seller or the Seller
Subsidiaries, including any such items leased as a lessee (taken as a
whole as to each of the foregoing with no single item deemed to be of
material importance) are in good working order and free of known
defects, subject only to normal wear and tear. The operation by Seller
or the Seller Subsidiaries of such properties and assets is in
compliance in all material respects with all applicable laws,
ordinances and rules and regulations of any governmental authority
having jurisdiction over such use.
2.08 Real Property.
-------------
(a) A list of each parcel of real property owned by Seller or
any of the Seller Subsidiaries (other than real property acquired in
foreclosure or in lieu of foreclosure in the course of the collection
of loans and being held by Seller or a Seller Subsidiary for
disposition as required by law) is set forth in Schedule 2.08(a) under
----------------
the heading "Owned Real Property" (such real property being herein
referred to as the "Owned Real Property"). A list of each parcel of
real property leased by Seller or any of the Seller Subsidiaries is
also set forth in Schedule 2.08(a) under the heading "Leased Real
----------------
Property" (such real property being herein referred to as the "Leased
Real Property"). Seller shall update Schedule 2.08(a) within ten (10)
----------------
days of acquiring any Owned Real Property or leasing any Leased Real
Property after the date hereof. Collectively, the Owned Real Property
and the Leased Real Property are herein referred to as the "Real
Property."
(b) There is no pending action involving Seller or any of the
Seller Subsidiaries as to the title of or the right to use any of the
Real Property.
(c) Except as disclosed on Schedule 2.08(c), neither Seller nor
----------------
any of the Seller Subsidiaries has any interest in any real property
other than as described above in Section 2.08(a) except interests as a
mortgagee, any real property acquired in foreclosure or in lieu of
foreclosure and being held for disposition as required by law and
property held by any Seller Subsidiary in its fiduciary capacity.
(d) To the best knowledge of Seller, none of the buildings,
structures or other improvements located on the Real Property
encroaches upon or over any adjoining parcel of real estate or any
easement or right-of-way or "setback" line and all such buildings,
structures and improvements are located and constructed in conformity
with all applicable zoning ordinances and building codes.
(e) None of the buildings, structures or improvements located
on the Owned Real Property are the subject of any official complaint or
notice by any governmental authority of violation of any applicable
zoning ordinance or building code, and there is no zoning ordinance,
building code, use or occupancy restriction or condemnation action or
proceeding pending, or, to the best knowledge of Seller, threatened,
with respect to any such building, structure or improvement. The Owned
Real Property is in generally
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16
good condition for its intended purpose, ordinary wear and tear excepted,
and has been maintained in accordance with reasonable and prudent business
practices applicable to like facilities.
(f) Except as may be reflected in the Seller Financial
Statements or with respect to such easements, Liens, defects or
encumbrances as do not individually or in the aggregate materially
adversely affect the use or value of the parcel of Owned Real Property,
Seller and the Seller Subsidiaries have, and at the Closing Date will
have, good and marketable title to their respective Owned Real
Properties.
(g) Neither Seller nor any of the Seller Subsidiaries has
caused or allowed the generation, treatment, storage, disposal or
release at any Real Property of any Toxic Substance, except in
accordance in all material respects with all applicable federal, state
and local laws and regulations. "Toxic Substance" means any hazardous,
toxic or dangerous substance, pollutant, waste, gas or material,
including, without limitation, petroleum and petroleum products, metals
liquids, semi-solids or solids, that are regulated under any federal,
state or local statute, ordinance, rule, regulation or other law
pertaining to environmental protection, contamination, quality, waste
management or cleanup. There are no underground storage tanks located
on, in or under any Owned Real Property or Leased Real Property.
2.09 Taxes. Seller and each Seller Subsidiary have timely filed or
-----
will timely file (including extensions) all material tax returns required to
be filed at or prior to the Closing Date ("Seller Returns"). Each of Seller
and the Seller Subsidiaries has paid, or set up adequate reserves on the
Seller Financial Statements for the payment of, all taxes required to be paid
in respect of the periods covered by such Seller Returns and has set up
adequate reserves on the most recent Seller Financial Statements for the
payment of all taxes anticipated to be payable in respect of all periods up
to and including the latest period covered by such Seller Financial
Statements. Neither Seller nor any Seller Subsidiary has any material
liability for any such taxes in excess of the amounts so paid or reserves so
established, and no material deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed in writing
(tentatively or definitely) against Seller or any of the Seller Subsidiaries
which have not been settled or would not be covered by existing reserves.
Neither Seller nor any of the Seller Subsidiaries is delinquent in the
payment of any material tax, assessment or governmental charge, nor has it
requested any extension of time within which to file any tax returns in
respect of any fiscal year which have not since been filed and no requests
for waivers of the time to assess any tax are pending. Except as set forth
on Schedule 2.09, no federal or state income tax return of Seller or any
-------------
Seller Subsidiaries has been audited by the Internal Revenue Service (the
"IRS") or any state tax authority for the seven most recent full calendar
years. Except as set forth on Schedule 2.09, there is no deficiency or
-------------
refund litigation or, to the best knowledge of Seller, matter in controversy
with respect to Seller Returns. Except as set forth on Schedule 2.09 hereof,
-------------
neither Seller nor any of the Seller Subsidiaries has extended or waived any
statute of limitations on the assessment of any tax due that is currently in
effect.
2.10 Material Adverse Effect. Since December 31, 1997, there has been
-----------------------
no Material Adverse Effect on Seller and the Seller Subsidiaries, taken as a
whole.
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17
2.11 Loans, Commitments and Contracts.
--------------------------------
(a) Schedule 2.11(a) contains a complete and accurate listing,
----------------
as of December 31, 1997, of all contracts entered into with respect to
deposits and repurchase agreements of $1,000,000 or more, by account,
and, as of December 31, 1997, all loan agreements, notes, security
agreements, bankers' acceptances, outstanding letters of credit,
participation agreements, and other documents relating to or involving
extensions of credit by Seller or any of the Seller Subsidiaries and,
as of December 31, 1997, all loan commitments and commitments to issue
letters of credit and other commitments to extend credit with respect
to any one entity or related group of entities in excess of $1,000,000
to which Seller or any of the Seller Subsidiaries is a party or by
which it is bound, by account.
(b) Except for the contracts and agreements required to be
listed on Schedule 2.11(a) and the loans required to be listed on
----------------
Schedule 2.11(f), and except as otherwise listed on Schedule 2.11(b),
---------------- ----------------
as of December 31, 1997, neither Seller nor any of the Seller
Subsidiaries is a party to or is bound by any:
(i) agreement, contract, arrangement, understanding or
commitment with any labor union;
(ii) material franchise or license agreement, excluding
software license agreements entered into in the ordinary course
of business;
(iii) written employment, severance, termination pay,
agency, consulting or similar agreement or commitment in respect
of personal services;
(iv) material agreement, arrangement or commitment (A)
not made in the ordinary course of business, and (B) pursuant to
which Seller or any of the Seller Subsidiaries is or may become
obligated to invest in or contribute to any Seller Subsidiary
other than pursuant to Seller Employee Plans (as that term is
defined in Section 2.19 hereof) or agreements relating to joint
ventures or partnerships set forth in Schedule 2.02, true and
-------------
complete copies of which have been furnished to Buyers;
(v) agreement, indenture or other instrument not
disclosed in the Seller Financial Statements relating to the
borrowing of money by Seller or any of the Seller Subsidiaries or
the guarantee by Seller or any of the Seller Subsidiaries of any
such obligation (other than trade payables or instruments related
to transactions entered into in the ordinary course of business
by Seller or any of the Seller Subsidiaries, such as deposits,
Federal Home Loan Bank ("FHLB") and Federal Funds borrowings and
repurchase and reverse repurchase agreements), other than such
agreements, indentures or instruments providing for annual
payments of less than $200,000;
(vi) contract containing covenants which limit the
ability of Seller or any of the Seller Subsidiaries to compete
in any line of business or with any person or which involves any
restrictions on the geographical area in which, or
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18
method by which, Seller or any of the Seller Subsidiaries may carry
on their respective businesses (other that as may be required by law
or any applicable Regulatory Authority);
(vii) contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K as
promulgated by the SEC to be performed after the date of this
Agreement that has not been filed or incorporated by reference in
the Seller Reports;
(viii) lease with annual rental payments aggregating
$100,000 or more;
(ix) loans or other obligations payable or owing to any
officer, director or employee except (A) salaries, wages and
directors' fees or other compensation incurred and accrued in the
ordinary course of business and (B) obligations due in respect of
any depository accounts maintained by any of the foregoing with
Seller or any of the Seller Subsidiaries in the ordinary course
of business; or
(x) other agreement, contract, arrangement,
understanding or commitment involving an obligation by Seller or
any of the Seller Subsidiaries of more than $250,000 and
extending beyond six months from the date hereof that cannot be
canceled without cost or penalty upon notice of 30 days or less,
other than contracts entered into in respect of deposits, loan
agreements and commitments, notes, security agreements,
repurchase and reverse repurchase agreements, bankers'
acceptances, outstanding letters of credit and commitments to
issue letters of credit, participation agreements and other
documents relating to transactions entered into by Seller or any
of the Seller Subsidiaries in the ordinary course of business and
not involving extensions of credit with respect to any one entity
or related group of entities in excess of $1,000,000.
(c) Seller and/or the Seller Subsidiaries carry property,
liability, director and officer errors and omissions, products
liability and other insurance coverage as set forth in Schedule 2.11(c)
----------------
under the heading "Insurance."
(d) True, correct and complete copies of the agreements,
contracts, leases and other documents referred to in Section 2.11(b)
have been included with Schedule 2.11(b) hereto. True, correct and
----------------
complete copies of the agreements, contracts, leases, insurance
policies and other documents referred to in Schedules 2.11(a) and (c)
-------------------------
have been or shall be furnished or made available to Buyers.
