EXCHANGE AGREEMENT
Exhibit
9
Execution
Version
THIS EXCHANGE AGREEMENT dated as of
November 21, 2009 (this “Agreement”), is
entered into by and among Mercantile Bancorp, Inc., a Delaware corporation
(“Mercantile
Bancorp”), HNB Financial Services, Inc., a Missouri corporation (“HNB Financial
Services,” and together with Mercantile Bancorp, the "Sellers"), and R.
Xxxx Xxxxxxxx, in his individual capacity (“Xxxxxxxx”).
RECITALS
A. Mercantile
Bancorp is the sole shareholder and bank holding company of Mercantile Bank, an
Illinois chartered bank (“Mercantile”), and HNB
Financial Services, which owns all of the outstanding shares of capital stock
HNB National Bank, a national banking association (“HNB
National”).
X. Xxxxxxxx
is the sole shareholder of Great River Bancshares, Inc., a Nevada corporation
(“Great River”)
and the holder of more than $28 million of the aggregate principal amount of the
Notes (as defined below).
C. Mercantile
Bancorp and Great River are parties to the Fourth Amended and Restated Loan
Agreement dated as of April 30, 2009 (the “Loan Agreement”), the
Fourth Amended and Restated Loan Agreement Waiver and Amendment dated as of
August 10, 2009 (the “August Waiver”) and
the Fourth Amended and Restated Loan Agreement Second Waiver and Amendment dated
as of November 21, 2009 (the “November Waiver,” and
together with the Loan Agreement and the August Waiver, the “Amended Loan
Agreement”), pursuant to which Great River issued to Mercantile Bancorp
$43,962,700.50 in aggregate principal amount of secured notes (the “Notes”).
D. In
connection with the implementation of a capital restoration plan for Mercantile
and Mercantile Bancorp, Mercantile Bancorp and HNB Financial Services desire to
sell, and Xxxxxxxx desires to purchase, all of the issued and outstanding shares
of capital stock of HNB National (the “Bank Shares”) in
exchange for the retirement of $28,000,000 of indebtedness under the Notes
issued pursuant to the Amended Loan Agreement.
NOW, THEREFORE, in
consideration of the agreement of the parties contained herein, and intending to
be legally bound, the parties hereto agree as follows:
1. Definitions. The
following terms, when used in this Agreement, shall have the meanings set forth
below:
“Annual Financial Statements”
means the unaudited balance sheets of HNB National, at December 31, 2008
and 2007, and the related statements of income and cash flows for the years
ended December 31, 2008 and 2007, in each case, together with the notes
thereto.
"Brokered Deposits" means
(a) "brokered deposits" within the meaning of 12 C.F.R. 337.6 and
(b) deposits that are of the type having risk characteristics similar to
"brokered deposits" as contemplated by the Joint Agency Authority on Brokered
and Rate Sensitive Deposits, dated May 11, 2001, of the Board of Governors of
the Federal Revenue System, FDIC, Office of the Comptroller of the Currency and
Office of Thrift Supervision.
“Contract” means any written
contract (including subcontracts), agreement, lease or other obligation or
arrangement (including any amendments and other modifications thereto), into
which HNB National has entered.
“Debt” means, without
duplication: (i) the principal of, premium (if any) and interest
in respect of (A) indebtedness of such Person for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable;
(ii) all obligations of such Person issued or assumed as the deferred
purchase price of property; (iii) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker’s acceptance or
similar credit transaction; (iv) all obligations of the type referred to in
clauses (i) through (iii) of other Persons for the payment of which such
Person is responsible or liable, directly or indirectly, as obligor, guarantor,
surety or otherwise, including guarantees of such obligations; and (v) all
obligations of the type referred to in clauses (i) through (iv) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person); provided, that Debt shall not
include accounts payable to trade creditors, accrued expenses arising in the
ordinary course of business consistent with past practice and the endorsement of
negotiable instruments for collection in the ordinary course of
business.
“Deposit(s)” means deposit
liabilities with respect to deposit accounts which constitute “deposits” for
purposes of the Federal Deposit Insurance Act, 12 U.S.C. § 1813,
including escrow deposit liabilities relating to the loans of HNB National and
collected and uncollected deposits and accrued interest thereon.
"Employee Plan" means
(i) each “employee benefit plan,” as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 (“ERISA”), and (ii) each
employment, severance or similar Contract, plan, material arrangement or
material policy and each other material plan or material arrangement, which is
written, providing for compensation, bonuses, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, other welfare benefits,
workers’ compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) which is maintained, administered,
contributed to or required, as of the date hereof, to be contributed to by HNB
National and covers any director, officer, or employee or former director,
officer, or employee of HNB National, or with respect to which HNB National has
any Liability.
“GAAP” means generally accepted
accounting principles in the United States, in effect as of the date of this
Agreement and as of the Closing Date, as the case may be.
“Governmental Authority” means
any federal, state, municipal, local, foreign or judicial, administrative,
legislative or regulatory agency, department, commission, court, or tribunal of
competent jurisdiction (including any branch, department or official
thereof).
“Interim Financial Statements”
means HNB National's unaudited balance sheet as of September 30, 2009, and
the related statements of income and cash flow for the period beginning on
July 1, 2009 and ending on September 30, 2009.
"Law" means any law,
regulation, code, statute, rule, or applicable regulation promulgated by any
Governmental Authority currently in effect.
