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AGREEMENT AND PLAN OF MERGER
between
MERCANTILE BANCORPORATION INC. and
MERCANTILE BANCORPORATION INCORPORATED OF ILLINOIS
as Buyers,
and
FIRST STERLING BANCORP, INC.
as Seller
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Dated July 24, 1995
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TABLE OF CONTENTS Page
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ARTICLE I
THE MERGER. . . . . . . . . . . . . . . . . . . . 1
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 Bylaws. . . . . . . 2
1.06. Boards of Directors and Officers. . . . . . . . . 2
1.07. Conversion of Securities. . . . . . . . . . . . . 2
1.09. Dissenting Shares.. . . . . . . . . . . . . . . . 4
1.10. No Fractional Shares. . . . . . . . . . . . . . . 4
1.11. Closing of Stock Transfer Books . . . . . . . . . 5
1.12. Anti-Dilution Adjustments . . . . . . . . . . . . 5
1.13. Reservation of Right to Revise Transaction. . . . 5
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SELLER. . . . . . . . . . . . . . . . . . . . . . 6
2.01. Organization and Authority. . . . . . . . . . . . 6
2.02. Subsidiaries. . . . . . . . . . . . . . . . . . . 6
2.03. Capitalization. . . . . . . . . . . . . . . . . . 7
2.04. Authorization . . . . . . . . . . . . . . . . . . 7
2.05. Seller Financial Statements.. . . . . . . . . . . 8
2.06. Seller Reports. . . . . . . . . . . . . . . . . . 9
2.07. Title to and Condition of Assets. . . . . . . . . 9
2.08. Real Property . . . . . . . . . . . . . . . . . . 10
2.09. Taxes . . . . . . . . . . . . . . . . . . . . . . 11
2.10. Material Adverse Change . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . 16
2.16. Labor . . . . . . . . . . . . . . . . . . . . . . 17
2.17. Material Interests of Certain Persons . . . . . . 18
2.18. Allowance for Loan and Lease Losses;
Non-Performing Assets . . . . . . . . . . . . . . 18
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 . . . . . . . . . . . . . . . 23
2.26. Interest Rate Risk Management Instruments . . . . 23
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Page
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
BUYERS. . . . . . . . . . . . . . . . . . . . . . 23
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. . . . . . . . . . . . . . . . 26
3.06. Material Adverse Change . . . . . . . . . . . . . 26
3.07. Legal Proceedings or Other Adverse Facts. . . . . 26
3.08. Registration Statement, Etc.. . . . . . . . . . . 26
3.09. Brokers and Finders . . . . . . . . . . . . . . . 27
ARTICLE IV
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE
TIME. . . . . . . . . . . . . . . . . . . . . . . 27
4.01. Conduct of Businesses Prior to the Effective Time 27
4.02. Forbearances of Seller. . . . . . . . . . . . . . 27
4.03. Forbearances of Buyers. . . . . . . . . . . . . . 30
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . 30
5.01. Access and Information. . . . . . . . . . . . . . 30
5.02. Registration Statement; Regulatory Matters. . . . 31
5.03. Shareholder Approval. . . . . . . . . . . . . . . 32
5.04. Current Information . . . . . . . . . . . . . . . 32
5.05. Conforming Entries. . . . . . . . . . . . . . . . 33
5.06. Environmental Reports . . . . . . . . . . . . . . 34
5.07. Agreements of Affiliates. . . . . . . . . . . . . 34
5.08. Expenses. . . . . . . . . . . . . . . . . . . . . 35
5.09. Miscellaneous Agreements. . . . . . . . . . . . . 35
5.10. Employee Agreements and Benefits. . . . . . . . . 36
5.11. Press Releases. . . . . . . . . . . . . . . . . . 36
5.12. State Takeover Statutes . . . . . . . . . . . . . 36
5.13. Directors' and Officers' Indemnification. . . . . 36
5.14. Tax Opinion Certificates. . . . . . . . . . . . . 37
5.15. Best Efforts to Insure Pooling. . . . . . . . . . 37
ARTICLE VI
CONDITIONS. . . . . . . . . . . . . . . . . . . . 37
6.01. Conditions to Each Party's Obligation To Effect
the Merger. . . . . . . . . . . . . . . . . . . . 37
6.02. Conditions to Obligations of Seller To Effect
the Merger. . . . . . . . . . . . . . . . . . . . 38
6.03. Conditions to Obligations of Buyers To Effect
the Merger. . . . . . . . . . . . . . . . . . . . 38
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Page
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . 39
7.01. Termination . . . . . . . . . . . . . . . . . . . 39
7.02. Effect of Termination . . . . . . . . . . . . . . 40
7.03. Amendment . . . . . . . . . . . . . . . . . . . . 40
7.04. Waiver. . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII
GENERAL PROVISIONS. . . . . . . . . . . . . . . . 41
8.01. Survival of Representations, Warranties and
Agreements; Updating Schedules. . . . . . . . . . 41
8.02. Indemnification . . . . . . . . . . . . . . . . . 41
8.03. No Assignment; Successors and Assigns . . . . . . 42
8.04. No Implied Waiver . . . . . . . . . . . . . . . . 42
8.05. Headings. . . . . . . . . . . . . . . . . . . . . 42
8.06. Entire Agreement. . . . . . . . . . . . . . . . . 42
8.07. Counterparts. . . . . . . . . . . . . . . . . . . 42
8.08. Notices . . . . . . . . . . . . . . . . . . . . . 42
8.09. Severability. . . . . . . . . . . . . . . . . . . 44
Exhibit A Form of Letter of Transmittal
Exhibit B Form of Affiliate Agreement
Exhibit C Shareholder Tax Certificate
Exhibit D Officer/Director Tax Certificate
Exhibit E Form of Opinion of Counsel of Mercantile
Exhibit F Form of Opinion of Counsel of Seller
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (this "Agreement") is
made and entered into on July 24, 1995 by and among MERCANTILE
BANCORPORATION INC., a Missouri corporation ("Mercantile"),
MERCANTILE BANCORPORATION INCORPORATED OF ILLINOIS, a Missouri
corporation ("Merger Sub" and, collectively with Mercantile, the
"Buyers") and FIRST STERLING BANCORP, INC., an Illinois
corporation ("Seller").
W I T N E S S E T H:
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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 of this Agreement; and
WHEREAS, the parties desire to provide for certain
undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated by
this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the
parties agree as follows:
ARTICLE I
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THE MERGER
1.01. The Merger. (a) Subject to the terms and
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conditions of this Agreement, Seller shall be merged with and
into Merger Sub in accordance with Chapter 351 of the Missouri
Revised Statutes (the "Missouri Statute") and Article 11 of the
Illinois Business Corporation Act (the "Illinois Act"), and the
separate corporate existence of Seller shall cease. Merger Sub
shall be the surviving corporation of the Merger (sometimes
referred to herein as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Missouri.
1.02. Closing. The closing (the "Closing") of the
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Merger shall take place at 10:00 a.m., local time, on the date
that the Effective Time (as defined in Section 1.03) occurs (the
"Closing Date").
1.03. Effective Time. The Merger shall become
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effective (the "Effective Time") upon the issuance of the
certificate of merger by the Secretary of State of the State of
Missouri. Buyers shall cause articles of merger to be filed with
the Secretary of State of the
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State of Missouri and a certificate of merger to be filed with the
Secretary of State of the State of Illinois, as soon as practicable
after the Closing. 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), which date shall
be the last to occur of (i) January 2, 1996 and (ii) the first
business day of the first full calendar month commencing at least
five business days following the satisfaction of all conditions set
forth in Section 6.01(a) and 6.01(b) (the "Approval Date").
