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AGREEMENT AND PLAN OF MERGER
AMONG
MERCANTILE BANCORPORATION INC.,
A MISSOURI CORPORATION
AND
AMERIBANC, INC.,
A MISSOURI CORPORATION
AND
HORIZON BANCORP, INC.
AN ARKANSAS CORPORATION
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JULY 31, 1997
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TABLE OF CONTENTS
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Page
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Recitals 1
ARTICLE I
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THE MERGER
1.01 The Merger 1
1.02 Closing 1
1.03 Effective Time 1
1.04 Additional Actions 2
1.05 Articles of Incorporation and By-Laws 2
1.06 Board of Directors and Officers 2
1.07 Conversion of Securities 2
1.08 Exchange Procedures 3
1.09 Dissenting Shares 4
1.10 No Fractional Shares 5
1.11 Closing of Stock Transfer Books 5
1.12 Anti-Dilution 5
1.13 Reservation of Right to Revise Transaction 6
1.14 Material Adverse Effect 6
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization and Authority 6
2.02 Subsidiaries 7
2.03 Capitalization 7
2.04 Authorization 8
2.05 Seller Financial Statements 9
2.06 Seller Reports 9
2.07 Title to and Condition of Assets 10
2.08 Real Property 10
2.09 Taxes 12
2.10 Material Adverse Effect 12
2.11 Loans, Commitments and Contracts 12
2.12 Absence of Defaults 15
2.13 Litigation and Other Proceedings 15
2.14 Directors' and Officers' Insurance 15
2.15 Compliance with Laws 15
2.16 Labor 17
2.17 Material Interests of Certain Persons 17
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets;
Financial Assets 17
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2.19 Employee Benefit Plans 19
2.20 Conduct of Seller to Date 20
2.21 Absence of Undisclosed Liabilities 21
2.22 Proxy Statement, Etc 22
2.23 Registration Obligations 22
2.24 Tax and Regulatory Matters 22
2.25 Brokers and Finders 22
2.26 Interest Rate Risk Management Instruments 22
2.27 Accuracy of Information 23
2.28 Year 2000 Compliant 23
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF THE BUYERS
3.01 Organization and Authority 23
3.02 Capitalization of Mercantile 23
3.03 Authorization 24
3.04 Mercantile Financial Statements 25
3.05 Mercantile Reports 25
3.06 Material Adverse Effect 26
3.07 Registration Statement, Etc 26
3.08 Brokers and Finders 26
ARTICLE IV
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CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time 26
4.02 Forbearances of Seller 26
4.03 Forbearances of the Buyers 29
ARTICLE V
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ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence 29
5.02 Registration Statement; Regulatory Matters 30
5.03 Shareholder Approval 30
5.04 Current Information 31
5.05 Conforming Entries 31
5.06 Environmental Reports 32
5.07 Agreements of Affiliates 32
5.08 Expenses 33
5.09 Miscellaneous Agreements and Consents 33
5.10 Employee Agreements and Benefits 33
5.11 Press Releases 34
5.12 State Takeover Statutes 34
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5.13 Directors' and Officers' Indemnification 34
5.14 Tax Opinion Certificates 35
5.15 Best Efforts to Insure Pooling 35
ARTICLE VI
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CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger 35
6.02 Conditions to Obligations of Seller 36
6.03 Conditions to Obligations of the Buyers 36
ARTICLE VII
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TERMINATION, AMENDMENT AND WAIVER
7.01 Termination 37
7.02 Effect of Termination 38
7.03 Amendment 38
7.04 Waiver 38
ARTICLE VIII
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GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and Agreements 39
8.02 Indemnification 39
8.03 No Assignment; Successors and Assigns 39
8.04 Severability 40
8.05 No Implied Waiver 40
8.06 Headings 40
8.07 Entire Agreement 40
8.08 Counterparts 40
8.09 Notices 40
8.10 Governing Law 41
Exhibit A - Affiliate Letter
Exhibit B - Director/Officer Certificate
Exhibit C - Shareholder Certificate
Exhibit D - Buyer's Opinion
Exhibit E - Seller's Opinion
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and
entered into as of July 31, 1997 by and among Mercantile Bancorporation Inc.,
a Missouri corporation ("Mercantile"), Ameribanc, Inc., a Missouri corporation
("Merger Sub" and, collectively, with Mercantile, the "Buyers"), and Horizon
Bancorp, Inc., an Arkansas corporation ("Seller").
WHEREAS, Merger Sub is a wholly owned subsidiary of Mercantile,
and each of Mercantile and Merger Sub is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended (the "BHCA"); and
WHEREAS, Seller is registered as a bank holding company under the
BHCA; and
WHEREAS, the respective Boards of Directors of Seller and Merger
Sub and the Executive Committee of the Board of Directors of Mercantile have
approved the merger (the "Merger") of Seller with and into Merger Sub pursuant
to the terms and subject to the conditions contained in this Agreement; and
WHEREAS, the parties desire to provide certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
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THE MERGER
1.01 The Merger. Subject to the terms and conditions of this
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Agreement, Seller shall be merged with and into Merger Sub in accordance with
Chapter 351 of the Missouri Revised Statutes (the "Missouri Statute") and the
provisions of the Arkansas Business Corporation Act (the "Arkansas Statute"),
and the separate corporate existence of Seller shall cease. Merger Sub shall
be the surviving corporation (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Missouri.
1.02 Closing. The closing (the "Closing") of the Merger,
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unless the parties hereto shall otherwise mutually agree, shall take place at
the offices of Mercantile in St. Louis, Missouri, at 10:00 am, local time, on
the date that the Effective Time (as defined in Section 1.03) occurs (the
"Closing Date").
1.03 Effective Time. The Merger shall become effective (the
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"Effective Time") upon the later of (i) the issuance of a Certificate of
Merger by the Office of the Secretary of State of the State
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of Missouri and (ii) the filing of Articles of Merger with the Office of the
Secretary of State of the State of Arkansas. Unless otherwise mutually agreed
in writing by Buyers and Seller, subject to the terms and conditions of this
Agreement, the Effective Time shall occur on such date as Buyers shall notify
Seller in writing (such notice to be at least five business days in advance of
the Effective Time) but (i) not earlier than the satisfaction of all conditions
set forth in Section 6.01(a) and 6.01(b) (the "Approval Date") and (ii) not
later than the first business day of the first full calendar month commencing
at least five business days after the Approval Date. On the Closing Date, the
parties hereto will cause the Merger to be consummated by delivering to the
Secretary of State of the State of Missouri and the Secretary of State of the
State of Arkansas, for filing, Articles of Merger in such form as required by,
and executed and acknowledged in accordance with, the relevant provisions of
the Missouri Statute and the Arkansas Statute.
1.04 Additional Actions. If, at any time after the Effective
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Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary or
desirable to (a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Seller or Merger Sub, or (b) otherwise carry
out the purposes of this Agreement, Seller and its officers and directors
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds, assignments or
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Surviving Corporation are
authorized in the name of Seller or otherwise to take any and all such action.
1.05 Articles of Incorporation and By-Laws. The Articles of
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Incorporation and By-Laws of Merger Sub in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation, unless otherwise appealed or amended.
1.06 Board of Directors and Officers. At the Effective Time,
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the directors and officers of Merger Sub immediately prior to the Effective
Time shall be the directors and officers, respectively, of the Surviving
Corporation following the Merger, and such directors and officers shall hold
office in accordance with the Surviving Corporation's By-Laws and applicable
law.
1.07 Conversion of Securities.
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At the Effective Time, by virtue of the Merger and without any
action on the part of the Buyers, Seller or the holder of any of the following
securities:
(a) Each share of the common stock, $1.00 par value, of
Merger Sub that is issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall be unchanged
after the Merger and shall thereafter constitute all of the issued
and outstanding capital stock of the Surviving Corporation; and
(b) Subject to Sections 1.10 and 1.12 hereof, each share
of common stock, $1.00 par value, of Seller ("Seller Common
Stock") issued and outstanding at the Effective Time (other than
any shares held by Seller, Mercantile or any of their
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respective Subsidiaries (as defined in Section 2.02 hereof) (in each
case other than in a fiduciary capacity or as a result of debts
previously contracted), which shall be cancelled, and other than
any Dissenting Shares (as defined in Section 1.09)), shall cease
to be outstanding and shall be converted into and become the right
to receive 2.6867 shares (the "Exchange Ratio") of common stock,
$0.01 par value, and the associated "Rights" under the "Rights
Agreement," as those terms are defined in Section 3.02 hereof, of
Mercantile (collectively, "Mercantile Common Stock"). The
Exchange Ratio was computed by (i) aggregating (A) the total
number of shares of Seller Common Stock that were issued and
outstanding on the date of this Agreement (as set forth in Section
2.03 hereof) with (B) the total number of shares of Seller Common
Stock that are reserved for issuance pursuant to options,
warrants, scrip, rights to subscribe to, calls or commitments
relating to, or securities or rights convertible into, Seller
Common Stock (as set forth in Section 2.03 hereof) and dividing
such number of shares of Seller Common Stock (computed by
aggregating (A) and (B) hereof) into (ii) 1,700,000, the aggregate
number of shares of Mercantile Common Stock to be issued in the
Merger. For purposes of this Agreement, and notwithstanding
Section 1.12 hereof, after the payment of the three-for-two
Mercantile Common Stock dividend that is payable on October 1,
1997 to shareholders of record of Mercantile as of September 10,
1997 (the "Stock Dividend"), the Exchange Ratio shall equal 4.0301
and the aggregate number of shares of Mercantile Common Stock to
be issued in the Merger shall not exceed 2,550,000.
1.08 Exchange Procedures.
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(a) As soon as practicable following the Effective Time,
Mercantile shall mail or cause to be mailed to holders of record
of certificates formerly representing shares of Seller Common
Stock (the "Certificates"), as identified on the Seller
Shareholder List (as provided pursuant to Section 1.11 hereof),
letters advising them of the effectiveness of the Merger and
instructing them to tender such Certificates to Mercantile or its
duly appointed agent as exchange agent (the "Exchange Agent"), or
in lieu thereof, such evidence of lost, stolen or mutilated
Certificates and such surety bond or other security as the
Exchange Agent may reasonably require (the "Required
Documentation").
(b) Subject to Section 1.11, after the Effective Time,
each previous holder of a Certificate that surrenders such
Certificate or in lieu thereof, the Required Documentation, to the
Exchange Agent, with a properly completed and executed letter of
transmittal with respect to such Certificate, will be entitled to
a certificate or certificates representing the number of full
shares of Mercantile Common Stock into which the Certificate so
surrendered shall have been converted pursuant to this Agreement,
and any distribution theretofore declared and not yet paid with
respect to such shares of Mercantile Common Stock and any amount
due with respect to fractional shares, without interest (the
"Merger Consideration"). Such shares of Mercantile Common Stock,
any amount due with respect to fractional shares and any
distribution shall be delivered by Mercantile to each such holder
as promptly as practicable after such surrender.
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(c) Each outstanding Certificate, until duly surrendered
to the Exchange Agent, shall be deemed to evidence ownership of
the Merger Consideration into which the stock previously
represented by such Certificate shall have been converted pursuant
to this Agreement.
(d) After the Effective Time, holders of Certificates
shall cease to have rights with respect to the stock previously
represented by such Certificates, and their sole rights shall be
to exchange such Certificates for the Merger Consideration. After
the closing of the transfer books as described in Section 1.11
hereof, there shall be no further transfer on the records of
Seller of Certificates, and if such Certificates are presented to
Seller for transfer, they shall be cancelled against delivery of
the Merger Consideration. Neither Buyers nor the Exchange Agent
shall be obligated to deliver the Merger Consideration until such
holder surrenders the Certificates or furnishes the Required
Documentation as provided herein. No dividends or distributions
declared after the Effective Time (including any redemption by
Mercantile of the Rights associated therewith) on the Mercantile
Common Stock will be remitted to any person entitled to receive
Mercantile Common Stock under this Agreement until such person
surrenders the Certificate representing the right to receive such
Mercantile Common Stock or furnishes the Required Documentation,
at which time such dividends or declarations shall be remitted to
such person, without interest and less any taxes that may have
been imposed thereon. Certificates surrendered for exchange by an
affiliate shall not be exchanged until Buyers have received a
written agreement from such affiliate as required pursuant to
Section 5.07 hereof. Neither the Exchange Agent nor any party to
this Agreement nor any affiliate thereof shall be liable to any
holder of stock represented by any Certificate for any Merger
Consideration issuable or payable in the Merger that is paid to a
public official pursuant to applicable abandoned property, escheat
or similar laws.
1.09 Dissenting Shares.
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(a) "Dissenting Shares" means any shares held by any
holder who becomes entitled to payment of the fair value of such
shares under Subchapter 13 of the Arkansas Statute. Any holders
of Dissenting Shares shall be entitled to payment for such shares
only to the extent permitted by and in accordance with the
provisions of such law and Mercantile shall cause the Surviving
Corporation to pay such consideration with funds provided by
Mercantile.