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“Liability” means any direct or
indirect, primary or secondary, liability, Debt, obligation, including any
obligation to pay or reimburse, penalties, costs or expenses, (including
reasonable costs of investigation, collection and defense) of any type, whether
accrued, absolute or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"Lien” means, with respect to
the Bank Shares or any asset of HNB National, any mortgage, lien, pledge,
charge, security interest or similar encumbrance of any kind or character in
respect of such asset.
“Material Adverse Effect” means
any event, fact, condition, change, circumstance or effect that is materially
adverse to the assets, liabilities, properties, results of operations or
financial condition of HNB National; provided, that with respect to this
definition, Material Adverse Effect shall not be deemed to include effects to
the extent resulting solely from (i) changes, after the date of this
Agreement, in (A) regulatory accounting requirements applicable to banks or
savings associations and their holding companies that do not have a
disproportionate impact on HNB National or (B) GAAP, (ii) changes,
after the date of this Agreement, in Laws or orders or interpretations thereof
by Governmental Authorities, (iii) actions or omissions of Sellers or HNB
National taken with the prior written consent of Xxxxxxxx or as required by this
Agreement, (iv) the negotiation, announcement, execution, pendency or
performance of this Agreement or the consummation of the transactions or any
communication by Xxxxxxxx or any of his affiliates of his plans or intentions
(including in respect of employees) with respect to HNB National,
(v) changes after the date of this Agreement in economic or political
conditions or the financing, banking, currency or capital markets in general,
(vi) changes affecting industries, markets or geographical areas in which
HNB National conducts its business, (vii) any natural disaster or any acts
of terrorism, sabotage, military action, armed hostilities or war (whether or
not declared) or any escalation or worsening thereof, whether or not occurring
or commenced before or after the date of this Agreement that do not have a
disproportionate impact on HNB National, (viii) any action required to be
taken under any Law or order or any existing Contract by which HNB National (or
any of its properties) is bound, (ix) any failure by HNB National to meet
any internal projections or forecasts, (x) any matter known to Xxxxxxxx as
of the date hereof in the case of each such matter described in the foregoing
clauses (i) through (x) shall be deemed not to constitute a “Material
Adverse Effect” and shall not be considered in determining whether a “Material
Adverse Effect” has occurred. A “Material Adverse Effect” shall be
measured only against past performance of HNB National and not against any
forward-looking statements, financial projections or forecasts of HNB
National.
“Material Contract” shall mean:
(i) any lease for tangible personal property providing for annual base rentals
for such personal property lease of $25,000 or more or aggregate base rental
payments for such personal property lease of $100,000 or more; (ii) any Contract
for the purchase of materials, software, supplies, goods, services, equipment or
other assets providing for either annual base payments by HNB National of
$100,000 or more or aggregate base payments by HNB National of $500,000 or more;
(iii) any partnership, joint venture or limited liability company agreement or
any Contract concerning an equity or partnership interest in another Person;
(iv) any Contract relating to the acquisition or disposition of any business
(whether by merger, sale of stock, sale of all or substantially all assets or
otherwise); (v) any Contract by which HNB National has incurred or is liable for
any indebtedness for borrowed money or the deferred purchase price of property
(in either case, whether incurred, assumed, guaranteed or secured by any of HNB
National’s assets), in excess of $1,000,000; (vi) any Contract that limits the
freedom of HNB National to compete in any line of business, in any market or
customer segment or with any Person; (vii) any Contract containing any right of
first refusal or right of first
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negotiation;
(viii) any Contract with any affiliate of HNB National; (ix) any Contract
requiring HNB National to use the products or services of the contracting party
on an exclusive basis; (x) any Contract requiring HNB National to provide
services on a “Most favored nation” basis; (xi) any Contract pursuant to which
HNB National is subject to confidentiality or non-disclosure obligations or that
restricts any Person from disclosing any confidential information in its
possession which relates to HNB National; (xii) any Contract under which HNB
National agrees to indemnify any party other than in the ordinary course of
business; or (xiii) any Employee Plan with HNB National's current or former
directors, officers, employees or independent contractors.
“Permitted Liens” shall
mean: (a) Liens for Taxes not yet due and payable or which are
being contested in good faith and through appropriate proceedings,
(b) statutory Liens or other Liens arising by operation of law securing
payments not yet due, including mechanics’ or materialmens’ Liens, Liens
affecting real property, including (i) servitudes, permits, licenses,
surface leases, ground leases to utilities, municipal agreements, railway siding
agreements and other similar rights, easements for streets, alleys, highways,
telephone lines, gas pipelines, power lines and railways, and other easements
and rights of way of public record on, over or in respect of any such real
property, (ii) conditions, covenants or other similar restrictions,
(iii) encroachments and other matters that would be shown in an accurate
survey or physical inspection of such real property, (iv) Liens in favor of
the lessors under real property leases or encumbering the interests of the
lessors in such real property and (v) any other such Liens, including
irregularities of title or connected with or in lieu of environmental
remediation affecting such real property as would not reasonably be expected to
have a Material Adverse Effect, (c) Liens created by licenses granted in
the ordinary course of business in any intellectual property, and (d) any
other Liens not described in clauses (a) through (c) above created by
the Agreement or connected with the transactions contemplated hereby or by the
actions of Xxxxxxxx.
“Person” means an individual,
firm, corporation (including any non-profit corporation), partnership, limited
liability company, joint venture, association, trust, Governmental Authority or
other entity or organization.
