________________________________________________________________
________________________________________________________________
AGREEMENT AND PLAN OF MERGER
by and between
BANTERRA CORP.
an Illinois corporation,
and
BANTERRA ACQUISITIONCO, INC.
an Illinois corporation,
and
HEARTLAND BANCSHARES, INC.
an Illinois corporation
Dated December 23, 1998
________________________________________________________________
________________________________________________________________
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE ONE. ARTICLE ONE. TERMS OF MERGER AND CLOSING...... 1
Section 1.01 ........................................Merger 1
Section 1.02 ...........................Merging Corporation 1
Section 1.03 .........................Surviving Corporation 1
Section 1.04 ..............................Effect of Merger 1
Section 1.05 ................Conversion of Heartland Common 2
Section 1.06 ...............Conversion of Heartland Options 3
Section 1.07 ..................Share and Option Adjustments 3
Section 1.08 .......................................Closing 4
Section 1.09 Exchange Procedures; Surrender of Certificates 4
Section 1.10 ..................................Closing Date 4
Section 1.11 ............................Closing Deliveries 5
Section 1.12 .................Disclosure Schedule; Standard 6
ARTICLE TWO. REPRESENTATIONS AND WARRANTIES OF HEARTLAND... 7
Section 2.01 ................Organization and Capital Stock 7
Section 2.02 ....................Authorization; No Defaults 8
Section 2.03 ..................................Subsidiaries 8
Section 2.04 .........................Financial Information 9
Section 2.05 ............................Absence of Changes 9
Section 2.06 ................Regulatory Enforcement Matters 9
Section 2.07 ...................................Tax Matters 9
Section 2.08 ................Litigation and Related Matters 10
Section 2.09 .........................Employment Agreements 10
Section 2.10 .......................................Reports 11
Section 2.11 ....................Employee Matters and ERISA 11
Section 2.12 ................Title to Properties; Insurance 12
Section 2.13 .........................Environmental Matters 13
Section 2.14 ...........................Compliance with Law 14
Section 2.15 .....................................Brokerage 14
Section 2.16 .......Non-Banking Activities of Heartland and
..................................Subsidiaries 14
Section 2.17 ..........................Trust Administration 14
Section 2.18 .....................................Year 2000 14
Section 2.19 .............Material Contracts and Agreements 14
Section 2.20 ....................No Undisclosed Liabilities 14
Section 2.21 ...................Statements True and Correct 15
Section 2.22 ...........................State Takeover Laws 15
Section 2.23 ......Fair Lending; Community Reinvestment Act 15
Section 2.24 ................................Loan Portfolio 15
Section 2.25 .....Interest Rate Risk Management Instruments 16
Section 2.26 ................................Interim Events 16
Section 2.27 ...............................Closing Matters 16
i
ARTICLE THREE. REPRESENTATIONS AND WARRANTIES OF
BANTERRA AND ACQUISITIONCO................... 16
Section 3.01 ...............Organization and Capital Stock 16
Section 3.02 ................................Authorization 17
Section 3.03 .................................Subsidiaries 17
Section 3.04 ........................Financial Information 17
Section 3.05 ...........................Absence of Changes 17
Section 3.06 ...................................Litigation 17
Section 3.07 ......................................Reports 18
Section 3.08 ..........................Compliance With Law 18
Section 3.09 ..................Statements True and Correct 18
Section 3.10 ...............Regulatory Enforcement Matters 18
Section 3.11 ..........................State Takeover Laws 18
Section 3.12 ...................No Undisclosed Liabilities 18
Section 3.13 ...................Community Reinvestment Act 19
Section 3.14 ..............................Closing Matters 19
Section 3.15 ............................Fund Availability 19
Section 3.16 ..Compliance with Capital Adequacy Guidelines 19
ARTICLE FOUR. AGREEMENTS OF HEARTLAND...................... 19
Section 4.01 ..................Business in Ordinary Course 19
Section 4.02 .....................................Breaches 21
Section 4.03 ...................Submission to Shareholders 21
Section 4.04 .............Consents to Contracts and Leases 22
Section 4.05 ....................Consummation of Agreement 22
Section 4.06 ........................Environmental Reports 22
Section 4.07 ........................Access to Information 23
Section 4.08 .......................Subsidiary Bank Merger 23
Section 4.09 ...............................Plan of Merger 23
Section 4.10 ............................Voting Agreements 23
Section 4.11 ..............Meeting with Heartland Auditors 23
Section 4.12 ..........Merger Expenses and Related Matters 23
Section 4.13 ....Heartland Option Consideration Agreements 24
Section 4.14 ........................Pending Legal Matters 24
Section 4.15 ..................Recovery of Attorneys' Fees 24
ARTICLE FIVE. AGREEMENTS OF BANTERRA AND ACQUISITIONCO..... 24
Section 5.01 .......Regulatory Approvals; Other Agreements 24
Section 5.02 .....................................Breaches 25
Section 5.03 ....................Consummation of Agreement 25
Section 5.04 ..Directors and Officers' Liability Insurance 25
Section 5.05 ............................Employee Benefits 26
Section 5.06 .................Contract of Xxxxx X. Xxxxxxx 27
ARTICLE SIX. CONDITIONS PRECEDENT TO MERGER............... 28
Section 6.01 .........Conditions to Banterra's Obligations 28
ii
Section 6.02 ........Conditions to Heartland's Obligations 29
ARTICLE SEVEN. TERMINATION OR ABANDONMENT................... 30
Section 7.01 .............................Mutual Agreement 30
Section 7.02 .........................Breach of Agreements 30
Section 7.03 ........................Environmental Reports 30
Section 7.04 ........................Failure of Conditions 30
Section 7.05 Regulatory Approval Denial; Burdensome
....................................Condition 30
Section 7.06 Shareholder Approval Denial; Withdrawal/
........ Modification of Board Recommendation 30
Section 7.07 ...............Regulatory Enforcement Matters 31
Section 7.08 ..............................Fall-Apart Date 31
Section 7.09 .....................Third Party Transactions 31
Section 7.10 ....................Heartland Termination Fee 31
ARTICLE EIGHT. GENERAL...................................... 32
Section 8.01 .....................Confidential Information 32
Section 8.02 ....................................Publicity 32
Section 8.03 ..........................Return of Documents 32
Section 8.04 ......................................Notices 32
Section 8.05 .....................Liabilities and Expenses 33
Section 8.06 Nonsurvival of Representations, Warranties
.............................. and Agreements 33
Section 8.07 .............................Entire Agreement 34
Section 8.08 ........................Headings and Captions 34
Section 8.09 ............Waiver, Amendment or Modification 34
Section 8.10 ........................Rules of Construction 34
Section 8.11 .................................Counterparts 34
Section 8.12 .......................Successors and Assigns 34
Section 8.13 .................................Severability 34
Section 8.14 ....................Governing Law; Assignment 35
Section 8.15 .....................Enforcement of Agreement 35
Section 8.16 ............................Fees and Expenses 35
SCHEDULE 2.01(b)-1 - Heartland Options
SCHEDULE 2.01(b)-2 - Heartland MRP Shares
EXHIBIT 1.11(a) - Heartland's Legal Opinion Matters
EXHIBIT 1.11(b) - Banterra's Legal Opinion Matters
iii
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is
made and entered into as of December 23, 1998, by and between
BANTERRA CORP., an Illinois corporation ("Banterra"), BANTERRA
ACQUISITIONCO, INC., an Illinois corporation ("AcquisitionCo"),
and HEARTLAND BANCSHARES, INC., an Illinois corporation
("Heartland").
RECITALS
--------
The Boards of Directors of Banterra, AcquisitionCo and
Heartland have approved and deem it advisable and in the best
interests of Banterra, AcquisitionCo and Heartland and their
respective shareholders to consummate the business combination
transaction provided for herein in which AcquisitionCo shall,
subject to the terms and conditions set forth herein, merge with
and into Heartland (the "Merger").
The Boards of Directors of Banterra, AcquisitionCo and
Heartland have each determined that the Merger and the other
transactions contemplated by this Agreement are consistent with,
and in furtherance of, their respective business strategies and
goals.
Banterra, AcquisitionCo and Heartland desire to make
certain representations, warranties and agreements in connection
with the Merger and also to prescribe certain conditions to the
Merger.
In consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth
herein, Banterra, AcquisitionCo and Heartland hereby agree as
follows:
ARTICLE ONE
-----------
TERMS OF MERGER AND CLOSING
---------------------------
SECTION 1.01. MERGER. Pursuant to the terms and
provisions set forth herein and the Illinois Business
Corporation Act of 1983, as amended (the "Illinois Corporate
Law"), AcquisitionCo shall merge with and into Heartland.
SECTION 1.02. Merging Corporation. AcquisitionCo shall be
the merging corporation in the Merger and its corporate identity
and existence, separate and apart from Heartland, shall cease
upon consummation of the Merger.
SECTION 1.03. SURVIVING CORPORATION. Heartland shall be
the surviving corporation in the Merger. No changes in the
Articles of Incorporation of Heartland shall be effected by the
Merger. All of the officers and directors of Heartland
immediately prior the Effective Time (as defined in Section 1.10
hereof) shall resign as officers and directors of Heartland as
of the Effective Time, and all of the officers and directors of
AcquisitionCo immediately prior to the Effective Time shall
become the officers and directors of Heartland at the Effective
Time.
SECTION 1.04. EFFECT OF MERGER. The Merger shall have all
of the effects provided for herein and under the Illinois
Corporate Law.
1
SECTION 1.05. CONVERSION OF HEARTLAND COMMON.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of Banterra, AcquisitionCo,
Heartland or their respective shareholders, each share of common
stock, par value $.01 per share, of Heartland ("Heartland
Common") issued and outstanding immediately prior to the
Effective Time (other than shares of Heartland Common held in
the treasury of Heartland or by any direct or indirect
subsidiary of Heartland or not vested, fully earned and
nonforfeitable or Dissenting Shares (as defined in Section
1.05(f) hereof)) shall be converted into the right to receive
$15.75 in cash (the "Stock Consideration").
(b) For purposes of determining those shares of Heartland
Common that are issued and outstanding immediately prior to the
Effective Time, and not held in the treasury of Heartland or by
any direct or indirect subsidiary of Heartland or not vested,
fully earned and nonforfeitable, and entitled to the Stock
Consideration, each share of Heartland Common issued to any
individual pursuant to the Heartland Bancshares, Inc. Management
Recognition Plan (the "Heartland MRP") and currently scheduled
to vest on January 28, 1999 pursuant to the Heartland MRP shall
be deemed to constitute an issued and outstanding share of
Heartland Common entitled to receive the Stock Consideration in
the event that the Effective Time occurs prior to January 28,
1999. Notwithstanding anything to the contrary contained
herein, all shares of Heartland Common issued to any individual
pursuant to the Heartland MRP but not vested on or prior to
January 28, 1999 shall not be entitled to the Stock
Consideration, and any shares of Heartland Common owned by
the Heartland MRP but unawarded under the Heartland MRP shall
not be entitled to the Stock Consideration.
(c) At the Effective Time, all of the shares of Heartland
Common, except for Dissenting Shares, by virtue of the Merger
and without any action on the part of the holders thereof, shall
no longer be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of any certificate or
certificates which immediately prior to the Effective Time
represented outstanding shares of Heartland Common (the "Stock
Certificates") shall thereafter cease to have any rights with
respect to such shares, except the right of such holders to
receive, without interest, the Stock Consideration upon the
surrender of such Stock Certificate or Stock Certificates in
accordance with Section 1.09 hereof.
(d) At the Effective Time, each share of Heartland Common,
if any, held in the treasury of Heartland or by any direct or
indirect subsidiary of Heartland (other than shares held in
trust accounts for the benefit of others or in other fiduciary,
nominee or similar capacities and shares held by Heartland or
any of its subsidiaries in respect to a debt previously
contracted or Dissenting Shares) immediately prior to the
Effective Time shall be canceled.
(e) Each share of common stock, par value $1.00 per share,
of AcquisitionCo ("AcquisitionCo Common") outstanding
immediately prior to the Effective Time shall be converted into
and become one share of Heartland Common.
(f) If any holder of shares of Heartland Common dissents
from this Agreement and the Merger in accordance with the
Illinois Corporate Law, any issued and outstanding shares of
Heartland Common held by any such dissenting holder ("Dissenting
Shares") shall not be converted as described in this Section
1.05 but from and after the Effective Time shall represent only
the right to receive such consideration as may be determined to
be due to such dissenting holder pursuant to the Illinois
Corporate Law; provided, however, that each share of Heartland
Common outstanding immediately prior to the Effective Time and
held by a dissenting holder who shall, after the Effective Time,
either withdraw his or her demand for appraisal or lose his or
her right to dissent shall have only such rights as are provided
for under the Illinois Corporate Law.
2
SECTION 1.06. CONVERSION OF HEARTLAND OPTIONS.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of Banterra, Heartland or their
respective shareholders, each outstanding option to purchase a
share of Heartland Common (a "Heartland Option") granted
pursuant to the Heartland Bancshares, Inc. 1996 Stock Option and
Incentive Plan (the "Heartland Stock Option Plan") which is
outstanding and vested immediately prior to the Effective Time
(a "Vested Heartland Option") shall be cancelled and shall cease
to represent a right to acquire a share of Heartland Common and
shall be converted automatically into the right to receive $1.75
in cash (the "Option Consideration") pursuant to those certain
agreements entered into by and between Banterra and all of the
holders of Vested Heartland Options contemporaneously with the
execution of this Agreement (the "Heartland Option Consideration
Agreements").
(b) For purposes of determining those Heartland Options
that constitute Vested Heartland Options entitled to the Option
Consideration, each outstanding Heartland Option granted to any
individual pursuant to the Heartland Stock Option Plan and
currently scheduled to vest on January 28, 1999 pursuant to the
Heartland Stock Option Plan shall be deemed to constitute a
Vested Heartland Option entitled to receive the Option
Consideration in the event that the Effective Time occurs prior
to January 28, 1999.
(c) At the Effective Time, all of the Heartland Options,
by virtue of the Merger and without any action on the part of
the holders thereof and pursuant to the Heartland Option
Consideration Agreements, shall no longer be outstanding and
shall be canceled and retired and shall cease to exist, and each
holder of any document, agreement, grant, award, certificate or
other evidence which immediately prior to the Effective Time
represented Vested Heartland Options (the "Option Certificates")
shall thereafter cease to have any rights with respect to such
options, except the right of such holders to receive, without
interest, the Option Consideration upon the surrender of such
Option Certificate or Option Certificates in accordance with
Section 1.09 hereof.