(b) Each party hereto shall give the other prompt notice
of any written demands for the payment of the fair value of any
shares, withdrawals of such demands, and any other instruments,
served pursuant to the Arkansas Statute received by such party and
Seller shall give Mercantile the opportunity to participate in all
negotiations and proceedings with respect to such demands. Seller
shall not voluntarily make any payment with respect to any demands
for payment of fair value and shall not, except with the prior
written consent of Mercantile, which consent shall not be
unreasonably withheld, settle or offer to settle any such demands.
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1.10 No Fractional Shares. Notwithstanding any other provision
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of this Agreement, neither certificates nor scrip for fractional shares of
Mercantile Common Stock shall be issued in the Merger. Each holder of shares
of Seller Common Stock who otherwise would have been entitled to a fraction of
a share of Mercantile Common Stock shall receive (by check from the Exchange
Agent, mailed to the shareholder with the certificate(s) for Mercantile Common
Stock which such holder is to receive pursuant to the Merger) in lieu thereof,
and at the time such holder receives the shares of Mercantile Common Stock to
which the holder is entitled, cash (without interest) in an amount determined
by multiplying the fractional share interest to which such holder would
otherwise be entitled by the closing stock price of Mercantile Common Stock on
the New York Stock Exchange (the "NYSE") Composite Tape as reported in The
Wall Street Journal on the Closing Date. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional
share.
1.11 Closing of Stock Transfer Books.
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(a) The stock transfer books of Seller shall be closed
at the end of business on the business day immediately preceding
the Closing Date. In the event of a transfer of ownership of
Seller Common Stock that is not registered in the transfer records
prior to the closing of such record books, the Merger
Consideration issuable or payable with respect to such stock may
be delivered to the transferee, if the Certificate or Certificates
representing such stock is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such
transfer and all applicable stock transfer taxes are paid.
(b) At the Effective Time, Seller shall provide Buyers
with a complete and verified list of registered holders of Seller
Common Stock based upon its stock transfer books as of the closing
of said transfer books, including the names, addresses,
certificate numbers and taxpayer identification numbers of such
holders (the "Seller Shareholder List"). Buyers shall be entitled
to rely upon the Seller Shareholder List to establish the identity
of those persons entitled to receive the Merger Consideration,
which list shall be conclusive with respect thereto. In the event
of a dispute with respect to ownership of stock represented by any
Certificate, Buyers shall be entitled to deposit any Merger
Consideration represented thereby in escrow with an independent
third party and thereafter be relieved with respect to any claims
thereto.
1.12 Anti-Dilution. Other than the adjustment to the Exchange
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Ratio set forth in Section 1.07 hereof with respect to the Stock Dividend, if
between the date of this Agreement and the Effective Time a share of
Mercantile Common Stock shall be changed into a different number of shares of
Mercantile Common Stock or a different class of shares by reason of
reclassification, recapitalization, split-up, combination, exchange of shares
or readjustment, or if a stock dividend thereon shall be declared with a
record date within such period, then appropriate and proportionate adjustment
or adjustments will be made to the Exchange Ratio such that each shareholder
of Seller shall be entitled to receive such number of shares of Mercantile
Common Stock or other securities as such shareholder would have received
pursuant to such reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment or as a result of such stock dividend had
the record date therefor been immediately following the Effective Time.
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1.13 Reservation of Right to Revise Transaction. Buyers may at
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any time change the method of effecting the acquisition of Seller by Buyers
(including, without limitation, the provisions of this Article I) if and to
the extent Buyers deem such change to be desirable, including, without
limitation, to provide for (i) a merger of Merger Sub with and into Seller, in
which Seller is the surviving corporation, or (ii) a merger of Seller directly
into Mercantile, in which Mercantile is the surviving corporation; provided,
however, that no such change shall (A) alter or change the amount or kind of
the consideration to be received by the shareholders of Seller in the Merger,
(B) adversely affect the tax treatment to Seller shareholders, as generally
described in Section 6.01(e) hereof, or (C) materially impede or delay receipt
of any approvals, referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement.
1.14 Material Adverse Effect. As used in this Agreement, the
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term "Material Adverse Effect" with respect to an entity means any condition,
event, change or occurrence that has or may reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), properties,
business or results of operations, of such entity and its Subsidiaries, taken
as a whole as reflected in the Seller Financial Statements (as defined in
Section 2.05(b)) or the Mercantile Financial Statements (as defined in Section
3.04), as the case may be; it being understood that a Material Adverse Effect
shall not include: (i) a change with respect to, or effect on, such entity and
its Subsidiaries resulting from a change in law, rule, regulation, generally
accepted accounting principles or regulatory accounting principles; (ii) a
change with respect to, or effect on, such entity and its Subsidiaries
resulting from any other matter affecting depository institutions generally
including, without limitation, changes in general economic conditions and
changes in prevailing interest and deposit rates; (iii) in the case of Seller,
any financial change resulting from adjustments taken pursuant to Section 5.05
hereof; or (iv) a change disclosed in the Seller Financial Statements or the
Mercantile Financial Statements, as the case may be.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to the Buyers to enter into and perform their
respective obligations under this Agreement, and notwithstanding any
examinations, inspections, audits and other investigations made by the Buyers,
Seller hereby represents and warrants to the Buyers as follows:
2.01 Organization and Authority. Seller is a corporation duly
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organized, validly existing and in good standing under the laws of the State
of Arkansas, 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 has the corporate power and
authority to own its properties and assets and to carry on its business as it
is now being conducted. Seller is registered as a bank holding company with
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") under the BHCA. True and complete copies of the Articles of
Incorporation and By-Laws of Seller and the Charter and By-Laws of Horizon
Bank, an Arkansas state-chartered bank and wholly owned subsidiary of Seller
("Horizon Bank"), each as in effect on the date of this Agreement, are
attached hereto as Schedule 2.01. Also attached hereto as Schedule 2.01 are
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true and complete lists of the
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shareholders of each of the Seller and Horizon Bank (including directors'
qualifying shares), as of a date not earlier than the fifth business day prior
to the date of this Agreement.
2.02 Subsidiaries.
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(a) Schedule 2.02 sets forth, a complete and correct
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list of all of Seller's "Subsidiaries" (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC"); each a "Seller Subsidiary" and,
collectively, the "Seller Subsidiaries"), and all outstanding
Equity Securities (as defined in Section 2.03) of each, all of
which are owned directly or indirectly by Seller. Except as
disclosed in Schedule 2.02, all of the outstanding shares of
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capital stock of the Seller Subsidiaries owned directly or
indirectly by Seller are validly issued, fully paid and
nonassessable and are owned free and clear of any lien, claim,
charge, option, encumbrance, agreement, mortgage, pledge, security
interest or restriction (a "Lien") with respect thereto. Each of
the Seller Subsidiaries is a corporation or bank duly incorporated
or organized and validly existing under the laws of its
jurisdiction of incorporation or organization, and has corporate
power and authority to own or lease its properties and assets and
to carry on its business as it is now being conducted. Each of
the Seller Subsidiaries is duly qualified to do business in each
jurisdiction where its ownership or leasing of property or the
conduct of its business requires it so to be qualified, except
where the failure to so qualify would not have a Material Adverse
Effect on Seller and the Seller Subsidiaries, taken as a whole.
Neither Seller nor any Seller Subsidiary owns beneficially,
directly or indirectly, any shares of any class of Equity
Securities or similar interests of any corporation, bank, business
trust, association or organization, or any interest in a
partnership or joint venture of any kind, other than those
identified as Seller Subsidiaries in Schedule 2.02 hereof.
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(b) Horizon Bank is a commercial bank duly organized,
validly existing and in good standing under the laws of the State
of Arkansas. The deposits of Horizon Bank are insured by the
Federal Deposit Insurance Corporation (the "FDIC") under the
Federal Deposit Insurance Act of 1950, as amended (the "FDI Act").
2.03 Capitalization. The authorized capital stock of Seller
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consists of (i) 2,000,000 shares of Seller Common Stock, of which, as of the
date hereof, 666,240 shares were issued and 632,743 shares were outstanding
and (ii) 25,000 shares of Preferred Stock, $100.00 par value, of Seller, of
which, as of the date hereof, no shares were issued and outstanding. As of
the date hereof, Seller had not reserved any shares of Seller Common Stock for
issuance and no Seller stock options were outstanding. Except as set forth
above, there are no other Equity Securities of Seller outstanding. "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. All of the
issued and outstanding shares of Seller Common Stock are validly issued, fully
paid and nonassessable, and have not been issued in violation of any
preemptive right of any
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shareholder of Seller. Neither Seller nor any Seller Subsidiary has taken or
agreed to take any action or has any knowledge of any fact or circumstance and
neither Seller nor any Seller Subsidiary will take any action that would prevent
the Merger from qualifying for pooling-of-interests accounting treatment.
2.04 Authorization.
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(a) Seller has the corporate power and authority to
enter into this Agreement and, subject to the approval of this
Agreement by the shareholders of Seller and Regulatory Authorities
(as defined in Section 2.06), to carry out its obligations
hereunder. The only shareholder vote required for Seller to
approve this Agreement is the affirmative vote of the holders of a
majority of the outstanding shares of Seller Common Stock entitled
to vote at a meeting called for such purpose. The execution,
delivery and performance of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby in
accordance with and subject to the terms of this Agreement have
been duly authorized by the Board of Directors of Seller. Subject
to the approval of Seller's shareholders and subject to the
receipt of such approvals of the Regulatory Authorities as may be
required by statute or regulation, this Agreement is a valid and
binding obligation of Seller enforceable against Seller in
accordance with its terms.
(b) Neither the execution nor delivery nor performance
by Seller of this Agreement, nor the consummation by Seller of the
transactions contemplated hereby, nor compliance by Seller with
any of the provisions hereof, will (i) violate, conflict with, or
result in a breach of any provisions of, or constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any
Lien upon any of the properties or assets of Seller or any of the
Seller Subsidiaries under any of the terms, conditions or
provisions of (x) its Articles of Incorporation, charter or
By-Laws or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to
which Seller or any of the Seller Subsidiaries is a party or by
which it may be bound, or to which Seller or any of the Seller
Subsidiaries or any of the properties or assets of Seller or any
of the Seller Subsidiaries may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in
subsection (c) of this Section 2.04 violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or any of the Seller Subsidiaries or any of
their respective properties or assets.
(c) Other than in connection or in compliance with the
provisions of the Missouri Statute, the Arkansas Statute, the
Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act"), the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or
exemptions required under the BHCA, or any required approvals of
the Federal Reserve Board and the Commissioner of the State Bank
Department of the State of Arkansas (the "Arkansas Commissioner")
or other
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governmental agencies or governing boards having regulatory
authority over Seller or any Seller Subsidiary, no notice to, filing
with, exemption or review by, or authorization, consent or approval
of, any public body or authority is necessary for the consummation
by Seller of the transactions contemplated by this Agreement.
2.05 Seller Financial Statements.
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(a) Attached hereto as Schedule 2.05(a) are copies of
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the following documents:
(i) Audited consolidated balance sheets of Seller
as of December 31, 1996 and 1995, related audited
consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three
(3) years in the period ended December 31, 1996, together
with the notes thereto, audited by Seller's independent
auditors;
(ii) Unaudited consolidated balance sheets of
Seller as of March 31, 1997 and 1996 and related
consolidated statements of income and changes in
shareholders' equity for the three-month period ended
March 31, 1997;
(iii) The Form F.R. Y-9C and F.R. Y-9LP reports of
Seller as of December 31, 1996, 1995 and 1994 and as of
March 31, 1997 and the Form F.R.Y-6 reports of Seller as
of December 31, 1996, 1995 and 1994 and any Form F.R. Y-6A
reports of Seller filed since January 1, 1997; and
(iv) The Consolidated Reports of Condition and
Income of Horizon Bank as of and for the years ended
December 31, 1996, 1995 and 1994 and as of and for the
three-months ended March 31, 1997, as filed by Horizon
Bank with the FDIC.
(b) The financial statements contained in the document
referenced in Schedule 2.05(a) are referred to collectively as the
----------------
"Seller Financial Statements." The Seller Financial Statements
have been prepared in accordance with generally accepted
accounting principles ("GAAP") or regulatory accounting
principles, as the case may be, consistently applied during the
periods involved, and present fairly the consolidated financial
position of Seller and the Seller Subsidiaries at the dates
thereof and the consolidated results of operations, changes in
shareholders' equity and cash flows of Seller and the Seller
Subsidiaries for the periods stated therein.
(c) Seller and the Seller Subsidiaries have each
prepared, kept and maintained through the date hereof true,
correct and complete financial and other books and records of
their affairs which fairly reflect their respective financial
conditions, results of operations, changes in shareholders' equity
and cash flows.
2.06 Seller Reports. Since January 1, 1995, each of Seller and
--------------
the Seller Subsidiaries has timely filed all material reports, registrations
and statements, together with any required amendments
- 9 -
14
thereto, that it was required to file with (i) the Federal Reserve Board, (ii)
the FDIC, (iii) the Arkansas Commissioner and (iv) any federal, state, municipal
or local government, securities, banking, savings and loan, environmental,
insurance and other governmental or regulatory authority, and the agencies and
staffs thereof (the entities in the foregoing clauses (i) through (iv) being
referred to herein collectively as the "Regulatory Authorities" and individually
as a "Regulatory Authority"), having jurisdiction over the affairs of it. All
such material reports and statements filed with any such Regulatory Authority
are collectively referred to herein as the "Seller Reports." As of each of
their respective dates, the Seller Reports complied in all material respects
with all the rules and regulations promulgated by the applicable Regulatory
Authority. With respect to Seller Reports filed with the Regulatory
Authorities, there is no material unresolved violation, criticism or exception
by any Regulatory Authority with respect to any report or statement filed by,
or any examinations of, Seller or any of the Seller Subsidiaries.
