NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On December 12, 2013
To the Shareholders of Mercantile Bank Corporation:
We are pleased to invite you to attend the special meeting of shareholders of Mercantile Bank Corporation, a Michigan
corporation (referred to as Mercantile), which will be held at Mercantile Bank Corporation headquarters, 310 Leonard Street NW, Grand Rapids, Michigan, 49504, on December 12, 2013 at 9:30 a.m., local time, for the following
purposes:
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to vote on a proposal to approve the merger agreement;
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to vote on a proposal to approve the issuance of shares of Mercantile common stock, no par value per share, to shareholders of Firstbank Corporation
(referred to as Firstbank) in connection with the merger contemplated by the Agreement and Plan of Merger, dated August 14, 2013, by and between Mercantile and Firstbank, as it may be amended from time to time (referred to as the
merger agreement), a copy of which is included as Annex A to the joint proxy statement and prospectus of which this notice is a part;
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to vote on a proposal to approve an amendment to Mercantiles articles of incorporation to increase the number of authorized shares of common
stock from 20 million to 40 million, a copy of which amendment is included as Annex B to the joint proxy statement and prospectus of which this notice is a part;
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to vote on a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named
executive officers that is based on or otherwise related to the proposed transactions; and
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to vote on a proposal to approve the adjournment of the Mercantile special meeting to a later date or dates, if necessary or appropriate, to solicit
additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the proposals listed above.
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Completion of the merger is conditioned on approval of the merger agreement and approval of the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger,
however it is not conditioned on the approval of the amendment to Mercantiles articles of incorporation to increase the number of authorized shares of Mercantile common stock.
Mercantile will transact no other business at the special meeting except such business as may properly be brought before the special
meeting or any adjournment or postponement thereof. Please refer to the joint proxy statement and prospectus of which this notice is a part for further information with respect to the business to be transacted at the Mercantile special meeting.
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The Mercantile board of directors has fixed the close of business on November 1, 2013 as the
record date for the Mercantile special meeting. Only Mercantile shareholders of record at that time are entitled to receive notice of, and to vote at, the Mercantile special meeting or any adjournment or postponement thereof.
The Mercantile board of directors has unanimously approved the merger, adopted the merger agreement, and unanimously recommends that
Mercantile shareholders vote FOR the proposal to approve the merger agreement, FOR the proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger,
FOR the proposal to approve the amendment to Mercantiles articles of incorporation, FOR the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to
Mercantiles named executive officers that is based on or otherwise related to the proposed transactions, and FOR the proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit
further solicitation of proxies.
Your vote is very important. Whether or not you expect to attend the Mercantile
special meeting in person, to ensure your representation at the Mercantile special meeting, we urge you to submit a proxy to vote your shares as promptly as possible by (i) visiting the internet site listed on the Mercantile proxy card,
(ii) calling the toll-free number listed on the Mercantile proxy card or (iii) submitting your Mercantile proxy card by mail by using the provided self-addressed, stamped envelope
. Submitting a proxy will not prevent you from
voting in person, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of record of Mercantile stock who is present at the Mercantile special meeting may vote in person, thereby canceling any previous proxy. In
any event, a proxy may be revoked in writing at any time before the Mercantile special meeting in the manner described in the accompanying document. If your shares are held in the name of a bank, broker or other nominee, please follow the
instructions on the voting instruction card furnished by the bank, broker or other nominee.
The enclosed joint proxy
statement and prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the Mercantile special meeting. We urge you to carefully read this joint proxy statement and prospectus,
including any documents incorporated by reference, and the Annexes in their entirety. If you have any questions concerning the merger or this joint proxy statement and prospectus, would like additional copies or need help voting your shares of
Mercantile common stock, please contact Mercantiles proxy solicitor, Georgeson Inc., by mail at 480 Washington Blvd., 26th Floor, Jersey City, New Jersey 07310, or by telephone, toll-free, at (800) 868-1390.
By Order of the Mercantile Board of Directors
Michael H. Price
Chairman of the Board, President and Chief Executive Officer
November 6, 2013
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Firstbank Corporation
311 Woodworth Ave.
PO Box 1029
Alma, Michigan 48801
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On December 12,
2013
To the Shareholders of Firstbank Corporation:
We are pleased to invite you to attend the special meeting of shareholders of Firstbank Corporation, a Michigan corporation (referred to as Firstbank), which will be held at Firstbank
Corporation headquarters, 311 Woodworth Avenue, Alma, Michigan 48801, on December 12, 2013 at 9:30 a.m., local time, for the following purposes:
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to vote on a proposal to adopt the Agreement and Plan of Merger, dated as of August 14, 2013, by and among Firstbank and Mercantile Bank
Corporation, a Michigan corporation (referred to as Mercantile), as it may be amended from time to time (referred to as the merger agreement), a copy of which is included as Annex A to the joint proxy statement and prospectus
of which this notice is a part;
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to consider and cast an advisory (non-binding) vote on the compensation that may be paid or become payable to Firstbanks named executive officers
that is based on or otherwise related to the proposed transactions; and
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to vote on a proposal to approve the adjournment of the Firstbank special meeting to a later date or dates, if necessary or appropriate, to solicit
additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the first proposal listed above.
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Firstbank will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof. Please refer to the
joint proxy statement and prospectus of which this notice is a part for further information with respect to the business to be transacted at the Firstbank special meeting.
The Firstbank board of directors has fixed the close of business on November 1, 2013 as the record date for the Firstbank special meeting. Only Firstbank shareholders of record at that time are entitled
to receive notice of, and to vote at, the Firstbank special meeting or any adjournment or postponement thereof. A complete list of such shareholders will be available for inspection by any Firstbank shareholder for any purpose germane to the special
meeting during ordinary business hours for the ten days preceding the Firstbank special meeting at Firstbanks offices at 311 Woodworth Ave., Alma, Michigan 48801. The eligible Firstbank shareholder list will also be available at the Firstbank
special meeting for examination by any shareholder present at such meeting.
Completion of the merger is conditioned on
approval and adoption of the merger agreement by the Firstbank shareholders, which requires the affirmative vote of a majority of the issued and outstanding shares of Firstbank common stock entitled to vote at the special meeting.
The Firstbank board of directors has unanimously approved the merger and the merger agreement and unanimously recommends that
Firstbank shareholders vote FOR the proposal to adopt the merger
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agreement, the merger and the other transactions contemplated by the merger agreement, FOR the approval, on an advisory (non-binding) basis, of the compensation that may be paid or
become payable to Firstbanks named executive officers that is based on or otherwise relates to the proposed transactions and FOR the proposal to approve the adjournment of the Firstbank special meeting, if necessary or appropriate,
to permit further solicitation of proxies.
Your vote is very important, regardless of the number of shares that you
own. Whether or not you expect to attend the Firstbank special meeting in person, to ensure your representation at the Firstbank special meeting, we urge you to submit a proxy to vote your shares as promptly as possible by (i) accessing the
internet site listed on the Firstbank proxy card, (ii) calling the toll-free number listed on the Firstbank proxy card or (iii) submitting your Firstbank proxy card by mail by using the provided self-addressed, stamped envelope.
Submitting a proxy will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of Firstbank stock who is present at the Firstbank special meeting may vote in person, thereby
canceling any previous proxy. In any event, a proxy may be revoked in writing at any time before the Firstbank special meeting in the manner described in the accompanying document. If your shares are held in the name of a bank, broker or other
nominee, please follow the instructions on the voting instruction card furnished by such bank, broker or other nominee.
The
enclosed joint proxy statement and prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the Firstbank special meeting. We urge you to carefully read the joint proxy statement and
prospectus, including any documents incorporated by reference, and the Annexes in their entirety. If you have any questions concerning the merger or the joint proxy statement and prospectus, would like additional copies or need help voting your
shares of Firstbank common stock, please contact Firstbanks proxy solicitor, Georgeson Inc., by mail at 480 Washington Blvd., 26th Floor, Jersey City, New Jersey 07310, or by telephone, toll-free, at (800) 868-1390.
By Order of the Firstbank Corporation Board of Directors,
Samuel G. Stone
Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
Alma, Michigan
November 6, 2013
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QUESTIONS AND ANSWERS
The following are some questions that you, as a Mercantile shareholder or a Firstbank shareholder, may have regarding the merger and the other matters
being considered at the special meetings and the answers to those questions. Mercantile and Firstbank urge you to carefully read the remainder of this joint proxy statement and prospectus, including any documents incorporated by reference, and the
Annexes in their entirety because the information in this section does not provide all of the information that might be important to you with respect to the merger and the other matters being considered at the special meetings.
Q: Why am I receiving this joint proxy statement and prospectus?
A: Mercantile and Firstbank have agreed to a business combination pursuant to the terms of the merger agreement that is described in this joint proxy statement and prospectus. A copy of the merger
agreement is included in this joint proxy statement and prospectus as Annex A. In order to complete the merger, among other things, Mercantile shareholders must approve the merger agreement and the issuance of shares of Mercantile common stock to
Firstbank shareholders in connection with the merger, and Firstbank shareholders must approve the merger agreement. In addition, while not a condition to the closing of the transactions contemplated by the merger agreement, Mercantile shareholders
will vote on a proposal to approve an amendment to Mercantiles articles of incorporation to increase the number of authorized of shares of capital stock of Mercantile and a proposal to approve, on an advisory (non-binding) basis, the
compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to the proposed transactions, and Firstbank shareholders will vote on a proposal to approve, on an advisory
(non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to the merger.
Mercantile and Firstbank will hold separate special meetings of their shareholders to obtain these approvals. This joint proxy statement and prospectus, including its Annexes, contains and incorporates by
reference important information about Mercantile and Firstbank, the merger and the shareholder meetings of Mercantile and Firstbank. You should read all of the available information carefully and in its entirety.
Q: What will I receive in the merger?
A: Mercantile shareholders: Whether or not the merger is completed, Mercantile shareholders will retain the Mercantile common stock that they currently
own. They will not receive any merger consideration, and they will not receive any additional shares of Mercantile common stock in the merger. As part of the merger, the Mercantile board of directors expects to declare and pay a special cash
dividend of $2.00 per share to Mercantile shareholders prior to the effective time of the merger, subject to the satisfaction of the closing conditions set forth in the merger agreement. Anticipation of the special dividend may cause upward pressure
on or support of the price of Mercantile common stock as investors purchase or hold shares to collect the expected special dividend. The price of Mercantile common stock may decline on or after the ex-dividend date or payment date of the dividend.
Firstbank shareholders: If the merger is completed, Firstbank shareholders will receive one share of Mercantile common stock for each share
of Firstbank common stock that they hold at the effective time of the merger. Based on the closing price of Mercantile common stock on the Nasdaq Stock Market on August 14, 2013, the last trading day before public announcement of the merger, the
exchange ratio represented approximately $18.77 in value for each share of Firstbank common stock. The closing price of Firstbank common stock on the Nasdaq Stock Market on August 14, 2013, was $16.66 per share. Firstbank shareholders will not
receive any fractional shares of Mercantile common stock in the merger. Instead, Mercantile will pay cash in lieu of any fractional shares of Mercantile common stock that a Firstbank shareholder would otherwise have been entitled to receive.
Firstbank shareholders will also be entitled to any dividends declared and paid by Mercantile with a record date after the effective time of the merger after they have surrendered their certificates representing Firstbank common stock.
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Q: What is the value of the merger consideration?
A: Because Mercantile will issue one share of Mercantile common stock in exchange for each share of Firstbank common stock, the value of the merger
consideration that Firstbank shareholders receive will depend on the price per share of Mercantile common stock at the effective time of the merger. That price will not be known at the time of the special meetings and may be less than the current
price or the price at the time of the special meetings. As part of the merger, the Mercantile board of directors expects to declare and pay a special cash dividend of $2.00 per share to Mercantile shareholders prior to the effective time of the
merger. Anticipation of the special dividend may cause upward pressure on or support of the price of Mercantile common stock as investors purchase or hold shares to collect the expected special dividend. The price of Mercantile common stock may
decline on or after the ex-dividend date or payment date of the dividend. We urge you to obtain current market quotations of Mercantile common stock and Firstbank common stock. See the section titled Risk Factors beginning on
page 31. Based on the closing price of Mercantile common stock on the Nasdaq Stock Market on August 14, 2013, the last trading day before public announcement of the merger, the exchange ratio represented approximately $18.77 in value for
each share of Firstbank common stock. The closing price of Firstbank common stock on the Nasdaq Stock Market on August 14, 2013, was $16.66 per share.
Q: When and where will the special meetings be held?
A: Mercantile shareholders: The
Mercantile special meeting will be held at Mercantile headquarters, 310 Leonard Street N.W., Grand Rapids, Michigan 49504, on December 12, 2013 at 9:30 a.m. local time.
Firstbank shareholders: The Firstbank special meeting will be held at Firstbank headquarters, 311 Woodworth Avenue, Alma, Michigan 48801, on December 12, 2013 at 9:30 a.m. local time.
Q: Who is entitled to vote at the special meetings?
A: Mercantile shareholders: The record date for the Mercantile special meeting is November 1, 2013. Only record holders of shares of Mercantile common stock at the close of business on such date are
entitled to notice of, and to vote at, the Mercantile special meeting or any adjournment or postponement thereof.
Firstbank shareholders: The
record date for the Firstbank special meeting is November 1, 2013. Only record holders of shares of Firstbank common stock at the close of business on such date are entitled to notice of, and to vote at, the Firstbank special meeting or any
adjournment or postponement thereof.
Q: What constitutes a quorum at the special meetings?
A: Mercantile shareholders: Shareholders who hold shares representing at least a majority of the shares entitled to vote at the Mercantile special meeting
must be present in person or represented by proxy to constitute a quorum. All shares of Mercantile common stock represented at the Mercantile special meeting, including shares that are represented but that vote to abstain, will be treated as present
for purposes of determining the presence or absence of a quorum. Broker non-votes will not be treated as present for purposes of determining the presence or absence of a quorum.
No business may be transacted at the Mercantile special meeting unless a quorum is present. If a quorum is not present, or if fewer shares than required for the necessary shareholder approvals, if
necessary or appropriate to allow additional time for obtaining additional proxies, the special meeting may be adjourned if the approval of a majority of the votes cast at the special meeting is obtained. No notice of an adjourned meeting need be
given unless a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. At any adjourned meeting, all proxies will be voted in
the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.
Firstbank shareholders: Shareholders who hold shares representing at least a majority of the shares entitled to vote at the Firstbank special meeting
must be present in person or represented by proxy to constitute a quorum.
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All shares of Firstbank common stock represented at the Firstbank special meeting, either person or by proxy, including shares that are represented but that vote to abstain, will be treated as
present for purposes of determining the presence or absence of a quorum. Broker non-votes will have no effect on determining the presence or absence of a quorum at the Firstbank special meeting.
No business may be transacted at the Firstbank special meeting unless a quorum is present. If a quorum is not present, or if fewer shares than required
for the necessary shareholder approval, if necessary or appropriate to allow additional time for obtaining additional proxies, the special meeting may be adjourned if the approval of a majority of the votes cast at the special meeting is obtained.
No notice of an adjourned meeting need be given unless a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. At any
adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.
Q: How do I vote if I am a shareholder of record?
A: Mercantile shareholders: If you were a record holder of Mercantile stock at the close of business on the record date for the Mercantile special meeting, you may vote in person by attending the
Mercantile special meeting or, to ensure that your shares are represented at the Mercantile special meeting, you may authorize a proxy to vote by:
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visiting the internet site listed on the Mercantile proxy card and following the instructions provided on that site anytime up to 1:00 a.m.
Eastern time on December 12, 2013;
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calling the toll-free number listed on the Mercantile proxy card and following the instructions provided in the recorded message anytime up to
1:00 a.m. Eastern time on December 12, 2013; or
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submitting your Mercantile proxy card by mail by using the provided self-addressed, stamped envelope.
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If you hold shares of Mercantile common stock in street name through a stock brokerage account or through a bank or other nominee, please
follow the voting instructions provided by your broker, bank or other nominee to ensure that your shares are represented at the Mercantile special meeting.
Firstbank shareholders: If you were a record holder of Firstbank stock at the close of business on the record date for the Firstbank special meeting, you may vote in person by attending the Firstbank
special meeting or, to ensure that your shares are represented at the Firstbank special meeting, you may authorize a proxy to vote by:
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visiting the internet site listed on the Firstbank proxy card and following the instructions provided on that site anytime up to 3:00 a.m. Eastern
time on December 12, 2013;
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calling the toll-free number listed on the Firstbank proxy card and following the instructions provided in the recorded message anytime up to
3:00 a.m. Eastern time on December 12, 2013; or
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submitting your Firstbank proxy card by mail by using the provided self-addressed, stamped envelope.
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If you hold shares of Firstbank common stock in street name through a stock brokerage account or through a bank or other nominee, please
follow the voting instructions provided by your broker, bank or other nominee to ensure that your shares are represented at the Firstbank special meeting.
Q: How many votes do I have?
A: Mercantile shareholders: With respect to each proposal to
be presented at the Mercantile special meeting, holders of Mercantile common stock are entitled to one vote for each share of Mercantile common stock owned at the close of business on the Mercantile record date. At the close of business on the
Mercantile record date, there were 8,707,534 shares of Mercantile common stock outstanding and entitled to vote at the Mercantile special meeting.
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Firstbank shareholders: With respect to each proposal to be presented at the Firstbank special meeting,
holders of Firstbank common stock are entitled to one vote for each share of Firstbank common stock owned at the close of business on the Firstbank record date. At the close of business on the Firstbank record date, there were 8,076,621 shares of
Firstbank common stock outstanding and entitled to vote at the Firstbank special meeting.
Q: What vote is required to approve each
proposal?
A: Mercantile shareholders: The approval of the merger agreement requires the affirmative vote of a majority of the issued and
outstanding shares of Mercantile common stock entitled to vote at the Mercantile special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal.
The approval of the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger requires the approval of a
majority of the votes cast on this proposal at the Mercantile special meeting, assuming a quorum. Failures to vote, broker non-votes and abstentions will have no effect on the vote for this proposal.
The approval of the proposed amendment to Mercantiles articles of incorporation requires the approval of a majority of the issued and outstanding
shares of Mercantile common stock entitled to vote at the Mercantile special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal.
The proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive
officers that is based on or otherwise related to the proposed transactions requires the approval of a majority of the votes cast on this proposal at the Mercantile special meeting, assuming a quorum. Failures to vote, broker non-votes and
abstentions will have no effect on the vote for this proposal.
The adjournment of the Mercantile special meeting, if necessary or
appropriate, to solicit additional proxies requires the approval of a majority of the votes cast on this proposal at the Mercantile special meeting, regardless of whether or not a quorum is present. Failures to vote, broker non-votes and abstentions
will have no effect on the vote for this proposal.
Firstbank shareholders: The approval of the merger agreement requires the affirmative vote
of a majority of the issued and outstanding shares of Firstbank common stock entitled to vote at the special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal.
The approval, on an advisory (non-binding) basis, of the compensation that may be paid or become payable to Firstbanks named executive officers
that is based on or otherwise related to the proposed transactions requires the affirmative vote of a majority of the votes cast at the Firstbank special meeting, assuming a quorum. Failures to vote, broker non-votes and abstentions will have no
effect on the vote for this proposal.
The adjournment of the Firstbank special meeting, if necessary or appropriate, to solicit additional
proxies requires the affirmative vote of a majority of the issued and outstanding shares of Firstbank common stock that are present in person or represented by proxy and entitled to vote at the special meeting, regardless of whether or not a quorum
is present. Failures to vote, broker non-votes and abstentions will have no effect on the vote for this proposal.
Q: How does the
Mercantile board of directors recommend that Mercantile shareholders vote?
A: The Mercantile board of directors has unanimously determined
that the merger and the other transactions contemplated by the merger agreement (including the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger and the proposed amendment to Mercantiles
articles of incorporation) are in the best interests of Mercantile and its shareholders. Accordingly, the Mercantile board of
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directors unanimously recommends that Mercantile shareholders vote FOR the proposal to approve the merger agreement, FOR the proposal to approve the issuance of shares of
Mercantile common stock to Firstbank shareholders in connection with the merger, FOR the proposal to approve the amendment to Mercantiles articles of incorporation, FOR the proposal to approve, on an advisory
(non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to the proposed transactions and FOR the proposal to approve the adjournment of
the Mercantile special meeting, if necessary or appropriate, to permit further solicitation of proxies.
Q: How does the Firstbank board of
directors recommend that Firstbank shareholders vote?
A: The Firstbank board of directors has unanimously adopted the merger agreement and
determined that the merger agreement is in the best interests of Firstbank and its shareholders. Accordingly, the Firstbank board of directors unanimously recommends that Firstbank shareholders vote FOR the proposal to approve the merger
agreement, FOR the proposal to approve on an advisory (non-binding) basis, the compensation that may be paid or become payable to Firstbanks named executive officers that is based on or otherwise related to the proposed
transactions and FOR the proposal to approve the adjournment of the Firstbank special meeting, if necessary or appropriate, to permit further solicitation of proxies.
Q: My shares are held in street name by my broker, bank or other nominee. Will my broker, bank or other nominee automatically vote my shares for me?
A: No. If your shares are held through a stock brokerage account or a bank or other nominee, you are considered the beneficial holder of the
shares held for you in what is known as street name. The record holder of such shares is your broker, bank or other nominee, and not you. If this is the case, this joint proxy statement and prospectus has been forwarded to
you by your broker, bank or other nominee. You must provide the record holder of your shares with instructions on how to vote your shares. Otherwise, your broker, bank or other nominee may not vote your shares on any of the proposals to be
considered at the Mercantile special meeting or the Firstbank special meeting, as applicable, and a broker non-vote will result. In connection with the Mercantile special meeting, broker non-votes will have (i) the same effect as a vote
AGAINST the proposal to approve the merger agreement, the merge and the other transactions contemplated by the merger agreement, (ii) no effect on the proposal to approve the issuance of shares of Mercantile common stock to
Firstbank shareholders in connection with the merger (assuming a quorum is present), (iii) the same effect as a vote AGAINST the proposal to approve the amendment to Mercantiles articles of incorporation, (iv) no effect
on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to the proposed transactions and (v) no
effect on the proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit further solicitation of proxies. In connection with the Firstbank special meeting, broker non-votes will have (a) the
same effect as a vote AGAINST the proposal to approve the of the merger agreement, (b) no effect on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Firstbanks
named executive officers that is based on or otherwise related to the proposed transactions and (c) no effect on the proposal to approve the adjournment of the Firstbank special meeting, if necessary or appropriate, to permit further
solicitation of proxies.
Please follow the voting instructions provided by your broker, bank or other nominee so that it may vote your shares
on your behalf. Please note that you may not vote shares held in street name by returning a proxy card directly to Mercantile or Firstbank or by voting in person at the special meeting unless you first obtain a legal proxy from your
broker, bank or other nominee.
Q: What will happen if I fail to vote?
A: Mercantile shareholders: If you fail to vote, it will have (i) the same effect as a vote AGAINST the proposal to approve the merger agreement, the merge and the other transactions
contemplated by the merger agreement, (ii) no effect on the proposal to approve the issuance of shares of Mercantile common stock to Firstbank
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shareholders in connection with the merger (assuming a quorum is present), (iii) the same effect as a vote AGAINST the proposal to approve the amendment to Mercantiles
articles of incorporation, (iv) no effect on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to
the proposed transactions and (v) no effect on the proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit further solicitation of proxies.
Firstbank shareholders: If you fail to vote, it will have (a) the same effect as a vote AGAINST the proposal to approve the merger
agreement, (b) no effect on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Firstbanks named executive officers that is based on or otherwise related to the proposed
transactions and (c) no effect on the proposal to approve the adjournment of the Firstbank special meeting, if necessary or appropriate, to permit further solicitation of proxies.
Q: What will happen if I mark my proxy or voting instructions to abstain from voting?
A:
Mercantile shareholders: If you mark your proxy or voting instructions to abstain, it will have (i) the same effect as a vote AGAINST the proposal to approve the merger agreement, the merge and the other transactions contemplated by
the merger agreement, (ii) no effect on the proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger (assuming a quorum is present), (iii) the same effect as a vote
AGAINST the proposal to approve the amendment to Mercantiles articles of incorporation, (iv) no effect on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to
Mercantiles named executive officers that is based on or otherwise related to the proposed transactions and (v) no effect on the proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit
further solicitation of proxies.
Firstbank shareholders: If you mark your proxy or voting instructions to abstain, it will have (i) the
same effect as a vote AGAINST the proposal to approve the merger agreement, (ii) no effect on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Firstbanks named
executive officers that is based on or otherwise related to the proposed transactions and (iii) no effect on the proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit further solicitation
of proxies.
Q: What will happen if I return my proxy card without indicating how to vote?
A: Mercantile shareholders: If you properly complete and sign your proxy card but do not indicate how your shares of Mercantile common stock should be
voted on a proposal, the shares of Mercantile common stock represented by your proxy will be voted as the Mercantile board of directors recommends and, therefore, FOR the proposal to approve the merger agreement, FOR the
proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger, FOR the proposal to approve the amendment to Mercantiles articles of incorporation, FOR the
proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to the proposed transactions and FOR the
proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit further solicitation of proxies.
Firstbank shareholders: If you properly complete and sign your proxy card but do not indicate how your shares of Firstbank common stock should be voted
on a proposal, the shares of Firstbank common stock represented by your proxy will be voted as the Firstbank board of directors recommends and, therefore, FOR the proposal to approve the merger agreement, FOR the proposal to
approve on an advisory (non-binding) basis, the compensation that may be paid or become payable to Firstbanks named executive officers that is based on or otherwise related to the proposed transactions and FOR the proposal to
approve the adjournment of the Firstbank special meeting, if necessary or appropriate, to permit further solicitation of proxies.
6
Q: Can I change my vote or revoke my proxy after I have returned a proxy or voting instruction card?
A: Yes. If you are the record holder of either Mercantile or Firstbank stock, you can change your vote or revoke your proxy at any time
before your proxy is voted at the applicable special meeting. You can do this by:
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timely delivering a signed written notice of revocation;
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timely delivering a new, valid proxy bearing a later date (including by telephone or through the internet); or
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attending the special meeting and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person.
Simply attending the Mercantile special meeting or the Firstbank special meeting without voting will not revoke any proxy that you have previously given or change your vote.
|
If you choose either of the first two methods, your notice of revocation or your new proxy must be received by the Secretary of Mercantile or Firstbank, as applicable, no later than the beginning of the
applicable special meeting.
Regardless of the method used to deliver your previous proxy, you may revoke your proxy by any of the above
methods.
If you hold shares of either Mercantile or Firstbank in street name, you must contact your broker, bank or other nominee
to change your vote.
Q: What are the material U.S. federal income tax consequences of the merger to U.S. holders of Firstbank common
stock?
A: Mercantile has received the opinion of Warner Norcross & Judd LLP, and Firstbank has the received the opinion of Varnum LLP,
that the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (referred to as the Code). Assuming the merger qualifies as a
reorganization, a holder of Firstbank common stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of the holders shares of Firstbank common stock for shares of Mercantile common stock in
connection with the merger, except with respect to cash received in lieu of fractional shares. As permitted by the terms of the merger agreement, the Mercantile board of directors expects to declare and pay a one-time special cash dividend of $2.00
per share to Mercantile shareholders prior to the effective time of the merger, subject to the satisfaction of the closing conditions set forth in the merger agreement. Generally, holders will be taxed on the pre-merger special cash dividend at
applicable U.S. Federal income tax rates.
Q: When do you expect the merger to be completed?
A: Mercantile and Firstbank hope to complete the merger as soon as reasonably possible and expect the effective time of the merger to occur on or about
January 1, 2014. However, the merger is subject to various regulatory clearances and the satisfaction or waiver of other conditions, and it is possible that factors outside the control of Mercantile and Firstbank could result in the merger
being completed at an earlier time, a later time or not at all. There may be a substantial amount of time between the Mercantile and Firstbank special meetings and the completion of the merger.
Q: Do I need to do anything with my shares of common stock other than vote for the proposals at the special meeting?
A: Mercantile shareholders: If you are a Mercantile shareholder, after the merger is completed, you are not required to take any action with respect to
your shares of Mercantile common stock.
7
Firstbank shareholders: If you are a Firstbank shareholder, after the merger is completed, each share of
Firstbank common stock that you hold will be converted automatically into the right to receive one share of Mercantile common stock, together with cash in lieu of any fractional shares, as applicable. You will receive instructions at that time
regarding exchanging your Firstbank shares for shares of Mercantile common stock. You do not need to take any action at this time. Please do not send your Firstbank stock certificates with your proxy card.
Q: Are shareholders entitled to appraisal or dissenters rights?
A: No. Neither the shareholders of Firstbank nor the shareholders of Mercantile are entitled to appraisal rights or dissenters rights in connection with the merger under Michigan law or under the
governing documents of either company.
Q: What happens if I sell my shares of Firstbank common stock before the Firstbank special meeting?
A: The record date for the Firstbank special meeting is earlier than the date of the Firstbank special meeting and the date that the
merger is expected to be completed. If you transfer your Firstbank shares after the Firstbank record date but before the Firstbank special meeting, you will retain your right to vote at the Firstbank special meeting, but will have transferred the
right to receive the merger consideration in the merger. In order to receive the merger consideration, you must hold your shares through the effective date of the merger.
Q: What if I hold shares in both Mercantile and Firstbank?
A: If you are both a Mercantile
shareholder and a Firstbank shareholder, you will receive two separate packages of proxy materials. A vote cast as a Mercantile shareholder will not count as a vote cast as a Firstbank shareholder, and a vote cast as a Firstbank shareholder will not
count as a vote cast as a Mercantile shareholder. Therefore, please separately submit a proxy for each of your Mercantile and Firstbank shares.
Q: Who can help answer my questions?
A:
Shareholders of Mercantile or Firstbank who have questions about the merger, the other matters to be voted on at the special meetings, or how to submit a proxy or who desire additional copies of this joint proxy statement and prospectus or
additional proxy cards should contact:
Georgeson Inc.
480 Washington Blvd.
26th Floor
Jersey City, New Jersey 07310
Toll-Free: (800) 868-1390
8
SUMMARY
This summary highlights information contained elsewhere in this joint proxy statement and prospectus and may not contain all the
information that is important to you with respect to the merger and the other matters being considered at the Mercantile and Firstbank special meetings. Mercantile and Firstbank urge you to read the remainder of this joint proxy statement and
prospectus carefully, including the attached Annexes, and the other documents to which we have referred you. See also the section entitled Where You Can Find More Information beginning on page 154. We have included page references
in this summary to direct you to a more complete description of the topics presented below.
The Companies
Mercantile Bank Corporation
Mercantile Bank Corporation is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. Mercantile was organized on July 15, 1997 under the laws of the State of
Michigan and is the holding company for Mercantile Bank of Michigan. Its current subsidiaries include an insurance company, a real estate company, and a Delaware business trust. Mercantile has seven full-service banking offices in Grand Rapids,
Holland, and Lansing, Michigan. Mercantile and its subsidiaries provide a wide variety of commercial and retail banking and related services primarily to small-to medium-sized businesses, and to a lesser extent, individuals and governmental units in
and around West Michigan. As of June 30, 2013, Mercantiles total assets were $1.3 billion, and total deposits were $1.1 billion.
Mercantile common stock trades on the Nasdaq Stock Market under the symbol MBWM.
The principal executive offices of Mercantile are located at 310 Leonard St., N.W., Grand Rapids, Michigan 49504, and Mercantiles telephone number is (616) 406-3000. Additional information
about Mercantile and its subsidiaries is included in documents incorporated by reference into this joint proxy statement and prospectus. See Where You Can Find More Information on page 154.
Firstbank Corporation
Firstbank Corporation is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. Firstbank has two subsidiary banks, Firstbank and Keystone Community Bank. The banks are
full-service community banks with 46 banking offices serving Michigans Lower Peninsula. Each subsidiary bank is a full-service community bank offering customary banking services, including the acceptance of checking, savings, and time deposits
and the making of commercial, mortgage, home improvement, automobile, and other consumer loans. As of June 30, 2013, Firstbanks total assets were $1.5 billion, and total deposits were $1.2 billion.
Firstbank common stock trades on the Nasdaq Stock Market under the symbol FBMI.
The principal executive offices of Firstbank are located at 311 Woodworth Ave., Alma, Michigan 48801, and Firstbanks telephone
number is (989) 463-3131. Additional information about Firstbank and its subsidiaries is included in documents incorporated by reference into this joint proxy statement and prospectus. See Where You Can Find More Information on
page 154.
The Merger
A copy of the merger agreement is attached as Annex A to this joint proxy statement and prospectus. Mercantile and Firstbank encourage you to read the entire merger agreement carefully because it
is the principal document governing the merger. For more information on the merger agreement, see the section entitled The Merger Agreement beginning on page 103.
9
Form of the Merger (see page 49)
Subject to the terms and conditions of the merger agreement, at the effective time of the merger, Firstbank will be merged with and into
Mercantile, and the separate corporate existence of Firstbank shall cease, and Mercantile shall be the surviving corporation of the merger. The combined company may pursue a consolidation of its subsidiary banks after completing the merger.
Merger Consideration (see page 104)
Firstbank shareholders will have the right to receive one share of Mercantile common stock for each share of Firstbank common stock they
hold at the effective time of the merger (referred to as the exchange ratio). The exchange ratio is fixed and will not be adjusted for changes in the market value of the common stock of Firstbank or Mercantile. As a result, the implied
value of the consideration to Firstbank shareholders will fluctuate between the date of this joint proxy statement and prospectus and the effective date of the merger. As part of the merger, the Mercantile board of directors expects to declare and
pay a special cash dividend of $2.00 per share to Mercantile shareholders prior to the effective time of the merger. Anticipation of the special dividend may cause upward pressure on or support of the price of Mercantile common stock as
investors purchase or hold shares to collect the expected special dividend. The price of Mercantile common stock may decline on or after the ex-dividend date or payment date of the dividend. Based on the closing price of Mercantile common stock on
the Nasdaq Stock Market (referred to as the Nasdaq) on August 14, 2013, the last trading day before public announcement of the merger, the exchange ratio represented approximately $18.77 in value for each share of Firstbank common
stock. The closing price of Firstbank common stock on the Nasdaq Stock Market on August 14, 2013, was $16.66 per share. Based on the closing price of Mercantile common stock on Nasdaq on November 5, 2013, the latest trading day before the date
of this joint proxy statement and prospectus, the exchange ratio represented approximately $21.99 in value for each share of Firstbank common stock.
Material U.S. Federal Income Tax Consequences of the Merger (see page 125)
Holders of Firstbank common stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of the holders shares of Firstbank common stock for shares
of Mercantile common stock pursuant to the merger, except with respect to cash received in lieu of fractional shares of Mercantile common stock. As permitted by the terms of the merger agreement, the Mercantile board of directors expects to declare
and pay a one-time special cash dividend of $2.00 per share per share to Mercantile shareholders prior to the effective time of the merger, subject to the satisfaction of the closing conditions set forth in the merger agreement. Generally, holders
will be taxed on the pre-merger special cash dividend at applicable U.S. Federal income tax rates.