SECTION 1.07. SHARE AND OPTION ADJUSTMENTS. Between the
date hereof and the Effective Time, no shares of Heartland
Common shall be changed into a different number of shares of
Heartland Common or a different class of shares by reason of
reclassification, recapitalization, splitup, exchange of shares,
readjustment, stock dividend, stock split, exercise of Heartland
Options or otherwise. If between the date hereof and the
Effective Time any Heartland Options shall become vested for any
reason whatsoever (an "Option Adjustment"), then the Option
Consideration into which a Vested Heartland Option shall be
converted pursuant to Section 1.06(a) hereof shall be
appropriately and proportionately adjusted so that each option
holder of Heartland shall be entitled to receive consideration
as such option holder would have received pursuant to such
Option Adjustment had the vesting been immediately following the
Effective Time. In the event that the sum of (i) the number of
shares of Heartland Common (including those shares of Heartland
Common scheduled to vest on January 28, 1999 pursuant to the
Heartland MRP) presented for exchange pursuant to Section 1.09
hereof or otherwise issued and outstanding at the Effective
Time, or (ii) the number of Vested Heartland Options (including
those Heartland Options scheduled to vest on January 28, 1999
pursuant to the Heartland Stock Option Plan) presented for
exchange pursuant to Section 1.09 hereof, shall be greater than
the sum of (x) the number of shares of Heartland Common
represented in Section 2.01(b) hereof as being outstanding
as of the date hereof and scheduled to vest on January 28, 1999,
or (y) the number of Vested Heartland Options represented in
Section 2.01(b) hereof as being outstanding as of the date
hereof and scheduled to vest on January 28, 1999, as the case
may be, then the Stock Consideration or the Option
Consideration, as the case may be, shall be appropriately and
proportionately decreased to take into account such additional
issued and outstanding shares of Heartland Common or Vested
Heartland Options.
3
SECTION 1.08. CLOSING. The closing of the Merger (the
"Closing") shall take place at a location mutually agreeable to
the parties at 10:00 a.m., Central Time, on the Closing Date
described in Section 1.10 hereof.
SECTION 1.09. EXCHANGE PROCEDURES; SURRENDER OF
CERTIFICATES.
(a) Mercantile Bank shall act as Exchange Agent in the
Merger (the "Exchange Agent"). At or before the Effective
Time, Banterra shall deposit, or shall cause to be deposited,
with the Exchange Agent a sum of cash equal to the aggregate
Stock Consideration and the aggregate Option Consideration.
(b) As soon as reasonably practicable after the Effective
Time, but in no event later than five (5) business days after
the Closing Date, the Exchange Agent shall mail to each record
holder of any Stock Certificate or Option Certificate whose
shares or options were converted into the right to receive the
Stock Consideration or the Option Consideration, as the case may
be, a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Stock
Certificates or Option Certificates shall pass, only upon proper
delivery of the Stock Certificates or Option Certificates to the
Exchange Agent and shall be in such form and have such other
provisions as Banterra may reasonably specify) (each such
letter, the "Merger Letter of Transmittal") and instructions for
use in effecting the surrender of the Stock Certificates or
Option Certificates in exchange for the Stock Consideration or
Option Consideration, as the case may be. Upon surrender to the
Exchange Agent of a Stock Certificate or Option Certificate,
together with a Merger Letter of Transmittal duly executed and
any other required documents, the holder of such Stock
Certificate or Option Certificate shall be entitled to receive
in exchange therefor solely the Stock Consideration or the
Option Consideration, as the case may be. No interest on the
Stock Consideration or Option Consideration issuable upon the
surrender of the Stock Certificates or Option Certificates shall
be paid or accrued for the benefit of holders of Stock
Certificates or Option Certificates. If the Stock Consideration
is to be issued to a person other than a person in whose name a
surrendered Stock Certificate is registered, it shall be a
condition of issuance that the surrendered Stock Certificate
shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such issuance shall pay
to the Exchange Agent any required transfer taxes or other taxes
or establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not applicable.
(c) In the event that any Stock Certificate or Option
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such
Stock Certificate or Option Certificate to be lost, stolen or
destroyed and, if required by Banterra in its sole discretion,
the posting by such person of a bond in such amount as Banterra
may determine is reasonably necessary as indemnity against any
claim that may be made against it with respect to such Stock
Certificate or Option Certificate, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificate
the Stock Consideration or Option Consideration deliverable in
respect thereof pursuant hereto.
(d) At or after the Effective Time there shall be no
transfers on the stock transfer books of Heartland of any shares
of Heartland Common. If, after the Effective Time, Stock
Certificates are presented for transfer, they shall be cancelled
and exchanged for the Stock Consideration as provided in, and
subject to the provisions of, this Section 1.09.
SECTION 1.10. CLOSING DATE. Subject to Section 7.08
hereof, the Closing shall take place on a date specified by
Banterra within thirty (30) days following the date after which
each of the conditions in Sections 6.01 and 6.02 hereof shall
have been satisfied or waived by the appropriate party (the
"Closing Date"). The Merger shall be effective upon the
issuance of a Certificate of Merger by the Secretary of State of
the State of Illinois (the "Effective Time"), which the parties
shall use their best efforts to cause to occur on the Closing
Date.
4
SECTION 1.11. CLOSING DELIVERIES.
(a) At the Closing, Heartland shall deliver to Banterra
and AcquisitionCo:
(i) a certified copy of the Articles of Incorporation
and Bylaws of Heartland, the Subsidiary Bank (as defined in
Section 2.04 hereof) and Xxxxxx First Service Corporation;
and
(ii) a Certificate signed by an appropriate officer
of Heartland stating that, to the best knowledge and belief
of such officer, (A) each of the representations and
warranties contained in Article Two hereof (subject to the
standard in Section 1.12 hereof) is true and correct at the
time of the Closing with the same force and effect as if
such representations and warranties had been made at
Closing, and (B) all of the conditions set forth in Section
6.01(b) hereof have been satisfied or waived as provided
therein; and
(iii) a certified copy of the resolutions of
Heartland's Board of Directors and shareholders as required
for valid approval of the execution of this Agreement and
the consummation of the Merger and the other transactions
contemplated by this Agreement; and
(iv) a Certificate of the Secretary of State of the
State of Illinois, dated a recent date, stating that
Heartland is in good standing; and
(v) a Certificate of Xxxxxx executed by Heartland,
reflecting the terms and provisions hereof and in proper
form for filing with the Secretary of State of the State of
Illinois in order to cause the Merger to become effective
pursuant to the Illinois Corporate Law; and
(vi) a legal opinion from counsel for Heartland, in
form reasonably acceptable to Banterra's and
AcquisitionCo's counsel, opining with respect to the
matters listed on Exhibit 1.11(a) hereto.
(b) At the Closing, Banterra and AcquisitionCo shall
deliver to Heartland:
(i) a certified copy of the Articles of Incorporation
and Bylaws of each of Banterra and AcquisitionCo; and
(ii) a Certificate signed by an appropriate officer
of each of Banterra and AcquisitionCo stating that, to the
best knowledge and belief of such officer, (A) each of the
representations and warranties contained in Article Three
hereof (subject to the standard in Section 1.12 hereof) is
true and correct at the time of the Closing with the same
force and effect as if such representations and warranties
had been made at Closing, and (B) all of the conditions set
forth in Section 6.02(b) and 6.02(d) hereof (but excluding
the approval of Heartland's shareholders) have been
satisfied or waived as provided therein; and
(iii) a certified copy of the resolutions of each
of Banterra's and AcquisitionCo's Board of Directors as
required for valid approval of the execution of this
Agreement and the consummation of the transactions
contemplated by this Agreement; and
(iv) a Certificate of the Secretary of State of the
State of Illinois, dated a recent date, stating that
Banterra is in good standing; and
5
(v) a Certificate of the Secretary of State of the
State of Illinois, dated a recent date, stating that
AcquisitionCo is in good standing; and
(vi) a Certificate of Xxxxxx executed by
AcquisitionCo, reflecting the terms and provisions hereof
and in proper form for filing with the Secretary of State
of the State of Illinois in order to cause the Merger to
become effective pursuant to the Illinois Corporate Law;
and
(vii) a legal opinion from counsel for Banterra
and AcquisitionCo, in form reasonable acceptable to
Heartland's counsel, opining with respect to the matters
listed on Exhibit 1.11(b) hereto.
SECTION 1.12. DISCLOSURE SCHEDULE; STANDARD.
(a) Heartland has delivered to Banterra and AcquisitionCo
a confidential schedule (the "Disclosure Schedule"), executed by
Heartland, Banterra and AcquisitionCo concurrently with the
delivery and execution hereof, setting forth, among other
things, items the disclosure of which shall be necessary or
appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception
to one or more representations or warranties contained in
Article Two hereof; provided, that (a) no such item shall be
required to be set forth in the Disclosure Schedule as an
exception to a representation or warranty if its absence would
not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard
established by Section 1.12(b) hereof, and (b) the mere
inclusion of an item in the Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission
by Heartland that such item represents a material exception or
fact, event or circumstance or that such item is reasonably
likely to result in a Material Adverse Effect (as defined in
Section 1.12(b) herein).
(b) No representation or warranty of Heartland contained
in Article Two hereof or of Banterra or AcquisitionCo contained
in Article Three hereof shall be deemed untrue or incorrect, and
Heartland, Banterra or AcquisitionCo, as the case may be, shall
not be deemed to have breached a representation or warranty, as
a consequence of the existence of any fact, event or
circumstance unless such fact, circumstance or event,
individually or taken together with all other facts, events or
circumstances inconsistent with any representation or warranty
contained in Article Two hereof, in the case of Heartland, or
Article Three hereof, in the case of Banterra or AcquisitionCo,
has had or is reasonably likely to have a Material Adverse
Effect on the party making such representation or warranty. As
used herein, the term "Material Adverse Effect" means, with
respect to Heartland, Banterra or AcquisitionCo, any effect that
(i) is, or is reasonably expected to be, material and adverse to
the financial position, results of operations or business of
Heartland and its subsidiaries taken as a whole, or Banterra and
its subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either Heartland, Banterra or
AcquisitionCo to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the
consummation of the Merger and the other transactions
contemplated by this Agreement; provided, however, that Material
Adverse Effect shall not be deemed to include the impact of
(a) changes in banking and similar laws of general applicability
or interpretations thereof by courts or governmental
authorities, (b) changes in generally accepted accounting
principles or regulatory accounting requirements applicable to
banks and their holding companies generally and (c) changes in
general economic conditions, including changes in interest
rates.
(c) Heartland shall be permitted to update and supplement
the Disclosure Schedule so as to disclose exceptions to one or
more representations or warranties contained in Article Two
hereof which shall have arisen between the date hereof and the
Closing Date; provided, however, that, anything herein to the
contrary notwithstanding, the exceptions and other information
set forth on any such updated or
6
supplemented Disclosure Schedule shall not be taken into
consideration in determining, for purposes of this Agreement,
whether the condition set forth in Section 6.01(a) hereof shall
have been satisfied.
ARTICLE TWO
-----------
REPRESENTATIONS AND WARRANTIES OF HEARTLAND
-------------------------------------------
Subject to Section 1.12 hereof and except as disclosed in a
Section of the Disclosure Schedule corresponding to the relevant
Section in this Article Two, Heartland hereby makes the
following representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
(a) Heartland is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Illinois and has the corporate power and authority to own all of
its property and assets, to incur all of its liabilities and to
carry on its business as now being conducted. Heartland is a
bank holding company registered with the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") under
the Bank Holding Company Act of 1956, as amended (the
"B.H.C.A."). Section 2.01(a) of the Disclosure Schedule
contains true, complete and correct copies of the Articles of
Incorporation and Bylaws of Heartland as in effect on the date
of this Agreement.
(b) The issued and outstanding capital stock of Heartland
consists only of shares of Heartland Common, of which, as of the
date hereof, 832,833 shares are issued and outstanding. All of
the issued and outstanding shares of Heartland Common are duly
and validly issued and outstanding and are fully paid and non-
assessable and free of preemptive rights. None of the
outstanding shares of Heartland Common have been issued in
violation of any preemptive rights of the current or past
shareholders of Heartland. As of the date hereof, Heartland had
outstanding Heartland Options representing the right to acquire
not more than 43,841 shares of Heartland Common. To the best
knowledge of Heartland, each Stock Certificate issued by
Heartland in replacement of any Stock Certificate theretofore
issued by it which was claimed by the record holder thereof to
have been lost, stolen or destroyed was issued by Heartland only
upon receipt of an affidavit of lost stock certificate and
indemnity agreement of such shareholder indemnifying Heartland
against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such Stock Certificate
or the issuance of such replacement Stock Certificate. Schedule
2.01(b) 1 hereto sets forth correct and accurate information
concerning the Heartland Options. Schedule 2.01(b) 2 hereto
sets forth correct and accurate information concerning the
shares of Heartland Common issued pursuant to the Heartland MRP.
(c) Except as set forth in subsection 2.01(b) and
Section 2.01(c) of the Disclosure Schedule, (i) there are no
shares of capital stock or other equity securities of Heartland
outstanding and no outstanding options, warrants, rights to
subscribe for, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or
exchangeable for, shares of Heartland Common or other capital
stock of Heartland or contracts, commitments, understandings or
arrangements by which Heartland is or may be obligated to issue
additional shares of its capital stock or options, warrants or
rights to purchase or acquire any additional shares of its
capital stock, and (ii) there are no outstanding stock
appreciation, phantom stock or similar rights.
(d) The minute books of Heartland accurately reflect all
corporate actions held or taken by its shareholders and Board of
Directors (including committees of the Board of Directors) since
its incorporation. True, complete and correct copies of the
minute book have been made available to Banterra by Heartland.
7
SECTION 2.02. AUTHORIZATION; NO DEFAULTS. Heartland's
Board of Directors has, by all appropriate action, approved this
Agreement and the Merger and authorized the execution hereof and
thereof on its behalf by its duly authorized officers and the
performance by Heartland of its obligations hereunder.