2.07 Title to and Condition of Assets.
--------------------------------
(a) Except as may be reflected in the Seller Financial
Statements and with the exception of all "Real Property" (which is
the subject of Section 2.08 hereof) Seller and the Seller
Subsidiaries have, and at the Closing Date will have, good and
marketable title to their owned properties and assets, including,
without limitation, those reflected in the Seller Financial
Statements (except those disposed of in the ordinary course of
business since the date thereof), free and clear of any Lien,
except for Liens for (i) taxes, assessments or other governmental
charges not yet delinquent and (ii) as set forth or described in
the Seller Financial Statements or any subsequent Seller Financial
Statements delivered to Buyers prior to the Effective Time.
(b) No material properties or assets that are reflected
as owned by Seller or any of the Seller Subsidiaries in the Seller
Financial Statements as of March 31, 1997 have been sold, leased,
transferred, assigned or otherwise disposed of since such date,
except in the ordinary course of business.
(c) All furniture, fixtures, vehicles, machinery and
equipment and computer software owned or used by Seller or the
Seller Subsidiaries, including any such items leased as a lessee
(taken as a whole as to each of the foregoing with no single item
deemed to be of material importance) are in good working order and
free of known defects, subject only to normal wear and tear. The
operation by Seller or the Seller Subsidiaries of such properties
and assets is in compliance in all material respects with all
applicable laws, ordinances and rules and regulations of any
governmental authority having jurisdiction over such use.
2.08 Real Property.
-------------
(a) The legal description of each parcel of real
property owned by Seller or any of the Seller Subsidiaries (other
than real property acquired in foreclosure or in lieu of
foreclosure in the course of the collection of loans and being
held by Seller or a Seller Subsidiary for disposition as required
by law) is set forth in Schedule 2.08(a) under the heading "Owned
----------------
Real Property" (such real property being herein referred to as the
"Owned Real Property"). The legal description of each parcel of
real property leased by
- 10 -
15
Seller or any of the Seller Subsidiaries is also set forth in
Schedule 2.08(a) under the heading "Leased Real Property" (such real
----------------
property being herein referred to as the "Leased Real Property").
Seller shall update Schedule 2.08(a) within ten (10) days of
acquiring or leasing any real property after the date hereof.
Collectively, the Owned Real Property and the Leased Real Property
is herein referred to as the "Real Property."
(b) There is no pending action involving Seller or any
of the Seller Subsidiaries as to the title of or the right to use
any of the Real Property.
(c) Neither Seller nor any of the Seller Subsidiaries
has any interest in any other real property except interests as a
mortgagee, and except for any real property acquired in
foreclosure or in lieu of foreclosure and being held for
disposition as required by law.
(d) None of the buildings, structures or other
improvements located on the Real Property encroaches upon or over
any adjoining parcel of real estate or any easement or
right-of-way or "setback" line and all such buildings, structures
and improvements are located and constructed in conformity with
all applicable zoning ordinances and building codes.
(e) None of the buildings, structures or improvements
located on the Owned Real Property are the subject of any official
complaint or notice by any governmental authority of violation of
any applicable zoning ordinance or building code, and there is no
zoning ordinance, building code, use or occupancy restriction or
condemnation action or proceeding pending, or, to the best
knowledge of Seller, threatened, with respect to any such
building, structure or improvement. The Owned Real Property is in
generally good condition for its intended purpose, ordinary wear
and tear excepted, and has been maintained in accordance with
reasonable and prudent business practices applicable to like
facilities.
(f) Except as may be reflected in the Seller Financial
Statements or with respect to such easements, Liens, defects or
encumbrances as do not individually or in the aggregate materially
adversely affect the use or value of the parcel of Owned Real
Property, Seller and the Seller Subsidiaries have, and at the
Closing Date will have, good and marketable title to their
respective Owned Real Properties.
(g) Neither Seller nor any of the Seller Subsidiaries
has caused or allowed the generation, treatment, storage, disposal
or release at any Real Property of any Toxic Substance, except in
accordance with all applicable federal, state and local laws and
regulations. "Toxic Substance" means any hazardous, toxic or
dangerous substance, pollutant, waste, gas or material, including,
without limitation, petroleum and petroleum products, metals,
liquids, semi-solids or solids, that are regulated under any
federal, state or local statute, ordinance, rule, regulation or
other law pertaining to environmental protection, contamination,
quality, waste management or cleanup.
- 11 -
16
(h) Except as disclosed on Schedule 2.08(a), there are
----------------
no underground storage tanks located on, in or under any Owned
Real Property. Neither Seller nor any Seller Subsidiaries own or
operate any underground storage tank at any Leased Real Property.
2.09 Taxes. Seller and each Seller Subsidiary have timely
-----
filed or will timely file (including extensions) all tax returns required to
be filed at or prior to the Closing Date ("Seller Returns"). Each of Seller
and the Seller Subsidiaries has paid, or set up adequate reserves on the
Seller Financial Statements for the payment of, all taxes required to be paid
in respect of the periods covered by such Seller Returns and has set up
adequate reserves on the most recent Seller Financial Statements for the
payment of all taxes anticipated to be payable in respect of all periods up to
and including the latest period covered by such Seller Financial Statements.
Neither Seller nor any Seller Subsidiary has any liability for any such taxes
in excess of the amounts so paid or reserves so established, and no
deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or definitely) against Seller or
any of the Seller Subsidiaries which would not be covered by existing
reserves. Neither Seller nor any of the Seller Subsidiaries is delinquent in
the payment of any tax, assessment or governmental charge, nor has it
requested any extension of time within which to file any tax returns in
respect of any fiscal year which have not since been filed and no requests for
waivers of the time to assess any tax are pending. No federal or state income
tax return of Seller or any Seller Subsidiaries has been audited by the
Internal Revenue Service (the "IRS") or any state tax authority for the seven
(7) most recent full calendar years. There is no deficiency or refund
litigation or, to the best knowledge of Seller, matter in controversy with
respect to Seller Returns. Neither Seller nor any of the Seller Subsidiaries
has extended or waived any statute of limitations on the assessment of any tax
due that is currently in effect.
2.10 Material Adverse Effect. Since March 31, 1997, there has
-----------------------
been no Material Adverse Effect on Seller and the Seller Subsidiaries, taken
as a whole.
2.11 Loans, Commitments and Contracts.
--------------------------------
(a) Schedule 2.11(a) contains a complete and accurate
----------------
listing as of the date hereof of all contracts entered into with
respect to deposits of $500,000 or more, by account, and all loan
agreements and commitments, notes, security agreements, repurchase
agreements, bankers' acceptances, outstanding letters of credit
and commitments to issue letters of credit, participation
agreements, and other documents relating to or involving
extensions of credit and other commitments to extend credit by
Seller or any of the Seller Subsidiaries with respect to any one
entity or related group of entities in excess of $500,000 to which
Seller or any of the Seller Subsidiaries is a party or by which it
is bound, by account, and, where applicable, such other
information as shall be necessary to identify any related group of
entities.
(b) Except for the contracts and agreements required to
be listed on Schedule 2.11(a) and the loans required to be listed
----------------
on Schedule 2.11(f), and except as otherwise listed on Schedule
---------------- --------
2.11(b), as of the date hereof neither Seller nor any of the
-------
Seller Subsidiaries is a party to or is bound by any:
- 12 -
17
(i) agreement, contract, arrangement,
understanding or commitment with any labor union;
(ii) franchise or license agreement;
(iii) written employment, severance, termination
pay, agency, consulting or similar agreement or commitment
in respect of personal services;
(iv) material agreement, arrangement or commitment
(A) not made in the ordinary course of business, and (B)
pursuant to which Seller or any of the Seller Subsidiaries
is or may become obligated to invest in or contribute to
any Seller Subsidiary other than pursuant to Seller
Employee Plans (as that term is defined in Section 2.19
hereof) and agreements relating to joint ventures or
partnerships set forth in Schedule 2.02, true and complete
-------------
copies of which have been furnished to Buyers;
(v) agreement, indenture or other instrument not
disclosed in the Seller Financial Statements relating to
the borrowing of money by Seller or any of the Seller
Subsidiaries or the guarantee by Seller or any of the
Seller Subsidiaries of any such obligation (other than
trade payables or instruments related to transactions
entered into in the ordinary course of business by Seller
or any of the Seller Subsidiaries, such as deposits,
Federal Funds borrowings and repurchase and reverse
repurchase agreements), other than such agreements,
indentures or instruments providing for annual payments of
less than $100,000;
(vi) contract containing covenants which limit the
ability of Seller or any of the Seller Subsidiaries to
compete in any line of business or with any person or
which involves any restrictions on the geographical area
in which, or method by which, Seller or any of the Seller
Subsidiaries may carry on their respective businesses
(other that as may be required by law or any applicable
Regulatory Authority);
(vii) contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of
Regulation S-K as promulgated by the SEC to be performed
after the date of this Agreement that has not been filed
or incorporated by reference in the Seller Reports;
(viii) lease with annual rental payments aggregating
$50,000 or more;
(ix) loans or other obligations payable or owing to
any officer, director or employee except (A) salaries,
wages and directors' fees or other compensation incurred
and accrued in the ordinary course of business and (B)
obligations due in respect of any depository accounts
maintained by any of the foregoing at Seller or any of the
Seller Subsidiaries in the ordinary course of business; or
- 13 -
18
(x) other agreement, contract, arrangement,
understanding or commitment involving an obligation by
Seller or any of the Seller Subsidiaries of more than
$250,000 and extending beyond six months from the date
hereof that cannot be cancelled without cost or penalty
upon notice of 30 days or less, other than contracts
entered into in respect of deposits, loan agreements and
commitments, notes, security agreements, repurchase and
reverse repurchase agreements, bankers' acceptances,
outstanding letters of credit and commitments to issue
letters of credit, participation agreements and other
documents relating to transactions entered into by Seller
or any of the Seller Subsidiaries in the ordinary course
of business and not involving extensions of credit with
respect to any one entity or related group of entities in
excess of $500,000.
(c) Seller and/or the Seller Subsidiaries carry
property, liability, director and officer errors and omissions,
products liability and other insurance coverage as set forth in
Schedule 2.11(c) under the heading "Insurance."
----------------
(d) True, correct and complete copies of the agreements,
contracts, leases, insurance policies and other documents referred
to in Section 2.11(b) have been included with Schedule 2.11(b)
--------------- ----------------
hereto. True, correct and complete copies of the agreements,
contracts, leases, insurance policies and other documents referred
to in Sections 2.11(a) and (c) have been or shall be furnished or
------------------------
made available to Buyers.
(e) To the best knowledge of Seller, each of the
agreements, contracts, leases, insurance policies and other
documents referred to in Schedules 2.11 (a), (b) and (c) is a
-------------------------------
valid, binding and enforceable obligation of the parties sought to
be bound thereby, except as the enforceability thereof against the
parties thereto (other than Seller or any of the Seller
Subsidiaries) may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws now or hereafter in
effect relating to the enforcement of creditors' rights generally,
and except that equitable principles may limit the right to obtain
specific performance or other equitable remedies.
(f) Schedule 2.11(f) under the heading "Loans" contains
----------------
a true, correct and complete listing, as of the date of this
Agreement, by account, of (i) all loans in excess of $250,000 of
Seller or any of the Seller Subsidiaries which have been
accelerated during the past twelve months; (ii) all loan
commitments or lines of credit of Seller or any of the Seller
Subsidiaries in excess of $250,000 which have been terminated by
Seller or any of the Seller Subsidiaries during the past twelve
months by reason of default or adverse developments in the
condition of the borrower or other events or circumstances
affecting the credit of the borrower; (iii) all loans, lines of
credit and loan commitments in excess of $250,000, as to which
Seller or any of the Seller Subsidiaries has given written notice
of its intent to terminate during the past twelve months; (iv)
with respect to all loans in excess of $250,000 all notification
letters and other written communications from Seller or any of the
Seller Subsidiaries to any of their respective borrowers,
customers or other parties during the past twelve months wherein
Seller or any of the Seller Subsidiaries has requested or demanded
that actions be taken to correct existing defaults or facts or
circumstances which may become defaults; (v) each borrower,
customer or other party
- 14 -
19
which has notified Seller or any of the Seller Subsidiaries during
the past twelve months of, or has asserted against Seller or any of
the Seller Subsidiaries, in each case in writing, any "lender
liability" or similar claim, and, to the best knowledge of Seller,
each borrower, customer or other party which has given Seller or any
of the Seller Subsidiaries any oral notification of, or orally
asserted to or against Seller or any of the Seller Subsidiaries, any
such claim; or (vi) all loans in excess of $100,000 (A) that are
contractually past due 90 days or more in the payment of principal
and/or interest, (B) that are on non-accrual status, (C) that have
been classified "doubtful," "loss" or the equivalent thereof by any
Regulatory Authority, (D) where a reasonable doubt exists as to the
timely future collectibility of principal and/or interest, whether
or not interest is still accruing or the loan is less than 90 days
past due, (E) the interest rate terms have been reduced and/or the
maturity dates have been extended subsequent to the agreement under
which the loan was originally created due to concerns regarding the
borrower's ability to pay in accordance with such initial terms, or
(F) where a specific reserve allocation exists in connection
therewith.