1.04. Additional Actions. If, at any time after the
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Effective Time, either of the Buyers shall consider or be advised
that any further deeds, assignments or assurances or any other
acts are necessary or desirable to (a) vest, perfect or confirm,
of record or otherwise, in the Surviving Corporation, all right,
title or interest in, to or under any of the rights, properties
or assets of Seller or (b) otherwise carry out the purposes of
this Agreement, Seller and its respective 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 and to do all acts necessary or
desirable to vest, perfect or confirm title and possession to
such rights, properties or assets in the Surviving Corporation
and otherwise to carry out the purposes of this Agreement, and
the officers and directors of the Surviving Corporation are
authorized in the name of Seller or otherwise to take any and all
such action.
1.05. Articles of Incorporation and Bylaws. The
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Articles of Incorporation and Bylaws of Merger Sub in effect
immediately prior to the Effective Time shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation following
the Merger, until otherwise amended or repealed.
1.06. Boards of Directors and Officers. The
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directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers, respectively,
of the Surviving Corporation following the Merger, and such
directors and officers shall hold office in accordance with the
Surviving Corporation's Bylaws and applicable law.
1.07. Conversion of Securities. At the Effective
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Time, by virtue of the Merger and without any action on the part
of 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) 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 respective wholly owned
subsidiaries (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
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defined in Section 1.09)), shall cease to be
outstanding and shall be converted into and become the
right to receive 0.1415 shares (the "Exchange Ratio") of
common stock, $5.00 par value, of Mercantile and the
associated rights under the "Mercantile Rights Agreement,"
as such term is defined in Section 3.02 hereof ("Mercantile
Common Stock"). The Exchange Ratio was computed by
aggregating the total number of shares of Seller Common
Stock that were issued and outstanding on the date of this
Agreement with 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 and dividing such
number of shares of Seller Common Stock into 521,424, the
aggregate number of shares of Mercantile Common Stock to be
issued in the Merger.
1.08. Exchange Procedures.
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(a) As soon as practicable following, and in any event
no more than five (5) business days after 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 (such agent to be reasonably acceptable to
Seller) as exchange agent (the "Exchange Agent"), pursuant
to the letter of transmittal (in substantially the form set
forth in Exhibit A to this Agreement) enclosed therewith.
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(b) Subject to Section 1.11, after the Effective Time,
each previous holder of a Certificate that surrenders such
Certificate to 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. 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.
(c) Each outstanding Certificate shall until duly
surrendered to Buyers be deemed to evidence ownership of
the consideration into which the stock previously
represented by such Certificate shall have been converted
pursuant to this Agreement.
(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
consideration provided for in this Agreement. 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
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delivery of the consideration provided therefor in
this Agreement. Buyers shall not be obligated to deliver
the consideration to which any former holder of Seller
Common Stock is entitled as a result of the Merger until
such holder surrenders the Certificates as provided herein.
No dividends declared on 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, at which time such
dividends shall be remitted to such person, without
interest and less any taxes that may have been imposed
thereon. Certificates surrendered for exchange by an
affiliate shall not be exchanged until Buyers have received
a written agreement from such affiliate as required
pursuant to Section 5.07 hereof. No party to this
Agreement nor any affiliate thereof shall be liable to any
holder of stock represented by any Certificate for any
consideration paid to a public official pursuant to
applicable abandoned property, escheat or similar laws.
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 Section 11.70 of the Illinois Act. 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 Illinois Act
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.
1.10. No Fractional Shares. Notwithstanding any other
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provision of this Agreement, neither certificates nor scrip for
fractional shares of Mercantile Common Stock shall be issued in
the Merger. Each holder who otherwise would have been entitled
to a fraction of a share of Mercantile Common Stock shall receive
in lieu thereof cash (without interest) in an amount determined
by multiplying the fractional share interest to which such holder
would otherwise be entitled by the closing stock price of
Mercantile Common Stock on the New York Stock Exchange ("NYSE")
Composite Tape as reported in The Wall Street Journal on the
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Closing Date. No such holder shall be entitled to dividends,
voting rights or any other rights in respect of any fractional
share.
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1.11. 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 which is not registered in
the transfer records prior to the closing of such record
books, the shares of Mercantile Common Stock issuable 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 Buyer
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 (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 consideration specified
in this Agreement, 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 consideration represented
thereby in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
1.12. Anti-Dilution Adjustments. If between the date of
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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.
1.13. Reservation of Right to Revise Transaction.
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Buyers may at 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 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,
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however, that no such change shall (A) alter or change the amount
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or kind of the consideration to be received by the shareholders
of Seller in the Merger, (B) adversely affect any representation,
warranty or covenant of Buyers contained herein, (C) adversely
affect the tax treatment to Seller shareholders, as generally
described in Section 6.01(e) hereof, (D) otherwise adversely
affect the rights of Seller or any shareholders of Seller
hereunder, or (E) impede or delay receipt of any approvals
referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement.
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ARTICLE II
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
As an inducement to Buyers to enter into and perform their
respective obligations under this Agreement, and, except as
otherwise provided herein, notwithstanding any examination,
inspection, audit or any other investigation made by Buyers,
Seller represents and warrants to and covenants with Buyers as
follows:
2.01. Organization and Authority. Seller is a
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corporation duly organized, validly existing and in good standing
under the laws of the State of Illinois, is duly qualified to do
business and is in good standing in all jurisdictions where the
ownership or leasing of its properties or the conduct of its
business requires it to be so qualified and the failure to be so
qualified or in good standing would have a material adverse
affect on the Condition of the Seller and the Seller Subsidiaries
(as such terms are defined in Section 2.02), taken as a whole and
has corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted.
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 Bylaws of Seller and of the Articles of
Association and Bylaws of First National Bank of Sterling--Rock
Falls ("Bank"), a national banking association and wholly-owned
subsidiary of Seller, each as in effect on the date of this
Agreement, have been provided to Buyers.
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"), all
outstanding Equity Securities (as defined in Section 2.03)
of each of which are owned directly or indirectly by
Seller. All of the outstanding shares of capital stock of
the Seller Subsidiaries owned directly or indirectly by
Seller are validly issued, fully paid and nonassessable and
are owned free and clear of any lien, claim, charge,
option, encumbrance, agreement, mortgage, pledge, security
interest or restriction (a "Lien") with respect thereto.
Each of the Seller Subsidiaries is a corporation 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 the ownership or leasing of its
properties 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 the financial
condition, results of operations or business (collectively,
the "Condition") of Seller
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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.
(b) The deposits of 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
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Seller consists of 5,000,000 shares of Seller Common Stock, of
which, as of March 31, 1995, 3,685,061 shares were issued and
outstanding. Since March 31, 1995, no Equity Securities of
Seller have been issued. "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, understand-
ings or arrangements by which such issuer is or may become bound
to issue additional shares of its capital stock or other Equity
Securities of such issuer, or options, warrants, scrip or rights
to purchase, acquire, subscribe to, calls on or commitments for
any shares of its capital stock or other Equity Securities.
Except as set forth above, there are no other Equity Securities
of Seller outstanding. All of the issued and outstanding shares
of Seller Common Stock are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any
preemptive right of any shareholder of Seller. Seller has
previously delivered a valid list of shareholders dated on or
prior to the date of this Agreement.
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 at least two-thirds of the
outstanding shares of Seller Common Stock entitled to vote
at a meeting called for such purpose. The execution,
delivery and performance of this Agreement by Seller and
the consummation by Seller of the transactions contemplated
hereby in accordance with and subject to the terms of this
Agreement have been duly authorized by the Board of
Directors of Seller. Subject to the approval of Seller's
shareholders and subject to the receipt of such approvals
of the Regulatory Authorities as may be required by statute
or regulation, this Agreement is a valid and binding
obligation of Seller enforceable against Seller in
accordance with its terms.
(b) 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
- 7 -
12
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 or bylaws 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; other than, with respect to (i) and (ii) above,
such violations, conflicts, breaches, defaults,
terminations, accelerations or Liens which would not have a
material adverse effect on the Condition of Seller and the
Seller Subsidiaries, taken as a whole.