(e) To the best knowledge of Seller, each of the agreements,
contracts, leases, insurance policies and other documents referred to
in Schedules 2.11 (a), (b) and (c) is a valid, binding and enforceable
-------------------------------
obligation of the parties sought to be bound thereby, except as the
enforceability thereof against the parties thereto (other than Seller
or any of the Seller Subsidiaries) may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws now or hereafter
in effect relating to the
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19
enforcement of creditors' rights generally, and except that equitable
principles may limit the right to obtain specific performance or other
equitable remedies.
(f) Schedule 2.11(f) under the heading "Loans" contains a true,
----------------
correct and complete listing, as of December 31, 1997, by account, of
(i) all loans in excess of $500,000 of Seller or any of the Seller
Subsidiaries that have been accelerated during the past twelve months;
(ii) all loan commitments or lines of credit of Seller or any of the
Seller Subsidiaries in excess of $500,000 which have been terminated by
Seller or any of the Seller Subsidiaries during the past twelve months
by reason of default or adverse developments in the condition of the
borrower or other events or circumstances affecting the credit of the
borrower; (iii) all loans, lines of credit and loan commitments in
excess of $500,000, as to which Seller or any of the Seller
Subsidiaries has given written notice of its intent to terminate during
the past twelve months; (iv) with respect to all loans in excess of
$500,000 all notification letters and other written communications from
Seller or any of the Seller Subsidiaries to any of their respective
borrowers, customers or other parties during the past twelve months
wherein Seller or any of the Seller Subsidiaries has requested or
demanded that actions be taken to correct existing defaults or facts or
circumstances which may become defaults; (v) each borrower, customer or
other party which has notified Seller or any of the Seller Subsidiaries
during the past twelve months of, or has asserted against Seller or any
of the Seller Subsidiaries, in each case in writing, any "lender
liability" or similar claim, and, to the best knowledge of Seller, each
borrower, customer or other party which has given Seller or any of the
Seller Subsidiaries any oral notification of, or orally asserted to or
against Seller or any of the Seller Subsidiaries, any such claim; or
(vi) all loans in excess of $250,000 (A) that are contractually past
due 90 days or more in the payment of principal and/or interest, (B)
that are on non-accrual status, (C) that have been classified
"doubtful," "loss" or the equivalent thereof by any Regulatory
Authority, (D) where a reasonable doubt exists as to the timely future
collectibility of principal and/or interest, whether or not interest is
still accruing or the loan is less than 90 days past due, (E) the
interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was
originally created due to concerns regarding the borrower's ability to
pay in accordance with such initial terms, or (F) where a specific
reserve allocation exists in connection therewith.
2.12 Absence of Defaults. Neither Seller nor any of the Seller
-------------------
Subsidiaries is in violation of its charter documents or By-Laws or in
default under any material agreement, commitment, arrangement, lease,
insurance policy or other instrument, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has
not occurred any event that, with the lapse of time or giving of notice or
both, would constitute such a default, except in all cases where such default
would not have a Material Adverse Effect on Seller and its Subsidiaries,
taken as a whole.
2.13 Litigation and Other Proceedings. Except as set forth on
--------------------------------
Schedule 2.13 or otherwise disclosed in the Seller Financial Statements,
-------------
neither Seller nor any of the Seller Subsidiaries is a party to any pending
or, to the best knowledge of Seller, threatened claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or reasonably
could not be expected to have, a Material Adverse Effect on Seller and the
Seller Subsidiaries, taken as a whole. Without limiting the generality of
the foregoing, there are no actions, suits or proceedings pending or, to the
best knowledge of Seller, threatened against Seller or any
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20
of the Seller Subsidiaries or any of their respective officers or directors by
any shareholder of Seller or any of the Seller Subsidiaries (or any former
shareholder of Seller or any of the Seller Subsidiaries) or involving claims
under the Community Reinvestment Act of 1977, as amended, the Bank Secrecy
Act, the fair lending laws or any other similar laws.
2.14 Directors' and Officers' Insurance. Each of Seller and the
----------------------------------
Seller Subsidiaries has taken or will take all requisite action (including,
without limitation, the making of claims and the giving of notices) pursuant
to its directors' and officers' liability insurance policy or policies in
order to preserve all rights thereunder with respect to all matters (other
than matters arising in connection with this Agreement and the transactions
contemplated hereby) occurring prior to the Effective Time that are known to
Seller.
2.15 Compliance with Laws
--------------------
(a) To the best knowledge of Seller, Seller and each of the
Seller Subsidiaries have all permits, licenses, authorizations, orders
and approvals of, and have made all filings, applications and
registrations with, all Regulatory Authorities that are required in
order to permit them to own or lease their respective properties and
assets and to carry on their respective businesses as presently
conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best
knowledge of Seller, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are
current; in each case except for permits, licenses, authorizations,
orders, approvals, filings, applications and registrations the failure
to have (or have made) would not have a Material Adverse Effect on
Seller and the Seller Subsidiaries, taken as a whole.
(b) (i) Each of Seller and the Seller Subsidiaries has complied
with all laws, regulations and orders (including, without limitation,
zoning ordinances, building codes, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and securities, tax,
environmental, civil rights, and occupational health and safety laws
and regulations including, without limitation, in the case of Seller or
any Seller Subsidiary that is a bank or savings association, banking
organization, banking corporation or trust company, all statutes,
rules, regulations and policy statements pertaining to the conduct of a
banking, deposit-taking, lending or related business, or to the
exercise of trust powers) and governing instruments applicable to it
and to the conduct of its business, and (ii) neither Seller nor any of
the Seller Subsidiaries is in default under, and no event has occurred
which, with the lapse of time or notice or both, could result in the
default under, the terms of any judgment, order, writ, decree, permit,
or license of any Regulatory Authority or court, whether federal,
state, municipal or local, and whether at law or in equity, except in
the case of subparts (i) and (ii) where such failure to comply or
default would not have a Material Adverse Effect on Seller and the
Seller Subsidiaries, taken as a whole.
(c) Except as set forth on Schedule 2.15(c), neither Seller nor
----------------
any of the Seller Subsidiaries is subject to or reasonably likely to
incur a liability as a result of its ownership, operation, or use of
any Property (as defined below) of Seller (whether directly or, to the
best knowledge of Seller, as a consequence of such Property being
acquired in foreclosure or in lieu of foreclosure or being part of the
investment portfolio
-15-
21
of Seller or any of the Seller Subsidiaries) (A) that is contaminated by
or contains any Toxic Substance (as defined in Section 2.08), including,
without limitation, petroleum and petroleum products, asbestos, PCBs,
pesticides, herbicides and any other substance or waste that is hazardous
to human health or the environment and regulated by federal, state or
local law, or (B) on which any Toxic Substance has been stored, disposed
of, placed or used at the Property or in the construction of structures
thereon; and which, in each case, reasonably could be expected to have a
Material Adverse Effect on Seller and the Seller Subsidiaries, taken as a
whole. "Property" shall include all property (real or personal, tangible
or intangible) owned or controlled by Seller or any of the Seller
Subsidiaries, including, without limitation, property acquired under
foreclosure or in lieu of foreclosure, property in which any venture
capital or similar unit of Seller or any of the Seller Subsidiaries has an
interest and, to the best knowledge of Seller, property held by Seller or
any of the Seller Subsidiaries in its capacity as a trustee. No claim,
action, suit or proceeding is pending or, to the best knowledge of Seller,
threatened, and no material claim has been asserted against Seller or any
of the Seller Subsidiaries relating to Property of Seller or any of the
Seller Subsidiaries before any court or other Regulatory Authority or
arbitration tribunal relating to Toxic Substances, pollution or the
environment, and there is no outstanding judgment, order, writ,
injunction, decree or award against or affecting Seller or any of the
Seller Subsidiaries with respect to the same.
(d) Neither Seller nor any of the Seller Subsidiaries has
received any notification or communication that has not been finally
resolved from any Regulatory Authority (i) asserting that the Seller or
any of the Seller Subsidiaries or any Property is not in substantial
compliance with any of the statutes, regulations or ordinances that
such Regulatory Authority enforces, except with respect to matters
which reasonably could not be expected to have a Material Adverse
Effect on the Seller and the Seller Subsidiaries, taken as a whole,
(ii) threatening to revoke any license, franchise, permit or
governmental authorization that reasonably could be expected to have a
Material Adverse Effect on the Seller and the Seller Subsidiaries,
taken as a whole, including, without limitation, such company's status
as an insured depository institution under the FDI Act, or (iii)
requiring or threatening to require Seller or any of the Seller
Subsidiaries, or indicating that Seller or any of the Seller
Subsidiaries may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement
restricting or limiting or purporting to direct, restrict or limit in
any manner the operations of Seller or any of the Seller Subsidiaries,
including, without limitation, any restriction on the payment of
dividends. No such cease and desist order, agreement or memorandum of
understanding or other agreement is currently in effect.
(e) Neither Seller nor any of the Seller Subsidiaries is
required by Section 32 of the FDI Act to give prior notice to any
federal banking agency of the proposed addition of an individual to its
board of directors or the employment of an individual as a senior
executive officer.
2.16 Labor. No work stoppage involving Seller or any of the Seller
-----
Subsidiaries is pending or, to the best knowledge of Seller, threatened.
Except as set forth on Schedule 2.13, neither Seller nor any of the Seller
-------------
Subsidiaries is involved in, or, to the best knowledge of Seller, threatened
with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding that reasonably
-16-
22
could be expected to have a Material Adverse Effect on the Seller and the
Seller Subsidiaries, taken as a whole. None of the employees of Seller or the
Seller Subsidiaries are represented by any labor union or any collective
bargaining organization.
2.17 Material Interests of Certain Persons. Except as set forth in
-------------------------------------
Seller's proxy statement for its 1998 Annual Meeting of Shareholders, no
officer or director of Seller or any of the Seller Subsidiaries, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such officer or director, has any interest in any contract or property
(real or personal, tangible or intangible), used in, or pertaining to the
business of, Seller or any of the Seller Subsidiaries, which in the case of
Seller and each of the Seller Subsidiaries would be required to be disclosed
by Item 404 of Regulation S-K promulgated by the SEC.