2.12 Absence of Defaults. Neither Seller nor any of the Seller
-------------------
Subsidiaries is in violation of its charter documents or By-Laws or in default
under any material agreement, commitment, arrangement, lease, insurance policy
or other instrument, whether entered into in the ordinary course of business
or otherwise and whether written or oral, and there has not occurred any event
that, with the lapse of time or giving of notice or both, would constitute
such a default.
2.13 Litigation and Other Proceedings. Except as set forth
--------------------------------
on Schedule 2.13 or otherwise disclosed in the Seller Financial Statements,
-------------
neither Seller nor any of the Seller Subsidiaries is a party to any pending
or, to the best knowledge of Seller, threatened claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or reasonably could
not be expected to have, a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole. Without limiting the generality of the
foregoing, there are no actions, suits or proceedings pending or, to the best
knowledge of Seller, threatened against Seller or any of the Seller
Subsidiaries or any of their respective officers or directors by any
shareholder of Seller or any of the Seller Subsidiaries (or any former
shareholder of Seller or any of the Seller Subsidiaries) or involving claims
under the Community Reinvestment Act of 1977, as amended, the Bank Secrecy
Act, the fair lending laws or any other similar laws.
2.14 Directors' and Officers' Insurance. Each of Seller and
----------------------------------
the Seller Subsidiaries has taken or will take all requisite action
(including, without limitation, the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance policy
or policies in order to preserve all rights thereunder with respect to all
matters (other than matters arising in connection with this Agreement and the
transactions contemplated hereby) occurring prior to the Effective Time that
are known to Seller.
2.15 Compliance with Laws.
--------------------
(a) To the best knowledge of Seller, Seller and each of
the Seller Subsidiaries have all permits, licenses,
authorizations, orders and approvals of, and have made all
filings, applications and registrations with, all Regulatory
Authorities that are required in
- 15 -
20
order to permit them to own or lease their respective properties and
assets and to carry on their respective businesses as presently
conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and no suspension
or cancellation of any of them is threatened; and all such filings,
applications and registrations are current; in each case except for
permits, licenses, authorizations, orders, approvals, filings,
applications and registrations the failure to have (or have made)
would not have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole.
(b) (i) Each of Seller and the Seller Subsidiaries has
complied with all laws, regulations and orders (including, without
limitation, zoning ordinances, building codes, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and
securities, tax, environmental, civil rights, and occupational
health and safety laws and regulations including, without
limitation, in the case of Seller or any Seller Subsidiary that is
a bank or savings association, banking organization, banking
corporation or trust company, all statutes, rules, regulations and
policy statements pertaining to the conduct of a banking,
deposit-taking, lending or related business, or to the exercise of
trust powers) and governing instruments applicable to it and to
the conduct of its business, except where such failure to comply
would not have a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole, and (ii) neither Seller nor any of
the Seller Subsidiaries is in default under, and no event has
occurred which, with the lapse of time or notice or both, could
result in the default under, the terms of any judgment, order,
writ, decree, permit, or license of any Regulatory Authority or
court, whether federal, state, municipal or local, and whether at
law or in equity.
(c) Neither Seller nor any of the Seller Subsidiaries is
subject to or reasonably likely to incur a liability as a result
of its ownership, operation, or use of any Property (as defined
below) of Seller (whether directly or, to the best knowledge of
Seller, as a consequence of such Property being acquired in
foreclosure or in lieu of foreclosure or being part of the
investment portfolio of Seller or any of the Seller Subsidiaries)
(A) that is contaminated by or contains any Toxic Substance (as
defined in Section 2.08) including, without limitation, petroleum,
asbestos, PCBs, pesticides, herbicides and any other substance or
waste that is hazardous to human health or the environment and
regulated by federal, state or local law, or (B) on which any
Toxic Substance has been stored, disposed of, placed or used at
the Property or in the construction of structures thereon; and
which, in each case, reasonably could be expected to have a
Material Adverse Effect on Seller and the Seller Subsidiaries,
taken as a whole. "Property" shall include all property (real or
personal, tangible or intangible) owned or controlled by Seller or
any of the Seller Subsidiaries, including, without limitation,
property acquired under foreclosure or in lieu of foreclosure,
property in which any venture capital or similar unit of Seller or
any of the Seller Subsidiaries has an interest and, to the best
knowledge of Seller, property held by Seller or any of the Seller
Subsidiaries in its capacity as a trustee. No claim, action, suit
or proceeding is threatened or pending and no material claim has
been asserted against Seller or any of the Seller Subsidiaries
relating to Property of Seller or any of the Seller Subsidiaries
before any court or other Regulatory Authority or arbitration
tribunal relating to Toxic Substances, pollution or the
- 16 -
21
environment, and there is no outstanding judgment, order, writ,
injunction, decree or award against or affecting Seller or any of
the Seller Subsidiaries with respect to the same. Except for
statutory or regulatory restrictions of general application, no
Regulatory Authority has placed any restriction on the business of
Seller or any of the Seller Subsidiaries which reasonably could be
expected to have a Material Adverse Effect on Seller and the
Seller Subsidiaries, taken as a whole.
(d) Neither Seller nor any of the Seller Subsidiaries
has received any notification or communication that has not been
finally resolved from any Regulatory Authority (i) asserting that
any Seller or any of the Seller Subsidiaries or any Property is
not in substantial compliance with any of the statutes,
regulations or ordinances that such Regulatory Authority enforces,
(ii) threatening to revoke any license, franchise, permit or
governmental authorization that is material to the Condition of
Seller and the Seller Subsidiaries, taken as a whole, including,
without limitation, such company's status as an insured depository
institution under the FDI Act, (iii) requiring or threatening to
require Seller or any of the Seller Subsidiaries, or indicating
that Seller or any of the Seller Subsidiaries may be required, to
enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting or
purporting to direct, restrict or limit in any manner the
operations of Seller or any of the Seller Subsidiaries, including,
without limitation, any restriction on the payment of dividends.
No such cease and desist order, agreement or memorandum of
understanding or other agreement is currently in effect.
(e) Neither Seller nor any of the Seller Subsidiaries is
required by Section 32 of the FDI Act to give prior notice to any
federal banking agency of the proposed addition of an individual
to its board of directors or the employment of an individual as a
senior executive officer.
2.16 Labor. No work stoppage involving Seller or any of the
-----
Seller Subsidiaries is pending or, to the best knowledge of Seller,
threatened. Neither Seller nor any of the Seller Subsidiaries is involved in,
or, to the best knowledge of Seller, threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding. None of the
employees of Seller or the Seller Subsidiaries are represented by any labor
union or any collective bargaining organization.
2.17 Material Interests of Certain Persons. No officer or
-------------------------------------
director of Seller or any of the Seller Subsidiaries, or any "associate" (as
such term is defined in Rule 14a-1 under the Exchange Act) of any such officer
or director, has any interest in any contract or property (real or personal,
tangible or intangible), used in, or pertaining to the business of, Seller or
any of the Seller Subsidiaries, which in the case of Seller and each of the
Seller Subsidiaries would be required to be disclosed by Item 404 of
Regulation S-K promulgated by the SEC.
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets;
-----------------------------------------------------------
Financial Assets.
----------------
(a) All of the accounts, notes, and other receivables
that are reflected in the Seller Financial Statements as of March
31, 1997 were acquired in the ordinary course of
- 17 -
22
business and were collectible in full in the ordinary course of
business, except for possible loan and lease losses which are
adequately provided for in the allowance for loan and lease losses
reflected in such Seller Financial Statements, and the collection
experience of Seller and the Seller Subsidiaries since March 31,
1997 to the date hereof, has not deviated in any material and
adverse manner from the credit and collection experience of Seller
and the Seller Subsidiaries, taken as a whole, for the year ended
December 31, 1996.
(b) The allowances for loan losses contained in the
Seller Financial Statements were established in accordance with
the past practices and experiences of Seller and the Seller
Subsidiaries, and the allowance for loan and lease losses shown on
the consolidated balance sheet of Seller and the Seller
Subsidiaries as of March 31, 1997, were adequate in all material
respects under the requirements of GAAP, or regulatory accounting
principles, as the case may be, to provide for possible losses on
loans and leases (including, without limitation, accrued interest
receivable) and credit commitments (including, without limitation,
stand-by letters of credit) as of the date of such balance sheet.
(c) Schedule 2.18(c) sets forth as of the date of this
----------------
Agreement all assets classified by Seller as real estate acquired
through foreclosure or repossession, including foreclosed assets.
(d) The aggregate amount of all Non-Performing Assets
(as defined below) on the books of Seller and the Seller
Subsidiaries does not exceed $5,000,000. "Non-Performing Assets"
shall mean (i) all loans (A) that are contractually past due 90
days or more in the payment of principal and/or interest, (B) that
are on nonaccrual status, (C) that have been classified
"doubtful," "loss" or the equivalent thereof by any Regulatory
Agency or (D) where the interest rate terms have been reduced
and/or the maturity dates have been extended subsequent to the
agreement under which the loan was originally created due to
concerns regarding the borrower's ability to pay in accordance
with such initial terms, and (ii) all assets classified by Seller
as real estate acquired through foreclosure or in lieu of
foreclosure, including in-substance foreclosures, and all other
assets acquired through foreclosure or in lieu of foreclosure.
(e) All loans receivable (including discounts) and
accrued interest entered on the books of Seller and the Seller
Subsidiaries, to the extent unpaid on the Closing Date, arose out
of bona fide arm's-length transactions, were made for good and
valuable consideration in the ordinary course of Seller's or the
appropriate Seller Subsidiary's respective business, and the notes
or other evidences of indebtedness with respect to such loans or
discounts are true and genuine and are what they purport to be.
The loans, discounts and the accrued interest reflected on the
books of Seller and the Seller Subsidiaries are subject to no
defenses, set-offs or counterclaims (including, without
limitation, those afforded by usury or truth-in-lending laws),
except as may be provided by bankruptcy, insolvency or similar
laws affecting creditors' rights generally or by general
principles of equity. All such loans are owned by Seller or the
appropriate Seller Subsidiary free and clear of any liens,
restrictions or encumbrances.
- 18 -
23
(f) The notes and other evidences of indebtedness
evidencing the loans described in (e) above, and all pledges,
mortgages, deeds of trust and other collateral documents or
security instruments relating thereto are and will be, in all
material respects, valid, true, genuine and enforceable, and what
they purport to be. Seller and each of the Seller Subsidiaries
has good and valid title to the investment securities shown on
their respective Seller Financial Statements and all securities
entered on the books of Seller or the appropriate Seller
Subsidiary subsequent to March 31, 1997, except for those sold or
redeemed in the ordinary course of business. A complete and
accurate list of such investment securities as of March 31, 1997
is attached as Schedule 2.18(f). Such list shall be updated each
----------------
month in writing until the Closing.
2.19 Employee Benefit Plans.
----------------------
(a) Schedule 2.19(a) lists all pension, retirement,
----------------
supplemental retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, medical, disability,
workers' compensation, vacation, group insurance, severance and
other employee benefit, incentive and welfare policies, contracts,
plans and arrangements, and all trust agreements related thereto,
maintained by or contributed to by Seller or any of the Seller
Subsidiaries in respect of any of the present or former directors,
officers, or other employees of and/or consultants to Seller or
any of the Seller Subsidiaries (collectively, "Seller Employee
Plans"). Seller has furnished Buyers with the following documents
with respect to each Seller Employee Plan: (i) a true and complete
copy of all written documents comprising such Seller Employee Plan
(including amendments and individual agreements relating thereto)
or, if there is no such written document, an accurate and complete
description of the Seller Employee Plan; (ii) the most recently
filed Form 5500 or Form 5500-C/R (including all schedules
thereto), if applicable; (iii) the most recent financial
statements and actuarial reports, if any; (iv) the summary plan
description currently in effect and all material modifications
thereof, if any; and (v) the most recent IRS determination letter,
if any.
(b) All Seller Employee Plans have been maintained and
operated in all material respects in accordance with their terms
and the requirements of all applicable statutes, orders, rules and
final regulations, including, without limitation, to the extent
applicable, ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"). All contributions required to be made to
Seller Employee Plans have been made or reserved.
