EXHIBIT 10
STOCK REDEMPTION AGREEMENT
This Agreement is entered into as of the 28th day of August, 2003, by
and between Merchants Bancorp, Inc., a Corporation organized under the laws of
the State of Ohio (the "Company"), and Xxxx Xxxxx West ("West"), Xxxx Xxxx
Xxxxxxx ("Xxxxxxx") and Xxxxx X. Xxxxxx ("Xxxxxx"). Xxxx, Xxxxxxx and Xxxxxx are
at times collectively referred to herein as "the Fling Family".
RECITALS
A. The Company has 3,000,000 shares of its common stock currently
issued and outstanding.
B. Collectively, the Fling Family owns 351,349.994 common shares of the
Company, or approximately 11.71% of the outstanding shares and desires to sell
333,349.994 of such shares (referred to herein as the "Shares"), to the Company.
C. The Company is willing to enter into a transaction to purchase the
Shares from the Fling Family pursuant to the terms and conditions set forth
herein.
D. The Company retained Austin Associates, LLC, of Toledo, Ohio to
determine a "fair value" for the Company to pay to the Fling Family for the
Shares. Austin Associates, LLC has issued a "fairness opinion to the Company
dated July 30, 2003 confirming that the payment of $21.00 per Share is fair to
the Company and its shareholders.
E. In order to consummate the purchase of the Shares from the Fling
Family it will be necessary for the Company to receive prepayment on a portion
of a subordinated note from Merchants National Bank, the wholly owned subsidiary
of the Company ("MNB").
F. Certain of the Shares are subject to a Pledge Agreement (the "MNB
Pledge") to MNB to secure the indebtedness of West, Mallory and Xxxxxx to MNB.
In addition, certain of the Shares owned by Xxxxxxx are subject to a Pledge
Agreement (the "Lender Pledge") to The Second National Bank of Xxxxxx (the
"Lender") to secure the indebtedness of Xxxxxxx to the Lender. The loans and
number of Shares pledged to MNB and Lender are noted on Exhibit A attached
hereto. For privacy purposes, the original and outstanding amounts of the loans
listed on Exhibit A are shown only for each of West, Mallory and Xxxxxx on
copies of the Agreement that each of them shall execute. The Company has agreed
to enter into this transaction to repurchase the Shares subject to a release of
the Shares and termination of the MNB Pledge and the Lender Pledge by MNB and
the Lender, respectively.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, and for other valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. PURCHASE OF SHARES.
The Company hereby agrees to purchase the Shares for a price of $21.00
per Share, an aggregate purchase price of $7,000,349.87, and the Fling Family
agrees to sell the Shares to the Company for such consideration, all such
obligations being subject to the terms and conditions set forth in this
Agreement.
2. REPRESENTATIONS AND WARRANTIES.
A. REPRESENTATIONS AND WARRANTIES OF WEST, MALLORY AND XXXXXX.
West, Mallory and Xxxxxx, severally and not jointly, represent
and warrant to the Company as follows:
(i). West, Mallory and Xxxxxx own the number of Shares specified on
Exhibit A attached hereto.
(ii). The Shares are free and clear of any liens, encumbrances or
charges, other than the MNB Pledge and, in the case of
Xxxxxxx, the Lender Pledge, and that they each have full power
and authority to sell and transfer the Shares owned by them to
the Company, subject to a release of the Shares from the MNB
Pledge and, in the case of Xxxxxxx, the Lender Pledge.
(iii). The loans listed on Exhibit A due to MNB and the Lender (the
"Loans") in regard to each of them constitute the original and
current (as of June 30, 2003) outstanding principle balance of
such Loans. Each understands that the proceeds to be paid to
each of them pursuant to this Agreement shall be net of the
outstanding principle balance and all accrued but unpaid
interest of such Loans as of the Closing (as defined below).
(iv). They each acknowledge that they may have adverse tax
consequences in connection with the transaction and that they
have reviewed these issues with their tax and legal advisors
and that such taxes, if any, due on their part for the
transaction will be solely their individual responsibility.
B. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Fling Family as
follows:
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(i). The Company is an Ohio Corporation validly existing and in
good standing under the laws of that State and it has all
requisite power and authority to enter into the proposed
transaction.
(ii). The proposed transaction for the purchase of the Shares has
been approved by its Board of Directors, subject to obtaining
funds from MNB through the prepayment of a portion of MNB's
subordinated note to the Company, which requires approval by
the Office of the Comptroller of the Currency (the "OCC"), the
release of the MNB Pledge by MNB and the release of the Lender
Pledge by the Lender.
(iii). Subject to receipt of the proceeds of the prepayment of the
subordinated note, the Company will have the financial
wherewithal to consummate the proposed transaction for the
repurchase of the Shares.
C. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The parties hereto acknowledge that the representations and
warranties set forth herein shall survive the consummation and closing
of the transaction.
3. CONDITIONS TO CLOSING.
A. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to perform on the closing date
are subject to the fulfillment of each of the following conditions:
(i) Receipt of any required regulatory approvals from the
OCC, Federal Reserve Bank of Cleveland or other
banking regulators for the repurchase of the Shares;
(ii) The receipt of the funds necessary to consummate the
transaction from the prepayment of a portion of the
subordinated note due to the Company from MNB; and
(iii) The release of the Shares by MNB and the Lender and
the termination of the MNB Pledge and the Lender
Pledge.