“Recent Balance Sheet” means
the unaudited balance sheet of HNB National as of the Recent Balance Sheet
Date.
“Recent Balance Sheet Date”
means December 31, 2008.
“Seller’s Knowledge” means the
actual knowledge of any executive vice president or higher ranking officer of
Seller or any senior vice president or higher ranking officer of HNB
National.
“Seller Group” means the
Sellers and HNB National and their respective affiliates immediately before the
Closing.
“Straddle Period” means any
taxable period beginning before and ending after the Closing Date.
“Tax” or “Taxes” means any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), custom duties, capital stock,
franchise, profits, withholding, social security (or similar excises),
unemployment, disability, ad valorem, real property, personal property, sales,
use, transfer, registration, value added, alternative or
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add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, by any Governmental Authority responsible for
imposition of any such tax (domestic or foreign), including amounts imposed on
HNB National as a result of being or having been on or before the Closing Date a
member of an affiliated, consolidated, combined or unitary group, or a party to
any agreement or arrangement, as a result of which liability of HNB National to
a Governmental Authority is determined or taken into account with reference to
the liability of any other Person.
“Tax Return” means any return,
declaration, disclosure, election, schedule, estimate, report, claim for refund,
estimates or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment
thereof.
“Transfer Tax” means any
federal, state, county, local, foreign and other sales, use, transfer, value
added, conveyance, documentary transfer, stamp duty, registration, recording or
other similar tax, fee or charge imposed in connection with the transaction or
the recording of any sale, transfer or assignment of property (or any interest
therein) effected pursuant to this Agreement.
Capitalized
terms used but not otherwise defined herein shall have their respective meanings
as assigned in the Amended Loan Agreement.
2. Purchase and Sale of Bank
Shares.
Upon the terms and subject to the
conditions of this Agreement, Mercantile Bancorp and HNB Financial Services
hereby agree to sell, convey, assign, transfer and deliver to Xxxxxxxx, free and
clear of any and all Liens whatsoever, and Xxxxxxxx hereby agrees to purchase
from Mercantile Bancorp and HNB Financial Services the Bank Shares.
3. Purchase
Price.
The purchase price for the Bank Shares
is $28,000,000. The purchase price will be paid on the Closing Date
(as hereinafter defined) by the repayment of amounts outstanding under the
Notes. The purchase price shall be applied to reduce the amounts
outstanding under the Notes in the following order of priority: first, to the
repayment of amounts outstanding under Term Note A until the outstanding
principal balance of Term Note A shall be paid in full; second, to the
repayment of amounts outstanding under the Revolving Credit Notes until the
outstanding principal balance of the Revolving Credit Notes shall be paid in
full; third, to
the repayment of amounts outstanding under Term Note C until the outstanding
principal balance of Term Note C shall be paid in full; fourth, to the
repayment of amounts outstanding under Term Note B until the outstanding
principal balance of Term Note B shall be paid in full; fifth, to the
repayment of amounts outstanding under Term Note D until the outstanding
principal balance of Term Note D shall be paid in full; and sixth, to the
repayment of amounts outstanding under the Liquidity Revolving Note until the
outstanding principal balance of the Liquidity Revolving Note shall be paid in
full. To the extent that the purchase price exceeds the
aggregate amount outstanding under the Notes as of the Closing Date, Xxxxxxxx
shall pay such excess to Sellers at the Closing in immediately available
funds.
4. Closing.
(a) Subject
to the satisfaction or waiver of all of the conditions to Closing (as
hereinafter defined) as set forth in this Section 4, the
closing of the transaction contemplated by this Agreement (the
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“Closing”) shall take
place at the offices of DLA Piper LLP (US) at 000 Xxxxxx Xxxxxx, XX, Xxxxxxxxxx,
X.X. 00000, upon the date specified by Xxxxxxxx after the satisfaction or waiver
of the conditions to Closing contained in this Section 4 (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions), unless another date
or place is agreed to in writing by the parties hereto. The date on
which the Closing actually occurs is hereinafter referred to as the “Closing
Date.”
(b) The
obligation of Mercantile Bancorp and HNB Financial Services to consummate the
transaction shall be subject to the satisfaction of the following
conditions:
(i) Mercantile
Bancorp shall have received from the holder thereof each outstanding Note which,
pursuant to the application of the purchase price in accordance with Section 3, shall be
deemed paid in full on the Closing Date (the "Discharged Notes"),
which Discharged Notes shall be deemed cancelled upon receipt by Mercantile
Bancorp;
(ii) The
representations and warranties of Xxxxxxxx shall be true and correct in all
material respects (except to the extent that any such representation or warranty
contains a materiality qualifier, in which case it shall be true and correct in
all respects), in each case at and as of the date of this Agreement and the
Closing Date with the same force and effect as though made at and as of the
Closing Date (except to the extent a representation or warranty speaks as of a
specified date, in which case as of such specified date); and
(iii) Mercantile
Bancorp and HNB Financial Services shall have received such other documents,
instruments and information as Mercantile Bancorp and HNB Financial Services may
reasonably request.