(c) With respect to each of the Seller Employee Plans
which is a pension plan (as defined in Section 3(2) of ERISA) (the
"Pension Plans"): (i) each Pension Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has
been determined to be so qualified by the IRS and such
determination letter may still be relied upon, and each related
trust is exempt from taxation under Section 501(a) of the Code;
(ii) the present value of all benefits vested and all benefits
accrued under each Pension Plan which is subject to Title IV of
ERISA did not, in each case, as of the last
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24
applicable annual valuation date (as indicated on Schedule 2.19(a)),
----------------
exceed the value of the assets of the Pension Plan allocable to such
vested or accrued benefits; (iii) there has been no "prohibited
transaction," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, which could subject any Pension Plan or
associated trust, or Seller or any of the Seller Subsidiaries, to
any tax or penalty; (iv) no Pension Plan or any trust created
thereunder has been terminated, nor has there been any "reportable
events" with respect to any Pension Plan, as that term is defined
in Section 4043 of ERISA since January 1, 1989; and (v) no Pension
Plan or any trust created thereunder has incurred any "accumulated
funding deficiency", as such term is defined in Section 302 of
ERISA (whether or not waived). No Pension Plan is a
"multiemployer plan" as that term is defined in Section 3(37) of
ERISA.
(d) Except as disclosed in Schedule 2.19(d), neither
----------------
Seller nor any of the Seller Subsidiaries has any liability for
any post-retirement health, medical or similar benefit of any kind
whatsoever, except as required by statute or regulation.
(e) Neither Seller nor any of the Seller Subsidiaries
has any material liability under ERISA or the Code as a result of
its being a member of a group described in Sections 414(b), (c),
(m) or (o) of the Code.
(f) Except as disclosed in Schedule 2.19(f), neither the
----------------
execution nor delivery of this Agreement, nor the consummation of
any of the transactions contemplated hereby, will (i) result in
any payment (including, without limitation, severance,
unemployment compensation or golden parachute payment) becoming
due to any director or employee of Seller or any of the Seller
Subsidiaries from any of such entities, (ii) increase any benefit
otherwise payable under any of the Seller Employee Plans or (iii)
result in the acceleration of the time of payment of any such
benefit. Seller shall use its best efforts to insure that no
amounts paid or payable by Seller, the Seller Subsidiaries or
Buyers to or with respect to any employee or former employee of
Seller or any of the Seller Subsidiaries will fail to be
deductible for federal income tax purposes by reason of Section
280G of the Code.
2.20 Conduct of Seller to Date. Except as disclosed in
-------------------------
Schedule 2.20, from and after March 31, 1997 through the date of this
-------------
Agreement, except as set forth in the Seller Financial Statements: (i) Seller
and the Seller Subsidiaries have conducted their respective businesses in the
ordinary and usual course consistent with past practices; (ii) neither Seller
nor any of the Seller Subsidiaries has issued, sold, granted, conferred or
awarded any of its Equity Securities, or any corporate debt securities which
would be classified under GAAP as long-term debt on the balance sheets of
Seller or the Seller Subsidiaries; (iii) Seller has not effected any stock
split or adjusted, combined, reclassified or otherwise changed its
capitalization; (iv) Seller has not declared, set aside or paid any dividend
(other than its regular quarterly dividends) or other distribution in respect
of its capital stock, or purchased, redeemed, retired, repurchased or
exchanged, or otherwise acquired or disposed of, directly or indirectly, any
of its Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise; (v) neither Seller nor any of the Seller Subsidiaries
has incurred any obligation or liability (absolute or contingent), except
liabilities incurred in the ordinary course of business, or subjected to Lien
any of its assets or properties other than in the ordinary course of business
consistent with past practice; (vi)
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25
neither Seller nor any of the Seller Subsidiaries has discharged or satisfied
any Lien or paid any obligation or liability (absolute or contingent), other
than in the ordinary course of business; (vii) neither Seller nor any of the
Seller Subsidiaries has sold, assigned, transferred, leased, exchanged, or
otherwise disposed of any of its properties or assets other than for a fair
consideration in the ordinary course of business; (viii) except as required by
contract or law, neither Seller nor any of the Seller Subsidiaries has (A)
increased the rate of compensation of, or paid any bonus to, any of its
directors, officers, or other employees, except in accordance with existing
policy, (B) entered into any new, or amended or supplemented any existing,
employment, management, consulting, deferred compensation, severance, or other
similar contract, (C) entered into, terminated, or substantially modified any of
the Seller Employee Plans or (D) agreed to do any of the foregoing; (ix) neither
Seller nor any Seller Subsidiary has suffered any material damage, destruction,
or loss, whether as the result of fire, explosion, earthquake, accident,
casualty, labor trouble, requisition, or taking of property by any Regulatory
Authority, flood, windstorm, embargo, riot, act of God or the enemy, or other
casualty or event, and whether or not covered by insurance; (x) neither Seller
nor any of the Seller Subsidiaries has cancelled or compromised any debt, except
for debts charged off or compromised in accordance with the past practice of
Seller and the Seller Subsidiaries; and (xi) neither Seller nor any of the
Seller Subsidiaries has entered into any material transaction, contract or
commitment outside the ordinary course of its business.
2.21 Absence of Undisclosed Liabilities.
----------------------------------
(a) As of the date of this Agreement, neither Seller nor
any of the Seller Subsidiaries has any debts, liabilities or
obligations equal to or exceeding $25,000, individually or $50,000
in the aggregate, whether accrued, absolute, contingent or
otherwise and whether due or to become due, which are required to
be reflected in the Seller Financial Statements or the notes
thereto in accordance with GAAP except:
(i) liabilities and obligations reflected on the
Seller Financial Statements;
(ii) operating leases reflected on Schedule
--------
2.11(b); and
-------
(iii) debts, liabilities or obligations incurred
since March 31, 1997 in the ordinary and usual course of
their respective businesses, none of which are for breach
of contract, breach of warranty, torts, infringements or
lawsuits and none of which have a Material Adverse Effect
on Seller and the Seller Subsidiaries, taken as a whole.
(b) Neither Seller nor any of the Seller Subsidiaries
was as of March 31, 1997, and since such date to the date hereof,
has become a party to, any contract or agreement, excluding
deposits, loan agreements, and commitments, notes, security
agreements, repurchase and reverse repurchase agreements, bankers'
acceptances, outstanding letters of credit and commitments to
issue letters of credit, participation agreements and other
documents relating to transactions entered into by Seller or any
of the Seller Subsidiaries in the ordinary course of business,
that had, has or may be reasonably expected to have a Material
Adverse Effect on Seller and the Seller Subsidiaries, taken as a
whole.
- 21 -
26
2.22 Proxy Statement, Etc. None of the information regarding
--------------------
Seller or any of the Seller Subsidiaries to be supplied by Seller for
inclusion or included in (i) the Registration Statement on Form S-4 to be
filed with the SEC by Mercantile for the purpose of registering the shares of
Mercantile Common Stock to be exchanged for shares of Seller Common Stock
pursuant to the provisions of this Agreement (the "Registration Statement"),
(ii) the Proxy Statement to be mailed to Seller's shareholders in connection
with the meeting to be called to consider this Agreement and the Merger (the
"Proxy Statement") or (iii) any other documents to be filed with any
Regulatory Authority in connection with the transactions contemplated hereby
will, at the respective times such documents are filed with any Regulatory
Authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading or, in
the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of Seller's shareholders referred to in
Section 5.03, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for such
meeting. All documents which Seller or any of the Seller Subsidiaries is
responsible for filing with any Regulatory Authority in connection with the
Merger will comply as to form in all material respects with the provisions of
applicable law.
2.23 Registration Obligations. Neither Seller nor any of the
------------------------
Seller Subsidiaries is under any obligation, contingent or otherwise, which
will survive the Effective Time by reason of any agreement to register any
transaction involving any of its securities under the Securities Act.
2.24 Tax and Regulatory Matters. Neither Seller nor any of the
--------------------------
Seller Subsidiaries has taken or agreed to take any action or has any
knowledge of any fact or circumstance that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement.
2.25 Brokers and Finders. Except for Xxxxxxxx, Inc. to whom a
-------------------
fee not to exceed $440,000 shall be paid, neither Seller nor any of the Seller
Subsidiaries nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for Seller or any of the Seller
Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
2.26 Interest Rate Risk Management Instruments.
-----------------------------------------
(a) Set forth on Schedule 2.26(a) is a list as of the
----------------
date hereof of all interest rate swaps, caps, floors and option
agreements and other interest rate risk management arrangements to
which Seller or any of the Seller Subsidiaries is a party or by
which any of their properties or assets may be bound.
(b) All such interest rate swaps, caps, floors and
option agreements and other interest rate risk management
arrangements to which Seller or any of the Seller Subsidiaries is
a party or by which any of their properties or assets may be bound
were entered into in the ordinary course of business and, to the
best knowledge of Seller, in
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27
accordance with prudent banking practice and applicable rules,
regulations and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the time
and are legal, valid and binding obligations of Seller or a Seller
Subsidiary and are in full force and effect. Seller and each of the
Seller Subsidiaries has duly performed in all material respects all
of its obligations thereunder to the extent that such obligations to
perform have accrued, and to the best knowledge of Seller, there are
no material breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
2.27 Accuracy of Information. The statements contained in this
-----------------------
Agreement, the Schedules and any other written document executed and delivered
by or on behalf of Seller pursuant to the terms of this Agreement are true and
correct as of the date hereof or as of the date delivered in all material
respects, and such statements and documents do not omit any material fact
necessary to make the statements contained therein not misleading.
2.28 Year 2000 Compliant. To the best knowledge of Seller, all
-------------------
computer software and hardware utilized by Seller or any Seller Subsidiary is
Year 2000 compliant, which, for purposes of this Agreement, shall mean that
the data outside the range 1990-1999 will be correctly processed in any level
of computer hardware or software including, but not limited to, microcode,
firmware, applications programs, files and data bases. All computer software
is designed to be used prior to, during and after the calendar year 2000 A.D.,
and that such software will operate during each such time period without error
relating to date data, specifically including any error relating to, or the
product of, date data that represents or references different centuries or
more than one century.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
As an inducement to Seller to enter into and perform its
obligations under this Agreement, and notwithstanding any examinations,
inspections, audits or other investigations made by Seller, the Buyers hereby
represent and warrant to Seller as follows:
3.01 Organization and Authority. Buyer and Merger Sub are each
--------------------------
corporations duly organized, validly existing and in good standing under the
laws of the State of Missouri, are each qualified to do business and are each
in good standing in all jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted, except where the failure to be so
qualified would not have a Material Adverse Effect on Mercantile and its
Subsidiaries, taken as a whole. Each of Mercantile and Merger Sub is
registered as a bank holding company with the Federal Reserve Board under the
BHCA.
3.02 Capitalization of Mercantile. The authorized capital
----------------------------
stock of Mercantile consists of (i) 200,000,000 shares of Mercantile Common
Stock, of which, as of June 30, 1997, 78,589,969 shares were issued and
74,042,343 were outstanding and (ii) 5,000,000 shares of preferred stock, no
par value ("Mercantile Preferred Stock"), issuable in series, of which as of
the date hereof, no shares were issued
- 23 -
28
and outstanding. Mercantile has designated 2,000,000 shares of Mercantile
Preferred Stock as "Series A Junior Participating Preferred Stock" and has
reserved such shares under a Rights Agreement dated May 23, 1988 between
Mercantile and Mercantile Bank National Association, as Rights Agent. As of
June 30, 1997, Mercantile had reserved: (i) 8,534,265 shares of Mercantile
Common Stock for issuance under various Mercantile employee and/or director
stock option, incentive and/or benefit plans ("Mercantile Employee/Director
Stock Grants"); and (ii) 13,042,110 shares of Mercantile Common Stock for
issuance upon the acquisition of Roosevelt Financial Group, Inc. ("Roosevelt")
pursuant to the Agreement and Plan of Reorganization dated as of December 22,
1996 by and between Mercantile and Roosevelt. From June 30, 1997 through the
date of this Agreement, no shares of Mercantile Common Stock have been issued,
excluding any such shares which may have been issued in connection with
Mercantile Employee/Director Stock Grants and the acquisition of Roosevelt.
Mercantile continually evaluates possible acquisitions and may
prior to the Effective Time enter into one or more agreements providing for,
and may consummate, the acquisition by it of another bank, association, bank
holding company, savings and loan holding company or other company (or the
assets thereof) for consideration that may include Equity Securities. In
addition, prior to the Effective Time, Mercantile may, depending on market
conditions and other factors, otherwise determine to issue equity,
equity-linked or other securities for financing purposes or repurchase its
outstanding Equity Securities. Notwithstanding the foregoing, neither
Mercantile nor any Mercantile Subsidiary has taken or agreed to take any
action or has any knowledge of any fact or circumstance and neither Mercantile
nor Merger Sub will take any action that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code, (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement or (iii) prevent the Merger from
qualifying for pooling-of-interests accounting treatment. Except as set forth
above, there are no other Equity Securities of Mercantile outstanding. All of
the issued and outstanding shares of Mercantile Common Stock are validly
issued, fully paid, and nonassessable, and have not been issued in violation
of any preemptive right of any shareholder of Mercantile. At the Effective
Time, the Mercantile Common Stock to be issued in the Merger will be duly
authorized, validly issued, fully paid and nonassessable, will not be issued
in violation of any preemptive right of any shareholder of Mercantile and will
be listed for trading on the NYSE.
3.03 Authorization.
-------------
(a) Mercantile and Merger Sub each have the corporate
power and authority to enter into this Agreement and to carry out
their respective obligations hereunder. The execution, delivery
and performance of this Agreement by Mercantile and Merger Sub and
the consummation by Mercantile and Merger Sub of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action of Mercantile and Merger Sub. Subject to the
receipt of such approvals of the Regulatory Authorities as may be
required by statute or regulation, this Agreement is a valid and
binding obligation of Mercantile and Merger Sub enforceable
against each in accordance with its terms.