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets;
-----------------------------------------------------------
Financial Assets.
----------------
(a) All of the accounts, notes and other receivables that are
reflected in the Seller Financial Statements as of December 31, 1997
were acquired in the ordinary course of business and were collectible
in full in the ordinary course of business, except for possible loan
and lease losses that are adequately provided for in the allowance for
loan and lease losses reflected in such Seller Financial Statements,
and the collection experience of Seller and the Seller Subsidiaries
since December 31, 1997 to the date hereof, has not deviated in any
material and adverse manner from the credit and collection experience
of Seller and the Seller Subsidiaries, taken as a whole, for the six
months ended December 31, 1997.
(b) The allowances for loan losses contained in the Seller
Financial Statements were established in accordance with the past
practices and experiences of Seller and the Seller Subsidiaries, and
the allowance for loan and lease losses shown on the consolidated
balance sheet of Seller and the Seller Subsidiaries as of December 31,
1997, were adequate in all material respects under the requirements of
GAAP, or regulatory accounting principles, as the case may be, to
provide for possible losses on loans and leases (including, without
limitation, accrued interest receivable) and credit commitments
(including, without limitation, stand-by letters of credit) as of the
date of such balance sheet.
(c) Schedule 2.18(c) sets forth as of the date of this
----------------
Agreement all assets classified by Seller as real estate acquired
through foreclosure or repossession, including foreclosed assets.
(d) As of December 31, 1997, the aggregate amount of all Non-
Performing Assets (as defined below) on the books of Seller and the
Seller Subsidiaries did not exceed $3,266,356. "Non-Performing Assets"
shall mean (i) all loans (A) that are contractually past due 90 days or
more in the payment of principal and/or interest, (B) that are on
nonaccrual status, (C) that have been classified "doubtful," "loss" or
the equivalent thereof by any Regulatory Agency or (D) where the
interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was
originally created due to concerns regarding the borrower's ability to
pay in accordance with such initial terms, and (ii) all assets
classified by Seller
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as real estate acquired through foreclosure or in lieu of foreclosure,
including in-substance foreclosures, and all other assets acquired through
foreclosure or in lieu of foreclosure.
(e) All loans receivable (including discounts) and accrued
interest entered on the books of Seller and the Seller Subsidiaries, to
the extent unpaid on the Closing Date, arose out of bona fide arm's-
length transactions, were made for good and valuable consideration in
the ordinary course of Seller's or the appropriate Seller Subsidiary's
respective business, and the notes or other evidences of indebtedness
with respect to such loans or discounts are true and genuine and are
what they purport to be. The loans, discounts and the accrued interest
reflected on the books of Seller and the Seller Subsidiaries are
subject to no defenses, set-offs or counterclaims (including, without
limitation, those afforded by usury or truth-in-lending laws), except
as may be provided by bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by general principles of equity. All
such loans are owned by Seller or the appropriate Seller Subsidiary
free and clear of any liens, restrictions or encumbrances.
(f) The notes and other evidences of indebtedness evidencing
the loans described in Section 2.18(e) above, and all pledges,
mortgages, deeds of trust and other collateral documents or security
instruments relating thereto are and will be, in all material respects,
valid, true, genuine and enforceable, and what they purport to be.
Seller and each of the Seller Subsidiaries has good and valid title to
the investment securities shown on the Seller Financial Statements and
all securities entered on the books of Seller or the appropriate Seller
Subsidiary subsequent to December 31, 1997, except for those sold or
redeemed in the ordinary course of business. A complete and accurate
list of such investment securities as of December 31, 1997 is attached
as Schedule 2.18(f). Such list shall be updated each month in writing
----------------
until the Closing.
2.19 Employee Benefit Plans.
----------------------
(a) Schedule 2.19(a) lists all pension, retirement,
----------------
supplemental retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, medical, disability, workers'
compensation, vacation, group insurance, severance and other employee
benefit, incentive and welfare policies, contracts, plans and
arrangements, and all trust agreements related thereto, maintained by
or contributed to by Seller or any of the Seller Subsidiaries in
respect of any of the present or former directors, officers, or other
employees of and/or consultants to Seller or any of the Seller
Subsidiaries (collectively, "Seller Employee Plans"). Seller has
furnished Buyers with the following documents with respect to each
Seller Employee Plan: (i) a true and complete copy of all written
documents comprising such Seller Employee Plan (including amendments
and individual agreements relating thereto) or, if there is no such
written document, an accurate and complete description of the Seller
Employee Plan; (ii) the most recently filed Form 5500 or Form 5500-C/R
(including all schedules thereto), if applicable; (iii) the most recent
financial statements and actuarial reports, if any; (iv) the summary
plan description currently in effect and all material modifications
thereof, if any; and (v) the most recent IRS determination letter, if
any.
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(b) All Seller Employee Plans have been maintained and operated
in all material respects in accordance with their terms and the
material requirements of all applicable statutes, orders, rules and
final regulations, including, without limitation, to the extent
applicable, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"). All contributions required to be made to Seller Employee
Plans have been made or reserved.
(c) With respect to each of the Seller Employee Plans which is
a pension plan (as defined in Section 3(2) of ERISA) (the "Pension
Plans"): (i) each Pension Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined to
be so qualified by the IRS and such determination letter may still be
relied upon, and each related trust is exempt from taxation under
Section 501(a) of the Code; (ii) the present value of all benefits
vested and all benefits accrued under each Pension Plan which is
subject to Title IV of ERISA did not, in each case, as of the last
applicable annual valuation date (as indicated on Schedule 2.19(a)),
----------------
exceed the value of the assets of the Pension Plan allocable to such
vested or accrued benefits; (iii) there has been no "prohibited
transaction," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA, which could subject any Pension Plan or
associated trust, or Seller or any of the Seller Subsidiaries, to any
material tax or penalty; (iv) no defined benefit Pension Plan or any
trust created thereunder has been terminated, nor has there been any
"reportable events" with respect to any Pension Plan, as that term is
defined in Section 4043 of ERISA since January 1, 1990; and (v) no
Pension Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA (whether or not waived). No Pension Plan is a
"multiemployer plan," as that term is defined in Section 3(37) of
ERISA.
(d) Except as disclosed in Schedule 2.19(d) or as reflected on
----------------
the Seller Financial Statements or the notes thereto, neither Seller
nor any of the Seller Subsidiaries has any liability for any post-
retirement health, medical or similar benefit of any kind whatsoever,
except as required by statute or regulation.
(e) Neither Seller nor any of the Seller Subsidiaries has any
material liability under ERISA or the Code as a result of its being a
member of a group described in Sections 414(b), (c), (m) or (o) of the
Code.
(f) Except as disclosed in Schedule 2.19(f), neither the
----------------
execution nor delivery of this Agreement, nor the consummation of any
of the transactions contemplated hereby, will (i) result in any payment
(including, without limitation, severance, unemployment compensation or
golden parachute payment) becoming due to any director or employee of
Seller or any of the Seller Subsidiaries from any of such entities,
(ii) increase any benefit otherwise payable under any of the Seller
Employee Plans or (iii) result in the acceleration of the time of
payment of any such benefit. Seller shall use its best efforts to
insure that no amounts paid or payable by Seller, the Seller
Subsidiaries or Buyers to or with respect to any employee or former
employee of Seller or any of the Seller Subsidiaries will fail to be
deductible for federal income tax purposes by reason of Section 280G of
the Code.
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2.20 Conduct of Seller to Date. From and after December 31, 1997
-------------------------
through the date of this Agreement, except as set forth in the Seller
Financial Statements and the Seller Reports: (i) Seller and the Seller
Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practices; (ii) except upon the exercise of
Seller Stock Options, neither Seller nor any of the Seller Subsidiaries has
issued, sold, granted, conferred or awarded any of its Equity Securities, or
any corporate debt securities which would be classified under GAAP as
long-term debt on the balance sheets of Seller or the Seller Subsidiaries;
(iii) Seller has not effected any stock split or adjusted, combined,
reclassified or otherwise changed its capitalization; (iv) Seller has not
declared, set aside or paid any dividend (other than its regular quarterly
dividends) or other distribution in respect of its capital stock, or purchased,
redeemed, retired, repurchased or exchanged, or otherwise acquired or disposed
of, directly or indirectly, any of its Equity Securities, whether pursuant to
the terms of such Equity Securities or otherwise; (v) neither Seller nor any of
the Seller Subsidiaries has incurred any obligation or liability (absolute or
contingent), except liabilities incurred in the ordinary course of business
or in connection with the transactions contemplated by this Agreement, or
subjected to Lien any of its assets or properties other than in the ordinary
course of business consistent with past practice; (vi) neither Seller nor any
of the Seller Subsidiaries has discharged or satisfied any Lien or paid any
obligation or liability (absolute or contingent), other than in the ordinary
course of business; (vii) neither Seller nor any of the Seller Subsidiaries
has sold, assigned, transferred, leased, exchanged, or otherwise disposed of
any of its properties or assets other than for a fair consideration in the
ordinary course of business; (viii) except as required by contract or law,
neither Seller nor any of the Seller Subsidiaries has (A) increased the rate
of compensation of, or paid any bonus to, any of its directors, officers, or
other employees, except in accordance with existing policy, (B) entered into
any new, or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar contract, (C)
entered into, terminated, or substantially modified any of the Seller
Employee Plans or (D) agreed to do any of the foregoing; (ix) neither Seller
nor any Seller Subsidiary has suffered any material damage, destruction, or
loss, whether as the result of fire, explosion, earthquake, accident,
casualty, labor trouble, requisition, or taking of property by any Regulatory
Authority, flood, windstorm, embargo, riot, act of God or the enemy, or other
casualty or event, and whether or not covered by insurance; (x) neither
Seller nor any of the Seller Subsidiaries has canceled or compromised any
debt, except for debts charged off or compromised in accordance with the past
practice of Seller and the Seller Subsidiaries; and (xi) neither Seller nor
any of the Seller Subsidiaries has entered into any material transaction,
contract or commitment outside the ordinary course of its business, except in
connection with the transactions contemplated by this Agreement.