(c) Other than in connection or in compliance with the
provisions of the Missouri Act, the Illinois Act, the
Securities Act of 1933 and the rules and regulations
thereunder (the "Securities Act"), the Securities Exchange
Act of 1934 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, the Illinois Bank Holding Company Act of 1957 (the
"Illinois BHCA"), or any required approvals of the Federal
Reserve Board, the Illinois Commissioner of Banks and Trust
Companies (the "Illinois Commissioner"), or other
governmental agencies or governing boards having regulatory
authority over Seller or any Seller Subsidiary, no notice
to, filing with, exemption or review by, or authorization,
consent or approval of, any public body or authority is
necessary for the consummation by Seller of the
transactions contemplated by this Agreement.
2.05. Seller Financial Statements.
---------------------------
(a) Attached hereto as Schedule 2.05(a) are copies of
----------------
the following financial statements:
(i) Audited consolidated balance sheets of
Seller as of September 30, 1994 and 1993, 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, 1994,
together with the notes thereto, audited by Seller's
independent auditors;
(ii) Unaudited consolidated balance sheets of
Seller as of June 30, 1995 and 1994 and related
consolidated statements of income, and changes in
shareholders' equity for the nine-month period ended
June 30, 1995;
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13
(iii) The Form F.R. Y-9C and F.R. Y-9LP
reports of Seller as of September 30, 1994, 1993 and
1992 and as of March 31, 1995; and
(iv) The Consolidated Reports of Condition
and Income of Bank as of and for the years ended
December 31, 1994, 1993 and 1992, as filed by Bank with
the FDIC.
(b) The financial statements 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, as to the financial
statements referenced in subsections (a) (iii) and (iv)
above, regulatory accounting principles, consistently
applied during the periods involved, and present fairly
(subject, in the case of the Seller Financial Statements
referred to in (a)(ii) to normal year end adjustments and
to the absence of cash flow statements for the periods
specified therein) the consolidated financial position of
Seller, Bank and their respective Subsidiaries, as the case
may be, at the dates thereof and the consolidated results
of operations and cash flows (with respect to the Seller
Financial Statements described in (a)(i)) of Seller, Bank
and their respective Subsidiaries, as the case may be, 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 and results of operations.
2.06. Seller Reports. Since June 30, 1995, each of
--------------
Seller and the Seller Subsidiaries has timely filed all material
reports, registrations and statements, together with any required
amendments thereto, that it was required to file with any
federal, state, municipal, or local government, securities,
banking, savings and loan, insurance and other governmental or
regulatory authority, and the agencies and staffs thereof (such
entities 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
Seller and the Seller Subsidiaries have, and at the Closing
Date will have, good and marketable title to its owned
properties and assets, including, without limitation, those
reflected in the Seller Financial Statements (except those
disposed of since the date thereof), free and clear of any
Lien, except
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14
for Liens for (i) taxes, assessments or other
governmental charges not yet delinquent (ii) Liens that do
not in the aggregate materially adversely affect the
conduct of the business of Seller and the Seller
Subsidiaries, taken as a whole, as presently conducted or
the aggregate value of all such property and assets, and
(iii) 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 June
30, 1995 have been sold, leased, transferred, assigned or
otherwise disposed of since June 30, 1995, 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 all material respects, 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 with all
applicable laws, ordinances and rules and regulations of
any governmental authority having jurisdiction over such
use, except where the failure to be in compliance would not
have a material adverse effect on the Condition of the
Seller and the Seller Subsidiaries, taken as a whole.
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 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"). 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
of Seller or any of the Seller Subsidiaries to use any of
the Real Property, the resolution of which is reasonably
likely to have a material adverse effect on the use of any
such real property, provided however, that Seller shall
provide Mercantile with notice of any such actions, whether
they are reasonably likely to have a material adverse
effect or not.
(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.
- 00 -
00
(x) Xxxx 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 in any material respect
and all such buildings, structures and improvements are
located and constructed in conformity with all applicable
zoning ordinances and building codes except where such
encroachment or non-conformity does not individually or in
the aggregate materially adversely affect the use or value
of the parcel of Real Property.
(e) Except as set forth in Schedule 2.15(c) 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 to the best knowledge of Seller there is no
zoning ordinance, building code, use or occupancy
restriction or condemnation action or proceeding pending,
or, threatened, with respect to any such building,
structure or improvement except such restrictions, actions
or proceedings that do not individually or in the aggregate
materially adversely affect the use or value of the parcel
of Owned Real Property. Except as set forth in Schedule
2.15(c) the Owned Real Property is in generally good
condition for its intended purposes, ordinary wear and tear
excepted, and has been maintained in accordance with
reasonable and prudent business practices applicable to
like facilities.
(f) Except as set forth in Schedule 2.15(c) or 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.
2.09. Taxes. Seller and each Seller Subsidiary have
-----
timely filed or will timely (including extensions) file all
material tax returns required to be filed at or prior to the
Closing Date ("Seller Returns"). Each of Seller and the Seller
Subsidiaries has paid, or set up adequate reserves on the Seller
Financial Statements for the payment of, all taxes required to be
paid in respect of the periods covered by such returns and has
set up reserves on the most recent Seller Financial Statements
substantially equal to the amount 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 material to
the Condition of Seller and the Seller Subsidiaries, taken as a
whole, for any such taxes in excess of the amounts so paid or
reserves so established, and no material deficiencies for any
tax, assessment or governmental charge have been proposed,
asserted or assessed (tentatively or definitely) against any of
Seller or any of the Seller Subsidiaries which would not be
covered by existing reserves. Neither Seller nor any of the
- 11 -
16
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.
Neither the Seller or any of the Seller Subsidiaries has been
audited by the Internal Revenue Service (the "IRS") or
appropriate state tax authorities during the previous seven
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 Change. Since June 30, 1995,
-----------------------
there has been no material adverse change in the Condition of
Seller and the Seller Subsidiaries, taken as a whole, except as
may have resulted or may result from changes to laws and
regulations, GAAP or regulatory accounting principles or
interpretations thereof, or changes in economic conditions,
including interest rates, applicable to commercial banking
institutions generally and other than for changes to the extent
of established reserves or accruals in the Seller Financial
Statements.
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 $250,000 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 $250,000, to which
any of the foregoing is a party or by which it is bound, by
account, and, where applicable, such other information as
shall be reasonably necessary to identify any related group
of entities.
(b) Except as set forth on Schedule 2.11(b) and 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), as of the date hereof neither Seller nor
----------------
any of the Seller Subsidiaries is a party to or is bound by
any:
(i) agreement, contract, arrangement,
understanding or commitment with any labor union;
(ii) franchise or license agreement;
(iii) written employment, severance or
termination pay, agency, consulting or similar
agreement or commitment in respect of personal
services;
(iv) any material agreement, arrangement or
commitment (A) not made in the ordinary course of
business, or (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
- 12 -
17
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) any 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
$50,000;
(vi) any 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) any other contract or agreement which
would be a "material contract" within the meaning of
Item 601(b)(10) of Regulation S-K as promulgated by the
SEC (if Seller had a class of securities registered
under Section 12 of the Exchange Act) to be performed
after the date of this Agreement;
(viii) any 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 the Seller or any of the Seller
Subsidiaries in the ordinary course of business;
(x) loans or debts payable or owing by any
executive officer or director of Seller or any of the
Seller Subsidiaries or any other person or entity
deemed an "executive officer" or a "related interest"
of any of the foregoing, as such terms are defined in
Regulation O of the Federal Reserve Board;
(xi) any other agreement, contract, arrange-
ment, understanding or commitment involving an
obligation by Seller or any of the Seller Subsidiaries
of more than $50,000 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
- 13 -
18
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 $250,000.