You are urged to consult
your own tax advisor regarding the particular consequences to you of the merger.
Recommendation of the Board of
Directors of Mercantile and Reasons for the Merger (see page 55)
After careful consideration, the Mercantile board of
directors unanimously determined that the merger and the other transactions contemplated by the merger agreement are in the best interests of Mercantile and its shareholders, approved the merger, adopted the merger agreement, and recommended to
Mercantile shareholders the approval of the merger agreement and the approval of the issuance of Mercantile common stock to Firstbank shareholders in connection with the merger. The board of directors of Mercantile is making this recommendation
because of the complementary business strengths of Mercantile and Firstbank, the expected strengthened competitive positioning of the combined company throughout Michigan, and because of the other reasons set forth under The Merger
Mercantiles Reasons for the Merger; Recommendation of the Mercantile Board of Directors beginning on page 55. The Mercantile board of directors approved and declared advisable the proposed amendment to Mercantiles articles of
incorporation which increases the number of authorized shares
10
of capital stock under its articles of incorporation at the effective time of the merger, and recommends the approval of the amendment to Mercantiles articles of incorporation to the
holders of Mercantile common stock. For more information regarding the factors considered by the Mercantile board of directors in reaching its decisions relating to its recommendations, see the section entitled The Merger
Mercantiles Reasons for the Merger; Recommendation of the Mercantile Board of Directors.
The Mercantile board of directors unanimously recommends that Mercantile shareholders vote FOR the proposal to approve the
merger agreement, FOR the proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger, FOR the proposal to approve the amendment to Mercantiles articles
of incorporation, FOR the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to the proposed
transactions and FOR the proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special
meeting to approve the issuance of shares of Mercantile common stock or the merger agreement.
Recommendation
of the Board of Directors of Firstbank and Reasons for the Merger (see page 69)
After careful consideration, the
Firstbank board of directors unanimously approved the merger agreement, determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Firstbanks shareholders, and recommended
that the merger agreement be approved by Firstbanks shareholders. Firstbanks board of directors is making this recommendation because it believes that the merger has the potential to deliver a higher value to Firstbanks
shareholders than the alternatives to the merger and because of the other reasons set forth under The Merger Firstbanks Reasons for the Merger; Recommendation of the Firstbank Board of Directors beginning on page 69. For
more information regarding the factors considered by the Firstbank board of directors in reaching its decision to recommend the approval of the merger agreement, see the section entitled The Merger Firstbanks Reasons for the
Merger; Recommendation of the Firstbank Board of Directors.
The Firstbank board of directors unanimously recommends that Firstbank shareholders vote FOR the proposal to approve the merger agreement, FOR the
proposal to approve on an advisory (non-binding) basis, the compensation that may be paid or become payable to Firstbanks named executive officers that is based on or otherwise related to the proposed transactions and FOR the
proposal to approve the adjournment of the Firstbank special meeting to a later date or dates, if necessary or appropriate to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the
merger agreement.
Opinion of Mercantiles Financial Advisor in Connection with the Merger (see
page 58)
In connection with the merger agreement and the transactions contemplated thereby, Mercantiles board
of directors received a written opinion, dated August 14, 2013, from Mercantiles financial advisor, Keefe, Bruyette & Woods, which we refer to as KBW, as to the fairness to Mercantile, from a financial point of view
and as of the date of such opinion, of the exchange ratio.
The full text of KBWs written opinion dated
August 14, 2013, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex C to this proxy statement and prospectus and is incorporated herein by reference. Shareholders are urged to read KBWs written opinion carefully and in its entirety. KBWs
opinion was provided for the use and benefit of Mercantiles board of directors (in its capacity as such) in its evaluation of the merger and related transactions. KBWs opinion is limited solely to the fairness to Mercantile, from a
financial point of view, of the exchange ratio and does not address Mercantiles underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that
might be available with respect to Mercantile. KBWs opinion does not constitute a recommendation to any shareholder of Mercantile as to how such shareholder should vote or act with respect to the merger or any other matter.
11
Opinion of Firstbanks Financial Advisor in Connection with the
Merger (see page 73)
In connection with the merger, Firstbanks board of directors received a written opinion,
dated August 14, 2013, from Sandler ONeill & Partners, L.P., which we refer to as Sandler ONeill, as to the fairness, from a financial point of view and as of the date of the opinion, to holders of Firstbank
common stock of the exchange ratio provided for in the merger agreement. The full text of Sandler ONeills written opinion, which is attached to this joint proxy statement and prospectus as Annex D, sets forth the assumptions made,
procedures followed, matters considered and limitations on the review undertaken.
Sandler ONeills opinion was provided for the information of Firstbanks board of directors (in its capacity as such) in connection with its
evaluation of the exchange ratio from a financial point of view and did not address any other aspects or implications of the merger. Sandler ONeill expressed no view as to, and its opinion did not address, the underlying business decision
of
Firstbank to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for Firstbank or the effect of any other transaction in which Firstbank might engage. Sandler
ONeills opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the proposed merger or otherwise.
Interests of Mercantile Directors and Executive Officers in the Merger (see page 90)
Certain of Mercantiles directors and executive officers have financial interests in the merger that may be different from, or in
addition to, the interests of Mercantile shareholders generally.
The merger will constitute a change in control
of Mercantile for the purposes of the Mercantile Bank Corporation Stock Incentive Plan of 2006. The vesting of restricted stock awards held by Mercantile executive officers and directors will be accelerated as of the effective time of the merger. In
addition, the merger will constitute a change in control for certain deferred compensation arrangements with Mercantile executive officers. This acceleration of vesting and payments are summarized in the following table:
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Value
of
Restricted
Stock
Vesting
($)
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NQDC
Payment
Accelerated
($)
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Total
($)
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Michael H. Price
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$
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162,512
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|
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$
|
137,462
|
|
|
$
|
299,974
|
|
Robert B. Kaminski
|
|
$
|
101,570
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|
|
$
|
4,403
|
|
|
$
|
105,973
|
|
Charles E. Christmas
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|
$
|
101,570
|
|
|
$
|
0
|
|
|
$
|
101,570
|
|
In addition, each of Mercantiles nine non-employee directors will realize the benefit of
approximately $182,790 in acceleration of the vesting of shares of restricted stock held by them. Please see The Merger Interests of Mercantile Directors and Executive Officers in the Merger beginning on page 90 for detailed
information.
As detailed below under The Merger Board of Directors and Management Following the
Merger, the merger agreement provides that upon consummation of the merger, the board of directors of Mercantile will consist of six directors, which will include (i) the President and Chief Executive Officer of Mercantile plus two
members of the Mercantile board of directors selected by the Mercantile board of directors and (ii) the President and Chief Executive Officer of Firstbank plus two members of the Firstbank board of directors selected by the Firstbank board of
directors. In addition, it is expected that, upon consummation of the merger:
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Michael H. Price, the Chairman of the Board, President and Chief Executive Officer of Mercantile, will serve as the President and Chief Executive
Officer of the combined company;
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Robert B. Kaminski, Jr., the Executive Vice President, Chief Operating Officer and Secretary of Mercantile, will serve as Executive Vice President and
Chief Operating Officer of the combined company; and
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12
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Charles E. Christmas, the current Senior Vice President, Chief Financial Officer and Treasurer of Mercantile will serve as Senior Vice President and
Chief Financial Officer of the combined company.
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As of November 1, 2013, the record date for the Mercantile
special meeting, the directors and executive officers of Mercantile and their affiliates beneficially owned and were entitled to vote 294,653 shares of Mercantile common stock, collectively representing approximately 3.4% of the
shares of Mercantile common stock outstanding and entitled to vote. Mercantiles directors have entered into agreements obligating them to vote their shares in favor of the merger agreement and the issuance of shares of Mercantile common stock
to Firstbank shareholders in connection with the Merger.
The Mercantile board of directors was aware of these interests and
considered them, among other matters, in evaluating the merger and in making its recommendations to Mercantile shareholders.
Interests of Firstbank Directors and Executive Officers in the Merger (see page 91)
Certain of Firstbanks
directors and executive officers have financial interests in the merger that may be different from, or in addition to, the interests of Firstbanks shareholders generally. The Firstbank board of directors was aware of these interests and
considered them, among other matters, in evaluating the merger and in making its recommendations to Firstbank shareholders.
As detailed below in Interests of Certain Firstbank Directors and Executive Officers in the Merger, the merger agreement
provides that upon consummation of the merger the board of directors of Mercantile will consist of six directors, which will include (i) the President and Chief Executive Officer of Mercantile plus two members of the Mercantile board of
directors selected by the Mercantile board of directors and (ii) the President and Chief Executive Officer of Firstbank plus two members of the Firstbank board of directors selected by the Firstbank board of directors.
13
Also as described in Interests of Certain Firstbank Directors and Executive
Officers in the Merger, Firstbank and Mercantile have entered into new employment agreements with the executive officers of Firstbank to be effective upon consummation of the merger. Under these new employment agreements, the merger will
result in the payment to executive officers of change in control cash payments or retention bonuses as disclosed in the table below and included in the column titled Subtotal Upon a Change in Control Without a Qualifying Termination. In
the event of a termination of employment of an executive officer by the combined company without cause or by the executive officer for good reason, the executive officers would be entitled to additional specified severance compensation as disclosed
in the table below and included in the column titled Total Upon a Change in Control With a Qualifying Termination.
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Name
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Cash
($)
(1)(2)
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Restricted
Stock
($)
(1)(3)
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Subtotal
Upon a
Change in
Control
Without a
Qualifying
Termination
($)
(1)(4)
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Health &
Welfare
Benefits
($)
(1)(5)
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Excise Tax
&
Gross-Up
($)
(1)(6)
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Cash
Severance
($)
(1)(7)
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Total Upon a
Change in
Control
With a
Qualifying
Termination
($)
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Thomas R. Sullivan
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|
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752,405
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56,327
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|
|
|
808,732
|
|
|
|
85,988
|
|
|
|
|
|
|
|
364,750
|
|
|
|
1,259,470
|
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Samuel G. Stone
|
|
|
530,774
|
|
|
|
36,340
|
|
|
|
567,114
|
|
|
|
79,432
|
|
|
|
431,197
|
|
|
|
411,000
|
|
|
|
1,488,743
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William L. Benear
|
|
|
395,584
|
|
|
|
23,985
|
|
|
|
419,569
|
|
|
|
66,974
|
|
|
|
|
|
|
|
0
|
|
|
|
486,543
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|
Douglas J. Ouellette
|
|
|
60,938
|
|
|
|
25,438
|
|
|
|
86,376
|
|
|
|
|
|
|
|
|
|
|
|
304,687
|
|
|
|
391,063
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|
James E. Wheeler, II
|
|
|
60,938
|
|
|
|
23,985
|
|
|
|
84,923
|
|
|
|
|
|
|
|
|
|
|
|
304,687
|
|
|
|
389,610
|
|
Daniel H. Grenier
|
|
|
52,500
|
|
|
|
21,804
|
|
|
|
74,304
|
|
|
|
|
|
|
|
|
|
|
|
262,500
|
|
|
|
336,804
|
|
Thomas O. Schlueter
|
|
|
55,625
|
|
|
|
23,985
|
|
|
|
79,610
|
|
|
|
|
|
|
|
|
|
|
|
278,125
|
|
|
|
357,735
|
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David L. Miller
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|
|
42,540
|
|
|
|
23,621
|
|
|
|
66,161
|
|
|
|
|
|
|
|
|
|
|
|
212,700
|
|
|
|
278,861
|
|
Richard D. Rice
|
|
|
42,750
|
|
|
|
23,985
|
|
|
|
66,735
|
|
|
|
|
|
|
|
|
|
|
|
213,750
|
|
|
|
280,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Executive Officer Totals
|
|
$
|
1,994,054
|
|
|
$
|
259,470
|
|
|
$
|
2,253,524
|
|
|
$
|
232,394
|
|
|
$
|
431,197
|
|
|
$
|
2,352,199
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|
|
$
|
5,269,314
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(1)
|
Please see the information under the caption Potential Payments to Firstbank Executive Officers Upon a Change in Control Resulting from the Merger beginning
on page 92 for more information about the components of these potential payments.
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(2)
|
Represents lump sum cash payments for Mr. Sullivan, Mr. Stone and Mr. Benear and retention bonuses for the other executives.
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(3)
|
Represents acceleration of outstanding Firstbank restricted stock awards.
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(4)
|
Payable upon a change of control if there is no qualifying termination of employment.
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(5)
|
Payable upon the occurrence of both a change of control and a qualifying termination of employment.
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(6)
|
Payable upon the occurrence of both a change of control and a qualifying termination of employment and based on assumptions that may change depending on the timing of
the change of control and qualifying termination of employment.
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(7)
|
Payable upon the occurrence of a change of control and, for all executives except Mr. Benear, a qualifying termination of employment. Represents continuations of
salaries for Mr. Sullivan and Mr. Stone and lump sum cash payments to each of Mr. Ouellette, Mr. J. Wheeler, Mr. Grenier, Mr. Schlueter, Mr. Miller and Mr. Rice based on each of their respective salaries, target incentive compensation and
retention bonuses.
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Firstbanks non-employee directors will not receive any merger-related compensation.
Current and former directors and officers of Firstbank will also be entitled to continued indemnification and liability
insurance coverage.
As of November 1, 2013, the record date of the Firstbank special meeting, the directors and executive
officers of Firstbank and their affiliates beneficially owned and were entitled to vote 551,156 shares of Firstbank
14
common stock, collectively representing approximately 6.8% of the shares of Firstbank common stock outstanding and entitled to vote. Firstbanks directors have entered into agreements
obligating them to vote their shares in favor of the merger agreement.
Board of Directors and Management
Following the Merger (see page 100)
Immediately following the effective time of the merger, the board of directors of
the combined company will consist of six members, including: (i) the President and Chief Executive Officer of Mercantile plus two members of the Mercantile board of directors as of the date of the merger agreement who are independent for
purposes of the rules of Nasdaq selected by the Mercantile board of directors and (ii) the President and Chief Executive Officer of Firstbank plus two members of the Firstbank board of directors who are independent for purposes of the rules of
Nasdaq selected by the Firstbank board of directors. The Firstbank board of directors has selected Edward Grant and Jeff Gardner to serve as directors of the combined company. The Mercantile board of directors has made a non-binding determination to
select David Cassard and Calvin Murdock to serve as directors of the combined company. The fees and/or other remuneration to be provided to the non-employee directors of the combined company have not been determined.
The merger agreement provides that, upon completion of the merger, Thomas R. Sullivan will serve as Mercantiles Chairman of the
Board, Michael H. Price will continue to serve as Mercantiles President and Chief Executive Officer, Robert B. Kaminski, Jr. will continue to serve as an Executive Vice President and Chief Operating Officer of Mercantile, Charles E. Christmas
will continue to service as Mercantiles Senior Vice President and Chief Financial Officer, and Samuel G. Stone will serve as an Executive Vice President of Mercantile.
Treatment of Firstbank Equity-Based Awards (see page 101)
Upon completion of the merger, each right of any kind to receive Firstbank common stock or benefits measured by the value of a number of shares of Firstbank common stock granted under the Firstbank stock
plans will be converted into an award with respect to a number of shares of Mercantile common stock equal to the aggregate number of shares of Firstbank common stock subject to such award. Such converted awards shall otherwise continue to have, and
be subject to, the same terms and conditions set forth in the applicable Firstbank stock plan (or any other agreement to which such converted award was subject immediately prior to the effective time of the merger). The exercise or strike price (if
any) per share of Mercantile common stock applicable to any such converted award shall be equal to the per share exercise price of such converted award immediately prior to the effective time of the merger. Firstbank restricted stock and unvested
stock options will become fully vested as of the effective time of the merger.
Regulatory Approval Required for
the Merger (see page 100)
Approval of the Board of Governors of the Federal Reserve System (FRB) is
required to complete the merger. An application was filed with the FRB on September 17, 2013. Approval has not yet been obtained. Mercantile and Firstbank have each agreed to take actions in order to obtain regulatory clearance required to
consummate the merger. While Mercantile and Firstbank expect to obtain all required regulatory clearances, we cannot assure you that these regulatory clearances will be obtained or that the granting of these regulatory clearances will not involve
the imposition of additional conditions on the completion of the merger, including the requirement to divest assets, or require changes to the terms of the merger agreement. These conditions or changes could result in the conditions to the merger
not being satisfied.
Amendment to the Articles of Incorporation of Mercantile (see page 69)
The Mercantile board of directors has approved, subject to Mercantile shareholder approval, an amendment to the
Mercantiles articles of incorporation which increases the number of authorized shares of common stock
15
from 20 million to 40 million. The form of amendment to Mercantiles articles of incorporation is included in this joint proxy statement and prospectus as Annex B. The approval of
the amendment by the Mercantile shareholders is not a condition precedent to the closing of the merger. In the event this proposal is approved by Mercantile shareholders, but the merger is not completed, the amendment will not become effective.
Expected Timing of the Merger
Mercantile and Firstbank currently expect the effective time of the merger to be on or about January 1, 2014. However, the merger is subject to various regulatory clearances and the satisfaction or
waiver of other conditions as described in the merger agreement, and it is possible that factors outside the control of Mercantile and Firstbank could result in the merger being completed at an earlier time, a later time or not at all.
Conditions to Completion of the Merger (see page 116)
The obligations of Mercantile and Firstbank to complete the merger are subject to the satisfaction of the following conditions:
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the approval of the merger agreement by the holders of a majority of the outstanding shares of Mercantile common stock;
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the approval of the merger agreement by the holders of a majority of the outstanding shares of Firstbank common stock;
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the approval of the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger by the affirmative vote of
holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Mercantile special meeting, assuming a quorum;
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the consents, authorizations, approvals, or exemptions required under the Bank Holding Company Act, the FDI Act, and the Michigan Banking Code;
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the absence of any injunction, decree, order, statute, rule or regulation by a court or other governmental entity that makes unlawful or prohibits the
consummation of the merger;
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the effectiveness of the registration statement of which this joint proxy statement and prospectus forms a part and the absence of a stop order or
proceedings threatened or initiated by the SEC for that purpose; and
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the authorization for the listing on Nasdaq of the shares of Mercantile common stock to be issued in connection with the merger and upon conversion of
the Firstbank restricted stock and the shares of Mercantile common stock reserved for issuance pursuant to Mercantile stock options, subject to official notice of issuance.
|
In addition, each of Mercantiles and Firstbanks obligations to effect the merger is subject to the satisfaction or waiver of
the following additional conditions:
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the representations and warranties of the other party, other than the representations related to the ownership of subsidiaries, capitalization, and
authorization of the merger (i) to the extent qualified by material adverse effect, will be true and correct, and (ii) to the extent not qualified by material adverse effect, will be true and correct except where the failure to be true and
correct, individually or in the aggregate, has not had, and would not reasonably be expected to have, a material adverse effect on such party, each as of the date of the merger agreement and as of the closing date (other than those representations
and warranties that were made only as of a specified date, which need only be true and correct as of such specified date);
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the representations and warranties of the other party relating to the ownership of subsidiaries and capitalization will be true and correct in all
respects (other than de minimis inaccuracies) as of the date
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16
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of the merger agreement and as of the closing date (except to the extent such representations or warranties were made only as of a specified date, which need only be true and correct as of such
specified date);
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the representations and warranties of the other party relating to the authorization of the merger will be true and correct in all respects;
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the other party will have performed, in all material respects, its covenants and agreements under the merger agreement required to be performed on or
prior to the closing date;
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a certificate executed by the other partys chief executive officer or chief financial officer as to the satisfaction of the conditions described
in the preceding four bullets will have been received by each party;
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there shall not have occurred a material adverse effect with respect to the other party; and
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a tax opinion from the partys tax counsel as described in the section titled The Merger Agreement Conditions to Completion of the
Merger, including an opinion that the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, will have been received by each party.
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No Solicitation of Alternative Proposals (see page 112)
The merger agreement generally precludes Mercantile and Firstbank from soliciting or engaging in discussions or negotiations with a third
party with respect to an acquisition proposal. However, if Mercantile or Firstbank receives an unsolicited acquisition proposal from a third party and Mercantiles or Firstbanks board of directors, as applicable, among other things,
determines in good faith (after consultation with its legal and financial advisors) that such unsolicited proposal is a superior proposal, then Mercantile or Firstbank, as applicable, may furnish non-public information to and enter into discussions
with, and only with, that third party regarding such acquisition proposal.
Termination of the Merger Agreement
(see page 117)
Mercantile and Firstbank may mutually agree to terminate the merger agreement at any time,
notwithstanding approval of the merger agreement by shareholders. Either company may also terminate the merger agreement if the merger is not consummated by March 31, 2014, subject to certain exceptions. In addition, either company may
terminate the agreement to enter into a definitive agreement with respect to a superior proposal, subject to certain conditions and the payment of a termination fee. See the section entitled The Merger Agreement Termination of the
Merger Agreement for a discussion of these and other rights of each of Mercantile and Firstbank to terminate the merger agreement.
Termination Fees and Expenses (see page 119)
Generally, all fees and expenses incurred in connection with the
merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring those expenses, subject to the specific exceptions discussed in this joint proxy statement and prospectus where Mercantile or Firstbank,
as the case may be, may be required to pay a termination fee of $7.9 million and/or expense reimbursement up to $2 million. See the section entitled The Merger Agreement Expenses and Termination Fees; Liability for
Breach for a discussion of the circumstances under which such termination fee will be required to be paid.
Accounting Treatment (see page 127)
Mercantile and Firstbank each prepares its respective financial statements in accordance with accounting principles generally accepted in the United States of America, referred to as GAAP. The
merger will be accounted for using the acquisition method of accounting. Mercantile will be treated as the acquiror for accounting purposes.
17
No Appraisal or Dissenters Rights (see page 150)
Neither the holders of shares of Mercantile common stock nor the holders of shares of Firstbank common stock are entitled
to appraisal rights or dissenters rights in connection with the merger, in accordance with Michigan law. Neither the articles of incorporation of Mercantile or its bylaws nor the articles of incorporation of Firstbank or its bylaws confers
such appraisal rights.
Comparison of Rights of Shareholders (see page 141)
Firstbank shareholders receiving merger consideration will have different rights once they become shareholders of the combined company due
to differences between the governing corporate documents of Firstbank and the governing corporate documents of the combined company. These differences are described in detail under the section entitled Comparison of Rights of
Shareholders.
Listing of Shares of Mercantile Common Stock; Delisting and Deregistration of Shares of
Firstbank Common Stock (see page 102)
It is a condition to the completion of the merger that the shares of Mercantile
common stock to be issued to Firstbank shareholders pursuant to the merger (including those shares of Mercantile common stock to be issued upon conversion of the Firstbank stock options, restricted stock, and restricted stock units) be authorized
for listing on Nasdaq at the effective time of the merger, subject to official notice of issuance. Upon completion of the merger, shares of Firstbank common stock currently listed on Nasdaq will cease to be listed on Nasdaq and will be subsequently
deregistered under the Exchange Act.
The Meetings
The Mercantile Special Meeting
(see page 39)
The special meeting of Mercantile shareholders will be held at Mercantile headquarters, 310 Leonard Street N.W., Grand Rapids, Michigan
49504, on December 12, 2013 at 9:30 a.m. local time. The special meeting of Mercantile shareholders is being held to consider and vote on:
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a proposal to approve the merger agreement, which is further described in the sections titled The Merger and The Merger
Agreement, beginning on pages 48 and 102, respectively;
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a proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger;
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a proposal to approve an amendment to Mercantiles articles of incorporation to increase the number of authorized shares of Mercantile common
stock;
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a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive
officers that is based on or otherwise related to the proposed transactions; and
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a proposal to approve the adjournment of the Mercantile special meeting to a later date or dates, if necessary or appropriate, to solicit additional
proxies in the event there are not sufficient votes at the time of the special meeting to approve the proposals listed above.
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Completion of the merger is conditioned on approval of the merger agreement and approval of the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger,
however it is not conditioned on the approval of the amendment to Mercantiles articles of incorporation to increase the number of authorized shares of Mercantile common stock.
With respect to each Mercantile proposal listed above, Mercantile shareholders may cast one vote for each share of Mercantile common
stock that they own. The proposal to approve the merger agreement requires the approval of a majority of the issued and outstanding shares of Mercantile common stock entitled to vote at the
18
special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal. The proposal to approve the issuance of shares of Mercantile common
stock to Firstbank shareholders in connection with the merger requires the approval of a majority of the votes cast on this proposal at the Mercantile special meeting, assuming a quorum. Failures to vote, broker non-votes and abstentions will have
no effect on the vote for this proposal. The proposal to approve the amendment to Mercantiles articles of incorporation requires the approval of a majority of the outstanding shares of Mercantile common stock entitled to vote at the Mercantile
special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal. The proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to
Mercantiles named executive officers that is based on or otherwise related to the proposed transactions requires the approval of a majority of the votes cast on this proposal at the Mercantile special meeting, assuming a quorum. Failures to
vote, broker non-votes and abstentions will have no effect on the vote for this proposal.
No business may be transacted at
the Mercantile special meeting unless a quorum is present. If a quorum is not present, or if fewer shares are voted than required to obtain the necessary shareholder approvals, to allow additional time for obtaining additional proxies, the special
meeting may be adjourned if the approval of a majority of the votes cast at the special meeting on this proposal is obtained, regardless of whether or not a quorum is present. No notice of an adjourned meeting need be given unless a new record date
is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.
The Firstbank Special Meeting
(see page 44)
The special
meeting of Firstbank shareholders will be held on December 12, 2013 at Firstbank headquarters, 311 Woodworth Avenue, Alma, Michigan 48801 at 9:30 a.m. local time. The special meeting of Firstbank shareholders is being held to consider and vote on:
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a proposal to adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement, which is further described in the
sections titled The Merger and The Merger Agreement, beginning on pages 49 and 103, respectively;
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an advisory (non-binding) proposal to approve the compensation that may be paid or become payable to Firstbanks named executive officers that is
based on or otherwise related to the proposed transactions; and
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a proposal to approve the adjournment of the Firstbank special meeting to a later date or dates, if necessary or appropriate, to solicit additional
proxies in the event there are not sufficient votes at the time of the special meeting to approve the first proposal listed above.
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Completion of the merger is conditioned on the adoption of the merger agreement, the merger and the other transactions contemplated by the merger agreement.
With respect to each Firstbank proposal listed above, Firstbank shareholders may cast one vote for each share of Firstbank common stock
that they own. The proposal to adopt the merger agreement, the merger, and other transactions required by the merger agreement requires the approval of a majority of the issued and outstanding shares of Firstbank common stock entitled to vote at the
special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal. The proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to
Firstbanks named executive officers that is based on or otherwise related to the proposed transactions requires the approval of a majority of the issued and outstanding shares of Firstbank common stock that are present in person or represented
by proxy and entitled to vote at the special meeting, assuming a quorum. Failures to vote and broker non-votes will have no effect on the vote for this proposal; however, abstentions will have the same effect as a vote against the approval of such
proposal.
19
No business may be transacted at the Firstbank special meeting unless a quorum is
present. If a quorum is not present, or if fewer shares are voted than required to obtain the necessary shareholder approvals, to allow additional time for obtaining additional proxies, the special meeting may be adjourned if the approval of a
majority of the votes cast at the special meeting is obtained, regardless of whether or not a quorum is present. No notice of an adjourned meeting need be given unless a new record date is fixed for the adjourned meeting, in which case a notice of
the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.
20
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF
FIRSTBANK
(Unaudited)
The following statement of earnings data for each of the three years in the period ended December 31, 2012 and the balance sheet data as of December 31, 2012 and 2011 have been derived from the
audited consolidated financial statements of Firstbank contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which is incorporated into this document by reference. The statement of earnings data for the
years ended December 31, 2009 and 2008 and the balance sheet data as of December 31, 2010, 2009 and 2008 have been derived from Firstbanks audited consolidated financial statements for such years, which have not been incorporated
into this document by reference.
The statement of earnings data for the six months ended June 30, 2013 and June 30,
2012, and the balance sheet data as of June 30, 2013 have been derived from Firstbanks unaudited interim condensed consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2013, which is incorporated into this document by reference. The balance sheet data as of June 30, 2012 has been derived from Firstbanks unaudited interim condensed consolidated financial statements contained in its
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, which has not been incorporated into this document by reference. The financial statements in the Form 10-Q are unaudited, but, in the opinion of Firstbanks
management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly Firstbanks consolidated financial position and results of operations for the periods indicated.
You should read this summary financial data together with the consolidated financial statements that are incorporated by reference into
this document and their accompanying notes and managements discussion and analysis of financial condition and results of operations of Firstbank contained in such reports. See Where You Can Find More Information beginning on
page 154.
21
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As of and for the Six
Months
Ended
June 30,
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As of and for the Years Ended December 31,
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2013
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2012
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2012
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|
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2011
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2010
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|
|
2009
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|
|
2008
|
|
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|
(In thousands, except per share data)
|
|
Consolidated Results of Operations:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
29,423
|
|
|
$
|
32,146
|
|
|
$
|
62,866
|
|
|
$
|
67,644
|
|
|
$
|
72,382
|
|
|
$
|
74,686
|
|
|
$
|
82,191
|
|
Interest expense
|
|
|
3,220
|
|
|
|
4,540
|
|
|
|
8,374
|
|
|
|
12,972
|
|
|
|
20,890
|
|
|
|
25,939
|
|
|
|
35,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
26,203
|
|
|
|
27,606
|
|
|
|
54,492
|
|
|
|
54,672
|
|
|
|
51,492
|
|
|
|
48,747
|
|
|
|
46,838
|
|
Provision for loan losses
|
|
|
1,830
|
|
|
|
4,988
|
|
|
|
7,690
|
|
|
|
13,337
|
|
|
|
13,344
|
|
|
|
14,671
|
|
|
|
8,256
|
|
Noninterest income
|
|
|
5,868
|
|
|
|
6,243
|
|
|
|
12,670
|
|
|
|
9,675
|
|
|
|
11,829
|
|
|
|
15,409
|
|
|
|
3,990
|
|
Noninterest expense
|
|
|
21,508
|
|
|
|
22,079
|
|
|
|
44,682
|
|
|
|
43,553
|
|
|
|
44,702
|
|
|
|
45,750
|
|
|
|
42,915
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense (benefit)
|
|
|
8,733
|
|
|
|
6,782
|
|
|
|
14,790
|
|
|
|
7,457
|
|
|
|
5,275
|
|
|
|
3,735
|
|
|
|
(343
|
)
|
Income tax expense (benefit)
|
|
|
2,527
|
|
|
|
1,961
|
|
|
|
4,256
|
|
|
|
1,834
|
|
|
|
1,512
|
|
|
|
1,044
|
|
|
|
(1,062
|
)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,206
|
|
|
$
|
4,821
|
|
|
$
|
10,534
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|
|
$
|
5,623
|
|
|
$
|
3,763
|
|
|
$
|
2,691
|
|
|
$
|
719
|
|
Preferred stock dividends and accretion
|
|
|
481
|
|
|
|
840
|
|
|
|
1,275
|
|
|
|
1,679
|
|
|
|
1,679
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income attributable to common shares
|
|
$
|
5,725
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|
|
$
|
3,981
|
|
|
$
|
9,259
|
|
|
$
|
3,944
|
|
|
$
|
2,084
|
|
|
$
|
1,151
|
|
|
$
|
719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Per Common Share Data:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
|
|
$
|
0.71
|
|
|
$
|
0.50
|
|
|
$
|
1.17
|
|
|
$
|
0.50
|
|
|
$
|
0.27
|
|
|
$
|
0.15
|
|
|
$
|
0.10
|
|
Diluted
|
|
|
0.71
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|
|
|
0.50
|
|
|
|
1.16
|
|
|
|
0.50
|
|
|
|
0.27
|
|
|
|
0.15
|
|
|
|
0.10
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|
Book value at end of period
|
|
|
16.41
|
|
|
|
16.14
|
|
|
|
16.26
|
|
|
|
15.53
|
|
|
|
14.82
|
|
|
|
14.77
|
|
|
|
15.44
|
|
Dividends declared
|
|
|
0.12
|
|
|
|
0.07
|
|
|
|
0.29
|
|
|
|
0.04
|
|
|
|
0.08
|
|
|
|
0.40
|
|
|
|
0.90
|
|
Dividend payout ratio
|
|
|
16.89
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%
|
|
|
13.92
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%
|
|
|
21.97
|
%
|
|
|
5.58
|
%
|
|
|
16.47
|
%
|
|
|
113.80
|
%
|
|
|
935.73
|
%
|
|
|
|
|
|
|
|
Consolidated Financial Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.83
|
%
|
|
|
0.65
|
%
|
|
|
0.70
|
%
|
|
|
0.38
|
%
|
|
|
0.25
|
%
|
|
|
0.19
|
%
|
|
|
0.05
|
%
|
Return on average shareholders equity
|
|
|
8.44
|
%
|
|
|
6.30
|
%
|
|
|
7.00
|
%
|
|
|
3.75
|
%
|
|
|
2.56
|
%
|
|
|
1.86
|
%
|
|
|
0.61
|
%
|
Average shareholders equity to average assets
|
|
|
9.80
|
%
|
|
|
10.40
|
%
|
|
|
10.04
|
%
|
|
|
10.07
|
%
|
|
|
9.87
|
%
|
|
|
10.09
|
%
|
|
|
8.38
|
%
|
Nonperforming loans to total loans
|
|
|
1.22
|
%
|
|
|
1.86
|
%
|
|
|
1.62
|
%
|
|
|
2.38
|
%
|
|
|
2.61
|
%
|
|
|
3.02
|
%
|
|
|
2.12
|
%
|
Allowance for loan losses to total loans
|
|
|
2.07
|
%
|
|
|
2.17
|
%
|
|
|
2.21
|
%
|
|
|
2.14
|
%
|
|
|
2.07
|
%
|
|
|
1.70
|
%
|
|
|
1.26
|
%
|
Tier 1 leverage capital
|
|
|
9.01
|
%
|
|
|
9.47
|
%
|
|
|
9.71
|
%
|
|
|
10.30
|
%
|
|
|
10.02
|
%
|
|
|
10.05
|
%
|
|
|
8.08
|
%
|
Tier 1 leverage risk-based capital
|
|
|
13.61
|
%
|
|
|
14.37
|
%
|
|
|
14.73
|
%
|
|
|
15.29
|
%
|
|
|
14.68
|
%
|
|
|
13.00
|
%
|
|
|
10.00
|
%
|
Total risk-based capital
|
|
|
14.87
|
%
|
|
|
15.63
|
%
|
|
|
15.99
|
%
|
|
|
16.55
|
%
|
|
|
15.94
|
%
|
|
|
14.21
|
%
|
|
|
11.06
|
%
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,457,046
|
|
|
$
|
1,485,738
|
|
|
$
|
1,498,762
|
|
|
$
|
1,485,299
|
|
|
$
|
1,458,343
|
|
|
$
|
1,482,356
|
|
|
$
|
1,425,340
|
|
Cash and cash equivalents
|
|
|
54,430
|
|
|
|
94,099
|
|
|
|
102,528
|
|
|
|
80,248
|
|
|
|
83,943
|
|
|
|
117,615
|
|
|
|
63,712
|
|
Securities
|
|
|
358,288
|
|
|
|
333,946
|
|
|
|
360,950
|
|
|
|
349,452
|
|
|
|
263,919
|
|
|
|
158,592
|
|
|
|
122,179
|
|
Loans
|
|
|
975,796
|
|
|
|
991,887
|
|
|
|
966,683
|
|
|
|
984,258
|
|
|
|
1,032,975
|
|
|
|
1,122,185
|
|
|
|
1,159,632
|
|
Allowance for loan losses
|
|
|
20,239
|
|
|
|
21,522
|
|
|
|
21,340
|
|
|
|
21,019
|
|
|
|
21,431
|
|
|
|
19,114
|
|
|
|
14,594
|
|
Goodwill
|
|
|
35,513
|
|
|
|
35,513
|
|
|
|
35,513
|
|
|
|
35,513
|
|
|
|
35,513
|
|
|
|
35,513
|
|
|
|
35,603
|
|
Deposits
|
|
|
1,208,302
|
|
|
|
1,211,846
|
|
|
|
1,241,401
|
|
|
|
1,220,542
|
|
|
|
1,183,783
|
|
|
|
1,149,063
|
|
|
|
1,046,914
|
|
Securities sold under agreements to repurchase
|
|
|
43,661
|
|
|
|
45,746
|
|
|
|
42,785
|
|
|
|
46,784
|
|
|
|
41,328
|
|
|
|
39,409
|
|
|
|
52,917
|
|
Federal Home Loan Bank advances
|
|
|
19,862
|
|
|
|
24,334
|
|
|
|
22,493
|
|
|
|
19,457
|
|
|
|
40,658
|
|
|
|
100,263
|
|
|
|
155,921
|
|
Subordinated debentures
|
|
|
36,084
|
|
|
|
36,084
|
|
|
|
36,084
|
|
|
|
36,084
|
|
|
|
36,084
|
|
|
|
36,084
|
|
|
|
36,084
|
|
Shareholders equity
|
|
|
132,444
|
|
|
|
145,143
|
|
|
|
147,058
|
|
|
|
155,377
|
|
|
|
148,428
|
|
|
|
146,880
|
|
|
|
114,983
|
|
22
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF
MERCANTILE
(Unaudited)
The following statement of earnings data for each of the three years ended December 31, 2012 and the balance sheet data as of December 31, 2012 and 2011 have been derived from the audited
consolidated financial statements of Mercantile contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which is incorporated into this document by reference. The statement of earnings data for the years
ended December 31, 2009 and 2008 and the balance sheet data as of December 31, 2010, 2009 and 2008 have been derived from Mercantiles audited consolidated financial statements for such years, which have not been incorporated into
this document by reference.
