Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
by and among
MERCANTILE BANCORPORATION INC.,
AMERIBANC, INC.,
and
FIRSTBANK OF ILLINOIS CO.
Dated January 30, 1998
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into on January 30, 1998, by and among MERCANTILE BANCORPORATION
INC., a Missouri corporation ("Mercantile"), Ameribanc, Inc., a Missouri
corporation and a wholly owned subsidiary of Mercantile ("Merger Sub"), and
FIRSTBANK OF ILLINOIS CO., a Delaware corporation ("Firstbank").
W I T N E S S E T H:
WHEREAS, Mercantile is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHCA"); and
WHEREAS, Firstbank is a registered bank holding company under the
BHCA; and
WHEREAS, the Board of Directors of Firstbank (the "Firstbank Board")
and the Executive Committee of the Board of Directors of Mercantile (the
"Mercantile Executive Committee") have approved the merger (the "Merger") of
Firstbank with and into Merger Sub, pursuant to the terms and subject to the
conditions of this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall qualify for
pooling-of-interests accounting treatment; and
WHEREAS, as a condition to, and immediately after the execution of
this Agreement, Mercantile and certain directors of Firstbank will enter into
Support Agreements (the "Support Agreements") in the form attached hereto as
Exhibit A; and
WHEREAS, as a condition to, and immediately prior to execution of
this Agreement, Mercantile and Firstbank will enter into a stock option
agreement (the "Stock Option Agreement") in the form attached hereto as Exhibit
B; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the
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parties agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger. Subject to the terms and conditions of this
Agreement, Firstbank shall be merged with and into Merger Sub in accordance with
the Delaware General Corporation Law (the "DGCL") and the Missouri General and
Business Corporation Law (the "MGBCL") and the separate corporate existence of
Firstbank shall cease. Merger Sub shall be the surviving corporation of the
Merger (sometimes referred to herein as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Missouri.
1.02. Closing. The closing (the "Closing") of the Merger shall take
place at 10:00 a.m., local time, on the date that the Effective Time (as defined
in Section 1.03) occurs, or at such other time, and at such place, as Mercantile
and Firstbank shall agree (the "Closing Date").
1.03. Effective Time. The Merger shall become effective on the date
and at the time (the "Effective Time") on which appropriate documents in respect
of the Merger are filed with the Secretaries of State of the States of Delaware
and Missouri in such form as required by, and in accordance with, the relevant
provisions of the DGCL and MGBCL, respectively. Subject to the terms and
conditions of this Agreement, the Effective Time shall occur on any such date as
Mercantile shall notify Firstbank in writing (such notice to be at least five
business days in advance of the Effective Time) but (i) not earlier than the
satisfaction of all conditions set forth in Section 6.01 and 6.02 (the "Approval
Date") and (ii) subject to clause (i), not later than the first business day of
the first full calendar month commencing at least five business days after the
Approval Date. As soon as practicable following the Effective Time, Mercantile
and Firstbank shall cause a certificate or plan of merger reflecting the terms
of this Agreement to be delivered for filing and recordation with other
appropriate state or local officials in the States of Delaware and Missouri in
accordance with the DGCL and the MGBCL, respectively.
1.04. Additional Actions. If, at any time after the Effective Time,
Mercantile or the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances or any other acts are necessary or
desirable to (a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Firstbank or Merger Sub or (b) otherwise carry
out the purposes of this Agreement, Firstbank and Merger Sub and each of their
respective officers and directors,
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shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds, assignments or
assurances and to do all acts necessary or desirable to vest, perfect or confirm
title and possession to such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement, and the
officers and directors of the Surviving Corporation are authorized in the name
of Firstbank or otherwise to take any and all such action.
1.05. Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Merger until otherwise amended or repealed.
1.06. Boards of Directors and Officers. At the Effective Time, the
directors and officers of Merger Sub immediately prior to the Effective Time
shall be directors and officers, respectively, of the Surviving Corporation
following the Merger; such directors and officers shall hold office in
accordance with the Surviving Corporation's Bylaws and applicable law.
1.07. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Mercantile, Firstbank or the
holder of any of the following securities:
(i) Each share of the common stock, par value $.01 per share, of
Merger Sub that is issued and outstanding immediately prior to the Effective
Time shall remain outstanding and shall be unchanged after the Merger and shall
thereafter constitute all of the issued and outstanding capital stock of the
Surviving Corporation; and
(ii) Subject to Sections 1.10 and 1.11 hereof, each share of the
common stock, $1.00 par value ("Firstbank Common Stock"), of Firstbank issued
and outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and become the right to receive 0.8308
(the "Exchange Ratio") shares of common stock, par value $.01 per share
("Mercantile Common Stock"), of Mercantile and the associated Rights under the
Mercantile Rights Agreement as those terms are defined in Section 3.02 (the "Per
Share Stock Consideration"), provided, however, that any shares of Firstbank
Common Stock held by Firstbank, Mercantile or any of their respective
Subsidiaries, in each case other than in a fiduciary capacity or as a result of
debts previously contracted, shall be cancelled and shall not be exchanged for
shares of Mercantile Common Stock. The Exchange Ratio was computed by (i)
aggregating (A) the total number of shares of Firstbank Common Stock that were
issued and outstanding on the date of this Agreement (as set forth in Section
2.03
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hereof) with (B) the total number of shares of Firstbank Common Stock that are
reserved for issuance pursuant to Firstbank Stock Options (as set forth in
Section 2.03 hereof) and dividing such number of shares of Firstbank Common
Stock (computed by aggregating (A) and (B) hereof) into (ii) 13,800,000, the
aggregate number of shares of Mercantile Common Stock to be issued in the
Merger.
1.08. Exchange Procedures. (a) Holders of record of certificates
formerly representing shares of Firstbank Common Stock (the "Certificates")
shall be instructed to tender such Certificates to Mercantile pursuant to a
letter of transmittal that Mercantile shall deliver or cause to be delivered to
such holders as soon as practicable following the Effective Time. Such letters
of transmittal shall specify that risk of loss and title to Certificates shall
pass only upon delivery of such Certificates to Mercantile or the Exchange Agent
(as defined below).
(b) Subject to Section 1.10, after the Effective Time, each previous
holder of a Certificate that surrenders such Certificate to Mercantile or to
Xxxxxx Trust and Savings Bank, as the exchange agent designated by Mercantile
(the "Exchange Agent"), will, upon acceptance thereof by Mercantile or the
Exchange Agent, be entitled to a certificate or certificates representing the
number of full shares of Mercantile Common Stock into which the shares
represented by the Certificate so surrendered shall have been converted pursuant
to this Agreement and any distribution theretofore declared and not yet paid
with respect to such shares of Mercantile Common Stock, without interest, and a
check representing the amount of any cash in lieu of fractional shares which
such holder has the right to receive with respect to the Certificate(s)
surrendered.
(c) Mercantile or, at the election of Mercantile, the Exchange Agent
shall accept Certificates upon compliance with such reasonable terms and
conditions as Mercantile or the Exchange Agent may impose to effect an orderly
exchange thereof in accordance with customary exchange practices. Certificates
shall be appropriately endorsed or accompanied by such instruments of transfer
as Mercantile or the Exchange Agent may reasonably require.
(d) Each outstanding Certificate shall until duly surrendered to
Mercantile or the Exchange Agent be deemed to evidence ownership of the
consideration into which the stock previously represented by such Certificate
shall have been converted pursuant to this Agreement.
(e) After the Effective Time, holders of Certificates shall cease to
have rights with respect to the stock previously represented by such
Certificates, and their sole rights shall be to exchange such Certificates for
the consideration provided for
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in this Agreement. After the Effective Time, there shall be no further transfer
on the records of Firstbank of Certificates, and if such Certificates are
presented to Firstbank for transfer, they shall be cancelled against delivery of
the consideration provided therefor in this Agreement. Mercantile shall not be
obligated to deliver the consideration to which any former holder of Firstbank
Common Stock is entitled as a result of the Merger until such holder surrenders
the Certificates as provided herein. No dividends declared will be remitted to
any person entitled to receive Mercantile Common Stock under this Agreement
until such person surrenders the Certificate representing the right to receive
such Mercantile Common Stock, at which time such dividends shall be remitted to
such person, without interest and less any taxes that may have been imposed
thereon. Certificates surrendered for exchange by any person constituting an
"affiliate" of Firstbank for purposes of Rule 145 of the Securities Act of 1933,
as amended (together with the rules and regulations thereunder, the "Securities
Act"), shall not be exchanged for certificates representing Mercantile Common
Stock until Mercantile has received a written agreement from such person in the
form attached as Exhibit C. Neither the Exchange Agent nor any party to this
Agreement nor any affiliate thereof shall be liable to any holder of stock
represented by any Certificate for any consideration paid to a public official
pursuant to applicable abandoned property, escheat or similar laws. Mercantile
and the Exchange Agent shall be entitled to rely upon the stock transfer books
of Firstbank to establish the identity of those persons entitled to receive
consideration specified in this Agreement, which books shall be conclusive with
respect thereto. In the event of a dispute with respect to ownership of stock
represented by any Certificate, Mercantile and the Exchange Agent shall be
entitled to deposit any consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any claims
thereto.
1.09. [Intentionally Omitted]
1.10. No Fractional Shares. Notwithstanding any other provision of
this Agreement, neither certificates nor scrip for fractional shares of
Mercantile Common Stock shall be issued in the Merger. Each holder who otherwise
would have been entitled to a fraction of a share of Mercantile Common Stock
shall receive in lieu thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the Closing Price per share of Mercantile Common Stock on the
last business day preceding the Effective Time. With respect to a share of
stock, "Closing Price" shall mean: the closing price as reported on the
Consolidated Tape (as reported in The Wall Street Journal or in the absence
thereof, by any other authoritative source). No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
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1.11. Anti-Dilution Adjustments. If prior to the Effective Time
Mercantile shall declare a stock dividend or make distributions upon or
subdivide, split up, reclassify or combine or make other similar change to
Mercantile Common Stock, exchange Mercantile Common Stock for a different number
or kind of shares or securities or declare a dividend or make a distribution on
Mercantile Common Stock or on any security convertible into Mercantile Common
Stock, or is involved in any transaction resulting in any of the foregoing
(including any exchange of Mercantile Common Stock for a different number or
kind of shares or securities), appropriate adjustment or adjustments will be
made to the Exchange Ratio.
1.12. Reservation of Right to Revise Transaction. Mercantile may at
any time change the method of effecting the acquisition of Firstbank or
Firstbank's Subsidiaries by Mercantile and Firstbank shall cooperate in such
efforts (including without limitation (a) the provisions of this Article I and
(b) causing the merger of any of the Banks (as defined herein) with any
depository institution which is a Subsidiary of Mercantile (any such merger
together with the Merger being referred to herein as the "Transactions")) if and
to the extent it deems such change to be desirable, including without limitation
to provide for a merger of Firstbank directly into Mercantile, in which
Mercantile is the surviving corporation, provided, however, that no such change
shall (A) alter or change the amount or kind of consideration to be issued to
holders of Firstbank Common Stock as provided for in this Agreement (the "Merger
Consideration"), (B) adversely affect the tax treatment to Firstbank's
stockholders as a result of receiving the Merger Consideration or (C) materially
delay receipt of any approval referred to in Section 6.01(b) or the consummation
of the transactions contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF FIRSTBANK
Firstbank represents and warrants to and covenants with Mercantile
as follows:
2.01. Organization and Authority. Firstbank is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, except as set forth on Schedule 2.01
and except where the failure to be so qualified would not have and could not
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business (collectively, the "Condition") of
Firstbank and its Subsidiaries, taken as a whole, and has corporate power and
au-
6
thority to own its properties and assets and to carry on its business as it is
now being conducted. Firstbank is registered as a bank holding company with the
Board of Governors of the Federal Reserve System (the "Board") under the BHCA.
True and complete copies of the Certificate of Incorporation and the Bylaws of
Firstbank and, to the extent requested in writing by Mercantile, of the articles
of incorporation and bylaws of the Firstbank Subsidiaries (as defined in Section
2.02), each as in effect on the date of this Agreement, have been provided to
Mercantile.
2.02. Subsidiaries. Schedule 2.02 sets forth, among other things, a
complete and correct list of all of Firstbank's Subsidiaries (each a "Firstbank
Subsidiary" and collectively the "Firstbank Subsidiaries"), all outstanding
Equity Securities of each of which, except as set forth on Schedule 2.02, are
owned directly or indirectly by Firstbank. "Equity Securities" of an issuer
means capital stock or other equity securities of such issuer, options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, shares of any
capital stock or other Equity Securities of such issuer, or contracts,
commitments, understandings or arrangements by which such issuer is or may
become bound to issue additional shares of its capital stock or other Equity
Securities of such issuer, or options, warrants, scrip or rights to purchase,
acquire, subscribe to, calls on or commitments for any shares of its capital
stock or other Equity Securities. Except as set forth on Schedule 2.02, all of
the outstanding shares of capital stock of the Firstbank Subsidiaries are
validly issued, fully paid and nonassessable, and those shares owned by
Firstbank are owned free and clear of any lien, claim, charge, option,
encumbrance, agreement, mortgage, pledge, security interest or restriction (a
"Lien") with respect thereto. Each of the Firstbank Subsidiaries is a
corporation, savings bank, bank or bank and trust company duly incorporated or
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation or organization, and has corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted. Each of the Firstbank Subsidiaries is duly
qualified to do business in each jurisdiction where its ownership or leasing of
property or the conduct of its business requires it so to be qualified, except
where the failure to so qualify would not have and could not reasonably be
expected to have a material adverse effect on the Condition of Firstbank and its
Subsidiaries, taken as a whole. Except as set forth on Schedule 2.02, Firstbank
does not own beneficially, directly or indirectly, any shares of any class of
Equity Securities or similar interests of any corporation, bank, business trust,
association or similar organization. The place and type of charter and the
applicable insurance fund for each of Firstbank's Subsidiaries which are
financial institutions (the "Banks") are set forth on Schedule 2.02. Except as
set forth on Schedule 2.02, neither Firstbank nor any Firstbank Subsidiary
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holds any interest in a partnership or joint venture of any kind.
