1
EXHIBIT 2.2
February 2, 1999
Midwest Bancshares, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Ladies and Gentlemen:
This letter is intended to supplement the Agreement and Plan of Merger
by and between Mahaska Investment Company ("Mahaska") and Midwest Bancshares,
Inc. ("Company") dated of even date herewith (the "Merger Agreement") and sets
out the agreements of the parties relating to various issues not fully addressed
in the Merger Agreement. The provisions of this letter agreement are hereby
incorporated into and made part of Section 4.18(c) of the Merger Agreement as if
set forth therein. Capitalized terms used in this letter agreement, not
otherwise defined in this letter agreement, shall have the meanings ascribed to
them in the Merger Agreement. The provisions of this letter agreement shall
survive consummation of the transactions under the Merger Agreement.
(1) Directors of Bank. The directors of the Bank immediately prior to
the Effective Time together with two members of Mahaska's then current board of
directors, who shall be selected by the Directors of Mahaska, shall be the
directors of the Bank at and after the Effective Time. Each such director of the
Bank will be eligible during his or her term of service as a director of the
Bank to participate in all director compensation plans, including any
non-qualified stock option awards, on the same basis as nonemployee directors of
Mahaska or a Mahaska Subsidiary generally. Mahaska further agrees that such
directors shall be given full credit for their past service with the Bank in
determining participation in, eligibility for and vesting in benefits under the
director compensation plans. Mahaska shall use its best efforts to cause each
such director of the Bank (other than a current member of the Mahaska Board of
Directors) to be re-elected for successive terms so that each such director will
serve for a minimum of three years after the Effective Time.
(2) Compensation and Benefits for Current Company CEO and CFO. To
maximize the value to be received by Mahaska in the Merger, Mahaska believes it
is essential to retain the services of the current Company CEO and CFO on a
long-term basis in order to integrate operations, to assure customer retention
and customer development, facilitate long-term strategic planning in Burlington,
Iowa and surrounding market area, and to otherwise enhance the acquired
franchise. Accordingly, Mahaska and each of the current Company CEO and CFO
shall on the date hereof enter into employment agreements in the form of Exhibit
D-1 (for the CEO) and Exhibit D-2 (for the CFO) to the Merger Agreement (the
"New Employment Agreements"). The New Employment Agreements shall become
effective at the Effective Time. The Bank shall pay
2
to each of the current Company CEO and CFO a lump sum cash payment immediately
prior to the Effective Time in the amount of $120,000 and $90,000, respectively,
in exchange for such executives entering into the New Employment Agreements and
thereby relinquishing their economic rights and benefits under their existing
employment agreements with the Bank.
(3) Salary Continuation Plans. At the Effective Time, or as soon as
thereafter as practicable, Mahaska agrees to establish Salary Continuation Plans
for the current Company CEO and CFO. Such plans will be consistent with and
substantially similar to those currently provided or to be provided to certain
of Mahaska's senior officers. Such plans will provide for full credit for past
service with the Company and the Bank for purposes of participation,
eligibility, vesting and accrual of benefits under the plans, including but not
limited to upon death of the executive the benefits payable shall be paid to the
executive's designated beneficiary. In no event will the annual benefit
commencing at age 55 be no less than $20,000 or at age 65 no less than $50,000
for a period of 10 years for the current CEO, and the annual benefit commencing
at age 65 be no less than $40,000 for a period of 10 years for the current CFO.
(4) Group Health Plan. At or after the Effective Time, the Company
Employees shall be integrated into the group health plans and cafeteria plan of
Mahaska and the Mahaska Subsidiaries in a manner whereby no Company Employee
shall be subject to any gap in coverage or a pre-existing condition exclusion
for which coverage is available to him or her under the group health plan of the
Company or the Bank immediately prior to the Effective Time. Consistent
herewith, Mahaska shall continue the group health plan of the Company or the
Bank after the Effective Time for those Company Employees who would be subject
to any gap in coverage or pre-existing condition exclusion as described above
until such time as they are not subject to such conditions under the group
health plan to be provided to them by Mahaska or a Mahaska Subsidiary.
(5) Qualified Plans. (a) Company ESOP. The Company ESOP will be merged
into the Mahaska ESOP at or as soon as practicable after the Effective Time.
Pending the merger of such plans, the Company ESOP shall be maintained, operated
and administered for the exclusive benefit of those participants in the Company
ESOP as of the Effective Time and those former participants or their
beneficiaries who have undistributed account balances in the Company ESOP as of
the Effective Time, in all cases in compliance with ERISA, the Code and all
other applicable laws and regulations. No amendment or change will be made by
Mahaska to the Company ESOP which would adversely affect the rights of
participants and/or their beneficiaries and after the merger of the plans the
vesting schedule currently contained in the Company ESOP shall continue to apply
to the unvested account balances of each participant as of the Effective Time.
(b) Bank Defined Benefit Pension Plan. This plan shall at the election
of the Company either be (a) frozen as to participation as of the Effective Time
and terminated at or as soon as practicable after the Effective Time; or (b)
continued for a period consisting of the tax year in which the Merger is
consummated and one tax year thereafter for the exclusive benefit of Company
Employees and persons having rights under the plan immediately prior to the
Effective Time, in which case the plan shall be frozen as to participation at
the expiration of the second tax period stated herein and terminated on such
date or as soon thereafter as is practicable. The
-2-
3
Company shall exercise its election by written notice to Mahaska prior to the
Effective Time. Prior to any termination of the plan, either the Bank or
Mahaska, whichever is applicable, shall cause the plan to be amended to allocate
excess assets on a plan termination basis to those participants in the plan on
the date it is frozen; and in the case where the plan is frozen after the
Effective Time, excess assets shall also be allocated to those persons who were
participants in the plan immediately prior to the Effective Time who are no
longer participants in the plan as of its freeze date, to the extent permitted
by the plan and applicable laws and regulations, including but not limited to,
ERISA and the Code. As soon as practicable after the receipt of a determination
letter for termination from the Internal Revenue Service relating to the
termination of the plan, benefits will be distributed in accordance with the
plan and, to the extent permitted by law, participants or beneficiaries will be
offered the right to roll over their benefits to another qualified plan of
Mahaska or to an eligible individual retirement account.
(6) Other Benefit Plans. Ninety days after the Effective Time, all
Company Employees will become participants in Mahaska's short-term and long-term
disability plan, group term life insurance plan, and 401(k) plan on a uniform
and nondiscriminatory basis. Company Employees will be given full credit for
prior years of service with the Company and the Company Subsidiaries in
determining participation in, eligibility for and vesting in benefits, to the
extent applicable, in such Mahaska plans.
Please indicate your agreement with the foregoing by signing one copy
of this letter in the space set forth below.
MAHASKA INVESTMENT COMPANY
By /s/ Xxxxxxx X. Xxxxxx
------------------------
Its President and Chief Executive Officer
Acknowledged and agreed to this 2nd day of February, 1999.
MIDWEST BANCSHARES, INC.
By /s/ Xxxxxxx X. Xxxxxx
------------------------
Its President and CEO
-3-
4
The undersigned have executed this Letter Agreement for the purpose of
agreeing in their individual capacities to provisions of items 2 and 3 above.
Xxxxxxx X. Xxxxxx, individually
/s/ Xxxxxxx X. Xxxxxx
---------------------
Dated: February 2, 1999
Xxxxxx X. Xxxxxxxxx, individually
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Dated: February 2, 1999
-4-