(c) The
obligation of Xxxxxxxx to consummate the transaction shall be subject to the
satisfaction of the following conditions:
(i) Mercantile
Bancorp shall have delivered to Xxxxxxxx a letter from the Federal Deposit
Insurance Corporation confirming that neither Xxxxxxxx nor HNB National would be
responsible under the liability established for commonly controlled insured
depository institutions, as set forth under 12 U.S.C. Section 1815(e), with
respect to any of the actual or future depository institution subsidiaries of
Mercantile Bancorp;
(ii) Mercantile
Bancorp and Xxxxxxxx shall have entered into a data processing agreement with
respect to HNB National in form and substance reasonably acceptable to
Mercantile Bancorp and Xxxxxxxx;
(iii) The
representations and warranties of Sellers shall be true and correct in all
material respects (except to the extent that any such representation or warranty
contains a materiality qualifier, in which case it shall be true and correct in
all respects), in each case at and as of the date of this Agreement and the
Closing Date with the same force and effect as though made at and as of the
Closing Date (except to the extent a representation or warranty speaks as of a
specified date, in which case as of such specified date); and
(iv) Xxxxxxxx
shall have received such other documents, instruments and information as
Xxxxxxxx may reasonably request.
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5.
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Representations
and Warranties.
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(a) The
Sellers, jointly and severally, represent and warrant to Xxxxxxxx, as of the
date hereof and as of the Closing Date, as follows:
(i) each Seller has all requisite
corporate or other power and corporate or other authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby;
(ii) this Agreement has been duly
executed and delivered by each Seller and (assuming the due authorization,
execution, and delivery by Xxxxxxxx) constitutes a valid and binding agreement
of such Seller enforceable against such Seller in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law);
(iii) the execution, delivery
and performance by each Seller of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (1) contravene or conflict
with the certificate of incorporation or bylaws of such Seller, (2) other than
consents, filings and notices, if any, previously obtained or made, contravene
or conflict in any material respect with any applicable law, regulation, rule or
order binding upon or applicable to such Seller or HNB National, (3) breach,
conflict with or constitute a default, or impair the rights of such Seller or
HNB National, or give rise to a right of termination, suspension or cancellation
of any right of such Seller or HNB National, or to a loss of any benefit to
which such Seller or HNB National is entitled, or accelerate any obligation of
such Seller or HNB National or increase or impose any liability on such Seller
or HNB National, in each case, under any provision of any contract, agreement,
arrangement or understanding binding upon such Seller or HNB National or by
which any of such Seller's or HNB National's assets or properties are
bound or subject, or any permit or approval held by such Seller or HNB National,
or (4) result in the creation or imposition of any lien or encumbrance on any
assets or properties of such Seller or HNB National, with such exceptions, in
the case of clauses (3) and (4), as would not, individually or in the aggregate,
materially adversely affect Seller's ability to consummate the transactions
contemplated hereby;
(iv) (A) the authorized capital stock
of HNB National consists solely of 64,000 shares of common stock and the issued
and outstanding capital stock of HNB National as of the date hereof and as of
the Closing Date is and will be 64,000 shares of common stock; (B) as of the
date hereof and as of the Closing Date there are no outstanding shares of
capital stock of HNB National other than the Bank Shares; (C) the
Bank Shares have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive rights,
rights of first refusal or first offer or similar rights of any kind;
(D) there are no accrued or unpaid dividends with respect to any
issued and outstanding shares of capital stock of HNB National;
(E) HNB National does not have any other authorized, issued or
outstanding class of capital stock; (F) there are no existing
options, rights, subscriptions, warrants, unsatisfied preemptive rights, calls
or other written, oral or implied commitments relating to (1) the
authorized and unissued capital stock of HNB National, or (2) any
securities or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire from HNB National, any shares of
capital stock of HNB National and no such convertible or exchangeable securities
or obligations are outstanding; (G) as of the Closing, no option, right,
subscription, warrant, unsatisfied preemptive right, call or other written, oral
or implied commitment relating to (1) the authorized and unissued capital
stock of HNB National, or (2) any securities or obligations convertible
into or exchangeable for, or giving any Person any right to subscribe for or
acquire from HNB National, capital stock of HNB National shall be outstanding;
and (H) all outstanding
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shares of
capital stock of HNB National and options and other securities convertible into
capital stock of HNB National were issued or granted in compliance in all
material respects with all applicable federal and state securities
laws;
(v) Since
the Recent Balance Sheet Date through Closing Date, HNB National has conducted
its business in the ordinary course consistent with past practice and there has
not been: (A) a Material Adverse Effect; (B) any declaration, setting aside
or payment of any dividend or other distribution with respect to any shares of
capital stock of HNB National other than in the ordinary course of business and
no declaration, setting aside or payment of any dividend or other distribution
with respect to any shares of capital stock of HNB National since September 30,
2009, (C) any repurchase, redemption or other acquisition by HNB National
of any outstanding shares of capital stock, any warrants, options or other
rights to purchase any capital stock of HNB National, or other securities of, or
other ownership interests in, HNB National, (D) any grants or issuances of
options or other rights to acquire any capital stock of HNB National or
transfers, issuances, sales or disposals of any shares of capital stock or