2.21 Absence of Undisclosed Liabilities.
----------------------------------
(a) As of December 31, 1997, neither Seller nor any of the
Seller Subsidiaries has any debts, liabilities or obligations equal to
or exceeding $50,000, individually or $100,000 in the aggregate,
whether accrued, absolute, contingent or otherwise and whether due or
to become due, which would be required to be reflected in the Seller
Financial Statements or the notes thereto in accordance with GAAP
except:
(i) debts, liabilities or obligations reflected on the
Seller Financial Statements and the notes thereto;
(ii) operating leases reflected on Schedule 2.11(b); and
----------------
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(iii) debts, liabilities or obligations incurred since
December 31, 1997 in the ordinary and usual course of their
respective businesses, none of which are for breach of contract,
breach of warranty, torts, infringements or lawsuits and none of
which have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
(b) Neither Seller nor any of the Seller Subsidiaries was as of
December 31, 1997, or since such date to the date hereof, a party to
any contract or agreement, excluding deposits, loan agreements, and
commitments, notes, security agreements, repurchase and reverse
repurchase agreements, bankers' acceptances, outstanding letters of
credit and commitments to issue letters of credit, participation
agreements and other documents relating to transactions entered into by
Seller or any of the Seller Subsidiaries in the ordinary course of
business, that had, has or may be reasonably expected to have a
Material Adverse Effect on Seller and the Seller Subsidiaries, taken as
a whole.
2.22 Proxy Statement, Etc. None of the information regarding Seller
---------------------
or any of the Seller Subsidiaries to be supplied by Seller for inclusion or
included in (i) the Registration Statement on Form S-4 to be filed with the
SEC by Mercantile for the purpose of registering the shares of Mercantile
Common Stock to be exchanged for Seller Common Stock pursuant to the
provisions of this Agreement (the "Registration Statement"), (ii) the Proxy
Statement to be mailed to Seller's shareholders in connection with the
meeting to be called to consider this Agreement and the Merger (the "Proxy
Statement") or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at
the respective times such documents are filed with any Regulatory Authority
and, in the case of the Registration Statement, when it becomes effective
and, with respect to the Proxy Statement, when mailed, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading or, in the
case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the meeting of Seller's shareholders referred to in Section
5.03, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which Seller or any of the Seller Subsidiaries is responsible
for filing with any Regulatory Authority in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law.
2.23 Registration Obligations. Neither Seller nor any of the Seller
------------------------
Subsidiaries is under any obligation, contingent or otherwise, which will
survive the Effective Time by reason of any agreement to register any
transaction involving any of its securities under the Securities Act.
2.24 Tax, Regulatory and Accounting Matters. Neither Seller nor any
--------------------------------------
of the Seller Subsidiaries has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code, (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement or (iii) prevent or impede the
transactions contemplated hereby from qualifying for pooling-of-interests
accounting treatment.
2.25 Brokers and Finders. Except for ABN AMRO Incorporated, neither
-------------------
Seller nor any of the Seller Subsidiaries nor any of their respective
officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
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commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Seller or any of the Seller Subsidiaries in connection with
this Agreement or the transactions contemplated hereby.
2.26 Interest Rate Risk Management Instruments
-----------------------------------------
(a) Set forth on Schedule 2.26(a) is a list as of the date
----------------
hereof of all interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which Seller or
any of the Seller Subsidiaries is a party or by which any of their
properties or assets may be bound.
(b) All such interest rate swaps, caps, floors and option
agreements and other interest rate risk management arrangements to
which Seller or any of the Seller Subsidiaries is a party or by which
any of their properties or assets may be bound were entered into in the
ordinary course of business and, to the best knowledge of Seller, in
accordance with prudent banking practice and applicable rules,
regulations and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the time and
are legal, valid and binding obligations of Seller or a Seller
Subsidiary and are in full force and effect. Seller and each of the
Seller Subsidiaries has duly performed in all material respects all of
its obligations thereunder to the extent that such obligations to
perform have accrued, and to the best knowledge of Seller, there are no
material breaches, violations or defaults or allegations or assertions
of such by any party thereunder.
2.27 Accuracy of Information. The statements contained in this
-----------------------
Agreement, the Schedules and any other written document executed and
delivered by or on behalf of Seller pursuant to the terms of this Agreement
are true and correct as of the date hereof or as of the date delivered in all
material respects, and such statements and documents do not omit any material
fact necessary to make the statements contained therein not misleading.
2.28 Year 2000 Compliant. To the best knowledge of Seller, both
-------------------
Seller and the Seller Subsidiaries have complied with regulatory bulletins
issued through February 28, 1998 by the Federal Financial Institutions
Examination Council on the subject of Year 2000 Compliance. Seller and the
Seller Subsidiaries have exercised ordinary care in assessing Year 2000
Compliance status of all material computer software, firmware and hardware
used in the ordinary course of business as set forth on Schedule 2.28, which
-------------
is a Y2K Inventory & Risk Assessment Matrix. Seller and the Seller
Subsidiaries shall continue to work through Closing with its vendors to
renovate or replace non-compliant computer software, firmware and hardware in
order to ensure that the testing of renovated or replaced items is
substantially underway by December 31, 1998.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
As an inducement to Seller to enter into and perform its obligations
under this Agreement, and notwithstanding any examinations, inspections,
audits or other investigations made by Seller, the Buyers hereby represent
and warrant to Seller as follows:
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3.01 Organization and Authority. Mercantile and Merger Sub are each
--------------------------
corporations duly organized, validly existing and in good standing under the
laws of the State of Missouri, are each qualified to do business and are each
in good standing in all jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect on Mercantile and its Subsidiaries, taken as a whole, and has
corporate power and authority to own its properties and assets and to carry
on its business as it is now being conducted. Each of Mercantile and Merger
Sub is registered as a bank holding company with the Federal Reserve Board
under the BHCA.
3.02 Capitalization of Mercantile. The authorized capital stock of
----------------------------
Mercantile consists of (i) 400,000,000 shares of Mercantile Common Stock, of
which, as of April 23, 1998, 134,960,625 shares were issued and [133,115,227]
were outstanding and (ii) 5,000,000 shares of preferred stock, no par value
("Mercantile Preferred Stock"), issuable in series, of which as of the date
hereof, no shares were issued and outstanding. Mercantile has designated
2,000,000 shares of Mercantile Preferred Stock as "Series A Junior
Participating Preferred Stock" and has reserved such shares under a Rights
Agreement dated May 23, 1988 between Mercantile and Mercantile Bank National
Association, as Rights Agent (the "Rights Agreement" and, the rights to be
issued pursuant thereto, the "Rights"). As of March 31, 1998, Mercantile had
reserved: (i) 13,836,802 shares of Mercantile Common Stock for issuance under
Mercantile's Shareholder Investment Plan (the "Investment Plan") and various
employee and/or director stock option, incentive and/or benefit plans
(collectively, "Mercantile Employee/Director Stock Grants"); (ii) 2,077,000
shares of Mercantile Common Stock for issuance upon the acquisition of
Financial Services Corporation of the Midwest ("FSCM") pursuant to the
Agreement and Plan of Merger, dated as of April 13, 1998, by and among
Mercantile, Merger Sub and FSCM; (iii) 5,400,000 shares of Mercantile Common
Stock for issuance upon the acquisition of CBT Corporation ("CBT") pursuant
to the Agreement and Plan of Merger, dated as of January 10, 1998, by and
among Mercantile, Merger Sub and CBT; and (iv) 13,800,000 shares of
Mercantile Common Stock for issuance upon the acquisition of Firstbank of
Illinois ("Firstbank") pursuant to the Agreement and Plan of Merger, dated as
of January 30, 1998, by and among Mercantile, Merger Sub and Firstbank. From
March 31, 1998 through the date of this Agreement, no shares of Mercantile
Common Stock have been issued, excluding any such shares which may have been
issued in connection with the Investment Plan or Mercantile Employee/Director
Stock Grants.
Mercantile continually evaluates possible acquisitions and may prior to
the Effective Time enter into one or more agreements providing for, and may
consummate, the acquisition by it of another bank, association, bank holding
company, savings and loan holding company or other company (or the assets
thereof) for consideration that may include Equity Securities. In addition,
prior to the Effective Time, Mercantile may, depending on market conditions
and other factors, otherwise determine to issue equity, equity-linked or
other securities for financing purposes or repurchase its outstanding Equity
Securities. Notwithstanding the foregoing, neither Mercantile nor any
Mercantile Subsidiary has taken or agreed to take any action or has any
knowledge of any fact or circumstance and neither Mercantile nor Merger Sub
will take any action that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368
of the Code, (ii) materially impede or delay receipt of any approval referred
to in Section 6.01(b) or the consummation of the transactions contemplated by
this Agreement or (iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment. Except as set forth above, there
are no other Equity Securities of Mercantile outstanding. All of the issued
and outstanding shares of Mercantile Common Stock are validly issued, fully
paid, and nonassessable, and have not been issued in violation of any
preemptive right of any shareholder of Mercantile. At the Effective Time,
the Mercantile Common Stock to be
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issued in the Merger will be duly authorized, validly issued, fully paid and
nonassessable, will not be issued in violation of any preemptive right of any
shareholder of Mercantile.
3.03 Authorization.
-------------
(a) Mercantile and Merger Sub each has the corporate power and
authority to enter into this Agreement and to carry out their
respective obligations hereunder. The execution, delivery and
performance of this Agreement by Mercantile and Merger Sub and the
consummation by Mercantile and Merger Sub of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action of Mercantile and Merger Sub. Subject to the receipt
of such approvals of the Regulatory Authorities as may be required by
statute or regulation, this Agreement is a valid and binding obligation
of Mercantile and Merger Sub enforceable against each in accordance
with its terms.