Heartland's Board of Directors has directed that the plan of
merger (within the meaning of the Illinois Corporate Law)
contained in this Agreement and the transactions contemplated by
this Agreement, including the Merger, be submitted to the
shareholders of Heartland for approval at the Heartland
Shareholders' Meeting (as defined in Section 4.03 hereof), and,
except for the adoption and approval of this Agreement by the
affirmative vote of the holders of two-thirds of the outstanding
shares of Heartland Common, no other corporate proceedings on
the part of Heartland are necessary to approve this Agreement or
to consummate the transactions contemplated by this Agreement,
including the Merger. Nothing in the Articles of Incorporation
or Bylaws of Heartland, or any other agreement, instrument,
decree, proceeding, law or regulation (except as specifically
referred to in or contemplated by this Agreement including
certain laws and regulations of the Office of Thrift Supervision
(the "O.T.S.") by or to which it or any of its subsidiaries are
bound or subject would prohibit or inhibit Heartland from
consummating this Agreement and the Merger on the terms and
conditions herein contained. This Agreement has been duly and
validly executed and delivered by Heartland and constitutes a
legal, valid and binding obligation of Heartland, enforceable
against Heartland in accordance with its respective terms.
Heartland and its subsidiaries are neither in default under
nor in violation of any provision of their Articles or
Certificate of Incorporation or Association, as the case may be,
Bylaws, or any promissory note, indenture or any evidence of
indebtedness or security therefor, lease, contract, insurance
policy, purchase or other commitment or any other agreement or
arrangement (however evidenced), 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 or
violation.
SECTION 2.03. SUBSIDIARIES. Each of Heartland's banking
subsidiaries and its other direct or indirect subsidiaries, and
each of their predecessors (collectively, the "subsidiaries"),
the name and jurisdiction of incorporation of which is disclosed
in Section 2.03 of the Disclosure Schedule, is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power to
own its respective properties and assets, to incur its
respective liabilities and to carry on its respective business
as now being conducted. The deposits of Subsidiary Bank are
insured by the Federal Deposit Insurance Corporation (the
"F.D.I.C.") in accordance with the Federal Deposit Insurance
Act, as amended, up to applicable limits. The number of issued
and outstanding shares of capital stock of each subsidiary is
disclosed in Section 2.03 of the Disclosure Schedule, all of
which shares are owned by Heartland or Heartland's subsidiaries
free and clear of all liens, encumbrances, rights of first
refusal, options or other restrictions of any nature whatsoever,
except for directors' qualifying shares, accessibility under 12
U.S.C. Section 55 and comparable state laws, if applicable.
There are no options, warrants or rights outstanding to acquire
any capital stock of Subsidiary Bank, and no person or entity
has any other right to purchase or acquire any unissued shares
of stock of Subsidiary Bank, nor does Subsidiary Bank have any
obligation of any nature with respect to its unissued shares of
stock. Except as set forth in Section 2.03 of the Disclosure
Schedule, neither Heartland nor any of its subsidiaries is a
party to any partnership or joint venture or owns an equity
interest in any other business or enterprise.
SECTION 2.04. FINANCIAL INFORMATION. The (i) audited
consolidated balance sheets of Heartland and its subsidiaries as
of December 31, 1997 and 1996, and related consolidated income
statements and statements of changes in shareholders' equity and
of cash flows for the three (3) years ended December 31, 1997,
together with the notes thereto, included in Heartland's Annual
Report on Form 10-KSB for the year ended December 31, 1997, as
currently on file with the Securities and Exchange Commission
(the "S.E.C."), and the unaudited consolidated balance sheets of
Heartland and its subsidiaries as of September 30, 1998, and the
related unaudited consolidated income statements and statements
of changes in shareholders' equity and cash flows for the nine
(9) months then ended included in Heartland's Quarterly
8
Reports on Form 10-QSB for the quarters then ended, as currently
on file with the Office of the Comptroller of the Currency
("O.C.C."), and (ii) the year-end and quarterly Reports of
Condition and Reports of Income of Heartland National Bank (the
"Subsidiary Bank") for 1997 and September 30, 1998, as currently
on file with the F.D.I.C., (together, the "Heartland Financial
Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
(except as may be disclosed therein and except for regulatory
reporting differences required by the Subsidiary Bank's reports)
and fairly present in all material respects the financial
position and the results of operations and changes in
shareholders' equity of the respective entity and its respective
subsidiary as of the dates and for the persons indicated
(subject, in the case of interim financial statements, none of
which shall be material). The books and records of Heartland
and its subsidiaries have been, and are being, maintained in
accordance with generally accepted accounting principles and any
other applicable legal and accounting requirements and reflect
only actual transactions.
SECTION 2.05. ABSENCE OF CHANGES. Since December 31,
1997, and to the date hereof, there has not been any change in
the financial condition, the results of operations or the
business of Heartland and its subsidiaries taken as a whole
which would have a Material Adverse Effect on Heartland, except
as disclosed by Heartland since December 31, 1997 in its
periodic reports filed with the S.E.C. under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.06. REGULATORY ENFORCEMENT MATTERS. Except as
set forth in Section 2.06 of the Disclosure Schedule, neither
Heartland nor any of its subsidiaries are subject or are party
to, or have received any notice or advice that it may become
subject or party to, any investigation with respect to, any
cease-and-desist order, agreement, consent agreement, memorandum
of understanding or other regulatory enforcement action,
proceeding or order with or by, or is a party to any commitment
letter or similar undertaking to, or is subject to any directive
by, or has been a recipient of any supervisory letter from, or
has adopted any board resolutions at the request of, any
Regulatory Agency (as defined below in this Section 2.06) that
currently restricts the conduct of its business or that
currently affects its capital adequacy, its credit policies, its
management or its business (each, a "Regulatory Agreement"), nor
has Heartland nor any of its subsidiaries been advised by any
Regulatory Agency that it is considering issuing or requesting
any such Regulatory Agreement. Except as set forth in Section
2.06 of the Disclosure Schedule, there is no unresolved
violation, criticism or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations
of Heartland or Subsidiary Bank. As used herein, the term
"Regulatory Agency" means any federal or state agency charged
with the supervision or regulation of banks or bank holding
companies, or engaged in the insurance of bank deposits, or any
court, administrative agency or commission or other governmental
agency, authority or instrumentality having supervisory or
regulatory authority with respect to Heartland or any of its
subsidiaries.
SECTION 2.07. TAX MATTERS.
(a) Each of Heartland and its subsidiaries have filed with
the appropriate governmental agencies all foreign, federal,
state and local Tax (as defined below in this Section 2.07)
returns, declarations, estimates, information returns,
statements and reports (collectively, "Tax Returns") required to
be filed by it. Except as set forth in Section 2.07 of the
Disclosure Schedule, neither Heartland nor its subsidiaries are
(a) delinquent in the payment of any Taxes shown on such Tax
Returns or on any assessments received by it for such Taxes, (b)
subject to any agreement extending the period for assessment or
collection of any Tax, or (c) a party to any action or
proceeding with, nor has any claim been asserted or threatened
against any of them by, any governmental authority for
assessment or collection of Taxes or for the refund of Taxes
previously paid. The income Tax Returns of Heartland and its
subsidiaries, as applicable, have been audited by the Internal
Revenue Service (the "I.R.S.") and comparable state agencies and
any liability with respect thereto has been satisfied for all
years to and including 1994, and either no
9
deficiencies were asserted as a result of such examination for
which Heartland does not have adequate reserves or all such
deficiencies have been satisfied. The reserve for Taxes in the
financial statements of Heartland for the year ended December
31, 1997, is adequate to cover all of the liabilities for Taxes
of Heartland and its subsidiaries that may become payable in
future years with respect to any transactions consummated prior
to December 31, 1997. As used herein, the term "Taxes" means
any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated or other tax of
any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or undisputed.
(b) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee,
officer or director of Heartland or any of its affiliates who is
a "Disqualified Individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation
arrangement or Heartland Employee Plan (as defined in Section
2.11(c) hereof) currently in effect would not be characterized
as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Internal Revenue Code of 1986, as
amended (the "Code").
(c) Heartland has not been subject to any disallowance of
a deduction under Section 162(m) of the Code nor does Heartland
reasonably believe that such a disallowance is reasonably likely
to be applicable for any tax year of Heartland ended on or
before the Closing Date.
SECTION 2.08. LITIGATION AND RELATED MATTERS. Section
2.08 of the Disclosure Schedule describes all litigation, claims
or other proceedings or investigations of any nature pending or,
to the knowledge of Heartland, threatened, against Heartland or
any of its subsidiaries, or of which the property of Heartland
or any of its subsidiaries is or would be subject. There is no
injunction, order, judgment, decree or regulatory restriction
imposed upon Heartland or any of its subsidiaries or the assets
of Heartland or any of its subsidiaries. Since January 1, 1993,
Heartland and its subsidiaries have continuously maintained
fidelity bonds insuring them against acts of dishonesty in such
amounts as are customary, usual and prudent for organizations of
their size and business. Except as set forth in Section 2.08 of
the Disclosure Schedule, there are no facts which would form the
basis of a claim or claims under such bonds. Neither Heartland
nor any of its subsidiaries has reason to believe that its
respective fidelity coverage would not be renewed by the carrier
on substantially the same terms as the existing coverage, except
for possible premium increases unrelated to Heartland's and its
subsidiaries' past claim experience.
SECTION 2.09. EMPLOYMENT AGREEMENTS. Section 2.09 of the
Disclosure Schedule lists each agreement, arrangement,
commitment or contract (whether written or oral) for the
employment, election, retention or engagement, or with respect
to the severance, of any present or former officer, employee,
agent, consultant or other person or entity to which Heartland
or any of its subsidiaries is a party to or bound by and which,
by its terms, is not terminable by Heartland or any of its
subsidiaries on thirty (30) days written notice or less without
the payment of any amount by reason of such termination. Copies
of each written (and summaries of each oral) agreement,
arrangement, commitment or contract listed in Section 2.09 of
the Disclosure Schedule have been previously made available to
Banterra by Heartland.
SECTION 2.10. REPORTS. Except as set forth in Section
2.10 of the Disclosure Schedule, since January 1, 1993,
Heartland and its subsidiaries have filed all reports and
statements, together with any amendments required to be made
with respect thereto, if any, that it was required to file with
(i) the Federal Reserve Board, (ii) the O.C.C, (iii) the O.T.S.,
(iv) the S.E.C., (v) any state securities authorities, and (vi)
any other Regulatory Agency with jurisdiction over Heartland or
its subsidiaries at such time, and have
10
paid all fees and assessments due and payable in connection
therewith. As of their respective dates, each of such reports
and documents, as amended, including any financial statements,
exhibits and schedules thereto, complied with the relevant
statutes, rules and regulations enforced or promulgated
by the regulatory authority with which they were filed, and did
not contain any untrue statement of a material fact or omit to
state any 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.
SECTION 2.11. EMPLOYEE MATTERS AND ERISA.
(a) Neither Heartland nor any of its subsidiaries has
entered into any collective bargaining agreement with any labor
organization with respect to any group of employees of Heartland
or any of its subsidiaries and to the knowledge of Heartland
there is no present effort nor existing proposal to attempt to
unionize any group of employees of Heartland or any of its
subsidiaries.
(b) Except as set forth in Section 2.11(b) of the
Disclosure Schedule, (i) Heartland and its subsidiaries are and
have been in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation,
any such laws respecting employment discrimination and
occupational safety and health requirements, and neither
Heartland nor any of its subsidiaries is engaged in any unfair
labor practice, (ii) there is no unfair labor practice complaint
against Heartland or any of its subsidiaries pending or, to the
knowledge of Heartland, threatened before the National Labor
Relations Board, (iii) there is no labor dispute, strike,
slowdown or stoppage actually pending or, to the knowledge of
Heartland, threatened against or directly affecting Heartland or
any of its subsidiaries, and (iv) neither Heartland nor any of
its subsidiaries has experienced any work stoppage or other
labor difficulty during the past five (5) years.
(c) Section 2.11(c) of the Disclosure Schedule describes
each employee benefit plan, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and each nonqualified employee benefit plan, deferred
compensation, bonus, stock and incentive plan, and each other
employee benefit and fringe benefit program for the benefit of
former or current employees of Heartland or its subsidiaries
(the "Heartland Employee Plans") which Heartland and its
subsidiaries maintain, contribute to or participate in or have
any liability under. No present or former employee of Heartland
or any of its subsidiaries has been charged with breaching, or
to the knowledge of Heartland has breached, a fiduciary duty
under any of the Heartland Employee Plans. Except as set forth
in Section 2.11(c) of the Disclosure Schedule, neither Heartland
nor any of its subsidiaries participates in, nor has it in the
past five (5) years participated in, nor has it any present or
future obligation or liability under, any multiemployer plan (as
defined at Section 3(37) of ERISA). Section 2.11(c) of the
Disclosure Schedule describes all plans that provide health,
major medical, disability or life insurance benefits to former
employees of Heartland or its subsidiaries that Heartland and
its subsidiaries maintain, contribute to, or participate in.
(d) Neither Heartland nor any of its subsidiaries
maintain, nor have any of them maintained for the past ten
years, any Heartland Employee Plans subject to Title IV of ERISA
or Section 412 of the Code. No reportable event (as defined in
Section 4043 of ERISA) has occurred with respect to any
Heartland Employee Plans as to which a notice would be required
to be filed with the Pension Benefit Guaranty Corporation. No
claim is pending, and Heartland has not received notice of any
threatened or imminent claim with respect to any Heartland
Employee Plan (other than a routine claim for benefits for which
plan administrative review procedures have not been exhausted)
for which Heartland or its subsidiaries would be liable after
December 31, 1997, except as reflected on the Heartland
Financial Statements. All liabilities of the Heartland Employee
Plans have been funded on the basis of consistent methods in
accordance with sound actuarial assumptions and practices, and
no Heartland Employee Plan,
11
at the end of any plan year, or at December 31, 1997, had or
has had an accumulated funding deficiency. No actuarial
assumptions have been changed since the last written report of
actuaries on such Heartland Employee Plans. All insurance
premiums (including premiums to the Pension Benefit Guaranty
Corporation) have been paid in full, subject only to normal
retrospective adjustments in the ordinary course. Heartland and
its subsidiaries have no contingent or actual liabilities under
Title IV of ERISA. No accumulated funding deficiency (within
the meaning of Section 302 of ERISA or Section 412 of the Code)
has been incurred with respect to any of the Heartland Employee
Plans, whether or not waived. After December 31, 1997,
Heartland and its subsidiaries do not have any liabilities for
excise taxes under Sections 4971, 4975, 4976, 4977, 4979 or
4980B of the Code or for a fine under Section 502 of ERISA with
respect to any Heartland Employee Plan. Except as set forth in
Section 2.11(d) of the Disclosure Schedule, all Heartland
Employee Plans have been operated, administered and maintained
in accordance with the terms thereof and in compliance with the
requirements of all applicable laws, including, without
limitation, ERISA and the Code.