rights to acquire capital stock of HNB National, (E) any recapitalization,
reclassification or like change in the capitalization of HNB National; (F) any
acquisition by HNB National of assets that are material to HNB National,
including stock or other equity interest, from any Person (whether by merger,
consolidation or combination or acquisition of stock or assets) or any sale,
lease, license or other disposition of material assets or property of HNB
National other than in the ordinary course of business consistent with past
practices; (G) any amendment of any term of any outstanding security of HNB
National; (H) any creation or assumption by HNB National of any material Lien
(other than Permitted Liens) on any asset; (I) any change in any method of
accounting or accounting practice by HNB National, except for any such change
required by reason of a concurrent change in GAAP or regulatory accounting
principles; (J) except as contemplated under this Agreement, any (1) grant
of any severance or termination pay to any director, officer, employee or
independent contractor of HNB National except pursuant to the severance policies
of HNB National or Employee Plan existing on the date hereof and except for any
severance or termination pay that does not require any payments to be made by
HNB National following the Closing, (2) commencement or renewal of, or
entering into any Employee Plan (or any amendment to any existing Employee Plan)
with any director, officer, employee or independent contractor of HNB National,
other than in the ordinary course of business consistent with past practice of
HNB National, (3) payment of or provision for any bonus, stock option,
stock purchase, profit sharing, deferred compensation, pension, retirement or
other similar payment or arrangement to any director, officer, employee or
independent contractor of HNB National, other than in the ordinary course of
business consistent with past practice of HNB National, (4) increase in
coverage or benefits payable under any existing Employee Plan, other than in the
ordinary course of business consistent with past practice of HNB National,
(5) any other increase in compensation, bonus or other benefits payable to
any director, officer, employee or independent contractor of HNB National other
than increases in the ordinary course of business consistent with past practice
of HNB National, or (6) material waiver of or significant modification to
any non-solicitation or non-competition provisions of any employment agreement
or other Contracts; (K) any material labor dispute, other than routine and
individual grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of HNB National, or any
lockouts, strikes, slowdowns or work stoppages or, to Seller’s Knowledge,
threats in writing thereof by or with respect to such employees; (L) any capital
expenditure, or commitment for a capital expenditure, for additions or
improvements to property, plant and equipment that require expenditures to be
made after the Closing in excess of $100,000 individually or $500,000 in the
aggregate; (M) any material transaction or commitment made, or any Material
Contract entered into, materially amended or terminated by HNB National or any
relinquishment by HNB National of any Material Contract or other material right,
other than those contemplated by this Agreement or in the ordinary course of
business; (N) a cancellation or compromise of any material Debt or claim; (O)
any settlement or compromise of any pending or threatened claim; (P) the making
or changing of any material
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election
in respect of Taxes other than as required by applicable Laws; or (Q) any
Contract entered into, other than this Agreement, to take any actions, or cause
to be taken, any of the actions specified in this
Section 5(a)(v);
(vi) There
are no material Liabilities or obligations of HNB National including any
Liability for Taxes, that are of a nature or type required to be set forth a
balance sheet prepared in accordance with GAAP, other than: (A) Liabilities or
obligations reflected in the balance sheet forming a part of the Interim
Financial Statements or reflected in the notes to the Annual Financial
Statements; or (B) Liabilities incurred in the ordinary course of business
consistent with past practice since September 30, 2009;
(vii) Except
for any fees which shall be borne by Sellers, no broker, finder, agent or
similar intermediary has acted on behalf of HNB National or Sellers in
connection with this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finders’ fees or similar fees or commissions
payable by HNB National in connection therewith;
(viii) (A)
HNB Financial Services is the record and beneficial owner of the Bank Shares,
and on the Closing Date, HNB Financial Services will be the record and
beneficial owner of the Bank Shares, free and clear of any and all Liens; (B)
other than the Bank Shares, neither Seller owns any securities of HNB National
or options to purchase or rights to subscribe for or otherwise acquire any
securities of HNB National and has no other interest in or voting rights with
respect to any securities of HNB National; and (C) none of such Bank
Shares is subject to any voting trust or other agreement or arrangement with
respect to the voting of such Bank Shares;
(b) Except
as expressly set forth in this Agreement, Mercantile Bancorp and HNB Financial
Services do not make any representations or warranties to Xxxxxxxx regarding the
condition of HNB National or the condition of any of the assets and properties
of HNB National. Furthermore, the condition of the assets of the HNB
National shall be “as is” and “where is” and Mercantile Bancorp and HNB
Financial Services make no warranty of merchantability, suitability, fitness for
a particular purpose or quality with respect to any of the tangible assets of
the HNB National or as to the condition or workmanship thereof or the absence of
any defects therein, whether latent or patent. It is understood that
any materials, documents or information made available to Xxxxxxxx, his
affiliates or any of his or their respective directors, officers, employees,
stockholders, agents or representatives in connection with the transactions
contemplated by this Agreement, do not, directly or indirectly, and shall not be
deemed to, directly or indirectly, contain representations or warranties of
Mercantile Bancorp and HNB Financial Services or their affiliates or their
respective directors, officers, employees, stockholders, agents or
representatives.