The statement of earnings data for the six months ended June 30, 2013 and 2012, and the
balance sheet data as of June 30, 2013 have been derived from Mercantiles unaudited interim condensed consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013,
which is incorporated into this document by reference. The balance sheet data as of June 30, 2012 has been derived from Mercantiles unaudited interim condensed consolidated financial statements contained in its Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2012, which has not been incorporated into this document by reference. The financial statements in the Form 10-Q are unaudited, but, in the opinion of Mercantiles management, contain
all adjustments (consisting of only normal recurring adjustments) necessary to present fairly Mercantiles consolidated financial position and results of operations for the periods indicated.
You should read this summary financial data together with the consolidated financial statements that are incorporated by reference into
this document and their accompanying notes and managements discussion and analysis of financial condition and results of operations of Mercantile contained in such reports. See Where You Can Find More Information beginning on
page 154.
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Six
Months
Ended
June 30,
|
|
|
As of and for the Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share data)
|
|
Consolidated Results of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
28,201
|
|
|
$
|
30,483
|
|
|
$
|
59,917
|
|
|
$
|
71,069
|
|
|
$
|
88,143
|
|
|
$
|
104,909
|
|
|
$
|
121,072
|
|
Interest expense
|
|
|
5,435
|
|
|
|
7,103
|
|
|
|
13,216
|
|
|
|
19,832
|
|
|
|
31,794
|
|
|
|
53,576
|
|
|
|
74,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
22,766
|
|
|
|
23,380
|
|
|
|
46,701
|
|
|
|
51,237
|
|
|
|
56,349
|
|
|
|
51,333
|
|
|
|
46,209
|
|
Provision for loan losses
|
|
|
(3,000
|
)
|
|
|
(3,000
|
)
|
|
|
(3,100
|
)
|
|
|
6,900
|
|
|
|
31,800
|
|
|
|
59,000
|
|
|
|
21,200
|
|
Noninterest income
|
|
|
3,599
|
|
|
|
3,874
|
|
|
|
7,994
|
|
|
|
7,282
|
|
|
|
9,244
|
|
|
|
7,558
|
|
|
|
7,282
|
|
Noninterest expense
|
|
|
17,397
|
|
|
|
20,258
|
|
|
|
39,624
|
|
|
|
41,495
|
|
|
|
47,156
|
|
|
|
46,488
|
|
|
|
42,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense (benefit)
|
|
|
11,968
|
|
|
|
9,996
|
|
|
|
18,171
|
|
|
|
10,124
|
|
|
|
(13,363
|
)
|
|
|
(46,597
|
)
|
|
|
(9,835
|
)
|
Income tax expense (benefit)
|
|
|
3,552
|
|
|
|
3,125
|
|
|
|
5,636
|
|
|
|
(27,361
|
)
|
|
|
(47
|
)
|
|
|
5,490
|
|
|
|
(4,876
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
8,416
|
|
|
$
|
6,871
|
|
|
$
|
12,535
|
|
|
$
|
37,485
|
|
|
$
|
(13,316
|
)
|
|
$
|
(52,087
|
)
|
|
$
|
(4,959
|
)
|
Preferred stock dividends and accretion
|
|
|
|
|
|
|
1,030
|
|
|
|
1,030
|
|
|
|
1,343
|
|
|
|
1,295
|
|
|
|
802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shares
|
|
$
|
8,416
|
|
|
$
|
5,841
|
|
|
$
|
11,505
|
|
|
$
|
36,142
|
|
|
$
|
(14,611
|
)
|
|
$
|
(52,889
|
)
|
|
$
|
(4,959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.97
|
|
|
$
|
0.68
|
|
|
$
|
1.33
|
|
|
$
|
4.20
|
|
|
$
|
(1.72
|
)
|
|
$
|
(6.23
|
)
|
|
$
|
(0.59
|
)
|
Diluted
|
|
|
0.97
|
|
|
|
0.65
|
|
|
|
1.30
|
|
|
|
4.07
|
|
|
|
(1.72
|
)
|
|
|
(6.23
|
)
|
|
|
(0.59
|
)
|
Book value at end of period
|
|
|
17.34
|
|
|
|
17.38
|
|
|
|
16.84
|
|
|
|
16.73
|
|
|
|
12.20
|
|
|
|
13.86
|
|
|
|
20.29
|
|
Dividends declared
|
|
|
0.21
|
|
|
|
|
|
|
|
0.09
|
|
|
|
|
|
|
|
0.01
|
|
|
|
0.07
|
|
|
|
0.31
|
|
Dividend payout ratio
|
|
|
21.55
|
%
|
|
|
NA
|
|
|
|
6.73
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
|
|
|
|
|
Consolidated Financial Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
1.23
|
%
|
|
|
0.83
|
%
|
|
|
0.82
|
%
|
|
|
2.36
|
%
|
|
|
(0.80
|
%)
|
|
|
(2.51
|
%)
|
|
|
(0.23
|
%)
|
Return on average shareholders equity
|
|
|
11.38
|
%
|
|
|
7.26
|
%
|
|
|
7.51
|
%
|
|
|
27.28
|
%
|
|
|
(10.62
|
%)
|
|
|
(29.91
|
%)
|
|
|
(2.87
|
%)
|
Average shareholders equity to average assets
|
|
|
10.83
|
%
|
|
|
11.46
|
%
|
|
|
10.90
|
%
|
|
|
8.66
|
%
|
|
|
7.56
|
%
|
|
|
8.40
|
%
|
|
|
8.01
|
%
|
Nonperforming loans to total loans
|
|
|
0.99
|
%
|
|
|
2.69
|
%
|
|
|
1.82
|
%
|
|
|
4.20
|
%
|
|
|
5.50
|
%
|
|
|
5.52
|
%
|
|
|
2.66
|
%
|
Allowance for loan losses to total loans
|
|
|
2.36
|
%
|
|
|
2.80
|
%
|
|
|
2.75
|
%
|
|
|
3.41
|
%
|
|
|
3.59
|
%
|
|
|
3.11
|
%
|
|
|
1.46
|
%
|
Tier 1 leverage capital
|
|
|
12.52
|
%
|
|
|
11.42
|
%
|
|
|
11.31
|
%
|
|
|
12.09
|
%
|
|
|
9.09
|
%
|
|
|
8.64
|
%
|
|
|
9.17
|
%
|
Tier 1 leverage risk-based capital
|
|
|
14.17
|
%
|
|
|
13.33
|
%
|
|
|
13.37
|
%
|
|
|
14.19
|
%
|
|
|
11.17
|
%
|
|
|
9.92
|
%
|
|
|
9.68
|
%
|
Total risk-based capital
|
|
|
15.43
|
%
|
|
|
14.59
|
%
|
|
|
14.63
|
%
|
|
|
15.46
|
%
|
|
|
12.45
|
%
|
|
|
11.18
|
%
|
|
|
10.93
|
%
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,343,750
|
|
|
$
|
1,385,245
|
|
|
$
|
1,422,926
|
|
|
$
|
1,433,229
|
|
|
$
|
1,632,421
|
|
|
$
|
1,906,208
|
|
|
$
|
2,208,010
|
|
Cash and cash equivalents
|
|
|
57,977
|
|
|
|
82,466
|
|
|
|
136,003
|
|
|
|
76,372
|
|
|
|
64,198
|
|
|
|
21,735
|
|
|
|
25,804
|
|
Securities
|
|
|
142,095
|
|
|
|
139,552
|
|
|
|
150,275
|
|
|
|
184,953
|
|
|
|
235,175
|
|
|
|
257,384
|
|
|
|
242,787
|
|
Loans
|
|
|
1,058,662
|
|
|
|
1,060,996
|
|
|
|
1,041,189
|
|
|
|
1,072,422
|
|
|
|
1,262,630
|
|
|
|
1,539,818
|
|
|
|
1,856,915
|
|
Allowance for loan losses
|
|
|
24,947
|
|
|
|
29,689
|
|
|
|
28,677
|
|
|
|
36,532
|
|
|
|
45,368
|
|
|
|
47,878
|
|
|
|
27,108
|
|
Bank owned life insurance
|
|
|
50,736
|
|
|
|
49,312
|
|
|
|
50,048
|
|
|
|
48,520
|
|
|
|
46,743
|
|
|
|
45,024
|
|
|
|
42,462
|
|
Deposits
|
|
|
1,061,315
|
|
|
|
1,105,630
|
|
|
|
1,135,204
|
|
|
|
1,112,075
|
|
|
|
1,273,832
|
|
|
|
1,401,627
|
|
|
|
1,599,575
|
|
Securities sold under agreements to repurchase
|
|
|
57,328
|
|
|
|
52,831
|
|
|
|
64,765
|
|
|
|
72,569
|
|
|
|
116,979
|
|
|
|
99,755
|
|
|
|
94,413
|
|
Federal Home Loan Bank advances
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
45,000
|
|
|
|
65,000
|
|
|
|
205,000
|
|
|
|
270,000
|
|
Subordinated debentures
|
|
|
32,990
|
|
|
|
32,990
|
|
|
|
32,990
|
|
|
|
32,990
|
|
|
|
32,990
|
|
|
|
32,990
|
|
|
|
32,990
|
|
Shareholders equity
|
|
|
150,938
|
|
|
|
149,662
|
|
|
|
146,590
|
|
|
|
164,999
|
|
|
|
125,936
|
|
|
|
140,104
|
|
|
|
174,372
|
|
24
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION OF MERCANTILE AND FIRSTBANK
The following table presents selected unaudited pro forma condensed combined
financial information about Mercantiles consolidated balance sheet and results of operations, after giving effect to the merger with Firstbank and the payment of the special cash dividend. The information under Results of Operations
Data in the table below gives effect to the merger as if it had been consummated on January 1, 2012, the beginning of the earliest period presented. The information under Balance Sheet Data in the table below assumes the
merger had been consummated on June 30, 2013. This unaudited pro forma combined financial information was prepared using the acquisition method of accounting with Mercantile considered the acquirer of Firstbank. See Accounting
Treatment on page 127.
In addition, the unaudited pro forma combined financial information includes adjustments which
are preliminary and will likely be revised as additional information becomes available and as additional analysis is performed. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma combined
financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company.
The information presented below should be read in conjunction with the historical consolidated financial statements of Mercantile and Firstbank, including the related notes, filed by each of them with the
SEC, and with the pro forma condensed combined financial statements of Mercantile and Firstbank, including the related notes, appearing elsewhere in this document. See Where You Can Find More Information beginning on page 154 and
Unaudited Pro Forma Condensed Combined Financial Information beginning on page 128. The unaudited pro forma condensed combined financial information is not necessarily indicative of results that actually would have occurred or that may
occur in the future had the merger been completed on the dates indicated.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Six Months Ended
June 30, 2013
|
|
|
Year Ended
December 31,
2012
|
|
Results of Operations Data
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
48,367
|
|
|
$
|
100,150
|
|
Provision for loan losses
|
|
|
(1,170
|
)
|
|
|
4,590
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
49,537
|
|
|
|
95,560
|
|
Other income
|
|
|
9,467
|
|
|
|
20,664
|
|
Other expense
|
|
|
39,836
|
|
|
|
86,320
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
19,168
|
|
|
|
29,904
|
|
Income tax expense
|
|
|
5,542
|
|
|
|
8,822
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
13,626
|
|
|
|
21,082
|
|
Preferred stock dividends
|
|
|
481
|
|
|
|
2,305
|
|
|
|
|
|
|
|
|
|
|
Net income to common shareholders
|
|
$
|
13,145
|
|
|
$
|
18,777
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
(in thousands)
|
|
As of June 30, 2013
|
|
Balance Sheet Data
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
100,352
|
|
Investment securities
|
|
|
500,383
|
|
Net loans
|
|
|
1,991,011
|
|
Total Assets
|
|
|
2,799,875
|
|
Deposits
|
|
|
2,271,917
|
|
Borrowings
|
|
|
173,951
|
|
Subordinated debentures
|
|
|
54,074
|
|
Total shareholders equity
|
|
|
285,061
|
|
The table below presents the pro forma regulatory capital levels for the consolidated combined company
and regulatory minimum required capital levels, giving effect to the merger as if it had occurred on June 30, 2013, and assuming payment of a $2.00 per share dividend by Mercantile (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile
(as reported)
|
|
|
Firstbank
(As reported)
|
|
|
Pro Forma
|
|
|
Minimum
Required for
Capital Adequacy
Purposes
|
|
June 30, 2013
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
Total capital
(to risk weighted assets)
|
|
$
|
183,956
|
|
|
|
15.4
|
%
|
|
$
|
144,062
|
|
|
|
14.0
|
%
|
|
$
|
304,698
|
|
|
|
13.9
|
%
|
|
$
|
173,069
|
|
|
|
8.0
|
%
|
Tier 1 capital
(to risk weighted assets)
|
|
$
|
168,929
|
|
|
|
14.2
|
%
|
|
$
|
131,858
|
|
|
|
13.5
|
%
|
|
$
|
279,751
|
|
|
|
12.9
|
%
|
|
$
|
86,535
|
|
|
|
4.0
|
%
|
Tier 1 capital
(to average assets)
|
|
$
|
168,929
|
|
|
|
12.5
|
%
|
|
$
|
131,858
|
|
|
|
9.0
|
%
|
|
$
|
279,751
|
|
|
|
10.0
|
%
|
|
$
|
112,024
|
|
|
|
4.0
|
%
|
26
Unaudited Selected Comparative Per Share Data
The following table sets forth the basic earnings, diluted earnings, cash dividends and book value per common share data
for Mercantile and Firstbank on a historical basis and on a pro forma combined basis, as of and for the six month period ended June 30, 2013, and as of and for the twelve months ended December 31, 2012. The pro forma data was derived by
combining the historical consolidated financial information of Mercantile and Firstbank using the acquisition method of accounting for business combinations and assumes the transaction is completed as contemplated. The pro forma and pro
forma-equivalent per share information gives effect to the merger as if the transactions had been effective on the dates presented in the case of the book value data, and as if the transactions had become effective on January 1, 2012, in the
case of the earnings per share and dividends declared data. The unaudited pro forma data represent a current estimate based on available information of the combined companys results of operations. The pro forma financial adjustments record the
assets and liabilities of Firstbank at their estimated fair values and are subject to adjustment as additional information becomes available and as additional analysis is performed. See Unaudited Pro Forma Condensed Combined Financial
Information for more information on page 128.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile As
Reported
|
|
|
Firstbank As
Reported
|
|
|
Pro Forma
Combined
Mercantile
(1)
|
|
|
Pro
Forma
Equivalent
Per Share
Information
(2)
|
|
Mercantile Pro Forma Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income for the six months ended June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.97
|
|
|
$
|
0.71
|
|
|
$
|
0.79
|
|
|
$
|
0.79
|
|
Diluted earnings per share
|
|
|
0.97
|
|
|
|
0.71
|
|
|
|
0.78
|
|
|
|
0.78
|
|
Cash Dividends
(3)
|
|
|
0.21
|
|
|
|
0.12
|
|
|
|
0.21
|
|
|
|
0.21
|
|
Book value per common share as of June 30, 2013
(4)
|
|
|
17.34
|
|
|
|
16.41
|
|
|
|
16.99
|
|
|
|
16.99
|
|
|
|
|
|
|
Income for the year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.33
|
|
|
$
|
1.17
|
|
|
$
|
1.13
|
|
|
$
|
1.13
|
|
Diluted earnings per share
|
|
|
1.30
|
|
|
|
1.16
|
|
|
|
1.12
|
|
|
|
1.12
|
|
Cash Dividends
(3)
|
|
|
0.09
|
|
|
|
0.29
|
|
|
|
0.09
|
|
|
|
0.09
|
|
Book value per common share as of December 31, 2012
(4)
|
|
|
16.84
|
|
|
|
16.26
|
|
|
|
|
|
|
|
|
|
(1)
|
Pro forma earnings per share are based on pro forma combined net income and pro forma combined weighted average shares outstanding at the end of the period.
|
(2)
|
Calculated based on pro forma combined multiplied by the applicable exchange ratio of 1.00.
|
(3)
|
Pro forma dividends per share represent Mercantiles historical dividends per share, excluding the special cash dividend.
|
(4)
|
Calculated based on pro forma combined equity and pro forma combined common shares outstanding at the end of period.
|
27
Comparative Market Prices
The following table shows the closing sale prices of Mercantile and Firstbank common stock as reported on NASDAQ as of August 14,
2013, the last trading day before public announcement of the merger, and as of November 5, 2013, the last trading day before the date of this joint proxy statement and prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile
Common
Stock
|
|
|
Firstbank
Common
Stock
|
|
|
Implied Value
for
Each Share of
Firstbank
Common
Stock
|
|
August 14, 2013
|
|
$
|
18.77
|
|
|
$
|
16.66
|
|
|
$
|
18.77
|
|
November 5, 2013
|
|
$
|
21.99
|
|
|
$
|
19.52
|
|
|
$
|
21.99
|
|
The market price of Mercantile common stock and Firstbank common stock will fluctuate prior to the merger.
Mercantiles shareholders and Firstbank shareholders are urged to obtain current market quotations for the shares prior to making any decision with respect to the merger.
28
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement and prospectus and the documents incorporated by reference into this joint proxy statement and
prospectus contain forward-looking statements within the meaning of the federal securities laws that are not limited to historical facts, but reflect Mercantile and Firstbanks current beliefs, expectations or intentions regarding future
events. Words such as may, will, could, should, expect, plan, project, intend, anticipate, believe, estimate,
predict, potential, pursue, target, continue, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation,
Mercantiles and Firstbanks expectations with respect to the synergies, costs and other anticipated financial impacts of the proposed transaction; future financial and operating results of the combined company; the combined companys
plans, objectives, expectations and intentions with respect to future operations and services; approval of the proposed transaction by shareholders and by governmental regulatory authorities; the satisfaction of the closing conditions to the
proposed transaction; and the timing of the completion of the proposed transaction. Managements determination of the provision and allowance for loan losses, the appropriate carrying value of intangible assets (including deferred pay assets)
and other real estate owned and the value of investment securities involves judgments that are inherently forward-looking. The financial projections set forth under the captions Certain Prospective Financial Information Reviewed by
Mercantile beginning on page 67 and Certain Prospective Financial Information Reviewed by Firstbank beginning on page 87 are inherently forward-looking.
All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally
outside the control of Mercantile and Firstbank and are difficult to predict. These risks and uncertainties also include those set forth under Risk Factors, beginning on page 31, as well as, among others, risks and uncertainties
relating to:
|
|
|
the ability to obtain regulatory approvals of the merger and satisfy other closing conditions or follow the expected schedule for the transactions;
|
|
|
|
the actions of actual or potential competitors in the markets in which the combined company will operate;
|
|
|
|
the combined companys ability to effectively maintain and improve customer relationships, realize expected benefits of the merger, realize growth
opportunities, maintain or expand customer base, reduce operating costs, continue to pay dividends, and successfully implement and realize the expected benefits of various programs, initiatives and goals;
|
|
|
|
difficulties and delays in integrating the Mercantile and Firstbank businesses following the merger;
|
|
|
|
changes in the value of commercial and residential real estate and the value of certain securities held in investment portfolios;
|
|
|
|
changes in interest rates and capital markets;
|
|
|
|
effects of governmental regulations and policies;
|
|
|
|
changes in asset quality and credit risk;
|
|
|
|
the effectiveness of the combined companys capital investments and marketing strategies;
|
|
|
|
general economic conditions;
|
|
|
|
the proposed merger, including the ability to complete the merger in the anticipated timeframe or at all, the diversion of each partys management
in connection with the merger and the combined companys ability to realize, fully or at all, the anticipated benefits of the merger; and
|
|
|
|
other financial, operational and legal risks and uncertainties detailed from time to time in each partys SEC filings.
|
29
Mercantile and Firstbank caution that the foregoing list of factors is not exclusive.
Additional information concerning these and other risk factors is contained in Mercantiles and Firstbanks most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current
Reports on Form 8-K and other SEC filings. All subsequent written and oral forward-looking statements concerning Mercantile, Firstbank, the proposed transaction or other matters and attributable to Mercantile or Firstbank or any
person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. The forward-looking statements speak only as of the date made and, other than as required by law, neither Mercantile nor Firstbank undertake
any obligation to update publicly or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.
30
RISK FACTORS
In addition to the other information included in and incorporated by reference into this joint proxy statement and prospectus,
including the matters addressed in the section entitled Special Note Regarding Forward-Looking Statements beginning on page 29, you should carefully consider the following risk factors before deciding whether to vote for the proposal to
approve the merger agreement and approve the merger and, in the case of Mercantile shareholders, for the proposal to approve the Mercantile share issuance. In addition, you should read and consider the risks associated with each of the businesses of
Firstbank and Mercantile because these risks will relate to the combined company following the completion of the merger. Descriptions of some of these risks can be found in the Annual Reports of Mercantile and Firstbank on Form 10-K for the fiscal
years ended December 31, 2012, in each case, as such risks may be updated or supplemented in each companys subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this
joint proxy statement and prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this document. See the section entitled Where You Can Find More Information
beginning on page 154.
Risks Relating to the Merger
The merger is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at
all. Failure to complete the merger could have material and adverse effects on Mercantile and Firstbank.
The
completion of the merger is subject to a number of conditions, including the approval by the shareholders of Mercantile and Firstbank, which make the completion and timing of the completion of the merger uncertain. See the section entitled The
Merger Agreement Conditions to Completion of the Transaction, beginning on page 116, for a more detailed discussion. Also, either Mercantile or Firstbank may terminate the merger agreement if the merger has not been consummated by
March 31, 2014, except that this right to terminate the merger agreement will not be available to any party whose failure to perform any obligation under the merger agreement is the cause of or the primary factor that results in the failure of
the merger to be consummated on or before that date.
If the merger is not completed on a timely basis, or at all,
Mercantiles and Firstbanks respective ongoing businesses may be adversely affected and, without realizing any of the benefits of having completed the merger, Mercantile and Firstbank will be subject to a number of risks, including the
following:
|
|
|
Mercantile and Firstbank will be required to pay their respective costs relating to the merger, such as legal, accounting, financial advisory and
printing fees, whether or not the merger is completed;
|
|
|
|
time and resources committed by Mercantiles and Firstbanks respective boards of directors and management to matters relating to the merger
could otherwise have been devoted to pursuing other beneficial opportunities;
|
|
|
|
the market price of Mercantile common stock or Firstbank common stock could decline to the extent that the current market price reflects a market
assumption that the merger will be completed; and
|
|
|
|
if the merger agreement is terminated and the board of directors of Mercantile or the board of directors of Firstbank seeks another business
combination, Mercantile shareholders and Firstbank shareholders cannot be certain that Mercantile or Firstbank will be able to find a party willing to enter into a merger agreement on terms equivalent to or more attractive than the terms that the
other party has agreed to in the merger agreement.
|
The market value of the merger consideration paid
to Firstbank shareholders will fluctuate because the exchange ratio is fixed and will not be adjusted in the event of any change in either Mercantiles or Firstbanks stock price.
Upon completion of the merger, each share of Firstbank common stock will be converted into the right to receive 1 share of Mercantile
common stock. This exchange ratio will not be adjusted for changes in the market
31
price of either Mercantile common stock or Firstbank common stock between the date of signing the merger agreement and completion of the merger. Changes in the price of Mercantile common stock
prior to the merger will affect the value of Mercantile common stock that Firstbank common shareholders will receive on the closing date.
The prices of Mercantile common stock and Firstbank common stock on the date of the completion of the merger may vary from their prices on the date the merger agreement was executed, on the date of this
joint proxy statement and prospectus and on the date of each shareholder meeting. As a result, the value represented by the exchange ratio will also vary. For example, based on the range of closing prices of Mercantile common stock during the period
from August 14, 2013, the last full trading day before the public announcement of the merger, through November 5, 2013, the latest practicable trading date before the date of this joint proxy statement and prospectus, the exchange ratio
represented a value ranging from a high of $22.49 to a low of $18.77 for each share of Firstbank common stock.
These
variations could result from changes in the business, operations or prospects of Mercantile or Firstbank prior to or following the completion of the merger, regulatory considerations, general market and economic conditions and other factors both
within and beyond the control of Mercantile or Firstbank. At the time of the special shareholders meetings, Firstbank shareholders will not know with certainty the value of the shares of Mercantile common stock that they will receive upon completion
of the merger.
Anticipation of the special dividend may cause upward pressure on or support of the price of Mercantile
common stock as investors purchase or hold shares to collect the expected special dividend. The price of Mercantile common stock may decline on or after the ex-dividend date or payment date of the dividend.
As part of the merger, the Mercantile board of directors expects to declare and pay a special cash dividend of $2.00 per share to
Mercantile shareholders prior to the effective time of the merger, subject to the satisfaction of the closing conditions set forth in the merger agreement. Anticipation of the special dividend may cause upward pressure on or support of the price of
Mercantile common stock as investors purchase or hold shares to collect the expected special dividend. The price of Mercantile common stock may decline on or after the ex-dividend date or payment date of the dividend because the shareholders
equity of Mercantile will decrease by the amount of the distribution.
The merger agreement contains provisions that
limit each partys ability to pursue alternatives to the merger, could discourage a potential competing acquiror of either Mercantile or Firstbank from making a favorable alternative transaction proposal and, in specified circumstances, could
require either party to pay a termination fee of $7.9 million and transaction-related expenses of up to $2 million to the other party.
The merger agreement contains certain provisions that restrict each of Mercantiles and Firstbanks ability to initiate, solicit, knowingly encourage or, subject to certain exceptions, engage in
discussions or negotiations with respect to, or approve or recommend, any third-party proposal for an alternative transaction. Further, even if the board of directors of either company withdraws or qualifies its recommendation with respect to the
approval of the merger, unless the merger agreement has been terminated in accordance with its terms, Mercantile or Firstbank, as the case may be, will still be required to submit each of their merger-related proposals to a vote at their special
meeting of shareholders. In addition, the other party generally has an opportunity to offer to modify the terms of the merger and other transactions contemplated by the merger agreement in response to any third-party alternative transaction proposal
before the board of directors of the company that has received a third-party alternative transaction proposal may withdraw or qualify its recommendation with respect to the merger-related proposal. In some circumstances, upon termination of the
merger agreement, a party will be required to pay a termination fee of $7.9 million and transaction-related expenses of up to $2 million to the other party. See the sections entitled The Merger Agreement Restrictions on
Solicitation beginning on page 112, The Merger Agreement Termination of the Merger Agreement beginning on page 117 and The Merger Agreement Termination Fees and Expenses; Liability for Breach beginning on
page 119.
32
These provisions could discourage a potential third-party acquiror or merger partner that
might have an interest in acquiring all or a significant portion of Mercantile or Firstbank or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per
share cash or market value than market value proposed to be received or realized in the merger, or might result in a potential third-party acquiror or merger partner proposing to pay a lower price to the Mercantile shareholders or Firstbank
shareholders than it might otherwise have proposed to pay because of the added expense of the $7.9 million termination fee and transaction-related expenses of up to $2 million that may become payable in certain circumstances.
If the merger agreement is terminated and either Mercantile or Firstbank determines to seek another business combination, Mercantile or
Firstbank, as applicable, may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.
If either party terminates the merger agreement because of the failure by the other party to fulfill its obligations, then the breaching party may be required to reimburse the terminating
partys expenses.
The merger agreement provides that Mercantile may terminate the merger agreement, subject to
certain exceptions, if Firstbank breaches or fails to perform any of its representations, warranties, covenants or other agreements therein and such breach or failure to perform is not cured within 30 business days or is incapable of being cured by
March 31, 2014. Similarly, Firstbank may terminate the agreement, subject to certain exceptions, if Mercantile breaches or fails to perform any of its respective representations, warranties, covenants or other agreements therein and such breach
or failure to perform is not cured within 30 business days or is incapable of being cured by March 31, 2014. If the merger agreement is terminated as a result of a breach by the other party, the breaching party will be required to reimburse up
to $2 million of the terminating partys documented out-of-pocket fees and expenses in connection with the transaction. In addition, if the breaching party receives a third-party proposal for certain types of alternative transactions prior to
termination of the merger agreement and consummates a takeover proposal within 12 months after termination of the merger agreement or enters into an agreement for a takeover proposal within 12 months after termination of the merger agreement and
subsequently consummates such transaction, the breaching party will be required to pay a termination of $7.9 million.
Mercantiles and Firstbanks executive officers and directors have interests in the merger that may be different from, or
in addition to, the interests of Mercantile and Firstbank shareholders generally.
Mercantiles and
Firstbanks executive officers and directors have interests in the merger that may be different from, or in addition to, the interests of Mercantile and Firstbank shareholders generally. The executive officers of Firstbank have agreements and
arrangements with Firstbank that provide for severance, accelerated vesting of certain rights and other benefits if their employment is terminated under certain circumstances following the completion of the merger. In addition, certain of
Firstbanks compensation and benefit plans and arrangements provide for payment or accelerated vesting or distribution of certain rights or benefits upon completion of the merger. Executive officers and directors of Firstbank also have rights
to indemnification, advancement of expenses and directors and officers liability insurance that will survive completion of the merger. Certain executive officers of Mercantile have arrangements with Mercantile that provide for the
accelerated vesting of restricted stock and deferred compensation upon completion of the merger.
The merger agreement
contains certain provisions relating to the governance of the combined company following completion of the merger. Completion of the merger is subject to the conditions described under The Merger Agreement Conditions to Completion of
the Transaction beginning on page 116.
The board of directors of the combined company and its committees will consist
of six directors, which will include (i) the current President and Chief Executive Officer of Mercantile plus two members of the current Mercantile board of directors selected by the Mercantile board of directors and (ii) the current
President and Chief Executive Officer of Firstbank plus two members of the current Firstbank board of directors selected by the Firstbank board of directors. The current President and Chief Executive Officer of Firstbank will serve as Chairman of
the Board following the Merger.
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The current President and Chief Executive Officer of Mercantile will serve as the President
and Chief Executive Officer of the combined company. The current Chief Operating Officer of Mercantile will serve as an Executive Vice President and Chief Operating Officer of the combined company. The Chief Financial Officer of Mercantile will
serve as a Senior Vice President and Chief Financial Officer of the combined company. The current Chief Financial Officer of Firstbank will serve as an Executive Vice President of the combined company.
The Mercantile and Firstbank boards of directors were aware of these interests at the time each approved the merger agreement, the merger
and the other transactions contemplated by the merger agreement. These interests may cause Mercantiles and Firstbanks directors and executive officers to view the proposed merger differently and more favorably than you may view them.
These interests are described in greater detail in the sections entitled The Merger Interests of Mercantile Directors and Executive Officers in the Merger beginning on page 90, The Merger Interests of Certain
Firstbank Directors and Executive Officers in the Merger beginning on page 91, and The Merger Board of Directors and Management Following the Merger beginning on page 100.
Each party is subject to business uncertainties and contractual restrictions while the proposed merger is pending, which could
adversely affect each partys business and operations.
In connection with the pendency of the merger, it is
possible that some customers and other persons with whom Mercantile or Firstbank has a business relationship may delay or defer certain business decisions or might seek to terminate, change or renegotiate their relationships with Mercantile or
Firstbank, as the case may be, as a result of the merger, which could negatively affect Mercantiles or Firstbanks respective revenues, earnings and cash flows, as well as the market price of Mercantiles or Firstbanks common
stock, regardless of whether the merger is completed.
Under the terms of the merger agreement, each of Mercantile or
Firstbank is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into or
amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could negatively affect each partys businesses and operations prior to the completion of the merger.
The merger is subject to the receipt of approvals, consents or clearances from regulatory authorities which, if not obtained, could
prevent completion of the merger.
Before the merger may be completed, the consents, authorizations, approvals, or
exemptions required under the Bank Holding Company Act, the FDI Act, the Michigan Banking Code and other applicable law must have been obtained. Under the merger agreement, Mercantile and Firstbank have agreed to use their commercially reasonable
efforts to obtain such approvals, consents and clearances. There is no assurance that such approvals, consents, and clearances will be obtained. For a more detailed description of the regulatory review process, see the section entitled The
Merger Regulatory Clearances Required for the Merger beginning on page 100.