B. CONDITIONS TO OBLIGATIONS OF THE FLING FAMILY.
The obligations of the Fling Family to perform on the closing
date are subject to the fulfillment of each of the following
conditions:
(i) Receipt at the Closing (as defined below) of the
purchase price of $7,000,349.87, in the aggregate
reduced by an amount equal to the outstanding
principle balance and accrued but unpaid interest on
the Loans; and
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(ii) The release of all of the Shares from the MNB Pledge
and the Lender Pledge.
4. CLOSING.
The closing of the transaction shall occur at the offices of the
Company at such date and time as is mutually agreeable to the parties (the
"Closing(s)"). The parties acknowledge that there shall be two separate
Closings, one involving a partial purchase of the Shares owned by West and
Xxxxxx that will occur not later than October 31, 2003 (the "First Closing"),
and a second Closing for the balance of Shares owned by West and Xxxxxx and all
of the Shares owned by Xxxxxxx, which shall occur on January 5, 2004 (the
"Second Closing").
At the First Closing, the Company shall deliver: (i) to West $630,000 less the
then outstanding principle amount and accrued interest on the Loans to West for
the purchase of 30,000 Shares; and (ii) to Xxxxxx $525,000 less the then
outstanding principle amount and accrued interest on the Loans to Xxxxxx for the
purchase of 25,000 Shares.
At the Second Closing, the Company shall deliver: (i) to West $1,703,449.94 for
the purchase of 81,116.664 Shares; (ii) to Xxxxxx $1,808,449.99 for the purchase
of 86,116.666 Shares; and (iii) to Xxxxxxx $2,333,449.94, less the then
outstanding principle amount and accrued interest on the Loans to Xxxxxxx, for
the purchase of 111,116.664 of the Shares owned by Xxxxxxx.
The Company shall make arrangements with Xxxxxxx and the Lender to pay the
Lender amounts due it and to obtain a release of the Shares pledged to Lender
under the Lender Pledge. The Company also shall cause MNB to release the Shares
subject to the MNB Pledge from such pledge upon payment to MNB of the amounts
due to MNB on the Loans as of the Closings. For West and Xxxxxx, it is
anticipated that such Loans to MNB will be paid in full in connection with the
First Closing. The Company shall pay the purchase price only upon delivery of
the certificates representing the Shares to be sold and acknowledgement by MNB
and the Lender of the cancellation and termination of the MNB Pledge and the
Lender Pledge. The certificates shall be endorsed in blank or transferred with
such form of stock power as reasonably requested by the Company. The Fling
Family acknowledges that the Company shall not be obligated to make payment on
the Shares until the certificates for the Shares are delivered by the Fling
Family, MNB or the Lender to the Company.
The Company acknowledges that Xxxxxx has considered transferring some or all of
the Shares owned by her to a charitable remainder trust, or taking other actions
to facilitate estate planning for she and her family. The Company agrees that it
shall allow and help facilitate the transfer of any Shares owned by Xxxxxx to a
trust, family limited partnership, limited liability company or other vehicle
for estate planning purposes, provided that such entity acknowledges its
obligations to assume the duties and responsibilities of Xxxxxx under the terms
of this Agreement and such entity specifically agrees to sell such portion of
the 111,116.666 Shares owned by Xxxxxx to be transferred to the Company
hereunder that have not already been transferred to the Company by Xxxxxx.
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5. MISCELLANEOUS.
A. REGULATORY APPROVAL.
The Company and the Fling Family believe that no regulatory approval
for the repurchase of the Shares shall be required, other than approval from the
OCC for prepayment of the subordinated note, because the Company and MNB, its
subsidiary bank, will be "well capitalized" both before and after consummation
of the proposed transaction. The Bank already has requested and received
approval from the OCC for the prepayment of a portion of the subordinated note.
In the event that the Company would not be "well capitalized" at the conclusion
of the transaction, additional regulatory approval from the OCC and the Federal
Reserve Bank of Cleveland would be required. Should it be determined that
additional regulatory approval is required, the Company agrees to seek such
regulatory approval promptly.
B. EXPENSES.
Each party shall pay its own expenses in connection with the
negotiation and consummation of the transaction contemplated hereby.
C. NOTICES.
All Notices, requests, demands and other communications required or
permitted by any provision of this Agreement shall be in writing and shall be
deemed to have been duly given at the time either personally delivered or sent
certified mail, postage pre-paid, return receipt requested, or via Federal
Express or other overnight carrier guaranteeing next day delivery and requiring
acknowledgment of receipt, as follows:
If to the Company: Merchants Bancorp, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xx. Xxxx X. Xxxxx, Xx.
President and CEO
If to Members of the Fling Family: To the addresses shown on
Exhibit A
D. ENTIRE AGREEMENT.
This Agreement and the documents and instruments referred to herein
constitute the entire Agreement between the parties hereto in regard to the
purchase of the Shares and supersedes all other Agreements whether written or
oral.
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E. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio.
F. HEADINGS.
The Headings of the sections contained in this Agreement are inserted
for convenience of reference only and shall not effect the meaning or
interpretation of this Agreement or any provisions hereof.
G. COUNTERPARTS.
This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the date first written above.
MERCHANTS BANCORP, INC.
By: /S/ Xxxx X. Xxxxx, Xx. /S/ Xxxx Xxxxx West
------------------------------ --------------------------------
Xxxx X. Xxxxx, Xx. Xxxx Xxxxx West, Individually
President and CEO
/S/ Xxxx Xxxx Xxxxxxx
--------------------------------
Xxxx Xxxx Xxxxxxx, Individually
/S/ Xxxxx X. Xxxxxx
--------------------------------
Xxxxx X. Xxxxxx, Individually
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