(c) Xxxxxxxx
represents and warrants to Sellers, as of the date hereof and as of the Closing
Date, as follows:
(i) this
Agreement has been duly executed and delivered by Xxxxxxxx and (assuming the due
authorization, execution, and delivery by the Sellers) constitutes a valid and
binding agreement of Xxxxxxxx enforceable against Xxxxxxxx in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law); and
(iii) the
execution, delivery and performance by Xxxxxxxx of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (1)
other than
9
consents,
filings and notices, if any, previously obtained or made, contravene or conflict
in any material respect with any applicable law, regulation, rule or order
binding upon or applicable to Xxxxxxxx, (2) breach, conflict with or constitute
a default, or impair the rights of Xxxxxxxx, or give rise to a right of
termination, suspension or cancellation of any right of Xxxxxxxx, or to a loss
of any benefit to which such Xxxxxxxx is entitled, or accelerate any obligation
of Xxxxxxxx or increase or impose any liability on Xxxxxxxx, in each case, under
any provision of any contract, agreement, arrangement or understanding binding
upon Xxxxxxxx or by which any of Xxxxxxxx' assets or properties are bound or
subject, or any permit or approval held by Xxxxxxxx, or (3) result in the
creation or imposition of any lien or encumbrance on any assets or properties of
Xxxxxxxx, with such exceptions, in the case of clauses (2) and (3), as would
not, individually or in the aggregate, materially adversely affect Xxxxxxxx'
ability to consummate the transactions contemplated hereby.
(d) Except
for the representations and warranties set forth in Sections 5(a)(i), 5(a)(ii),
5(a)(iv), 5(a)(v)(B), 5(a)(viii), and 5(c)(i), which shall survive the Closing
indefinitely, none of the representations and warranties of Sellers and Xxxxxxxx
set forth in this Agreement shall survive the Closing. The covenants
and agreements of Sellers and Xxxxxxxx set forth in this Agreement shall survive
the Closing for a period of 12 months following the Closing Date, except for
those covenants and agreements that are required to be performed after the
Closing, which covenants shall survive for a period of 12 months from the date
such covenant or agreement is or is required to be fully performed.
6. Certain
Covenants.
(a) Actions of HNB National
Pending Closing. From
the date hereof through the earlier of the Closing Date or the termination of
this Agreement in accordance with its terms, Sellers shall cause HNB National,
except as set forth in this Agreement (a) to conduct its business and
operations only in the ordinary course and consistent with past practice,
(b) to use its commercially reasonable efforts to preserve its business
organization intact, and (c) to not terminate its present executive
officers, except for a termination for cause. Without limiting the
generality of the foregoing, prior to the Closing Date Sellers shall cause HNB
National not to, except as expressly contemplated by this Agreement, without the
prior written consent of Xxxxxxxx, directly or indirectly do any of the
following:
(i) except
to the extent required by applicable Law, amend or otherwise change the articles
of incorporation or bylaws of HNB National;
(ii) issue
or authorize or propose the issuance of, sell, transfer, pledge or dispose of,
grant or otherwise create, or agree to issue or authorize or propose the
issuance, sale, transfer, pledge, disposition, grant or creation of any
additional shares of, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of, its capital stock or any debt or
equity securities convertible into or exchangeable for such capital
stock;
(iii) purchase,
redeem or otherwise acquire or retire, or offer to purchase, redeem or otherwise
acquire or retire, any shares of its capital stock;
(iv) materially
amend any Material Contract other than in the ordinary course of business;
terminate or fail to renew any Material Contract except for termination due to
the expiration of the term of such Material Contract;
(v) authorize
any new capital expenditures or purchase of fixed assets which are in excess of
$100,000 individually or $500,000 in the aggregate;
10
(vi) except
as may be required by applicable Law, Contract or Employee Plan,
(A) increase the compensation or benefits payable or to become payable to,
or enter into or amend any employment agreement with, its directors, officers,
employees or independent contractors, except in the ordinary course of business,
(B) grant any severance or termination pay to any director, officer,
employee or independent contractor, (C) enter into any severance agreement
with any director, officer, employee or independent contractor, except in the
ordinary course of business, or (D) establish, adopt, enter into,
terminate, withdraw from or amend in any material respect or take action to
accelerate any rights or benefits under any collective bargaining agreement, any
stock option plan or any Employee Plan or policy;
(vii) change
any accounting methods, policies, procedures, or practices, except as may be
required by GAAP or applicable Law;
(viii) acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other means, any business or any Person;
(ix) mortgage
or otherwise encumber, subject to any Lien other than Permitted Liens, or sell,
transfer or otherwise dispose of, any of its properties or assets that are
material, individually or in the aggregate, to HNB National’s
business;
(x) adopt
a plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization of HNB National;
(xi) except
for any matter relating to a Tax imposed on Seller Group on a consolidated,
combined or unitary basis, make any material Tax election not required by Law
that could have a continuing effect on HNB National following the Closing Date,
or settle or compromise any material Tax liability other than in the ordinary
course of business;
(xii) waive,
release, assign, settle or compromise any material rights or Actions (including
any rights under any confidentiality agreement), other than in the ordinary
course of business consistent with past practices;
(xiii) declare,
set aside or pay any dividend or other distribution payable in cash or in
property, on which or with respect to any class of its capital
stock;
(xiv) materially
change the (A) business organization of HNB National, or (B) method by
which brokers, agents and correspondents of HNB National are compensated (it
being agreed that the foregoing does not prohibit HNB National from terminating
the engagement of any brokers, agents or correspondents, or engaging new
brokers, agents and correspondents on terms substantially similar to agreements
currently in effect or extending the term of any existing
agreement);
(xv) except
as required by applicable Law, (A) implement or adopt any material change
in its interest rate and other risk management policies, procedures or
practices, or (B) fail to follow its existing policies or practices with
respect to managing its exposure to interest rate and other risk (including in
respect of underwriting policies);
(xvi) incur
any Debt, other than Deposits but excluding Brokered Deposits;
11
(xvii) solicit
or accept any Brokered Deposits;
(xviii) purchase,
originate, renew or extend any Loan in excess of $200,000;
(xix) make
any material change in the composition of its investment securities portfolio,
whether held to maturity or available for sale; or
(xx) authorize
any of, or commit or agree to take any of, the foregoing actions.