Uncertainties associated
with the merger may cause a loss of management personnel and other key employees which could adversely affect the future business and operations of the combined company.
Mercantile and Firstbank are dependent on the experience and industry knowledge of their officers and other key employees to execute their
business plans. The combined companys success after the completion of the merger will depend in part upon the ability of Mercantile and Firstbank to retain key management personnel and other key employees. Current and prospective employees of
Mercantile and Firstbank may experience uncertainty about their roles within the combined company following the completion of the merger, which may have an adverse effect on the ability of each of Mercantile and Firstbank to attract or retain key
management and other key personnel. Accordingly, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees of Mercantile and Firstbank to the same extent that Mercantile
and Firstbank have previously been able to attract or retain their own employees.
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Litigation may be filed against Mercantile, Firstbank and/or their respective boards
of directors could prevent or delay the consummation of the merger or result in the payment of damages following completion of the merger.
In connection with the merger, it is possible that Firstbank shareholders may file putative shareholder class action lawsuits against Firstbank and its board of directors, and against Mercantile, and it
is possible that Mercantile shareholders may file putative shareholder class action lawsuits against Mercantile and its board of directors. Among other remedies, the plaintiffs may seek to enjoin the merger. The outcome of any such litigation is
uncertain. If a dismissal is not granted or a settlement is not reached, such potential lawsuits could prevent or delay completion of the merger and result in substantial costs to Mercantile and Firstbank, including any costs associated with
indemnification. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is consummated may adversely affect the combined companys business, financial condition, results of operations, cash flows and
market price.
The unaudited pro forma condensed combined financial information in this joint proxy statement and
prospectus is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of the combined company following completion of the merger.
The unaudited pro forma condensed combined financial information in this joint proxy statement and prospectus is presented for
illustrative purposes only and is not necessarily indicative of what the combined companys actual financial position or results of operations would have been had the merger been completed on the date indicated. Further, the combined
companys actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma condensed combined financial data that is included in this joint proxy statement and prospectus. The unaudited pro
forma condensed combined financial information has been prepared based on the determination that Mercantile will be identified as the acquiror under GAAP and reflects adjustments based upon preliminary estimates of the fair value of assets to be
acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual purchase price and the fair value of the assets and liabilities of Firstbank as of the date of the completion of the merger. In addition,
subsequent to the closing date, there will be further refinements of the acquisition accounting as additional information becomes available. Accordingly, the final acquisition accounting may differ materially from the pro forma condensed combined
financial information reflected in this document. See Unaudited Pro Forma Condensed Combined Financial Information beginning on page 128 for more information.
Completion of the merger will trigger change in control or other provisions in certain agreements to which Mercantile or Firstbank is a party.
The completion of the merger will trigger change in control or other provisions in certain agreements to which Mercantile or Firstbank is
a party. If Mercantile and Firstbank are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if
Mercantile and Firstbank are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Firstbank, Mercantile or the combined company.
Risks Relating to the Combined Company after Completion of the Merger
The combined company may be unable to successfully integrate the businesses of Mercantile and Firstbank and realize the anticipated
benefits of the merger.
The merger involves the combination of two companies that currently operate, and will continue
to operate until the effective date of the merger, as independent public companies. The combined company will be required
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to devote significant management attention and resources to integrating the business practices and operations of Mercantile and Firstbank. Potential difficulties the combined company may
encounter as part of the integration process include the following:
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inability to successfully combine the businesses of Mercantile and Firstbank in a manner that permits the combined company to achieve the full benefits
anticipated to result from the merger;
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complexities associated with managing the businesses of the combined company, including the challenge of integrating complex systems, technology,
networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, employees and other constituencies; and
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potential unknown liabilities and unforeseen increased expenses or delays associated with the merger, including capital expenditures and one-time cash
costs to integrate the two companies.
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In addition, Mercantile and Firstbank have operated and, until the
completion of the merger, will continue to operate independently and may not begin the actual integration process. Although the parties are conducting an integration planning process as permitted by legal restrictions, this process could result in:
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diversion of the attention of each companys management; and
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the disruption of, or the loss of momentum in, each companys ongoing businesses or inconsistencies in standards, controls, procedures and
policies,
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any of which could adversely affect each companys ability to maintain relationships with customers,
employees and other constituencies or Mercantiles and Firstbanks ability to achieve the anticipated benefits of the merger or could reduce each companys earnings or otherwise adversely affect the business and financial results of
the combined company.
Mercantile shareholders and Firstbank shareholders will have a reduced ownership and voting
interest after the merger and will exercise less influence over management.
Mercantile shareholders presently have the
right to vote in the election of Mercantiles board of directors and on other matters affecting Mercantile. Firstbank shareholders presently have the right to vote in the election of Firstbanks board of directors and on other matters
affecting Firstbank. Immediately after the merger is completed, it is expected that current Mercantile shareholders will own approximately 52% of the combined companys common stock outstanding and current Firstbank shareholders will own
approximately 48% of the combined companys common stock outstanding, respectively.
As a result, current Mercantile
shareholders and current Firstbank shareholders will have less influence on the management and policies of the combined company than they now have on the management and policies of Mercantile and Firstbank, respectively.
The future results of the combined company will suffer if the combined company does not effectively manage its expanded operations
following the completion of the merger.
Following the completion of the merger, the size of the business of the
combined company will increase significantly beyond the current size of either Mercantiles or Firstbanks business. The combined companys future success depends, in part, upon its ability to manage this expanded business, which will
pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the combined company will be successful or
that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.
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The combined company is expected to incur substantial expenses related to the
completion of the merger and the integration of Mercantile and Firstbank.
The combined company is expected to incur
substantial expenses in connection with the completion of the merger and the integration of Mercantile and Firstbank. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated,
including banking operations software and systems, accounting and finance, payroll, revenue management, marketing and benefits. While Mercantile and Firstbank have assumed that a certain level of expenses will be incurred, there are many factors
beyond their control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These expenses could, particularly in the
near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses likely will result in the combined company
taking significant charges against earnings following the completion of the merger, and the amount and timing of such charges are uncertain at present.
The market price of the combined companys common stock may be affected by factors different from those affecting the price of Mercantile or Firstbank common stock.
Upon completion of the merger, holders of Mercantile common stock and Firstbank common stock will become holders of common stock in the
combined company. As the businesses of Mercantile and Firstbank are different, the results of operations of the combined company as well as the price of the combined companys common stock may in the future be affected by factors different from
those factors affecting Mercantile and Firstbank as independent, stand-alone companies. The combined company will face additional risks and uncertainties to which Mercantile or Firstbank may not currently be exposed as independent companies.
Other Risks Relating to Mercantile and Firstbank
Mercantiles and Firstbanks businesses are and will be subject to the risks described above. In addition, Mercantile and
Firstbank are and will continue to be subject to the risks described in Mercantiles and Firstbanks respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2012, as updated by subsequent Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement and prospectus. See Where You Can Find More Information beginning on page 154 for the location
of information incorporated by reference into this joint proxy statement and prospectus.
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THE COMPANIES
Mercantile Bank Corporation
Mercantile Bank Corporation is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. Mercantile was organized on July 15, 1997 under the laws of the State of
Michigan to provide banking services to business, individuals, and governmental unites, and commenced business on December 15, 1997. Mercantile is the holding company for Mercantile Bank of Michigan and its current subsidiaries include an
insurance company, a real estate company, and a Delaware business trust. Mercantile has seven full-service banking offices in Grand Rapids, Holland, and Lansing, Michigan. As of June 30, 2013, Mercantiles total assets were $1.3 billion,
and total deposits were $1.1 billion.
Mercantiles common stock is traded on Nasdaq under the symbol MBWM.
The principal executive offices of Mercantile are located at 310 Leonard St., N.W., Grand Rapids, Michigan 49504, and
Mercantiles telephone number is (616) 406-3000. Additional information about Mercantile and its subsidiaries is included in documents incorporated by reference into this joint proxy statement and prospectus. See Where You
Can Find More Information on page 154.
Firstbank Corporation
Firstbank Corporation is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. Firstbank has two
subsidiary banks, Firstbank and Keystone Community Bank. The banks are full-service community banks with 46 banking offices serving Michigans Lower Peninsula. Each subsidiary bank is a full-service community bank offering customary banking
services, including the acceptance of checking, savings, and time deposits and the making of commercial, mortgage, home improvement, automobile, and other consumer loans. As of June 30, 2013, Firstbanks total assets were $1.5 billion, and
total deposits were $1.2 billion.
Firstbank common stock trades on the Nasdaq Stock Market under the symbol FBMI.
The principal executive offices of Firstbank are located at 311 Woodworth Ave., Alma, Michigan 48801, and Firstbanks
telephone number is (989) 463-3131. Additional information about Firstbank and its subsidiaries is included in documents incorporated by reference into this joint proxy statement and prospectus. See Where You Can Find More
Information on page 154.
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THE MERCANTILE SPECIAL MEETING
This joint proxy statement and prospectus is being provided to the Mercantile shareholders as part of a solicitation of proxies by the
Mercantile board of directors for use at the Mercantile special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment or postponement thereof. This joint proxy statement and prospectus
provides Mercantile shareholders with information they need to know to be able to vote or instruct their vote to be cast at the Mercantile special meeting.
Date, Time and Place
The special meeting of
Mercantile shareholders will be held at Mercantile headquarters, 310 Leonard Street N.W., Grand Rapids, Michigan 49504, on December 12, 2013 at 9:30 a.m. local time.
Purpose of the Mercantile Special Meeting
At
the Mercantile special meeting, Mercantile shareholders will be asked to consider and vote on the following:
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a proposal to approve the merger agreement, which is further described in the sections titled The Merger and The Merger
Agreement, beginning on pages 49 and 103, respectively;
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a proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger;
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a proposal to approve an amendment to Mercantiles articles of incorporation to increase the number of authorized shares of Mercantile common
stock;
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a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles named executive
officers that is based on or otherwise related to the proposed transactions;
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a proposal to approve the adjournment of the Mercantile special meeting to a later date or dates, if necessary or appropriate, to solicit additional
proxies in the event there are not sufficient votes at the time of the special meeting to approve the first two proposals listed above.
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Completion of the merger is conditioned on approval of the merger agreement and approval of the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger.
Completion of the merger is not conditioned on the approval of the amendment to Mercantiles articles of incorporation to increase the number of authorized shares of Mercantile common stock or the approval of the compensation that may be paid
or become payable to Mercantiles named executive officers in connection with the merger.
Recommendation
of the Mercantile Board of Directors
At a special meeting held on August 14, 2013, the Mercantile board of directors
unanimously determined that the merger and the other transactions contemplated by the merger agreement, including the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger, are in the best interests of
Mercantile and its shareholders. In addition, the Mercantile board of directors determined that the proposed amendment to the Mercantiles articles of incorporation to increase the authorized shares of common stock from 20 million to
40 million is in the best interests of Mercantile and its shareholders.
Accordingly, the Mercantile board of directors unanimously recommends that Mercantile shareholders vote FOR the proposal to approve the merger agreement,
FOR the proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger, FOR the proposal to approve the amendment to Mercantiles articles of incorporation,
FOR the a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles
named executive officers that is based on or otherwise related to the
proposed
transactions and FOR the proposal to approve the adjournment of the Mercantile special meeting, if necessary or appropriate, to permit further solicitation of proxies.
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Mercantile shareholders should carefully read this joint proxy statement and prospectus,
including any documents incorporated by reference, and the Annexes in their entirety, for more detailed information concerning the merger and the transactions contemplated by the merger agreement.
Mercantile Record Date; Shareholders Entitled to Vote
The record date for the Mercantile special meeting is November 1, 2013. Only record holders of shares of Mercantile common stock at the
close of business on such date are entitled to notice of, and to vote at, the Mercantile special meeting or any adjournment or postponement thereof. At the close of business on the record date, the only outstanding voting securities of Mercantile
were common stock, and 8,707,534 shares of Mercantile common stock were issued and outstanding.
Each share of Mercantile
common stock outstanding on the record date of the Mercantile special meeting is entitled to one vote on each proposal and any other matter coming before the Mercantile special meeting.
Voting by Mercantiles Directors and Executive Officers
At the close of business on the record date for the Mercantile special meeting, Mercantile directors and executive officers and their affiliates were entitled to vote 294,653 shares of
Mercantile common stock or approximately 3.4% of the shares of Mercantile common stock outstanding on that date. Mercantiles directors have entered into agreements obligating them to vote their shares in favor of the merger agreement and the
issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the Merger.
Quorum
No business may be transacted at the Mercantile special meeting unless a quorum is present. Shareholders who hold shares
representing at least a majority of the shares entitled to vote at the Mercantile special meeting must be present in person or represented by proxy to constitute a quorum. If a quorum is not present, the chairman may adjourn the meeting to solicit
additional proxies. In addition, if fewer shares than required are voted than required to obtain the necessary shareholder approvals, then the special meeting may be adjourned to allow additional time for obtaining additional proxies, if the
approval of a majority of the votes cast at the special meeting on this proposal is obtained.
No notice of an adjourned
meeting need be given unless, the adjournment is more than 30 days or after the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each shareholder of record entitled
to vote at the meeting. At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn
prior to the adjourned meeting.
All shares of Mercantile common stock represented at the Mercantile special meeting,
including shares that are represented but that vote to abstain, will be treated as present for purposes of determining the presence or absence of a quorum. Broker non-votes will have no effect on determining the presence or absence of a quorum.
Required Vote
The required votes to approve the Mercantile proposals are as follows:
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The approval of the merger agreement requires the affirmative vote of a majority of the issued and outstanding shares of Mercantile common stock
entitled to vote at the special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal.
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The approval of the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger requires the approval of a
majority of the votes cast on this proposal at the Mercantile special meeting, assuming a quorum. Failures to vote, broker non-votes and abstentions will have no effect on the vote for the proposal.
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The approval of the proposed amendment to Mercantiles articles of incorporation to increase the number of authorized shares of Mercantile common
stock requires the approval of a majority of the outstanding shares of Mercantile common stock entitled to vote at the Mercantile special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against the
proposal.
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The approval of the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles
named executive officers that is based on or otherwise related to the proposed transactions requires the approval of a majority of the votes cast on this proposal at the Mercantile special meeting, assuming a quorum. Failures to vote, broker
non-votes and abstentions will have no effect on the vote for the proposal.
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The adjournment of the Mercantile special meeting, if necessary or appropriate, to solicit additional proxies requires the approval of a majority of
the votes cast on this proposal at the Mercantile special meeting, regardless of whether or not there is a quorum. Failures to vote, broker non-votes and abstentions will have no effect on the vote for the proposal.
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Voting of Proxies by Holders of Record
If you were a record holder of Mercantile stock at the close of business on the record date of the Mercantile special meeting, a proxy card is enclosed for your use. Mercantile requests that you vote your
shares as promptly as possible by (i) visiting the internet site listed on the Mercantile proxy card, (ii) calling the toll-free number listed on the Mercantile proxy card or (iii) submitting your Mercantile proxy card by mail by
using the provided self-addressed, stamped envelope. Information and applicable deadlines for voting through the internet or by telephone are set forth on the enclosed proxy card. When the accompanying proxy is returned properly executed, the shares
of Mercantile common stock represented by it will be voted at the Mercantile special meeting or any adjournment or postponement thereof in accordance with the instructions contained in the proxy card. Your internet or telephone vote authorizes the
named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.
If a proxy is
returned without an indication as to how the shares of Mercantile common stock represented are to be voted with regard to a particular proposal, the Mercantile common stock represented by the proxy will be voted in accordance with the recommendation
of the Mercantile board of directors and, therefore, FOR the proposal to approve the merger agreement, FOR the proposal to approve the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the
merger, FOR the proposal to amend the Mercantiles articles of incorporation, FOR the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Mercantiles
named executive officers that is based on or otherwise related to the proposed transactions and FOR the proposal to adjourn the Mercantile special meeting, if necessary or appropriate, to permit further solicitation of proxies.
As of the date hereof, the Mercantile board of directors has no knowledge of any business that will be presented for
consideration at the Mercantile special meeting and that would be required to be set forth in this joint proxy statement and prospectus or the related proxy card other than the matters set forth in Mercantiles Notice of Special Meeting of
Shareholders. If any other matter is properly presented at the Mercantile special meeting for consideration, the persons named in the enclosed form of proxy and acting thereunder will vote in accordance with their best judgment on such matter.
Your vote is important. Accordingly, if you were a record holder of Mercantile common stock on the record date of the
Mercantile special meeting, please sign and return the enclosed proxy card or vote via
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the internet or telephone whether or not you plan to attend the Mercantile special meeting in person. Proxies submitted through the specified internet website or by phone must be received by 1:00
a.m., Eastern Time, on December 12, 2013.
Shares Held in Street Name
If you hold shares of Mercantile common stock through a stock brokerage account or a bank or other nominee, you are considered the
beneficial holder of the shares held for you in what is known as street name. The record holder of such shares is your broker, bank or other nominee, and not you, and you must provide the record holder of your
shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Mercantile
or by voting in person at the Mercantile special meeting unless you have a legal proxy, which you must obtain from your broker, bank or other nominee. Please also note that brokers, banks or other nominees who hold shares of Mercantile
common stock on behalf of their customers may not give a proxy to Mercantile to vote those shares without specific instructions from their customers.
If you are a Mercantile shareholder and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee may not vote your shares on any of the
Mercantile proposals.
Attending the Meeting; Voting in Person
Only Mercantile shareholders, their duly appointed proxies and invited guests may attend the meeting.
All attendees must present
government-issued photo identification
(such as a drivers license or passport) for admittance. The additional items, if any, that attendees must bring depend on whether they are shareholders of record, beneficial owners, or proxy holders.
A Mercantile shareholder who holds shares directly registered in such shareholders name with Mercantiles transfer
agent, Computershare, who wishes to attend the special meeting in person should bring government-issued photo identification.
A shareholder who holds shares in street name through a broker, bank, trustee or other nominee (referred to in this joint
proxy statement and prospectus as a beneficial owner) who wishes to attend the special meeting in person must bring proof of beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee
that is the record owner of such beneficial owners shares, a brokerage account statement or the voting instruction form provided by the broker).
A person who holds a validly executed proxy entitling such person to vote on behalf of a record owner of Mercantile shares who wishes to attend the special meeting in person must bring the validly
executed proxy naming such person as the proxy holder, signed by the Mercantile shareholder, and proof of the signing shareholders record ownership as of the record date.
No cameras, recording equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested
documents at the door or failure to comply with the procedures for the special meeting may prevent shareholders from being admitted to the Mercantile special meeting.
Revocation of Proxies
A Mercantile shareholder
may revoke a proxy at any time before it is voted at the meeting by taking any of the following four actions:
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delivering written notice of revocation to Mercantiles Secretary, 310 Leonard St., N.W., Grand Rapids, Michigan 49504;
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delivering a proxy card bearing a later date than the proxy that you wish to revoke;
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casting a subsequent vote via telephone or the Internet, as described above; or
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attending the meeting and voting in person.
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Merely attending the meeting will not, by itself, revoke your proxy; you must cast a subsequent vote at the meeting using forms provided for that purpose. Your last valid vote that we receive before or at
the annual meeting is the vote that will be counted.
Solicitation of Proxies
Mercantile is soliciting proxies for the Mercantile special meeting from its shareholders. In accordance with the merger agreement,
Mercantile will pay its own cost of soliciting proxies from its shareholders, including the cost of mailing this joint proxy statement and prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by Mercantiles
officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication.
Mercantile will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of Mercantile common stock. Mercantile may
reimburse these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.
To help assure the presence in person or by proxy of the largest number of shareholders possible, we have engaged Georgeson Inc., a proxy solicitation firm, which we refer to as Georgeson, to
solicit proxies on Mercantiles behalf. We have agreed to pay Georgeson a proxy solicitation fee of $6,000. We will also reimburse Georgeson for its reasonable out-of-pocket costs and expenses.
Adjournments
Any adjournment of the Mercantile special meeting may be made from time to time if the approval of the holders of a majority of the votes cast at the Mercantile special meeting is obtained, whether or not
a quorum exists, without further notice other than by an announcement made at the special meeting (unless a new record date is fixed). If a quorum is not present at the special meeting then the chairman may adjourn the meeting to solicit additional
proxies. If a quorum is present at the special meeting but there are not sufficient votes to obtain the necessary shareholder approvals, then Mercantile shareholders may be asked to approve an adjournment of the meeting to permit the further
solicitation of proxies.
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THE FIRSTBANK SPECIAL MEETING
This joint proxy statement and prospectus is being provided to the Firstbank shareholders as part of a solicitation of proxies by the
Firstbank board of directors for use at the Firstbank special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment or postponement thereof. This joint proxy statement and prospectus
provides Firstbank shareholders with information they need to know to be able to vote or instruct their vote to be cast at the Firstbank special meeting.
Date, Time and Place
The special meeting of
Firstbank shareholders will be held on December 12, 2013 at Firstbank headquarters, 311 Woodworth Avenue, Alma, Michigan 48801 at 9:30 a.m. local time.
Purpose of the Firstbank Special Meeting
At the
Firstbank special meeting, Firstbank shareholders will be asked to consider and vote on the following:
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a proposal to adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement, which is further described in the
sections titled The Merger and The Merger Agreement, beginning on pages 49 and 103, respectively;
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an advisory (non-binding) proposal to approve the compensation that may be paid or become payable to Firstbanks named executive officers that is
based on or otherwise related to the proposed transactions; and
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a proposal to approve the adjournment of the Firstbank special meeting to a later date or dates, if necessary or appropriate, to solicit additional
proxies in the event there are not sufficient votes at the time of the special meeting to approve the first proposal listed above.
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Completion of the merger is conditioned on the adoption of the merger agreement, the merger and the other transactions contemplated by the merger agreement.
Recommendation of the Firstbank Board of Directors
At a special meeting held on August 14, 2013, the Firstbank board of directors unanimously determined that the merger and the other
transactions contemplated by the merger agreement are in the best interests of Firstbank and its shareholders.
Accordingly, the Firstbank board of directors unanimously recommends that Firstbank shareholders vote FOR the proposal to
adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement, FOR approval, on an advisory (non-binding) basis, of the compensation that may be paid or become payable to Firstbanks named
executive officers that is based or otherwise relates to the proposed transactions and FOR the proposal to approve the adjournment of the Firstbank special meeting, if necessary or appropriate, to permit further solicitation of
proxies.
Firstbank shareholders should carefully read this joint proxy statement and prospectus, including any documents
incorporated by reference, and the Annexes in their entirety for more detailed information concerning the merger and the transactions contemplated by the merger agreement.
Firstbank Record Date; Shareholders Entitled to Vote
The record date for the Firstbank special meeting is November 1, 2013. Only record holders of shares of Firstbank common stock at the close of business on such date are entitled to notice of, and to vote
at, the Firstbank special meeting or any adjournment or postponement thereof. At the close of business on the record date, the only outstanding voting securities of Firstbank were common stock, and 8,076,621 shares of Firstbank common
stock were issued and outstanding. Each share of Firstbank common stock outstanding on the record date of the Firstbank special meeting is entitled to one vote on each proposal and any other matter coming before the Firstbank special meeting.
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Voting by Firstbanks Directors and Executive Officers
At the close of business on the record date for the Firstbank special meeting, Firstbank directors and executive officers and their
affiliates were entitled to vote 551,156 shares of Firstbank common stock or approximately 6.8% of the shares of Firstbank common stock outstanding on that date. We currently expect that Firstbank directors and executive officers and their
affiliates will vote their shares in favor of all Firstbank proposals. Each of Firstbanks directors has entered into an agreement obligating him to do so.
Quorum
No business may be transacted at the
Firstbank special meeting unless a quorum is present. Shareholders who hold shares representing at least a majority of the shares entitled to vote at the Firstbank special meeting must be present in person or represented by proxy to constitute a
quorum. If a quorum is not present, or if fewer shares are voted in favor of the proposal to adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement that is required, then the special meeting may be
adjourned to allow additional time for obtaining additional proxies, if the approval of a majority of the votes cast at the special meeting is obtained.
No notice of an adjourned meeting need be given unless after the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting. At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been
effectively revoked or withdrawn prior to the adjourned meeting.
All shares of Firstbank common stock represented at the
Firstbank special meeting, including shares that are represented but that vote to abstain, will be treated as present for purposes of determining the presence or absence of a quorum. Broker non-votes will have no effect on determining the presence
or absence of a quorum.
Required Vote
The required votes to approve the Firstbank proposals are as follows:
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The approval of the merger agreement, the merger and the other transactions required by the merger agreement requires the affirmative vote of a
majority of the outstanding shares of Firstbank common stock entitled to vote at the Firstbank special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as a vote AGAINST the proposal.
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The approval, on an advisory (non-binding) basis, of the compensation that may be paid or become payable to Firstbanks named executive officers
that is based on or otherwise related to the proposed transactions requires the affirmative vote of a majority of the issued and outstanding shares of Firstbank common stock that are present in person or represented by proxy and entitled to vote at
the special meeting, assuming a quorum. Failures to vote and broker non-votes will have no effect on the vote for this proposal; however, abstentions will have the same effect as a vote AGAINST the approval of such proposal.
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The adjournment of the Firstbank special meeting, if necessary or appropriate, to solicit additional proxies requires the approval of a majority of the
votes cast at the Firstbank special meeting, regardless of whether there is a quorum. Failures to vote, broker non-votes and abstentions will have no effect on the vote for the proposal.
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Voting of Proxies by Holders of Record
If you were a record holder of Firstbank stock at the close of business on the record date of the Firstbank special meeting, a proxy card is enclosed for your use. Firstbank requests that you vote your
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as possible by (i) visiting the internet site listed on the Firstbank proxy card, (ii) calling the toll-free number listed on the Firstbank proxy card or (iii) submitting your
Firstbank proxy card by mail by using the provided self-addressed, stamped envelope. Information and applicable deadlines for voting through the internet or by telephone are set forth on the enclosed proxy card. When the accompanying proxy is
returned properly executed, the shares of Firstbank common stock represented by it will be voted at the Firstbank special meeting or any adjournment or postponement thereof in accordance with the instructions contained in the proxy card. Your
internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.
If a proxy is returned without an indication as to how the shares of Firstbank common stock represented are to be voted with regard to a particular proposal, the Firstbank common stock represented by the
proxy will be voted in accordance with the recommendation of the Firstbank board of directors and, therefore, FOR the proposal to adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement,
FOR approval, on an advisory (non-binding) basis, of the compensation that may be paid or become payable to Firstbanks named executive officers that is based or otherwise relates to the proposed transactions and FOR the
proposal to approve the adjournment of the Firstbank special meeting, if necessary or appropriate, to permit further solicitation of proxies.
At the date hereof, the Firstbank board of directors has no knowledge of any business that will be presented for consideration at the Firstbank special meeting and that would be required to be set forth
in this joint proxy statement and prospectus or the related proxy card other than the matters set forth in Firstbanks Notice of Special Meeting of Stockholders. If any other matter is properly presented at the Firstbank special meeting for
consideration, it is intended that the persons named in the enclosed form of proxy and acting thereunder will vote in accordance with their best judgment on such matter.
Your vote is important. Accordingly, if you were a record holder of Firstbank common stock on the record date of the Firstbank special meeting, please sign and return the enclosed proxy card or vote
via the internet or telephone whether or not you plan to attend the Firstbank special meeting in person. Proxies submitted through the specified internet website or by phone must be received by 3:00 a.m., Eastern Time, on December 12, 2013.
Shares Held in Street Name
If you hold shares of Firstbank common stock through a stock brokerage account or a bank or other nominee, you are considered the
beneficial holder of the shares held for you in what is known as street name. The record holder of such shares is your broker, bank or other nominee, and not you, and you must provide the record holder of your
shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Firstbank
or by voting in person at the Firstbank special meeting unless you have a legal proxy, which you must obtain from your broker, bank or other nominee. Please also note that brokers, banks or other nominees who hold shares of Firstbank
common stock on behalf of their customers may not give a proxy to Firstbank to vote those shares without specific instructions from their customers.
If you are a Firstbank shareholder and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee may not vote your shares on any of the
Firstbank proposals.
Attending the Meeting; Voting in Person
Only Firstbank shareholders, their duly appointed proxies, and invited guests may attend the meeting.
All attendees must present
government-issued photo identification
(such as a drivers license or passport) for admittance. The additional items, if any, that attendees must bring depend on whether they are shareholders of record, beneficial owners, or proxy holders.
A Firstbank shareholder who holds shares directly registered in such shareholders name with Firstbanks transfer agent, Registrar & Transfer Company, who wishes to attend the special meeting in person should bring
government-issued photo identification.
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A shareholder who holds shares in street name through a broker, bank, trustee or
other nominee (referred to as a beneficial owner) who wishes to attend the special meeting in person must bring proof of beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee that is
the record owner of such beneficial owners shares, a brokerage account statement or the voting instruction form provided by the broker).
A person who holds a validly executed proxy entitling such person to vote on behalf of a record owner of Firstbank shares who wishes to attend the special meeting in person must bring the validly executed
proxy naming such person as the proxy holder, signed by the Firstbank shareholder, and proof of the signing shareholders record ownership as of the record date.
No cameras, recording equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the
special meeting may prevent shareholders from being admitted to the Firstbank special meeting.
Revocation of
Proxies
A Firstbank shareholder may revoke a proxy at any time before it is voted at the meeting by taking any of the
following four actions:
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delivering written notice of revocation to Firstbanks Secretary, 311 Woodworth Ave., Alma, Michigan 48801-1826;
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delivering a proxy card bearing a later date than the proxy that you wish to revoke;
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casting a subsequent vote via telephone or the Internet, as described above; or
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attending the meeting and voting in person.
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Merely attending the meeting will not, by itself, revoke your proxy; you must cast a subsequent vote at the meeting using forms provided for that purpose. Your last valid vote that we receive before or at
the annual meeting is the vote that will be counted.
Solicitation of Proxies
Firstbank is soliciting proxies for the Firstbank special meeting from its shareholders. In accordance with the merger agreement,
Firstbank will pay its own cost of soliciting proxies from its shareholders, including the cost of mailing this joint proxy statement and prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by Firstbanks
officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication.
Firstbank will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of Firstbank common stock. Firstbank may reimburse
these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.
To help assure the presence in person or by proxy of the largest number of shareholders possible, we have engaged Georgeson, Inc., a proxy solicitation firm, which we refer to as Georgeson),
to solicit proxies on Firstbanks behalf. We have agreed to pay to Georgeson a proxy solicitation fee of $6,000. We will also reimburse Georgeson for its reasonable out-of-pocket costs and expenses.
Adjournments
Any adjournment of the Firstbank special meeting may be made from time to time if the approval of the holders of a majority of the votes cast at the Firstbank special meeting is obtained, whether or not a
quorum
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exists, without further notice other than by an announcement made at the special meeting (unless a new record date is fixed). If a quorum is not present at the special meeting, or if a quorum is
present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the proposal to issue shares of Firstbank common stock in connection with the merger, then Firstbank shareholders may be asked to vote on
a proposal to adjourn the Firstbank special meeting so as to permit the further solicitation of proxies.
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THE MERGER
This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this joint proxy
and registration statement as Annex A. You should read the entire merger agreement carefully, as it is the legal document that governs the merger.
Effects of the Merger
At the effective time of
the merger, Firstbank will merge with and into Mercantile. Mercantile will be the surviving entity following the merger.
In
the merger, each outstanding share of Firstbank common stock will be converted into the right to receive one share of Mercantile common stock, with cash paid in lieu of fractional shares. This exchange ratio is fixed and will not be adjusted to
reflect stock price changes prior to the effective time of the merger. Mercantile shareholders will continue to hold their existing Mercantile shares.
Background of the Merger
The Firstbank board of
directors regularly reviews Firstbanks performance, risks, opportunities and strategy and discusses such matters at board meetings. Firstbanks board of directors and management team review and evaluate the possibility of pursuing various
strategic alternatives and relationships as part of Firstbanks ongoing efforts to strengthen its businesses and improve its operations and financial performance in order to create value for its shareholders, taking into account economic,
regulatory, competitive and other conditions. In the past, such reviews and evaluations have resulted in considering strategic transactions with other companies.
Mercantiles board of directors regularly evaluates and assesses Mercantiles strategy and opportunities to achieve profitable growth through various strategic initiatives and transactions,
giving consideration to the context of developments in the industry, conditions in the geographic areas that Mercantile serves, competitive considerations and other factors. Most recently, the board of directors of Mercantile instructed senior
management to explore possible strategic transactions to grow Mercantiles business and enhance shareholder value following the accomplishment of several key milestones in 2012 that strengthened the company financially, including
Mercantiles successful exit from the Troubled Asset Relief Program (TARP) with the full repurchase of preferred stock issued and common stock purchase warrant issued to the U.S. Department of the Treasury.
Thomas R. Sullivan and Michael H. Price, the Chief Executive Officers of Firstbank and Mercantile, respectively, have known each other
professionally since approximately 2005 when they both served on the Board of Directors of the Federal Home Loan Bank of Indianapolis. Since that time, Mr. Price and Mr. Sullivan met informally at various professional events from time to
time and discussed developments in the banking industry and the markets that the companies serve.
In mid-September 2012,
Mr. Price telephoned Mr. Sullivan and arranged for a lunch meeting in Greenville, Michigan on October 5, 2012. At the October meeting, the officers spoke in general terms about Firstbanks recent exit from TARP; Mercantiles
desire to expand within Michigan; the strengths and weaknesses of each company; and the complementary geographic, cultural, and service orientations of each company. While there was no specific discussion of a potential business combination of
Mercantile and Firstbank, both Mr. Price and Mr. Sullivan recognized the synergies and potential for a merger, and agreed to meet again later that month.
On September 24, 2012, the Firstbank board of directors discussed strategic planning topics in the context of accomplishments achieved during the year, including Firstbanks successful exit from
TARP and the associated movement of capital internally within the company, progress on improving credit metrics, progress on earnings and a significant increase in stock price. Mr. Sullivan also advised the board of his upcoming meeting with
Mr. Price. The board of directors instructed management to continue efforts to increase shareholder value and identify strategic opportunities.
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Mr. Price and Mr. Sullivan met again in Greenville, Michigan on October 26,
2012. Mr. Price and Mr. Sullivan reviewed an illustration of a potential combination of Mercantile and Firstbank and had preliminary discussions regarding a potential combination of Mercantile and Firstbank. Mr. Price and
Mr. Sullivan did not discuss specific details of a potential transaction, but the discussion was based upon a merger of equals concept. Mr. Price and Mr. Sullivan agreed to meet in the future to continue discussions and that a mutual
exchange of information would add value to those discussions. Following the October 26 meeting, each of Mr. Sullivan and Mr. Price advised the board of directors of their respective companies regarding the discussions.