(b) Neither the execution, delivery and performance by
Mercantile and Merger Sub of this Agreement, nor the consummation
by Mercantile and Merger Sub of the
- 24 -
29
transactions contemplated hereby, nor compliance by Mercantile and
Merger Sub with any of the provisions hereof, will (i) violate,
conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration of, or result in the
creation of, any Lien upon any of the properties or assets of
Mercantile or Merger Sub under any of the terms, conditions or
provisions of (x) their respective Articles of Incorporation or
By-Laws, or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
Mercantile or Merger Sub is a party or by which they may be bound,
or to which Mercantile or Merger Sub or any of their respective
properties or assets may be subject, or (ii) subject to compliance
with the statutes and regulations referred to in subsection (c) of
this Section 3.03, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to
Mercantile or Merger Sub or any of their respective properties or
assets; other than violations, conflicts, breaches, defaults,
terminations, accelerations or Liens which would not have a
Material Adverse Effect on Mercantile and its Subsidiaries, taken
as a whole.
(c) Other than in connection with or in compliance with
the provisions of the Missouri Statute, the Arkansas Statute, the
Securities Act, the Exchange Act, the securities or blue sky laws
of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required under the BHCA,
the FDI Act or any required approvals of any other Regulatory
Authority, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or
authority is necessary for the consummation by Mercantile and
Merger Sub of the transactions contemplated by this Agreement.
3.04 Mercantile Financial Statements. The supplemental
-------------------------------
consolidated balance sheets of Mercantile and its Subsidiaries as of December
31, 1996, 1995 and 1994 and related supplemental consolidated statements of
income, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1996, together with the notes thereto,
audited by KPMG Peat Marwick LLP, as filed with the SEC on Form 8-K dated May
13, 1997 (collectively, the "Mercantile Financial Statements"), have been
prepared in accordance with GAAP, present fairly the consolidated financial
position of Mercantile and its Subsidiaries at the dates thereof and the
consolidated results of operations, changes in shareholders' equity and cash
flows of Mercantile and its Subsidiaries for the periods stated therein and
are derived from the books and records of Mercantile and its Subsidiaries,
which are complete and accurate in all material respects and have been
maintained in accordance with good business practices. Neither Mercantile nor
any of its Subsidiaries has any material contingent liabilities that are not
described in the Mercantile Financial Statements.
3.05 Mercantile Reports. Since January 1, 1995, each of
------------------
Mercantile and its Subsidiaries has filed all reports, registrations and
statements, together with any required amendments thereto, that it was
required to file with any Regulatory Authority. All such reports and
statements filed 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
- 25 -
30
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.06 Material Adverse Effect. Since March 31, 1997, there has
-----------------------
been no Material Adverse Effect on Mercantile and its Subsidiaries, taken as a
whole.
3.07 Registration Statement, Etc. None of the information
----------------------------
regarding Mercantile or any of its Subsidiaries to be supplied by Buyers for
inclusion or included in (i) the Registration Statement, (ii) the Proxy
Statement, or (iii) any other documents to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will, at the
respective times such documents are filed with any Regulatory Authority and,
in the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein not misleading or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the meeting of shareholders referred to in Section 5.03, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for such meeting. All documents
which Mercantile or Merger Sub are responsible for filing with any Regulatory
Authority in connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
3.08 Brokers and Finders. Neither Mercantile, Merger Sub nor
-------------------
any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has
acted directly or indirectly for Mercantile or Merger Sub in connection with
this Agreement or the transactions contemplated hereby.
ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01 Conduct of Businesses Prior to the Effective Time. During
-------------------------------------------------
the period from the date of this Agreement to the Effective Time, Seller and
the Seller Subsidiaries shall conduct their businesses according to the
ordinary and usual course consistent with past and current practices and shall
use their best efforts to maintain and preserve their business organization,
employees and advantageous business relationships and retain the services of
their officers and key employees.
4.02 Forbearances of Seller. Except as set forth in Schedule
---------------------- --------
4.02 and except to the extent required by law, regulation or Regulatory
----
Authority, or with the prior written consent of Buyers (unless otherwise
specifically noted in this Section 4.02), during the period from the date of
this Agreement to the Effective Time, Seller shall not and shall not permit
any of the Seller Subsidiaries to:
(a) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital
stock (other than dividends from any of the Seller Subsidiaries to
Seller or to another of the Seller Subsidiaries), except that
Seller may declare and pay regular quarterly cash dividends of not
more than $0.32 per share on the
- 26 -
31
Seller Common Stock; provided, however, that if the Effective Time
shall not have occurred on or before March 1, 1998, Seller may
declare, set aside or pay a dividend for each share of Seller Common
Stock for each quarter thereafter in which the Mercantile Board of
Directors shall declare a dividend on shares of Mercantile Common
Stock that equals the product or (i) the Exchange Ratio and (ii) the
amount of the dividend per share declared by the Board of Directors
of Mercantile; provided, further, however, that Seller shall not
declare or pay a quarterly dividend for any quarter in which
Seller shareholders will be entitled to receive a regular
quarterly dividend on the shares of Mercantile Common Stock to be
issued in the Merger;
(b) enter into or amend any employment, severance or
similar agreement or arrangement with any director, officer or
employee, or materially modify any of the Seller Employee Plans or
grant any salary or wage increase or materially increase any
employee benefit (including incentive or bonus payments), except
(i) normal individual increases in compensation to employees
consistent with past practice, (ii) as required by law or contract
and (iii) such increases of which Seller notifies Buyers in
writing and which Buyers do not disapprove within 10 days of the
receipt of such notice;
(c) authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter into an
agreement in principle with respect to, any merger, consolidation
or business combination (other than the Merger), any acquisition
of a material amount of assets or securities, any disposition of a
material amount of assets or securities or any release or
relinquishment of any material contract rights;
(d) propose or adopt any amendments to its Articles of
Incorporation or other charter document or By-Laws;
(e) issue, sell, grant, confer or award any of its
Equity Securities or effect any stock split or adjust, combine,
reclassify or otherwise change its capitalization as it existed on
the date of this Agreement;
(f) purchase, redeem, retire, repurchase or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of
its Equity Securities, whether pursuant to the terms of such
Equity Securities or otherwise;
(g) without first consulting with and obtaining the
written consent of Mercantile, cause or permit Horizon Bank to
enter into, renew or increase any loan or credit commitment
(including stand-by letters of credit) to, or invest or agree to
invest in any person or entity or modify any of the material
provisions or renew or otherwise extend the maturity date of any
existing loan or credit commitment (collectively, "Lend to") in an
amount equal to or in excess of $500,000 or in any amount which,
when aggregated with any and all loans or credit commitments of
Seller and the Seller Subsidiaries to such person or entity, would
be equal to or in excess of $500,000; provided, however, that
Seller or any of the Seller Subsidiaries may make any such loan or
credit commitment in the event (A) Seller or any Seller Subsidiary
has delivered to Buyers or their designated representative a
notice of its intention to make such loan and
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32
such information as Buyers or their designated representative may
reasonably require in respect thereof and (B) Buyers or their
designated representative shall not have reasonably objected to such
loan by giving written or facsimile notice of such objection within
two (2) business days following the delivery to Buyers or their
designated representative of the notice of intention and
information as aforesaid; provided further, however, that nothing
in this paragraph shall prohibit Seller or any Seller Subsidiary
from honoring any contractual obligation in existence on the date
of this Agreement. Notwithstanding this Section 4.02(g), Seller
shall be authorized without first consulting with Buyers or
obtaining Buyers' prior written consent, to cause or permit
Horizon Bank to increase the aggregate amount of any credit
facilities theretofore established in favor of any person or
entity (each a "Pre-Existing Facility"), provided that the
aggregate amount of any and all such increases shall not be in
excess of the lesser of ten percent (10%) of such Pre-Existing
Facilities or $25,000;
(h) directly or indirectly (including through its
officers, directors, employees or other representatives) (i)
initiate, solicit or encourage any discussions, inquiries or
proposals with any third party (other than Buyers) relating to the
disposition of any significant portion of the business or assets
of Seller or any of the Seller Subsidiaries or the acquisition of
Equity Securities of Seller or any of the Seller Subsidiaries or
the merger of Seller or any of the Seller Subsidiaries with any
person (other than Buyers) or any similar transaction (each such
transaction being referred to herein as an "Acquisition
Transaction"), or (ii) provide any such person with information or
assistance or negotiate with any such person with respect to an
Acquisition Transaction, and Seller shall promptly notify Buyers
orally of all the relevant details relating to all inquiries,
indications of interest and proposals which it may receive with
respect to any Acquisition Transaction;
(i) take any action that would (A) materially impede or
delay the consummation of the transactions contemplated by this
Agreement or the ability of Buyers or Seller to obtain any
approval of any Regulatory Authority required for the transactions
contemplated by this Agreement or to perform its covenants and
agreements under this Agreement, (B) prevent or impede the
transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code or
(C) prevent the Merger from qualifying for pooling-of-interests
accounting treatment;
(j) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for the obligations of
any other individual, corporation or other entity;
(k) materially restructure or change its investment
securities portfolio, through purchases, sales or otherwise, or
the manner in which the portfolio is classified or reported, or
execute individual investment transactions of greater than
$2,000,000 for U.S. Treasury or Federal Agency Securities and
$250,000 for all other investment instruments;
- 28 -
33
(l) agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any
transaction or intentionally take or omit to take any other act
which would make any of the representations and warranties in
Article II of this Agreement untrue or incorrect in any material
respect if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other act; or
(m) enter into, increase or renew any loan or credit
commitment (including standby letters of credit) to any executive
officer or director of Seller or any of the Seller Subsidiaries,
any holder of 10% or more of the outstanding shares of Seller
Common Stock, or any entity controlled, directly or indirectly, by
any of the foregoing or engage in any transaction with any of the
foregoing which is of the type or nature sought to be regulated in
12 U.S.C. Sec. 371c and 12 U.S.C. Sec. 371c-1, without first
obtaining the prior written consent of Buyers, which consent shall
not be unreasonably withheld. For purposes of this subsection
(m), "control" shall have the meaning associated with that term
under 12 U.S.C. Sec. 371c.
4.03 Forbearances of the Buyers. During the period from the
--------------------------
date of this Agreement to the Closing Date, the Buyers shall not, without the
prior consent of Seller, agree in writing or otherwise to engage in any
activity, enter into any transaction or take or omit to take any other action
(a) that would (i) materially impede or delay the
consummation of the transactions contemplated by this Agreement or
the ability of Mercantile or Seller to obtain any necessary
approvals of any regulatory authority required for the
transactions contemplated by this Agreement or to perform its
covenants and agreements under this Agreement, (ii) prevent or
impede the transactions contemplated hereby from qualifying for
pooling-of-interests accounting treatment or as a reorganization
within the meaning of Section 368 of the Code or (iii) prevent the
Merger from qualifying for pooling-of-interests accounting
treatment; or
(b) which would make any of the representations and
warranties of Article III of this Agreement untrue or incorrect in
any material respect if made anew after engaging in such activity,
entering into such transaction, or taking or omitting such other
action.
ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01 Access and Information; Due Diligence. Buyers and Seller
-------------------------------------
shall each afford to the other, and to the other's accountants, counsel and
other representatives, full access during normal business hours, during the
period prior to the Effective Time, to all their respective properties, books,
contracts, commitments and records and, during such period, each shall furnish
promptly to the other (i) a copy of each report, schedule and other document
filed or received by it during such period pursuant to the requirements of
federal and state securities laws and (ii) all other information concerning
its business, properties and personnel as the other may reasonably request.
Each party shall, and shall cause its advisors and representatives to, (A)
hold confidential all information obtained in connection with any transaction
contemplated hereby with respect to the other party and its Subsidiaries which
is not
- 00 -
00
xxxxxxxxx xxxxxx xxxxxxxxx, (X) in the event of a termination of this Agreement,
return all documents (including copies thereof) obtained hereunder from the
other party or any of its Subsidiaries to it and (C) use their respective best
efforts to cause all of such party's confidential information obtained pursuant
to this Agreement or in connection with the negotiation of this Agreement to be
treated as confidential and not use, or knowingly permit others to use, any such
information unless such information becomes generally available to the public.
5.02 Registration Statement; Regulatory Matters.
------------------------------------------
(a) Mercantile shall prepare and, subject to the review
and consent of Seller with respect to matters relating to Seller,
file with the SEC as soon as is reasonably practicable the
Registration Statement (or the equivalent in the form of
preliminary proxy materials) with respect to the shares of
Mercantile Common Stock to be issued in the Merger. Mercantile
shall prepare and, subject to the review and consent of Seller
with respect to matters relating to Seller, use its best efforts
to file as soon as is reasonably practicable an application for
approval of the Merger with the Federal Reserve Board, and such
additional regulatory authorities as may require an application,
and shall use its best efforts to cause the Registration Statement
to become effective. Mercantile shall also take any action
required to be taken under any applicable state blue sky or
securities laws in connection with the issuance of such shares,
and Seller and the Seller Subsidiaries shall furnish Mercantile
all information concerning Seller and the Seller Subsidiaries and
the shareholders thereof as Mercantile may reasonably request in
connection with any such action.