2.03. Capitalization. The authorized capital stock of Firstbank
consists of (i) 20,000,000 shares of Firstbank Common Stock, of which, as of
January 2, 1998, 15,753,053 shares were issued and outstanding and (ii)
1,000,000 shares of preferred stock, no par value per share, of which, as of
January 2, 1998, no shares were issued and outstanding ("Firstbank Preferred
Stock"). As of January 2, 1998, Firstbank had reserved 857,201 shares of
Firstbank Common Stock for issuance under Firstbank's stock option and incentive
plans, a list of which is set forth on Schedule 2.03 (the "Firstbank Stock
Plans"), pursuant to which options ("Firstbank Stock Options") covering 857,201
shares of Firstbank Common Stock were outstanding as of January 2, 1998. Except
as set forth on Schedule 2.03, since December 31, 1997, no Equity Securities of
Firstbank have been issued other than shares of Firstbank Common Stock which may
have been issued upon the exercise of Firstbank Stock Options. Except as set
forth above, there are no other Equity Securities of Firstbank outstanding. All
of the issued and outstanding shares of Firstbank Common Stock are validly
issued, fully paid, and nonassessable, and have not been issued in violation of
any preemptive right of any stockholder of Firstbank. Since January 2, 1998,
Firstbank has not granted any options or similar rights pursuant to which shares
of Firstbank Common Stock may be issued and has not issued any shares of
Firstbank Common Stock. Neither Firstbank nor any Firstbank Subsidiary, to the
best of Firstbank's knowledge, has taken or agreed to take any action or has any
knowledge of any fact or circumstance and neither Firstbank nor any Firstbank
Subsidiary will take any action that would, or intentionally will fail to take
any action the failure of which to take would, prevent the Merger from
qualifying for pooling-of-interests accounting treatment.
2.04. Authorization. (a) Except as set forth on Schedule 2.04A,
Firstbank has the corporate power and authority to enter into this Agreement
and, subject to the approval of this Agreement by the stockholders of Firstbank,
to carry out its obligations hereunder. The only stockholder vote required for
Firstbank to approve this Agreement is the affirmative vote of the holders of at
least a majority of the shares of Firstbank Common Stock entitled to vote at a
meeting called for such purpose. The execution, delivery and performance of this
Agreement by Firstbank and the consummation by Firstbank of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Firstbank. Subject to approval by the stockholders of Firstbank, this Agreement
is a valid and binding obligation of Firstbank enforceable against Firstbank in
accordance with its terms, except as enforceability may be limited by applicable
laws relating to bankruptcy, insolvency or creditors rights generally and
general principles of equity.
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(b) Except as set forth on Schedule 2.04B, neither the execution nor
delivery nor performance by Firstbank of this Agreement, nor the consummation by
Firstbank of the transactions contemplated hereby, nor compliance by Firstbank
with any of the provisions hereof, will (i) violate, conflict with, or result in
a breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of, any Lien
upon any of the material properties or assets of Firstbank or any Firstbank
Subsidiary under any of the terms, conditions or provisions of (x) its articles
or certificate of incorporation or bylaws or (y) any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Firstbank or any Firstbank Subsidiary is a
party or by which it may be bound, or to which Firstbank or any Firstbank
Subsidiary or any of the material properties or assets of Firstbank or any
Firstbank Subsidiary may be subject (in all cases other than any of the
foregoing which would not have and could not reasonably be expected to have a
material adverse effect on the Condition of Firstbank and the Firstbank
Subsidiaries, taken as a whole), or (ii) subject to compliance with the statutes
and regulations referred to in paragraph (c) of this Section 2.04, to the best
knowledge of Firstbank, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Firstbank or any Firstbank
Subsidiary or any of their respective material properties or assets.
(c) Other than in connection or in compliance with the provisions of
the DGCL, the MGBCL, the Securities Act, the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act"), the
Investment Company Act of 1940, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA or any required approvals or filings pursuant to any
state statutes or regulations applicable to Firstbank, Mercantile or their
respective Subsidiaries with respect to the transactions contemplated by this
Agreement, no notice to, filing with, exemption or review by, or authorization,
consent or approval of, any public body or authority is necessary for the
consummation by Firstbank of the transactions contemplated by this Agreement.
2.05. Firstbank Financial Statements. The consolidated balance
sheets of Firstbank and its Subsidiaries as of December 31, 1996, 1995 and 1994
and related consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the three-year period ended
December 31, 1996, together with the notes thereto, audited by KPMG Peat Marwick
LLP and included in an annual report on Form 10-K (including amendments thereto)
as filed with the Securities
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and Exchange Commission (the "SEC"), and the unaudited consolidated balance
sheets of Firstbank and its Subsidiaries as of March 31, June 30, and September
30, 1997 and the related unaudited consolidated statements of income and cash
flows for the periods then ended, together with the notes thereto, included in
quarterly reports on Form 10-Q (including amendments thereto) (each a "Firstbank
Form 10-Q") as filed with the SEC (collectively, the "Firstbank Financial
Statements"), except as set forth on Schedule 2.05, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP"), present fairly the consolidated financial position of Firstbank
and its Subsidiaries at the dates and the consolidated results of operations,
cash flows and changes in stockholders' equity of Firstbank and its Subsidiaries
for the periods stated therein and are derived from the books and records of
Firstbank and its Subsidiaries, which are complete and accurate in all material
respects and have been maintained in all material respects in accordance with
applicable laws and regulations. Except as set forth on Schedule 2.05, neither
Firstbank nor any of its Subsidiaries has any contingent liabilities that are
material to Firstbank and the Firstbank Subsidiaries, taken as a whole, and
which are not reflected in the Firstbank Reports (defined below) or disclosed in
the financial statements described above.
2.06. Firstbank Reports. Except as set forth on Schedule 2.06, since
January 1, 1994, each of Firstbank and the Firstbank Subsidiaries has filed all
material reports, registrations and statements, together with any required
material amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy
statements, (ii) the FDIC, (iii) the Board and (iv) any other federal, state,
municipal, local or foreign government, securities, banking, savings and loan,
insurance and other governmental or regulatory authority and the agencies and
staffs thereof (the entities in the foregoing clauses (i) through (iv) being
referred to herein collectively as the "Regulatory Authorities" and individually
as a "Regulatory Authority"). All such reports and statements filed with any
such Regulatory Authority are collectively referred to herein as the "Firstbank
Reports." As of its respective date, each Firstbank Report complied in all
material respects with all the rules and regulations promulgated by the
applicable Regulatory Authority and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.07. Properties and Leases. Except as set forth on Schedule 2.07 or
as may be reflected in the Firstbank Financial Statements, except for any Lien
for current taxes not yet delinquent and except with respect to assets
classified as real estate owned, Firstbank and its Subsidiaries have good title
free
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and clear of any material Lien to all the real and personal property reflected
in Firstbank's consolidated balance sheet as of September 30, 1997 included in
the most recent Firstbank Form 10-Q and, in each case, all real and personal
property acquired since such date, except such real and personal property as has
been disposed of in the ordinary course of business. All leases material to
Firstbank or any Firstbank Subsidiary pursuant to which Firstbank or any
Firstbank Subsidiary, as lessee, leases real or personal property, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any material existing default by Firstbank or any Firstbank
Subsidiary or any event which, with notice or lapse of time or both, would
constitute such a material default. Substantially all of Firstbank's and
Firstbank Subsidiaries' buildings, structures and equipment in regular use have
been well maintained and are in good and serviceable condition, normal wear and
tear excepted.
2.08. Taxes. Except as set forth on Schedule 2.08, Firstbank and
each Firstbank Subsidiary have timely filed or will timely (including
extensions) file all material tax returns, reports and certifications required
to be filed on or prior to the Closing Date ("Firstbank Returns"), and such
filed Firstbank Returns are and will be complete and accurate in all material
respects. Each of Firstbank and its Subsidiaries has paid (taking into account
all applicable extensions), or set up adequate reserves on the Firstbank
Financial Statements for the payment of, all taxes required to be paid in
respect of the periods covered by the Firstbank Financial Statements and has set
up adequate reserves on the most recent financial statements Firstbank has filed
under the Exchange Act for the payment of all taxes anticipated to be payable in
respect of all periods up to and including the latest period covered by such
financial statements. Neither Firstbank nor any Firstbank Subsidiary will have
any liability material or reasonably expected to be material to the Condition of
Firstbank and the Firstbank Subsidiaries, taken as a whole, for any such taxes
in excess of the amounts so paid or reserves so established and, to the
knowledge of Firstbank, no material deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
definitely) against any of Firstbank or any Firstbank Subsidiary which would not
be covered by existing reserves. Neither Firstbank nor any Firstbank Subsidiary
is delinquent in the payment of any material tax, assessment or governmental
charge, nor has it requested any extension of time within which to file any tax
returns in respect of any fiscal year which have not since been timely filed and
no requests for extensions or waivers of the time to assess any tax are pending.
The federal and state income tax returns of Firstbank and the Firstbank
Subsidiaries have been audited and settled by the Internal Revenue Service (the
"IRS") or appropriate state tax authorities for all periods ended through
December 31, 1994 (with respect to federal income tax returns) and
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December 31, 1993 (with respect to state income tax returns) or the period for
assessment of taxes in respect of such periods has expired. There is no
deficiency or refund litigation or matter in controversy with respect to
Firstbank Returns. Neither Firstbank nor any Firstbank Subsidiary has extended
or waived any statute of limitations on the assessment of any tax due that is
currently in effect.
2.09. Material Adverse Change. Since September 30, 1997, there has
been no material adverse change in the Condition of Firstbank and its
Subsidiaries, taken as a whole, except (i) as may have resulted or may result
from changes to laws and regulations or changes in economic conditions
applicable to banking institutions generally or in general levels of interest
rates affecting banking institutions generally and (ii) costs, up to the amounts
set forth on Schedule 2.23, incurred or to be incurred by Firstbank in
connection with this Agreement, which include costs incurred for investment
banking, accounting and legal services.
2.10. Commitments and Contracts. (a) Except as set forth on Schedule
2.10A, neither Firstbank nor any Firstbank Subsidiary is a party or subject to
any of the following (whether written or oral, express or implied):
(i) any material agreement, arrangement or commitment (A) not
made in the ordinary course of business or (B) pursuant to which
Firstbank or any of its Subsidiaries is or may become obligated to
invest in or contribute capital to any Firstbank Subsidiary;
(ii) any agreement, indenture or other instrument not
disclosed in the Firstbank Financial Statements relating to the
borrowing of money by Firstbank or any Firstbank Subsidiary or the
guarantee by Firstbank or any Firstbank Subsidiary of any such
obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by any
Firstbank Subsidiary, such as deposits and Fed Funds borrowings);
(iii) any contract, agreement or understanding with any labor
union or collective bargaining organization relating to employees of
Firstbank or any Firstbank Subsidiaries;
(iv) any contract containing covenants which limit the ability
of Firstbank or any Firstbank Subsidiary to compete in any line of
business or with any person or which involve any restriction of the
geographical area in which, or method by which, Firstbank or any
Firstbank Subsidiary may carry on its
12
business other than as may be required by law or any applicable
Regulatory Authority) and which are not material or reasonably
expected to be material to the Condition of Firstbank and the
Firstbank Subsidiaries, taken as a whole;
(v) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K
promulgated by the SEC; or
(vi) any lease with annual rental payments aggregating
$250,000 or more.
(b) Neither Firstbank nor any Firstbank Subsidiary is in violation
of its charter documents or bylaws or in default under any material agreement,
commitment, arrangement, lease, insurance policy, or other instrument, whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a default, except, in all cases,
where such default would not have and could not reasonably be expected to have a
material adverse effect on the Condition of Firstbank and its Subsidiaries,
taken as a whole.
2.11. Litigation and Other Proceedings. Except as set forth on
Schedule 2.11, neither Firstbank nor any Firstbank Subsidiary is a party to any
pending or, to the best knowledge of Firstbank, threatened claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or reasonably could
not be expected to have, a material adverse effect on the Condition of Firstbank
and its Subsidiaries, taken as a whole, or which purports or seeks to enjoin or
restrain the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, as of the date of this Agreement, there are no
actions, suits, or proceedings pending or, to the best knowledge of Firstbank,
threatened against Firstbank or any Firstbank Subsidiary or any of their
respective officers or directors by any stockholder of Firstbank or any
Firstbank Subsidiary (or any former stockholder of Firstbank or any Firstbank
Subsidiary) or involving claims under the Securities Act, the Exchange Act, the
Community Reinvestment Act of 1977, as amended, or the fair lending laws.