On October 30, 2012, Mercantile and Firstbank entered into a confidentiality agreement providing for the mutual exchange and
non-disclosure of confidential information. Following the execution of this agreement, the parties began exchanging a limited amount of financial and operational due diligence information.
On November 30, 2012, Firstbank Executive Vice President Samuel G. Stone, Mercantile Chief Operating Officer Robert Kaminski and
Mercantile Chief Financial Officer Charles Christmas met with Mr. Price and Mr. Sullivan in Grand Rapids, Michigan. At this meeting, the respective senior management teams of Mercantile and Firstbank reviewed and discussed a possible
business combination between the two companies, to be structured as a merger of equals, with both Mercantile and Firstbank represented equally on the board of directors of the combined company. Topics of discussion at the meeting included balance
sheet and income statement contribution analysis, the combined loan portfolio, branch locations, corporate culture, social issues and other matters.
On December 10, 2012, Mr. Sullivan reported the substance of the November 30, 2012 meeting to the Firstbank board. The board discussed the environment for merger and acquisition
transactions, including mergers of equals, and the progress of Firstbanks business plan and the increase in Firstbanks stock price over the past year. Following discussion and deliberation, the board determined to continue to explore a
full range of strategic options.
During December 2012 and January 2013, the senior management teams of Mercantile and
Firstbank met to discuss various aspects of a possible combination, including whether or not the subsidiary banks should be consolidated, the proposed name of the combined company, the governance and management of the companies (including Board
structure and membership) and the governance of the subsidiary bank following bank consolidation. The boards of directors of each company were apprised of these discussions at appropriate intervals.
On January 11, 2013, Messrs. Sullivan and Stone of Firstbank met with representatives of Sandler ONeill & Partners,
LP (referred to as Sandler ONeill) at Firstbanks offices in Alma, Michigan. Sandler ONeill had previously advised Firstbank in connection with Firstbanks exit from the TARP program and the associated warrant
repurchase. At the meeting, Firstbank and Sandler ONeill discussed general trends in Michigan banking, Firstbanks capital position and strategic alternatives.
At regular meetings of the board of directors of Mercantile held on January 10 and January 24, 2013, the board discussed several potential strategic alternatives for Mercantile, including a
proposed merger with Firstbank and other possible strategic transactions. The primary strategic alternatives considered by Mercantile at these meetings and other meetings were: (i) to continue Mercantiles business on a stand-alone basis, while
seeking growth through increased market share and an expansion of the services offered and markets covered; (ii) a strategic transaction with another bank holding company in near or adjacent markets to increase the companys size and scope; or
(iii) a merger with Firstbank. The Mercantile board of directors determined to pursue the merger with Firstbank instead of these other alternatives for several reasons, including the fact that Firstbanks footprint is generally contiguous with
Mercantiles footprint; the complementary cultures and business strengths of each company, including Firstbanks strength in retail banking; the attractiveness of the combined loan portfolio of the two companies; the estimated probability
of execution of a transaction with Firstbank given factors such as regulatory approval, shareholder approval, and the ability to integrate the two
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companies; the cost and difficulty of establishing branch networks in adjacent markets other than through a merger; and the other factors described in the section entitled The Merger
Mercantiles Reasons for the Merger; Recommendation of the Mercantile Board of Directors.
On January 28,
2013, Mr. Sullivan provided an update to the directors of Firstbank. The board of directors of Firstbank authorized the engagement of Sandler ONeill to serve as Firstbanks financial advisor for a potential transaction with
Mercantile and to provide a review of strategic alternatives for Firstbank, including an analysis of other potential strategic transactions. This engagement was formalized on February 25, 2013.
On or about February 4, 2013, Mercantile formally engaged Stifel, Nicolaus & Company, Incorporated to advise Mercantile
regarding a strategic transaction with Firstbank. The services under the engagement were performed by Keefe, Bruyette &Woods, Inc. (referred to as KBW), an affiliate of Stifel, Nicolaus & Company. On February 20, 2013,
Mercantile engaged Warner Norcross & Judd LLP (Warner Norcross) to serve as Mercantiles legal counsel with respect to a potential merger with Firstbank.
On February 22, 2013, Mr. Price and Mr. Sullivan met at Mercantiles headquarters in Grand Rapids. They reviewed the
progress of the discussions to date. In addition, Messrs. Stone, Christmas and Kaminski joined the meeting to review financial and operational aspects of a potential merger, including synergies and cost savings. At that meeting, the parties began
discussing and planning for a reciprocal comprehensive due diligence investigation, including discussion of engaging a third-party consulting firm to conduct due diligence on each companys loan portfolio.
On February 25, 2013, the Firstbank board reviewed and discussed certain general market materials provided by Sandler ONeill.
On February 26, 2013, at a meeting of the Mercantile board of directors, Mercantiles senior management presented
to the board of directors its preliminary findings and proposals regarding the structure and terms of the potential transaction, including discussion of the proposed management of the combined company, potential synergies, a transaction timetable
and risks. KBW presented financial information and analysis of a potential transaction with Firstbank, prepared in coordination with Mercantiles senior management. Warner Norcross advised the Mercantile board of directors regarding the
boards fiduciary duties in connection with considering a possible business combination and the boards fiduciary duties of care and loyalty in the boards review and deliberations. At the conclusion of the meeting, the Mercantile
board of directors authorized management to continue consideration and negotiation of a potential transaction with Firstbank.
During March and April 2013, Mr. Sullivan, Mr. Price and the senior management teams of Firstbank and Mercantile continued to
discuss a possible merger and exchange due diligence information. Mr. Sullivan and Mr. Price advised their respective boards of directors regarding discussions at appropriate intervals.
On March 25, 2013, the Firstbank board of directors held a regular meeting. Representatives of Sandler ONeill and Varnum LLP
(Varnum), Firstbanks legal advisors, were present at the meeting. At the meeting, the board reviewed and discussed the banking industry and the competitive landscape of banks in Michigan. The board discussed the potential for
strategic combinations with certain other parties. After extensive review and discussion, the Firstbank board instructed management to further explore strategic alternatives, including a possible combination with Mercantile. Varnum advised the
members of the board of their responsibilities and fiduciary duties as directors, including the importance of considering alternatives, carefully investigating any potential merger partner and the importance of making informed decisions. Following
adjournment of the meeting, directors, management and advisors present continued informal discussion over dinner.
Since the
February 22, 2013 meeting, the management teams of Mercantile and Firstbank had discussed retaining a third-party consultant to assist with loan due diligence. On April 12, 2013, a joint conference call was held during which Mercantile,
Firstbank and the third-party consultant discussed a two-step approach to loan due
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diligence. It was agreed that Firstbank and Mercantile would engage the consultant for the first phase of the due diligence process, and on April 15, 2013, the consultant was formally
engaged to perform loan due diligence for both parties.
On April 22, 2013, Mr. Sullivan updated the Firstbank board
on recent developments. On April 26, 2013 and May 9, 2013, Messrs. Sullivan, Stone, Price, Kaminski, and Christmas held a joint telephone conference to discuss with the third-party consultant the results of the first phase of the loan due
diligence.
On May 16, 2013, Messrs. Price, Stone, Kaminski, Christmas and Sullivan, together with representatives of KBW and
Sandler ONeill, met at the offices of Varnum in Grand Rapids to review financial analysis of the proposed transaction and other aspects of the proposed merger. The parties discussed the exchange ratio for the proposed transaction, the results
of the loan due diligence review, accounting matters related to the transaction, including credit marks, social issues, the relative contribution of each company, and governance matters. The discussions at this meeting continued to focus on the
transaction as a merger of equals, with each company making a similar contribution to the combined company. Representatives of KBW presented a range of exchange ratios for discussion based on resulting ownership splits in a range of 60% Mercantile
and 40% Firstbank to 52% Mercantile and 48% Firstbank. For that range of relative ownership, the corresponding exchange ratios ranged from 0.726 to 1.003 shares of Mercantile common stock for each share Firstbank common stock. The corresponding
range of implied values for Firstbank common stock based on the May 15, 2013 closing price of Mercantile was $12.42 to $17.16, compared to Firstbanks actual closing price of $13.70 on May 15, 2013. However, because the discussions focused on a
merger of equals based on balance sheet contributions, the relationship between the exchange ratio and relative trading prices of the companies stock was not emphasized in the discussions.
At the conclusion of the meeting, the parties agreed that the Chief Executive Officer of each company would meet the board of directors
and senior officers of the other company as a next step in the process. Accordingly, on June 4, 2013, Mr. Price met with key officers of Firstbank in Mount Pleasant, Michigan and on June 11, 2013, Mr. Price had a lunch meeting with the Firstbank
board of directors. On June 13, 2013, Mr. Sullivan attended portions of the Mercantile board of directors meeting to meet with directors, answer questions and discuss various aspects of the merger.
On May 22, 2013, a meeting of the Firstbank board of directors was held. Members of the Firstbank management team and a
representative of Sandler ONeill were present at the meeting. The board of directors reviewed the progress of discussions with Mercantile to date, and reviewed and discussed other potential opportunities and strategic alternatives. This
discussion included a review of the prospects for earnings and growth of Firstbank as an independent business. The board of directors considered remaining independent, but believed that the future anticipated earnings per share and stock price would
ultimately be greater if Firstbank merged with Mercantile. The board of directors also considered the geographic fit and the ability of the merger to better enable the pursuit of the loan growth opportunities available in the large and desirable
Grand Rapids, Michigan, metropolitan area. The board of directors also considered alternative merger partners, including both larger regional and national banks and other community banks. The board of directors decided not to pursue a sale to a
larger regional or national bank because it believed the merger presented a better long term opportunity for Firstbanks shareholders. The board of directors decided not to pursue a merger with another community bank because the board believed
that Mercantile was the best available community bank merger because of the geographic fit, shared community bank culture and access to the desirable Grand Rapids, Michigan metropolitan market. In considering the alternatives, the board of directors
also considered the other factors described in the section entitled The Merger Firstbanks Reasons for the Merger; Recommendation of the Firstbank Board of Directors.
At a regular meeting of the Mercantile board of directors held on June 13, 2013, the board discussed and considered the exchange
ratio in connection with the possible transaction. Mr. Price advised the board that Firstbank indicated that it would proceed only with a transaction structured as a merger of equals, with Firstbank shareholders owning not less than 48% of the
combined company. Mr. Price, in consultation with KBW, advised
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the board that 52% ownership of the combined company by Mercantile shareholders was not consistent with the relative contribution of shareholders equity and market capitalization by
Mercantile. Mr. Price and KBW led further discussion regarding the differences in relative contribution between Mercantile and Firstbank based upon earnings, various balance sheet metrics and market capitalization. At the conclusion of this
meeting, the board instructed Mercantile management to continue to negotiate with Firstbank in an effort to reach an exchange ratio that the senior management team of each company could present to each board of directors.
On June 19, 2013, Mr. Price and Mr. Stone met at a banking industry conference on Mackinac Island, Michigan and discussed
the possibility of Mercantile paying a $2.00 per share special cash dividend prior to the merger to address the disproportionate level of shareholders equity that would be contributed by Mercantile at the contemplated pro forma ownership
levels.
During the week of June 17, 2013, Mr. Sullivan and Mr. Price continued to discuss a possible merger.
Each agreed that, based on a relative-contribution analysis, and after considering a $2.00 per share special dividend paid to Mercantile shareholders, the combined company should be 52% owned by Mercantile shareholders and 48% owned by Firstbank
shareholders, and they agreed to recommend this pro forma ownership to their respective boards of directors, subject to continued due diligence and financial analysis.
On June 24, 2013, the Firstbank board of directors continued its discussions of Firstbanks strategic options. During this discussion, the Firstbank board of directors received analysis from
Sandler ONeill and was advised regarding legal matters by Varnum. The board reviewed potential terms for a merger of equals transaction with Mercantile as well as potential terms for transactions with other companies. In addition, the
Firstbank board of directors reviewed management-identified strategies that could be employed to enhance Firstbank shareholder value as a stand-alone company. At the conclusion of deliberations, the board determined to proceed with a detailed due
diligence investigation and further negotiations with Mercantile with the objective of entering into a definitive merger agreement, subject to satisfactory due diligence and further approval by the Firstbank board of directors at a later date.
On June 27, 2013, at a regular meeting of the Mercantile Board of Directors, the board of directors reviewed and
discussed a proposed combination with Firstbank on the basis that Mercantile would pay $2.00 per share special dividend prior to the effective time of the merger, with Mercantile shareholders having 52% pro forma ownership of the combined company.
KBW presented detailed financial analysis, including analysis of the payment of a $2.00 special dividend in connection with the merger. Upon conclusion of the discussion, the Mercantile board of directors voted unanimously to determine that the
proposed merger with Firstbank appeared to be in the best interests of Mercantile and its shareholders, that the structure and terms of the transaction as presented were acceptable in principal (as a non-binding determination) and to authorize the
officers, advisors and legal counsel of Mercantile to proceed with negotiation of a proposed definitive merger agreement to be presented to the Mercantile board of directors for consideration and approval at a later meeting.
On July 1, 2013, Mercantile delivered a due diligence document and information request list to Firstbank. On July 2, 2013,
Firstbank issued a due diligence document and information request list to Mercantile. From approximately July 2, 2013 through August 14, 2013, Mercantile, Firstbank and their respective legal and financial advisors conducted reciprocal due
diligence, primarily by reviewing documents and also by meeting by telephone and in person.
On July 1, 2013, Firstbank
conducted a conference call with the third-party consultant who had been engaged to assist with the first phase of loan due diligence to determine scope and cost of a more in-depth loan due diligence. The consultant was instructed to proceed with
the second phase of due diligence. Also on July 1, Messrs. Sullivan and Price met in Stanwood, Michigan for a lunch meeting during which they discussed details of the potential merger and additional due diligence.
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On July 11, 2013, Messrs. Christmas, Sullivan, Price and Stone met at the offices of
Varnum in Grand Rapids. Representatives from the Federal Deposit Insurance Corporation, Federal Reserve and the Michigan Department of Insurance and Financial Services were present in person or by telephone. Plans for combining Firstbank and
Mercantile through a merger of equals were discussed.
On July 17, 2013, Mr. Sullivan met with Mr. Price at
Mercantiles offices in Grand Rapids. Messrs. Sullivan and Price agreed to meet weekly going forward in order to discuss and plan for integration and transition matters.
On July 17, 2013, representatives of Warner Norcross and Varnum spoke telephonically regarding the drafting of a definitive agreement for the merger. Following that call, Warner Norcross delivered an
initial draft of the agreement and plan of merger to Varnum. Through August 14, 2013, legal counsel and financial advisors to Firstbank and Mercantile, together with each of their management teams, engaged in negotiations and exchanged drafts
of the agreement and plan of merger.
On July 22, 2013, Sandler ONeill and Varnum joined the Firstbank board
meeting telephonically. Sandler ONeill reviewed recent merger and acquisition announcements, showing trends in pricing ratios, and discussed recent transactions. Sandler ONeill also discussed the fair value credit mark and stock prices
in the context of the proposed transaction between Firstbank and Mercantile. At the meeting, Varnum provided a written and oral review of director responsibilities in the context of considering a business combination transaction. The Firstbank board
of directors also reviewed and discussed treatment of various employee matters and executive agreements. All directors had participated in a Firstbank Compensation Committee meeting immediately prior to the board meeting to discuss the employment
and compensation matters.
On July 25, 2013, Messrs. Sullivan and Price met in Mecosta, Michigan to continue discussion
of various terms within the definitive agreement, board composition of both the holding company and the bank, employment agreements and establishment of transition and integration teams.
On July 31, 2013, the Firstbank board of directors met via telephone conference. In advance of the meeting, the board had been
provided an updated draft merger agreement and related materials. The board reviewed and discussed the terms to be offered to certain employees, including new employment agreements for certain executives and a proposed amendment to certain existing
executive agreements, which had been previously discussed and approved by the Firstbank Compensation Committee. The board of directors also discussed certain retention payments and the conditions for the payments, including non-compete and
non-solicitation agreements. Varnum reviewed certain changes in the draft merger agreement since the previous draft reviewed by the board. Mr. Sullivan reviewed the proposed exchange ratio of 1.00:1.00 for the merger. Based on the closing
prices of Mercantile common stock and Firstbank common stock on July 30, 2013 (the trading day immediately preceding this meeting), the proposed exchange ratio of 1:00:1.00 represented an implied premium of 25% for Firstbank common stock. At the
conclusion of the meeting, the board determined to continue negotiations with Mercantile and scheduled a special meeting on August 14, 2013.
On August 14, 2013, the Mercantile board of directors held a special meeting. At the meeting, the Mercantile management team presented a proposed definitive agreement and plan of merger. Warner
Norcross provided the board of directors of Mercantile with a summary of the terms of the proposed agreement and plan of merger, including covenants related to the non-solicitation of alternative acquisition proposals, the ability of the board of
directors of each party to change its recommendation, the post-closing board structure of the combined company, termination rights and the size and triggers for termination fees. Warner Norcross reviewed the boards fiduciary duties in
connection with the proposed merger. In addition, Warner Norcross reviewed the proposed voting agreements with the board of directors. The Mercantile board of directors reviewed the results of Mercantiles due diligence process regarding a
review of the combined company loan portfolio and credit marks. KBW presented financial aspects of the proposed merger, including an analysis of the factors considered in determining the proposed exchange ratio in the proposed merger. In
addition, KBW delivered its oral opinion, subsequently confirmed in writing, that as of August 14, 2013, and based upon and subject to the various factors, assumptions and limitations set forth in its opinion, the exchange ratio was fair, from
a financial point of view, to
54
Mercantile (the assumptions, details and limitations of KBWs opinion can be found below under The Merger Opinion of Mercantiles Financial Advisor). The Mercantile
board of directors then considered the information presented to them at the meeting, together with the information presented at prior meetings of the board, and deliberated regarding the alternatives available to Mercantile, including continuing to
execute on Mercantiles long-term strategic plan, and various other factors described below under The Merger Mercantiles Reasons for the Merger; Recommendation of the Mercantile Board of Directors. Following these
deliberations, the Mercantile board of directors voted unanimously to determine that the merger with Firstbank is fair to and in the best interests of Mercantile and its shareholders, adopt the plan of merger, recommend that the shareholders approve
the merger, authorize the issuance of shares of Mercantile common stock in the merger, and authorize Mercantiles Chief Executive Officer to execute the merger agreement.
On August 14, 2013, the Firstbank board of directors held a special meeting. Representatives from Sandler ONeill were present both in person and telephonically, and representatives of Varnum
were present in person. Varnum provided a written outline of the proposed merger agreement for the transaction between Firstbank and Mercantile and reviewed the outline and agreement with the board of directors. The board of directors review
and discussion of the proposed agreement and plan of merger included discussion and deliberation concerning the transaction structure, merger consideration, treatment of stock options and restricted stock awards, suspension of the Firstbank dividend
reinvestment plan, the board of directors and management team of the combined company, the Mercantile special dividend and regular dividends of the combined company, covenants (including the covenant of non-solicitation), representations and
warranties, closing condition, proxy statement and other securities matters, regulatory approvals, termination fees, indemnification and insurance, end date, employee matters and the proposed voting agreements. Sandler ONeill reviewed with the
board of directors its financial analysis of the merger. Sandler ONeill provided its oral opinion, subsequently confirmed in writing, that the exchange ratio is fair to Firstbank shareholders, from a financial point of view. Following
deliberations, the Firstbank board of directors unanimously approved the merger agreement and recommended to the shareholders of Firstbank that they vote to adopt the merger agreement. In addition, in accordance with the merger agreement, the
Firstbank board of directors voted to designate Edward Grant and Jeff Gardner, who are independent directors of Firstbank, to become directors of the combined company on the effective date of the merger.
Firstbank and Mercantile executed the merger agreement on August 14, 2013 and, before the financial markets opened on
August
15, 2013, issued a joint press release announcing the execution of the merger agreement and the terms of the merger.
Mercantiles Reasons for the Merger; Recommendation of the Mercantile Board of Directors
In approving the merger
agreement and recommending approval of the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger, the Mercantile board of directors consulted with members of Mercantiles management, as well as
with Mercantiles legal, financial, and business advisors, and also considered a number of factors that the Mercantile board of directors viewed as supporting its decisions. The principal factors that the Mercantile board of directors viewed as
supporting its decisions are:
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the complementary business strengths of Mercantile and Firstbank, with Mercantile as a leader in commercial lending and Firstbank having a strong
retail branch network;
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the expected strengthened competitive positioning of the combined company throughout Michigan, which Mercantile expects will enhance its ability to
serve customers;
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the expectation that the combined company will have an attractive and increasingly diversified loan portfolio;
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the expectation that the combined company will be able to offer an increase breadth of banking products;
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the potential opportunities for greater efficiencies from conducting Mercantiles and Firstbanks operations as part of a single enterprise,
which Mercantile estimated to be approximately $5.5 million annually, with 60% of these savings to be achieved in the first year after the merger and the full amount to be realized in subsequent years;
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the board of directors belief that the merger represents a superior opportunity for increasing shareholder value compared to the other strategic
alternatives available to Mercantile;
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the expectation that the combined company will have increased resources to invest in future growth opportunities in comparison to Mercantile on a
stand-alone basis;
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the expectation that shareholders will experience opportunities for share price growth driven by a more liquid public company stock and a more
diversified business profile;
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that the board of directors of the combined company following the merger will have representation from the two companies consisting of three directors
chosen by the current Mercantile directors and the three current Firstbank directors who are independent for the purposes of Nasdaq rules, as described under Board of Directors and Management Following the Merger; and
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the opinion of KBW, dated August 14, 2013, addressed to Mercantiles board of directors as to the fairness to Mercantile, from a financial
point of view and as of the date of such opinion, of the Exchange Ratio, as more fully described below under the caption Opinion of Mercantiles Financial Advisor.
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In addition to considering the factors described above, the Mercantile board of directors also considered the following factors:
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its knowledge of Mercantiles business, operations, financial condition, earnings and prospects and its knowledge of Firstbanks business,
operations, financial condition, earnings and prospects, taking into account Firstbanks publicly-filed information and the results of Mercantiles due diligence review of Firstbank;
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the long-term and recent historical trading prices with respect to shares of Mercantile common stock and Firstbank common stock and the amount of the
merger consideration;
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the fact that the exchange ratio is fixed and will not fluctuate based upon changes in the market price of Mercantile or Firstbank common stock between
the date of the merger agreement and the date of the completion of the merger;
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the terms and conditions of the merger agreement, including the commitments by both Mercantile and Firstbank to complete the merger and certain
reciprocal provisions that may have the effect of discouraging alternative acquisition proposals involving Firstbank or Mercantile, and the likelihood of completing the merger; and
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the fact that the merger agreement does not preclude a third party from making an unsolicited proposal for a competing transaction with Mercantile or
Firstbank and, that under certain circumstances more fully described in the sections The Merger Agreement Restrictions on Solicitation beginning on page 112 and The Merger Agreement Changes in Board
Recommendations beginning on page 113, Mercantile or Firstbank, as applicable, may furnish non-public information to and enter into discussions with such third party regarding the competing transaction and the Mercantile or Firstbank
board, as applicable, may withdraw or modify its recommendations to Mercantile or Firstbank shareholders regarding the merger and terminate the merger agreement to enter into a competing transaction under certain circumstances.
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The Mercantile board of directors weighed the foregoing against a number of potentially negative factors,
including:
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the restrictions on the conduct of Mercantiles business during the period between the execution of the merger agreement and the completion of the
merger;
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the costs associated with the completion of the merger and the realization of the benefits expected to be obtained in connection with the merger,
including managements time and energy and potential opportunity cost;
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the challenges in absorbing the effect of any failure to complete the merger, including potential termination fees and shareholder and market
reactions;
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the risk that regulatory agencies may not approve the merger or may impose terms and conditions on their approvals that adversely affect the business
and financial results of the combined company as more fully described under the caption Regulatory Clearances Required for the Merger beginning on page 100;
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the challenges inherent in the combination of two businesses of the size and complexity of Mercantile and Firstbank, including the possible diversion
of management attention for an extended period of time;
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the risk of not being able to realize all of the anticipated cost savings and operational synergies between Mercantile and Firstbank and the risk that
other anticipated benefits might not be realized; and
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the risks of the type and nature described under Risk Factors, beginning on page 31, and the matters described under Special
Note Regarding Forward-Looking Statements, beginning on page 29.
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This discussion of the
information and factors considered by Mercantiles board of directors in reaching its conclusions and recommendation includes the principal factors considered by the board of directors, but is not intended to be exhaustive and may not include
all of the factors considered by the Mercantile board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the other transactions contemplated by the merger agreement, and the complexity
of these matters, the Mercantile board of directors did not find it useful and did not attempt to quantify, rank or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger
and the other transactions contemplated by the merger agreement, and to make its recommendation to Mercantile shareholders. Rather, the Mercantile board of directors viewed its decisions as being based on the totality of the information presented to
it and the factors it considered, including its discussions with and questioning of members of Mercantiles management and outside legal and financial advisors. In addition, individual members of the Mercantile board of directors may have
assigned different weights to different factors.
Certain of Mercantiles directors and executive officers have financial
interests in the merger that are different from, or in addition to, those of Mercantiles shareholders generally. The Mercantile board of directors was aware of and considered these potential interests, among other matters, in evaluating the
merger and in making its recommendation to Mercantile shareholders. For a discussion of these interests, see Interests of Mercantile Directors and Executive Officers in the Merger.
The Mercantile board of directors unanimously approved the merger, adopted the merger agreement, and determined that the merger and
the other transactions contemplated by the merger agreement, including the issuance of shares of Mercantile common stock to Firstbank shareholders in connection with the merger, are in the best interests of Mercantile and its shareholders.
Accordingly, the Mercantile board of directors unanimously recommends that Mercantile shareholders vote FOR the proposal to approve the merger agreement, FOR the proposal to approve the issuance of shares of Mercantile common
stock to Firstbank shareholders in connection with the merger, FOR the proposal to approve the amendment to Mercantiles articles of incorporation, FOR the a proposal to approve, on an advisory (non-binding) basis, the
compensation that may be paid or become payable to Mercantiles named executive officers that is based on or otherwise related to the proposed transactions and FOR the proposal to approve the adjournment of the Mercantile special
meeting, if necessary or appropriate, to permit further solicitation of proxies.
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Opinion of Mercantiles Financial Advisor in Connection with the Merger
On January 24, 2013, Mercantile entered into an engagement agreement with Stifel, Nicolaus & Company,
Incorporated, an affiliate of KBW, to render financial advisory and investment banking services to Mercantile, which services were subsequently performed by KBW. As part of its engagement, KBW agreed to assist Mercantile in analyzing, structuring,
negotiating and, if appropriate, effecting a transaction between Mercantile and Firstbank. KBW also agreed to provide Mercantile with an opinion as to the fairness to Mercantile, from a financial point of view, of the exchange ratio in the proposed
merger. Mercantile engaged KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with Mercantile and its business. As part of its investment banking
business, KBW is continually engaged in the valuation of financial businesses and their securities in connection with mergers and acquisitions.
On August 14, 2013, the Mercantile board of directors held a meeting to evaluate the proposed merger. At that meeting, KBW reviewed the financial aspects of the proposed merger and rendered an
opinion to the Mercantile board that, as of such date and based upon and subject to factors and assumptions set forth therein, the exchange ratio in the merger is fair, from a financial point of view, to Mercantile. The Mercantile board of directors
approved the merger agreement at that meeting.
The full text of KBWs written opinion, dated August 14, 2013,
which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this document and is incorporated herein by reference. The description
of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion. Mercantiles shareholders are urged to read the opinion in its entirety. KBW has reviewed and consented to the inclusion in this joint
proxy statement and prospectus of the description of its opinion set forth below.
KBWs opinion speaks only as of
the date of the opinion and KBW undertakes no obligation to revise or update its opinion. The opinion is directed to the Mercantile board of directors and addresses only the fairness, from a financial point of view to Mercantile, of the exchange
ratio in the merger. The opinion does not address, and KBW expresses no view or opinion with respect to, (i) the underlying business decision of Mercantile to engage in the merger or enter into the merger agreement, (ii) the underlying
decision of the Mercantile board of directors to announce its intention to declare and pay, and any subsequent declaration and payment of, the $2.00 special cash dividend (referred to as the
pre-merger
special dividend) per share of common stock of Mercantile, as described in and contemplated by the merger agreement, including the merits of such decision as compared to any other alternatives that are, have been or may be available to
Mercantile or the Mercantile board of directors, (iii) the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by Mercantile or the Mercantile board of directors,
(iv) the fairness of the amount or nature of any compensation to any of Mercantiles officers directors or employees, or any class of such persons, relative to the compensation to the public shareholders of Mercantile, (v) the effect
of the merger on, or the fairness of the consideration to be received by, holders of any class of securities of Mercantile or any other party to any transaction contemplated by the merger agreement, (vi) any advice or opinions, including tax
advice, provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement, or (vii) any legal, regulatory, accounting, tax or similar matters relating to Mercantile, Firstbank, their
respective shareholders, or relating to or arising out of the merger, including whether or not the merger would qualify as a tax-free reorganization for United States federal income tax purposes. The opinion has been reviewed and approved by
KBWs Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.
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In connection with its opinion, KBW reviewed, analyzed and relied upon material bearing upon
the merger and the financial and operating condition of Mercantile and Firstbank, including among other things, the following:
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a version of the merger agreement dated August 12, 2013 (the most recent version made available to KBW at the time of its opinion);
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the Annual Report to Shareholders for the year ended December 31, 2012 and Annual Reports on Form 10-K for the three years ended
December 31, 2012 of Mercantile;
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the Annual Reports to Shareholders and Annual Reports on Form 10-K for the three years ended December 31, 2012 of Firstbank;
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certain interim reports to shareholders and the Quarterly Reports on Form 10-Q for the three months ended March 31, 2013 and the three months
ended June 30, 2013 of Mercantile and Firstbank, and certain other communications from Mercantile and Firstbank to their respective shareholders; and
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other financial information concerning the businesses and operations of Mercantile and Firstbank furnished to KBW by Mercantile and Firstbank for
purposes of its analysis.
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KBW also held discussions with members of senior management of Mercantile and
Firstbank regarding the past and current business operations, regulatory relations, financial condition, and future prospects of the respective companies and other matters that KBW deemed relevant to its inquiry. In addition, KBW reviewed the
historical and current financial position and results of operations of Mercantile and Firstbank, reviewed the assets and liabilities of Mercantile and Firstbank, compared certain financial and stock market information for Mercantile and Firstbank
with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the banking industry, and performed other studies and analyses that it
considered appropriate. KBWs opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW by members of senior management of Mercantile and Firstbank
through the date of such opinion.
In conducting its review and arriving at its opinion, KBW relied upon, and assumed the
accuracy and completeness of, all of the financial and other information provided to it or publicly available, and did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such
verification, accuracy or completeness. KBW relied upon members of the senior management of Mercantile and Firstbank as to the reasonableness and achievability of the financial and operating forecasts and projections (and assumptions and bases
therefore, including cost savings, operating synergies and merger-related costs) provided to KBW, and KBW assumed that such forecasts and projections reflected the best currently-available estimates and judgments of such managements and that such
forecasts and projections will be realized in the amounts and in the time periods currently estimated by such senior members of management. KBW also assumed that the merger will be consummated in a manner that complies with the applicable provisions
the Securities Act, the Exchange Act and all other applicable federal and state statutes, rules and regulations. As stated in its opinion, KBW is not an expert in the independent valuation of the adequacy of allowances for loan and lease losses, and
without independent verification, assumed that the aggregate allowances for loan and lease losses for Mercantile and Firstbank are adequate to cover those losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals of
any assets or liabilities of Mercantile or Firstbank, the collateral securing of any such assets or liabilities or the collectability of any such assets, nor did KBW examine or review any individual credit files. KBW did not evaluate the solvency,
financial capability or fair value of Mercantile or Firstbank under any state or federal laws, including those related to bankruptcy, insolvency or other matters.
The projections and associated assumptions furnished to and used by KBW in certain of its analyses were prepared by Mercantiles and Firstbanks senior management teams. Mercantile and Firstbank
do not publicly disclose internal management projections of the type provided to KBW in connection with its review of the merger. As a result, such projections were not prepared with a view towards public disclosure. The projections were based on
numerous variables and assumptions, which are inherently uncertain, including factors related to
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general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections. Any estimates or projections contained in the analyses
performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates or projections of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty, and KBW expressly disclaims
responsibility or liability for their accuracy.
KBW was not asked to, and it did not, offer any opinion as to the terms of
the merger agreement or the form of the merger or any aspect of the merger, other than the exchange ratio to the extent expressly specified in KBWs opinion. For purposes of rendering its opinion, KBW assumed that, in all respects material to
its analyses:
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the merger will be completed substantially in accordance with the terms set forth in the merger agreement (the final terms of which will not differ in
any respect material to KBWs analyses from the draft reviewed) with no additional payments or adjustments to the exchange ratio;
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the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger
agreement are true and correct;
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each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party
under such documents;
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all conditions to the completion of the merger will be satisfied without any waivers or modifications to the merger agreement; and
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in the course of obtaining the necessary regulatory, contractual or other consents or approvals for the merger, no restrictions, including any
divestiture requirements, termination or other payments or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated
benefits of the merger, including the cost savings, revenue enhancements and related expenses expected to result from the merger.
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KBW further assumed that the merger will be accounted for as a purchase transaction under generally accepted accounting principles, and that the merger will qualify as a tax-free reorganization for United
States federal income tax purposes. KBWs opinion does not in any manner address the prices at which the Mercantile common stock will trade following (i) the announcement or consummation of the merger, (ii) the announcement of the
Mercantile board of directors intention to declare and pay the pre-merger special dividend, or (iii) any actual declaration or payment of the pre-merger special dividend (or the occurrence of the ex-dividend date with respect thereto).
In performing its analyses, KBW considered such financial and other factors it deemed appropriate under the circumstances,
including, among others, the following: (i) the historical and current financial position and results of operations of Mercantile and Firstbank; (ii) the assets and liabilities of Mercantile and Firstbank; and (iii) the nature and
terms of certain other merger transactions involving banks and bank holding companies. KBW also took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience
in securities valuation and knowledge of the banking industry generally.
The exchange ratio was determined through
negotiation between Mercantile and Firstbank and the decision to enter into the merger was solely that of Mercantiles board of directors. In addition, the KBW opinion was among several factors taken into consideration by the Mercantile board
in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the Mercantile board with respect to the fairness of the exchange ratio
in the merger.
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Summary of Analysis by KBW
The following is a summary of the material financial analyses performed by KBW and presented to the Mercantile board on August 14,
2013, in connection with rendering the fairness opinion described above. The following summary is not a complete description of the financial analyses performed by KBW in rendering its opinion or the presentation made by KBW to the Mercantile board,
nor does the order of analysis described represent relative importance or weight given to any particular analysis by KBW and is qualified in its entirety by reference to the written opinion of KBW attached as Annex C. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not
readily susceptible to partial analysis or summary description. Selecting portions of the analysis or of the summary set forth herein, without considering the analysis as a whole, could create an incomplete view of the processes underlying
KBWs opinion. In arriving at its opinion, KBW considered the results of its entire analysis and KBW did not attribute any particular weight to any analysis or factor that it considered. Rather, KBW made its determination as to fairness on the
basis of its experience and professional judgment after considering the results of its entire analysis. The financial analyses summarized below include information presented in tabular format. Accordingly, KBWs analyses and the summary of its
analyses must be considered as a whole and selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion. The tables alone do not constitute a complete description of
the financial analyses.