(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 Schedules 2.11 (a), (b) 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 and except where
the failure of such agreement, contract, lease, insurance
policy or other document would not have a material adverse
effect on the Condition of Seller and the Seller
Subsidiaries, taken as a whole.
(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 $100,000 of the 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
$100,000 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 $100,000 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
$100,000 all notification letters and other written
communications from Seller or any of the Seller
Subsidiaries to any of their respective borrowers,
customers or other parties during the past twelve months
wherein Seller or any of the Seller Subsidiaries has
requested or demanded that actions be taken to correct
existing defaults or facts or circumstances which may
become defaults; (v) each borrower, customer, or other
party which has notified Seller or any of the Seller
Subsidiaries during the past twelve months of, or has
asserted against Seller or any of the Seller Subsidiaries,
in each case in writing, any "lender liability" or similar
claim, and, to the best knowledge of Seller, each borrower,
customer or other party which has given Seller or any of the
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19
Seller Subsidiaries any oral notification of, or orally
asserted to and against Seller or any of the Seller
Subsidiaries, any such claim; (vi) all loans in excess of
$50,000 (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," "substandard," "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 bylaws or in default under any material agreement, commitment,
arrangement, lease, insurance policy, or other instrument or
document, 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 thereunder,
except, in all cases, where such default would not have a
material adverse effect on the Condition of Seller and the Seller
Subsidiaries, taken as a whole.
2.13. Litigation and Other Proceedings. Except as set
--------------------------------
forth on Schedule 2.13 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 the Condition of 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 applicable laws except such claims
as would not be reasonably expected to have a material adverse
affect on the Condition of Sellers and the Seller Subsidiaries,
taken as a whole.
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 in all material respects 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,
except for such matters which, individually or in the aggregate,
will not have and reasonably could not be expected to have a
material adverse effect on the Condition of Seller and the Seller
Subsidiaries, taken as a whole.
- 15 -
20
2.15. Compliance with Laws.
--------------------
(a) To the best knowledge of Seller, Seller and each
of the Seller Subsidiaries have all permits, licenses,
authorizations, orders and approvals of, and have made all
filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit
them to own or lease their respective properties and assets
and to carry on their respective businesses as presently
conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and
effect and to the best knowledge of Seller no suspension or
cancellation of any of them is threatened; and all such
filings, applications and registrations are current; in
each case above, except for permits, licenses, authoriza-
tions, orders, approvals, filings, applications and
registrations the failure to have (or have made) or be
current which would not have a material adverse effect on
the Condition of Seller and the Seller Subsidiaries, taken
as a whole.
(b) (i) Except as set forth on the Schedules attached
hereto, 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 the Condition of Seller and the Seller Subsidiaries,
taken as a whole, and (ii) neither Seller nor any of the
Seller Subsidiaries is in default under, and to the best
knowledge of Seller no event has occurred which, with the
lapse of time or notice or both, could result in the
default under, the terms of any judgment, order, writ,
decree, permit, or license of any Regulatory Authority or
court, whether federal, state, municipal or local, and
whether at law or in equity, except where such default
would not have a material adverse effect on the Condition
of Seller and the Seller Subsidiaries, taken as a whole.
(c) Except as otherwise scheduled on Schedule 2.15(c)
hereto, 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 part of the investment portfolio of Seller
or any of the Seller Subsidiaries) (A) that is contaminated
by or contains any hazardous waste, toxic substance, or
related materials, including without limitation asbestos,
PCBs, pesticides, herbicides, and any other substance or
waste that is hazardous to human health or the environment
(collectively, a "Toxic Substance"), or (B) on which any
Toxic Substance has been stored, disposed of, placed, or
used in the construction thereof; and which, in each case
above, reasonably could be expected to have a
- 16 -
21
material adverse effect on the Condition of Seller and the
Seller Subsidiaries, taken as a whole. "Property" shall
include all property (real or personal) owned or controlled by
Seller or any of the Seller Subsidiaries, including without
limitation property under foreclosure, property held by
Seller or any of the Seller Subsidiaries in its capacity as
a trustee and property in which any venture capital or
similar unit of Seller or any of the Seller Subsidiaries
has an interest. Except as set forth in Schedule 2.15(c)no
action, suit or proceeding is 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 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 the Condition of Seller and the
Seller Subsidiaries, taken as a whole.
(d) Since December 31, 1991, neither Seller nor any of
the Seller Subsidiaries has received any notification or
communication which has not been resolved from any
Regulatory Authority (i) asserting that any Seller or any
of the Seller Subsidiaries is not in substantial compliance
with any of the statutes, regulations or ordinances that
such Regulatory Authority enforces, except with respect to
matters which reasonably could not be expected to have a
material adverse effect on the Condition of Seller and the
Seller Subsidiaries, taken as a whole, (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 material
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 any labor dispute, arbitration, lawsuit or
administrative proceeding, involving the employees of Seller or
any of the Seller Subsidiaries which reasonably could be expected
to have a material
- 17 -
22
adverse affect on the Condition of Seller and the Seller
Subsidiaries, taken as a whole. None of the employees of Seller or
the Seller Subsidiaries are represented by any labor union or any
collective bargaining organization.
2.17. Material Interests of Certain Persons. To the
-------------------------------------
best knowledge of Seller 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 if such entity had a class of securities
registered under Section 12 of the Exchange Act.
2.18. Allowance for Loan and Lease Losses; Non-Performing
---------------------------------------------------
Assets.
------
(a) All of the accounts, notes, and other receivables
which are reflected in the Seller Financial Statements as
of June 30, 1995 were acquired in the ordinary course of
business and, to the best knowledge of Seller, as of June
30, 1995, were collectible in full in the ordinary course
of business, except for possible loan and lease losses
which are adequately provided for in all material respects
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 June
30, 1995, to the date hereof has not deviated in any
material and adverse manner from the credit and collection
experience of the Seller and the Seller Subsidiaries, taken
as a whole, in the nine months ended June 30, 1995.
(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 condensed balance sheet of
Seller and the Seller Subsidiaries as of June 30, 1995,
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
impaired loans.
(d) The aggregate amount of all Nonperforming Assets
(as defined below) on the books of Seller and its
Subsidiaries does not exceed six-tenths of one percent of
the gross amounts of all loans and leases on the books of
Seller and the Seller Subsidiaries taken as a whole, plus
Nonperforming Assets. "Nonperforming 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
- 18 -
23
been classified "doubtful," "loss," or the equivalent thereof
by any Regulatory Agency, (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, or (E) where a specific reserve allocation exists in
connection therewith, and (ii) all assets classified by
Seller as real estate acquired through foreclosure or
repossession, including impaired loans, and all other
assets acquired through foreclosure or repossession.
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, 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 (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 by Seller or any Seller Subsidiaries have been made.
(c) With respect to each of the Seller Employee Plans
which is a pension plan (as defined in Section 3(2) of
ERISA) (the "Pension Plans"): (i) each Pension Plan which
is intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined to be so
qualified by the IRS and such determination letter may
still be relied upon, and each related trust is exempt from
taxation under Section 501(a) of the Code; (ii) the present
value of all benefits vested and all benefits accrued under
each Pension Plan which is subject to Title IV of ERISA did
not, in each case, as of the last applicable annual
valuation date (as indicated on Schedule 2.19(a)), exceed
----------------
the value of the assets of the Pension Plan allocable to
such vested
- 19 -
24
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 the
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 set forth on Schedule 2.19(a) 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) 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. From and after June
-------------------------
30, 1995, 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 which are not
- 20 -
25
material to the Condition of Seller and the Seller Subsidiaries,
taken as a whole, or subjected to Lien any of its assets or
properties other than in the ordinary course of business consistent
with past practice or which are not material to the Condition of
Seller and the Seller Subsidiaries, taken as a whole; (vi) neither
Seller nor any of the Seller Subsidiaries has discharged or
satisfied any Lien or paid any obligation or liability (absolute or
contingent), other than in the ordinary course of business; (vii)
neither Seller nor any of the Seller Subsidiaries has sold,
assigned, transferred, leased, exchanged, or otherwise disposed of
any of its material properties or assets other than for a fair
consideration in the ordinary course of business; (viii) except as
required by contract or law or plan, 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 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, except where such damage, destruction or loss does not
materially adversely affect the Condition of Seller or the Seller
Subsidiaries, taken as a whole; (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, liabili-
ties or obligations equal to or exceeding $25,000,
individually or $150,000 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 consistently applied except:
(i) liabilities and obligations reflected on
the Seller Financial Statements;
(ii) operating leases reflected on Schedule
--------
2.11; and
----
(iii) debts, liabilities or obligations incurred
since June 30, 1995 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 the Condition of the Seller
and the Seller Subsidiaries, taken as a whole.