(b) Seller and Buyers shall cooperate and use their
respective best efforts to prepare all documentation, to effect
all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities
necessary to consummate the transactions contemplated by this
Agreement and, as and if directed by Mercantile, to consummate
such other transactions by and among Mercantile's Subsidiaries and
the Seller Subsidiaries concurrently with or following the
Effective Time, provided that such actions do not: (i) materially
impede or delay the receipt of any approval referred to in Section
6.01(b); (ii) prevent or impede the transactions contemplated
hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (iii) the consummation of the
transactions contemplated by this Agreement.
5.03 Shareholder Approval. Seller shall call a special meeting
--------------------
of its shareholders to be held as soon as is reasonably possible for the
purpose of voting upon this Agreement and the Merger and related matters. In
connection with such meeting, Mercantile shall prepare, subject to the review
and consent of Seller, the Proxy Statement (which shall be part of the
Registration Statement to be filed with the SEC by Mercantile) and mail the
same to the shareholders of Seller. The Board of Directors of Seller shall
submit for approval of Seller's shareholders the matters to be voted upon at
such meeting. The Board of Directors of Seller hereby does and will recommend
this Agreement and the transactions contemplated hereby to the shareholders of
Seller and use its reasonable best efforts to obtain any vote of Seller's
shareholders necessary for the approval of this Agreement.
- 30 -
35
5.04 Current Information. During the period from the date of
-------------------
this Agreement to the Closing Date, (i) each party will promptly furnish the
other with copies of all monthly and other interim financial statements as the
same become available and shall cause one or more of its designated
representatives to confer on a regular and frequent basis with representatives
of the other party and (ii) Mercantile shall promptly furnish to the Seller
copies of all filings by Mercantile with each of the Federal Reserve Board and
the SEC. Each party shall promptly notify the other party of the following
events immediately upon learning of the occurrence thereof, describing the
same and, if applicable, the steps being taken by the affected party with
respect thereto: (a) the occurrence of any event which could cause any
representation or warranty of such party or any schedule, statement, report,
notice, certificate or other writing furnished by such party to be untrue or
misleading in any material respect; (b) any Material Adverse Change; (c) the
issuance or commencement of any governmental and/or regulatory agency
complaint, investigation or hearing or any communications indicating that the
same may be contemplated and, as to any such matter which shall now or
hereafter be in effect, any communications pertaining thereto; or (d) the
institution or the threat of litigation involving such party.
5.05 Conforming Entries.
------------------
(a) Notwithstanding that Seller believes that Seller and
Seller Subsidiaries have established all reserves and taken all
provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Seller recognizes that
Buyers may have adopted different loan, accrual and reserve
policies (including loan classifications and levels of reserves
for possible loan losses). From and after the date of this
Agreement to the Effective Time, Seller and Buyers shall consult
and cooperate with each other with respect to conforming the loan,
accrual and reserve policies of Seller and the Seller Subsidiaries
to those policies of Buyers, as specified in each case in writing
to Seller, based upon such consultation and as hereinafter
provided.
(b) In addition, from and after the date of this
Agreement to the Effective Time, Seller and Buyers shall consult
and cooperate with each other with respect to determining
appropriate Seller accruals, reserves and charges to establish and
take in respect of excess equipment write-off or write-down of
various assets and other appropriate charges and accounting
adjustments taking into account the parties' business plans
following the Merger, as specified in each case in writing to
Seller, based upon such consultation and as hereinafter provided.
(c) Seller and Buyers shall consult and cooperate with
each other with respect to determining the amount and the timing
for recognizing for financial accounting purposes Seller's
expenses of the Merger and the restructuring charges related to or
to be incurred in connection with the Merger.
(d) Subject to the language contained in the second
sentence hereof, at the request of Mercantile, Seller shall (i)
establish and take such reserves and accruals to conform Seller's
loan, accrual and reserve policies to Mercantile's policies, (ii)
establish and take such accruals, reserves and charges in order to
implement such policies in respect of excess facilities and
equipment capacity, severance costs, litigation matters, write-off
or write-down of various assets and other appropriate accounting
adjustments,
- 31 -
36
and to recognize for various accounting purposes such expenses of
the Merger and restructuring charges related to or to be incurred in
connection with the Merger, and (iii) effect such divestitures or
otherwise implement such restructuring in respect of its investment
securities portfolio to conform Seller's investment securities
portfolio policies to Mercantile's policies, in the case of each of
the foregoing at such times as are requested by Mercantile in a
written notice to Seller.
(e) With respect to clauses (a) through (d) of this
Section 5.05, it is the objective of Mercantile and Seller that
such reserves, accruals, charges and divestitures, if any, to be
taken shall be consistent with GAAP.
(f) No reserves, accruals or charges taken in accordance
with Section 5.05(d) above may be a basis to assert a violation of
a breach of a representation, warranty or covenant of Seller
herein.
5.06 Environmental Reports. Buyer, at the expense of Buyers,
---------------------
may perform, as soon as reasonably practicable, but not later than ninety (90)
days after the date hereof, a phase one environmental investigation and/or
asbestos survey by Environmental Operations, Inc. on all real property owned,
leased or operated by Seller or any of the Seller Subsidiaries as of the date
hereof (but excluding space in retail and similar establishments leased by
Seller for automatic teller machines or leased bank branch facilities where
the space leased comprises less than 20% of the total space leased to all
tenants of such property) and within fifteen (15) days after being notified by
Sellers of the acquisition or lease of any real property acquired or leased by
Seller or any of the Seller Subsidiaries after the date hereof (but excluding
space in retail and similar establishments leased by Seller for automatic
teller machines or leased bank facilities where the space leased comprises
less than 20% of the total space leased to all tenants of such property). If
the results of the phase one investigation indicate, in Buyers' reasonable
opinion, that additional investigation is warranted, Buyers may perform, at
Buyers' expense, a phase two subsurface investigation or investigations by
Environmental Operations, Inc. on properties deemed to warrant such additional
study. Buyers shall perform any such phase two investigation as soon as
reasonably practicable after receipt of the phase one report(s) for such
properties. 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 safety concerns, in
the aggregate, exceed the sum of Five Hundred Thousand Dollars ($500,000), as
reasonably estimated by Environmental Operations, Inc. or if the cost of such
actions or measures cannot be so reasonably estimated by Environmental
Operations, Inc. to be such amounts or less with any reasonable degree of
certainty, Buyers shall have the right pursuant to Section 7.01(e) hereof, for
a period of fifteen (15) business days following receipt from Environmental
Operations, Inc. of such estimate or indication that the cost of such actions
and measures cannot be so reasonably estimated, to terminate this Agreement.
5.07 Agreements of Affiliates. Set forth as Schedule 5.07 is a
------------------------ -------------
list (which includes all individual and beneficial ownership and also
identifies how all such beneficially owned shares are registered on the stock
record book of Seller) of all persons whom Seller believes to be "affiliates"
of Seller for purposes of Rule 145 under the Securities Act and for
pooling-of-interests accounting treatment. Seller shall use its best efforts
to cause each person who is identified as an "affiliate" to deliver to
Mercantile, as of the date hereof, or as soon as practicable hereafter, a
written agreement in
- 32 -
37
substantially the form set forth as Exhibit A to this Agreement providing that
---------
each such person will agree not to sell, pledge, transfer or otherwise dispose
of the shares of Mercantile Common Stock to be received by such person in the
Merger during the period designated in such letter and thereafter in compliance
with the applicable provisions of the Securities Act. Prior to the Closing
Date, and via letter, Seller shall amend and supplement Schedule 5.07 and use
-------------
its best efforts to cause each additional person who is identified as an
"affiliate" to execute a written agreement as provided in this Section 5.07.
5.08 Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger; provided, however, that the Buyers shall pay all
printing expenses and filing fees incurred in connection with this Agreement,
the Registration Statement and the Proxy Statement.
5.09 Miscellaneous Agreements and Consents.
-------------------------------------
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its respective best
efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement as expeditiously
as possible, including, without limitation, using its respective
best efforts to lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby. Each
party shall, and shall cause each of its respective Subsidiaries
to, use its best efforts to obtain consents of all third parties
and Regulatory Authorities necessary or, in the opinion of Buyers,
desirable for the consummation of the transactions contemplated by
this Agreement.
(b) Seller, prior to the Effective Time, shall (i)
consult and cooperate with Buyers regarding the implementation of
those policies and procedures established by Buyers for its
governance and that of its Subsidiaries and not otherwise
referenced in Section 5.05 hereof, including, without limitation,
policies and procedures pertaining to the accounting,
asset/liability management, audit, credit, human resources,
treasury and legal functions, and (ii) at the reasonable request
of Buyers, conform Seller's existing policies and procedures in
respect of such matters to Buyers' policies and procedures or, in
the absence of any existing Seller policy or procedure regarding
any such function, introduce Buyers' policies or procedures in
respect thereof, unless to do so would cause Seller or any of the
Seller Subsidiaries to be in violation of any law, rule or
regulation of any Regulatory Authority having jurisdiction over
Seller and/or the Seller Subsidiary affected thereby.
5.10 Employee Agreements and Benefits.
--------------------------------
(a) Following the Effective Time, Buyers shall cause the
Surviving Corporation to honor in accordance with their terms all
employment, severance and other compensation contracts set forth
on Schedule 2.11(b) between Seller, any of the Seller
----------------
Subsidiaries, and any current or former director, officer,
employee or agent
- 33 -
38
thereof, and all provisions for vested benefits or other vested
amounts earned or accrued through the Effective Time under the
Seller Employee Plans.
(b) The provisions of the Seller Stock Plans and any
other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the Equity Securities of
Seller or any of the Seller Subsidiaries shall be deleted and
terminated as of the Effective Time.
(c) Except as set forth in Section 5.10(b) hereof, the
Seller Employee Plans shall not be terminated by reason of the
Merger but shall continue thereafter as plans of the Surviving
Corporation until such time as the employees of Seller and the
Seller Subsidiaries are integrated into Mercantile's employee
benefit plans that are available to other employees of Mercantile
and its Subsidiaries, subject to the terms and conditions
specified in such plans and to such changes therein as may be
necessary to reflect the consummation of the Merger. Mercantile
shall take such steps as are necessary or required to integrate
the employees of Seller and the Seller Subsidiaries into
Mercantile's employee benefit plans available to other employees
of Mercantile and its Subsidiaries as soon as practicable after
the Effective Time, with (i) full credit for prior service with
Seller or any of the Seller Subsidiaries for purposes of vesting
and eligibility for participation (but not benefit accruals under
any defined benefit plan), and co-payments and deductibles, and
(ii) waiver of all waiting periods and pre-existing condition
exclusions or penalties.
5.11 Press Releases. Seller and the Buyers shall consult with
--------------
each other as to the form and substance of any proposed press release or other
proposed public disclosure of matters related to this Agreement or any of the
transactions contemplated hereby.
5.12 State Takeover Statutes. Seller will take all steps
-----------------------
necessary to exempt the transactions contemplated by this Agreement and any
agreement contemplated hereby from, and if necessary challenge the validity
of, any applicable state takeover law.
5.13 Directors' and Officers' Indemnification. Mercantile
----------------------------------------
agrees that the Merger shall not affect or diminish any of the duties and
obligations of indemnification of Seller or any of the Seller Subsidiaries
existing as of the Effective Time in favor of employees, agents, directors or
officers of Seller or any of the Seller Subsidiaries arising by virtue of its
Articles of Incorporation, Charter or By-Laws in the form in effect at the
date of this Agreement or arising by operation of law or arising by virtue of
any contract, resolution or other agreement or document existing at the date
of this Agreement, and such duties and obligations shall continue in full
force and effect for so long as they would (but for the Merger) otherwise
survive and continue in full force and effect. To the extent that Seller's
existing directors' and officers' liability insurance policy would provide
coverage for any action or omission occurring prior to the Effective Time,
Seller agrees to give proper notice to the insurance carrier and to Mercantile
of a potential claim thereunder so as to preserve Seller's rights to such
insurance coverage. Mercantile represents that the directors' and officers'
liability insurance policy maintained by it provides for coverage of "prior
acts" for directors and officers of entities acquired by Mercantile including
Seller and the Seller Subsidiaries on and after the Effective Time.
- 34 -
39
5.14 Tax Opinion Certificates. Seller shall cause such of its
------------------------
executive officers, directors and/or holders of one percent (1%) or more of
the Seller Common Stock (including shares beneficially held or constructively
owned) as may be reasonably requested by Xxxxxxxx Xxxxxx to timely execute and
deliver to Xxxxxxxx Xxxxxx certificates substantially in the form of Exhibit B
---------
or Exhibit C hereto, as the case may be.
---------
5.15 Best Efforts to Insure Pooling. Each of Mercantile and
------------------------------
Seller undertakes and agrees to use its best efforts to cause the Merger to
qualify for pooling-of-interests accounting treatment.
ARTICLE VI
----------
CONDITIONS
6.01 Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. The approval of this Agreement
--------------------
and the Merger shall have received the requisite vote of
shareholders of Seller at the special meeting of shareholders
called pursuant to Section 5.03 hereof.