Summary of Proposal
Pursuant to the terms of the merger agreement, each share of common stock, no par value per share, of Firstbank issued and outstanding and not owned by Mercantile or Firstbank shall be converted into the
right to receive 1.000 fully paid and nonassessable share of common stock, no par value per share, of Mercantile. The terms and conditions of the merger are more fully set forth in the merger agreement which is attached as Annex A to this joint
proxy statement and prospectus.
Selected Companies Analysis
Using publicly available information, KBW compared the financial performance, financial condition and market performance of Mercantile and
Firstbank to the following banks and bank holding companies traded on the New York Stock Exchange, NYSE MKT Equities or NASDAQ, and headquartered in Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota,
Ohio, South Dakota or Wisconsin, with total assets between $1.0 billion and $2.0 billion, and excluded merger targets as of August 13, 2013. Companies in this group were:
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German American Bancorp, Inc.
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MutualFirst Financial, Inc.
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Peoples Bancorp Inc.
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Pulaski Financial Corp.
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United Community Financial Corp.
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LNB Bancorp, Inc.
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Farmers Capital Bank Corporation
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First Business Financial Services, Inc.
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Horizon Bancorp
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Ames National Corporation
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MidwestOne Financial Group, Inc.
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HF Financial Corp.
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Bank of Kentucky Financial Corporation
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Hawthorn Bancshares, Inc.
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BankFinancial Corporation
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First Citizens Banc Corp
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West Bancorporation, Inc.
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Farmers National Banc Corp.
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To perform this analysis, KBW used financial information for the last twelve months (as of the most
recently available quarter) and market price information as of August 13, 2013. Earnings estimates for 2013 and 2014 were taken from a nationally recognized earnings estimate consolidator for the selected companies. Certain
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financial data prepared by KBW, and as referenced in the tables presented below, may not correspond to the data presented in Mercantiles and Firstbanks historical financial
statements, or to the data prepared by Sandler ONeill, presented under the section Opinion of Firstbanks Financial Advisor, as a result of the different periods, assumptions and methods used by KBW to compute the financial
data presented.
KBWs analysis showed the following concerning Mercantiles and Firstbanks financial
performance for the last twelve months:
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Mercantile
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Firstbank
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Selected
Companies
Minimum
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Selected
Companies
Mean
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Selected
Companies
Median
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Selected
Companies
Maximum
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Return on Average Assets
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1.01
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%
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|
0.80
|
%
|
|
|
(1.99
|
%)
|
|
|
0.57
|
%
|
|
|
0.87
|
%
|
|
|
1.26
|
%
|
Return on Average Equity
|
|
|
9.57
|
%
|
|
|
8.18
|
%
|
|
|
(15.66
|
%)
|
|
|
6.33
|
%
|
|
|
8.07
|
%
|
|
|
13.44
|
%
|
Net Interest Margin
|
|
|
3.65
|
%
|
|
|
3.90
|
%
|
|
|
2.63
|
%
|
|
|
3.45
|
%
|
|
|
3.47
|
%
|
|
|
4.07
|
%
|
Efficiency Ratio
|
|
|
68.2
|
%
|
|
|
65.1
|
%
|
|
|
47.9
|
%
|
|
|
66.2
|
%
|
|
|
68.7
|
%
|
|
|
87.7
|
%
|
KBWs analysis showed the following concerning Mercantiles and Firstbanks financial
condition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile
|
|
|
Firstbank
|
|
|
Selected
Companies
Minimum
|
|
|
Selected
Companies
Mean
|
|
|
Selected
Companies
Median
|
|
|
Selected
Companies
Maximum
|
|
Tangible Common Equity / Tangible Assets
|
|
|
11.23
|
%
|
|
|
6.77
|
%
|
|
|
4.98
|
%
|
|
|
8.20
|
%
|
|
|
8.09
|
%
|
|
|
11.69
|
%
|
Total Capital Ratio
|
|
|
15.43
|
%
|
|
|
14.87
|
%
|
|
|
12.39
|
%
|
|
|
15.22
|
%
|
|
|
14.71
|
%
|
|
|
19.52
|
%
|
Loans / Deposits
|
|
|
99.8
|
%
|
|
|
80.7
|
%
|
|
|
51.5
|
%
|
|
|
79.3
|
%
|
|
|
81.1
|
%
|
|
|
106.6
|
%
|
Loan Loss Reserve / Loans
|
|
|
2.36
|
%
|
|
|
2.07
|
%
|
|
|
1.21
|
%
|
|
|
1.70
|
%
|
|
|
1.64
|
%
|
|
|
2.44
|
%
|
Nonperforming Assets / Loans + OREO
|
|
|
5.41
|
%
|
|
|
3.70
|
%
|
|
|
0.99
|
%
|
|
|
3.54
|
%
|
|
|
2.93
|
%
|
|
|
8.94
|
%
|
Nonperforming Assets / Assets
|
|
|
4.27
|
%
|
|
|
2.48
|
%
|
|
|
0.59
|
%
|
|
|
2.33
|
%
|
|
|
1.91
|
%
|
|
|
5.23
|
%
|
Net Charge-Offs / Average Loans
|
|
|
0.16
|
%
|
|
|
0.60
|
%
|
|
|
(0.12
|
%)
|
|
|
0.63
|
%
|
|
|
0.42
|
%
|
|
|
4.10
|
%
|
KBWs analysis showed the following concerning Mercantiles and Firstbanks market
performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile
|
|
|
Firstbank
|
|
|
Selected
Companies
Minimum
|
|
|
Selected
Companies
Mean
|
|
|
Selected
Companies
Median
|
|
|
Selected
Companies
Maximum
|
|
Market Capitalization ($mm)
|
|
$
|
166
|
|
|
$
|
142
|
|
|
$
|
54
|
|
|
$
|
165
|
|
|
$
|
185
|
|
|
$
|
339
|
|
1-Year Stock Price Change
|
|
|
13.3
|
%
|
|
|
80.8
|
%
|
|
|
1.6
|
%
|
|
|
34.1
|
%
|
|
|
29.2
|
%
|
|
|
177.0
|
%
|
1-Year Total Return
|
|
|
16.2
|
%
|
|
|
86.2
|
%
|
|
|
5.2
|
%
|
|
|
36.7
|
%
|
|
|
32.2
|
%
|
|
|
177.0
|
%
|
Year-to-Date Price Change
|
|
|
15.3
|
%
|
|
|
64.0
|
%
|
|
|
(1.9
|
%)
|
|
|
30.4
|
%
|
|
|
25.4
|
%
|
|
|
97.8
|
%
|
Stock Price / Book Value per Share
|
|
|
1.10x
|
|
|
|
1.07x
|
|
|
|
0.66x
|
|
|
|
1.17x
|
|
|
|
1.11x
|
|
|
|
1.86x
|
|
Stock Price / Tangible Book Value per Share
|
|
|
1.10x
|
|
|
|
1.47x
|
|
|
|
0.86x
|
|
|
|
1.29x
|
|
|
|
1.21x
|
|
|
|
2.11x
|
|
Stock Price / 2013 EPS
(1)
|
|
|
10.7x
|
|
|
|
11.8x
|
|
|
|
9.1x
|
|
|
|
12.3x
|
|
|
|
12.4x
|
|
|
|
15.9x
|
|
Stock Price / 2014 EPS
(1)
|
|
|
13.5x
|
|
|
|
9.8x
|
|
|
|
8.4x
|
|
|
|
12.7x
|
|
|
|
12.4x
|
|
|
|
18.9x
|
|
Dividend Yield
|
|
|
2.52
|
%
|
|
|
1.37
|
%
|
|
|
0.00
|
%
|
|
|
1.89
|
%
|
|
|
1.92
|
%
|
|
|
3.74
|
%
|
LTM Dividend Payout Ratio
(1)
|
|
|
18.6
|
%
|
|
|
24.8
|
%
|
|
|
0.0
|
%
|
|
|
22.4
|
%
|
|
|
23.8
|
%
|
|
|
54.2
|
%
|
(1)
|
Consensus earnings estimates for the selected companies per FactSet Research Systems, Inc., as compiled by SNL Financial, as of 8/13/13; earnings estimates for
Mercantile and Firstbank per respective managements guidance.
|
62
Selected Transactions Analysis
KBW reviewed publicly available information related to certain selected bank and thrift transactions announced after December 31,
2010 with deal values between $100 million and $1 billion and a target assets / buyer assets ratio greater than 30%:
|
|
|
Acquiror:
|
|
Acquired Company:
|
MB Financial, Inc.
|
|
Taylor Capital Group, Inc.
|
First Federal Bancshares of Arkansas, Inc.
|
|
First National Security Company
|
Peoples Financial Services Corp.
|
|
Penseco Financial Services Corp
|
Home BancShares, Inc.
|
|
Liberty Bancshares, Inc
|
Union First Market Bankshares Corp
|
|
StellarOne Corporation
|
Provident New York Bancorp
|
|
Sterling Bancorp
|
SCBT Financial Corporation
|
|
First Financial Holdings, Inc.
|
Renasant Corporation
|
|
First M&F Corporation
|
United Bankshares, Inc.
|
|
Virginia Commerce Bancorp, Inc.
|
PacWest Bancorp
|
|
First California Financial Group, Inc.
|
Columbia Banking System, Inc.
|
|
West Coast Bancorp
|
Cadence Bancorp, LLC
|
|
Encore Bancshares, Inc.
|
Prosperity Bancshares, Inc.
|
|
American State Financial Corp
|
Brookline Bancorp, Inc.
|
|
Bancorp Rhode Island, Inc.
|
Transaction multiples for the merger were derived from an implied aggregate offer price per share of
$19.02, prior to giving effect to the pre-merger special dividend of $2.00 per share paid to Mercantile shareholders, and $17.02 after giving effect to the pre-merger special dividend of $2.00 per share paid to Mercantile shareholders. The offer
price was based on Mercantiles closing price of $19.02 on August 13, 2013 and a fixed exchange ratio of 1.000. For each transaction referred to above, KBW derived and compared, among other things, the following implied ratios:
|
|
|
price per common share paid for the acquired company to tangible book value per share of the acquired company based on the latest publicly available
financial statements of the company available prior to the announcement of the acquisition;
|
|
|
|
tangible common equity premium (excess of purchase price over tangible common equity) to core deposits (total deposits less time deposits greater than
$100,000) based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition;
|
|
|
|
price per common share paid for the acquired company to the last twelve months earnings per share of the acquired company; and
|
|
|
|
price per common share paid for the acquired company as a premium to the closing price of the acquired company one day, one month and three months
prior to the announcement of the acquisition (expressed as a percentage and referred to as the one day, one month, and three month market premiums).
|
63
The results of the analysis are set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile / Firstbank Merger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction Multiples:
|
|
Prior to Effect
of Pre-Merger
Special
Dividend
|
|
|
After Giving
Effect to Pre-
Merger
Special
Dividend
|
|
|
Selected
Transactions
Minimum
|
|
|
Selected
Transactions
Mean
|
|
|
Selected
Transactions
Median
|
|
|
Selected
Transactions
Maximum
|
|
Price / Tangible Book Value
|
|
|
1.60x
|
|
|
|
1.43x
|
|
|
|
1.26x
|
|
|
|
1.67x
|
|
|
|
1.64x
|
|
|
|
2.40x
|
|
Core Deposit Premium
|
|
|
5.5
|
%
|
|
|
3.9
|
%
|
|
|
2.0
|
%
|
|
|
8.1
|
%
|
|
|
7.8
|
%
|
|
|
13.8
|
%
|
Price / LTM EPS
|
|
|
13.9x
|
|
|
|
12.4x
|
|
|
|
11.3x
|
|
|
|
16.2x
|
|
|
|
14.7x
|
|
|
|
22.6x
|
|
1-Day Market Premium
|
|
|
8.5
|
%
|
|
|
(2.9
|
%)
|
|
|
11.6
|
%
|
|
|
26.5
|
%
|
|
|
22.3
|
%
|
|
|
56.3
|
%
|
1-Month Market Premium
|
|
|
38.2
|
%
|
|
|
23.7
|
%
|
|
|
8.7
|
%
|
|
|
35.7
|
%
|
|
|
29.8
|
%
|
|
|
76.2
|
%
|
3-Month Market Premium
|
|
|
40.5
|
%
|
|
|
25.7
|
%
|
|
|
17.1
|
%
|
|
|
41.7
|
%
|
|
|
37.6
|
%
|
|
|
76.4
|
%
|
No company or transaction used as a comparison in the above analysis is identical to Mercantile,
Firstbank or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.
Contribution Analysis
KBW analyzed the relative contribution of Mercantile and Firstbank to the pro forma market capitalization, balance sheet and income statement items of the combined entity, including pro forma ownership,
assets, gross loans, deposits, tangible common equity, and projected 2014 and 2015 net income available to common. This analysis excluded any purchase accounting adjustments and was based on Mercantiles and Firstbanks closing prices on
August 13, 2013 of $19.02 and $17.53, respectively. To perform this analysis, KBW used financial information as of the three month period ended June 30, 2013. The results of KBWs analysis are set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile
Stand-alone
at 6/30/13
|
|
|
Mercantile
as a %
of
Total
|
|
|
Firstbank
Stand-alone
at 6/30/13
|
|
|
Firstbank as
a % of Total
|
|
|
Total
(1)
|
|
Ownership
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% stock (1.000x exchange ratio)
|
|
|
|
|
|
|
52
|
%
|
|
|
|
|
|
|
48
|
%
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet ($mm)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
1,344
|
|
|
|
48
|
%
|
|
$
|
1,457
|
|
|
|
52
|
%
|
|
$
|
2,801
|
|
Gross Loans
|
|
$
|
1,059
|
|
|
|
52
|
%
|
|
$
|
976
|
|
|
|
48
|
%
|
|
$
|
2,034
|
|
Deposits
|
|
$
|
1,061
|
|
|
|
47
|
%
|
|
$
|
1,208
|
|
|
|
53
|
%
|
|
$
|
2,270
|
|
Tangible Common Equity (Prior to Giving Effect to Pre-Merger Special Dividend)
|
|
$
|
151
|
|
|
|
61
|
%
|
|
$
|
96
|
|
|
|
39
|
%
|
|
$
|
247
|
|
Tangible Common Equity (Prior to Giving Effect to Pre-Merger Special Dividend)
(2)
|
|
$
|
134
|
|
|
|
58
|
%
|
|
$
|
96
|
|
|
|
42
|
%
|
|
$
|
230
|
|
|
|
|
|
|
|
Earnings ($mm)
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 Est. GAAP Net Income
|
|
$
|
12
|
|
|
|
46
|
%
|
|
$
|
15
|
|
|
|
54
|
%
|
|
$
|
27
|
|
2015 Est. GAAP Net Income
|
|
$
|
13
|
|
|
|
47
|
%
|
|
$
|
14
|
|
|
|
53
|
%
|
|
$
|
27
|
|
|
|
|
|
|
|
Market Capitalization ($mm)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Market Capitalization (Prior to Giving Effect to Pre-Merger Special Dividend)
|
|
$
|
166
|
|
|
|
54
|
%
|
|
$
|
142
|
|
|
|
46
|
%
|
|
$
|
307
|
|
Current Market Capitalization (After Giving Effect to Pre-Merger Special Dividend)
(2)
|
|
$
|
148
|
|
|
|
51
|
%
|
|
$
|
142
|
|
|
|
49
|
%
|
|
$
|
290
|
|
(1)
|
Total does not include any purchase accounting adjustments
|
64
(2)
|
Adjusted for a theoretical reduction in Mercantiles stock price equal to the $2.00 per share pre-merger special dividend.
|
(3)
|
All income projections per respective management estimates and exclude the anticipated impact of cost savings
|
Financial Impact Analysis
KBW performed pro forma merger analyses that combined projected income statement and balance sheet information of Mercantile and Firstbank. Assumptions regarding the accounting treatment, acquisition
adjustments and cost savings were provided by Mercantile and Firstbank management, were relied on by KBW and were used to calculate the financial impact that the merger would have on certain projected financial results of Mercantile. In the course
of this analysis, KBW used earnings estimates for Mercantile and Firstbank for 2014 and 2015, as prepared and provided by Mercantile and Firstbank management, respectively. This analysis indicated that the merger is expected to be accretive to
Mercantiles estimated earnings per share in 2014 and 2015. The analysis also indicated that the merger is expected to be dilutive to tangible book value per share for Mercantile and that Mercantile is expected to maintain well-capitalized
capital ratios, after giving effect to the $2.00 per share
pre-merger
special dividend. For all of the above analyses, the actual results achieved by Mercantile following the merger will vary from the
estimates used and the projected results, and the variations may be material.
Firstbank Discounted Cash Flow Analysis
KBW performed a discounted cash flow analysis to estimate a range of the present values of after-tax cash flows that
Firstbank could provide to equity holders through 2018 on a stand-alone basis. In performing this analysis, KBW used earnings estimates for Firstbank, cost savings estimates, loan credit mark adjustments and restructuring charges, all as prepared
and provided by Mercantile and Firstbank management, and assumed discount rates ranging from 11.0% to 16.0%. The range of values was determined by adding (i) the present value of projected cash flows to Firstbank shareholders from 2014 to 2018
and (ii) the present value of the terminal value of Firstbanks common stock. In determining cash flows available to shareholders, KBW assumed balance sheet growth provided by Firstbank management and assumed that Firstbank would maintain
a tangible common equity/tangible asset ratio of 8.00% and would retain sufficient earnings to maintain these levels. Any earnings in excess of what would need to be retained represented dividendable cash flows for Firstbank. In calculating the
terminal value of Firstbank, KBW applied multiples ranging from 10.0 times to 14.0 times the 2019 forecasted earnings provided by Firstbank. This resulted in a range of values of Firstbank from $15.93 to $26.27 per share. The discounted cash flow
present value analysis is a widely used valuation methodology that relies on numerous assumptions, including asset and earnings growth rates, terminal values and discount rates. The analysis did not purport to be indicative of the actual values or
expected values of Firstbank.
Mercantile Discounted Cash Flow Analysis
KBW performed a discounted cash flow analysis to estimate a range of the present values of after-tax cash flows that Mercantile could
provide to equity holders through 2018 on a stand-alone basis. In performing this analysis, KBW used earnings estimates for Mercantile prepared and provided by Mercantile management and assumed discount rates ranging from 11.0% to 16.0%. The range
of values was determined by adding (i) the present value of projected cash flows to Mercantile shareholders from 2014 to 2018 and (ii) the present value of the terminal value of Mercantiles common stock. In determining cash flows
available to shareholders, KBW assumed balance sheet growth provided by Mercantile management and assumed that Mercantile would maintain a tangible common equity/tangible asset ratio of 8.00%, and would retain sufficient earnings to maintain these
levels. Any earnings in excess of what would need to be retained represented dividendable cash flows for Mercantile. In calculating the terminal value of Mercantile, KBW applied multiples ranging from 10.0 times to 14.0 times the 2019 forecasted
earnings provided by Mercantile. This resulted in a range of values of Mercantile from $18.48 to $26.06 per share. To illustrate the implied offer to Firstbank, KBW applied the exchange ratio of
65
1.000 shares of Mercantile to the aforementioned implied discounted cash flow value per Mercantile share, resulting in an implied offer range of values to Firstbank of $18.48 to $26.06 per share,
without giving effect to the $2.00 per share special dividend. The discounted cash flow present value analysis is a widely used valuation methodology that relies on numerous assumptions, including asset and earnings growth rates, terminal values and
discount rates. The analysis did not purport to be indicative of the actual values or expected values of Mercantile.
Pro
Forma Discounted Cash Flow Analysis
KBW performed a discounted cash flow analysis to estimate a range of the present
values of after-tax cash flows that Mercantile (pro forma for the merger) could provide to equity holders through 2018 on a pro forma basis. In performing this analysis, KBW used earnings estimates, cost savings estimates, purchase accounting
adjustments, and restructuring charges provided by Mercantile management and assumed discount rates ranging from 10.0% to 15.0%. The range of values was determined by adding (i) the present value of projected cash flows to Mercantile (pro forma
for the merger) shareholders from 2014 to 2018 and (ii) the present value of the terminal value of Mercantiles (pro forma for the merger) common stock. In determining cash flows available to shareholders, KBW assumed balance sheet growth
prepared and provided by Mercantile management and assumed, at the direction of Mercantile management, that Mercantile (pro forma for the merger) would maintain a tangible common equity/tangible asset ratio of 8.00% and would retain sufficient
earnings to maintain these levels. Any earnings in excess of what would need to be retained represented dividendable cash flows for Mercantile (pro forma for the merger). In calculating the terminal value of Mercantile (pro forma for the merger),
KBW applied multiples ranging from 10.0 times to 14.0 times 2019 forecasted earnings. This resulted in a range of share values of Mercantile (pro forma for the merger) from $16.78 to $26.11 per share, prior to giving effect to the pre-merger special
dividend, and from $18.78 to $28.11 after giving effect to the pre-merger special dividend. The discounted cash flow present value analysis is a widely used valuation methodology that relies on numerous assumptions, including asset and earnings
growth rates, terminal values and discount rates. The analysis did not purport to be indicative of the actual values or expected values of Mercantile (pro forma for the merger).
Engagement of KBW by Mercantile
The Mercantile board retained KBW as financial adviser to Mercantile regarding the merger. As part of its investment banking business, KBW is continually engaged in the valuation of banking businesses and
their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in
the securities of banking companies, KBW has experience in, and knowledge of, the valuation of banking enterprises. In the ordinary course of its business as a broker-dealer, KBW may, from time to time, purchase securities from, and sell securities
to, Mercantile and Firstbank. As a market maker in securities, KBW may from time to time have a long or short position in, and buy or sell, debt or equity securities of Mercantile and Firstbank for KBWs own account and for the accounts of its
customers. To the extent KBW held any such positions, it was disclosed to the Mercantile board of directors on or before the August 14, 2013 board of directors meeting.
KBW has acted exclusively for the Mercantile board of directors in rendering its opinion in connection with the merger. Pursuant to the KBW engagement agreement, Mercantile agreed to pay to KBW a cash fee
of $200,000 concurrently with the rendering of KBWs opinion as well as a cash contingent advisory fee equal to approximately $1,459,000 to be paid at the time of closing of the merger. In addition, pursuant to the engagement agreement,
Mercantile also agreed to reimburse KBW for all reasonable out-of-pocket expenses and disbursements up to $25,000, including fees and reasonable expenses of counsel, incurred in connection with the engagement and to indemnify KBW and related parties
against certain liabilities, including but not limited to liabilities under federal securities laws, relating to, or arising out of, its engagement. During the two years preceding the date of its opinion to the Mercantile board of directors, KBW and
its affiliates have received $24,000 in compensation for investment banking services from Mercantile, and have received no other compensation from Mercantile. KBW has not received compensation for investment banking services from Firstbank.
66
Certain Prospective Information Reviewed by Mercantile
Mercantile does not as a matter of course make public projections as to future sales, earnings, or other results. However, the management
of Mercantile has prepared the prospective financial information set forth below in connection with its evaluation of the proposed merger. The accompanying prospective financial information was not prepared with a view toward public disclosure or
with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but in the view of Mercantiles management, was prepared on a reasonable
basis, reflects the best currently available estimates and judgments, and presents, to the best of the knowledge and belief of Mercantiles management, the expected course of action and the expected future financial performance of Mercantile
and Firstbank. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and the readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the
prospective financial information. Neither Mercantiles independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein,
nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.
The prospective financial information regarding Mercantiles and Firstbanks anticipated future operations were prepared by
Mercantile for the years 2013 through 2018. In the case of Mercantiles projections of Firstbanks future performance, Mercantiles management based these projections in part on estimates of certain expected 2013 financial and
operating data provided by Firstbank to Mercantile. The projections were reviewed by the Mercantile board of directors and provided by management to Mercantiles financial advisors in connection with the proposed merger. The projections were
independently prepared by Mercantile management based on assumptions that Mercantile management believed to be reasonable at the time and were provided to and reviewed by Firstbank or its financial advisors prior to the announcement of the
transaction.
The financial projections were based on numerous variables and assumptions (including but not limited to those
related to industry performance, competition, general business, economic, market and financial conditions) that are inherently uncertain and are beyond the control of Mercantile and Firstbank. Financial projections for both Mercantile and Firstbank
are subject to many risks and uncertainties, including, but not limited to, the impact of general economic factors outside the control of Mercantile or Firstbank, volatility in interest rates, economic conditions generally and in the markets that
Mercantile and Firstbank serve, consumer sentiment, and other risks and uncertainties relating to Mercantiles and Firstbanks business (including their ability to achieve strategic goals, objectives and targets over applicable periods)
and other factors described under Special Note Regarding Forward-Looking Statements, all of which are subject to change. As a result, actual results may differ materially from those contained in the financial projections.
The inclusion of a summary of the financial projections in this joint proxy statement/prospectus should not be regarded as an indication
that any of Mercantile, Firstbank or their respective affiliates, officers, directors or other representatives consider the financial projections to be necessarily predictive of actual future events, and the financial projections should not be
relied upon as such. None of Mercantile, Firstbank or their respective affiliates, officers, directors or other representatives can give you any assurance that actual results will not differ materially from the financial projections, and none of
them undertakes any obligation to update or otherwise revise or reconcile the financial projections to reflect circumstances existing after the date the financial projections were generated or to reflect the occurrence of future events, even in the
event that any or all of the assumptions underlying the projections are shown to be in error. None of Mercantile, Firstbank or their respective affiliates, officers, directors or other representatives has made or makes any representation to any
shareholder or other person regarding Mercantiles or Firstbanks ultimate performance compared to the information contained in the financial projections or that the projected results will be achieved. The summary of the financial
projections included below is not being included to influence your decision whether to vote for the merger and the transactions contemplated in connection with the merger, but are being provided because the financial projections were considered in
connection with the merger.
67
Mercantile has made no representations to Firstbank, and Firstbank has made no
representations to Mercantile, in the merger agreement or otherwise, concerning the financial projections or the estimates on which they are based. Mercantile and Firstbank urge all shareholders to review Mercantiles and Firstbanks most
recent SEC filings for a description of Mercantile and Firstbanks reported financial results.
Mercantile
Summary Financial Projections
(Prepared by Mercantile)
(Dollars in thousands, except per share data)
(Assumes payment of $2.00 special dividend in 2013)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31
|
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Net income to common shareholders
|
|
$
|
15,499
|
|
|
$
|
12,245
|
|
|
$
|
12,621
|
|
|
$
|
13,634
|
|
|
$
|
14,873
|
|
|
$
|
16,126
|
|
Total assets
|
|
$
|
1,386,068
|
|
|
$
|
1,415,459
|
|
|
$
|
1,465,383
|
|
|
$
|
1,518,531
|
|
|
$
|
1,573,993
|
|
|
$
|
1,631,761
|
|
Total stockholders equity
|
|
$
|
138,520
|
|
|
$
|
146,587
|
|
|
$
|
154,900
|
|
|
$
|
163,881
|
|
|
$
|
173,678
|
|
|
$
|
184,300
|
|
Tier 1 capital/Total assets (5%)
|
|
|
11.29
|
%
|
|
|
11.63
|
%
|
|
|
11.80
|
%
|
|
|
11.98
|
%
|
|
|
12.18
|
%
|
|
|
12.40
|
%
|
Tier 1 capital/Risk weighted assets (6%)
|
|
|
13.36
|
%
|
|
|
13.76
|
%
|
|
|
13.96
|
%
|
|
|
14.17
|
%
|
|
|
14.41
|
%
|
|
|
14.67
|
%
|
Total RBC/Risk weighted assets (10%)
|
|
|
14.62
|
%
|
|
|
15.02
|
%
|
|
|
15.22
|
%
|
|
|
15.43
|
%
|
|
|
15.67
|
%
|
|
|
15.93
|
%
|
Diluted EPS
|
|
$
|
1.78
|
|
|
$
|
1.40
|
|
|
$
|
1.45
|
|
|
$
|
1.56
|
|
|
$
|
1.71
|
|
|
$
|
1.85
|
|
Firstbank Summary Financial Projections
(Prepared by Mercantile)
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31
|
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Net income to common shareholders
|
|
$
|
12,151
|
|
|
$
|
14,507
|
|
|
$
|
14,187
|
|
|
$
|
14,922
|
|
|
$
|
15,716
|
|
|
$
|
16,951
|
|
Total assets
|
|
$
|
1,512,660
|
|
|
$
|
1,546,152
|
|
|
$
|
1,593,174
|
|
|
$
|
1,631,414
|
|
|
$
|
1,670,679
|
|
|
$
|
1,713,021
|
|
Total stockholders equity
|
|
$
|
137,900
|
|
|
$
|
149,663
|
|
|
$
|
160,304
|
|
|
$
|
171,488
|
|
|
$
|
183,326
|
|
|
$
|
196,107
|
|
Tier 1 capital/Total assets (5%)
|
|
|
9.31
|
%
|
|
|
9.90
|
%
|
|
|
10.30
|
%
|
|
|
10.76
|
%
|
|
|
11.22
|
%
|
|
|
11.70
|
%
|
Tier 1 capital/Risk weighted assets (6%)
|
|
|
13.66
|
%
|
|
|
14.54
|
%
|
|
|
15.14
|
%
|
|
|
15.82
|
%
|
|
|
16.51
|
%
|
|
|
17.23
|
%
|
Total RBC/Risk weighted assets (10%)
|
|
|
14.91
|
%
|
|
|
15.79
|
%
|
|
|
16.39
|
%
|
|
|
17.07
|
%
|
|
|
17.76
|
%
|
|
|
18.48
|
%
|
Diluted EPS
|
|
$
|
1.49
|
|
|
$
|
1.79
|
|
|
$
|
1.74
|
|
|
$
|
1.83
|
|
|
$
|
1.92
|
|
|
$
|
2.07
|
|
In preparing the foregoing projections, Mercantile made a number of assumptions and estimates regarding,
among other things, loan growth rates, deposit growth rates, borrowing growth rates, ratio of loan loss reserves to gross loans, ratio of net charge-offs to gross loans, net interest spread, net interest margin, non-interest income and non-interest
expense. Mercantile believed these assumptions and estimates were reasonable at the time the projections were prepared, but these assumptions and estimates may not be realized and are inherently subject to significant business, economic, competitive
and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under the sections entitled Special Note Regarding Forward-Looking Statements beginning on page 29 and Risk
Factors beginning on page 31. These uncertainties and contingencies are difficult to estimate or predict and many are or will be beyond the control of Mercantile, Firstbank, or the combined company.
68
Readers of this joint proxy statement/prospectus are cautioned not to place undue reliance
on the projections set forth above. The inclusion of the above projections in this joint proxy statement/prospectus should not be regarded as an indication that Mercantile, Firstbank, or their respective officers, directors, agents or other
affiliates consider such information to be an accurate prediction of future results or necessarily achievable. There can be no assurance that the underlying assumptions will prove to be accurate or that the projected results will be realized, and
actual results likely will differ, and may differ materially, from those reflected in the projections, whether or not the merger is completed. In addition, the above projections do not give effect to the merger nor do they take into account the
effect of any failure of the merger to occur, and should not be viewed as necessarily accurate or continuing in that context.
Readers of this joint proxy statement/prospectus are urged to review Mercantiles and Firstbanks most recent SEC filings for a
description of each companys results of operations and financial condition during the prior year. Mercantile does not intend to update or otherwise revise the above projections to reflect events that occur or circumstances that exist after the
date of this joint proxy statement/prospectus, except as may be required by applicable law.
Amendment to
Mercantiles Articles of Incorporation
The Mercantile board of directors has approved, subject to Mercantile
shareholder approval and completion of the merger, an amendment to the Mercantiles articles of incorporation to provide for an increase in the number of authorized shares of common stock of Mercantile from 20,000,000 to 40,000,000. The
approval of this amendment to the articles of incorporation is not a condition to completion of the merger. In the event this proposal is approved by Mercantile shareholders but the merger is not completed, this amendment will not become effective.
As of November 1, 2013, Mercantile had no shares of Mercantile preferred stock and 8,707,534 shares of Mercantile common
stock issued and outstanding. As of November 1, 2013, there were approximately 700,000 shares of Mercantile common stock reserved for issuance. Based on the number of shares of Firstbank common stock outstanding as of such date, if the merger
is completed, Mercantile would be required to issue approximately 8.5 million additional shares of Mercantile common stock to the Firstbank shareholders. In addition, upon completion of the merger, Mercantile would likely reserve for issuance
approximately 1 million additional shares of Mercantile common stock to cover, among other things, stock options, restricted stock, and other share-based awards assumed from Firstbank. Although the number of shares of common stock
currently authorized under Mercantiles articles of incorporation will be sufficient to complete the merger, unless Mercantiles capital stock is increased, upon completion of the merger the combined company is expected to have fewer than
3 million authorized shares of common stock available for issuance. The Mercantile board of directors believes that it is advisable to have additional authorized shares of common stock available for important corporate purposes, such as to
provide the ability to react quickly to strategic opportunities and to attract and retain talented employees through the use of equity incentive compensation. Although there are no present plans or commitments for the issuance of any of the
additional shares that would be authorized upon approval of this amendment, such shares would be available for equity incentive plans, possible future stock splits and dividends, public or private offerings of common stock or securities convertible
into common stock, equity-based acquisitions and other corporate purposes that might be proposed. The additional shares of Mercantile common stock will not be entitled to preemptive rights nor will existing shareholders have any preemptive right to
acquire any of those shares when issued.
The Mercantile Board of Directors unanimously recommends that the Mercantile shareholders vote FOR the proposal to approve the amendment to the articles of incorporation to increase the number
of authorized shares to 40,000,000
.
Firstbanks Reasons for the Merger; Recommendation of the
Firstbank Board of Directors
After careful consideration, Firstbanks board of directors, at a meeting held on
August 14, 2013, unanimously determined that the merger agreement is in the best interests of Firstbank and its shareholders. Accordingly, Firstbanks board of directors adopted and approved the merger agreement
69
and unanimously recommends that Firstbank shareholders vote FOR the approval of the Firstbank merger proposal, FOR the approval of the advisory compensation proposal and
FOR the approval of the Firstbank adjournment proposal.