(b) Neither Seller nor any of the Seller Subsidiaries
was as of June 30,
- 21 -
26
1995, 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 which affected, affects or may reasonably be expected
to affect, materially and adversely, the Condition of the
Seller and the Seller Subsidiaries, taken as a whole.
2.22. Proxy Statement, Etc. None of the information
---------------------
regarding Seller or any of the Seller Subsidiaries to be supplied
by Seller for inclusion or included in (i) the Registration
Statement on Form S-4 to be filed with the SEC by Mercantile for
the purpose of registering the shares of Mercantile Common Stock
to be exchanged for 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 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.
- 22 -
27
2.25. Brokers and Finders. Except for The Chicago
-------------------
Corporation, 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. The
aggregate amount of all liabilities incurred by Seller and/or the
Seller Subsidiaries in respect of the retention of The Chicago
Corporation, as aforesaid, and due and payable by Seller and/or
the Seller Subsidiaries shall not exceed one percent (1%) of the
total consideration paid in connection with the Merger.
2.26. Interest Rate Risk Management Instruments.
-----------------------------------------
Neither Seller nor any of the Seller Subsidiaries are parties to,
nor are any of their properties or assets bound by, interest rate
swaps, caps, floors and option agreements and other interest rate
risk management arrangements.
ARTICLE III
-----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYERS
As an inducement to Seller to enter into and perform its
obligations under this Agreement, and notwithstanding any
examination, inspection, audit or other investigation made by
Seller, Buyers jointly and severally represent and warrant to and
covenant with Seller as follows:
3.01. Organization and Authority. Mercantile and Merger
--------------------------
Sub are each corporations duly organized, validly existing and in
good standing under the laws of the State of Missouri, are each
qualified to do business and are each in good standing in all
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified 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 the Condition of 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. True and complete copies of the
Articles of Incorporation and Bylaws of Mercantile and Merger
Sub, each in effect on the date of this Agreement, have been
provided to Seller.
3.02. Capitalization of Mercantile. The authorized
----------------------------
capital stock of Mercantile consists of (i) 100,000,000 shares of
Mercantile Common Stock, of which, as of July 7, 1995,
54,194,248 shares were issued and outstanding and (ii)
5,000,000 shares of preferred stock, no par value ("Mercantile
Preferred Stock"), issuable in series, of which 5,306 shares of
Series B-1 Preferred Stock and 9,500 shares of Series B-2
Preferred Stock are issued and outstanding. Mercantile has
designated 1,000,000 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 (the
"Mercantile Rights Agreement"), between Mercantile and Mercantile
Bank of St. Louis National Association, as Rights Agent. As of
July 7, 1995, Mercantile had reserved (i) 4,764,581 shares of
Mercantile Common
- 23 -
28
Stock for issuance under the Mercantile stock option and incentive
plans; (ii) 675,000 shares of Mercantile Common Stock for issuance
upon the acquisition of Southwest Bancshares, Inc. ("SBI") pursuant
to the Agreement and Plan of Merger dated January 27, 1995 by and
between Mercantile, Ameribanc, Inc. ("ABNK") and SBI; (iii) 661,385
shares of Mercantile Common Stock for issuance upon the acquisition
of AmeriFirst Bancorporation, Inc. ("ABI") pursuant to the
Agreement and Plan of Merger dated February 16, 1995, as amended,
by and between Mercantile, ABNK and ABI; and (iv) 322,000 shares of
Mercantile Common Stock for issuance upon the acquisition of
Security Bank of Xxxxxx, F.S.B. ("Xxxxxx"), pursuant to the
Agreement and Plan of Reorganization between Mercantile and
Xxxxxx dated July 7, 1995. From July 7, 1995 through the date of
this Agreement, no Equity Securities of Mercantile have been
issued (excluding the number of shares disclosed in this Section
3.02 pursuant to the consummation of the SBI, ABI and Xxxxxx
acquisitions and any shares of Mercantile Common Stock which may
have been issued under Mercantile stock option and incentive
plans).
Mercantile continually evaluates possible acquisitions
and may prior to the Effective Time enter into one or more
agreements providing for, and may consummate, the acquisition by
it of another bank, association, bank holding company, savings
and loan holding company or other company (or the assets thereof)
for consideration that may include Equity Securities. In
addition, prior to the Effective Time, Mercantile may, depending
on market conditions and other factors, otherwise determine to
issue equity, equity-linked or other securities for financing
purposes. Notwithstanding the foregoing, Buyers have not taken
and will not 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 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. 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 shares of Mercantile
Common Stock to be issued in the Merger will be duly authorized,
validly issued, fully paid and nonassessable, and will not be
issued in violation of any preemptive right of any shareholder of
Mercantile. The shares of Mercantile Common Stock to be issued
in the Merger will be listed on the NYSE as of the Effective
Time.
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.
- 24 -
29
(b) Neither the execution, delivery and performance by
Mercantile or Merger Sub of this Agreement, nor the
consummation by Mercantile or Merger Sub of the
transactions contemplated hereby, nor compliance by
Mercantile or Merger Sub with any of the provisions hereof,
will (i) violate, conflict with or result in a breach of
any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would
constitute a default) or result in the termination of, or
accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the
creation of, any Lien upon any of the properties or assets
of Mercantile or Merger Sub under any of the terms,
conditions or provisions of (x) their respective Articles
of Incorporation or Bylaws, 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, with respect to (i) and (ii) above, such
violations, conflicts, breaches, defaults, terminations,
accelerations or Liens which would not have a material
adverse effect on the Condition of 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 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, 1994, 1993 and 1992 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, 1994, together with the notes thereto, audited
by KPMG Peat Marwick LLP, and the consolidated balance sheet of
Mercantile and its Subsidiaries as of March 31, 1995 and related
consolidated statements of income and cash flows for the three-
month period ended March 31, 1995, as filed with the SEC
(collectively, the "Mercantile Financial Statements"), have been
prepared in accordance with GAAP, present fairly the consolidated
financial position of Mercantile and its Subsidiaries at the
dates 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.
- 25 -
30
3.05. Mercantile Reports. Since January 1, 1992, each
------------------
of Mercantile and its Subsidiaries has timely filed all material
reports, registrations and statements, together with any required
amendments thereto, that it was required to file with any
Regulatory Authority. All such reports and statements filed with
any such Regulatory Authority are collectively referred to herein
as the "Mercantile Reports." As of its respective date, each
Mercantile Report complied in all material respects with all the
rules and regulations promulgated by the applicable Regulatory
Authority and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
3.06. Material Adverse Change. Since March 31, 1995,
-----------------------
there has been no material adverse change in the Condition of
Mercantile and its Subsidiaries, taken as a whole, except as may
have resulted or may result from changes to laws and regulations,
GAAP or regulatory accounting principles, or interpretations
thereof, or changes in economic conditions, including interest
rates, applicable to commercial banking institutions generally
and other than for changes to the extent of established reserves
or accruals in the Mercantile Financial Statements.