2.12. Insurance. Each of Firstbank and its Subsidiaries has taken
all requisite action (including without limitation the making of claims and the
giving of notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect to
all matters (other than matters arising in connection with this Agreement and
the transactions contemplated hereby) occurring prior to the Effective Time that
are known to Firstbank, except
13
for such matters which, individually or in the aggregate, will not have and
reasonably could not be expected to have a material adverse effect on the
Condition of Firstbank and its Subsidiaries, taken as a whole. Set forth on
Schedule 2.12 is a list of all insurance policies maintained by or for the
benefit of Firstbank or its Subsidiaries or their directors, officers, employees
or agents.
2.13. Compliance with Laws. (a) Except as set forth on Schedule
2.13A, Firstbank and each of its Subsidiaries have all permits, licenses,
authorizations, orders and approvals of, and have made all filings, applications
and registrations with, all Regulatory Authorities that are required in order to
permit them to own or lease their properties and assets and to carry on their
business as presently conducted and that are material or reasonably expected to
be material to the Condition of Firstbank and its Subsidiaries, taken as a
whole; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best knowledge of Firstbank,
no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current.
(b) Except as set forth on Schedule 2.13B and except for failures to
comply or defaults which individually or in the aggregate would not have and
could not reasonably be expected to have a material adverse effect on the
Condition of Firstbank and its Subsidiaries, taken as a whole, (i) each of
Firstbank and its Subsidiaries has complied with all laws, regulations and
orders (including without limitation zoning ordinances, building codes, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
securities, tax, environmental, civil rights, and occupational health and safety
laws and regulations and including without limitation in the case of any
Firstbank Subsidiary that is a bank, banking organization, banking corporation
or trust company, all statutes, rules, regulations and policy statements
pertaining to the conduct of a banking, deposit-taking, lending or related
business, or to the exercise of trust powers) and governing instruments
applicable to them and to the conduct of their business, and (ii) neither
Firstbank nor any Firstbank Subsidiary is in default under, and no event has
occurred which, with the lapse of time or notice or both, could result in the
default under, the terms of any judgment, order, writ, decree, permit, or
license of any Regulatory Authority or court, whether federal, state, municipal,
or local and whether at law or in equity. Except as set forth on Schedule 2.13B
and except as would not have and could not reasonably be expected to have a
material adverse effect on the Condition of Firstbank and its Subsidiaries,
taken as a whole, as of the date of this Agreement, neither Firstbank nor any
Firstbank Subsidiary is subject to or reasonably likely to incur a liability as
a result of its ownership, operation, or use of any Property (as defined below)
of Firstbank (whether directly or, to the best knowledge of Firstbank, as a
14
consequence of such Property being part of the investment portfolio of Firstbank
or any Firstbank Subsidiary) (A) that is contaminated by or contains any
hazardous waste, toxic substance, or related materials, including without
limitation asbestos, PCBs, pesticides, herbicides, and any other substance or
waste that is hazardous to human health or the environment (collectively, a
"Toxic Substance"), or (B) on which any Toxic Substance has been stored,
disposed of, placed, or used in the construction thereof. "Property" of a person
shall include all property (real or personal, tangible or intangible) owned or
controlled by such person, including without limitation property under
foreclosure, property held by such person or any Subsidiary of such person in
its capacity as a trustee and property in which any venture capital or similar
unit of such person or any Subsidiary of such person has an interest. Except as
set forth on Schedule 2.13B, no claim, action, suit, or proceeding is pending
against Firstbank or any Firstbank Subsidiary relating to Property of Firstbank
before any court or other Regulatory Authority or arbitration tribunal relating
to hazardous substances, pollution, or the environment, and there is no
outstanding judgment, order, writ, injunction, decree, or award against or
affecting Firstbank or any Firstbank Subsidiary with respect to the same. Except
for statutory or regulatory restrictions of general application, no Regulatory
Authority has placed any restriction on the business of Firstbank or any
Firstbank Subsidiary which reasonably could be expected to have a material
adverse effect on the Condition of Firstbank and its Subsidiaries, taken as a
whole.
(c) From and after January 1, 1994, neither Firstbank nor any
Firstbank Subsidiary has received any notification or communication which has
not been finally resolved from any Regulatory Authority (i) asserting that any
Firstbank or any Subsidiary of Firstbank, is not in substantial compliance with
any of the statutes, regulations or ordinances that such Regulatory Authority
enforces, except with respect to matters which (A) are set forth on Schedule
2.13C or (B) reasonably could not be expected to have a material adverse effect
on the Condition of Firstbank and its Subsidiaries, taken as a whole, (ii)
threatening to revoke any license, franchise, permit or governmental
authorization that is material or reasonably expected to be material to the
Condition of Firstbank and its Subsidiaries, taken as a whole, including without
limitation such company's status as an insured depositary institution under the
Federal Deposit Insurance Act, or (iii) requiring or threatening to require
Firstbank or any of its Subsidiaries, or indicating that Firstbank or any of its
Subsidiaries may be required, to enter into a cease and desist order, agreement
or memorandum of understanding or any other agreement restricting or limiting or
purporting to direct, restrict or limit in any manner the operations of
Firstbank or any of its Subsidiaries, including without limitation any
restriction on the payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is
15
currently in effect.
(d) Except as set forth on Schedule 2.13D, neither Firstbank nor any
Firstbank Subsidiary is required by Section 32 of the Federal Deposit Insurance
Act to give prior notice to any federal banking agency of the proposed addition
of an individual to its board of directors or the employment of an individual as
a senior executive officer.
2.14. Labor. No work stoppage involving Firstbank or any Firstbank
Subsidiary, is pending or, to the best knowledge of Firstbank, threatened which
reasonably could be expected to have a material adverse effect on the Condition
of Firstbank and its Subsidiaries, taken as a whole. Neither Firstbank nor any
Firstbank Subsidiary is involved in, or, to the best knowledge of Firstbank,
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding which reasonably could be expected to have a material
adverse affect on the Condition of Firstbank and its Subsidiaries, taken as a
whole. Employees of neither Firstbank nor any Firstbank Subsidiary, are
represented by any labor union or any collective bargaining organization.
2.15. Material Interests of Certain Persons. (a) Except as set forth
in Firstbank's Proxy Statement for its 1997 Annual Meeting of Shareholders, to
the best knowledge of Firstbank, no officer or director of Firstbank or any
Subsidiary of Firstbank, or any "associate" (as such term is defined in Rule
l4a-1 under the Exchange Act) of any such officer or director, has any material
interest in any material contract or property (real or personal, tangible or
intangible), used in, or pertaining to the business of, Firstbank or any
Subsidiary of Firstbank, which in the case of Firstbank is required to be
disclosed by Item 404 of Regulation S-K promulgated by the SEC or in the case of
any such Subsidiary would be required to be so disclosed if such Subsidiary had
a class of securities registered under Section 12 of the Exchange Act.
(b) Except as set forth in Firstbank's Proxy Statement for its 1997
Annual Meeting of Shareholders or on Schedule 2.15B, there are no loans from
Firstbank or any Firstbank Subsidiary to any present officer, director, employee
or any associate or related interest of any such person which was or would be
required under any rule or regulation to be approved by or reported to
Firstbank's or Firstbank Subsidiary's Board of Directors ("Insider Loans"). All
outstanding Insider Loans from Firstbank or any Firstbank Subsidiary were
approved by or reported to the appropriate board of directors to the extent
required in accordance with applicable law and regulations.
2.16. Allowance for Loan and Lease Losses; Nonperforming
Assets. (a) The allowances for loan and lease losses contained in the
Firstbank Financial Statements were established
16
in accordance with the past practices and experiences of Firstbank and its
Subsidiaries, and the allowance for loan losses shown on the consolidated
condensed balance sheet of Firstbank and its Subsidiaries contained in the most
recent Firstbank Form 10-Q is adequate in all material respects under the
requirements of GAAP to provide for possible losses on loans (including without
limitation accrued interest receivable) and credit commitments (including
without limitation stand-by letters of credit) outstanding as of the date of
such balance sheet.
(b) As of September 30, 1997, the aggregate amount of all
Nonperforming Assets (as defined below) on the books of Firstbank and its
Subsidiaries does not exceed $12,000,000. "Nonperforming Assets" shall mean (i)
all loans and leases (A) that are contractually past due 90 days or more in the
payment of principal and/or interest, (B) that are on nonaccrual status, (C)
where a reasonable doubt exists, in the reasonable judgment of Firstbank, as to
the timely future collectibility of principal and/or interest, whether or not
interest is still accruing or the loan is less than 90 days past due, (D) where
the interest rate terms have been reduced and/or the maturity dates have been
extended subsequent to the agreement under which the loan was originally created
due to concerns regarding the borrower's ability to pay in accordance with such
initial terms, (E) where a specific reserve allocation exists in connection
therewith, or (F) that have been classified "doubtful", "loss" or the equivalent
thereof by any Regulatory Authority, and (ii) all assets classified as real
estate acquired through foreclosure or repossession and other assets acquired
through foreclosure or repossession.
2.17. Employee Benefit Plans. (a) Except as set forth on Schedule
2.17A, neither Firstbank nor any Firstbank Subsidiary is a party to any existing
employment, management, consulting, deferred compensation, change-in-control or
other similar contract. Schedule 2.17A lists all pension, retirement,
supplemental retirement, savings, profit sharing, stock option, stock purchase,
stock ownership, stock appreciation right, deferred compensation, consulting,
bonus, medical, disability, workers' compensation, vacation, group insurance,
severance and other material employee benefit, incentive and welfare policies,
contracts, plans and arrangements, and all trust agreements related thereto,
maintained (currently or at any time in the last five years) by or contributed
to by Firstbank or any Firstbank Subsidiary in respect of any of the present or
former directors, officers, or other employees of and/or consultants to
Firstbank or any Firstbank Subsidiary (collectively, "Firstbank Employee
Plans"). Firstbank has furnished Mercantile with the following documents with
respect to each Firstbank Employee Plan: (i) a true and complete copy of all
material written documents comprising such Firstbank Employee Plan (including
amendments and individual agreements relating thereto) or, if there is no such
17
written document, an accurate and complete description of the Firstbank Employee
Plan; (ii) the most recent Form 5500 or Form 5500-C (including all schedules
thereto), if applicable; (iii) the most recent financial statements and
actuarial reports, if any; (iv) the summary plan description currently in effect
and all material modifications thereof, if any; and (v) the most recent IRS
determination letter, if any. Without limiting the generality of the foregoing,
Firstbank has furnished Mercantile with true and complete copies of each form of
stock option grant or stock option agreement that is outstanding under any stock
option plan of Firstbank or any Firstbank Subsidiary.
(b) Except as set forth on Schedule 2.17B, all Firstbank Employee
Plans have been maintained and operated materially in accordance with their
terms and with the material requirements of all applicable statutes, orders,
rules and final regulations, including without limitation ERISA and the Code.
All contributions required to be made to Firstbank Employee Plans have been
made.
(c) With respect to each of the Firstbank Employee Plans which is a
pension plan (as defined in Section 3(2) of ERISA) (the "Pension Plans"), except
as set forth on Schedule 2.17C: (i) each Pension Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
to be so qualified by the IRS and, to the knowledge of Firstbank, such
determination letter may still be relied upon, and each related trust is exempt
from taxation under Section 501(a) of the Internal Revenue Code of 1986, as
amended, together with the Treasury regulations thereunder (the "IRC"); (ii) the
actuarial present value of all benefits under each Pension Plan which is subject
to Title IV of ERISA, valued using the assumptions in the most recent actuarial
report, did not, in each case, as of the last applicable annual valuation date
(as indicated on Schedule 2.17A), exceed the value of the assets of the Pension
Plan allocable to such vested or accrued benefits; (iii) to the best knowledge
of Firstbank, there has been no "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, which could subject
any Pension Plan or associated trust, or Firstbank or any Firstbank Subsidiary,
to any material tax or penalty; (iv) except as set forth on Schedule 2.17C, no
Pension Plan subject to Title IV of ERISA or any trust created thereunder has
been terminated, nor have there been any "reportable events" with respect to any
Pension Plan, as that term is defined in Section 4043 of ERISA for which the
30-day notice requirement has not been waived on or after January 1, 1993; and
(v) no Pension Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA (whether or not waived). Except as set forth on Schedule 2.17C, no Pension
Plan is a "multiemployer plan" as that term is defined in Section 3(37) of
ERISA. With respect to each Pension Plan that is described in Section 4063(a) of
ERISA (a
18
"Multiple Employer Pension Plan"): (i) neither Firstbank nor any Firstbank
Subsidiary would have any liability or obligation to post a bond under Section
4063 of ERISA if Firstbank and all Firstbank Subsidiaries were to withdraw from
such Multiple Employer Pension Plan; and (ii) neither Firstbank nor any
Firstbank Subsidiary would have any liability under Section 4064 of ERISA if
such Multiple Employer Pension Plan were to terminate.
(d) Except as set forth on Schedule 2.17D, neither Firstbank nor any
Firstbank Subsidiary has any liability for any post-retirement health, medical
or similar benefit of any kind whatsoever, except as required by statute or
regulation.