In reaching its decision to adopt and approve the
merger agreement and to recommend that its shareholders approve the merger agreement, the Firstbank board of directors consulted with Firstbank management, as well as its financial and legal advisors, and considered a number of factors, including,
without limitation, the following material factors:
|
|
|
the business strategy and strategic plan of Firstbank, its prospects for the future, projected financial results and expectations relating to the
proposed merger with Mercantile;
|
|
|
|
a review of the risks and prospects of Firstbank remaining independent, including the challenges of the current financial and regulatory climate;
|
|
|
|
the boards belief that the merger has the potential to deliver a higher value to Firstbanks shareholders than the alternatives to the
merger;
|
|
|
|
whether there might be other potential merger parties that might be attractive and have sufficient market capitalization or other resources to
consummate a merger with Firstbank;
|
|
|
|
a review of the historical financial statements and condition of Firstbank and certain other internal information, primarily financial in nature,
relating to the business, earnings and balance sheet of Firstbank;
|
|
|
|
the fact that the merger would combine two established banking franchises to create a well-positioned, Michigan based community bank with approximately
$3.0 billion in assets;
|
|
|
|
comparative stand alone and pro forma analyses of Firstbank, Mercantile and the combined entity, and the book and tangible book values per share,
earnings per share, dividends and capital levels of each entity;
|
|
|
|
the anticipated future earnings growth of Firstbank compared to the potential future earnings growth of Mercantile and the combined entity;
|
|
|
|
the anticipated future trading value of the Firstbank common stock compared to the value of the common stock consideration offered by Mercantile and
the potential future trading value of the combined entitys common stock;
|
|
|
|
the anticipated future receipt by Firstbank shareholders of an increase in dividends after completion of the merger as Mercantile shareholders, based
on Mercantiles current and forecasted dividend payout ratio;
|
|
|
|
the prospects for increased commercial loan growth opportunities and improved market demographics resulting from Mercantiles market presence in
the large and desirable Grand Rapids, Michigan metropolitan area;
|
|
|
|
the complementary nature of the businesses of Firstbank and Mercantile and the anticipated improved stability of the combined companys business
and earnings in varying economic and market climates;
|
|
|
|
the familiarity of certain members of Firstbanks senior management team with Mercantiles senior management team and the belief of
Firstbanks senior management that the management and employees of both Firstbank and Mercantile possess complementary skills and expertise, as well as the potential advantages of a combined larger institution when pursuing, or seeking to
retain, capable personnel;
|
|
|
|
the value of Mercantiles common stock consideration being offered to Firstbank shareholders in relation to the historic and current market value,
tangible book value per share, earnings per share and projected earnings per share of Firstbank and the combined entity;
|
70
|
|
|
the form and amount of the merger consideration, including the tax effects of stock consideration and the fact that Firstbank shareholders would own
approximately 48% of the combined company;
|
|
|
|
the anticipated greater market capitalization of the combined organization and trading volume and liquidity of Mercantile common stock after the merger
in the event Firstbank shareholders desire to sell the shares of Mercantile common stock to be received by them upon completion of the merger;
|
|
|
|
the fact that the merger consideration represented more than a 12% premium to the closing price of Firstbank common stock on August 14, 2013 (the
business day prior to the news report of a potential transaction), 13.8x LTM earnings per share and 1.58 times the June 30, 2013 tangible book value per share of Firstbank common stock;
|
|
|
|
the ability of Mercantile to complete a merger transaction from a financial and regulatory perspective;
|
|
|
|
the geographic fit and increased customer convenience of the branch networks of the combined entity;
|
|
|
|
the scale, scope, strength and diversity of operations, product lines and delivery systems that could be achieved by combining Firstbank with
Mercantile;
|
|
|
|
the potential cost-saving opportunities resulting from the merger which were estimated to be approximately $5.5 million per year, with 60% of these
savings expected to be achieved in the first year after the merger and the full amount to be achieved in subsequent years;
|
|
|
|
the ability of the combined company to provide comprehensive financial services to its customers, and the potential for operating synergies and
cross-marketing of products and services across the combined company;
|
|
|
|
the continued representation of Firstbanks management and directors on the management team and board of directors of the combined entity, with
Firstbank directors to comprise half of the combined companys board of directors immediately following the merger in order to continue to influence the actions and profitability of the combined entity;
|
|
|
|
the shared community banking cultures of Firstbank and Mercantile;
|
|
|
|
the likelihood of successful integration and operation of the combined company;
|
|
|
|
the likelihood of obtaining the regulatory approvals needed to complete the transaction;
|
|
|
|
the analyses presented by Varnum LLP, Firstbanks outside legal counsel, as to the structure of the merger, the merger agreement, duties of the
Firstbank board of directors under applicable law, and the process that Firstbank (including its board of directors) employed in considering potential strategic alternatives, including the merger with Mercantile;
|
|
|
|
the thorough process conducted by Firstbank, with the assistance of its advisors;
|
|
|
|
certain structural protections included in the merger agreement, including the ability of Firstbank to terminate the merger agreement in certain
circumstances; and
|
|
|
|
the financial analyses reviewed and discussed with the Firstbank board of directors by representatives of Sandler ONeill, as well as the oral
opinion of Sandler ONeill rendered to the Firstbank board of directors on August 14, 2013 (which was subsequently confirmed in writing by delivery of Sandler ONeills written opinion dated August 16, 2013) with
respect to the fairness of the exchange ratio in the merger pursuant to the merger agreement, from a financial point of view, to the holders of Firstbank common stock.
|
The Firstbank board of directors also considered a number of potential risks and uncertainties associated with the merger in connection
with its deliberation of the proposed transaction, including, without limitation, the following:
|
|
|
the challenges of integrating Firstbanks business, operations and employees with those of Mercantile;
|
|
|
|
the need to obtain approval by shareholders of Firstbank and Mercantile, as well as regulatory approvals in order to complete the transaction;
|
71
|
|
|
the risks associated with the operations of the combined company including the ability to achieve the anticipated cost savings;
|
|
|
|
the risks and costs associated with entry into the merger agreement and restrictions on the conduct of Firstbanks business before the merger is
completed;
|
|
|
|
the impact that provisions of the merger agreement relating to payment of a termination fee by Firstbank may have on Firstbank receiving superior
acquisition offers;
|
|
|
|
the Boards review of the potential costs associated with executing the merger agreement, including change in control payments and related costs,
as well as estimated advisor fees;
|
|
|
|
that the fixed exchange ratio, by its nature, would not adjust upwards to compensate for declines in Mercantiles stock price prior to the
completion of the merger, meaning that Firstbank shareholders would not be protected against decreases in Mercantiles stock price prior to the completion of the merger; based upon its review of Mercantile and its historical stock prices and
prospects, the Firstbank board of directors believes that a fixed exchange ratio is appropriate and in the best interests of Firstbank shareholders and achieves the intended 48% percentage ownership by Firstbank shareholders of the combined company;
and
|
|
|
|
the possibility of litigation in connection with the merger.
|
The Firstbank board of directors also noted that it could terminate the merger agreement in order to concurrently enter into an agreement
with respect to an unsolicited acquisition proposal that was received and considered by Firstbank in compliance with the nonsolicitation provisions of the merger agreement and that would, if consummated, result in a transaction that is more
favorable to Firstbank shareholders than the merger. This termination right is conditioned on Firstbank providing notice of the unsolicited acquisition proposal to Mercantile, Mercantile not making a revised offer to Firstbank that is at least as
favorable as the unsolicited acquisition proposal and Firstbank paying a $7.9 million break-up fee to Mercantile. The amount of this potential fee was negotiated at arms-length and was deemed by the Firstbank board of directors to be
reasonable. As of the date of this joint proxy statement and prospectus, no unsolicited acquisition proposals have been received. See The Merger Agreement Termination Fees and Expenses; Liability for Breach on page 119 for more
information.
Based on the factors described above, the board of directors of Firstbank determined that the merger with
Mercantile would be advisable and in the best interests of Firstbank shareholders and unanimously approved the merger agreement.
The foregoing discussion of the information and factors considered by Firstbanks board of directors is not intended to be exhaustive but includes the material factors considered by Firstbanks
board of directors. In view of the wide variety of the factors considered in connection with its evaluation of the merger and the complexity of these matters, Firstbanks board of directors did not find it useful, and did not attempt, to
quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, the individual members of Firstbanks board of directors may have given different weight to different factors. Firstbanks
board of directors conducted an overall analysis of the factors described above including thorough discussions with, and questioning of, Firstbank management and Firstbanks legal and financial advisors, and considered the factors overall to be
favorable to, and to support, its determination.
The foregoing explanation of Firstbanks board of directors
reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled Special Note Regarding Forward-Looking Statements.
72
Opinion of Firstbanks Financial Advisor in Connection with the Merger
By letter dated February 4, 2013, Firstbank retained Sandler ONeill to act as its financial advisor in
connection with Firstbanks merger with Mercantile. Sandler ONeill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business,
Sandler ONeill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
Sandler ONeill acted as financial advisor to Firstbank in connection with the proposed transaction and participated in certain of
the negotiations leading to the execution of the merger agreement. At a meeting of the Firstbank board of directors on August 14, 2013, Sandler ONeill delivered to the Firstbank board of directors its oral opinion, followed by delivery of
its written opinion, that, as of such date, the exchange ratio was fair to the holders of Firstbank common stock from a financial point of view.
The full text of Sandler ONeills written opinion dated August 14, 2013 is attached
as
Annex D
to this proxy statement. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler ONeill in rendering its opinion. The
description of the opinion set forth below is qualified in its entirety by reference to the opinion. Firstbank shareholders are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.
Sandler ONeills opinion speaks only as of the date of the opinion. The opinion was directed to the Firstbank board of
directors and is directed only to the fairness of the common stock consideration to be paid to the holders of Firstbank common stock from a financial point of view. It does not address the underlying business decision of Firstbank to engage in the
merger or any other aspect of the merger and is not a recommendation to any Firstbank shareholder as to how such shareholder should vote with respect to the merger or any other matter.
In connection with its opinion on August 14, 2013, Sandler ONeill reviewed and considered, among other things:
|
(2)
|
certain financial statements and other historical financial information of Firstbank that Sandler ONeill deemed relevant;
|
|
(3)
|
certain financial statements and other historical financial information of Mercantile that Sandler ONeill deemed relevant;
|
|
(4)
|
internal financial projections for Firstbank for the years ending December 31, 2013 through 2018 as provided by with senior management of Firstbank;
|
|
(5)
|
internal financial projections for Mercantile for the year ended December 31, 2013 through 2018 as provided by with senior management of Mercantile;
|
|
(6)
|
the pro forma financial impact of the Merger on the combined company based on assumptions relating to transaction expenses, purchase accounting adjustments, cost
savings and other synergies as determined by the senior management of Firstbank and Mercantile;
|
|
(7)
|
a comparison of certain financial and other information for Firstbank and Mercantile with similar publicly available information for certain other banking institutions,
the securities of which are publicly traded;
|
|
(8)
|
the terms and structures of other recent mergers and acquisition transactions in the banking sector;
|
|
(9)
|
the current market environment generally and in the banking sector in particular; and
|
|
(10)
|
such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler ONeill considered relevant.
|
73
Sandler ONeill also discussed with certain members of senior management of Firstbank
the business, financial condition, results of operations and prospects of Firstbank and held similar discussions with the senior management of Mercantile regarding the business, financial condition, results of operations and prospects of Mercantile.
In performing its review, Sandler ONeill relied upon the accuracy and completeness of all of the financial and other
information that was available to it from public sources, that was provided to it by Firstbank and Mercantile or that was otherwise reviewed by it and assumed such accuracy and completeness for purposes of rendering its opinion. Sandler ONeill
further relied on the assurances of the management of Firstbank and Mercantile that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading in any material respect. Sandler ONeill did
not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Firstbank or Mercantile or any of their respective subsidiaries. Sandler ONeill did not make
an independent evaluation of the adequacy of the allowance for loan losses of Firstbank and Mercantile or the combined entity after the Merger and did not review any individual credit files relating to Firstbank and Mercantile. Sandler ONeill
has assumed, with Firstbanks consent, that the respective allowances for loan losses for both Firstbank and Mercantile are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.
In preparing its analyses, Sandler ONeill used internal financial projections as provided by the senior managements of Firstbank
and Mercantile. Sandler ONeill also received and used in its analyses certain projections of transaction costs, purchase accounting adjustments, expected cost savings and other synergies which were prepared by and/or reviewed with
representatives and senior management of Mercantile and Firstbank. With respect to those projections, estimates and judgments, the respective managements of Firstbank and Mercantile confirmed those projections, estimates and judgments reflected the
best currently available estimates and judgments of those respective managements of the future financial performance of Firstbank and Mercantile, respectively, and Sandler ONeill has assumed that such performance would be achieved. Sandler
ONeill expressed no opinion as to such estimates or the assumptions on which they were based. Sandler ONeill assumed that there has been no material change in the respective assets, liabilities, financial condition, results of
operations, business or prospects of Firstbank and Mercantile since the date of the most recent financial data made available to it. Sandler ONeill also assumed in all respects material to its analysis that Firstbank and Mercantile would
remain as going concerns for all periods relevant to its analyses. Sandler ONeill expressed no opinion as to any of the legal, accounting and tax matters relating to the Merger and any other transactions contemplated in connection therewith.
Sandler ONeills analyses and the views expressed herein were necessarily based on financial, economic,
regulatory, market and other conditions as in effect on, and the information made available to it as of, the date of its opinion. Events occurring after the date of Sandler ONeills opinion could materially affect its opinion. Sandler
ONeill has not undertaken to update, revise, reaffirm or withdraw this opinion or otherwise comment upon events occurring after the date hereof.
Sandler ONeill has acted as Firstbanks financial advisor in connection with the Merger and a significant portion of its fees are contingent upon closing of the Merger. Sandler ONeill
will receive a fee from Firstbank for providing this opinion. Firstbank has also agreed to indemnify Sandler ONeill against certain liabilities arising out of its engagement. In the ordinary course of Sandler ONeills business as a
broker-dealer, it may purchase securities from and sell securities to Firstbank and Mercantile and their affiliates. Sandler ONeill may also actively trade the equity and debt securities of Firstbank and Mercantile or their affiliates for its
own account and for the accounts of its customers.
Sandler ONeills opinion was directed to the Board of Directors
of Firstbank in connection with its consideration of the Merger and does not constitute a recommendation to any shareholder of Firstbank as to how such shareholder should vote at any meeting of Firstbank shareholders called to consider and vote upon
the Merger. Sandler ONeills opinion is directed only to the fairness, from a financial point of view, of the
74
Exchange Ratio to holders of Firstbank common stock and does not address the underlying business decision of Firstbank to engage in the Merger, the relative merits of the Merger as compared to
any other alternative business strategies that might exist for Firstbank or the effect of any other transaction in which Firstbank might engage. This opinion shall not be reproduced or used for any other purposes, without Sandler ONeills
prior written consent. This Opinion has been approved by Sandler ONeills fairness opinion committee. Sandler ONeill does not express any opinion as to the fairness of the amount or nature of the compensation to be received in the
Merger by Firstbanks officers, directors, or employees, or class of such persons, relative to the compensation to be received in the Merger by any other shareholders of Firstbank.
In rendering its August 14, 2013 opinion, Sandler ONeill performed a variety of financial analyses. The following is a summary
of the material analyses performed by Sandler ONeill, but is not a complete description of all the analyses underlying Sandler ONeills opinion. The summary includes information presented in tabular format.
In order to fully
understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses.
The preparation of a fairness opinion is a complex process
involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. In arriving at its opinion, Sandler ONeill did not attribute any
particular weight to any analysis or factor that it considered. Rather Sandler ONeill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler ONeill did not form an opinion as to whether any
individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion; rather Sandler ONeill made its determination as to the fairness of the common stock consideration on the basis of its
experience and professional judgment after considering the results of all its analyses taken as a whole. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler ONeill believes that its
analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could
create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler ONeills comparative analyses described below is identical to Firstbank or Mercantile and no transaction is identical to the
merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public
trading values or merger transaction values, as the case may be, of Firstbank or Mercantile and the companies to which they are being compared.
In performing its analyses, Sandler ONeill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be
predicted and are beyond the control of Firstbank, Mercantile and Sandler ONeill. The analysis performed by Sandler ONeill is not necessarily indicative of actual values or future results, both of which may be significantly more or less
favorable than suggested by such analyses. Sandler ONeill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Firstbank board of directors at the August 14, 2013 meeting. Estimates on the
values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different.
Accordingly, Sandler ONeills analyses do not necessarily reflect the value of Firstbanks common stock or the prices at which Firstbanks common stock may be sold at any time. The analysis and opinion of Sandler ONeill
was among a number of factors taken into consideration by the Firstbank board of directors in making its determination to adopt the plan of merger contained in the merger agreement and the analyses described below should not be viewed as
determinative of the decision the Firstbank board of directors with respect to the fairness of the merger.
At the
August 14, 2013 meeting of the Firstbank board of directors, Sandler ONeill presented certain financial analyses of the merger. The summary below is not a complete description of the analyses underlying the opinions of Sandler
ONeill or the presentation made by Sandler ONeill to the Firstbank board of directors, but is instead a summary of the material analyses performed and presented in connection with the opinion. Sandler ONeill has reviewed and
consented to the inclusion in this joint proxy statement and prospectus of the disclosure below relating to its opinion.
75
Summary of Proposal
Sandler ONeill reviewed the financial terms of the proposed transaction. Shares of Firstbank common stock issued and outstanding
immediately prior to the merger will be converted into the right to receive 1.0 share of Mercantile common stock. The aggregate transaction value was approximately $155.0 million¹, or $18.87 per share. Based upon financial information as or for
the quarter ended June 30, 2013, Sandler ONeill calculated the following transaction ratios:
|
|
|
|
|
|
|
|
|
|
|
Implied
Transaction
Multiples
|
|
Nationwide
Transactions
4
|
|
Midwest
Transactions
5
|
|
Merger
Transactions
6
|
Price / Last Twelve Months Earnings Per Share:
|
|
13.8x
|
|
18.7x
|
|
14.6x
|
|
15.4x
|
Price / 2013 Estimated Earnings Per Share²:
|
|
13.1x
|
|
20.0x
|
|
19.3x
|
|
15.4x
|
Price / 2013 Management Estimated Earnings Per Share:
|
|
12.7x
|
|
N/A
|
|
N/A
|
|
N/A
|
Price / Book Value Per Share:
|
|
115%
|
|
123%
|
|
110%
|
|
117%
|
Price / Tangible Book Value Per Share:
|
|
158%
|
|
136%
|
|
124%
|
|
147%
|
Tangible Book Premium / Core Deposits³:
|
|
5.4%
|
|
5.2%
|
|
2.3%
|
|
7.4%
|
Market Premium as of August 12, 2013:
|
|
8%
|
|
38%
|
|
25%
|
|
20%
|
60-Day Average Market Premium as of August 12, 2013:
|
|
33%
|
|
N/A
|
|
N/A
|
|
N/A
|
Note:
¹
|
Based on 8,070,268 shares outstanding plus $2.604mm attributable to Firstbank options
|
²
|
2013E EPS based on average published I/B/E/S estimates
|
³
|
Core deposits defined as total deposits less jumbo CDs greater than $100,000
|
4
|
Nationwide Transactions Since January 1, 2012 with Deal Value $50mm $300mm and Target NPAs/Assets < 5.0%
|
5
|
Midwest Transactions Since January 1, 2012 with Deal Value > $25mm and Target NPAs/Assets < 5.0%
|
6
|
Includes Merger Transactions (targets pro forma ownership is greater than 40%) Since January 1, 2006 with a Bank or Thrift Target
|
Firstbank Stock Price Performance
Sandler ONeill reviewed the history of the publicly reported trading prices of Firstbank common stock for the one-year period ended
August 12, 2013. Sandler ONeill also reviewed the history of the publicly reported trading prices of Firstbanks common stock for the three-year period and the five-year period ended August 12, 2013. Sandler ONeill
then compared the relationship between the movements in the price of Firstbanks common stock against the movements in the prices of Mercantiles common stock, its peer group and the S&P 500 Index.
|
|
|
|
|
|
|
|
|
Firstbank One Year Stock Performance
|
|
|
|
Beginning Index Value
August 12, 2012
|
|
|
Ending Index Value
August 12, 2013
|
|
Firstbank
|
|
|
100.0
|
%
|
|
|
181.9
|
%
|
Mercantile
|
|
|
100.0
|
%
|
|
|
111.7
|
%
|
Firstbank Peer Group
|
|
|
100.0
|
%
|
|
|
118.7
|
%
|
S&P 500 Index
|
|
|
100.0
|
%
|
|
|
120.1
|
%
|
|
|
|
|
|
|
|
|
|
Firstbank Three Year Stock Performance
|
|
|
|
Beginning Index Value
August 12, 2010
|
|
|
Ending Index Value
August 12, 2013
|
|
Firstbank
|
|
|
100.0
|
%
|
|
|
357.1
|
%
|
Mercantile
|
|
|
100.0
|
%
|
|
|
351.4
|
%
|
Firstbank Peer Group
|
|
|
100.0
|
%
|
|
|
166.3
|
%
|
S&P 500 Index
|
|
|
100.0
|
%
|
|
|
155.9
|
%
|
76
|
|
|
|
|
|
|
|
|
Firstbank Five Year Stock Performance
|
|
|
|
Beginning Index Value
August 12, 2008
|
|
|
Ending Index Value
August 12, 2013
|
|
Firstbank
|
|
|
100.0
|
%
|
|
|
167.2
|
%
|
Mercantile
|
|
|
100.0
|
%
|
|
|
198.6
|
%
|
Firstbank Peer Group
|
|
|
100.0
|
%
|
|
|
105.2
|
%
|
S&P 500 Index
|
|
|
100.0
|
%
|
|
|
130.3
|
%
|
Sandler ONeill noted that the above analysis showed that Firstbank stock outperformed Mercantile
and the indices to which Firstbank was compared for the one year period and for the three year period and outperformed its peer group and the S&P 500 Index for the five year period.
Firstbank Comparable Company Analysis
Sandler ONeill also used publicly available information to compare selected financial and market trading information for Firstbank and a group of financial institutions selected by Sandler
ONeill.
The Firstbank peer group was selected by Sandler ONeill and consisted of the following publicly-traded
Midwest commercial banks with total assets between $1 billion and $2 billion and nonperforming assets to total assets less than 5.0%. The group excluded thrifts and merger targets:
|
|
|
Bank of Kentucky Financial Corporation
|
|
MidWestOne Financial Group, Inc.
|
First Business Financial Services, Inc.
|
|
MutualFirst Financial, Inc.
|
First Citizens Banc Corp
|
|
Security National Corporation
|
Horizon Bancorp
|
|
STAR Financial Group, Inc.
|
Mercantile Bank Corporation
|
|
Tri City Bankshares Corporation
|
Marquette National Corporation
|
|
West Bancorporation, Inc.
|
Merchants Financial Group, Inc.
|
|
|
77
The analysis compared publicly available financial information for Firstbank and the median
financial and market trading data for the Firstbank peer group as of and for the last twelve months ended June 30, 2013. The table below sets forth the data for Firstbank and the Firstbank peer group as of and for the last twelve months ended
June 30, 2013, with pricing data as of August 12, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Data for the Period Ending June 30, 2013 or
Most Recent Quarter Pricing Data as of August 12,
2013
Dollar Values in Millions
|
|
|
|
|
|
|
|
|
|
|
Capital Position
|
|
|
LTM Profitability
|
|
|
Asset Quality
|
|
|
Valuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
TCE/
TA
|
|
|
Leverage
Ratio
|
|
|
Total
RBC
Ratio
|
|
|
ROAA
|
|
|
ROAE
|
|
|
Net
Interest
Margin
|
|
|
Efficiency
Ratio
|
|
|
LLR/
Gross
Loans
|
|
|
NPAs/
Total
Assets
|
|
|
NCOs/
Avg.
Loans
|
|
|
Tang.
Book
Value
|
|
|
LTM
EPS
|
|
|
2013
Est.
EPS
|
|
|
Current
Dividend
Yield
|
|
|
LTM
Dividend
Ratio
|
|
|
Market
Value
|
|
Company
|
|
City, State
|
|
Ticker
|
|
($)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(x)
|
|
|
(x)
|
|
|
(%)
|
|
|
(%)
|
|
|
($)
|
|
Horizon Bancorp
|
|
Michigan City, IN
|
|
HBNC
|
|
|
1,786
|
|
|
|
7.05
|
|
|
|
9.73
|
|
|
|
15.33
|
|
|
|
1.18
|
|
|
|
13.27
|
|
|
|
4.07
|
|
|
|
59.9
|
|
|
|
1.67
|
|
|
|
1.49
|
|
|
|
0.45
|
|
|
|
161
|
|
|
|
10.1
|
|
|
|
10.1
|
|
|
|
1.7
|
|
|
|
17.4
|
|
|
|
202
|
|
Bank of Kentucky Financial Corporation
|
|
Crestview
Hills, KY
|
|
BKYF
|
|
|
1,766
|
|
|
|
8.39
|
|
|
|
8.99
|
|
|
|
13.18
|
|
|
|
1.00
|
|
|
|
10.48
|
|
|
|
3.53
|
|
|
|
58.2
|
|
|
|
1.39
|
|
|
|
1.78
|
|
|
|
0.75
|
|
|
|
142
|
|
|
|
11.7
|
|
|
|
11.5
|
|
|
|
2.5
|
|
|
|
35.3
|
|
|
|
208
|
|
MidWestOne Financial Group, Inc.
|
|
Iowa City, IA
|
|
MOFG
|
|
|
1,742
|
|
|
|
9.42
|
|
|
|
10.01
|
|
|
|
14.23
|
|
|
|
1.03
|
|
|
|
10.44
|
|
|
|
3.45
|
|
|
|
58.0
|
|
|
|
1.71
|
|
|
|
0.75
|
|
|
|
0.11
|
|
|
|
137
|
|
|
|
12.5
|
|
|
|
12.4
|
|
|
|
1.9
|
|
|
|
22.2
|
|
|
|
224
|
|
STAR Financial Group, Inc.
|
|
Fort Wayne, IN
|
|
SFIGA
|
|
|
1,667
|
|
|
|
9.16
|
|
|
|
10.07
|
|
|
|
14.15
|
|
|
|
0.76
|
|
|
|
8.04
|
|
|
|
3.66
|
|
|
|
75.9
|
|
|
|
1.91
|
|
|
|
1.26
|
|
|
|
0.34
|
|
|
|
61
|
|
|
|
7.4
|
|
|
|
NA
|
|
|
|
0.0
|
|
|
|
37.2
|
|
|
|
93
|
|
Marquette National Corporation
|
|
Chicago, IL
|
|
MNAT
|
|
|
1,558
|
|
|
|
4.90
|
|
|
|
7.98
|
|
|
|
15.11
|
|
|
|
0.28
|
|
|
|
3.30
|
|
|
|
3.51
|
|
|
|
78.8
|
|
|
|
2.67
|
|
|
|
4.25
|
|
|
|
1.02
|
|
|
|
79
|
|
|
|
23.7
|
|
|
|
NA
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
59
|
|
West Bancorporation, Inc.
|
|
West Des Moines,
IA
|
|
WTBA
|
|
|
1,452
|
|
|
|
8.38
|
|
|
|
9.84
|
|
|
|
13.82
|
|
|
|
1.15
|
|
|
|
11.91
|
|
|
|
3.40
|
|
|
|
52.3
|
|
|
|
1.64
|
|
|
|
0.95
|
|
|
|
0.02
|
|
|
|
180
|
|
|
|
14.9
|
|
|
|
13.9
|
|
|
|
3.2
|
|
|
|
44.6
|
|
|
|
219
|
|
MutualFirst Financial, Inc.
|
|
Muncie, IN
|
|
MFSF
|
|
|
1,408
|
|
|
|
7.64
|
|
|
|
9.15
|
|
|
|
14.90
|
|
|
|
0.58
|
|
|
|
5.98
|
|
|
|
3.07
|
|
|
|
72.1
|
|
|
|
1.60
|
|
|
|
2.33
|
|
|
|
0.47
|
|
|
|
100
|
|
|
|
15.8
|
|
|
|
16.5
|
|
|
|
1.6
|
|
|
|
25.0
|
|
|
|
108
|
|
Mercantile
|
|
Grand Rapids, MI
|
|
MBWM
|
|
|
1,344
|
|
|
|
11.23
|
|
|
|
12.52
|
|
|
|
15.43
|
|
|
|
1.01
|
|
|
|
9.57
|
|
|
|
3.65
|
|
|
|
68.2
|
|
|
|
2.36
|
|
|
|
4.27
|
|
|
|
0.16
|
|
|
|
109
|
|
|
|
11.7
|
|
|
|
11.1
|
|
|
|
2.5
|
|
|
|
26.1
|
|
|
|
164
|
|
Merchants Financial Group, Inc.
|
|
Winona, MN
|
|
MFGI
|
|
|
1,294
|
|
|
|
6.98
|
|
|
|
10.03
|
|
|
|
13.88
|
|
|
|
0.93
|
|
|
|
10.85
|
|
|
|
3.46
|
|
|
|
75.6
|
|
|
|
1.24
|
|
|
|
1.09
|
|
|
|
0.13
|
|
|
|
99
|
|
|
|
7.1
|
|
|
|
NA
|
|
|
|
2.6
|
|
|
|
17.9
|
|
|
|
87
|
|
First Business Financial Services, Inc.
|
|
Madison, WI
|
|
FBIZ
|
|
|
1,276
|
|
|
|
8.09
|
|
|
|
9.17
|
|
|
|
13.12
|
|
|
|
0.95
|
|
|
|
12.81
|
|
|
|
3.49
|
|
|
|
59.0
|
|
|
|
1.60
|
|
|
|
1.01
|
|
|
|
0.16
|
|
|
|
124
|
|
|
|
9.4
|
|
|
|
10.0
|
|
|
|
1.7
|
|
|
|
12.1
|
|
|
|
128
|
|
Tri City Bankshares Corporation
|
|
Oak Creek, WI
|
|
TRCY
|
|
|
1,196
|
|
|
|
9.22
|
|
|
|
9.24
|
|
|
|
16.09
|
|
|
|
0.59
|
|
|
|
5.77
|
|
|
|
3.66
|
|
|
|
71.5
|
|
|
|
1.65
|
|
|
|
3.80
|
|
|
|
1.06
|
|
|
|
109
|
|
|
|
17.1
|
|
|
|
NA
|
|
|
|
0.0
|
|
|
|
241.8
|
|
|
|
120
|
|
Security National Corporation
|
|
Dakota Dunes, SD
|
|
SNLC
|
|
|
1,193
|
|
|
|
9.39
|
|
|
|
9.35
|
|
|
|
17.17
|
|
|
|
1.08
|
|
|
|
11.13
|
|
|
|
2.99
|
|
|
|
60.8
|
|
|
|
2.55
|
|
|
|
0.55
|
|
|
|
(0.06
|
)
|
|
|
125
|
|
|
|
11.0
|
|
|
|
NA
|
|
|
|
1.3
|
|
|
|
101.0
|
|
|
|
140
|
|
First Citizens Banc Corp
|
|
Sandusky, OH
|
|
FCZA
|
|
|
1,174
|
|
|
|
4.98
|
|
|
|
8.96
|
|
|
|
15.14
|
|
|
|
0.54
|
|
|
|
5.94
|
|
|
|
3.84
|
|
|
|
72.8
|
|
|
|
2.44
|
|
|
|
3.12
|
|
|
|
0.26
|
|
|
|
93
|
|
|
|
9.2
|
|
|
|
9.2
|
|
|
|
2.3
|
|
|
|
18.7
|
|
|
|
53
|
|
|
|
|
|
High
|
|
|
1,786
|
|
|
|
11.23
|
|
|
|
12.52
|
|
|
|
17.17
|
|
|
|
1.18
|
|
|
|
13.27
|
|
|
|
4.07
|
|
|
|
78.8
|
|
|
|
2.67
|
|
|
|
4.27
|
|
|
|
1.06
|
|
|
|
180
|
|
|
|
23.7
|
|
|
|
16.5
|
|
|
|
3.2
|
|
|
|
241.8
|
|
|
|
224
|
|
|
|
|
|
Low
|
|
|
1,174
|
|
|
|
4.90
|
|
|
|
7.98
|
|
|
|
13.12
|
|
|
|
0.28
|
|
|
|
3.30
|
|
|
|
2.99
|
|
|
|
52.3
|
|
|
|
1.24
|
|
|
|
0.55
|
|
|
|
(0.06
|
)
|
|
|
61
|
|
|
|
7.1
|
|
|
|
9.2
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
53
|
|
|
|
|
|
Mean
|
|
|
1,450
|
|
|
|
8.06
|
|
|
|
9.62
|
|
|
|
14.73
|
|
|
|
0.85
|
|
|
|
9.19
|
|
|
|
3.52
|
|
|
|
66.4
|
|
|
|
1.88
|
|
|
|
2.05
|
|
|
|
0.38
|
|
|
|
117
|
|
|
|
12.4
|
|
|
|
11.8
|
|
|
|
1.6
|
|
|
|
46.1
|
|
|
|
139
|
|
|
|
|
|
Median
|
|
|
1,408
|
|
|
|
8.38
|
|
|
|
9.35
|
|
|
|
14.90
|
|
|
|
0.95
|
|
|
|
10.44
|
|
|
|
3.51
|
|
|
|
68.2
|
|
|
|
1.67
|
|
|
|
1.49
|
|
|
|
0.26
|
|
|
|
109
|
|
|
|
11.7
|
|
|
|
11.3
|
|
|
|
1.7
|
|
|
|
25.0
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Firstbank
|
|
Alma, MI
|
|
|
|
|
1,457
|
|
|
|
6.77
|
|
|
|
9.01
|
|
|
|
14.87
|
|
|
|
0.80
|
|
|
|
8.18
|
|
|
|
3.90
|
|
|
|
65.1
|
|
|
|
2.07
|
|
|
|
2.48
|
|
|
|
0.60
|
|
|
|
146
|
|
|
|
12.7
|
|
|
|
12.1
|
|
|
|
1.4
|
|
|
|
24.1
|
|
|
|
141
|
|
|
|
Firstbank Ranking out of 14:
|
|
|
6
|
|
|
|
12
|
|
|
|
11
|
|
|
|
8
|
|
|
|
9
|
|
|
|
9
|
|
|
|
2
|
|
|
|
7
|
|
|
|
5
|
|
|
|
10
|
|
|
|
11
|
|
|
|
3
|
|
|
|
5
|
|
|
|
4
|
|
|
|
10
|
|
|
|
8
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
Mercantile Stock Price Performance
Sandler ONeill reviewed the history of the publicly reported trading prices of Mercantile common stock for the one-year period ended
August 12, 2013. Sandler ONeill also reviewed the history of the publicly reported trading prices of Mercantiles common stock for the three-year period and the five-year period ended August 12, 2013. Sandler ONeill
then compared the relationship between the movements in the price of Mercantiles common stock against the movements in the prices of Firstbanks common stock, its peer group and the S&P 500 Index.
|
|
|
|
|
|
|
|
|
Mercantile One Year Stock Performance
|
|
|
|
Beginning Index Value
August 12, 2013
|
|
|
Ending Index Value
August 12, 2013
|
|
Mercantile
|
|
|
100.0
|
%
|
|
|
111.7
|
%
|
Firstbank
|
|
|
100.0
|
%
|
|
|
181.9
|
%
|
Mercantile Peer Group
|
|
|
100.0
|
%
|
|
|
122.7
|
%
|
S&P 500 Index
|
|
|
100.0
|
%
|
|
|
118.7
|
%
|
|
|
|
|
|
|
|
|
|
Mercantile Three Year Stock Performance
|
|
|
|
Beginning Index Value
August 12, 2010
|
|
|
Ending Index Value
August 12, 2013
|
|
Mercantile
|
|
|
100.0
|
%
|
|
|
351.4
|
%
|
Firstbank
|
|
|
100.0
|
%
|
|
|
357.1
|
%
|
Mercantile Peer Group
|
|
|
100.0
|
%
|
|
|
164.7
|
%
|
S&P 500 Index
|
|
|
100.0
|
%
|
|
|
155.9
|
%
|
|
|
|
|
|
|
|
|
|
Mercantile Five Year Stock Performance
|
|
|
|
Beginning Index Value
August 12, 2008
|
|
|
Ending Index Value
August 12, 2013
|
|
Mercantile
|
|
|
100.0
|
%
|
|
|
198.6
|
%
|
Firstbank
|
|
|
100.0
|
%
|
|
|
167.2
|
%
|
Mercantile Peer Group
|
|
|
100.0
|
%
|
|
|
103.3
|
%
|
S&P 500 Index
|
|
|
100.0
|
%
|
|
|
130.3
|
%
|
Sandler ONeill noted that the above analysis showed that Mercantile stock outperformed Firstbank
and the indices to which it was compared for the five year period and underperformed Firstbank, and outperformed its peer group and the S&P 500 Index for the three year period. Sandler ONeill also noted that the above analysis showed that
Mercantile stock underperformed Firstbank and the indices to which it was compared for the one year period.