3.07. Legal Proceedings or Other Adverse Facts. There
----------------------------------------
is no legal action or other proceeding or investigation pending
or, to the best knowledge of Buyers, threatened against
Mercantile or any of its Subsidiaries that could be reasonably
expected to prevent or adversely affect in a material manner or
seek to prohibit the consummation of the transactions
contemplated herein or have a material adverse effect on the
Condition of Mercantile and its Subsidiaries, taken as a whole,
nor is Mercantile or any of its Subsidiaries subject to any order
of a court or governmental authority having any such effect. To
the best knowledge of Buyers, there is no other fact that could
be reasonably expected to prevent or adversely affect the
consummation of the transactions contemplated herein.
3.08. 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 Registra-
tion 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.
- 26 -
31
3.09. 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 shall, and shall cause each of the Seller
Subsidiaries to, conduct their respective businesses according to
the ordinary and usual course consistent with past practices and
shall, and shall cause each such Seller Subsidiary to, use all
reasonable efforts to maintain and preserve its business
organization, employees and advantageous business relationships
and retain the services of its officers and key employees.
4.02. Forbearances of 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 $.04 per
share on the Seller Common Stock, provided that Seller
--------
shall not declare or pay its regular 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 or plan 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;
- 27 -
32
(d) propose or adopt any amendments to its articles of
incorporation,
association or other charter document or bylaws;
(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) (i) without first consulting with Mercantile,
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 in excess of
$200,000 with respect to commercial transactions (including
commercial construction transactions), $300,000 with
respect to residential transactions, 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 in excess of $350,000; (ii)
without first obtaining the written consent of Mercantile,
Lend to any person or entity in an amount 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 in
excess of $750,000; (iii) Lend to any person other than in
accordance with lending policies as in effect on the date
hereof, provided that in the case of clauses (i) and (iii)
--------
Seller or any of the Seller Subsidiaries may make any such
loan in the event (A) Seller or any Seller Subsidiary has
delivered to Buyers or their designated representative a
notice of its intention to make such loan and such
information as Buyers or their designated representative
may reasonably require in respect thereof and (B) Buyers or
their designated representative shall not have reasonably
objected to such loan by giving written or facsimile notice
of such objection within two business days following the
delivery to Buyers or their designated representative of
the notice of intention and information as aforesaid; or
(iv) Lend to any person or entity any of the loans or other
extensions of credit to which or investments in which are
on a "watch list" or similar internal report of Seller or
any of the Seller Subsidiaries (except those denoted "pass"
thereon), in an amount in excess of $100,000; provided,
--------
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 clauses (i) and (ii) of this
Section 4.02(g), Seller shall be authorized without first
consulting with Buyers or obtaining Buyers' prior written
consent, to increase the aggregate amount of any credit
facilities theretofore established in favor of any person
or entity (each a "Pre-Existing Facility"), provided that
the aggregate amount of any and all such increases shall
not be in excess of the lesser of five percent (5%) of such
Pre-Existing Facilities or $25,000;
- 28 -
33
(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) knowingly take or omit to 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 or (B) prevent or
impede the transactions contemplated hereby from qualifying
as a reorganization within the meaning of Section 368 of
the Code;
(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 in excess of $25,000 in the aggregate;
(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, without first consulting with
Mercantile, execute individual investment transactions of
greater than $500,000 for U.S. Treasury Securities and
$250,000 for all other investment instruments;
(l) agree in writing or otherwise to take any of the
foregoing actions or intentionally engage in any activity,
enter into any transaction or knowingly take or omit to
take any other action 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 Seller shareholder, or any entity
controlled, directly or
- 29 -
34
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. Section 371c and 12
U.S.C. Section 371c-1, without 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. Section 371c.
4.03. Forbearances of Buyers. During the period from
----------------------
the date of this Agreement to the Closing Date, Buyers shall not,
and shall not permit any of their Subsidiaries to, without the
prior written consent of Seller, agree in writing or otherwise
intentionally engage in any activity, enter into any transaction
or knowingly 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 Buyers or Seller to obtain any
approval of any Regulatory Authority required for the
transactions contemplated by this Agreement or to perform
its covenants and agreements under this Agreement or (ii)
prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of
Section 368 of the Code; 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.
----------------------
(a) Buyers and Seller shall each afford to the other,
and to the other's accountants, counsel and other represen-
tatives, reasonable 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. Except as required by law, 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 (including
information derived from such information) which is not
otherwise public knowledge other than by violation of this
provision, (B) in the event of a termination of this
Agreement, return all documents (including copies or
extracts thereof) obtained hereunder from the other party
or any of its Subsidiaries to it and (C) cause all of such
party's confidential information obtained or derived in
connection with 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 for any purpose other than in connection
herewith.
- 30 -
35
(b) Buyers shall promptly following the date of this
Agreement, commence its review of Seller and the Seller
Subsidiaries and their respective operations, business
affairs, prospects and financial condition, including,
without limitation, those matters which are the subject of
the Seller's representations and warranties (the "Due
Diligence Review"). Buyers shall conclude such review by
no later than twenty (20) business days after the date of
this Agreement (the "Due Diligence Review Period"), but the
pendency of such Due Diligence Review shall not delay
Mercantile's obligation pursuant to Section 5.02 of this
Agreement to file a Registration Statement with the SEC and
all other necessary applications and filings with the
appropriate Regulatory Authorities. Buyers shall advise
Seller of any situation, event, circumstance or other
matter which first comes to the attention of Buyers during
the Due Diligence Review which could potentially result in
the termination of this Agreement by Buyer pursuant to
Section 7.01(d) hereof, or, if applicable, notify Seller as
promptly as possible of the absence of any perceived
impediment to the consummation of the Merger.
Notwithstanding anything hereinabove contained or implied
to the contrary, the Due Diligence Review shall not limit,
restrict or preclude Buyers, at any time or from time to
time thereafter, from conducting further such reviews or
from exercising any rights available to it hereunder as a
result of the existence or occurrence prior to the Due
Diligence Period of any event or condition which was not
detected in the Due Diligence Review by Buyers and which
constitutes a breach of any representation, warranty or
agreement of Seller under this Agreement, provided that no
event or condition known to Buyers or information delivered
by Seller to Buyers as a result of, or in connection with,
the Due Diligence Review may be the basis for asserting the
breach of any representation, warranty, or covenant after
the time that Mercantile may terminate the Agreement
pursuant to Section 7.01(d).
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 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 applications for approval of the Merger with the
Federal Reserve Board and the Illinois Commissioner and any
other applicable Regulatory Authority 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 or the NYSE in connection with the issuance or listing
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.
- 31 -
36
(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 impede
--------
or delay (i) the receipt of any approval referred to in
Section 6.01(b) or (ii) the consummation of the
transactions contemplated by this Agreement or have any of
the effects described in the proviso in Section 1.13.
5.03. Shareholder Approval. Seller shall call a meeting
--------------------
of its shareholders to be held as soon as practicable after the
date that the Registration Statement is declared effective by the
SEC for the purpose of voting upon the Merger. 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 shareholders of Seller and use its reasonable best efforts to
obtain any vote of Seller's shareholders necessary for the
approval and adoption of this Agreement. The Company and its
Board of Directors shall not be obligated to make the
recommendation or otherwise solicit votes for the approval or
adoption of the Agreement required by this Section 5.03 if the
Board of Directors determines in good faith, after consultation
with its legal counsel, that making such a recommendation or
otherwise soliciting votes for the approval or adoption of the
Agreement would be inconsistent with its fiduciary duties to the
Company and its shareholders under applicable law.
5.04. Current Information. During the period from the
-------------------
date of this Agreement to the Effective Time, each party shall
promptly furnish the other with copies of all interim financial
statements as the same become available and shall cause one or
more of its designated representatives to confer on a regular and
frequent basis with representatives of the other party. Each
party shall promptly notify the other party of 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) an event which
would cause any representation or warranty of such party or any
Schedule to be untrue in any material respect, (b) any material
adverse change in its Condition, (c) the issuance or commencement
of any governmental complaint, investigation or hearing (or any
communication indicating that the same may be contemplated), or
(d) the institution or threat of material litigation involving
such party, and shall keep the other party fully informed of such
events.