(e) Except as set forth in Section 2.11(e) of the
Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
by this Agreement (either alone or upon the occurrence of any
additional acts or events) would (i) result in any payment
(including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director, officer or employee of Heartland or any of its
affiliates from Heartland or any of its affiliates under any
Heartland Employee Plan or otherwise, (ii) increase any benefits
otherwise payable under any Heartland Employee Plan, or (iii)
result in any acceleration of the time of payment or vesting of
any such benefits.
(f) Copies of each Heartland Employee Plan described in
Section 2.11(c) of the Disclosure Schedule, and all amendments
or supplements thereto, have been previously made available to
Banterra by Heartland. Section 2.11(f) of the Disclosure
Schedule lists, for each Heartland Employee Plan, all of the
following with respect thereto: (i) summary plan descriptions,
(ii) lists of all current participants and all participants with
benefit entitlements, (iii) contracts relating to plan
documents, (iv) actuarial valuations for any defined benefit
plan, (v) valuations for any plan as of the most recent date,
(vi) determination letters from the I.R.S., (vii) the most
recent annual report filed with the I.R.S., (viii) registration
statements and prospectuses, and (ix) trust agreements. Copies
of each of the documents described in the preceding sentence
have been previously made available to Banterra by Heartland.
SECTION 2.12. TITLE TO PROPERTIES; INSURANCE. (i)
Heartland and its subsidiaries have marketable title, insurable
at standard rates, free and clear of all liens, charges and
encumbrances (except Taxes which are a lien but not yet payable
and liens, charges or encumbrances reflected in the Heartland
Financial Statements and easements, rights-of-way, and other
restrictions and imperfections not material in nature, and
further excepting in the case of Other Real Estate Owned (as
such real estate is internally classified on the books of
Heartland or its subsidiaries) rights of redemption under
applicable law) to all of their owned real properties, (ii) all
leasehold interests for real property and personal property used
by Heartland and its subsidiaries in their businesses are held
pursuant to lease agreements which are valid and enforceable in
accordance with their terms, (iii) all such properties comply
with all applicable private agreements, zoning requirements and
other governmental laws and regulations relating thereto and
there are no condemnation proceedings pending or, to the
knowledge of Heartland, threatened with respect to such
properties, (iv) Heartland and its subsidiaries have valid title
or other ownership rights under licenses to all intangible
personal or intellectual property necessary to conduct the
business and operations of Heartland and its subsidiaries as
presently conducted, free and clear of any claim, defense or
right of any other person or entity, subject only to rights of
the licensors pursuant to applicable license agreements, which
rights do not adversely interfere with the use of such property,
(v) all insurable properties owned or held by Heartland and its
subsidiaries are adequately insured by financially sound and
reputable insurers in such amounts and
12
against fire and other risks insured against by extended
coverage and public liability insurance, as is customary with
bank holding companies of similar size, and there are presently
no claims pending under such policies of insurance and no
notices have been given by Heartland or any of its subsidiaries
under such policies, and (vi) all tangible properties used in
the businesses of Heartland and its subsidiaries are in good
condition, reasonable wear and tear excepted, and are
useable in the ordinary course of business consistent with past
practices. Section 2.12 of the Disclosure Schedule sets forth,
for each policy of insurance maintained by Heartland and its
subsidiaries, the amount and type of insurance, the name of the
insurer and the amount of the annual premium.
SECTION 2.13. ENVIRONMENTAL MATTERS.
(a) As used herein, the term "Environmental Laws" shall
mean all local, state and federal environmental, health and
safety laws and regulations and common law standards in all
jurisdictions in which Heartland and its subsidiaries have done
business or owned, leased or operated property, including,
without limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the
Federal Clean Air Act, and the Federal Occupational Safety and
Health Act.
(b) Neither the conduct nor operation of Heartland or its
subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them violates or
violated or, to the knowledge of Heartland, may violate,
Environmental Laws in a manner or to any extent exposing
Heartland or its subsidiaries to liability or potential
liability, and, to the knowledge of Heartland, no condition has
existed or event has occurred with respect to any of them or any
such property that, with notice or the passage of time, or both,
would constitute or, to the knowledge of Heartland, may
constitute, a violation of Environmental Laws in a manner or to
any extent that would obligate (or potentially obligate)
Heartland or its subsidiaries to remedy, stabilize, neutralize
or otherwise alter the environmental condition of any such
property. Neither Heartland nor its subsidiaries has received
any notice from any person or entity that Heartland or its
subsidiaries or the operation or condition of any property ever
owned, leased or operated by any of them are or were in
violation of any Environmental Laws in a manner or to any extent
exposing Heartland or its subsidiaries to liability or potential
liability or that any of them are responsible (or potentially
responsible) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property and,
to the knowledge of Heartland, Heartland and its subsidiaries
and the operation and condition of any property ever owned,
leased or operated by any of them are not and were not in
violation of any Environmental Laws in a manner or to any extent
exposing Heartland or its subsidiaries to liability or potential
liability and none of them are responsible (or potentially
responsible) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property.
Section 2.13(b) of the Disclosure Schedule lists each property
presently owned, leased or operated by Heartland or its
subsidiaries which, to the knowledge of Heartland, contains any
pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property or
which otherwise violates any Environmental Laws.
SECTION 2.14. COMPLIANCE WITH LAW. Except as set forth in
Section 2.14 of the Disclosure Schedule with respect to certain
regulatory actions of the O.C.C. and the Federal Reserve Board,
Heartland and its subsidiaries have all licenses, franchises,
permits and other governmental authorizations that are legally
required to enable them to conduct their respective businesses
and are in compliance with all applicable laws and regulations.
13
SECTION 2.15. BROKERAGE. Except as set forth in
Section 2.15 of the Disclosure Schedule, there are no existing
claims or agreements for brokerage commissions, finders' fees,
or similar compensation in connection with the transactions
contemplated by this Agreement payable by Heartland or its
subsidiaries.
SECTION 2.16. NON-BANKING ACTIVITIES OF HEARTLAND AND
SUBSIDIARIES. Neither Heartland nor its subsidiaries that are
neither a bank, a bank operating subsidiary or a bank service
corporation, directly or indirectly, engages in any activity
prohibited by the Federal Reserve Board or the B.H.C.A. or which
is not listed at 12 C.F.R. Section 225.25. Without limiting the
generality of the foregoing, any equity investment of Heartland
and each of its subsidiaries is not prohibited by the Federal
Reserve Board, the B.H.C.A. or the O.C.C.
SECTION 2.17. TRUST ADMINISTRATION. Neither Heartland nor
any of it subsidiaries acts or serves as a trust company or
otherwise acts or serves in a fiduciary capacity, whether as
trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor.
SECTION 2.18. YEAR 2000. Section 2.18 of the Disclosure
Schedule contains a complete and accurate copy of Heartland's
plan, including an estimate of the anticipated costs, for
implementing modifications to Heartland's and its subsidiaries'
hardware, software and computer systems, chips and
microprocessors, to ensure proper execution and accurate
processing of all date-related data, whether from years in the
same century or in different centuries.
SECTION 2.19. MATERIAL CONTRACTS AND AGREEMENTS. Neither
Heartland nor any subsidiary of Heartland is a party to, or is
bound by, any material contract (as defined in Item 601(b)(10)
of Regulation S-K of the S.E.C.) or any other material contract
or similar arrangement whether or not made in the ordinary
course of business (other than loans or loan commitments and
funding transactions in the ordinary course of business of
Subsidiary Bank) that has not been filed or incorporated by
reference in periodic reports filed by Heartland with the S.E.C.
under the Exchange Act or is not otherwise listed in Section
2.19 of the Disclosure Schedule. Section 2.19 of the Disclosure
Schedule lists (i) each agreement restricting the nature or
geographic scope of any line of business or activity of
Heartland or its subsidiaries, and (ii) each agreement,
indenture or other instrument relating to the borrowing of money
by Heartland or its subsidiaries or the guarantee by Heartland
or its subsidiaries of any such obligation, other than
instruments relating to transactions entered into in the
ordinary course of business. Copies of each of the contracts
and agreements listed in Section 2.19 of the Disclosure Schedule
have been previously furnished to Banterra by Heartland.
SECTION 2.20. NO UNDISCLOSED LIABILITIES. Except as set
forth in Section 2.20 of the Disclosure Schedule, Heartland and
its subsidiaries do not have any liability, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any
liability for Taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any
present or future action, suit or proceeding, hearing, charge,
complaint, claim or demand against Heartland or its subsidiaries
giving rise to any such liability), except (i) for liabilities
set forth in the Heartland Financial Statements, and (ii) normal
fluctuation in the amount of the liabilities referred to in
clause (i) above occurring in the ordinary course of business of
Heartland and its subsidiaries since the date of the September
30, 1998 balance sheet included in the Heartland Financial
Statements.
SECTION 2.21. STATEMENTS TRUE AND CORRECT. None of the
information supplied or to be supplied by Heartland or its
subsidiaries for inclusion in (i) the Proxy Statement (as
defined in Section 4.03 hereof), and (ii) any other documents to
be filed with the S.E.C. or any other Regulatory Agency in
connection with the transactions contemplated by this Agreement
shall, at the respective times such documents are filed, and,
with respect to the Proxy Statement, when first mailed to the
shareholders of Heartland and at the time
14
of the Heartland Shareholders' Meeting, contain any untrue
statement of a material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light
of the circumstances under which they are made, not misleading.
All documents that Heartland shall be responsible for filing
with the S.E.C. or any other Regulatory Agency in connection
with the transactions contemplated by this Agreement shall
comply as to form in all material respects with the provisions
of applicable law and the applicable rules and regulations
thereunder.
SECTION 2.22. STATE TAKEOVER LAWS. The Board of Directors
of Heartland has taken all such action required to be taken by
it to provide that this Agreement and the transactions
contemplated by this Agreement shall be exempt from the
requirements of any "moratorium," "control share," "fair price"
or other anti-takeover laws or regulations of any state.
SECTION 2.23. FAIR LENDING; COMMUNITY REINVESTMENT ACT.
With the exception of routine investigation of consumer
complaints, neither Heartland nor any of its subsidiaries have
been advised by any Regulatory Agency that it is or may be in
violation of the Equal Credit Opportunity Act or the Fair
Housing Act or any similar federal or state statute. Subsidiary
Bank received a Community Reinvestment Act ("CRA") rating of
"Outstanding" or "Satisfactory" in its most recent CRA
examination.
SECTION 2.24. LOAN PORTFOLIO. Except as disclosed in
Section 2.24 of the Disclosure Schedule, (i) all loans and
discounts shown on the Heartland Financial Statements or which
were entered into after the date of the most recent balance
sheet included in the Heartland Financial Statements were and
shall be made in all material respects for good, valuable and
adequate consideration in the ordinary course of the business of
Heartland and its subsidiaries, and are not subject to any
material known defenses, setoffs or counterclaims, including
without limitation any such as are afforded by usury or truth in
lending laws, except as may be provided by bankruptcy,
insolvency or similar laws or by general principles of equity,
(ii) the notes or other evidences of indebtedness evidencing
such loans and all forms of pledges, mortgages and other
collateral documents and security agreements are and shall be,
in all material respects, enforceable, valid, true and genuine
and what they purport to be, and (iii) Heartland and its
subsidiaries have complied and shall prior to the Closing
Date comply in all material respects with all laws and
regulations relating to such loans, or to the extent there has
not been such compliance, such failure to comply shall not
materially interfere with the collection of any such loan. The
reserve for possible loan losses shown on the most recent
consolidated balance sheet included in the Heartland Financial
Statements is adequate, and the reserve for possible loan losses
shown on the consolidated balance sheet as of the end of the
Heartland fiscal quarter immediately preceding the Effective
Time shall be adequate, in all material respects under the
requirements of generally accepted accounting principles to
provide for possible losses, net of recoveries relating to loans
previously charged-off, on loans outstanding (including, without
limitation, accrued interest receivable) as of the date of each
such consolidated balance sheet.
SECTION 2.25. INTEREST RATE RISK MANAGEMENT INSTRUMENTS.
Except with respect to adjustable rate mortgage loans made by
Subsidiary Bank or as may be otherwise specifically disclosed in
Section 2.25 of the Disclosure Schedule, there are no interest
rate swaps, caps, floors, option agreements or other interest
rate risk management arrangements or agreements, whether entered
into for the account of Heartland or its subsidiaries or for the
account of a customer of Heartland or one of its subsidiaries.
SECTION 2.26. INTERIM EVENTS. Except as may be disclosed
in Section 2.26 of the Disclosure Schedule, since September 30,
1998, neither Heartland nor its subsidiaries has paid or
declared any dividend or made any other distribution to their
shareholders.
15
SECTION 2.27. CLOSING MATTERS. As of the date hereof and
as of the Closing Date, Heartland has no knowledge of any fact
or circumstance that is reasonably likely to prevent any of the
transactions contemplated herein, including the Merger, from
being consummated pursuant to the terms hereof.
ARTICLE THREE
-------------
REPRESENTATIONS AND WARRANTIES OF BANTERRA AND ACQUISITIONCO
------------------------------------------------------------
Subject to Section 1.12 hereof, Banterra and AcquisitionCo
hereby make the following representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
(a) Banterra is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Illinois and has the corporate power and authority to own all of
its property and assets, to incur all of its liabilities and to
carry on its business as now being conducted. Banterra is a
bank holding company registered with the Federal Reserve Board
under the B.H.C.A. AcquisitionCo is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Illinois with full corporate power and authority
to carry on its business as now being conducted.
(b) The authorized capital stock of Banterra consists of
500,000 shares of common stock, par value $.25 per share
("Banterra Common"), of which, as of November 30, 1998, 259,686
shares were issued and outstanding. All of the issued and
outstanding shares of Banterra Common are duly and validly
issued and outstanding and are fully paid and non-assessable and
free of preemptive rights.
(c) The authorized capital stock of AcquisitionCo consists
of 100 shares of AcquisitionCo Common, of which, as of the date
hereof, 100 shares were issued and outstanding. All of the
issued and outstanding shares of AcquisitionCo Common are duly
and validly issued and outstanding and are fully paid and
non-assessable and free of preemptive rights.
SECTION 3.02. AUTHORIZATION. The Board of Directors of
Banterra and the Board of Directors of AcquisitionCo have, by
all appropriate action, approved this Agreement and the Merger
and authorized the execution hereof on their behalf by their
duly authorized officers and the performance by Banterra and
AcquisitionCo of their obligations hereunder. Nothing in the
Articles of Incorporation or Bylaws of Banterra or AcquisitionCo
or any other agreement, instrument, decree, proceeding, law or
regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which Banterra or
AcquisitionCo or any of their subsidiaries are bound or subject
would prohibit or inhibit Banterra or AcquisitionCo from
entering into and consummating this Agreement and the Merger on
the terms and conditions herein contained. This Agreement has
been duly and validly executed and delivered by Banterra and
AcquisitionCo and constitutes a legal, valid and binding
obligation of Banterra and AcquisitionCo, enforceable against
Banterra and AcquisitionCo in accordance with its terms, and no
other corporate acts or proceedings are required to be taken by
Banterra or AcquisitionCo to authorize the execution, delivery
and performance of this Agreement.