(b) Certain Tax
Matters
(i) Returns and
Taxes.
(A) Returns to be Filed and
Taxes to be Paid by Sellers. With respect to all Taxes for
taxable periods ending on or before the Closing Date for which Tax Returns are
required to be filed by HNB National or the Seller Group after the Closing Date
(each a “Seller Return”), Sellers shall timely
prepare and file (or cause to be prepared and filed) all such Seller
Returns. Sellers shall be liable for all Taxes arising from any Tax
imposed on HNB National with respect to any taxable period ending on or before
the Closing Date, whether or not shown on a Seller Return. Xxxxxxxx
agrees to cooperate with Sellers in preparing Seller Returns, including, without
limitation, delivering to Sellers such information and data concerning HNB
National's business as Sellers may reasonably request, and, if required by
applicable law, executing any such Seller Returns or other
documentation. With respect to the Tax Returns covered by this
paragraph (A), Sellers may be reimbursed for the tax imposed with respect to HNB
National under any tax sharing or similar agreement and if the amount ultimately
due differs from the amount paid under the tax sharing (or similar) agreement,
Xxxxxxxx will promptly pay to Sellers any excess Tax liability over the amount
paid by HNB National under such tax sharing (or similar) agreement and Sellers
shall pay to Xxxxxxxx any excess payment under the tax sharing (or similar)
agreement over the Tax liability.
(B) Returns to be filed and
Taxes to be Paid by Xxxxxxxx. Xxxxxxxx shall timely prepare
and file (or cause to be so prepared and filed) all Tax Returns that are
required to be filed by HNB National after the Closing Date other than Tax
Returns for the filing of which Sellers have responsibility under Section 6(b)(i)(A)
(each a “Buyer
Return”). Xxxxxxxx shall permit Sellers to review and comment
on any Buyer Return that relates to a Straddle Period and shall make such
revisions to such a return as are reasonably requested. Any such Tax
Returns shall be prepared in good faith in a manner consistent with past
practice of HNB National unless otherwise required by applicable
law. Except as provided in Section 6(b)(i)(A),
Xxxxxxxx shall timely pay (or cause to be paid) on behalf of HNB National all
Taxes that are due and payable for the period covered by Buyer
Returns.
(C) Straddle Period
Taxes. For purposes of this Section 6(b)(i)(C),
the amount of any Taxes attributable to a Straddle Period shall be determined
based upon a hypothetical closing of the taxable year on such Closing Date with
the Closing Date being included in the pre-Closing portion of such Straddle
Period; provided, that the amount attributable to the pre-Closing portion in the
case of any ad valorem Tax shall be equal to the total amount of such Tax
multiplied by a fraction the numerator of which is number of days in the
pre-Closing portion of such Straddle Period and the denominator of which is the
total number of days in such Straddle Period.
12
(D) Transfer
Taxes. Xxxxxxxx and Sellers shall each be responsible for the
payment of one-half of all Transfer Taxes.
(ii) Tax
Cooperation. Xxxxxxxx and Sellers shall, and shall cause their
respective affiliates and representatives to, reasonably cooperate with each
other in connection with the preparation and filing of Tax Returns and shall
preserve all information, returns, books and records and other documents
relating to any liabilities for Taxes with respect to a taxable period until the
later of the expiration of all applicable statutes of limitation and extensions
thereof, or a final determination with respect to Taxes for such period and
shall not destroy or otherwise dispose of any record without first providing the
other party with a reasonable opportunity to review and copy the
same.
(iii) Controversies. The
following provisions shall govern any controversy or claim related to
Taxes.
(A) Sellers
shall have the exclusive authority to control any audit or examination by any
taxing authority, initiate any claim for refund, amend any Tax Return, and
contest, resolve and defend against any assessment for additional Taxes, notice
of Tax deficiency or other adjustment of Taxes of or relating to any Tax
liability of HNB National attributable to the period before the Closing, and
Sellers shall be entitled to any Tax refund relating to such Taxes provided,
however, that Sellers shall provide to Xxxxxxxx (at Xxxxxxxx' expense)
reasonable participation rights with respect to so much of any Tax matter that
is reasonably likely to materially affect the Tax liability of Xxxxxxxx or HNB
National for any taxable period ending after the Closing
Date. Sellers shall not enter into any settlement of, or otherwise
compromise, any such Tax Matter that would bind Xxxxxxxx or HNB National for any
such period without the prior written consent of Xxxxxxxx, which consent shall
not be unreasonably withheld, delayed or conditioned.
(B) Except
as provided in Section 6(b)(iii)(A),
Xxxxxxxx shall have the exclusive authority to control any audit or examination
by any tax authority, initiate any claim for refund, amend any Tax Return, and
contest, resolve and defend against any assessment for additional Taxes, notice
of Tax deficiency or other adjustment of Taxes of or relating to any Tax
liability of HNB National.
(iv) Carrybacks. Neither
of Xxxxxxxx nor HNB National shall carry back any net operating loss or other
item or attribute from a period beginning on or after the Closing Date to a
taxable period ending on or prior to the Closing Date, unless such carry back
may not be waived.