- 32 -
37
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, as specified in a
written notice from Buyers to Seller, based upon such
consultation and as hereinafter provided, 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 of this Section 5.05, at the request of
Mercantile, Seller shall (i) establish and take such
reserves and accruals as Mercantile reasonably shall
request to conform Seller's loan, accrual and reserve
policies to Mercantile's policies, and (ii) establish and
take such accruals, reserves and charges in order to
implement such policies in respect of excess facilities and
equipment capacity, severance costs, litigation matters,
write-off or write-down of various assets and other
appropriate accounting adjustments, and to recognize for
financial accounting purposes such expenses of the Merger
and restructuring charges related to or to be incurred in
connection with the Merger, in each case at such times as
are reasonably requested by Mercantile in written notice to
Seller. It is the objective of Mercantile and Seller that
such reserves, accruals and charges referred to in this
Section 5.05 shall be taken as of or immediately prior to
December 31, 1995, and, in all events not later than as of
immediately prior to the Closing Date, provided, however,
-------- -------
that if such reserves, accruals and charges are to be taken
as of or immediately prior to December 31, 1995 and the
Closing Date is to occur thereafter, Mercantile shall
certify to Seller on or prior to December 31, 1995 that the
Buyer's representations and warranties are true and correct
as of such date, that the Regulatory Authority approval
conditions to its obligations contemplated by Section
6.01(b) have been satisfied or waived (except to the extent
that any waiting
- 33 -
38
period associated therewith may then have commenced but not
expired) and that Buyers are otherwise in compliance with this
Agreement, and Mercantile and Seller shall have mutually
agreed by December 31, 1995 to the scheduling of the Closing
Date; and provided, further, that Seller shall not be required
-------- -------
to take any such action that is not consistent with GAAP and
regulatory accounting principles.
(e) 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. Seller shall provide to
---------------------
Buyers as soon a reasonably practicable, but not later than ten
business days, after the acquisition, leasing, foreclosure or
repossession by Seller or any of the Seller Subsidiaries of any
other real property subsequent to the date hereof, a report of a
phase one environmental investigation on such other real property
(but excluding space in retail or similar establishments leased
by Seller or any of the Seller Subsidiaries for automatic teller
machines or bank branch facilities where the space leased
comprises less than 20% of the total space leased to all tenants
of such property). If required by the phase one report with
respect to any parcel of real property referred to above, in the
reasonable opinion of Mercantile, Seller shall also provide to
Mercantile a phase two investigation report on such designated
parcels. Mercantile shall have 15 business days from the receipt
of any such phase two investigation report to notify Seller of
any dissatisfaction with the contents of such report. If the
estimated costs of all remedial or other corrective actions or
measures with regard to the real properties referred to above
required by applicable law exceed $100,000 in the aggregate, as
reasonably estimated by an environmental expert retained for such
purpose by Seller upon Mercantile's reasonable request and such
costs will be incurred by Seller and the Seller Subsidiaries, or
if such cost cannot be so reasonably estimated by such expert to
be such amount or less with any reasonable degree of certainty,
then Mercantile, after providing Seller with written notice of
Mercantile's intent to do so and allowing Seller a six-month
period from the date of such notice to take and complete, to the
reasonable satisfaction of Mercantile, all such remedial or other
corrective actions and measures (the aggregate cost which will be
incurred by Seller and the Seller Subsidiaries shall not exceed
$100,000) and shall have the right pursuant to Section 7.01(f)
hereof to terminate this Agreement, which shall be Mercantile's
sole remedy in such event.
5.07. Agreements of Affiliates. Set forth as Schedule
------------------------ --------
5.07 is a list (which includes individual and beneficial
----
ownership) of all persons whom Seller believes to be "affiliates"
of Seller for purposes of Rule 145 under the Securities Act.
Seller shall use all reasonable efforts to cause each person who
is identified as an "affiliate" to deliver to Mercantile, as of
the date hereof, or as soon as practicable hereafter, a written
agreement in substantially the form set forth as Exhibit B to
---------
this Agreement providing that each such person will agree not to
sell, pledge, transfer or otherwise dispose of any shares of
Mercantile Common Stock to be received by such person in the
Merger except in compliance with the applicable provisions of the
Securities Act and the rules and regulations promulgated
thereunder, and until such time as financial results covering at
least thirty (30) days of combined operations of Mercantile and
Seller shall have been published. Prior to the Effective Time,
and via letter, Seller shall amend and supplement Schedule 5.07
-------------
and use all reasonable efforts to cause each
- 34 -
39
additional person who is identified as an "affiliate" to execute a
written agreement as set forth in this Section 5.07.
5.08. Expenses. Each party hereto shall bear its own
--------
expenses incident to preparing, entering into and carrying out
this Agreement and to consummating the Merger, provided, however,
-------- -------
that any and all fees and expenses paid by Seller to its legal
counsel, shall not exceed the amount of $100,000; provided
--------
further, however, that Buyers shall pay all printing and mailing
-------
expenses and filing fees associated with the Registration
Statement, the Proxy Statement and regulatory applications.
5.09. Miscellaneous Agreements.
------------------------
(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.
(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 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 (to the extent deemed
reasonable by Seller), 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. No action taken in connection with the
foregoing shall be the basis to assert the violation of a
representation, warranty, or covenant of Seller herein.
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 5.10 between Seller, any of
-------------
the Seller Subsidiaries, and any current or former
director, officer, employee or agent thereof, and all
provisions for vested benefits or other vested amounts
earned or accrued through the Effective Time under the
Seller Employee Plans.
(b) The provisions of any plan, program or arrangement
providing for the issuance or grant of any interest in
respect of the Equity Securities of Seller or any of
- 35 -
40
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
the 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 in
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. Except as may be required by law,
--------------
Seller and Mercantile shall consult and agree with each other as
to the form and substance of any proposed press release relating
to this Agreement or any of the transactions contemplated hereby.
5.12. State Takeover Statutes. Subject to the fiduciary
-----------------------
duties of the Board of Directors, 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 the
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 Bylaws 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 are hereby expressly
assumed by Mercantile, 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, but in no event for a
period of not less than five (5) years after the Closing Date. 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.
5.14. Tax Opinion Certificates. Seller shall use its
------------------------
reasonable to cause (a) no more than two of its executive
officers or directors with regard to Exhibit C and (b) such
---------
holders of one percent (1%) or more of the Seller Common Stock
(including shares beneficially held)
- 36 -
41
with regard to Exhibit D, in each case, as may be requested by
---------
Xxxxxxxx & Xxxxxxxx to timely execute and deliver to Xxxxxxxx &
Xxxxxxxx certificates substantially in the form of Exhibit C or
---------
Exhibit D hereto, as the case may be.
---------
5.15. Best Efforts to Insure Pooling. Each of Buyers
------------------------------
and Seller undertakes and agrees to use its best efforts to cause
the Merger to qualify for pooling-of-interests accounting treat-
ment.
ARTICLE VI
----------
CONDITIONS
6.01. Conditions to Each Party's Obligation To Effect
-----------------------------------------------
the Merger. The respective obligations of each party to effect
----------
the Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following conditions:
(a) This Agreement shall have received the requisite
approval of shareholders of Seller at the meeting of
shareholders called pursuant to Section 5.03 of this
Agreement.
(b) All requisite approvals of this Agreement and the
transactions contemplated hereby shall have been received
from the Regulatory Authorities, and all waiting periods
after such approvals required by law or regulation have
been satisfied.
(c) The Registration Statement shall have been
declared effective and shall not be subject to a stop order
or any threatened stop order and the Mercantile Common
Stock to be issued in the Merger shall have been approved
for listing on the NYSE.