(e) Except as set forth on Schedule 2.17E, to the knowledge of
Firstbank, neither Firstbank nor any Firstbank Subsidiary has any material
liability under ERISA or the Code as a result of its being a member of a group
described in Sections 414(b), (c), (m) or (o) of the IRC.
(f) Except as set forth on Schedule 2.17F, neither the execution nor
delivery of this Agreement, nor the consummation of any of the transactions
contemplated hereby, will (i) result in any material payment (including without
limitation severance, unemployment compensation or golden parachute payment)
becoming due to any director or employee of Firstbank or any Firstbank
Subsidiary from any of such entities, (ii) materially increase any benefit
otherwise payable under any of the Firstbank Employee Plans or (iii) result in
the acceleration of the time of payment of any such benefit. No holder of an
option to acquire stock of Firstbank has or will have at any time through the
Effective Time the right to receive any cash or other payment (other than the
issuance of stock of Firstbank) in exchange for or with respect to all or any
portion of such option. Except as described on Schedule 2.17F, Firstbank shall
use its best efforts to insure that no amounts paid or payable by Firstbank,
Firstbank Subsidiaries or Mercantile to or with respect to any employee or
former employee of Firstbank or any Firstbank Subsidiary will fail to be
deductible for federal income tax purposes by reason of Section 280G of the IRC.
No Firstbank Stock Option has an associated "Additional Option Right" (e.g., an
SAR, etc.) or similar "re-load" feature.
2.18. Conduct of Firstbank to Date. From and after January 1, 1997
through the date of this Agreement, except as set forth on Schedule 2.18 or in
Firstbank Financial Statements or Firstbank Reports: (i) Firstbank and the
Firstbank Subsidiaries have conducted their respective businesses in all
material respects in the ordinary and usual course consistent with past
practices; (ii) neither Firstbank nor any Firstbank Subsidiary has incurred any
material obligation or liability (absolute or contingent), except normal trade
or business obligations or liabilities incurred in the ordinary course of
business, or sub-
19
jected to Lien any of its material assets or properties other than in the
ordinary course of business consistent with past practice; (iii) neither
Firstbank nor any Firstbank Subsidiary has discharged or satisfied any material
Lien or paid any material obligation or liability (absolute or contingent),
other than in the ordinary course of business; (iv) neither Firstbank nor any
Firstbank Subsidiary has sold, assigned, transferred, leased, exchanged, or
otherwise disposed of any of its material properties or assets other than for a
fair consideration in the ordinary course of business; (v) except as required by
contract or law, neither Firstbank nor any Firstbank Subsidiary has (A)
increased the rate of compensation of, or paid any bonus to, any of its
directors, officers, or other employees, except merit, promotion or annual
increases and bonuses in accordance with existing policy, (B) entered into any
new, or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar contract, (C)
entered into, terminated, or substantially modified any of the Firstbank
Employee Plans or (D) agreed to do any of the foregoing; (vi) neither Firstbank
nor any Firstbank Subsidiary has suffered any material damage, destruction, or
loss, whether as the result of fire, explosion, earthquake, accident, casualty,
labor trouble, requisition, or taking of property by any Regulatory Authority,
flood, windstorm, embargo, riot, act of God or the enemy, or other casualty or
event, and whether or not covered by insurance; and (vii) neither Firstbank nor
any Firstbank Subsidiary has cancelled or compromised any material debt, except
for debts charged off or compromised in accordance with the past practice of
Firstbank and its Subsidiaries.
2.19. Proxy Statement, etc. None of the information regarding
Firstbank or any Firstbank Subsidiary supplied or to be supplied by Firstbank
for inclusion and included in (i) the registration statement on Form S-4 to be
filed with the SEC by Mercantile for the purpose of registering the shares of
Mercantile Common Stock to be exchanged for shares of Firstbank Common Stock
pursuant to the provisions of this Agreement (the "Registration Statement"),
(ii) the proxy or information statement (the "Proxy Statement") to be mailed to
Firstbank's stockholders in connection with the transactions contemplated by
this Agreement or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at the
respective times such documents are filed with any Regulatory Authority and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed, be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements therein not misleading or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
meeting of Firstbank's stockholders referred to in Section 5.03 (the "Meeting")
(or, if no Meeting is held, at the time the Proxy Statement is first furnished
to Firstbank's
20
stockholders), be false or misleading with respect to any material fact, or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Meeting. All
documents which Firstbank or any Firstbank Subsidiary is responsible for filing
with any Regulatory Authority in connection with the Merger will comply as to
form in all material respects with the provisions of applicable law.
2.20. Registration Obligations. Except as set forth on Schedule
2.20, neither Firstbank nor any Firstbank Subsidiary is under any obligation,
contingent or otherwise to register any of its securities under the Securities
Act.
2.21. State Takeover Statutes; Firstbank's Certificate of
Incorporation. (a) Except as set forth on Schedule 2.21, the transactions
contemplated by this Agreement are not subject to any applicable state takeover
law assuming that neither Mercantile nor any of its affiliates or associates
beneficially own (other than pursuant to or as a result of the Stock Option
Agreement) more than 15 percent of the outstanding voting shares of Firstbank
prior to the Effective Time.
(b) Except as set forth on Schedule 2.21, the transactions
contemplated by this Agreement and the agreements contemplated hereby are not,
and will not be, prohibited by, or subject to any super majority provisions
under Firstbank's Certificate of Incorporation or Bylaws.
2.22. Accounting, Tax and Regulatory Matters. Neither Firstbank nor
any Firstbank Subsidiary has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would, or intentionally will fail to
take any action the failure of which to take would, (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the transactions
contemplated by this Agreement.
2.23. Brokers and Finders. Except for Xxxxx Xxxxxx, Inc., neither
Firstbank nor any Firstbank Subsidiary nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Firstbank or any Firstbank Subsidiary in connection with this Agreement or the
transactions contemplated hereby. Schedule 2.23 discloses a bona fide estimate
of the aggregate amount of all fees and expenses expected to be paid by
Firstbank to all third parties in connection with the Merger ("Merger Fees").
2.24. Other Activities. (a) Except as set forth on
21
Schedule 2.24A, neither Firstbank nor any of its Subsidiaries engages in any
insurance activities other than acting as a principal, agent or broker for
insurance that is directly related to an extension of credit by Firstbank or any
of its Subsidiaries and limited to assuring the repayment of the balance due on
the extension of credit in the event of the death, disability or involuntary
unemployment of the debtor.
(b) Except as set forth on Schedule 2.24B, to the knowledge of
Firstbank's management: each Firstbank Subsidiary that is a bank that performs
personal trust, corporate trust and other fiduciary activities ("Trust
Activities") has done so with requisite authority under applicable law of
Regulatory Authorities and in material accordance with the agreements and
instruments governing such Trust Activities, sound fiduciary principles and
applicable law and regulation (specifically including but not limited to Section
9 of Title 12 of the Code of Federal Regulations); there is no investigation or
inquiry by any governmental entity pending or, to the knowledge of Firstbank,
threatened against Firstbank or any of its Subsidiaries thereof relating to the
compliance by Firstbank or any of its Subsidiaries with sound fiduciary
principles and applicable law and regulations; and, except where such failures
would not have and could not reasonably be expected to have a material adverse
effect on the Condition of Firstbank and the Firstbank Subsidiaries, taken as a
whole, each employee of any such bank had the authority to act in the capacity
in which such employee acted with respect to Trust Activities in each case in
which such employee was held out as a representative of such bank; and such bank
has established policies and procedures for the purpose of complying with
applicable laws of governmental entities relating to Trust Activities, has
followed such policies and procedures in all material respects and has performed
appropriate internal audit reviews of Trust Activities, which audits have
disclosed no material violations of applicable laws of governmental entities or
such policies and procedures.
2.25. Interest Rate Risk Management Instruments. (a) Set forth on
Schedule 2.25A is a list, as of the date hereof, of all interest rate swaps,
caps, floors, and option agreements and other interest rate risk management
arrangements to which Firstbank or any of its Subsidiaries is a party or by
which any of their properties or assets may be bound.
(b) All interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which Firstbank or any of
its Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to the best
knowledge of Firstbank, in accordance with prudent banking practice and
applicable rules, regulations and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the time and are legal,
valid and binding
22
obligations, except as enforceability may be limited by applicable laws relating
to bankruptcy, insolvency or creditors rights generally and general principles
of equity, and are in full force and effect. Firstbank and each of its
Subsidiaries has duly performed in all material respects all of its obligations
thereunder to the extent that such obligations to perform have accrued, and, to
the knowledge of Firstbank, there are no material breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
2.26. Accuracy of Information. To the best knowledge of Firstbank,
the statements of Firstbank contained in this Agreement, the Schedules and any
other written document executed and delivered by or on behalf of Firstbank
pursuant to the terms of this Agreement are true and correct in all material
respects, and such statements and documents do not omit any material fact
necessary to make the statements contained therein not misleading.
2.27. Year 2000 Compliant. Except as set forth on Schedule 2.27, to
the best knowledge of Firstbank, all computer software and hardware utilized by
Firstbank or any Firstbank Subsidiary is, or is reasonably expected to be, Year
2000 compliant, which, for purposes of this Agreement, shall mean that the data
outside the range 1900-1999 will be correctly processed in any level of computer
hardware or software including, but not limited to, microcode, firmware,
applications programs, files and data bases. All computer software is, or
Firstbank is taking steps to ensure that all computer software will be, designed
to be used prior to, during and after the calendar year 2000 A.D., and such
software will operate during each such time period without material error
relating to date data, specifically including any error relating to, or the
product of, date data that represents or references different centuries or more
than one century.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
MERCANTILE AND MERGER SUB
Each of Mercantile and Merger Sub represents, and warrants to and
covenants with Firstbank as follows:
3.01. Organization and Authority. Mercantile and each of its
Subsidiaries is a corporation, bank, trust company or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of organization, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and, except where the
failure to be so qualified would not have and could not reasonably be expected
to have a material adverse effect on the Condition of Mercantile and its
Subsidiaries, taken as a whole, has corporate power and
23
authority to own its properties and assets and to carry on its business as it is
now being conducted, except, in the case of the Mercantile Subsidiaries, where
the failure to be so qualified would not have and could not reasonably be
expected to have a material adverse effect on the Condition of Mercantile and
its Subsidiaries, taken as a whole. Mercantile is registered as a bank holding
company with the Board under the BHCA. True and complete copies of the Articles
of Incorporation and Bylaws of Mercantile and Merger Sub, each in effect on the
date of this Agreement, have been provided to Firstbank.
3.02. Capitalization of Mercantile. The authorized capital stock of
Mercantile consists of (i) 200,000,000 shares of Mercantile Common Stock, of
which, as of December 31, 1997, 130,508,090 shares were issued and outstanding
and (ii) 5,000,000 shares of preferred stock, no par value ("Mercantile
Preferred Stock"), issuable in series, none of which, as of December 31, 1997,
is issued or outstanding. Mercantile has designated 2,000,000 shares of
Mercantile Preferred Stock as "Series A Junior Participating Preferred Stock"
and has reserved such shares for issuance upon exercise of Preferred Stock
Purchase Rights ("Rights") under a Rights Agreement dated May 23, 1988 (the
"Mercantile Rights Agreement"), between Mercantile and Mercantile Bank of St.
Louis National Association, as Rights Agent. As of December 31, 1997 Mercantile
had reserved (i) 14,840,856 shares of Mercantile Common Stock for issuance under
various employee stock option and incentive plans and the Mercantile Shareholder
Investment Plan ("Mercantile Stock Options"), (ii) up to 951,380 shares of
Mercantile Common Stock for issuance upon the acquisition of HomeCorp, Inc.
pursuant to an agreement dated October 29, 1997, (iii) up to 2,550,000 shares of
Mercantile Common Stock for issuance upon the acquisition of Horizon Bancorp,
Inc. pursuant to an agreement dated July 31, 1997, and (iv) up to 5,400,000
shares of Mercantile Common Stock for issuance upon the acquisition of CBT
Corporation pursuant to an agreement dated January 10, 1998. From December 31,
1997 through the date of this Agreement, no shares of Mercantile Common Stock or
other Equity Securities of Mercantile have been issued excluding any such shares
which may have been issued pursuant to stock-based employee benefit or incentive
plans and programs or pursuant to the foregoing agreements. Mercantile
continually evaluates possible acquisitions and may prior to the Effective Time
enter into one or more agreements providing for, and may consummate, the
acquisition by it of another bank, association, bank holding company, savings
and loan holding company or other company (or the assets thereof) for
consideration that may include equity securities. In addition, prior to the
Effective Time, Mercantile may, depending on market conditions and other
factors, otherwise determine to issue equity, equity-linked or other securities
for financing purposes. Notwithstanding the foregoing, neither Mercantile nor
Merger Sub will take any action that would, or intentionally will fail to take
any action the failure of which to take would, (i)
24
prevent the transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code, (ii) materially impede or delay
receipt of any approval referred to in Section 6.01(b) or the consummation of
the transactions contemplated by this Agreement or (iii) unless Mercantile shall
have waived the condition set forth in Section 6.03(c), prevent the Merger from
qualifying for pooling-of-interests accounting treatment. Except as set forth
above and except pursuant to the Mercantile Rights Agreement, there are no other
Equity Securities of Mercantile outstanding. All of the issued and outstanding
shares of Mercantile Common Stock are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any preemptive right of
any stockholder of Mercantile. At the Effective Time, the Mercantile Common
Stock to be issued in the Merger will be duly authorized, validly issued, fully
paid and non-assessable, and will not be issued in violation of any preemptive
right of any stockholder of Mercantile.