(b) Regulatory Approval. This Agreement and the
-------------------
transactions contemplated hereby shall have been approved by the
Federal Reserve Board and any other federal and/or state
regulatory agencies whose approval is required for consummation of
the transactions contemplated hereby and all requisite waiting
periods imposed by the foregoing shall have expired.
(c) Effectiveness of Registration Statement. The
---------------------------------------
Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(d) No Judicial Prohibition. Neither Seller, Mercantile
-----------------------
nor Merger Sub shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger.
(e) Tax Opinion. Each of Buyers and Seller shall have
-----------
received from Xxxxxxxx Xxxxxx an opinion (which opinion shall not
have been withdrawn at or prior to the Effective Time) reasonably
satisfactory in form and substance to it to the effect that the
Merger will constitute a reorganization within the meaning of
Section 368 of the Code and to the effect that, as a result of the
Merger, except with respect to fractional share interests and
assuming that such Seller Common Stock is a capital asset in the
hands of the holder thereof at the Effective Time, (i) holders of
Seller Common Stock who receive Mercantile Common Stock in the
Merger will not recognize gain or loss for federal income tax
purposes on the receipt of such stock, (ii) the basis of such
Mercantile Common Stock will equal the basis of the Seller Common
Stock for which it is
- 35 -
40
exchanged and (iii) the holding period of such Mercantile Common
Stock will include the holding period of the Seller Common Stock for
which it is exchanged.
6.02 Conditions to Obligations of Seller. The obligations of
-----------------------------------
Seller to effect the Merger shall be subject to the fulfillment or waiver at
or prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations
------------------------------
and warranties of Buyers set forth in Article III of this
Agreement shall be true and correct in all material respects as of
the date of this Agreement and as of the Effective Time (as though
made on and as of the Effective Time, except (i) to the extent
such representations and warranties are by their express
provisions made as of a specified date, (ii) where the facts which
caused the failure of any representation or warranty to be so true
and correct have not resulted, and are not likely to result, in a
Material Adverse Effect on Mercantile and its Subsidiaries, taken
as a whole, and (iii) for the effect of transactions contemplated
by this Agreement, and Seller shall have received a certificate of
any Executive Vice President of Mercantile, signing solely in his
capacity as an officer of Mercantile, to such effect.
(b) Performance of Obligations. Buyers shall have
--------------------------
performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Effective Time,
and Seller shall have received a certificate of any Executive Vice
President of Mercantile, signing solely in his capacity as an
officer of Mercantile, to that effect.
(c) Permits, Authorizations, etc. Buyers shall have
-----------------------------
obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation of the
Merger.
(d) No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall have been no Material Adverse Effect on
Mercantile and its Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Mercantile shall have delivered
------------------
to Seller an opinion of Mercantile's counsel dated as of the
Closing Date or a mutually agreeable earlier date in substantially
the form set forth as Exhibit D to this Agreement.
----------
6.03 Conditions to Obligations of the Buyers. The obligations
---------------------------------------
of the Buyers to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations
------------------------------
and warranties of Seller set forth in Article II of this Agreement
shall be true and correct in all material respects as of the date
of this Agreement and as of the Effective Time (as though made on
and as of the Effective Time, except (i) to the extent such
representations and warranties are by their express provisions
made as of a specific date, (ii) where the facts
- 36 -
41
which caused the failure of any representation or warranty to be so
true and correct have not resulted, and are not likely to result, in
a Material Adverse Effect on Seller and its Subsidiaries, taken as a
whole, and (iii) for the effect of transactions contemplated by
this Agreement) and Buyers shall have received a certificate of
the Chairman and the President of Seller, signing solely in their
capacities as officers of Seller, to such effect.
(b) Performance of Obligations. Seller shall have
--------------------------
performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Effective Time,
and Buyers shall have received a certificate of the Chairman and
the President of Seller signing solely in their capacities as
officers of Seller, to that effect.
(c) Permits, Authorizations, etc. Seller shall have
-----------------------------
obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation by it
of the Merger.
(d) No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall have been no Material Adverse Effect on
Seller and the Seller Subsidiaries, taken as a whole.
(e) Opinion of Counsel. Seller shall have delivered to
------------------
Buyers an opinion of Seller's counsel dated as of the Closing Date
or a mutually agreeable earlier date in substantially the form set
forth as Exhibit E to this Agreement.
---------
(f) Election of Dissenting Shareholders. Unless
-----------------------------------
otherwise waived by the Buyers in their sole discretion, holders
of less than five percent (5%) of the total value of shares of
Seller Common Stock outstanding shall have taken such steps as are
then possible to dissent from the Merger pursuant to the Arkansas
Statute.
(g) Pooling Letter. The Buyers shall have received as
--------------
soon as practicable after the date of this Agreement an opinion of
KPMG Peat Marwick LLP, satisfactory in form and substance to the
Buyers, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment, which opinion shall
have not been withdrawn.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing Date, whether before or after approval by the
shareholders of Seller:
(a) by mutual consent by the Executive Committee of the
Board of Directors of Mercantile and by the Board of Directors of
Seller;
(b) by the Executive Committee of the Board of Directors
of Mercantile or the Board of Directors of Seller at any time
after July 31, 1998 if the Merger shall not
- 37 -
42
theretofore have been consummated (provided that the terminating
party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein);
(c) by the Executive Committee of the Board of Directors
of Mercantile or the Board of Directors of Seller if (i) the
Federal Reserve Board or any other federal and/or state regulatory
agency whose approval is required for the consummation of the
transactions contemplated hereby has denied approval of the Merger
and such denial has become final and nonappealable or (ii) the
shareholders of Seller shall not have approved this Agreement at
the meeting referred to in Section 5.03;
(d) by the Executive Committee of the Board of Directors
of Mercantile, on the one hand, or by the Board of Directors of
Seller, on the other hand, in the event of a material volitional
breach by the other party to this Agreement of any representation,
warranty or agreement contained herein, which breach is not cured
within 30 days after written notice thereof is given to the
breaching party by the non-breaching party or is not waived by the
non-breaching party during such period; or
(e) by the Executive Committee of the Board of Directors
of Mercantile pursuant to and in accordance with the provisions of
Section 5.06 hereof.
7.02 Effect of Termination. In the event of termination of
---------------------
this Agreement as provided in Section 7.01 above, this Agreement shall
forthwith become void and there shall be no liability on the part of Buyers or
Seller or their respective officers or directors except as set forth in the
second sentence of Section 5.01 and in Sections 5.08 and 8.02, and except that
no termination of this Agreement pursuant to Section 7.01(e) shall relieve the
breaching party of any liability to the non-breaching party hereto arising
from the intentional, deliberate and willful non-performance of any covenant
contained herein, after giving notice to such breaching party and an
opportunity to cure as set forth in Section 7.01(e).
7.03 Amendment. This Agreement, the Exhibits and the Schedules
---------
hereto may be amended by the parties hereto, by action taken by or on behalf
of the Executive Committee of the Board of Directors of Mercantile and the
respective Boards of Directors of Merger Sub or Seller, at any time before or
after approval of this Agreement by the shareholders of Seller; provided,
however, that after any such approval by the shareholders of Seller no such
modification shall (A) alter or change the amount or kind of Merger
Consideration to be received by holders of Seller Common Stock as provided in
this Agreement or (B) adversely affect the tax treatment to Seller
shareholders as a result of the receipt of the Merger Consideration. This
Agreement, the Exhibits and the Schedules hereto may not be amended except by
an instrument in writing signed on behalf of each of Buyers and Seller.
7.04 Waiver. Any term, condition or provision of this
------
Agreement may be waived in writing at any time by the party which is, or whose
shareholders are, entitled to the benefits thereof.
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ARTICLE VIII
------------
GENERAL PROVISIONS
8.01 Non-Survival of Representations, Warranties and
-----------------------------------------------
Agreements. No investigation by the parties hereto made heretofore or
----------
hereafter shall affect the representations and warranties of the parties which
are contained herein and each such representation and warranty shall survive
such investigation. Except as set forth below in this Section 8.01, all
representations, warranties and agreements in this Agreement of Buyers and
Seller or in any instrument delivered by Buyers or Seller pursuant to or in
connection with this Agreement shall expire at the Effective Time or upon
termination of this Agreement in accordance with its terms. In the event of
consummation of the Merger, the agreements contained in or referred to in
Sections 1.05-1.11, 5.02(b), 5.08, 5.10 and 5.13 shall survive the Effective
Time. In the event of termination of this Agreement in accordance with its
terms, the agreements contained in or referred to in the second sentence of
Section 5.01 and Sections 5.08, 7.02 and 8.02 shall survive such termination.
8.02 Indemnification. Buyers and Seller (hereinafter, in such
---------------
capacity being referred to as the "Indemnifying Party") agree to indemnify and
hold harmless each other and their officers, directors and controlling persons
(each such other party being hereinafter referred to, individually and/or
collectively, as the "Indemnified Party") against any and all losses, claims,
damages or liabilities, joint or several, to which the Indemnified Party may
become subject under the Securities Act, the Exchange Act or other federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof): (a) arise
primarily out of any information furnished to the Indemnified Party by the
Indemnifying Party and included in the Registration Statement as originally
filed or in any amendment thereof, or in the Proxy Statement, or in any
amendment therefor or supplement thereof, or are based primarily upon any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement as originally filed or in any amendment thereof, or
in the Proxy Statement, or in any amendment thereof or supplement thereto, and
provided for inclusion thereof by the Indemnifying Party or (b) arise
primarily out of or are based primarily upon the omission or alleged omission
by the Indemnifying Party to state in the Registration Statement as originally
filed or in any amendment thereof, or in the Proxy Statement, or in any
amendment thereof, a material fact required to be stated therein or necessary
to make the statements made therein not misleading, and agrees to reimburse
each such Indemnified Party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action.
8.03 No Assignment; Successors and Assigns. This Agreement
-------------------------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors (including any corporation deemed to be a successor
corporation of any of the parties by operation of law) and assigns, but
neither this Agreement nor any right or obligation set forth in any provision
hereof may be transferred or assigned (except by operation of law) by any
party hereto without the prior written consent of all other parties, and any
purported transfer or assignment in violation of this Section 8.03 shall be
void and of no effect. There shall not be any third party beneficiaries of
any provisions hereof except for Sections 1.07, 1.10, 1.11, 5.10, 5.13 and
8.02 which may be enforced against Mercantile or Seller, as the case may be,
by the parties therein identified or described.
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44
8.04 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part of any
-----------------
party hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.
8.06 Headings. Article, section, subsection and paragraph
--------
titles, captions and headings herein are inserted only as a matter of
convenience and for reference, and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof.
8.07 Entire Agreement. This Agreement and the Schedules and
----------------
Exhibits hereto constitute the entire agreement between the parties with
respect to the subject matter hereof, supersede all prior negotiations,
representations, warranties, commitments, offers, letters of interest or
intent, proposal letters, contracts, writings or other agreements or
understandings with respect thereto. No waiver, and no modification or
amendment, of any provision of this Agreement, shall be effective unless
specifically made in writing and duly signed by all parties thereto.
8.08 Counterparts. This Agreement may be executed in one or
------------
more counterparts, and any party to this Agreement may execute and deliver
this Agreement by executing and delivering any of such counterparts, each of
which when executed and delivered shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument.
8.09 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to be duly received (a) on the date
given if delivered personally or by cable, telegram, telex or telecopy or (b)
on the date received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to the Buyers:
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, XX 00000-0000
Attention: Xxxx X. Xxxx
Executive Vice President
Telecopy: (000) 000-0000
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45
Copy to:
Xxx X. Xxxxxxxx, Esq.
General Counsel
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000
and
Xxxxxx X. XxXxxx, Esq.
Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
(ii) if to Seller:
Horizon Bancorp, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Chairman and Chief
Executive Officer
Telecopy: (000) 000-0000
Copy to:
Xxxxxxx X. Xxxxx, Xx., Esq.
Xxxxx, Xxxxxxxxxxxxx & Xxxxxx
000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
8.10 Governing Law. This Agreement shall be governed by and
-------------
controlled as to validity, enforcement, interpretation, effect and in all
other respects by the internal laws of the State of Missouri applicable to
contracts made in that state.
[remainder of this page intentionally left blank]
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46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized and their
respective corporate seals to be affixed hereto, all as of the date first
written above.
Attest: MERCANTILE BANCORPORATION INC.
/s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxx
--------------------------- ---------------------------------------------
Xxxxxxx X. Xxxxxx Xxxx X. Xxxx
Executive Vice President, Mercantile Bank
National Association, Authorized Officer
Attest: AMERIBANC, INC.
/s/ Xxxxx X. Xxxxx By: /s/ Xxxx X. Xxxx
--------------------------- ---------------------------------------------
Xxxxx X. Xxxxx Xxxx X. Xxxx
Vice President
Attest: HORIZON BANCORP, INC.
/s/ Xxxxx XxXxxx By: /s/ Xxxx X. Xxxxxxx
--------------------------- ---------------------------------------------
Xxxx X. Xxxxxxx
Chairman and Chief Executive Officer
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