(b) Neither the execution, delivery and performance by
Mercantile and Merger Sub of this Agreement, nor the consummation by
Mercantile and Merger Sub of the transactions contemplated hereby, nor
compliance by Mercantile and Merger Sub with any of the provisions
hereof, will (i) violate, conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) or result in the
termination of, or accelerate the performance required by, or result in
a right of termination or acceleration of, or result in the creation
of, any Lien upon any of the properties or assets of Mercantile or
Merger Sub under any of the terms, conditions or provisions of (x)
their respective Articles of Incorporation or By-Laws, or (y) any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Mercantile or Merger Sub is a
party or by which they may be bound, or to which Mercantile or Merger
Sub or any of their respective properties or assets may be subject, or
(ii) subject to compliance with the statutes and regulations referred
to in subsection (c) of this Section 3.03, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to Mercantile or Merger Sub or any of their respective
properties or assets; other than violations, conflicts, breaches,
defaults, terminations, accelerations or Liens which would not have a
Material Adverse Effect on Mercantile and its Subsidiaries, taken as a
whole.
(c) Other than in connection with or in compliance with the
provisions of the Missouri Statute, the IBCA, the Securities Act, the
Exchange Act, the securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA, the FDI Act or any required approvals of any
other Regulatory Authority, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Mercantile and Merger
Sub of the transactions contemplated by this Agreement.
3.04 Mercantile Financial Statements. The consolidated balance sheets
-------------------------------
of Mercantile and its Subsidiaries as of December 31, 1997, 1996 and 1995 and
related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1997, together with the notes thereto, audited by KPMG Peat Marwick LLP, as
filed with
-24-
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the SEC on Form 10-K for the year ended December 31, 1997 (collectively, the
"Mercantile Financial Statements"), have been prepared in accordance with GAAP,
present fairly the consolidated financial position of Mercantile and its
Subsidiaries at the dates thereof and the consolidated results of operations,
changes in shareholders' equity and cash flows of Mercantile and its
Subsidiaries for the periods stated therein and are derived from the books and
records of Mercantile and its Subsidiaries, which are complete and accurate in
all material respects and have been maintained in accordance with good business
practices. Neither Mercantile nor any of its Subsidiaries has any material
contingent liabilities that are not described in the Mercantile Financial
Statements.
3.05 Mercantile Reports. Since January 1, 1995, each of Mercantile
------------------
and its Subsidiaries has filed any and all reports, registrations and
statements, together with any required amendments thereto, that it was
required to file with any Regulatory Authority. All such reports and
statements filed with any such Regulatory Authority are collectively referred
to herein as the "Mercantile Reports." As of its respective date, each
Mercantile Report complied in all material respects with all the rules and
regulations promulgated by the applicable Regulatory Authority and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.06 Material Adverse Effect. Since December 31, 1997, there has been
-----------------------
no Material Adverse Effect on Mercantile and its Subsidiaries, taken as a
whole.
3.07 Registration Statement, Etc. None of the information regarding
---------------------------
Mercantile or any of its Subsidiaries to be supplied by Buyers for inclusion
or included in (i) the Registration Statement, (ii) the Proxy Statement, or
(iii) any other documents to be filed with any Regulatory Authority in
connection with the transactions contemplated hereby will, at the respective
times such documents are filed with any Regulatory Authority and, in the case
of the Registration Statement, when it becomes effective and, with respect to
the Proxy Statement, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make
the statements therein not misleading or, in the case of the Proxy Statement
or any amendment thereof or supplement thereto, at the time of the meeting of
Seller's shareholders referred to in Section 5.03, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect
to the solicitation of any proxy for such meeting. All documents which
Mercantile or Merger Sub are responsible for filing with any Regulatory
Authority in connection with the Merger will comply as to form in all
material respects with the provisions of applicable law.
3.08 Brokers and Finders. Neither Mercantile, Merger Sub nor any of
-------------------
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Mercantile or Merger Sub in connection with this
Agreement or the transactions contemplated hereby.
3.09 Accuracy of Information. The statements contained in this
-----------------------
Agreement and any other written document executed and delivered by or on
behalf of Buyers pursuant to the terms of this Agreement are true and correct
as of the date hereof in all material respects, and such statements and
documents do not omit any material fact necessary to make the statements
contained therein not misleading.
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ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time. During the
-------------------------------------------------
period from the date of this Agreement to the Effective Time, Seller and each
of the Seller Subsidiaries shall conduct their businesses according to the
ordinary and usual course consistent with past and current practices and
shall use their best efforts to maintain and preserve their business
organization, employees and advantageous business relationships and retain
the services of their officers and key employees.
4.02 Forbearances of Seller Except as set forth in Schedule 4.02, and
--------------------- -------------
except to the extent required by law, regulation or Regulatory Authority, or
with the prior written consent of Buyers (unless otherwise specifically noted
in this Section 4.02), during the period from the date of this Agreement to
the Effective Time, Seller shall not and shall not permit any of the Seller
Subsidiaries to:
(a) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital stock
(other than dividends from any of the Seller Subsidiaries to Seller or
to another of the Seller Subsidiaries), except that Seller may declare
and pay regular quarterly cash dividends of not more than $0.2725 per
share on the Seller Common Stock; provided, however, that Seller shall
not declare or pay a quarterly dividend for any quarter in which Seller
shareholders will be entitled to receive a regular quarterly dividend
on the shares of Mercantile Common Stock to be issued in the Merger;
(b) enter into or amend any employment, severance or similar
agreement or arrangement with any director, officer or employee, or
materially modify any of the Seller Employee Plans or grant any salary
or wage increase or materially increase any employee benefit (including
incentive or bonus payments), except (i) normal individual increases in
compensation to employees consistent with past practice, (ii) as
required by law or contract, (iii) such increases of which Seller
notifies Buyers in writing and which Buyers do not disapprove within 10
days of the receipt of such notice and (iv) pursuant to the provisions
of Section 5.10 hereof;
(c) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in
principle with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of a material
amount of assets or securities, any disposition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights;
(d) propose or adopt any amendments to its Articles of
Incorporation or other charter document or By-Laws;
(e) issue, sell, grant, confer or award any of its Equity
Securities, except that the Seller may issue shares of Seller Common
Stock upon exercise of the Seller Stock Options outstanding on the date
of this Agreement and pursuant to the option granted to Mercantile in
connection with the transaction contemplated by this Agreement, or
effect any stock split or adjust, combine, reclassify or otherwise
change its capitalization as it existed on the date of this Agreement;
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(f) purchase, redeem, retire, repurchase or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of its
Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise;
(g) without first consulting with and obtaining the written
consent of Mercantile, cause or permit FNBI to enter into, renew or
increase any loan or credit commitment (including stand-by letters of
credit) to, or invest or agree to invest in any person or entity or
modify any of the material provisions or renew or otherwise extend the
maturity date of any existing loan or credit commitment (collectively,
"Lend to") in an amount equal to or in excess of $1,000,000 or in any
amount which, when aggregated with any and all loans or credit
commitments of Seller and the Seller Subsidiaries to such person or
entity, would be equal to or in excess of $1,000,000; provided,
however, that Seller or any of the Seller Subsidiaries may make any
such loan or credit commitment in the event (A) Seller or any Seller
Subsidiary has delivered to Buyers or their designated representative a
notice of its intention to make such loan and such information as
Buyers or their designated representative may reasonably require in
respect thereof and (B) Buyers or their designated representative shall
not have reasonably objected to such loan by giving written or
facsimile notice of such objection within two (2) business days
following the delivery to Buyers or their designated representative of
the notice of intention and information as aforesaid; provided further,
however, that nothing in this paragraph shall prohibit Seller or any
Seller Subsidiary from honoring any contractual obligation in existence
on the date of this Agreement. Notwithstanding this Section 4.02(g),
Seller shall be authorized without first consulting with Buyers or
obtaining Buyers' prior written consent, to cause or permit FNBI to
increase the aggregate amount of any credit facilities theretofore
established in favor of any person or entity (each a "Pre-Existing
Facility"), provided that the aggregate amount of any and all such
increases shall not be in excess of the lesser of 10% of such Pre-
Existing Facilities or $50,000;
(h) directly or indirectly (including through its officers,
directors, employees or other representatives) (i) initiate, solicit or
encourage any discussions, inquiries or proposals with any third party
(other than Buyers) relating to the disposition of any significant
portion of the business or assets of Seller or any of the Seller
Subsidiaries or the acquisition of Equity Securities of Seller or any
of the Seller Subsidiaries or the merger of Seller or any of the Seller
Subsidiaries with any person (other than Buyers) or any similar
transaction (each such transaction being referred to herein as an
"Acquisition Transaction"), (ii) provide any such person with
information or assistance or negotiate with any such person with
respect to an Acquisition Transaction, and Seller shall promptly notify
Buyers orally of all the relevant details relating to all inquiries,
indications of interest and proposals which it may receive with respect
to any Acquisition Transaction;
(i) take any action that would (i) prevent or impede the
transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code, (ii) materially impede
or delay the consummation of the transactions contemplated by this
Agreement or the ability of Buyers or Seller to obtain any approval of
any Regulatory Authority required for the transactions contemplated by
this Agreement or to perform its covenants and agreements under this
Agreement, or
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(iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment;
(j) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity;
(k) materially restructure or change its investment securities
portfolio, through purchases, sales or otherwise, or the manner in
which the portfolio is classified or reported, or execute individual
investment transactions for its own account of greater than $1,000,000
for U.S. Treasury or Federal Agency Securities and $250,000 for all
other investment instruments;
(l) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or
intentionally take or omit to take any other act which would make any
of the representations and warranties in Article II of this Agreement
untrue or incorrect in any material respect if made anew after engaging
in such activity, entering into such transaction, or taking or omitting
such other act; or
(m) enter into, increase or renew any loan or credit commitment
(including standby letters of credit) to any executive officer or
director of Seller or any of the Seller Subsidiaries, any holder of 10%
or more of the outstanding shares of Seller Common Stock, or any entity
controlled, directly or indirectly, by any of the foregoing or engage
in any transaction with any of the foregoing which is of the type or
nature sought to be regulated in 12 U.S.C. Sec. 371c and 12 U.S.C. Sec.