3.03. Authorization. (a) Each of Mercantile and Merger Sub has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. No stockholder vote is required for Mercantile to approve
this Agreement. The execution, delivery and performance of this Agreement by
Mercantile and Merger Sub and the consummation by Mercantile and Merger Sub of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action of Mercantile and Merger Sub. This Agreement is a valid and
binding obligation of Mercantile and Merger Sub enforceable against Mercantile
and Merger Sub in accordance with its terms, except as enforceability may be
limited by applicable laws relating to bankruptcy, insolvency or creditors
rights generally and general principles of equity.
(b) Neither the execution, delivery and performance by Mercantile or
Merger Sub of this Agreement, nor the consummation by Mercantile or Merger Sub
of the transactions contemplated hereby, nor compliance by Mercantile or Merger
Sub with any of the provisions hereof, will (i) violate, conflict with or result
in a breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of, any Lien
upon any of the material properties or assets of Mercantile or any Mercantile
Subsidiary under any of the terms, conditions or provisions of (x) its articles
or certificate of incorporation or bylaws, or (y) any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Mercantile or any of the material properties
or assets of Mercantile is a party or by which it may be bound, or to which
Mercantile may be subject (in all cases other than any of the foregoing which
would not have and could not reasonably be
25
expected to have a material adverse effect on the Condition of Mercantile and
the Mercantile Subsidiaries, taken as a whole), or (ii) subject to compliance
with the statutes and regulations referred to in paragraph (c) of this Section
3.03, to the best knowledge of Mercantile, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to Mercantile
or any of its Subsidiaries or any of their respective material properties or
assets.
(c) Other than in connection with or in compliance with the
provisions of the DGCL, the MGBCL, the Securities Act, the Exchange Act, the
Investment Company Act of 1940, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA or any required approvals of, or notice to, any other
Regulatory Authority, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Mercantile of the transactions contemplated by this
Agreement.
3.04. Mercantile Financial Statements. The supplemental consolidated
and parent company only balance sheets of Mercantile and its Subsidiaries as of
December 31, 1996, 1995 and 1994 and related supplemental consolidated and
parent company only statements of income, cash flows and changes in
stockholders' equity for each of the three years in the three-year period ended
December 31, 1996, together with the notes thereto, audited by KPMG Peat Marwick
LLP ("Mercantile Auditors") and included in Mercantile's current report on Form
8-K dated May 13, 1997 as filed with the SEC, and the unaudited consolidated
balance sheets of Mercantile and its Subsidiaries as of March 31, June 30, and
September 30, 1997 and the related unaudited consolidated statements of income
and cash flows for the periods then ended included in quarterly reports on Form
10-Q (including amendments thereto) as filed with the SEC (collectively, the
"Mercantile Financial Statements"), have been prepared in accordance with GAAP,
present fairly the consolidated financial position of Mercantile and its
Subsidiaries at the dates and the consolidated results of operations, changes in
stockholders' equity and cash flows of Mercantile and its Subsidiaries for the
periods stated therein and are derived from the books and records of Mercantile
and its Subsidiaries, which are complete and accurate in all material respects
and have been maintained in all material respects in accordance with applicable
laws and regulations. Neither Mercantile nor any of its Subsidiaries has any
material contingent liabilities that are not reflected in the Mercantile Reports
(defined below) or disclosed in the financial statements described above.
3.05. Mercantile Reports. Since January 1, 1994, each of
Mercantile and the Mercantile Subsidiaries has filed all material reports,
registrations and statements, together with any
26
required material amendments thereto, that it was required to file with any
Regulatory Authority. All such reports and statements filed with any such
Regulatory Authority are collectively referred to herein as the "Mercantile
Reports." As of its respective date, each Mercantile Report complied in all
material respects with all the rules and regulations promulgated by the
applicable Regulatory Authority and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.06. Material Adverse Change. Since September 30, 1997, there has
been no material adverse change in the Condition of Mercantile and its
Subsidiaries, taken as a whole, except as may have resulted or may result from
changes to laws and regulations or changes in economic conditions applicable to
banking or thrift institutions generally or in general levels of interest rates
affecting banking or thrift institutions generally.
3.07. Registration Statement, etc. None of the information regarding
Mercantile or any of its Subsidiaries supplied or to be supplied by Mercantile
for inclusion or included in (i) the Registration Statement, (ii) the Proxy
Statement, or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at the
respective times such documents are filed with any Regulatory Authority and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed (or furnished to stockholders of
Firstbank), be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Meeting. All documents which Mercantile or any
of its Subsidiaries are responsible for filing with any Regulatory Authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
3.08. Brokers and Finders. Except for UBS Securities Inc., neither
Mercantile nor any of its Subsidiaries nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Mercantile or any of its Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
27
3.09. Commitments and Contracts. Neither Mercantile nor any
Mercantile Subsidiary is in violation of its charter documents or bylaws or in
default under any material agreement, commitment, arrangement, lease, insurance
policy, or other instrument, whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there has not occurred
any event that, with the lapse of time or giving of notice or both, would
constitute such a default, except, in all cases, where such default would not
have and could not reasonably be expected to have a material adverse effect on
the Condition of Mercantile and its Subsidiaries, taken as a whole.
3.10. Litigation and Other Proceedings. Neither Mercantile nor any
Mercantile Subsidiary is a party to any pending or, to the best knowledge of
Mercantile, threatened claim, action, suit, investigation or proceeding, or is
subject to any order, judgment or decree, except for matters which, in the
aggregate, will not have, or reasonably could not be expected to have, a
material adverse effect on the Condition of Mercantile and its Subsidiaries,
taken as a whole. Without limiting the generality of the foregoing, as of the
date of this Agreement, there are no actions, suits, or proceedings pending or,
to the best knowledge of Mercantile, threatened against Mercantile or any
Mercantile Subsidiary or any of their respective officers or directors by any
stockholder of Mercantile or any Mercantile Subsidiary (or any former
stockholder of Mercantile or any Mercantile Subsidiary) involving claims under
the Securities Act, the Exchange Act, the Community Reinvestment Act of 1977, as
amended, or the fair lending laws or which purport or seek to enjoin or restrain
the transactions contemplated by this Agreement.
3.11. Accounting, Tax and Regulatory Matters. Neither Mercantile nor
any Mercantile Subsidiary has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the transactions
contemplated by this Agreement.
3.12. Accuracy of Information. The statements of Mercantile and
Merger Sub contained in this Agreement, the Schedules and in any other written
document executed and delivered by or on behalf of Mercantile or Merger Sub
pursuant to the terms of this Agreement are true and correct in all material
respects, and such statements and documents do not omit any material fact
necessary to make the statements contained herein or therein not misleading.
3.13. Taxes. Except as set forth on Schedule 3.13, Mercantile
and each Mercantile Subsidiary have timely filed or will timely (including
extensions) file all material tax returns,
28
reports and certifications required to be filed on or prior to the Closing Date
("Mercantile Returns"), and such filed Mercantile Returns are and will be
complete and accurate in all material respects. Each of Mercantile and its
Subsidiaries has paid (taking into account all applicable extensions), or set up
adequate reserves on the Mercantile Financial Statements for the payment of, all
taxes required to be paid in respect of the periods covered by the Mercantile
Financial Statements and has set up adequate reserves on the most recent
financial statements Mercantile has filed under the Exchange Act for the payment
of all taxes anticipated to be payable in respect of all periods up to and
including the latest period covered by such financial statements. Neither
Mercantile nor any Mercantile Subsidiary will have any liability material or
reasonably expected to be material to the Condition of Mercantile and the
Mercantile Subsidiaries, taken as a whole, for any such taxes in excess of the
amounts so paid or reserves so established and, to the knowledge of Mercantile,
no material deficiencies for any tax, assessment or governmental charge have
been proposed, asserted or assessed (tentatively or definitely) against any of
Mercantile or any Mercantile Subsidiary which would not be covered by existing
reserves. Neither Mercantile nor any Mercantile Subsidiary is delinquent in the
payment of any material tax, assessment or governmental charge, nor has it
requested any extension of time within which to file any tax returns in respect
of any fiscal year which have not since been timely filed and no requests for
extensions or waivers of the time to assess any tax are pending. The federal and
state income tax returns of Mercantile and the Mercantile Subsidiaries have been
audited and settled by the Internal Revenue Service (the "IRS") or appropriate
state tax authorities for all periods ended through December 31, 1994 or the
period for assessment of taxes in respect of such periods has expired. There is
no deficiency or refund litigation or matter in controversy with respect to
Mercantile Returns. Except as set forth on Schedule 3.13, neither Mercantile nor
any Mercantile Subsidiary has extended or waived any statute of limitations on
the assessment of any tax due that is currently in effect.
3.14. Compliance with Laws. (a) Mercantile and each of its
Subsidiaries have all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit them to own or lease
their properties and assets and to carry on their business as presently
conducted and that are material or reasonably expected to be material to the
Condition of Mercantile and its Subsidiaries, taken as a whole; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to the best knowledge of Mercantile, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current.
29
(b) Except as set forth on Schedule 3.14B and except for failures to
comply or defaults which individually or in the aggregate would not have and
could not reasonably be expected to have a material adverse effect on the
Condition of Mercantile and its Subsidiaries, taken as a whole, (i) each of
Mercantile and its Subsidiaries has complied with all laws, regulations and
orders (including without limitation zoning ordinances, building codes, ERISA,
and securities, tax, environmental, civil rights, and occupational health and
safety laws and regulations and including without limitation in the case of any
Mercantile Subsidiary that is a bank, banking organization, banking corporation
or trust company, all statutes, rules, regulations and policy statements
pertaining to the conduct of a banking, deposit-taking, lending or related
business, or to the exercise of trust powers) and governing instruments
applicable to them and to the conduct of their business, and (ii) neither
Mercantile nor any Mercantile Subsidiary is in default under, and no event has
occurred which, with the lapse of time or notice or both, could result in the
default under, the terms of any judgment, order, writ, decree, permit, or
license of any Regulatory Authority or court, whether federal, state, municipal,
or local and whether at law or in equity. Except as set forth on Schedule 3.14B
and except as would not have and could not reasonably be expected to have a
material adverse effect on the Condition of Mercantile and its Subsidiaries,
taken as a whole, as of the date of this Agreement, neither Mercantile nor any
Mercantile Subsidiary is subject to or reasonably likely to incur a liability as
a result of its ownership, operation, or use of any Property of Mercantile
(whether directly or, to the best knowledge of Mercantile, as a consequence of
such Property being part of the investment portfolio of Mercantile or any
Mercantile Subsidiary) (A) that is contaminated by or contains any Toxic
Substance, or (B) on which any Toxic Substance has been stored, disposed of,
placed, or used in the construction thereof. Except as set forth on Schedule
3.14B, no claim, action, suit, or proceeding is pending against Mercantile or
any Mercantile Subsidiary relating to Property of Mercantile before any court or
other Regulatory Authority or arbitration tribunal relating to hazardous
substances, pollution, or the environment, and there is no outstanding judgment,
order, writ, injunction, decree, or award against or affecting Mercantile or any
Mercantile Subsidiary with respect to the same. Except for statutory or
regulatory restrictions of general application, no Regulatory Authority has
placed any restriction on the business of Mercantile or any Mercantile
Subsidiary which reasonably could be expected to have a material adverse effect
on the Condition of Mercantile and its Subsidiaries, taken as a whole.
(c) From and after January 1, 1994, neither Mercantile nor any
Mercantile Subsidiary has received any notification or communication which has
not been finally resolved from any Regulatory Authority (i) asserting that any
Mercantile or any Subsidiary of Mercantile, is not in substantial compliance
with
30
any of the statutes, regulations or ordinances that such Regulatory Authority
enforces, except with respect to matters which (A) are set forth on Schedule
3.14C or (B) reasonably could not be expected to have a material adverse effect
on the Condition of Mercantile and its Subsidiaries, taken as a whole, (ii)
threatening to revoke any license, franchise, permit or governmental
authorization that is material or reasonably expected to be material to the
Condition of Mercantile and its Subsidiaries, taken as a whole, including
without limitation such company's status as an insured depositary institution
under the Federal Deposit Insurance Act, or (iii) requiring or threatening to
require Mercantile or any of its Subsidiaries, or indicating that Mercantile or
any of its Subsidiaries may be required, to enter into a cease and desist order,
agreement or memorandum of understanding or any other agreement restricting or
limiting or purporting to direct, restrict or limit in any manner the operations
of Mercantile or any of its Subsidiaries, including without limitation any
restriction on the payment of dividends. No such cease and desist order,
agreement or memorandum of understanding or other agreement is currently in
effect.
(d) Except as set forth on Schedule 3.14D, neither Mercantile nor
any Mercantile Subsidiary is required by Section 32 of the Federal Deposit
Insurance Act to give prior notice to any federal banking agency of the proposed
addition of an individual to its board of directors or the employment of an
individual as a senior executive officer.