(v) Tax-Sharing
Agreements. Subject to Section 6(b)(i)(A)
above, all tax-sharing agreements or similar agreements with respect to or
involving HNB National and its Subsidiaries shall be terminated as of the
Closing Date and, after the Closing Date, HNB National and its Subsidiaries
shall not be bound thereby or have any liability thereunder.
(d) Termination of
Commitment. Prior to the Closing Date, Sellers shall cause HNB
National to terminate its commitment to make any loans to Forestar USA Real
Estate Group, Inc., which the Bank presently has through a participation from
Mercantile Bank on a loan participation from Key Bank National
Association. Sellers hereby jointly and severally represent to
Xxxxxxxx that HNB National has the legal right to terminate such commitment
without payment of any fee or other amount.
13
7. Entire Agreement.
This Agreement constitutes the entire
agreement and understanding among the parties relating to the subject matter
hereof and thereof and supersedes all prior proposals, negotiations, agreements
and understandings relating to such subject matter.
8. Notices.
All notices, requests, demands and
other communications required or permitted hereunder shall be in
writing:
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Xxxxxxxx:
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R. Xxxx
Xxxxxxxx
Great
River Bancshares, Inc.
000
X. 00xx Xxxxxx
Xxxxxx,
Xxxxxxxx 00000
Facsimile: (000)
000-0000
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||
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With a
copy (which shall not constitute notice) to:
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|||
|
Husch
Xxxxxxxxx Xxxxxxx LLP
0000
Xxxx Xxxxxx
Xxxxx
0000
Xxxxxx
Xxxx, Xxxxxxxx 00000
Attention: Xxxxx
X. Xxxxxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
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|||
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Mercantile
Bancorp or HNB Financial Services:
|
|||
|
000
Xxxxx 00xx Xx., X.X. Xxx 0000
Xxxxxx,
Xxxxxxxx 00000-0000
Attention: Chief
Executive Officer
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
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|||
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With a
copy (which shall not constitute notice) to:
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|||
|
DLA
Piper LLP (US)
000
Xxxxxx Xxxxxx, XX
Xxxxxxxxxx,
XX 00000
Attention: Xxxxxxx
X. Xxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
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Notices
will be deemed to have been duly given (a) three business days after being
mailed by certified or registered United States mail, postage prepaid, return
receipt requested, (b) on the first business day after being sent, prepaid, by
nationally recognized overnight courier that issues a receipt or other
confirmation of delivery, (c) when received (to the extent receipt is confirmed
by telephone) if sent by facsimile transmission or (d) at the time delivered by
hand.
14
9.
Severability.
If any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or enforceability without in any manner affecting the validity
or enforceability of such provision in any other jurisdiction or the remaining
provisions of this Agreement in any other jurisdiction.
10. Representation by Counsel;
Interpretation.
Mercantile Bancorp and HNB Financial
Services on one hand, and Xxxxxxxx on the other hand, each acknowledge that such
parties have been represented by counsel in connection with this Agreement and
the transactions contemplated hereby. Accordingly, any rule of law or
any legal decision that would require interpretation of any claimed ambiguities
in this Agreement against the party that drafted it has no application and any
such right is expressly waived. The provisions of this Agreement
shall be interpreted in a reasonable manner to affect the intent of the
parties.
11. Governing Law; Successors
and Assigns.
This Agreement is governed by the laws
of the State of Illinois and is binding upon Mercantile Bancorp, HNB Financial
Services and Xxxxxxxx and their respective successors and/or assigns and/or
heirs and executors, as the case may be.
12. Amendment and
Modifications.
This Agreement may be amended, modified
and supplemented only by written agreement among the parties hereto which states
that it is intended to be an amendment, modification, or supplement of this
Agreement.
13. Waiver of Compliance;
Remedies.
Any failure of Mercantile Bancorp or
HNB Financial Services, on the one hand, or Xxxxxxxx, on the other, to comply
with any obligation, representation, warranty, covenant, agreement or condition
herein may be waived in writing by the other applicable parties, but such waiver
or failure to insist upon strict compliance with such obligation,
representation, warranty, covenant, agreement or condition shall not operate as
a waiver of, or estoppel with respect to, any subsequent or other
failure. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof, nor shall any
single or partial exercise preclude any further or other exercise of such or any
other right. To the maximum extent permitted by Law, except as
otherwise specifically provided by this Agreement, all rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available under applicable Law.
14. Expenses.
The parties agree that all fees and
expenses incurred by them in connection with this Agreement and the Transactions
contemplated hereby shall be borne by the party incurring such fees and
expenses, including, all fees of counsel and accountants.
15. Assignment.
This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of
15
the
parties hereto and their respective successors, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other
parties.
16. Counterparts.
This Agreement may be executed by one
or more of the parties on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
16
IN
WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement to be
executed by their respective officers thereunto duly authorized, on the date
first above written.
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By:
/s/ Xxx X.
Xxxxxxxx
Name: Xxx X.
Xxxxxxxx
Title: President and
Chief Executive Officer
|
|
|
HNB
FINANCIAL SERVICES, INC.
By: /s/ Xxxxxx X.
Xxxxxxx
Name: Xxxxxx X.
Xxxxxxx
Title:
President
|
|
|
R.
XXXX XXXXXXXX
By:
/s/ R. Xxxx
Xxxxxxxx
Name: R. Xxxx
Xxxxxxxx
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17