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. Sec. 371c.
4.03 Forbearances of the Buyers. During the period from the date of
--------------------------
this Agreement to the Closing Date, the Buyers shall not, without the prior
consent of Seller, agree in writing or otherwise to engage in any activity,
enter into any transaction or take or omit to take any other action:
(a) that would (i) prevent or impede the transactions
contemplated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code, (ii) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Mercantile or Seller to obtain any necessary approvals of
any Regulatory Authority required for the transactions contemplated by
this Agreement or to perform its covenants and agreements under this
Agreement, or (iii) prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment; or
(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.
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ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence. Buyers and Seller shall
-------------------------------------
each afford to the other, and to the other's accountants, counsel and other
representatives, full access during normal business hours, during the period
prior to the Effective Time, to all their respective properties, books,
contracts, commitments and records and, during such period, each shall
furnish promptly to the other (i) a copy of each report, schedule and other
document filed or received by it during such period pursuant to the
requirements of federal and state securities laws and (ii) all other
information concerning its business, properties and personnel as the other
may reasonably request. Each party shall, and shall cause its advisors and
representatives to, (A) hold confidential all information obtained in
connection with any transaction contemplated hereby with respect to the other
party and its Subsidiaries which is not otherwise public knowledge, (B) in
the event of a termination of this Agreement, return all documents (including
copies thereof) obtained hereunder from the other party or any of its
Subsidiaries to such other party or its Subsidiaries and (C) use its best
efforts to cause all information obtained pursuant to this Agreement or in
connection with the negotiation of this Agreement to be treated as
confidential and not use, or knowingly permit others to use, any such
information unless such information becomes generally available to the
public.
5.02 Registration Statement; Regulatory Matters.
------------------------------------------
(a) Mercantile shall prepare and, subject to the review and
consent of Seller with respect to matters relating to Seller, file with
the SEC the Registration Statement (or the equivalent in the form of
preliminary proxy materials) with respect to the shares of Mercantile
Common Stock to be issued in the Merger and the exercise of the Seller
Stock Options after the Effective Time. Mercantile shall promptly
prepare and, subject to the review and consent of Seller with respect
to matters relating to Seller, use its best efforts to file as soon as
is reasonably practicable an application for approval of the Merger
with the Federal Reserve Board, and such additional regulatory
authorities as may require an application, and shall use its best
efforts to cause the Registration Statement to become effective.
Mercantile shall also take any action required to be taken under any
applicable state blue sky or securities laws in connection with the
issuance of such shares and the exercise of such options, and Seller
and the Seller Subsidiaries shall furnish Mercantile all information
concerning Seller and the Seller Subsidiaries and the shareholders
thereof as Mercantile may reasonably request in connection with any
such action.
(b) Seller and Buyers shall cooperate and use their respective
best efforts to prepare all documentation, to effect all filings and to
obtain all permits, consents, approvals and authorizations of all third
parties and Regulatory Authorities necessary to consummate the
transactions contemplated by this Agreement and, as and if directed by
Mercantile, to consummate such other transactions by and among
Mercantile's Subsidiaries and the Seller Subsidiaries concurrently with
or following the Effective Time, provided, however, that such actions
do not: (i) prevent or impede the transactions contemplated
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hereby from qualifying as a reorganization within the meaning of Section
368 of the Code; (ii) materially impede or delay the receipt of any
approval referred to in Section 6.01(b); (iii) prevent or impede the
transactions contemplated hereby from qualifying for pooling-of-
interests accounting treatment unless Buyers first waive Seller's
covenants in Sections 5.02(b) and 5.16 hereof and the condition to
Buyers' obligation to consummate the Merger set forth in Section
6.03(f) hereof; or (iv) materially impede or delay the consummation of
the transactions contemplated by this Agreement.
5.03 Shareholder Approval. Seller shall call a special meeting of its
--------------------
shareholders to be held as soon as is reasonably possible for the purpose of
voting upon this Agreement and the Merger and related matters. In connection
with such meeting, Mercantile shall prepare, subject to the review and
consent of Seller, the Proxy Statement (which shall be part of the
Registration Statement to be filed with the SEC by Mercantile) and mail the
same to the shareholders of Seller. The Board of Directors of Seller shall
submit for approval of Seller's shareholders the matters to be voted upon at
such meeting. The Board of Directors of Seller hereby does and, subject to
the fiduciary duties of the Seller's Board of Directors, as advised by
outside legal counsel, will recommend this Agreement and the transactions
contemplated hereby to the shareholders of Seller and use its reasonable best
efforts to obtain any vote of Seller's shareholders necessary for the
approval of this Agreement.
5.04 Current Information. During the period from the date of this
-------------------
Agreement to the Closing Date, (i) each party will promptly furnish the other
with copies of all monthly and other interim financial statements as the same
become available and shall cause one or more of its designated
representatives to confer on a regular and frequent basis with
representatives of the other party and (ii) Mercantile shall promptly furnish
to the Seller copies of all filings by Mercantile with each of the Federal
Reserve Board and the SEC. Each party shall promptly notify the other party
of the following events immediately upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken by the affected
party with respect thereto: (a) the occurrence of any event which could cause
any representation or warranty of such party or any schedule, statement,
report, notice, certificate or other writing furnished by such party to be
untrue or misleading in any material respect; (b) any Material Adverse
Effect; (c) the issuance or commencement of any governmental and/or
regulatory agency complaint, investigation or hearing or any communications
indicating that the same may be contemplated and, as to any such matter which
shall now or hereafter be in effect, any communications pertaining thereto;
or (d) the institution or the threat of any material litigation involving
such party.
5.05 Conforming Entries.
------------------
(a) Notwithstanding that Seller believes that Seller and Seller
Subsidiaries have established all reserves and taken all provisions for
possible loan losses required by GAAP and applicable laws, rules and
regulations, Seller recognizes that Buyers may have adopted different
loan, accrual and reserve policies (including loan classifications and
levels of reserves for possible loan losses). From and after the date
of this Agreement, Seller and Buyers shall consult and cooperate with
each other with respect to conforming the loan, accrual and reserve
policies of Seller and the Seller Subsidiaries to those policies of
Buyers, as specified in each case in writing to Seller, based upon such
consultation and as hereinafter provided.
(b) In addition, from and after the date of this Agreement,
Seller and Buyers shall consult and cooperate with each other with
respect to determining appropriate Seller accruals, reserves and
charges to establish and take in respect of excess equipment write-off
or write-down of various assets and other appropriate charges and
accounting
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adjustments taking into account the parties' business plans following the
Merger, as specified in each case in writing to Seller, based upon such
consultation and as hereinafter provided.
(c) Seller and Buyers shall consult and cooperate with each
other with respect to determining the amount and the timing for
recognizing for financial accounting purposes Seller's expenses of the
Merger and the restructuring charges, if any, related to or to be
incurred in connection with the Merger.
(d) With respect to clauses (a) through (c) of this Section
5.05, it is the objective of Mercantile and Seller that such reserves,
accruals, charges and divestitures, if any, to be taken shall be
consistent with GAAP.
5.06 Environmental Reports. Buyers may perform, as soon as reasonably
---------------------
practicable, but not later than ninety (90) days after the date hereof, a
phase one environmental investigation and/or asbestos survey by Environmental
Operations, Inc. or any other firm designated by Buyers, or any of them, on
all real property owned, leased or operated by Seller or any of the Seller
Subsidiaries as of the date hereof (but excluding space in retail and similar
establishments leased by Seller for automatic teller machines or leased bank
branch facilities where the space leased comprises less than 20% of the total
space leased to all tenants of such property) and within fifteen (15) days
after being notified by Sellers of the acquisition or lease of any real
property acquired or leased by Seller or any of the Seller Subsidiaries after
the date hereof (but excluding space in retail and similar establishments
leased by Seller for automatic teller machines or leased bank facilities
where the space leased comprises less than 20% of the total space leased to
all tenants of such property). If the results of the phase one investigation
indicate, in Buyers' reasonable opinion, that additional investigation is
warranted, Buyers may perform, at Buyers' expense, a phase two subsurface
investigation or investigations by Environmental Operations, Inc. on
properties deemed to warrant such additional study. Buyers shall perform any
such phase two investigation as soon as reasonably practicable after receipt
of the phase one report(s) for such properties and, in any event, shall
notify Seller and Environmental Operations, Inc. within fifteen (15) days
after receipt of the phase one report that Environmental Operations, Inc.
should promptly commence any such phase two investigation. Should the cost
of taking all remedial or other corrective actions and measures (i) required
by applicable law or (ii) recommended by Environmental Operations, Inc. in
such phase one or two report or reports, in the aggregate, exceed the sum of
$500,000, as reasonably estimated by Environmental Operations, Inc., or if
the cost of such actions or measures cannot be so reasonably estimated by
Environmental Operations, Inc. to be such amounts or less with any reasonable
degree of certainty, Buyers shall have the right pursuant to Section 7.01(e)
hereof, for a period of fifteen (15) business days following receipt from
Environmental Operations, Inc. of such estimate or indication that the cost
of such actions and measures cannot be so reasonably estimated, to terminate
this Agreement.