3.15. Labor. No work stoppage involving Mercantile or any Mercantile
Subsidiary, is pending or, to the best knowledge of Mercantile, threatened which
reasonably could be expected to have a material adverse effect on the Condition
of Mercantile and its Subsidiaries, taken as a whole. Neither Mercantile nor any
Mercantile Subsidiary is involved in, or, to the best knowledge of Mercantile,
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding which reasonably could be expected to have a material
adverse affect on the Condition of Mercantile and its Subsidiaries, taken as a
whole. Employees of neither Mercantile nor any Mercantile Subsidiary, are
represented by any labor union or any collective bargaining organization.
3.16. Interest Rate Risk Management Instruments. All interest rate
swaps, caps, floors and option agreements and other interest rate risk
management arrangements to which Mercantile or any of its Subsidiaries is a
party or by which any of their properties or assets may be bound were entered
into in the ordinary course of business and, to the best knowledge of
Mercantile, in accordance with prudent banking practice and applicable rules,
regulations and policies of Regulatory Authorities and with counterparties
believed to be financially responsible at the time and are legal, valid and
binding
31
obligations, except as enforceability my be limited by applicable laws relating
to bankruptcy, insolvency or creditors rights generally and general principles
of equity, and are in full force and effect. Mercantile and each of its
Subsidiaries has duly performed in all material respects all of its obligations
thereunder to the extent that such obligations to perform have accrued, and, to
the knowledge of Mercantile, there are no material breaches, violations or
defaults or allegations or assertions of such by any party thereunder.
3.17. Year 2000 Compliant. Except as set forth on Schedule 3.17, to
the best knowledge of Mercantile, all computer software and hardware utilized by
Mercantile or any Mercantile Subsidiary is, or is reasonably expected to be,
Year 2000 compliant, which, for purposes of this Agreement, shall mean that the
data outside the range 1900-1999 will be correctly processed in any level of
computer hardware or software including, but not limited to, microcode,
firmware, applications programs, files and data bases. All computer software is,
or Mercantile is taking steps to ensure that all computer software will be,
designed to be used prior to, during and after the calendar year 2000 A.D., and
such software will operate during each such time period without material error
relating to date data, specifically including any error relating to, or the
product of, date data that represents or references different centuries or more
than one century.
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01. Conduct of Businesses Prior to the Effective Time. During the
period from the date of this Agreement to the Effective Time, each of Mercantile
and Firstbank shall, and shall cause each of their respective Subsidiaries to,
conduct its business according to the ordinary and usual course consistent with
past practices and shall, and shall cause each such Subsidiary to, use all
reasonable efforts to maintain and preserve its business organization, employees
and advantageous business relationships and retain the services of its officers
and key employees.
4.02. Forbearances of Firstbank. Except as set forth on Schedule
4.02, to the extent required by applicable law or Regulatory Authority or as
otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, Firstbank shall not and shall not permit
any of its Subsidiaries to, without the prior written consent of Mercantile:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from a Subsidiary of
32
Firstbank to Firstbank or another Subsidiary of Firstbank), except that
Firstbank may declare and pay cash dividends on the Firstbank Common Stock
equal to the product of (i) the Exchange Ratio and (ii) the amount of the
dividends per share declared by the Board of Directors of Mercantile;
provided, further, however, that Firstbank shall not declare or pay a
quarterly dividend for any quarter in which Firstbank shareholders will be
entitled to receive a regular quarterly dividend on the shares of
Mercantile Common Stock to be issued in the Merger; or
(b) enter into or amend any employment, severance or similar
agreement or arrangement with any director or officer or employee, or
materially modify any of the Firstbank Employee Plans or grant any salary
or wage increase or materially increase any employee benefit (including
incentive or bonus payments), except normal individual increases in
compensation to employees consistent with past practice, or as required by
law or contract; or
(c) authorize, recommend, propose or announce an intention to
authorize, so recommend or propose, or enter into an agreement in principle
with respect to, any merger, consolidation or business combination (other
than the Merger), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
any release or relinquishment of any material contract rights; or
(d) propose or adopt any amendments to its articles of incorporation,
association or other charter document or bylaws; or
(e) issue, sell, grant, confer or award any of its Equity Securities
(except that Firstbank may (i) issue shares of Firstbank Common Stock upon
exercise of Firstbank Stock Options outstanding on the date of this
Agreement or granted in compliance with this subsection and (ii) issue
shares of Firstbank Common Stock purchased by Firstbank on the open market
for such purpose, and only such shares, pursuant to its dividend
reinvestment plan) or effect any stock split or adjust, combine, reclassify
or otherwise change its capitalization as it existed on the date of this
Agreement; or
(f) purchase, redeem, retire, repurchase, or exchange, or otherwise
acquire or dispose of, directly or indirectly, any of its Equity
Securities, whether pursuant to the terms of such Equity Securities or
otherwise; or
(g) without first consulting with and obtaining the written consent
of Mercantile, enter into, renew or increase any loan or credit commitment
(including stand-by letters of
33
credit) to, or invest or agree to invest in, any person or entity or modify
any of the material provisions or renew or otherwise extend the maturity
date of any existing loan or credit commitment in an amount in excess of
$3,000,000 or in any amount which, when aggregated with any and all loans
or credit commitments to such person or entity, would be equal to or in
excess of $3,000,000; provided that Firstbank or any Firstbank Subsidiary
may make any such loan or credit commitment in the event (A) Firstbank or
any Firstbank Subsidiary has delivered to Mercantile or its designated
representative a notice of its intention to make such loan and such
information as Mercantile or its designated representative may reasonably
require in respect thereof and (B) Mercantile or its designated
representative shall not have reasonably objected to such loan by giving
written or facsimile notice of such objection within two business days
following the delivery to Mercantile or its designated representative of
the notice of intention and information as aforesaid; provided further,
however, that nothing in this paragraph shall prohibit Firstbank or any
Firstbank Subsidiary from honoring any contractual obligation in existence
on the date of this Agreement. Notwithstanding this Section 4.02(g),
Firstbank shall be authorized without first obtaining Mercantile's prior
written consent, to increase the aggregate amount of any credit facilities
theretofore established in favor of any person or entity (each a
"Pre-Existing Facility") beyond the $3,000,000 credit level, provided that
the aggregate amount of any and all such increases shall not be in excess
of the lesser of five percent (5%) of such Pre-Existing Facility or
$100,000; or
(h) directly or indirectly (including through its officers,
directors, employees or other representatives) initiate, solicit, encourage
or facilitate any discussions, inquiries or proposals with any third party
relating to the disposition of any significant portion of the business or
assets of Firstbank or any Firstbank Subsidiary or the acquisition of
Equity Securities of Firstbank or any Firstbank Subsidiary or the merger of
Firstbank or any Firstbank Subsidiary with any person (other than
Mercantile) or any similar transaction (each such transaction being
referred to herein as an "Acquisition Transaction"), or provide any such
person with information or assistance or negotiate with any such person
with respect to an Acquisition Transaction, and Firstbank shall promptly
notify Mercantile orally of all the relevant details relating to all
inquiries, indications of interest and proposals which it may receive with
respect to any Acquisition Transaction; or
(i) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Mercantile or Firstbank to
34
obtain any approval of any Regulatory Authority required for the
transactions contemplated by this Agreement or to perform its covenants and
agreements under this Agreement, (B) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section
368(a) of the Code or (C) prevent the Merger from qualifying for
pooling-of-interests accounting treatment; or
(j) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible or
liable for the obligations of any other individual, corporation or other
entity, or pay without prior approval of Mercantile, which shall not be
unreasonably withheld, any Merger Fees in excess of the amount set forth on
Schedule 2.23; or
(k) materially restructure or materially change its investment
securities portfolio, without prior written consent of Mercantile which
consent shall not be unreasonably withheld or delayed, through purchases,
sales or otherwise, or the manner in which the portfolio is classified or
reported, or execute any individual investment transaction for its own
account (i) in securities backed by the full faith and credit of the United
States or an agency thereof in excess of $10,000,000 and (ii) in any other
investment securities in excess of $1,000,000; or
(l) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or take or
omit to take any other act which would make any of the representations and
warranties in Article II of this Agreement untrue or incorrect in any
material respect if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other act.
4.03. Forbearances of Mercantile. Except to the extent required by
law, regulation or Regulatory Authority, or with the prior written consent of
Firstbank, during the period from the date of this Agreement to the Effective
Time, Mercantile shall not and shall not permit any of the Mercantile
Subsidiaries to:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from any of the Mercantile Subsidiaries to Mercantile or to
another of the Mercantile Subsidiaries), except that Mercantile may pay its
regular quarterly dividends in amounts as it shall determine from time to
time consistent with past practices;
(b) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by
35
this Agreement or the ability of Firstbank or Mercantile to obtain any
approval of any Regulatory Authority required for the transactions
contemplated by this Agreement or to perform its covenants and agreements
under this Agreement, (B) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code or (C) unless Mercantile shall have waived the condition set forth in
Section 6.03(c), prevent the Merger from qualifying for
pooling-of-interests accounting treatment; or
(c) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or
intentionally take or omit to take any other action which would make any of
the representations and warranties in Article III of this Agreement untrue
or incorrect in any material respect if made anew after engaging in such
activity, entering into such transaction, or taking or omitting such other
action.
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Access and Information. Mercantile and its Subsidiaries, on
the one hand, and Firstbank and its Subsidiaries, on the other hand, shall each
afford to each other, and to the other's accountants, counsel and other
representatives, full access during normal business hours, during the period
prior to the Effective Time, to all their respective properties, books,
contracts, commitments and records and, during such period, each shall furnish
promptly to the other (i) a copy of each report, schedule and other document
filed or received by it during such period pursuant to the requirements of
federal and state securities laws and (ii) all other information concerning its
business, properties and personnel as such other party may reasonably request.
Each party hereto shall, and shall cause its advisors and representatives to,
(A) hold confidential all information obtained in connection with any
transaction contemplated hereby with respect to the other party which is not
otherwise public knowledge, (B) return all documents (including copies thereof)
obtained hereunder from the other party to such other party and (C) use its best
efforts to cause all information obtained pursuant to this Agreement or in
connection with the negotiation of this Agreement to be treated as confidential
and not use, or knowingly permit others to use, any such information unless such
information becomes generally available to the public.
5.02. Registration Statement; Regulatory Matters. (a) Mercantile
shall prepare and, subject to the review and consent of Firstbank with respect
to matters relating to Firstbank, file with the SEC as soon as is reasonably
practicable, but in any event within 90 days following the date hereof, the
Registration
36
Statement (or the equivalent in the form of preliminary proxy material) with
respect to the shares of Mercantile Common Stock to be issued in the Merger and
the exercise of Mercantile Stock Options (that replace Firstbank Stock Options)
after the Effective Time. After the date of filing the Registration Statement
with the SEC, each party hereto shall promptly notify the others of and correct
any information which it furnished for inclusion in the Registration Statement
that may have become false or misleading in any material respect. Mercantile
shall prepare and file a notice with the Board as soon as reasonably
practicable, but in any event within 90 days following the date hereof.
Mercantile shall use all reasonable efforts to cause the Registration Statement
to become effective. Mercantile shall also take any action required to be taken
under any applicable state blue sky or securities laws in connection with the
issuance of such shares and the exercise of such options, and Firstbank and its
Subsidiaries shall furnish Mercantile all information concerning Firstbank and
its Subsidiaries and the stockholders thereof as Mercantile may reasonably
request in connection with any such action. Mercantile shall use its best
efforts to cause the shares of Mercantile Common Stock to be issued in the
Merger to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance, prior to the Effective Time.
(b) Firstbank and Mercantile shall cooperate and use their
respective best efforts to prepare all documentation, to effect all filings and
to obtain all permits, consents, approvals and authorizations of all third
parties and Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement and, as and if directed by Mercantile and
consistent with the other provisions of this Agreement, to consummate such other
mergers, consolidations or asset transfers or other transactions by and among
Mercantile's Subsidiaries and Firstbank's Subsidiaries concurrently with or
following the Effective Time, provided, however, that the foregoing shall not
(A) alter or change the Merger Consideration, (B) adversely affect the tax
treatment to Firstbank's stockholders or Firstbank Stock Option holders as a
result of receiving the Merger Consideration or (C) materially impede or delay
receipt of any approval referred to in Section 6.01(b) or the consummation of
the transactions contemplated by this Agreement.
5.03. Stockholder Approval. Firstbank shall call a meeting of its
stockholders to be held as soon as practicable for the purpose of voting upon
the Merger or take other action for stockholders to authorize the Merger. In
connection therewith, Mercantile shall prepare the Proxy Statement and, with the
approval of each of Mercantile and Firstbank, the Proxy Statement shall be filed
with the SEC and, after such review and amendment as may be required, mailed to
the stockholders of Firstbank. The Board of Directors of Firstbank shall submit
for approval of Firstbank's stockholders the matters to be voted upon in order
to
37
authorize the Merger. The Board of Directors of Firstbank hereby does and,
unless the Board of Directors of Firstbank reasonably determines not to so
recommend based upon the written opinion of counsel, which counsel either is one
of those identified on Schedule 2.23 or is otherwise reasonably acceptable to
Mercantile, to the effect that to so recommend would constitute a breach of the
Board's fiduciary duties under applicable law, will recommend this Agreement and
the transactions contemplated hereby to stockholders of Firstbank and will use
its best efforts to obtain any vote of Firstbank's stockholders that is
necessary for the approval and adoption of this Agreement and consummation of
the transactions contemplated hereby.