16
SECTION 3.03. SUBSIDIARIES. Each of Banterra's
subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation
and has the corporate power to own its respective properties and
assets, to incur its respective liabilities and to carry on its
respective business as now being conducted.
SECTION 3.04. FINANCIAL INFORMATION. The consolidated
balance sheets of Banterra and its subsidiaries as of December
31, 1997 and 1996, and related consolidated statements of
income, changes in shareholders' equity and cash flows for the
three (3) years ended December 31, 1997, together with the notes
thereto, as currently on file with the applicable Regulatory
Agency, and the unaudited consolidated balance sheets of
Banterra and its subsidiaries as of September 30, 1998, and the
related unaudited consolidated income statements and statement
of changes in shareholders' equity for the nine (9) months then
ended, as currently on file with the applicable Regulatory
Agency (together, the "Banterra Financial Statements"), have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be
disclosed therein and except for regulatory reporting
differences required by the reports) and fairly present in all
material respects the consolidated financial position and the
consolidated results of operations, changes in shareholders'
equity and cash flows of Banterra and its consolidated
subsidiaries as of the dates and for the periods indicated
(subject, in the case of interim financial statements, to normal
recurring year-end adjustments, none of which shall be
material). The deposits of Banterra's depository institution
subsidiaries are insured by the F.D.I.C. in accordance
with the Federal Deposit Insurance Act, as amended, up to
applicable limits. The books and records of Banterra and its
subsidiaries have been, and are being, maintained in accordance
with generally accepted accounting principles and any other
applicable legal and accounting requirements and reflect only
actual transactions.
SECTION 3.05. ABSENCE OF CHANGES. Since December 31,
1997, there has not been any change in the financial condition,
the results of operations or the business of Banterra and its
subsidiaries which would have a Material Adverse Effect on
Banterra, except as disclosed by Banterra since December 31,
1997 in its periodic reports filed with the appropriate
Regulatory Agency.
SECTION 3.06. LITIGATION. There is no litigation, claim
or other proceeding pending or, to the knowledge of Banterra,
threatened, against Banterra or any of its subsidiaries, or of
which the property of Banterra or any of its subsidiaries is or
would be subject, and there is no injunction, order, judgment,
decree or regulatory restriction imposed upon Banterra, or any
of its subsidiaries or the assets of Banterra of any of its
subsidiaries, which would have a Material Adverse Effect on
Banterra.
SECTION 3.07. REPORTS. Banterra and each of its
subsidiaries has filed all material reports and statements,
together with any amendments required to be made with respect
thereto, that it was required to file with (i) the Federal
Reserve Board, (ii) the F.D.I.C. and (iii) any other Regulatory
Agency with jurisdiction over Banterra or any of its significant
subsidiaries, and have paid all fees and assessments due and
payable in connection therewith. As of their respective dates,
each of such reports and documents, as amended, including any
financial statements, exhibits and schedules thereto, complied
with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were
filed and did not contain any untrue statement of a material
fact or omit to state any 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.
SECTION 3.08. COMPLIANCE WITH LAW. Banterra and its
subsidiaries have all licenses, franchises, permits and other
governmental authorizations that are legally required to enable
them to conduct their respective businesses and are in
compliance with all applicable laws and regulations.
17
SECTION 3.09. STATEMENTS TRUE AND CORRECT. None of the
information supplied or to be supplied by Banterra or
AcquisitionCo for inclusion in (i) the Proxy Statement, and (ii)
any other documents to be filed with the S.E.C. or any other
Regulatory Agency in connection with the transactions
contemplated by this Agreement shall, at the respective times
such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of Heartland
and at the time of the Heartland Shareholders' Meeting, contain
any untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements made
therein, in light of the circumstances under which they are
made, not misleading. All documents that Banterra or
AcquisitionCo shall be responsible for filing with any
Regulatory Agency in connection with the transactions
contemplated by this Agreement shall comply as to form in all
material respects with the provisions of applicable law and the
applicable rules and regulations thereunder.
SECTION 3.10. REGULATORY ENFORCEMENT MATTERS. Neither
Banterra nor any of its subsidiaries is subject or is party to,
or has received any notice or advice that it may become subject
or party to, any Regulatory Agreement, nor has Banterra or any
of its subsidiaries been advised by any Regulatory Agency that
it is considering issuing or requesting any such Regulatory
Agreement.
SECTION 3.11. STATE TAKEOVER LAWS. The Board of Directors
of AcquisitionCo has taken all such action required to be taken
by it to provide that this Agreement and the transactions
contemplated by this Agreement shall be exempt from the
requirements of any "moratorium," "control share," "fair price"
or other anti-takeover laws or regulations of any state.
SECTION 3.12. NO UNDISCLOSED LIABILITIES. As of the date
hereof, Banterra and its subsidiaries do not have any liability,
whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become
due, including any liability for Taxes (and there is no past or
present fact, situation, circumstance, condition or other basis
for any present or future action, suit or proceeding, hearing,
charge, complaint, claim or demand against Banterra or its
subsidiaries giving rise to any such liability) which would have
a material adverse effect on Banterra's ability to consummate
the Merger, except (i) for liabilities set forth in the Banterra
Financial Statements, and (ii) normal fluctuation in the amount
of the liabilities referred to in clause (i) above occurring in
the ordinary course of business of Banterra and its subsidiaries
since the date of the September 30, 1998 balance sheet included
in the Banterra Financial Statements.
SECTION 3.13. COMMUNITY REINVESTMENT ACT. Prior to
December 15, 1998, each of Banterra's depository institution
subsidiaries received a CRA rating of "Outstanding" or
"Satisfactory" in its most recent CRA examination.
SECTION 3.14. CLOSING MATTERS. As of the date hereof and
as of the Closing Date, Banterra has no knowledge of any fact or
circumstance that is reasonably likely to prevent any of the
transactions contemplated herein, including the Merger, from
being consummated pursuant to the terms hereof.
SECTION 3.15. FUND AVAILABILITY. Banterra has sufficient
funds to pay the Stock Consideration and the Option
Consideration.
SECTION 3.16. COMPLIANCE WITH CAPITAL ADEQUACY GUIDELINES.
Banterra meets or exceeds all applicable capital adequacy
regulatory standards as of September 30, 1998 and as of the date
hereof, and Banterra meets or exceeds all applicable capital
adequacy regulatory standards on a pro forma basis reflecting
the Merger (including payment of the Stock Consideration and the
Option Consideration) as of the date hereof and (on a pro forma
basis) at the Effective Time.
18
ARTICLE FOUR
------------
AGREEMENTS OF HEARTLAND
-----------------------
SECTION 4.01. BUSINESS IN ORDINARY COURSE.
(a) Heartland shall not declare or pay any dividend or
make any other distribution to shareholders, whether in cash,
stock or other property, after the date hereof.
(b) Heartland shall, and shall cause each of its
subsidiaries to, (1) continue to carry on after the date hereof
its respective business and the discharge or incurrence of
obligations and liabilities, only in the usual, regular and
ordinary course of business, as heretofore conducted, (2) use
reasonable best efforts to maintain and preserve intact its
respective business organization, employees and advantageous
business relationships and retain the services of its officers
and key employees, and (3) by way of amplification and not
limitation, Heartland and each of its subsidiaries shall not,
except with respect to the exercise of vested stock options as
disclosed in Schedule 2.01(b)-1, without the prior written
consent of Banterra:
(i) issue any shares of Heartland Common or other
capital stock or any options, warrants, or other rights to
subscribe for or purchase shares of Heartland Common or any
other capital stock or any securities convertible into or
exchangeable for any capital stock of Heartland or any of
its subsidiaries; or
(ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of Heartland Common or any
other capital stock of Heartland or effect a
reclassification, recapitalization, splitup, exchange of
shares, readjustment or other similar change in or to any
capital stock or otherwise reorganize or recapitalize
Heartland; or
(iii) directly or indirectly redeem, purchase or
otherwise acquire any shares of capital stock of or effect
a reclassification, recapitalization, splitup, exchange of
shares, readjustment or other similar change in or to any
capital stock or otherwise reorganize or recapitalize any
subsidiary of Heartland; or
(iv) change its Articles of Incorporation or Bylaws;
or
(v) grant any increase, other than ordinary and
normal increases consistent with past practices, in the
compensation payable or to become payable to officers or
salaried employees, grant any Heartland Options or, except
as required by law or as required by existing contractual
obligations which shall have been described in Section 2.11
of the Disclosure Schedule, adopt or make any change in any
bonus, insurance, pension, or other Heartland Employee
Plan, agreement, payment or arrangement made to, for or
with any of such officers or employees; or
(vi) borrow or agree to borrow any amount of funds
except in the ordinary course of business, or directly or
indirectly guarantee or agree to guarantee any obligations
of others, except in the ordinary course of business; or
(vii) make or commit to make any new loan or
letter of credit or any new or additional discretionary
advance under any existing line of credit in principal
amounts in excess of $150,000 or that would increase the
aggregate credit outstanding to any one borrower (or group
of affiliated borrowers) to more than $150,000 (excluding
for this purpose any accrued interest or overdrafts) unless
the amount of any additional loan, letter of credit or
advance is no greater than $50,000, and is made to an
existing borrower whose indebtedness currently exceeds
$150,000, provided that
19
such borrower is not on a watchlist of Heartland or its
subsidiaries or has any credit classified for regulatory
purposes, without the prior written consent of Banterra; or
(viii) purchase or otherwise acquire any investment
security for its own account, except in a manner and
pursuant to policies consistent with past practice; or
(ix) increase or decrease the rate of interest paid
on time deposits, or on certificates of deposit, except in
a manner and pursuant to policies consistent with past
practices; or
(x) enter into any agreement, contract or commitment
out of the ordinary course of business that requires an
annual payment in excess of Ten Thousand Dollars ($10,000);
or
(xi) except in the ordinary course of business, place
on any of its assets or properties any mortgage, pledge,
lien, charge, or other encumbrance; or
(xii) except in the ordinary course of business,
cancel or accelerate any material indebtedness owing to
Heartland or any of its subsidiaries or any claims which
Heartland or any of its subsidiaries may possess or waive
any material rights with respect thereto; or
(xiii) sell or otherwise dispose of any real
property or any material amount of any tangible or
intangible personal property other than in the ordinary
course of business and other than properties acquired in
foreclosure or otherwise in the ordinary collection of
indebtedness to Heartland or any of its subsidiaries; or
(xiv) foreclose upon or otherwise take title to or
possession or control of any real property without first
obtaining a phase one environmental report thereon which
indicates that the property is free of pollutants,
contaminants or hazardous or toxic waste materials;
provided, however, that Heartland and its subsidiaries
shall not be required to obtain such a report with respect
to single family, non-agricultural residential property of
one acre or less to be foreclosed upon unless it has reason
to believe that such property might contain any such waste
materials or otherwise might be contaminated; or
(xv) commit any act or fail to do any act which would
cause a breach of any agreement, contract or commitment and
which would have a Material Adverse Effect on Heartland; or
(xvi) except as may be necessary to comply with
Year 2000 requirements in an amount not to exceed Ten
Thousand Dollars ($10,000) or as may otherwise be approved
in writing by Banterra, purchase any real or personal
property or make any other capital expenditure, except in a
manner and pursuant to policies consistent with past
practice; or
(xvii) take any action which would materially and
adversely effect or delay the ability of either Banterra or
Heartland to obtain any necessary approvals of any
Regulatory Agency or other governmental authority required
for the transactions contemplated by this Agreement or to
perform its covenants and agreements under this Agreement;
or
(xviii) violate any law, statute, rule, governmental
regulation or order, which violation would have a Material
Adverse Effect on Heartland; or
20
(xix) change accounting principles or practices,
or the method of applying such principles or practices,
except as required by generally accepted accounting
principles.
(c) Heartland and its subsidiaries shall not engage in any
transaction or take any action that would render untrue (under
the standard of Section 1.12 hereof) any of the representations
and warranties of Heartland contained in Article Two hereof,
except as otherwise required herein, if such representations and
warranties were given as of the date of such transaction or
action.
(d) Heartland shall promptly notify Banterra in writing of
the occurrence of any matter or event known to and directly
involving Heartland, which would not include any changes in
conditions that affect the banking industry generally, that
would have, either individually or in the aggregate, a Material
Adverse Effect on Heartland.
(e) Heartland and its subsidiaries shall not, and shall
not authorize or permit any of their respective officers,
directors, employees or agents to, on or before the earlier of
the Closing Date or the date of termination of this Agreement,
directly or indirectly solicit, initiate or encourage or
(subject to the fiduciary duties of its directors as advised by
counsel) hold discussions or negotiations with or provide any
information to any person in connection with any proposal from
any person for the acquisition of all or any substantial portion
of the business, assets, shares of Heartland Common or other
securities of Heartland or Subsidiary Bank or any merger of
Heartland or Subsidiary Bank with any person. Heartland shall
promptly (which for this purpose shall mean within twenty-four
(24) hours) advise Banterra of its receipt of any such proposal
or inquiry concerning any possible such proposal, the substance
of such proposal or inquiry, and the identity of such person.
SECTION 4.02. BREACHES. Heartland shall, in the event it
has knowledge of the occurrence, or impending or threatened
occurrence, of any event or condition which would cause or
constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date
hereof) of any of its representations or agreements contained or
referred to herein, give prompt written notice thereof to
Banterra and use its best efforts to prevent or promptly remedy
the same.
SECTION 4.03. SUBMISSION TO SHAREHOLDERS. Heartland shall
cause to be duly called and held, on a date selected by
Heartland with the approval of Banterra, a special meeting of
its shareholders (the "Heartland Shareholders' Meeting") for
submission of this Agreement and the Merger for approval of such
Heartland shareholders as required by the Illinois Corporate
Law. In connection with the Heartland Shareholders' Meeting,
(i) Banterra and AcquisitionCo shall cooperate and assist
Heartland in preparing and filing a Proxy Statement (the "Proxy
Statement") with the S.E.C., and Heartland shall mail the Proxy
Statement to its shareholders, (ii) Banterra and AcquisitionCo
shall furnish Heartland all information concerning themselves
that Heartland may reasonably request in connection with such
Proxy Statement, and (iii) the Board of Directors of Heartland
(subject to compliance with its fiduciary duties as advised by
counsel) shall recommend to its shareholders the approval of
this Agreement and the Merger contemplated by this Agreement and
use its best efforts to obtain such shareholder approval.