5.07 Agreements of Affiliates. Set forth as Schedule 5.07 is a list
------------------------ -------------
(which includes all individual and beneficial ownership and also identifies
how all such beneficially owned shares are registered on the stock record
book of Seller) of all persons whom Seller believes to be "affiliates" of
Seller for purposes of Rule 145 under the Securities Act and for
pooling-of-interests accounting treatment. Seller shall use its best efforts
to cause each person who is identified as an "affiliate" to deliver to
Mercantile, as of the date hereof, or as soon as practicable hereafter, a
written agreement in substantially the form set forth as Exhibit A to this
---------
Agreement providing that each such person will agree not to sell, pledge,
transfer or otherwise dispose of the shares of Mercantile Common Stock to be
received by such person in the Merger during the period designated in such
letter and thereafter in
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compliance with the applicable provisions of the Securities Act. Prior to the
Closing Date, and via letter, Seller shall amend and supplement Schedule 5.07
-------------
and use its best efforts to cause each additional person who is identified as an
"affiliate" to execute a written agreement as provided in this Section 5.07.
5.08 Expenses. Each party hereto shall bear its own expenses incident
--------
to preparing, entering into and carrying out this Agreement and to
consummating the Merger; provided, however, that any and all fees (excluding
reasonable out-of-pocket expenses) paid by Seller to its legal counsel,
Sidley & Austin, related to the preparation of this Agreement and all other
agreements and documentation in connection with the consummation of the
transactions contemplated herein, shall not exceed $100,000; provided
further, however, that Buyers shall pay all printing expenses and filing fees
incurred in connection with this Agreement, the Registration Statement and
the Proxy Statement.
5.09 Miscellaneous Agreements and Consents.
-------------------------------------
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its respective best efforts to
take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible, including,
without limitation, using its respective best efforts to lift or
rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby. Each party shall, and shall cause each of its
respective Subsidiaries to, use its best efforts to obtain consents of
all third parties and Regulatory Authorities necessary or, in the
opinion of Buyers, desirable for the consummation of the transactions
contemplated by this Agreement.
(b) Seller, prior to the Effective Time, shall (i) consult and
cooperate with Buyers regarding the implementation of those policies
and procedures established by Buyers for its governance and that of its
Subsidiaries and not otherwise referenced in Section 5.05 hereof,
including, without limitation, policies and procedures pertaining to
the accounting, asset/liability management, audit, credit, human
resources, treasury and legal functions, and (ii) at the 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 or requirement of any
Regulatory Authority having jurisdiction over Seller and/or the Seller
Subsidiary affected thereby.
5.10 Employee Agreements and Benefits.
--------------------------------
(a) Following the Effective Time, Buyers shall cause the
Surviving Corporation to honor in accordance with their terms all
employment, severance and other compensation contracts set forth on
Schedule 2.11(b) between Seller, any of the Seller Subsidiaries, and
----------------
any current or former director, officer, employee or agent thereof, and
all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the Seller Employee Plans.
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(b) Subject to Section 5.15, the provisions of the Seller Stock
Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the Equity
Securities of Seller or any of the Seller Subsidiaries shall be deleted
and terminated as of the Effective Time.
(c) Except as set forth in Section 5.10(b) hereof, the Seller
Employee Plans shall not be terminated by reason of the Merger but
shall continue thereafter as plans of the Surviving Corporation until
such time as the employees of Seller and the Seller Subsidiaries are
integrated into Mercantile's employee benefit plans that are available
to other employees of Mercantile and its Subsidiaries, subject to the
terms and conditions specified in such plans and to such changes
therein as may be necessary to reflect the consummation of the Merger.
Mercantile shall take such steps as are necessary or required to
integrate the employees of Seller and the Seller Subsidiaries into
Mercantile's employee benefit plans available to other employees of
Mercantile and its Subsidiaries as soon as practicable after the
Effective Time, with (i) full credit for prior service with Seller or
any of the Seller Subsidiaries for purposes of vesting and eligibility
for participation and benefit allocation (but not benefit accruals
under any defined benefit plan), and co-payments and deductibles, (ii)
waiver of all waiting periods, evidence of insurability and pre-
existing condition exclusions or penalties, and (iii) full credit for
claims arising prior to the Effective Time for purposes of deductibles,
out-of-pocket maximums, benefit maximums and all other similar
limitations for the applicable plan year in which the Merger is
consummated.
5.11 Press Releases. Except to the extent disclosure may be required
--------------
by applicable law, Seller and the Buyers shall consult with each other as to
the form and substance of any proposed press release or other proposed public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby.
5.12 State Takeover Statutes. Seller will take all steps necessary to
-----------------------
exempt the transactions contemplated by this Agreement and any agreement
contemplated hereby from, and if necessary challenge the validity of, any
applicable state takeover law.
5.13 Directors' and Officers' Indemnification. Mercantile agrees that
----------------------------------------
the Merger shall not affect or diminish any of the duties and obligations of
indemnification of Seller or any of the Seller Subsidiaries existing as of
the Effective Time in favor of employees, agents, directors or officers of
Seller or any of the Seller Subsidiaries arising by virtue of its Articles of
Incorporation, Charter or By-Laws in the form in effect at the date of this
Agreement or arising by operation of law or arising by virtue of any
contract, resolution or other agreement or document existing at the date of
this Agreement, and Mercantile shall continue such duties and obligations in
full force and effect for so long as they would (but for the Merger)
otherwise survive and continue in full force and effect. To the extent that
Seller's existing directors' and officers' liability insurance policy would
provide coverage for any action or omission occurring prior to the Effective
Time, Seller agrees to give proper notice to the insurance carrier and to
Mercantile of any potential claim thereunder so as to preserve Seller's
rights to such insurance coverage. Mercantile represents that the directors'
and officers' liability insurance policy maintained by it provides for
coverage of "prior acts" for directors and officers of entities acquired by
Mercantile including Seller and the Seller Subsidiaries on and after the
Effective Time. After the Effective Time, Mercantile will provide, or cause
to be provided, such coverage to the officers and
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directors of Seller to the same extent as provided to officer and directors of
Mercantile's other Subsidiaries.
5.14 Tax Opinion Certificates. Seller shall cause such of its
------------------------
executive officers and directors as may be reasonably requested by Xxxxxxxx
Xxxxxx to timely execute and deliver to Xxxxxxxx Xxxxxx a certificate
substantially in the form of Exhibit B hereto.
---------
5.15 Employee Stock Options.
----------------------
(a) At the Effective Time, all rights with respect to Seller
Common Stock pursuant to Seller Stock Options that are outstanding at
the Effective Time, whether or not then exercisable, shall be converted
into and become rights with respect to Mercantile Common Stock, and
Mercantile shall assume all Seller Stock Options in accordance with the
terms of the Seller Stock Plan under which it was issued and the Seller
Stock Option Agreement by which it is evidenced. From and after the
Effective Time, (i) each Seller Stock Option assumed by Mercantile
shall be exercised solely for shares of Mercantile Common Stock, (ii)
the number of shares of Mercantile Common Stock subject to each Seller
Stock Option shall be equal to the number of shares of Seller Common
Stock subject to such Seller Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio and (iii) the per share
exercise price under each Seller Stock Option shall be adjusted by
dividing the per share exercise price under such Seller Stock Option by
the Exchange Ratio and rounding down to the nearest cent; provided,
however, that the terms of each Seller Stock Option shall, in
accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction subsequent to the
Effective Time. It is intended that the foregoing assumption shall be
undertaken in a manner that will not constitute a "modification" as
defined in the Code, as to any Seller Stock Option that is an
"incentive stock option" as defined under the Code.
(b) The shares of Mercantile Common Stock covered by the Seller
Stock Options shall be covered by an effective registration statement
filed on Form S-8 with the SEC and shall be duly authorized, validly
issued and in compliance with all applicable federal and state
securities laws, fully paid and nonassessable and not subject to or in
violation of any preemptive rights. Mercantile shall maintain the
effectiveness of such registration statement (and maintain current
status of the prospectus contained therein) for as long as such options
remain outstanding. Mercantile shall at and after the Effective Time
have reserved sufficient shares of Mercantile Common Stock for issuance
with respect to such options. Mercantile shall also take any action
required to be taken under any applicable state blue sky or securities
laws in connection with the issuance of such shares.
5.16 Best Efforts to Insure Pooling. Each of Mercantile and Seller
------------------------------
undertakes and agrees to use its best efforts to cause the Merger to qualify
for pooling-of-interests accounting treatment.
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ARTICLE VI
----------
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. The approval of this Agreement and
--------------------
the Merger shall have received the requisite vote of shareholders of
Seller at the special meeting of shareholders called pursuant to
Section 5.03 hereof.
(b) Regulatory Approval. This Agreement and the transactions
-------------------
contemplated hereby shall have been approved by the Federal Reserve
Board and any other federal and/or state regulatory agencies whose
approval is required for consummation of the transactions contemplated
hereby and all requisite waiting periods imposed by the foregoing shall
have expired.
(c) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement shall have been declared effective and shall not be subject
to a stop order or any threatened stop order.
(d) No Judicial Prohibition. Neither Seller, Mercantile nor
-----------------------
Merger Sub shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
the consummation of the Merger.
(e) Tax Opinion. Each of Buyers and Seller shall have received
-----------
from Xxxxxxxx Xxxxxx an opinion (which opinion shall not have been
withdrawn at or prior to the Effective Time) reasonably satisfactory in
form and substance to it to the effect that the Merger will constitute
a reorganization within the meaning of Section 368 of the Code, and to
the effect that, as a result of the Merger, except with respect to
fractional share interests and assuming that such Seller Common Stock
is a capital asset in the hands of the holder thereof at the Effective
Time, (i) holders of Seller Common Stock who receive Mercantile Common
Stock in the Merger will not recognize gain or loss for federal income
tax purposes on the receipt of such stock, (ii) the basis of such
Mercantile Common Stock will equal the basis of the Seller Common Stock
for which it is exchanged, and (iii) and the holding period of such
Mercantile Common Stock will include the holding period of the Seller
Common Stock for which it is exchanged.
6.02 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
to effect the Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
-----------------------------
warranties of Buyers set forth in Article III of this Agreement shall
be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time (as though made on and as of the
Effective Time, except (i) to the extent such representations and
warranties are by their express provisions made as of a specified date
or period,
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(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 C to this Agreement.