5.04. Current Information. During the period from the date of this
Agreement to the Effective Time, each party shall promptly furnish the other
with copies of all monthly and other interim financial statements as the same
become available and shall cause one or more of its designated representatives
to confer on a regular and frequent basis with representatives of the other
party. Each party shall promptly notify the other party of any material change
in its business or operations and of any governmental complaints, investigations
or hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of material litigation involving such party, and
shall keep the other party fully informed of such events.
5.05. Agreements of Affiliates. (a) As soon as practicable after the
date of this Agreement, Firstbank shall deliver to Mercantile a letter
identifying all persons whom Firstbank believes to be, at the time this
Agreement is submitted to a vote of the stockholders of Firstbank, "affiliates"
of Firstbank for purposes of Rule 145 under the Securities Act and for purposes
of pooling-of-interests accounting treatment. Firstbank shall use all reasonable
efforts to cause each person who is so identified as an "affiliate" to deliver
to Mercantile as soon as practicable thereafter, and in any event no later than
the publication of notice in the Federal Register of Mercantile's notice to the
Board referred to in Section 5.02, a written agreement providing that from the
date of such agreement each such person will agree not to sell, pledge, transfer
or otherwise dispose of any shares of stock of Firstbank held by such person or
any shares of Mercantile Common Stock to be received by such person in the
Merger except in compliance with the applicable provisions of the Securities
Act. Prior to the Effective Time, Firstbank shall amend and supplement such
letter and use all reasonable efforts to cause each additional person who is
identified as an "affiliate" to execute a written agreement as set forth in this
Section 5.05.
(b) Mercantile shall use all reasonable efforts to publish as
promptly as reasonably practicable, but in no event
38
later than 90 days after the end of the first month after the Effective Time in
which there are at least 30 days of post-Merger combined operations, combined
sales and net income figures as contemplated by and in accordance with the terms
of SEC Accounting Series Release No. 135.
5.06. Expenses. Each party hereto shall bear its own expenses
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger.
5.07. Miscellaneous Agreements and Consents. (a) Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use,
respectively, all reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as possible,
including without limitation using, respectively, all reasonable efforts to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby. Each party shall, and shall cause each of its respective Subsidiaries
to, use all reasonable efforts to obtain consents of all third parties and
Regulatory Authorities necessary or, in the opinion of Mercantile, desirable for
the consummation of the transactions contemplated by this Agreement.
(b) Subject to applicable laws, regulations and requirements of
Regulatory Authorities, Firstbank, prior to the Effective Time, shall (i)
consult and cooperate with Mercantile regarding the implementation of those
policies and procedures established by Mercantile for its governance and that of
its Subsidiaries and not otherwise referenced in Section 5.15 hereof, including,
without limitation, policies and procedures pertaining to the accounting,
asset/liability management, audit, credit, human resources, treasury and legal
functions, and (ii) at the request of Mercantile, conform Firstbank's existing
policies and procedures in respect of such matters to Mercantile's policies and
procedures or, in the absence of any existing Firstbank policy or procedure
regarding any such function, introduce Mercantile's policies or procedures in
respect thereof, unless to do so would cause Firstbank or any of the Firstbank
Subsidiaries to be in violation of any law, rule or regulation of any Regulatory
Authority having jurisdiction over Firstbank and/or the Firstbank Subsidiary
affected thereby; provided, however, that prior to the date that it shall be a
requirement hereunder for such policies and procedures to be established,
Mercantile shall certify to Firstbank that Mercantile's representations and
warranties are true and correct as of such date, that the approval conditions to
its obligations contemplated by Section 6.01(b) have been satisfied or waived
(except to the extent that any waiting period associated therewith may then have
commenced but not expired) and
39
that Mercantile is otherwise in compliance with this Agreement; and provided,
further, that Firstbank shall not be required to take any such action that is
not consistent with GAAP and regulatory accounting principles or would, in the
reasonable judgment of Firstbank's Board of Directors, have a material negative
impact on Firstbank and/or its shareholders if the transactions contemplated by
this Agreement are not consummated.
5.08. Employee Benefits. The Firstbank Employee Plans shall not be
terminated by reason of the Merger but shall continue thereafter as plans of the
Surviving Corporation until such time as the employees of Firstbank and the
Firstbank Subsidiaries are integrated into Mercantile's employee benefit plans
that are available to other employees of Mercantile and Mercantile Subsidiaries,
subject to the terms and conditions specified in such plans and to such changes
therein as may be necessary to reflect the consummation of the Merger.
Mercantile shall take such steps as are necessary or required to integrate the
employees of Firstbank and the Firstbank Subsidiaries in Mercantile's employee
benefit plans available to other employees of Mercantile and Mercantile
Subsidiaries as soon as practicable after the Effective Time, (i) with full
credit for prior service with Firstbank or any of the Firstbank Subsidiaries for
all purposes other than determining the amount of benefit accruals under any
Mercantile defined benefit plan (it being understood that benefits accrued as of
the Effective Time under any Firstbank defined benefit plan will not be
extinguished under any circumstances), (ii) without any waiting periods,
evidence of insurability, or application of any pre-existing condition
limitations, and (iii) with full credit for claims arising prior to the
Effective Time for purposes of deductibles, out-of-pocket maximums, benefit
maximums, and all other similar limitations for the applicable plan year during
which the Merger is consummated. Each of Mercantile and Firstbank shall use all
reasonable efforts to insure that (other than amounts paid pursuant to the
agreement described on Schedule 2.17F under the heading "Parachute Payments") no
amounts paid or payable by Firstbank, Firstbank Subsidiaries or Mercantile to or
with respect to any employee or former employee of Firstbank or any Firstbank
Subsidiary will fail to be deductible for federal income tax purposes by reason
of Section 280G of the IRC. Firstbank shall ensure that following the Effective
Time no holder of Firstbank Stock Options or any participant in any Firstbank
Stock Plan shall have any right thereunder to acquire any securities of
Firstbank or any Firstbank Subsidiary.
5.09. Firstbank Stock Options. (a) At the Effective Time, all rights
with respect to Firstbank Common Stock pursuant to Firstbank Stock Options that
are outstanding at the Effective Time, whether or not then exercisable, shall be
converted into and become rights with respect to Mercantile Common Stock, and
Mercantile shall assume each Firstbank Stock Option in accordance with the terms
of the stock option plan under which it was issued
40
and the stock option agreement by which it is evidenced. From and after the
Effective Time, (i) each Firstbank Stock Option assumed by Mercantile shall be
exercised solely for shares of Mercantile Common Stock, (ii) the number of
shares of Mercantile Common Stock subject to each Firstbank Stock Option shall
be equal to the number of shares of Firstbank Common Stock subject to such
Firstbank Stock Option immediately prior to the Effective Time multiplied by the
Exchange Ratio and (iii) the per share exercise price under each Firstbank Stock
Option shall be adjusted by dividing the per share exercise price under such
Firstbank Stock Option by the Exchange Ratio and rounding down to the nearest
cent; provided, however, that the terms of each Firstbank Stock Option shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or other similar
transaction subsequent to the Effective Time. It is intended that the foregoing
assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in the IRC, as to any Firstbank Stock Option that is
an "incentive stock option." The parties recognize that the Merger will not
cause vesting to occur under the Firstbank Stock Options, except as otherwise
identified on Schedule 2.03.
(b) At or prior to the Effective Time, Mercantile shall take all
corporate action necessary to authorize and reserve for issuance a sufficient
number of shares of Mercantile Common Stock for delivery upon exercise of
Firstbank Stock Options to purchase Firstbank Common Stock assumed by it in
accordance with paragraph (a) above. As soon as practicable after the Effective
Time, Mercantile shall file a registration statement on Form S-3 or Form S-8, as
the case may be (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of Mercantile Common Stock subject
to such options and shall use its best efforts to maintain the effectiveness of
such registration statements (and maintain the current status of the prospectus
contained therein) for so long as such options remain outstanding.
5.10. Press Releases. Except as may be required by law, Firstbank
and Mercantile shall consult and agree with each other as to the form and
substance of any proposed press release relating to this Agreement or any of the
transactions contemplated hereby.
5.11. State Takeover Statutes; Firstbank's Certificate of
Incorporation. (a) Each of Mercantile and Firstbank will take all steps
reasonably necessary to exempt the transactions contemplated by this Agreement
and any agreement contemplated hereby from, and if necessary challenge the
validity of, any applicable state takeover law.
(b) Firstbank will take all steps reasonably necessary
41
to exempt the transactions contemplated by this Agreement and any agreement
contemplated hereby from any super-majority voting provisions under Firstbank's
Certificate of Incorporation and Bylaws.
5.12. D&O Indemnification. From and after the Effective Time,
Mercantile agrees to indemnify and hold harmless the past and present employees,
agents, directors or officers of Firstbank and/or its Subsidiaries against all
losses, expenses, claims, damages or liabilities relating to acts or omissions
occurring at or prior to the Effective Time to the same extent such persons are
indemnified and held harmless (A) under their respective Articles or Certificate
of Incorporation or Bylaws of Firstbank and its Subsidiaries in the form in
effect at the date of this Agreement, (B) by operation of law, or (C) by virtue
of any contract, resolution or other agreement or document existing at the date
of this Agreement, and such duties and obligations shall continue in full force
and effect for so long as they would (but for the Merger) otherwise survive and
continue in full force and effect. Mercantile will provide, or cause to be
provided, for a period of not less than six years from the Effective Time, an
insurance and indemnification policy that provides the officers and directors of
Firstbank and its Subsidiaries immediately prior to the Effective Time coverage
no less favorable in the aggregate than that provided by Mercantile to its
officers and directors.
5.13. Best Efforts. Each of Mercantile and Firstbank undertakes and
agrees to use its reasonable best efforts to cause the Merger (i) to qualify as
a reorganization within the meaning of Section 368(a) of the Code (including, if
necessary, to take reasonable steps to restructure the transactions contemplated
by this Agreement to so qualify) and (ii) to occur as soon as practicable. Each
of Mercantile and Firstbank agrees to not take any action that would materially
impede or delay the consummation of the transactions contemplated by this
Agreement or the ability of Mercantile or Firstbank to obtain any approval of
any Regulatory Authority required for the transactions contemplated by this
Agreement or to perform its covenants and agreements under this Agreement.
5.14. Insurance. Firstbank shall, and Firstbank shall cause
each of its Subsidiaries to, use its best efforts to maintain its existing
insurance.
5.15. Conforming Entries. (a) Notwithstanding that Firstbank
believes that Firstbank and the Firstbank Subsidiaries have established all
reserves and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Firstbank recognizes that Mercantile may
have adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). Subject to
applicable laws, regulations and the
42
requirements of Regulatory Authorities, from and after the date of this
Agreement to the Effective Time, Firstbank and Mercantile shall consult and
cooperate with each other with respect to conforming the loan, accrual and
reserve policies of Firstbank and the Firstbank Subsidiaries to those policies
of Mercantile, as specified in each case in writing to Firstbank, based upon
such consultation and as hereinafter provided; provided that Firstbank not be
required to take any action that would, in the reasonable judgment of
Firstbank's Board of Directors, have a material negative impact on Firstbank
and/or its shareholders if the transactions contemplated by this Agreement are
not consummated.
(b) Subject to applicable laws, regulations and the requirements of
Regulatory Authorities, in addition, from and after the date of this Agreement
to the Effective Time, Firstbank and Mercantile shall consult and cooperate with
each other with respect to determining appropriate Firstbank accruals, reserves
and charges to establish and take in respect of excess equipment write-off or
write-down of various assets and other appropriate charges and accounting
adjustments taking into account the parties' business plans following the
Merger, as specified in each case in writing to Firstbank, based upon such
consultation and as hereinafter provided; provided that Firstbank not be
required to take any action that would, in the reasonable judgment of
Firstbank's Board of Directors, have a material negative impact on Firstbank
and/or its shareholders if the transactions contemplated by this Agreement are
not consummated.
(c) Subject to applicable laws, regulations and the requirements of
Regulatory Authorities, Firstbank and Mercantile shall consult and cooperate
with each other with respect to determining, as specified in a written notice
from Mercantile to Firstbank, based upon such consultation and as hereinafter
provided, the amount and the timing for recognizing for financial accounting
purposes Firstbank's expenses of the Merger and the restructuring charges
relating to or to be incurred in connection with the Merger; provided that
Firstbank not be required to take any action that would, in the reasonable
judgment of Firstbank's Board of Directors, have a material negative impact on
Firstbank and/or its shareholders if the transactions contemplated by this
Agreement are not consummated..