SECTION 4.04. CONSENTS TO CONTRACTS AND LEASES. Heartland
shall use its best efforts to obtain all necessary consents with
respect to all interests of Heartland and its subsidiaries in
any material leases, licenses, contracts, instruments and rights
which require the consent of another person for their transfer
or assumption pursuant to the Merger, if any.
SECTION 4.05. CONSUMMATION OF AGREEMENT. Heartland shall
use its best efforts to perform and fulfill all conditions and
obligations on its part to be performed or fulfilled under this
Agreement and to effect the Merger and the other transactions
contemplated hereby in accordance with the terms and
21
provisions hereof and to effect the transition and integration
of the business and operations of Heartland and its subsidiaries
with the business and operations of Banterra and its
subsidiaries. Heartland shall furnish to Banterra in a timely
manner all information, data and documents in the possession of
Heartland or its subsidiaries requested by Banterra as may be
required to obtain any necessary regulatory or other approvals
of the Merger and shall otherwise cooperate fully with Banterra
to carry out the purpose and intent of this Agreement.
SECTION 4.06. ENVIRONMENTAL REPORTS. Heartland shall
provide to Banterra, as soon as reasonably practical, but not
later than sixty (60) days after the date hereof, a report of a
phase one environmental investigation on all real property owned
(including, without limitation, Other Real Estate Owned and
property leased or operated by Heartland or any of its
subsidiaries as of the date hereof (other than space in retail
and similar establishments leased by Heartland or any of its
subsidiaries for automatic teller machines)) and within ten (10)
days after the acquisition or lease of any real property
acquired or leased by Heartland or its subsidiaries after the
date hereof (but excluding space in office or retail and similar
establishments leased by Heartland or its subsidiaries for
automatic teller machines), except as otherwise provided in
Section 4.01(b)(xiv) hereof. If required by the phase one
investigation in Banterra's reasonable opinion, Heartland shall
provide to Banterra, within sixty (60) days of the receipt by
Heartland of the request of Banterra therefor, a report of a
phase two investigation on properties requiring such additional
study. Banterra shall have fifteen (15) business days from the
receipt of any such phase two investigation report to notify
Heartland of any dissatisfaction with the contents of such
report. Should the cost of taking all remedial or other
corrective actions and measures (i) required by applicable law
or reasonably likely to be required by applicable law, or (ii)
recommended or suggested by such report or reports or prudent in
light of serious life, health or safety concerns, in the
aggregate, exceed the sum of One Hundred Thousand Dollars
($100,000) as reasonably estimated by an environmental
expert retained for such purpose by Banterra and reasonably
acceptable to Heartland, or if the cost of such actions and
measures cannot be so reasonably estimated by such expert to be
such amount or less with any reasonable degree of certainty,
then Banterra shall have the right pursuant to Section 7.03
hereof, for a period of fifteen (15) business days following
receipt of such estimate or indication that the cost of such
actions and measures can not be so reasonably estimated, to
terminate this Agreement, which shall be Banterra's sole remedy
in such event.
SECTION 4.07. ACCESS TO INFORMATION. Heartland shall
permit Banterra and its accountants, attorneys and other
representatives reasonable access in a manner which shall avoid
undue disruption or interference with Heartland's normal
operations to its properties and shall disclose and make
available to Banterra all books, documents, papers, records and
computer systems documentation and files relating to its assets,
stock ownership, properties, operations, obligations and
liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of
directors' and shareholders' meetings, organizational documents,
material contracts and agreements, loan files, filings with any
regulatory authority, accountants' workpapers (if available and
subject to the respective independent accountants' consent),
litigation files (but only to the extent that such review would
not result in a waiver of the attorney-client or attorney work
product privileges under the rules of evidence), Employee
Benefit Plans, and any other business activities or prospects in
which Banterra may have a reasonable and legitimate interest in
furtherance of the transactions contemplated by this Agreement.
Banterra shall hold any such information which is nonpublic in
confidence in accordance with the provisions of Section 8.01
hereof.
SECTION 4.08. SUBSIDIARY BANK MERGER. Upon the request of
Banterra, Heartland shall cause the Subsidiary Bank to enter
into a merger agreement, subject to the conditions of this
Agreement with Banterra Bank and take all other actions and
cooperate with Banterra in causing such merger (the "Subsidiary
Bank Merger") to be effected. Such subsidiary bank merger
agreement shall provide, in
22
addition to customary terms for the combination of subsidiary
bank operations in transactions such as this: (i) for
consummation of any such merger on a date on or after the
Closing Date, as may be selected by Banterra, and (ii) that the
obligations of the Subsidiary Bank thereunder are conditioned on
the prior or simultaneous consummation of the Merger pursuant to
this Agreement.
SECTION 4.09. PLAN OF MERGER. At the request of Banterra,
Heartland shall enter into a separate plan of merger or
certificate of merger reflecting the terms hereof for purposes
of any filing requirement of the Illinois Corporate Law.
SECTION 4.10. VOTING AGREEMENTS. Heartland shall cause
all of the directors of Heartland as of the date hereof and each
of their respective spouses, except for Xxxxxxx X. Xxxxxx, to
enter into voting agreements as of the date hereof obligating
all of the directors of Heartland and each of their respective
spouses to vote all shares of Heartland Common beneficially
owned or controlled by them in favor of the Agreement and the
Merger.
SECTION 4.11. MEETING WITH HEARTLAND AUDITORS. If
requested by Banterra, Heartland shall arrange for a meeting
between Banterra and Gray Xxxxxx Xxxxx LLP, Heartland's
independent auditors, to review and discuss the Heartland
Financial Statements.
SECTION 4.12. MERGER EXPENSES AND RELATED MATTERS.
(a) Banterra and Heartland shall consult and reasonably
cooperate with each other with respect to determining, as
specified in a written notice from Banterra to Heartland, based
upon such consultation and as hereinafter provided, the amount
of, and timing for recognizing for financial accounting purposes
the expenses of the Merger and the restructuring charges related
to or to be incurred in connection with the Merger provided that
in no event shall such adjustments be made any earlier than the
day prior to Closing and provided further that Heartland shall
be under no obligation to take any such action unless Banterra
and AcquisitionCo provide a written waiver of any right they may
have to terminate this Agreement and acknowledge and agree that
all conditions precedent to the obligations of Banterra and
AcquisitionCo in this Agreement have either been satisfied or
waived. No such recognition of expenses or restructuring
charges shall be deemed to be a breach or violation of any
representation, warranty, covenant, condition or other
provision of this Agreement.
(b) From and after the date of this Agreement to the
Effective Time, Heartland and its subsidiaries shall maintain
and keep all of the Heartland Employee Plans fully funded, and
shall, to the extent any such benefit plan may not be fully or
adequately funded, make such contributions as are necessary to
fully fund any such inadequately funded benefit plan, including
payments to Heartland's Employee Stock Ownership Plan, as may be
required.
(c) From December 1, 1998 forward, Xxxxxxxxx's attorneys'
fees incurred in connection with this Agreement and the
transactions contemplated herein shall not exceed the sum of
$80,000. Heartland's investment bankers' fees incurred in
connection with this Agreement and the transactions contemplated
herein shall not exceed the sum of $275,000. Heartland's
accountants' fees incurred in connection with this Agreement and
the transactions contemplated herein shall not exceed the sum of
$100,000. In the event that Heartland's attorneys' fees,
investment bankers' fees and/or accountants' fees in the
aggregate exceed the sum of $455,000, the aggregate amount of
the Stock Consideration payable by Banterra hereunder shall be
reduced on a dollar for dollar basis by the amount by which such
attorneys' fees, investment bankers' fees and/or accountants'
fees in the aggregate exceed the sum of $455,000.
23
SECTION 4.13. HEARTLAND OPTION CONSIDERATION AGREEMENTS.
Heartland shall cause all of the holders of Vested Heartland
Options to enter into the Heartland Option Consideration
Agreements.
Section 4.14. Pending Legal Matters. Heartland shall
pursue resolution or settlement of the lawsuits styled Xxxxxxx
Xxxxxx v. Heartland National Bank and Xxxxxx X. Xxxxxx v.
Heartland National Bank, each currently pending in the Illinois
Circuit Court of the First Judicial Circuit, Xxxxxxxxxx County,
Illinois, on terms most favorable to Heartland, and shall fully
inform Banterra as to the ongoing status of these lawsuits.
Resolution or settlement of either of these lawsuits shall only
occur, or be made, after full consultation with Banterra, and
only after consent is obtained from Banterra, which consent
shall not be unreasonably withheld.
SECTION 4.15. RECOVERY OF ATTORNEYS' FEES. From and after
the date hereof, Heartland shall use its best efforts to
promptly recover the maximum amount that it can recover from its
insurer for any legal fees and expenses or other fees and
expenses incurred in connection with the lawsuit styled Xxxxxxx
v. Heartland Bancshares, Inc. et al., Cause No. 98-CH-32, filed
in the Illinois Circuit Court of the First Judicial Circuit,
Xxxxxxxxxx County, Illinois.
ARTICLE FIVE
------------
AGREEMENTS OF BANTERRA AND ACQUISITIONCO
----------------------------------------
SECTION 5.01. REGULATORY APPROVALS; OTHER AGREEMENTS.
(a) Within sixty (60) days after the date hereof, Banterra
shall file all regulatory applications required in order to
consummate the Merger, including but not limited to the
necessary applications for the prior approval of the Federal
Reserve Board and the O.T.S. Banterra shall keep Heartland
reasonably informed as to the status of such applications. At
least five (5) business days prior to filing, Banterra shall
provide copies of such applications to Heartland and its counsel
for review and comment.
(b) Banterra shall not, without the prior written consent
of Heartland, engage in any transaction or take any action that
would render untrue (under the standard of Section 1.12 hereof)
any of the representations and warranties of Banterra contained
in Article Three hereof (except for any such representations and
warranties made only as of a specified date), if such
representations and warranties were given as of the date of such
transaction or action.
SECTION 5.02. BREACHES. Banterra shall, in the event it
has knowledge of the occurrence, or impending or threatened
occurrence, of any event or condition which would cause or
constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date
hereof) of any of its representations or agreements contained or
referred to herein, give prompt written notice thereof to
Heartland and use its best efforts to prevent or promptly remedy
the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. Banterra and
AcquisitionCo shall their best efforts to perform and fulfill
all conditions and obligations on their part to be performed or
fulfilled under this Agreement and to effect the Merger in
accordance with the terms and conditions of this Agreement.
SECTION 5.04. DIRECTORS AND OFFICERS' LIABILITY INSURANCE.
(a) For a period of three (3) years after the Effective
Time, Banterra shall use its reasonable best efforts to cause to
be maintained in effect the current policies of directors' and
officers' liability insurance maintained by Heartland (provided
that Banterra may substitute therefor policies of comparable
coverage
24
with respect to claims arising from facts or events which
occurred before the Effective Time); provided, however, that in
no event shall Banterra be obligated to expend a total amount in
excess of $53,100 in order to maintain or provide insurance
coverage pursuant to this Section 5.04 (the "Maximum Amount").
If the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount,
Banterra shall use all reasonable efforts to maintain the most
advantageous policies of directors' and officers' insurance
obtainable but in no event shall the cost of such insurance
exceed the Maximum Amount. Notwithstanding the foregoing, prior
to the Effective Time, Banterra may request Heartland to, and
Heartland shall, purchase insurance coverage, on such terms and
conditions as shall be acceptable to Banterra, extending for a
period of three (3) years Heartland's directors' and officers'
liability insurance coverage in effect as of the date hereof
(covering past or future claims with respect to periods before
the Effective Time) and such coverage shall satisfy Banterra's
obligations under this Section 5.04.
(b) For a period of six (6) years after the Effective
Time, Banterra shall, or shall cause Banterra Bank to,
indemnify, defend and hold harmless each person who is now, or
who has been at any time before the date hereof or who becomes
before the Effective Time, an officer or director of Heartland,
Heartland National Bank or any of their respective subsidiaries
(the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorney's fees), liabilities or
judgments or amounts that are paid in settlement (which
settlement shall require the prior written consent of Banterra,
which consent shall not be unreasonably withheld) of or in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, or administrative (each
a "Claim"), in which an Indemnified Party is, or is threatened
to be made, a party or witness in whole or in part on or arising
in whole or in part out of the fact that such person is or was a
director, officer or employee of Heartland, Heartland National
Bank or any of their subsidiaries if such Claim pertains to any
matter of fact arising, existing or occurring before the
Effective Time (including, without limitation, the Merger and
the other transactions contemplated hereby), regardless of
whether such Claim is asserted or claimed before, or at or
after, the Effective Time (the "Indemnified Liabilities"), to
the fullest extent permitted under applicable state or federal
law in effect as of the date hereof or as amended applicable to
a time before the Effective Time and under Heartland's and
Heartland National Bank's Articles or Articles and By-Laws.
Banterra shall pay expenses in advance of the final disposition
of any such action or proceeding to each Indemnified Party to
the full extent permitted by applicable state or federal law in
effect as of the date hereof or as amended applicable to a time
before the Effective Time upon receipt of an undertaking to
repay such advance payments if he shall be adjudicated or
determined to be not entitled to indemnification in the manner
set forth below. Any Indemnified Party wishing to claim
indemnification under this Section 5.04(b) upon learning of any
Claim, shall notify Banterra (but the failure so to notify
Banterra shall not relieve it from any liability which it may
have under this Section 5.04(b), except to the extent such
failure materially prejudices Banterra) and shall deliver to
Banterra the undertaking referred to in the previous sentence.