(d) Neither Seller nor Buyers 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) Each of Buyers and Seller shall have received from
Xxxxxxxx & Xxxxxxxx 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, holders of Seller Common
Stock who receive Mercantile Common Stock in the Merger
will not recognize gain or loss for federal income tax
purposes, the basis of such Mercantile Common Stock will
equal the basis of the Seller Common Stock for which it is
exchanged and the holding period of such Mercantile Common
Stock will include the holding period of the Seller Common
Stock for which it is exchanged, assuming that such Seller
Common Stock is a capital asset in the hands of the holder
thereof at the Effective Time.
6.02. Conditions to Obligations of Seller To Effect the
-------------------------------------------------
Merger. The obligations of
------
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42
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 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
the Condition of 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 that 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) 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 E
---------
to this Agreement.
6.03. Conditions to Obligations of Buyers To Effect the
-------------------------------------------------
Merger. The obligations of Buyers 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 Seller set forth in
Article II of this Agreement shall be true and correct in
all material respects 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 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
the Condition of the Seller 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 President and the Chief Financial
Officer of Seller, acting solely in their capacities as
officers of Seller, to that effect.
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43
(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 President and the Chief Financial
Officer of Seller acting 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) 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 F to this
---------
Agreement.
(e) Opinion of KPMG Peat Marwick. Buyer shall have
----------------------------
received an opinion of KPMG Peat Marwick, satisfactory in
form and substance to Mercantile, that the Merger will
qualify for pooling-of-interests accounting treatment,
which opinion shall not have been withdrawn at or prior to
the Effective Time.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at
-----------
any time prior to the Effective Time, whether before or after
approval by Seller shareholders:
(a) by mutual consent by the Executive Committee of
the Board of Directors of Mercantile and by the respective
Boards of Directors of Seller and Merger Sub;
(b) by the Executive Committee of the Board of
Directors of Mercantile or the respective Boards of
Directors of either Seller or Merger Sub at any time after
April 30, 1996 if the Merger shall not theretofore have
been consummated (provided that the terminating party is
not then in material breach of any representation,
warranty, covenant or other agreement contained herein);
(c) by the Executive Committee of the Board of
Directors of Mercantile or the respective Boards of
Directors of either Seller or Merger Sub if (i) the Federal
Reserve Board, the Illinois Commissioner, 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 or the Board of Directors of Merger
Sub in the event (i) any situation, event, circumstance or
other matter shall come to the attention of Mercantile or
Merger Sub during the course of the Due Diligence Review
conducted pursuant to Section 5.01(b) hereof which
Mercantile or Merger Sub shall, in a good faith exercise of its
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44
reasonable discretion, believe to be inconsistent in
any material and adverse respect with any of the
representations or warranties of Seller, (ii) Mercantile or
Merger Sub notifies Seller of such matters within five (5)
business days after the end of the Due Diligence Review
Period and such matters are not capable of being cured or
have not been cured within thirty (30) days after written
notice thereof to Seller;
(e) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of Merger
Sub, on the one hand, or by the Board of Directors of
Seller, on the other hand, in the event of a breach by the
other party or parties 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
(f) by the Executive Committee of the Board of
Directors of Mercantile or the Board of Directors of Merger
Sub pursuant to and in accordance with the provisions of
Section 5.06 hereof.
7.02. Effect of Termination. In the event of termin-
---------------------
ation of this Agreement as provided in Section 7.01 hereof, 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(a) 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 or parties 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
the consideration to be received by the shareholders of Seller in
the Merger, (B) adversely affect any representation, warranty or
covenant of Buyer contained herein, (C) adversely affect the tax
treatment to Seller shareholders, as generally described in
Section 6.01(e) hereof, (D) otherwise adversely affect the rights
of Seller or any shareholders of Seller hereunder, or (E) impede
or delay receipt of any approvals, referred to in Section 6.01(b)
or the consummation of the transactions contemplated by this
Agreement. 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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45
ARTICLE VIII
------------
GENERAL PROVISIONS
8.01. Survival of Representations, Warranties and
-------------------------------------------
Agreements; Updating Schedules. Except as otherwise provided in
---------- ------------------
Section 5.01(b) herein 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 or representations
contained in or referred to in Article I, Sections 5.02(b), 5.07,
5.08, 5.11, 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(a), and Sections 5.08, 7.02 and 8.02
shall survive such termination. Any Schedule delivered with this
Agreement as of the date hereof, may be revised from time to time
or at any time prior to the Effective Time to include therein the
disclosure of additional information or other matters, but only
to the extent that such additional information and other matters
so disclosed in such revised Schedules first arises after the
date hereof.
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) 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 therein 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 and assigns, but
neither this Agreement nor any right or obligation set forth in
any provision hereof may be transferred or assigned by any party
hereto without the prior written consent of the other party, 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, 1.08, 5.08, 5.11, 5.13 and 8.02, which may be
- 41 -
46
enforced against Buyers or Seller by the parties therein
identified.
8.04. No Implied Waiver. No failure or delay on the
-----------------
part of either 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.
8.05. 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 or meaning of any provision hereof.
8.06. Entire Agreement. This Agreement, the Exhibits,
----------------
and the Schedules hereto constitute the entire agreement between
the parties with respect to the subject matter hereof, and
supersede all prior negotiations, representations, warranties,
commitments, offers, letters of interest or intent, proposal
letters, contracts, writings or other agreements or
understandings, whether written or oral, with respect thereto.
8.07. 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.
8.08. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to be duly
received (i) on the date given if delivered personally or (ii)
upon confirmation of receipt, if by facsimile transmission or
(iii) on the date received if mailed by registered or certified
mail (return receipt requested), 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 Buyers:
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. Xxxx
Executive Vice President
Mercantile Bank of St. Louis National Association
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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47
Copies to:
Mercantile Bancorporation Inc.
Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxx X. Xxxxxxxx, Esq.
General Counsel and Secretary
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Xxxxxxxx & Xxxxxxxx
Xxx Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. XxXxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(ii) if to Seller:
First Sterling Bancorp, Inc.
000 Xxxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Copies to:
Xxxx X. Xxxxx
0000 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (___) ___-____
and
Xxxxxxx X. Xxxxxxx, Xx.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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48
8.09. Severability. Any term, provision, covenant or
------------
restriction contained in this Agreement held by a court or a
Regulatory Authority of competent jurisdiction to be invalid,
void or unenforceable, shall be ineffective to the extent of such
invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained
in this Agreement nor the validity or enforceability thereof in
any other jurisdiction shall be affected or impaired thereby.
Any term, provision, covenant or restriction contained in this
Agreement that is so found to be so broad as to be unenforceable
shall be interpreted to be as broad as is enforceable.
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.
- 44 -
49
IN WITNESS WHEREOF, Buyers and Seller have caused this
Agreement to be signed and, by such signature, acknowledged by
their respective officers thereunto duly authorized, and such
signatures to be attested to by their respective officers
thereunto duly authorized, all as of the date first above
written.
"BUYERS"
MERCANTILE BANCORPORATION INC.
Attest: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxx
--------------------------------- -----------------------------
Xxxxxxx X. Xxxxxxxx Xxxx X. Xxxx
Senior Attorney and Assistant Secretary Executive Vice President
Mercantile Bancorporation Inc. Mercantile Bank of St. Louis
National Association
MERCANTILE BANCORPORATION
INCORPORATED OF ILLINOIS
Attest: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxx
--------------------------------- -----------------------------
Xxxxxxx X. Xxxxxxxx Xxxx X. Xxxx
Senior Attorney and Assistant Secretary Vice President
"SELLER"
FIRST STERLING BANCORP, INC.
Attest: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxx X. Xxxxx
--------------------------------- -----------------------------
Xxxx X. Xxxxx
Vice President
00338N95.MJM/TRH
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