(d) Subject to applicable laws, regulations and the requirements of
Regulatory Authorities, Firstbank shall (i) establish and take such reserves and
accruals at such time as Mercantile shall reasonably request to conform
Firstbank's loan, accrual and reserve policies to Mercantile's policies, and
(ii) establish and take such accruals, reserves and charges in order to
implement such policies in respect of excess facilities and equipment capacity,
severance costs, litigation matters, write-off or write-down of various assets
and other appropriate accounting adjustments, and to recognize for financial
accounting purposes
43
such expenses of the Merger and restructuring charges related to or to be
incurred in connection with the Merger, in each case at such times as are
reasonably requested by Mercantile; provided, however, that on the date such
reserves, accruals and charges are to be taken, Mercantile shall certify to
Firstbank that Mercantile's representations and warranties are true and correct
as of such date, that the approval conditions to its obligations contemplated by
Section 6.01(b) have been satisfied or waived (except to the extent that any
waiting period associated therewith may then have commenced but not expired) and
that Mercantile is otherwise in compliance with this Agreement; and provided,
further, that Firstbank shall not be required to take any such action that is
not consistent with GAAP and regulatory accounting principles or would, in the
reasonable judgment of Firstbank's Board of Directors, have a material negative
impact on Firstbank and/or its shareholders if the transactions contemplated by
this Agreement are not consummated..
(e) No reserves, accruals or charges taken in accordance with
Section 5.15(d) above may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Firstbank herein.
5.16. Environmental Reports. Mercantile, at its expense, may
perform, as soon as reasonably practicable, but not later than ninety (90) days
after the date hereof, a phase one environmental investigation and/or asbestos
survey by Environmental Operations, Inc. on all real property owned, leased or
operated by Firstbank or any of the Firstbank Subsidiaries as of the date hereof
(but excluding space in retail and similar establishments leased by Firstbank
for automatic teller machines or leased bank branch facilities where the space
leased comprises less than 20% of the total space leased to all tenants of such
property) and within fifteen (15) days after being notified by Firstbank of the
acquisition or lease of any real property acquired or leased by Firstbank or any
of the Firstbank Subsidiaries after the date hereof (but excluding space in
retail and similar establishments leased by Firstbank for automatic teller
machines or leased bank facilities where the space leased comprises less than
20% of the total space leased to all tenants of such property). If the results
of the phase one investigation indicate, in Mercantile's reasonable opinion,
that additional investigation is warranted, Mercantile may perform, at its
expense, a phase two subsurface investigation or investigations by Environmental
Operations, Inc. on properties deemed to warrant such additional study.
Mercantile shall perform any such phase two investigation as soon as reasonably
practicable after receipt of the phase one report(s) for such properties. Should
the cost of taking all remedial or other corrective actions and measures (i)
required by applicable law or (ii) recommended by Environmental Operations, Inc.
in such phase one or phase two report or reports in light of potentially serious
life, health or
44
safety concerns, in the aggregate, exceed the sum of $7,000,000, as reasonably
estimated by Environmental Operations, Inc. or if the cost of such actions or
measures cannot be so reasonably estimated by Environmental Operations, Inc. to
be such amounts or less with any reasonable degree of certainty, Mercantile
shall have the right pursuant to Section 7.01(f) hereof, for a period of fifteen
(15) business days following receipt from Environmental Operations, Inc. of such
estimate or indication that the cost of such actions and measures cannot be so
reasonably estimated, to terminate this Agreement.
5.17. Best Efforts to Insure Pooling. Firstbank undertakes and
agrees and, unless Mercantile shall have waived the condition set forth in
Section 6.03(c), Mercantile undertakes and agrees to use their reasonable best
efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment.
5.18. Community Support. Mercantile shall use all reasonable efforts
following the Effective Time to maintain a level of community support and
involvement in the communities served by Firstbank that is substantially
equivalent in the aggregate to Firstbank's general level of support and
involvement prior to the Merger.
ARTICLE VI
CONDITIONS
6.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have received the requisite approval of
stockholders of Firstbank.
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from or waived by the Board
and any other Regulatory Authority and all applicable waiting periods have
expired.
(c) The Registration Statement shall have been declared effective
and shall not be subject to a stop order or any threatened stop order.
(d) Neither Firstbank nor Mercantile shall be subject to any order,
decree or injunction, and there shall be no pending or threatened order,
decree or injunction, of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of any of the Transactions.
(e) There shall be no legislative, statutory or
45
regulatory action (whether federal or state) pending which prohibits or
threatens in a material way to prohibit consummation of the Transactions
or which otherwise materially adversely affects the Transactions.
(f) Each of Mercantile and Firstbank shall have received, from
counsel reasonably satisfactory to the recipient, an opinion, dated the
Closing Date, reasonably satisfactory in form and substance to the
recipient, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, (i) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code and (ii) no gain or loss will be recognized by the
stockholders of Firstbank who receive solely Mercantile Common Stock in
exchange for shares of Firstbank Common Stock pursuant to the Merger
(except with respect to cash received in lieu of a fractional share
interest in Mercantile Common Stock). In rendering such opinions, counsel
shall receive, and may rely on, customary representations from Mercantile,
Firstbank and others, including but not limited to representations
contained in certificates of officers of Mercantile, Firstbank and others.
6.02. Conditions to Obligations of Firstbank To Effect the Merger.
The obligations of Firstbank to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. The representations and
warranties of Mercantile set forth in Article III of this Agreement shall
be true and correct in all respects as of the date of this Agreement and
as of the Effective Time (as though made on and as of the Effective Time
except (i) to the extent such representations and warranties are by their
express provisions made as of a specified date or period and (ii) for the
effect of transactions contemplated by this Agreement), except for such
failures to be so true and correct as would not have and could not
reasonably be expected to have in the aggregate a material adverse effect
on the Condition of Mercantile and its Subsidiaries, taken as a whole, and
Firstbank shall have received a certificate of the chairman or vice
chairman of Mercantile to that effect; provided, however, that for
purposes of determining the satisfaction of the condition contained in
this Section 6.02(a), no effect shall be given to any exception or
qualification in such representations and warranties relating to
materiality or material adverse effect.
(b) Performance of Obligations. Mercantile shall have performed in
all material respects all obligations required
46
to be performed by it under this Agreement prior to the Effective Time,
and Firstbank shall have received a certificate of the chairman or vice
chairman of Mercantile to that effect.
6.03. Conditions to Obligations of Mercantile To Effect the Merger.
The obligations of Mercantile to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. The representations and
warranties of Firstbank set forth in Article II of this Agreement shall be
true and correct in all respects as of the date of this Agreement and as
of the Effective Time (as though made on and as of the Effective Time
except (i) to the extent such representations and warranties are by their
express provisions made as of a specific date or period and (ii) for the
effect of transactions contemplated by this Agreement), except for such
failures to be so true and correct as would not have and could not
reasonably be expected to have in the aggregate a material adverse effect
on the Condition of Firstbank and its Subsidiaries, taken as a whole, and
Mercantile shall have received a certificate of the chairman and president
of Firstbank and a certificate of the chief financial officer of Firstbank
to that effect; provided, however, that for purposes of determining the
satisfaction of the condition contained in this Section 6.03(a), no effect
shall be given to any exception or qualification in such representations
and warranties relating to materiality or material adverse effect.
(b) Performance of Obligations. Firstbank shall have performed in
all material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and Mercantile shall have
received a certificate of the chairman and president of Firstbank and a
certificate of the chief financial officer of Firstbank to that effect.
(c) Pooling Letter. Mercantile shall have received as soon as
practicable after the date of this Agreement an opinion of KPMG Peat
Marwick LLP, reasonably satisfactory in form and substance to Mercantile,
to the effect that the Merger will qualify for pooling-of-interests
accounting treatment, which opinion shall have not been withdrawn.
(d) Divestitures. Firstbank shall have divested or have entered into
binding agreements to divest, in each case on a basis reasonably
acceptable to Mercantile and as required under applicable law or by any
Regulatory Authority, the Missouri bank Subsidiaries of Firstbank.
47
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any requisite
stockholder approval:
(a) by mutual consent by the Executive Committee of the Board of
Directors of Mercantile and the Board of Directors of Firstbank;
(b) by the Executive Committee of the Board of Directors of
Mercantile or the Board of Directors of Firstbank at any time after
January 27, 1999 if the Merger shall not theretofore have been consummated
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein);
(c) by the Executive Committee of the Board of Directors of
Mercantile or the Board of Directors of Firstbank if (i) the Board has
denied approval of the Merger and such denial has become final and
nonappealable or (ii) stockholders of Firstbank shall not have approved
this Agreement at the Meeting following a favorable recommendation of
Firstbank's Board of Directors;
(d) by the Executive Committee of the Board of Directors of
Mercantile in the event of a material breach by Firstbank of any
representation, warranty, covenant or other agreement contained in this
Agreement, which breach is not cured within 30 days after written notice
thereof to Firstbank by Mercantile;
(e) by the Board of Directors of Firstbank in the event of a
material breach by Mercantile of any representation, warranty, covenant or
other agreement contained in this Agreement, which breach is not cured
within 30 days after written notice thereof is given to Mercantile by
Firstbank; or
(f) by the Executive Committee of the Board of Directors of
Mercantile pursuant to and in accordance with the provisions of the last
sentence of Section 5.16.
7.02. Effect of Termination. In the event of termination of this
Agreement as provided in Sections 7.01(a) through 7.01(c) and Section 7.01(f)
above, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Mercantile or Firstbank or their
respective officers or directors except as set forth in the second sentence of
Section
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5.01 and in Section 5.06.
7.03. Amendment. This Agreement and the Schedules hereto may be
amended by the parties hereto, by action taken by or on behalf of their
respective Boards of Directors, at any time before or after approval of this
Agreement by the stockholders of Firstbank; provided, however, that after any
such approval by the stockholders of Firstbank no such modification shall alter
or change the amount or kind of consideration to be received by holders of
Firstbank Common Stock as provided in this Agreement. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of
Mercantile and Firstbank.
7.04. Severability. Any term, provision, covenant or restriction
contained in this Agreement held by a court or a Regulatory Authority of
competent jurisdiction or the Board to be invalid, void or unenforceable, shall
be ineffective to the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or restrictions contained
in this Agreement nor the validity or enforceability thereof in any other
jurisdiction shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Agreement that is so found to be so
broad as to be unenforceable shall be interpreted to be as broad as is
enforceable.
7.05. Waiver. Any term, condition or provision of this Agreement may
be waived in writing at any time by the party which is, or whose stockholders
are, entitled to the benefits thereof.
ARTICLE VIII
GENERAL PROVISIONS
8.01. Non-Survival of Representations, Warranties and Agreements. No
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein and
each such representation and warranty shall survive such investigation. Except
as set forth below in this Section 8.01, all representations, warranties and
agreements in this Agreement of Mercantile and Firstbank or in any instrument
delivered by Mercantile or Firstbank pursuant to or in connection with this
Agreement shall expire at the Effective Time or upon termination of this
Agreement in accordance with its terms or, in the case of any other such
instrument, in accordance with the terms of such instrument. In the event of
consummation of the Merger, the agreements contained in or referred to in
Sections 1.12 (last sentence only), 5.02(b), 5.05(b), 5.07, 5.08, 5.09, 5.12,
5.18 and in any other provision contained herein which by its terms applies in
whole or in part after the Effective Time shall survive the Effective Time. In
the event of termination of this Agreement in
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accordance with its terms, the agreements contained in or referred to in the
second sentence of Section 5.01, Section 5.06 and Section 7.02 shall survive
such termination.
8.02. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to be duly received (i) on the date given if
delivered personally or (ii) upon confirmation of receipt, if by facsimile
transmission or (iii) on the date received if mailed by registered or certified
mail (return receipt requested), or (iv) on the business date after being
delivered to a reputable overnight delivery service, if by such service, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to Mercantile:
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. Xxxx
Executive Vice President,
Mercantile Bank National
Association
Copies to:
Xxx X. Xxxxxxxx, Esq.
General Counsel
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, Xxxxxxxx 00000-0000
and
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
(ii) if to Firstbank:
Firstbank of Illinois Co.
000 Xxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
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Copies to:
Suelthaus & Xxxxx, P.C.
0000 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
and
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
8.03. Miscellaneous. This Agreement (including the Schedules and
other written documents referred to herein or provided hereunder) (i)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, including any confidentiality agreement
between the parties hereto, (ii) except for the provisions of Sections 5.09 and
5.12, is not intended to confer upon any person not a party hereto any rights or
remedies hereunder, (iii) shall not be assigned by operation of law or otherwise
and (iv) shall be governed in all respects by the laws of the State of Missouri,
except as otherwise specifically provided herein or required by the DGCL.
Nothing in this Agreement shall be construed to require any party (or any
subsidiary or affiliate of any party) to take any action or fail to take any
action in violation of applicable law, rule or regulation. This Agreement may be
executed in counterparts which together shall constitute a single agreement.
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IN WITNESS WHEREOF, Mercantile, Merger Sub and Firstbank have caused
this Agreement to be signed and, by such signature, acknowledged by their
respective officers thereunto duly authorized, and such signatures to be
attested to by their respective officers thereunto duly authorized, all as of
the date first written above.
Attest: MERCANTILE BANCORPORATION INC.
/s/ Xxxxx X. Xxxxx By: /s/ Xxxx X. Xxxx
Name: Xxxxx X. Xxxxx Name: Xxxx X. Xxxx
Title: Senior Vice President Title: Executive Vice
President
Attest: AMERIBANC, INC.
/s/ Xxxxx X. Xxxxx By: /s/ Xxxx X. Xxxx
Name: Xxxxx X. Xxxxx Name: Xxxx X. Xxxx
Title: Senior Vice President Title: Vice President
Attest: FIRSTBANK OF ILLINOIS CO.
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxx Name: Xxxx X. Xxxxxxxx
Title: Assistant Secretary Title: Chairman & CEO
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