---------
6.03 Conditions to Obligations of the Buyers. The obligations of the
---------------------------------------
Buyers to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Seller set forth in Article II of this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and as of the Effective Time (as though made on and as of the
Effective Time, except (i) to the extent such representations and
warranties are by their express provisions made as of a specific date
or period, (ii) where the facts which caused the failure of any
representation or warranty to be so true and correct have not resulted,
and are not likely to result, in a Material Adverse Effect on Seller
and its Subsidiaries, taken as a whole, and (iii) for the effect of
transactions contemplated by this Agreement) and Buyers shall have
received a certificate of the Chief Executive Officer and Chief
Financial Officer of Seller, signing solely in their capacities as
officers of Seller, to such effect.
(b) Performance of Obligations. Seller shall have performed in
--------------------------
all material respects all obligations required to be performed by it
under this Agreement prior to the Effective Time, and Buyers shall have
received a certificate of the Chief Executive Officer and Chief
Financial Officer, signing solely in their capacities as officers of
Seller, to that effect.
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(c) Permits, Authorizations, etc. Seller shall have obtained
-----------------------------
any and all material permits, authorizations, consents, waivers and
approvals required for the lawful consummation by it of the Merger.
(d) No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall have been no Material Adverse Effect on Seller
and the Seller Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Seller shall have delivered to Buyers
------------------
an opinion of Seller's counsel dated as of the Closing Date or a
mutually agreeable earlier date in substantially the form set forth as
Exhibit D to this Agreement.
---------
(f) Pooling Letter. The Buyers shall have received as soon as
--------------
practicable after the date of this Agreement a letter of KPMG Peat
Marwick LLP, reasonably satisfactory in form and substance to the
Buyers, to the effect that the Merger will qualify for pooling-of-
interests accounting treatment, which letter shall have not been
withdrawn.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing Date, whether before or after approval by the shareholders of
Seller:
(a) by mutual consent by the Executive Committee of the Board
of Directors of Mercantile and by the Board of Directors of Seller;
(b) by the Executive Committee of the Board of Directors of
Mercantile or the Board of Directors of Seller at any time after May 1,
1999 if the Merger shall not theretofore have been consummated
(provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained
herein);
(c) by the Executive Committee of the Board of Directors of
Mercantile or the Board of Directors of Seller if (i) the Federal
Reserve Board or any other federal and/or state regulatory agency whose
approval is required for the consummation of the transactions
contemplated hereby has denied approval of the Merger and such denial
has become final and nonappealable or (ii) the shareholders of Seller
shall not have approved this Agreement at the meeting referred to in
Section 5.03;
(d) by the Executive Committee of the Board of Directors of
Mercantile, on the one hand, or by the Board of Directors of Seller, on
the other hand, in the event of a material volitional breach by the
other party to this Agreement of any representation, warranty, covenant
or agreement contained herein, which breach is not cured within 30 days
after written notice thereof is given to the breaching party by the
non-breaching party or is not waived by the non-breaching party during
such period; or
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(e) by the Executive Committee of the Board of Directors of
Mercantile pursuant to and in accordance with the provisions of Section
5.06 hereof.
7.02 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 7.01 above, this Agreement shall forthwith
become void and there shall be no liability on the part of Buyers or Seller
or their respective officers or directors except as set forth in the second
sentence of Section 5.01 and in Sections 5.08 and 8.02, and except that no
termination of this Agreement pursuant to Section 7.01(d) shall relieve the
breaching party of any liability to the non-breaching party hereto arising
from the intentional, deliberate or willful breach of any representation,
warranty, covenant or agreement contained herein, after giving notice to such
breaching party and an opportunity to cure as set forth in Section 7.01(d).
7.03 Amendment. This Agreement, the Exhibits and the Schedules hereto
---------
may be amended by the parties hereto, by action taken by or on behalf of the
Executive Committee of the Board of Directors of Mercantile and the
respective Boards of Directors of Merger Sub or Seller, at any time before or
after approval of this Agreement by the shareholders of Seller; provided,
however, that after any such approval by the shareholders of Seller no such
modification shall (A) alter or change the amount or kind of Merger
Consideration to be received by holders of Seller Common Stock as provided in
this Agreement or (B) adversely affect the tax treatment to holders of Seller
Common Stock as a result of the receipt of the Merger Consideration. This
Agreement, the Exhibits and the Schedules hereto may not be amended except by
an instrument in writing signed on behalf of each of Buyers and Seller.
7.04 Waiver. Any term, condition or provision of this Agreement may
------
be waived in writing at any time by the party which is, or whose shareholders
or stockholders, as the case may be, are, entitled to the benefits thereof.
ARTICLE VIII
------------
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements. No
----------------------------------------------------------
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein
and each such representation and warranty shall survive such investigation.
Except as set forth below in this Section 8.01, all representations,
warranties and agreements in this Agreement of Buyers and Seller or in any
instrument delivered by Buyers or Seller pursuant to or in connection with
this Agreement shall expire at the Effective Time or upon termination of this
Agreement in accordance with its terms. In the event of consummation of the
Merger, the agreements contained in or referred to in Sections 1.05-1.11,
5.02(b), 5.08, 5.10, 5.13 and 5.15 shall survive the Effective Time. In the
event of termination of this Agreement in accordance with its terms, the
agreements contained in or referred to in the second sentence of Section 5.01
and Sections 5.08, 7.02 and 8.02 shall survive such termination.
8.02 Indemnification. Buyers and Seller (hereinafter, in such
---------------
capacity being referred to as the "Indemnifying Party") agree to indemnify
and hold harmless each other and their officers, directors and controlling
persons (each such other party being hereinafter referred to, individually
and/or collectively, as the "Indemnified Party") against any and all losses,
claims, damages or liabilities, joint or several, to which the Indemnified
Party may become subject under the Securities Act, the Exchange Act
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or other federal or state law or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof):
(a) arise primarily out of any information furnished to the Indemnified Party
by the Indemnifying Party and included in the Registration Statement as
originally filed or in any amendment therefor and supplement thereof, or in
the Proxy Statement, or in any amendment therefor or supplement thereof, or
are based primarily upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement as originally filed
or in any amendment therefor and supplement thereof, or in the Proxy
Statement, or in any amendment therefor or supplement thereof, and provided
for inclusion thereof by the Indemnifying Party or (b) arise primarily out of
or are based primarily upon the omission or alleged omission by the
Indemnifying Party to state in the Registration Statement as originally filed
or in any amendment therefor and supplement thereof, or in the Proxy
Statement, or in any amendment therefor and supplement thereof, a material
fact required to be stated therein or necessary to make the statements made
therein not misleading, and agrees to reimburse each such Indemnified Party,
as incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action.
8.03 No Assignment; Successors and Assigns. This Agreement shall be
-------------------------------------
binding upon and inure to the benefit of the parties hereto and their
respective successors (including any corporation deemed to be a successor
corporation of any of the parties by operation of law) and assigns, but
neither this Agreement nor any right or obligation set forth in any provision
hereof may be transferred or assigned (except by operation of law) by any
party hereto without the prior written consent of all other parties, and any
purported transfer or assignment in violation of this Section 8.03 shall be
void and of no effect. There shall not be any third party beneficiaries of
any provisions hereof except for Sections 1.09, 1.10, 1.11, 5.10, 5.13, 5.15
and 8.02 which may be enforced against Mercantile or Seller, as the case may
be, by the parties therein identified or described.
8.04 Severability. Nothing in this Agreement shall be construed to
------------
require any party (or any subsidiary of a party) to take any action or fail
to take any action in violation of any applicable law, rule or regulation.
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remaining
provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part of any party
-----------------
hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege.
8.06 Headings. Article, section, subsection and paragraph titles,
--------
captions and headings herein are inserted only as a matter of convenience and
for reference, and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof.
8.07 Entire Agreement. This Agreement and the Schedules and Exhibits
----------------
hereto constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior negotiations,
representations, warranties, commitments, offers, letters of interest or
intent, proposal letters, contracts, writings or other agreements or
understandings with respect thereto. No waiver, and no modification or
amendment, of any provision of this Agreement, shall be effective unless
specifically made in writing and duly signed by all parties thereto.
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45
8.08 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and any party to this Agreement may execute and deliver this
Agreement by executing and delivering any of such counterparts, each of which
when executed and delivered shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument.
8.09 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to be duly received (a) on the date given if
delivered personally or by cable, telegram, telex or facsimile or (b) on the
date received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to the Buyers:
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, XX 00000-0000
Attention: Xxxx X. Xxxx
Executive Vice President
Facsimile: (000) 000-0000
Copy to:
Xxx X. Xxxxxxxx, Esq.
General Counsel
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, XX 00000-0000
Facsimile: (000) 000-0000
and
Xxxxxx X. XxXxxx, Esq.
Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
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(ii) if to Seller:
First Financial Bancorporation
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
President and Chief Executive Officer
Facsimile: (000) 000-0000
Copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be affixed hereto, all as of the date first
written above.
Attest: MERCANTILE BANCORPORATION INC.
/s/ Xxxxx X. Xxxxx By: /s/ Xxxx X. Xxxx
--------------------------- -------------------------------------------
Xxxxx X. Xxxxx Xxxx X. Xxxx
Executive Vice President, Mercantile Bank
National Association, Authorized Officer
Attest: AMERIBANC, INC.
/s/ Xxxxx X. Xxxxx By: /s/ Xxxx X. Xxxx
--------------------------- -------------------------------------------
Xxxxx X. Xxxxx Xxxx X. Xxxx
Vice President
Attest: FIRST FINANCIAL BANCORPORATION
/s/ Xxxxx X. Xxxx By: /s/ Xxxxxx X. Xxxxx
--------------------------- -------------------------------------------
Xxxxx X. Xxxx Xxxxxx X Xxxxx
President and Chief Executive Officer
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