In the event of any such Claim (whether arising before or after
the Effective Time) (1) Banterra shall have the right to assume
the defense thereof (in which event the Indemnified Parties will
cooperate in the defense of any such matter) and upon such
assumption Banterra shall not be liable to any Indemnified Party
for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection
with the defense thereof, except that if Banterra elects not to
assume such defense, or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are or may
be (whether or not any have yet actually arisen) issues which
raise conflicts of interest between Banterra and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them, and Banterra shall pay the reasonable fees
and expenses of such counsel for the Indemnified Parties, (2)
Banterra shall be obligated pursuant to this paragraph
to pay for only one firm of counsel for all Indemnified Parties
whose reasonable fees and expenses shall be paid promptly as
statements are received, (3) Banterra shall not be liable for
any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld) and (4) no
Indemnified Party shall be entitled to indemnification hereunder
with respect to a matter as to which
25
(x) he shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was
in the best interests of Heartland, Heartland National Bank or
any Subsidiary, or (y) in the event that a proceeding is
compromised or settled so as to impose any liability or
obligation upon an Indemnified Party, if there is a
determination that with respect to said matter said Indemnified
Party did not act in good faith in the reasonable belief that
his action was in the best interests of Heartland, Heartland
National Bank or any Subsidiary. In the event that either
Banterra or Banterra Bank or any of its successors or assigns
(i) consolidates with or merges into any other person and shall
not be the continuing or surviving bank or entity of such
consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in
each such case, proper provision shall be made so that the
successors and assigns of Banterra shall assume the obligations
set forth in this Section 5.04(b). The obligations of Banterra
provided under this Section 5.04(b) are intended to be
enforceable against Banterra directly by the Indemnified Parties
and shall be binding on all respective successors and permitted
assigns of Banterra.
SECTION 5.05. EMPLOYEE BENEFITS.
(a) Banterra shall, with respect to each employee of
Heartland or its subsidiaries at the Effective Time who shall
continue in employment with Banterra or its subsidiaries (each a
"Continued Employee"), provide the benefits described in this
Section 5.05. Subject to the right of subsequent amendment,
modification or termination of Banterra's Employee Plans, as
defined below, in Banterra's sole discretion which applies to
all employees of Banterra or its subsidiaries, each Continued
Employee shall be entitled, as a new employee of a subsidiary of
Banterra, to participate in such employee benefit plans, as
defined in Section 3(3) of ERISA, or any non-qualified employee
benefit plans or deferred compensation, stock option, bonus or
incentive plans, or other employee benefit or fringe benefit
programs that may be in effect generally for employees of all of
Banterra's subsidiaries (the "Banterra Employee Plans"), if and
as a Continued Employee shall be eligible and, if required,
selected for participation therein under the terms thereof.
Continued Employees shall be eligible to participate on the same
basis as similarly situated employees of other Banterra
subsidiaries. All such participation shall be subject to such
terms of such Banterra Employee Plans as may be in effect from
time to time and this Section 5.05 is not intended to give
Continued Employees any rights or privileges superior to those
of other employees of Banterra's subsidiaries (except as
provided in the following sentence with respect to credit for
past service). For purposes of determining credit for
past service, and eligibility for and vesting of such employee
benefits with respect to the Banterra Employee Plans, service
with Heartland, Heartland National Bank, or any subsidiary
thereof prior to the Effective Time shall be treated as service
with an "employer" as if such persons had been employees of
Banterra, or its subsidiaries. The Banterra Employee Plans
shall cover pre-existing medical conditions to the extent
provided therein. Upon request, Banterra shall provide a copy
of the Banterra Employee Plans to those Continued Employees
entitled to participate thereunder.
(b) At the Effective Time, the Heartland Employee Plans
shall terminate and be of no further force and effect, and all
employees of Heartland or its subsidiaries shall receive all
benefits to which they are entitled to thereunder. Banterra
shall provide customary out placement assistance, in an amount
not to exceed $500 per employee, and continued health insurance
(as required by COBRA) to any employee of Heartland or its
subsidiaries who shall not be a Continued Employee. Banterra
shall pay severance pay in an amount equal to one week's salary
for each full year of employment by Heartland or its
subsidiaries, with a minimum of four (4) weeks severance pay and
a maximum of ten (10) weeks severance pay, plus any accrued
vacation pay, to any employee of Heartland or its subsidiaries
who (i) shall not be a Continued Employee, provided that such
employee was never offered employment by Banterra or its
subsidiaries or such employee was offered employment with
Banterra or its subsidiaries but such employment involved such
employee changing his or her place of employment to
a location other than Marion, Illinois or Carbondale, Illinois,
or (ii) shall be a Continued Employee but shall be terminated by
Banterra or its
26
subsidiaries within six (6) months of becoming a Continued
Employee. Banterra shall not pay any severance pay to any
employee of Heartland or its subsidiaries who shall not be a
Continued Employee if such employee, other than Xxxxx X.
Xxxxxxx, was offered employment by Banterra or its subsidiaries
that involved such employee's place of employment being their
current place of employment, Marion, Illinois, or Carbondale,
Illinois, and that is at a comparable compensation level and
level of responsibility to their previous position with
Heartland or its subsidiaries.
SECTION 5.06. CONTRACT OF XXXXX X. XXXXXXX. Xxxxxxxx
agrees that (i) the consummation of the transactions
contemplated hereby constitutes a "Change in Control" as defined
in the Employment Agreements of Xxxxx X. Xxxxxxx with both
Heartland and Heartland National Bank, and that Xx. Xxxxxxx will
be deemed to have suffered a material change in his
responsibilities and supervision as of the Effective Time, it
being understood that Xx. Xxxxxxx'x employment with both
Heartland and Heartland National Bank shall terminate as
of the Effective Time, and that Xx. Xxxxxxx shall receive,
without duplication, the payments called for under Section 11(a)
of his Employment Agreements at such time.
ARTICLE SIX
-----------
CONDITIONS PRECEDENT TO MERGER
------------------------------
SECTION 6.01. CONDITIONS TO BANTERRA'S OBLIGATIONS. The
obligations of Banterra and AcquisitionCo to effect the Merger
shall be subject to the satisfaction (or waiver by Banterra)
prior to or on the Closing Date of the following conditions:
(a) The representations and warranties made by Heartland
in this Agreement shall be true and correct (subject to the
standard in Section 1.12 hereof) on and as of the Closing Date
with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date
(except for any such representations and warranties made only as
of a specified date which shall be true and correct (subject to
the standard in Section 1.12 hereof) as of such date); and
(b) Heartland shall have performed and complied in all
material respects with all of its obligations and agreements
required to be performed on or prior to the Closing Date under
this Agreement; and
(c) No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition
(an "Injunction") preventing the consummation of the Merger
shall be in effect, nor shall any proceeding by any Regulatory
Agency or other person seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the
Merger illegal; and
(d) All necessary regulatory approvals, consents,
authorizations and other approvals, including the requisite
approval of this Agreement and the Merger by the shareholders of
Heartland, required by law for consummation of the Merger shall
have been obtained and all waiting periods required by law shall
have expired, and no regulatory approval shall have imposed any
condition, requirement or restriction that the Board of
Directors of Banterra reasonably determines in good faith would
so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement to Banterra
and its shareholders as to render inadvisable the consummation
of the Merger (any such condition, requirement or restriction, a
"Burdensome Condition"); and
27
(e) Banterra shall have received the environmental reports
required by Section 4.06 hereof, and shall not have elected,
pursuant to Section 4.06 hereof, to terminate and cancel this
Agreement; and
(f) Banterra shall have received all documents required to
be received from Heartland on or prior to the Closing Date, all
in form and substance reasonably satisfactory to Banterra; and
(g) Banterra shall have received a legal opinion
substantially in the form of Exhibit 1.11(a) hereto; and
(h) The Subsidiary Bank Merger shall be consummated if the
subsidiary bank merger agreement, if any, provides for
consummation of the Subsidiary Bank Merger on the Closing Date;
and
(i) Banterra shall have reasonably determined, in good
faith, that there has not been any change in the financial
condition, the results of operations or the business of
Heartland and its subsidiaries that would have, or has had,
since the date of this Agreement, a Material Adverse Effect on
Heartland; and
(j) All of the Heartland Option Consideration Agreements
shall be in full force and effect; and
(k) Banterra shall have received information from Xxxxx &
Xxxxxxx concerning the matters upon which Xxxxx & Xxxxxxx
currently represents Heartland in form and substance acceptable
to Banterra, which information shall be included in Section 2.24
of the Disclosure Schedule.
SECTION 6.02. CONDITIONS TO HEARTLAND'S OBLIGATIONS. The
obligations of Heartland to effect the Merger shall be subject
to the satisfaction (or waiver by Heartland) prior to or on the
Closing Date of the following conditions:
(a) The representations and warranties made by Banterra
and AcquisitionCo in this Agreement shall be true and correct
(subject to the standard in Section 1.12 hereof) on and as of
the Closing Date with the same effect as though such
representations and warranties had been made or given on and as
of the Closing Date (except for any such representations and
warranties made only as of a specified date which shall be true
and correct (subject to the standard in Section 1.12 hereof) as
of such date); and
(b) Banterra and AcquisitionCo shall have performed and
complied in all material respects with all of their obligations
and agreements hereunder required to be performed on or prior to
the Closing Date under this Agreement; and
(c) No Injunction preventing the consummation of the
Merger shall be in effect, nor shall any proceeding by any
Regulatory Agency or any other person seeking any of the
foregoing be pending. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal; and
(d) All necessary regulatory approvals, consents,
authorizations and other approvals, including the requisite
approval of this Agreement and the Merger by the shareholders of
Heartland, required by law for consummation of the Merger shall
have been obtained and all waiting periods required by law shall
have expired; and
(e) Heartland shall have received all documents required
to be received from Banterra or AcquisitionCo on or prior to the
Closing Date, all in form and substance reasonably satisfactory
to Heartland; and
28
(f) Heartland shall have received, on or before the date
of the mailing of the Proxy Statement, from its investment
banker, Trident Securities, Inc., the reaffirmation of the
opinion of such investment banker, originally rendered and
delivered to Heartland at the meeting of the Board of Directors
of Heartland at which this Agreement was approved by such Board
of Directors, to the effect that the transactions contemplated
by this Agreement, including the Merger, are fair to Heartland
and its shareholders from a financial point of view; and
(g) Heartland shall have received a legal opinion
substantially in the form of Exhibit 1.11(b) hereto; and
(h) Banterra shall have deposited, or cause to be
deposited, the Stock Consideration and the Option Consideration
with the Exchange Agent.
ARTICLE SEVEN
-------------
TERMINATION OR ABANDONMENT
--------------------------
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be
terminated by the mutual written agreement of Banterra and
Heartland at any time prior to the Closing Date, regardless of
whether approval of this Agreement and the Merger by the
shareholders of Heartland shall have been previously obtained.
SECTION 7.02. BREACH OF AGREEMENTS. In the event that
there is a breach in any of the representations and warranties
(subject to the standard in Section 1.12 hereof) or a material
breach of any of the agreements of Banterra or Heartland, which
breach is not cured within thirty (30) days after written notice
to cure such breach is given to the breaching party by the
non-breaching party, then the non-breaching party, regardless of
whether shareholder approval of this Agreement and the Merger
shall have been previously obtained, may terminate and cancel
this Agreement by providing written notice of such action to the
other party hereto.
SECTION 7.03. ENVIRONMENTAL REPORTS. Banterra may
terminate this Agreement to the extent provided by Section 4.06
hereof and this Section 7.03 by giving timely written notice
thereof to Heartland.
SECTION 7.04. FAILURE OF CONDITIONS. In the event any of
the conditions to the obligations of either party are not
satisfied or waived on or prior to the Closing Date, and if any
applicable cure period provided in Section 7.02 hereof has
lapsed, then such party may, regardless of whether approval of
this Agreement and the Merger by the shareholders of Heartland
has been previously obtained, terminate and cancel this
Agreement by delivery of written notice of such action to the
other party on such date.
SECTION 7.05. REGULATORY APPROVAL DENIAL; BURDENSOME
CONDITION. If any regulatory application filed pursuant to
Section 5.01(a) hereof should be finally denied or disapproved
by the respective regulatory authority, or not obtained from the
respective regulatory authority on or before the date which is
nine (9) months following the date hereof, then this Agreement
thereupon shall be deemed terminated and canceled; provided,
however, that a request for additional information or
undertaking by Banterra, as a condition for approval, shall not
be deemed to be a denial or disapproval so long as Banterra
diligently provides the requested information or undertaking.
In the event that an application is denied pending an appeal,
petition for review, or similar such act on the part of Banterra
(hereinafter referred to as the "appeal") then the application
shall be deemed denied unless Banterra prepares and timely files
such appeal and continues the appellate process for purposes of
obtaining the necessary approval. Banterra may terminate this
Agreement if its Board of Directors shall have reasonably
determined in good faith that any of the requisite regulatory
approvals imposes a Burdensome Condition, and Banterra shall
deliver written
29
notice of such determination to Heartland not later than five
(5) days after receipt by Banterra of notice of the imposition
of such Burdensome Condition from the applicable Regulatory
Agency (unless an appeal of such determination is being pursued
by Banterra, in which event the foregoing notice shall be given
within thirty (30) days of the termination of any such appeal by
Banterra or the denial of such appeal by the appropriate
Regulatory Agency).
SECTION 7.06. SHAREHOLDER APPROVAL DENIAL; WITHDRAWAL/
MODIFICATION OF BOARD RECOMMENDATION. If this Agreement and the
relevant transactions contemplated by this Agreement, including
the Merger, are not approved by the requisite vote of the
shareholders of Heartland at the Heartland Shareholders'
Meeting, then either party may terminate this Agreement.
Banterra may terminate this Agreement if Heartland's Board of
Directors shall have failed to approve or recommend this
Agreement or the Merger, or shall have withdrawn or modified in
any manner adverse to Banterra its approval or recommendation of
this Agreement or the Merger, or shall have resolved or publicly
announced an intention to do either of the foregoing.
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In the
event that Heartland or any of its subsidiaries shall, after the
date hereof, become a party or subject to any new or amended
written agreement, memorandum of understanding, cease and desist
order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with a Regulatory Agency, which
would have a Material Adverse Effect on Heartland, then Banterra
may terminate this Agreement. In the event that Banterra or any
of its subsidiaries shall, after the date hereof, become a party
or subject to any new or amended written agreement, memorandum
of understanding, cease and desist order, imposition of civil
money penalties or other regulatory enforcement action or
proceeding with a Regulatory Agency, which would have a Material
Adverse Effect on Banterra, then Heartland may terminate this
Agreement.
SECTION 7.08. FALL-APART DATE. If the Closing Date does
not occur on or prior to nine (9) months from the date hereof,
then this Agreement may be terminated by either party by giving
written notice thereof to the other, unless the failure of the
Closing to occur by such date shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth in this
Agreement.
SECTION 7.09. THIRD PARTY TRANSACTIONS. Banterra may
terminate this Agreement in the event that any of the events set
forth in Section 7.10(b) hereof occur.
SECTION 7.10. HEARTLAND TERMINATION FEE. (a) Heartland
shall pay to Banterra, within ten (10) business days of
Heartland's receipt of written demand thereof, the sum of One
Hundred Fifty Thousand Dollars ($150,000) as an agreed upon
termination fee and as liquidated damages, in lieu of all
remedies at law or in equity and in full satisfaction of all
obligations or liabilities of Heartland hereunder, upon the
termination of this Agreement by Banterra due to (i) a material
breach of this Agreement by Heartland that has not been cured as
provided in Section 7.02 hereof; or (ii) the failure of the
shareholders of Heartland to approve this Agreement and the
Merger at the Heartland Shareholders' Meeting.
(b) Heartland shall pay to Banterra, within ten (10)
business days of Heartland's receipt of written demand thereof,
the sum of Four Hundred Fifty Thousand Dollars ($450,000) as an
agreed upon termination fee and as liquidated damages, in lieu
of all remedies at law or in equity and in full satisfaction of
all obligations or liability of Heartland hereunder, upon
termination of this Agreement by Banterra due to the following
events: (i) any person or group of persons (other than Banterra
and/or its affiliates) shall acquire, or have the right to
acquire, thirty-five percent (35%) or more of the outstanding
shares of Heartland Common; (ii) the expiration date of a tender
or exchange offer by any person or group of persons (other than
Banterra and/or its affiliates) to purchase or acquire
securities of Heartland if upon
30
consummation of such offer, such person or group of person would
own, control or acquire the right to acquire more than
thirty-five percent (35%) of the issued and outstanding shares
of Heartland Common; or (iii) the entry by Heartland into a
definitive agreement with a person or group of persons (other
than Banterra and/or its affiliates) for such person or group of
persons to acquire, merge or consolidate with Heartland or to
acquire all or substantially all of Heartland's assets or more
than thirty-five percent (35%) of the outstanding shares of
Heartland Common.
ARTICLE EIGHT
-------------
GENERAL
-------
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties
acknowledge the confidential and proprietary nature of the
"Information" (as described below in this Section 8.01) which
has heretofore been exchanged and which shall be received from
each other hereunder and agree to hold and keep the same
confidential. Such Information shall include any and all
financial, technical, commercial, marketing, customer or other
information concerning the business, operations and affairs of a
party that may be provided to the other, irrespective of the
form of the communications, by such party's employees or agents.
Such Information shall not include information which is or
becomes generally available to the public other than as a result
of a disclosure by a party or its representatives in violation
of this Agreement. The parties agree that the Information shall
be used solely for the purposes contemplated by this Agreement
and that such Information shall not be disclosed to any person
other than employees and agents of a party who are directly
involved in evaluating the transaction. The Information shall
not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the other party's
business or any business or enterprise in which such party
may have an interest, now or in the future, and whether or not
now in competition with such other party.
SECTION 8.02. PUBLICITY. Banterra and Heartland shall
cooperate with each other in the development and distribution of
all news releases and other public disclosures concerning this
Agreement and the Merger and shall not issue any news release or
make any other public disclosure without the prior consent of
the other party, unless it reasonably believes such is required
by law upon the advice of counsel or is in response to published
newspaper or other mass media reports regarding the transactions
contemplated by this Agreement, in which such latter event the
parties shall give reasonable notice, and to the extent
practicable, consult with each other regarding such responsive
public disclosure.
SECTION 8.03. RETURN OF DOCUMENTS. Upon termination of
this Agreement without the Merger becoming effective, each party
(i) shall deliver to the other originals and all copies of all
Information made available to such party, (ii) shall not retain
any copies, extracts or other reproductions in whole or in part
of such Information, and (iii) shall destroy all memoranda,
notes and other writings prepared by any party based on the
Information.
SECTION 8.04. NOTICES. Any notice or other communication
shall be in writing and shall be deemed to have been given or
made on the date of delivery, in the case of hand delivery, or
three (3) business days after deposit in the United States
Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any
case) as follows:
(a) if to Banterra:
Xxxxxxx X. Xxxxxx
Chairman
Banterra Corp.
31
0000 Xxxxx X.X. Xxxxx 45
P. O. Box 291
Eldorado, Illinois 62930
Facsimile: (000) 000-0000
(b) with a copy to:
Xxxx X. Xxxxxxxxx, Esq.
Xxxxx, Xxxx & Xxxxxxxx, X.X.
000 X. Xxxxxxxx, Xxx. 0000
Xx. Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
and
(c) if to Heartland:
Xxxxxxx X. Xxxxxxxxxx
Heartland Bancshares, Inc.
000 X. 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Housely Kantarian & Xxxxxxxxx, P.C.
Xxxxx 000
0000 00xx Xxxxxx, X.X.
Washington, D.C. 20036
Facsimile: (000) 000-0000
or to such other address as any party may from time to time
designate by notice to the others.
SECTION 8.05. LIABILITIES AND EXPENSES. Except as
provided in Section 7.10 hereof, in the event that this
Agreement is terminated pursuant to the provisions of Article
Seven hereof, no party hereto shall have any liability to any
other party for costs, expenses, damages or otherwise; provided,
however, that, notwithstanding the foregoing, in the event that
this Agreement is terminated pursuant to Article Seven hereof on
account of a willful breach of any of the representations and
warranties set forth herein or any willful breach of any of the
agreements set forth herein, then the non-breaching party shall
be entitled to recover appropriate damages from the breaching
party, including, without limitation, reimbursement to the
non-breaching party of its costs, fees and expenses (including
attorneys', accountants' and advisors' fees and expenses)
incident to the negotiation, preparation, execution and
performance of this Agreement and related documentation;
provided, however, that nothing in this proviso shall be deemed
to constitute liquidated damages for the willful breach by a
party of the terms of this Agreement or otherwise limit
the rights of the non-breaching party.
SECTION 8.06. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS. Except for as provided in this Section 8.06, no
representation, warranty or agreement contained herein shall
survive the
32
Effective Time or the earlier termination of this Agreement;
provided, however, that no such representation, warranty or
covenant shall be deemed to be terminated or extinguished so as
to deprive Banterra or Heartland (or any director, officer or
controlling person thereof) of any defense in law or equity
which otherwise would be available against the claims of any
person, including, without limitation, any shareholder or former
shareholder of either Banterra or Heartland, the aforesaid
representations, warranties and covenants being material
inducements to the consummation by Banterra and Heartland of the
transactions contemplated herein. The agreements set forth in
Sections 5.04, 5.05, and 5.06 hereof shall survive the Effective
Time and the agreements set forth in Sections 7.10, 8.01, 8.02,
8.03 and 8.05 hereof and this Section 8.06 shall survive the
Effective Time or the earlier termination of this Agreement.
SECTION 8.07. ENTIRE AGREEMENT. This Agreement
constitutes the entire agreement between the parties and
supersede and cancel any and all prior discussions,
negotiations, undertakings, agreements in principle or other
agreements between the parties relating to the subject matter
hereof.
SECTION 8.08. HEADINGS AND CAPTIONS. The captions of
Articles and Sections hereof are for convenience only and shall
not control or affect the meaning or construction of any of the
provisions of this Agreement.
SECTION 8.09. WAIVER, AMENDMENT OR MODIFICATION. The
conditions of this Agreement which may be waived may only be
waived by notice to the other party waiving such condition. The
failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect the right at a
later time to enforce the same. This Agreement may be amended
or modified by the parties hereto, at any time before or after
shareholder approval of the Agreement; provided, however, that
after any such approval no such amendment or modification shall
alter the amount or change the form of the Stock Consideration
or Option Consideration contemplated by this Agreement to be
received by shareholders and option holders of Heartland. This
Agreement not be amended or modified except by a written
document duly executed by the parties hereto.
SECTION 8.10. RULES OF CONSTRUCTION. Unless the context
otherwise requires: (i) a term has the meaning assigned to it,
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles, (iii) "or" is not exclusive, (iv) words in the
singular may include the plural and in the plural include the
singular, and (v) "knowledge" of a party means the actual or
constructive knowledge of any director or executive officer of
such party or any of its subsidiaries.
SECTION 8.11. COUNTERPARTS. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original and all of which shall be deemed one and the
same instrument. For purposes of executing this Agreement, a
document (or signature page thereto) signed and transmitted by
facsimile machine or telecopier is to be treated as an original
document. The signature of any party thereon, for purposes
hereof, is to be considered as an original signature, and the
document transmitted is to be considered to have the same
binding effect as an original signature on an original document.
At the request of any party, any facsimile or telecopy document
shall be re-executed in original form by the parties who
executed the facsimile or telecopy document. No party may raise
the use of a facsimile machine or telecopier or the fact that
any signature was transmitted through the use of a facsimile or
telecopier machine as a defense to the enforcement of this
Agreement or any amendment or other document executed in
compliance with this Section 8.11.
SECTION 8.12. SUCCESSORS AND ASSIGNS. This Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors. There shall be no third
party beneficiaries hereof, except as provided for herein.
33
SECTION 8.13. SEVERABILITY. In the event that any
provisions of this Agreement or any portion thereof shall be
finally determined to be unlawful or unenforceable, such
provision or portion thereof shall be deemed to be severed from
this Agreement, and every other provision, and any portion of a
provision, that is not invalidated by such determination, shall
remain in full force and effect. To the extent that a provision
is deemed unenforceable by virtue of its scope but may be made
enforceable by limitation thereof, such provision shall be
enforceable to the fullest extent permitted under the laws and
public policies of the State whose laws are deemed to govern
enforceability. It is declared to be the intention of the
parties that they would have executed the remaining provisions
without including any that may be declared unenforceable.
SECTION 8.14. GOVERNING LAW; ASSIGNMENT. This Agreement
shall be governed by the laws of the State of Illinois and
applicable federal laws and regulations. This Agreement may not
be assigned by either of the parties hereto.
SECTION 8.15. ENFORCEMENT OF AGREEMENT. The parties
hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties hereto
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any
state having jurisdiction and such right shall be in addition to
any other remedy to which they shall be entitled at law or in
equity.
SECTION 8.16. FEES AND EXPENSES. Except as provided in to
Section 8.05 hereof, each of the parties to this Agreement shall
bear their respective costs, fees and expenses incurred in
connection with this Agreement, the Merger and any other
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
BANTERRA CORP.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
Title:Chairman
BANTERRA ACQUISITIONCO, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
Title:Chairman
HEARTLAND BANCSHARES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title:Chairman
34
EXHIBIT 1.11(a)
---------------
HEARTLAND'S LEGAL OPINION MATTERS
---------------------------------
1. The due incorporation, valid existence and good
standing of Heartland under the laws of the State of Illinois,
its power and authority to own and operate its properties and to
carry on its business as now conducted and as described in
Heartland's Form 10-KSB, and its power and authority to enter
into the Agreement, to merge with AcquisitionCo in accordance
with the terms of the Agreement and to consummate the
transactions contemplated by the Agreement.
2. The due incorporation or organization, valid existence
and good standing of the Subsidiary Bank and its power and
authority to own and operate its properties.
3. The due and proper performance of all corporate acts
and other proceedings necessary or required to be taken by
Heartland to authorize the execution, delivery and performance
of the Agreement, the due execution and delivery of the
Agreement by Heartland, and the Agreement as a valid and binding
obligation of Heartland, enforceable against Heartland in
accordance with its terms (subject to the provisions of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforceability of
creditors' rights generally from time to time in effect, and
equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial
discretion).
4. The execution of the Agreement by Heartland, and the
consummation of the Merger, does not violate or cause a default
under Heartland's Articles of Incorporation or Bylaws, or, to
the actual knowledge of counsel, any federal banking or Illinois
banking statute, regulation or rule or any judgment, order or
decree.
5. To the actual knowledge of such counsel, the receipt of
all required consents, approvals (including the requisite
approval of the shareholders of Heartland), orders or
authorizations of, or registrations, declarations or filings
with or notices to, any court, administrative agency or
commission or other federal banking governmental authority or
instrumentality, domestic or foreign, or any other person or
entity required to be obtained or made by Heartland or its
subsidiaries in connection with the execution and delivery of
the Agreement or the consummation of the transactions
contemplated therein.
6. To the actual knowledge of counsel, the nonexistence of
any material actions, suits, proceedings, orders, or
investigations or claims pending against Heartland or its
subsidiaries which, if adversely determined, would have a
material adverse effect upon their respective properties or
assets or the transactions contemplated by the Agreement.
Ex-1.11(a)-1
EXHIBIT 1.11(b)
---------------
BANTERRA'S LEGAL OPINION MATTERS
--------------------------------
1. The due incorporation, valid existence and good
standing of Banterra and AcquisitionCo under the laws of the
State of Illinois, their power and authority to own and operate
their properties and to carry on their businesses presently
conducted and their power and authority to enter into the
Agreement, to merge with Heartland in accordance with the terms
of the Agreement and to consummate the transactions contemplated
by the Agreement.
2. The due and proper performance of all corporate acts
and other proceedings necessary or required to be taken by
Banterra and AcquisitionCo to authorize the execution, delivery
and performance of the Agreement, the due execution and delivery
of the Agreement by Banterra and AcquisitionCo, and the
Agreement as a valid and binding obligation of Banterra and
AcquisitionCo, enforceable against Banterra and AcquisitionCo in
accordance with its terms (subject to the provisions of
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforceability of creditors' rights generally
from time to time in effect, and equitable principles relating
to the granting of specific performance and other equitable
remedies as a matter of judicial discretion).
3. The execution and delivery of the Agreement by
Banterra and AcquisitionCo and the consummation of the
transactions contemplated therein, as neither conflicting with,
in breach of or in default under, resulting in the acceleration
of, creating in any party the right to accelerate, terminate,
modify or cancel, or violate, any provision of Banterra's or
AcquisitionCo's Articles of Incorporation or Bylaws, or any
federal banking or Illinois banking statute, regulation, rule,
judgment, order or decree binding upon Banterra or AcquisitionCo
which would be materially adverse to the business of Banterra or
AcquisitionCo and their subsidiaries taken as a whole.
4. To the actual knowledge of such counsel, the receipt of
all required consents, approvals, orders or authorizations of,
or registrations, declarations or filings with or without
notices to, any court, administrative agency or commission or
other federal banking governmental authority or instrumentality,
domestic or foreign, or any other person or entity required to
be obtained or made by or with respect to Banterra or
AcquisitionCo in connection with the execution and delivery of
the Agreement or the consummation of the transactions
contemplated therein.
5. To the actual knowledge of counsel, the nonexistence of
any material actions, suits, proceedings, orders, or
investigations or claims pending against Banterra or
AcquisitionCo or any of their significant subsidiaries which, if
adversely determined, would have a material adverse effect upon
their respective properties or assets or the transactions
contemplated by the Agreement.
Ex-1.11(b)-1