Mercantile
Comparable Company Analysis
Sandler ONeill also used publicly available information to compare selected
financial and market trading information for Mercantile and a group of financial institutions selected by Sandler ONeill.
The Mercantile peer group was selected by Sandler ONeill and consisted of the following publicly-traded Midwest commercial banks
with total assets between $1 billion and $2 billion and nonperforming assets to total assets less than 5.0%. The group excluded thrifts and merger targets:
|
|
|
Bank of Kentucky Financial Corporation
|
|
MidWestOne Financial Group, Inc.
|
First Business Financial Services, Inc.
|
|
MutualFirst Financial, Inc.
|
First Citizens Banc Corp
|
|
Security National Corporation
|
Firstbank
|
|
STAR Financial Group, Inc.
|
Horizon Bancorp
|
|
Tri City Bankshares Corporation
|
Marquette National Corporation
|
|
West Bancorporation, Inc.
|
Merchants Financial Group, Inc.
|
|
|
79
The analysis compared publicly available financial information for Mercantile and the median
financial and market trading data for the Mercantile peer group as of and for the last twelve months ended June 30, 2013. The table below sets forth the data for Mercantile and the Mercantile peer group as of and for the last twelve months
ended June 30, 2013, with pricing data as of August 12, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Data for the Period Ending June 30, 2013
or Most Recent Quarter Pricing Data as of August 12,
2013
Dollar Values in Millions
|
|
|
|
|
|
|
|
|
|
|
Capital Position
|
|
|
LTM Profitability
|
|
|
Asset Quality
|
|
|
Valuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
TCE/
TA
|
|
|
|
Leverage
Ratio
|
|
|
|
Total
RBC
Ratio
|
|
|
|
ROAA
|
|
|
|
ROAE
|
|
|
|
Net
Interest
Margin
|
|
|
|
Efficiency
Ratio
|
|
|
|
LLR/
Gross
Loans
|
|
|
|
NPAs/
Total
Assets
|
|
|
|
NCOs/
Avg.
Loans
|
|
|
|
Tang.
Book
Value
|
|
|
|
LTM
EPS
|
|
|
|
2013
Est.
EPS
|
|
|
|
Current
Dividend
Yield
|
|
|
|
LTM
Dividend
Ratio
|
|
|
|
Market
Value
|
|
Company
|
|
City, State
|
|
Ticker
|
|
($)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(x)
|
|
|
(x)
|
|
|
(%)
|
|
|
(%)
|
|
|
($)
|
|
Horizon Bancorp
|
|
Michigan City, IN
|
|
HBNC
|
|
|
1,786
|
|
|
|
7.05
|
|
|
|
9.73
|
|
|
|
15.33
|
|
|
|
1.18
|
|
|
|
13.27
|
|
|
|
4.07
|
|
|
|
59.9
|
|
|
|
1.67
|
|
|
|
1.49
|
|
|
|
0.45
|
|
|
|
161
|
|
|
|
10.1
|
|
|
|
10.1
|
|
|
|
1.7
|
|
|
|
17.4
|
|
|
|
202
|
|
Bank of Kentucky Financial Corporation
|
|
Crestview Hills, KY
|
|
BKYF
|
|
|
1,766
|
|
|
|
8.39
|
|
|
|
8.99
|
|
|
|
13.18
|
|
|
|
1.00
|
|
|
|
10.48
|
|
|
|
3.53
|
|
|
|
58.2
|
|
|
|
1.39
|
|
|
|
1.78
|
|
|
|
0.75
|
|
|
|
142
|
|
|
|
11.7
|
|
|
|
11.5
|
|
|
|
2.5
|
|
|
|
35.3
|
|
|
|
208
|
|
MidWestOne Financial Group, Inc.
|
|
Iowa City, IA
|
|
MOFG
|
|
|
1,742
|
|
|
|
9.42
|
|
|
|
10.01
|
|
|
|
14.23
|
|
|
|
1.03
|
|
|
|
10.44
|
|
|
|
3.45
|
|
|
|
58.0
|
|
|
|
1.71
|
|
|
|
0.75
|
|
|
|
0.11
|
|
|
|
137
|
|
|
|
12.5
|
|
|
|
12.4
|
|
|
|
1.9
|
|
|
|
22.2
|
|
|
|
224
|
|
STAR Financial Group, Inc.
|
|
Fort Wayne, IN
|
|
SFIGA
|
|
|
1,667
|
|
|
|
9.16
|
|
|
|
10.07
|
|
|
|
14.15
|
|
|
|
0.76
|
|
|
|
8.04
|
|
|
|
3.66
|
|
|
|
75.9
|
|
|
|
1.91
|
|
|
|
1.26
|
|
|
|
0.34
|
|
|
|
61
|
|
|
|
7.4
|
|
|
|
NA
|
|
|
|
0.0
|
|
|
|
37.2
|
|
|
|
93
|
|
Marquette National Corporation
|
|
Chicago, IL
|
|
MNAT
|
|
|
1,558
|
|
|
|
4.90
|
|
|
|
7.98
|
|
|
|
15.11
|
|
|
|
0.28
|
|
|
|
3.30
|
|
|
|
3.51
|
|
|
|
78.8
|
|
|
|
2.67
|
|
|
|
4.25
|
|
|
|
1.02
|
|
|
|
79
|
|
|
|
23.7
|
|
|
|
NA
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
59
|
|
Firstbank
|
|
Alma, MI
|
|
FBMI
|
|
|
1,457
|
|
|
|
6.77
|
|
|
|
9.01
|
|
|
|
14.87
|
|
|
|
0.80
|
|
|
|
8.18
|
|
|
|
3.90
|
|
|
|
65.1
|
|
|
|
2.07
|
|
|
|
2.48
|
|
|
|
0.60
|
|
|
|
146
|
|
|
|
12.7
|
|
|
|
12.1
|
|
|
|
1.4
|
|
|
|
24.1
|
|
|
|
141
|
|
West Bancorporation, Inc.
|
|
West Des Moines,
IA
|
|
WTBA
|
|
|
1,452
|
|
|
|
8.38
|
|
|
|
9.84
|
|
|
|
13.82
|
|
|
|
1.15
|
|
|
|
11.91
|
|
|
|
3.40
|
|
|
|
52.3
|
|
|
|
1.64
|
|
|
|
0.95
|
|
|
|
0.02
|
|
|
|
180
|
|
|
|
14.9
|
|
|
|
13.9
|
|
|
|
3.2
|
|
|
|
44.6
|
|
|
|
219
|
|
MutualFirst Financial, Inc.
|
|
Muncie, IN
|
|
MFSF
|
|
|
1,408
|
|
|
|
7.64
|
|
|
|
9.15
|
|
|
|
14.90
|
|
|
|
0.58
|
|
|
|
5.98
|
|
|
|
3.07
|
|
|
|
72.1
|
|
|
|
1.60
|
|
|
|
2.33
|
|
|
|
0.47
|
|
|
|
100
|
|
|
|
15.8
|
|
|
|
16.5
|
|
|
|
1.6
|
|
|
|
25.0
|
|
|
|
108
|
|
Merchants Financial Group, Inc.
|
|
Winona, MN
|
|
MFGI
|
|
|
1,294
|
|
|
|
6.98
|
|
|
|
10.03
|
|
|
|
13.88
|
|
|
|
0.93
|
|
|
|
10.85
|
|
|
|
3.46
|
|
|
|
75.6
|
|
|
|
1.24
|
|
|
|
1.09
|
|
|
|
0.13
|
|
|
|
99
|
|
|
|
7.1
|
|
|
|
NA
|
|
|
|
2.6
|
|
|
|
17.9
|
|
|
|
87
|
|
First Business Financial Services, Inc.
|
|
Madison, WI
|
|
FBIZ
|
|
|
1,276
|
|
|
|
8.09
|
|
|
|
9.17
|
|
|
|
13.12
|
|
|
|
0.95
|
|
|
|
12.81
|
|
|
|
3.49
|
|
|
|
59.0
|
|
|
|
1.60
|
|
|
|
1.01
|
|
|
|
0.16
|
|
|
|
124
|
|
|
|
9.4
|
|
|
|
10.0
|
|
|
|
1.7
|
|
|
|
12.1
|
|
|
|
128
|
|
Tri City Bankshares Corporation
|
|
Oak Creek, WI
|
|
TRCY
|
|
|
1,196
|
|
|
|
9.22
|
|
|
|
9.24
|
|
|
|
16.09
|
|
|
|
0.59
|
|
|
|
5.77
|
|
|
|
3.66
|
|
|
|
71.5
|
|
|
|
1.65
|
|
|
|
3.80
|
|
|
|
1.06
|
|
|
|
109
|
|
|
|
17.1
|
|
|
|
NA
|
|
|
|
0.0
|
|
|
|
241.8
|
|
|
|
120
|
|
Security National Corporation
|
|
Dakota Dunes, SD
|
|
SNLC
|
|
|
1,193
|
|
|
|
9.39
|
|
|
|
9.35
|
|
|
|
17.17
|
|
|
|
1.08
|
|
|
|
11.13
|
|
|
|
2.99
|
|
|
|
60.8
|
|
|
|
2.55
|
|
|
|
0.55
|
|
|
|
(0.06
|
)
|
|
|
125
|
|
|
|
11.0
|
|
|
|
NA
|
|
|
|
1.3
|
|
|
|
101.0
|
|
|
|
140
|
|
First Citizens Banc Corp
|
|
Sandusky, OH
|
|
FCZA
|
|
|
1,174
|
|
|
|
4.98
|
|
|
|
8.96
|
|
|
|
15.14
|
|
|
|
0.54
|
|
|
|
5.94
|
|
|
|
3.84
|
|
|
|
72.8
|
|
|
|
2.44
|
|
|
|
3.12
|
|
|
|
0.26
|
|
|
|
93
|
|
|
|
9.2
|
|
|
|
9.2
|
|
|
|
2.3
|
|
|
|
18.7
|
|
|
|
53
|
|
|
|
|
|
High
|
|
|
1,786
|
|
|
|
9.42
|
|
|
|
10.07
|
|
|
|
17.17
|
|
|
|
1.18
|
|
|
|
13.27
|
|
|
|
4.07
|
|
|
|
78.8
|
|
|
|
2.67
|
|
|
|
4.25
|
|
|
|
1.06
|
|
|
|
180
|
|
|
|
23.7
|
|
|
|
16.5
|
|
|
|
3.2
|
|
|
|
241.8
|
|
|
|
224
|
|
|
|
|
|
Low
|
|
|
1,174
|
|
|
|
4.90
|
|
|
|
7.98
|
|
|
|
13.12
|
|
|
|
0.28
|
|
|
|
3.30
|
|
|
|
2.99
|
|
|
|
52.3
|
|
|
|
1.24
|
|
|
|
0.55
|
|
|
|
(0.06
|
)
|
|
|
61
|
|
|
|
7.1
|
|
|
|
9.2
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
53
|
|
|
|
|
|
Mean
|
|
|
1,459
|
|
|
|
7.72
|
|
|
|
9.35
|
|
|
|
14.69
|
|
|
|
0.84
|
|
|
|
9.09
|
|
|
|
3.54
|
|
|
|
66.2
|
|
|
|
1.86
|
|
|
|
1.91
|
|
|
|
0.41
|
|
|
|
120
|
|
|
|
12.5
|
|
|
|
12.0
|
|
|
|
1.5
|
|
|
|
45.9
|
|
|
|
137
|
|
|
|
|
|
Median
|
|
|
1,452
|
|
|
|
8.09
|
|
|
|
9.24
|
|
|
|
14.87
|
|
|
|
0.93
|
|
|
|
10.44
|
|
|
|
3.51
|
|
|
|
65.1
|
|
|
|
1.67
|
|
|
|
1.49
|
|
|
|
0.34
|
|
|
|
124
|
|
|
|
11.7
|
|
|
|
11.8
|
|
|
|
1.7
|
|
|
|
24.1
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercantile
|
|
Grand Rapids, MI
|
|
|
|
|
1,344
|
|
|
|
11.23
|
|
|
|
12.52
|
|
|
|
15.43
|
|
|
|
1.01
|
|
|
|
9.57
|
|
|
|
3.65
|
|
|
|
68.2
|
|
|
|
2.36
|
|
|
|
4.27
|
|
|
|
0.16
|
|
|
|
109
|
|
|
|
11.7
|
|
|
|
11.1
|
|
|
|
2.5
|
|
|
|
26.1
|
|
|
|
164
|
|
|
|
Mercantile
Ranking out of 14:
|
|
|
|
|
9
|
|
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
|
|
5
|
|
|
|
8
|
|
|
|
6
|
|
|
|
8
|
|
|
|
4
|
|
|
|
14
|
|
|
|
5
|
|
|
|
9
|
|
|
|
8
|
|
|
|
6
|
|
|
|
3
|
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
Firstbank Net Present Value Analysis
Sandler ONeill performed an analysis that estimated the present value of Firstbank through December 31, 2017. Sandler
ONeill based the analysis on Firstbanks projected earnings and dividend stream as derived from the internal financial projections provided by Firstbank management for the years ending December 31, 2013 through 2018.
To approximate the terminal value of Firstbanks common stock at December 31, 2017, Sandler ONeill applied price to
forward earnings multiples of 10.0x to 18.0x and multiples of tangible book value ranging from 100% to 180%. The income streams and terminal values were then discounted to present values using different discount rates ranging from 9.32% to 15.32%,
which were assumed deviations downward, as selected by Sandler ONeill based on the calculated Firstbank discount rate of 15.32% as determined by Sandler ONeill. The discount rate is determined by adding the 10 year Treasury Bond rate
(2.61%), the published Ibbotson 60 year equity risk premium (5.70%), the published Ibbotson size premium (3.81%) and the published Ibbotson Industry Premium (3.20%).
Earnings Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
10.0x
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
9.32%
|
|
$14.23
|
|
$16.80
|
|
$19.36
|
|
$21.93
|
|
$24.50
|
10.32%
|
|
$13.68
|
|
$16.15
|
|
$18.61
|
|
$21.07
|
|
$23.53
|
11.32%
|
|
$13.16
|
|
$15.52
|
|
$17.89
|
|
$20.25
|
|
$22.62
|
12.32%
|
|
$12.66
|
|
$14.93
|
|
$17.20
|
|
$19.47
|
|
$21.75
|
13.32%
|
|
$12.18
|
|
$14.37
|
|
$16.55
|
|
$18.73
|
|
$20.91
|
14.32%
|
|
$11.73
|
|
$13.83
|
|
$15.93
|
|
$18.02
|
|
$20.12
|
15.32%
|
|
$11.30
|
|
$13.32
|
|
$15.33
|
|
$17.35
|
|
$19.37
|
Tangible Book Value Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
100%
|
|
120%
|
|
140%
|
|
160%
|
|
180%
|
9.32%
|
|
$13.69
|
|
$16.14
|
|
$18.59
|
|
$21.05
|
|
$23.50
|
10.32%
|
|
$13.16
|
|
$15.51
|
|
$17.87
|
|
$20.22
|
|
$22.58
|
11.32%
|
|
$12.66
|
|
$14.92
|
|
$17.18
|
|
$19.44
|
|
$21.70
|
12.32%
|
|
$12.18
|
|
$14.35
|
|
$16.52
|
|
$18.69
|
|
$20.86
|
13.32%
|
|
$11.72
|
|
$13.81
|
|
$15.89
|
|
$17.98
|
|
$20.07
|
14.32%
|
|
$11.28
|
|
$13.29
|
|
$15.30
|
|
$17.30
|
|
$19.31
|
15.32%
|
|
$10.87
|
|
$12.80
|
|
$14.73
|
|
$16.66
|
|
$18.58
|
81
Sandler ONeill also considered and discussed with the Firstbank board of directors how
this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler ONeill performed a similar analysis assuming Firstbanks net income varied from
25% above projections to 25% below projections. This analysis resulted in the following reference ranges of indicated aggregate values for Firstbanks common stock, using a discount rate of 15.32%:
Earnings Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Annual Budget Variance
|
|
10.0x
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
(25.0%)
|
|
$8.78
|
|
$10.29
|
|
$11.80
|
|
$13.32
|
|
$14.83
|
(20.0%)
|
|
$9.28
|
|
$10.89
|
|
$12.51
|
|
$14.12
|
|
$15.74
|
(15.0%)
|
|
$9.78
|
|
$11.50
|
|
$13.21
|
|
$14.93
|
|
$16.64
|
(10.0%)
|
|
$10.29
|
|
$12.10
|
|
$13.92
|
|
$15.74
|
|
$17.55
|
(5.0%)
|
|
$10.79
|
|
$12.71
|
|
$14.63
|
|
$16.54
|
|
$18.46
|
0.0%
|
|
$11.30
|
|
$13.32
|
|
$15.33
|
|
$17.35
|
|
$19.37
|
5.0%
|
|
$11.80
|
|
$13.92
|
|
$16.04
|
|
$18.13
|
|
$20.28
|
10.0%
|
|
$12.31
|
|
$14.53
|
|
$16.74
|
|
$18.96
|
|
$21.18
|
15.0%
|
|
$12.81
|
|
$15.13
|
|
$17.45
|
|
$19.77
|
|
$22.09
|
20.0%
|
|
$13.32
|
|
$15.74
|
|
$18.16
|
|
$20.58
|
|
$23.00
|
25.0%
|
|
$13.82
|
|
$16.34
|
|
$18.86
|
|
$21.39
|
|
$23.91
|
Mercantile Net Present Value Analysis
Sandler ONeill performed an analysis that estimated the present value of Mercantile through December 31, 2017. Sandler
ONeill based the analysis on Mercantiles projected earnings and dividend stream as derived from the internal financial projections provided by Mercantile management for the years ending December 31, 2013 through 2018.
To approximate the terminal value of Mercantiles common stock at December 31, 2017, Sandler ONeill applied price to
forward earnings multiples of 10.0x to 18.0x and multiples of tangible book value ranging from 100% to 180%. The income streams and terminal values were then discounted to present values using different discount rates ranging from 9.32% to 15.32%,
which were assumed deviations downward, as selected by Sandler ONeill based on the calculated Mercantile discount rate of 15.32% as determined by Sandler ONeill. The discount rate is determined by adding the 10 year Treasury Bond rate
(2.61%), the published Ibbotson 60 year equity risk premium (5.70%), the published Ibbotson size premium (3.81%) and the published Ibbotson Industry Premium (3.20%).
Earnings Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
10.0x
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
9.32%
|
|
$15.15
|
|
$17.44
|
|
$19.72
|
|
$22.01
|
|
$24.30
|
10.32%
|
|
$14.64
|
|
$16.83
|
|
$19.03
|
|
$21.22
|
|
$23.42
|
11.32%
|
|
$14.15
|
|
$16.26
|
|
$18.37
|
|
$20.48
|
|
$22.58
|
12.32%
|
|
$13.69
|
|
$15.71
|
|
$17.74
|
|
$19.76
|
|
$21.79
|
13.32%
|
|
$13.25
|
|
$15.19
|
|
$17.14
|
|
$19.08
|
|
$21.03
|
14.32%
|
|
$12.82
|
|
$14.69
|
|
$16.56
|
|
$18.43
|
|
$20.30
|
15.32%
|
|
$12.42
|
|
$14.22
|
|
$16.02
|
|
$17.81
|
|
$19.61
|
82
Tangible Book Value Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
100%
|
|
120%
|
|
140%
|
|
160%
|
|
180%
|
9.32%
|
|
$17.09
|
|
$19.77
|
|
$22.44
|
|
$25.12
|
|
$27.80
|
10.32%
|
|
$16.50
|
|
$19.07
|
|
$21.64
|
|
$24.21
|
|
$26.78
|
11.32%
|
|
$15.94
|
|
$18.41
|
|
$20.87
|
|
$23.34
|
|
$25.81
|
12.32%
|
|
$15.41
|
|
$17.78
|
|
$20.15
|
|
$22.51
|
|
$24.88
|
13.32%
|
|
$14.90
|
|
$17.17
|
|
$19.45
|
|
$21.73
|
|
$24.00
|
14.32%
|
|
$14.41
|
|
$16.60
|
|
$18.79
|
|
$20.98
|
|
$23.16
|
15.32%
|
|
$13.95
|
|
$16.05
|
|
$18.16
|
|
$20.26
|
|
$22.36
|
Sandler ONeill also considered and discussed with the Firstbank board of directors how this
analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler ONeill performed a similar analysis assuming Mercantiles net income varied from 25%
above projections to 25% below projections. This analysis resulted in the following reference ranges of indicated per share values for Mercantiles common stock, using a discount rate of 15.32%:
Earnings Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
Annual Budget Variance
|
|
10.0x
|
|
12.0x
|
|
14.0x
|
|
16.0x
|
|
18.0x
|
(25.0%)
|
|
$10.17
|
|
$11.52
|
|
$12.87
|
|
$14.22
|
|
$15.57
|
(20.0%)
|
|
$10.62
|
|
$12.03
|
|
$13.50
|
|
$14.94
|
|
$16.38
|
(15.0%)
|
|
$11.07
|
|
$12.60
|
|
$14.13
|
|
$15.66
|
|
$17.19
|
(10.0%)
|
|
$11.52
|
|
$13.14
|
|
$14.76
|
|
$16.38
|
|
$17.99
|
(5.0%)
|
|
$11.97
|
|
$13.68
|
|
$15.39
|
|
$17.10
|
|
$18.80
|
0.0%
|
|
$12.42
|
|
$14.22
|
|
$16.02
|
|
$17.81
|
|
$19.61
|
5.0%
|
|
$12.87
|
|
$14.76
|
|
$16.65
|
|
$18.53
|
|
$20.42
|
10.0%
|
|
$13.32
|
|
$15.30
|
|
$17.28
|
|
$19.25
|
|
$21.23
|
15.0%
|
|
$13.77
|
|
$15.84
|
|
$17.90
|
|
$19.97
|
|
$22.04
|
20.0%
|
|
$14.22
|
|
$16.38
|
|
$18.53
|
|
$20.69
|
|
$22.85
|
25.0%
|
|
$14.67
|
|
$16.92
|
|
$19.16
|
|
$21.41
|
|
$23.66
|
83
Analysis of Selected Merger Transactions
Sandler ONeill reviewed three sets of comparable mergers and acquisitions.
The first set of mergers and acquisitions included 10 transactions announced from January 1, 2012 through August 12, 2013 in
which the targets were Midwest commercial bank and thrifts having an announced transaction value greater than $25 million and target nonperforming assets to total assets less than 5.0%. Sandler ONeill deemed these transactions to be reflective
of the proposed Firstbank and Mercantile combination. Sandler ONeill reviewed the following multiples: transaction price to book value, transaction price to tangible book value, transaction price to last twelve months earnings per share,
transaction price to estimated next twelve months earnings per share, core deposit premium and 1-day market premium. As illustrated in the following table, Sandler ONeill compared the proposed merger multiples to the median multiples of
these comparable transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar Values in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction Information
|
|
|
Seller Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
Core
Deposit
Premium
|
|
|
1-Day
Market
Premium
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deal
Value
|
|
|
LTM
Earnings
|
|
|
Est.
EPS
|
|
|
Book
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
TCE/
TA
|
|
|
YTD
ROAA
|
|
|
Res./
Loans
|
|
|
NPAs/
Assets
|
|
|
|
|
|
|
|
|
|
|
Annc.
Date
|
|
|
|
|
|
Value
|
|
|
TBV
|
|
|
|
|
|
|
|
|
Acquiror
|
|
St
|
|
|
Target
|
|
St
|
|
|
($)
|
|
|
(x)
|
|
|
(x)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
($)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
MB Financial Inc.
|
|
|
IL
|
|
|
Taylor Capital Group Inc.
|
|
IL
|
|
|
07/14/13
|
|
|
|
658.8
|
|
|
|
11.3
|
|
|
|
14.0
|
|
|
|
182
|
|
|
|
182
|
|
|
|
11.5
|
|
|
|
24.6
|
|
|
|
5,901.4
|
|
|
|
6.0
|
|
|
|
1.15
|
|
|
|
2.09
|
|
|
|
1.89
|
|
Heartland Financial USA Inc.
|
|
|
IA
|
|
|
Morrill Bancshares Inc.
|
|
KS
|
|
|
06/12/13
|
|
|
|
61.5
|
|
|
|
11.0
|
|
|
|
NA
|
|
|
|
102
|
|
|
|
125
|
|
|
|
2.3
|
|
|
|
NA
|
|
|
|
752.3
|
|
|
|
6.6
|
|
|
|
0.64
|
|
|
|
1.12
|
|
|
|
0.48
|
|
First Merchants Corp.
|
|
|
IN
|
|
|
CFS Bancorp Inc.
|
|
IN
|
|
|
05/13/13
|
|
|
|
114.7
|
|
|
|
19.8
|
|
|
|
25.0
|
|
|
|
101
|
|
|
|
101
|
|
|
|
0.2
|
|
|
|
13.8
|
|
|
|
1,146.4
|
|
|
|
9.8
|
|
|
|
0.53
|
|
|
|
1.81
|
|
|
|
4.89
|
|
Croghan Bancshares Inc.
|
|
|
OH
|
|
|
Indebancorp
|
|
OH
|
|
|
04/30/13
|
|
|
|
29.1
|
|
|
|
18.6
|
|
|
|
NA
|
|
|
|
134
|
|
|
|
134
|
|
|
|
4.2
|
|
|
|
NA
|
|
|
|
219.3
|
|
|
|
9.4
|
|
|
|
0.64
|
|
|
|
1.13
|
|
|
|
2.00
|
|
CNB Financial Corp.
|
|
|
PA
|
|
|
FC Banc Corp.
|
|
OH
|
|
|
02/12/13
|
|
|
|
40.5
|
|
|
|
10.9
|
|
|
|
NA
|
|
|
|
117
|
|
|
|
117
|
|
|
|
2.3
|
|
|
|
25.4
|
|
|
|
367.3
|
|
|
|
9.3
|
|
|
|
0.98
|
|
|
|
1.35
|
|
|
|
0.77
|
|
F.N.B. Corp.
|
|
|
PA
|
|
|
PVF Capital Corp.
|
|
OH
|
|
|
01/29/13
|
|
|
|
109.6
|
|
|
|
22.8
|
|
|
|
34.2
|
|
|
|
141
|
|
|
|
141
|
|
|
|
6.9
|
|
|
|
76.7
|
|
|
|
781.8
|
|
|
|
9.6
|
|
|
|
1.04
|
|
|
|
2.52
|
|
|
|
4.73
|
|
Wintrust Financial Corp.
|
|
|
IL
|
|
|
HPK Financial Corp.
|
|
IL
|
|
|
09/18/12
|
|
|
|
27.5
|
|
|
|
14.6
|
|
|
|
NA
|
|
|
|
101
|
|
|
|
106
|
|
|
|
(3.3
|
)
|
|
|
NA
|
|
|
|
389.8
|
|
|
|
8.6
|
|
|
|
0.54
|
|
|
|
1.85
|
|
|
|
2.21
|
|
FirstMerit Corp.
|
|
|
OH
|
|
|
Citizens Republic Bancorp Inc.
|
|
MI
|
|
|
09/12/12
|
|
|
|
1,291.4
|
|
|
|
2.6
|
|
|
|
4.3
|
|
|
|
90
|
|
|
|
130
|
|
|
|
4.1
|
|
|
|
14.7
|
|
|
|
9,670.5
|
|
|
|
7.7
|
|
|
|
6.92
|
|
|
|
2.46
|
|
|
|
1.16
|
|
National Australia Bank
|
|
|
AUS
|
|
|
North Central Bancshares Inc.
|
|
IA
|
|
|
03/12/12
|
|
|
|
41.5
|
|
|
|
20.0
|
|
|
|
NA
|
|
|
|
99
|
|
|
|
100
|
|
|
|
(0.0
|
)
|
|
|
31.2
|
|
|
|
433.0
|
|
|
|
9.6
|
|
|
|
0.59
|
|
|
|
1.83
|
|
|
|
3.61
|
|
Old National Bancorp
|
|
|
IN
|
|
|
Indiana Community Bancorp
|
|
IN
|
|
|
01/24/12
|
|
|
|
105.2
|
|
|
|
NM
|
|
|
|
19.3
|
|
|
|
123
|
|
|
|
123
|
|
|
|
2.2
|
|
|
|
65.4
|
|
|
|
984.6
|
|
|
|
6.8
|
|
|
|
(0.17
|
)
|
|
|
2.10
|
|
|
|
4.35
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
|
1,291.4
|
|
|
|
22.8
|
|
|
|
34.2
|
|
|
|
182
|
|
|
|
182
|
|
|
|
11.5
|
|
|
|
76.7
|
|
|
|
9,670.5
|
|
|
|
9.8
|
|
|
|
6.92
|
|
|
|
2.52
|
|
|
|
4.89
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
|
|
27.5
|
|
|
|
2.6
|
|
|
|
4.3
|
|
|
|
90
|
|
|
|
100
|
|
|
|
(3.3
|
)
|
|
|
13.8
|
|
|
|
219.3
|
|
|
|
6.0
|
|
|
|
(0.17
|
)
|
|
|
1.12
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
|
248.0
|
|
|
|
14.6
|
|
|
|
19.3
|
|
|
|
119
|
|
|
|
126
|
|
|
|
3.0
|
|
|
|
36.0
|
|
|
|
2,064.6
|
|
|
|
8.4
|
|
|
|
1.29
|
|
|
|
1.83
|
|
|
|
2.61
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
|
83.3
|
|
|
|
14.6
|
|
|
|
19.3
|
|
|
|
110
|
|
|
|
124
|
|
|
|
2.3
|
|
|
|
25.4
|
|
|
|
767.0
|
|
|
|
8.9
|
|
|
|
0.64
|
|
|
|
1.84
|
|
|
|
2.11
|
|
84
The second set of mergers and acquisitions included 34 transactions announced from
January 1, 2012 through August 12, 2013 in which the targets were Nationwide commercial bank and thrifts having an announced transaction value between $50 million and $300 million and target nonperforming assets to total assets less than
5.0%. Sandler ONeill deemed these transactions to be reflective of the proposed Firstbank and Mercantile combination. Sandler ONeill reviewed the following multiples: transaction price to book value, transaction price to tangible book
value, transaction price to last twelve months earnings per share, transaction price to estimated next twelve months earnings per share, core deposit premium and 1-day market premium. As illustrated in the following table, Sandler
ONeill compared the proposed merger multiples to the median multiples of these comparable transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar Values in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction Information
|
|
|
Seller Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
Core
Market
Premium
(%)
|
|
|
1-Day
Deposit
Premium
(%)
|
|
|
Total
Assets
($)
|
|
|
TCE/
TA
(%)
|
|
|
YTD
ROAA
(%)
|
|
|
Res./
Loans
(%)
|
|
|
NPAs/
Assets
(%)
|
|
Acquiror
|
|
St
|
|
Target
|
|
St
|
|
|
Annc.
Date
|
|
|
Deal
Value
($)
|
|
|
LTM
Earnings
(x)
|
|
|
Est.
EPS
(x)
|
|
|
Book
Value
(%)
|
|
|
TBV
(%)
|
|
|
|
|
|
|
|
|
CenterState Banks
|
|
FL
|
|
Gulfstream Bancshares Inc.
|
|
|
FL
|
|
|
|
07/29/13
|
|
|
|
77.6
|
|
|
|
16.4
|
|
|
|
NA
|
|
|
|
131
|
|
|
|
131
|
|
|
|
4.2
|
|
|
|
NA
|
|
|
|
572.3
|
|
|
|
9.0
|
|
|
|
0.68
|
|
|
|
3.65
|
|
|
|
1.53
|
|
Wilshire Bancorp Inc.
|
|
CA
|
|
Saehan Bancorp
|
|
|
CA
|
|
|
|
07/15/13
|
|
|
|
105.5
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
170
|
|
|
|
170
|
|
|
|
11.3
|
|
|
|
(3.5
|
)
|
|
|
542.4
|
|
|
|
10.8
|
|
|
|
0.03
|
|
|
|
3.43
|
|
|
|
1.79
|
|
First Federal Bancshares of AR
|
|
AR
|
|
First National Security Co.
|
|
|
AR
|
|
|
|
07/01/13
|
|
|
|
123.4
|
|
|
|
14.2
|
|
|
|
NA
|
|
|
|
84
|
|
|
|
137
|
|
|
|
5.2
|
|
|
|
NA
|
|
|
|
954.4
|
|
|
|
10.0
|
|
|
|
0.90
|
|
|
|
2.27
|
|
|
|
0.38
|
|
Peoples Financial Services
|
|
PA
|
|
Penseco Financial Services
|
|
|
PA
|
|
|
|
06/28/13
|
|
|
|
155.9
|
|
|
|
15.1
|
|
|
|
NA
|
|
|
|
117
|
|
|
|
147
|
|
|
|
7.6
|
|
|
|
26.1
|
|
|
|
929.8
|
|
|
|
11.7
|
|
|
|
1.10
|
|
|
|
1.12
|
|
|
|
0.43
|
|
F.N.B. Corp.
|
|
PA
|
|
BCSB Bancorp Inc.
|
|
|
MD
|
|
|
|
06/13/13
|
|
|
|
77.6
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
134
|
|
|
|
134
|
|
|
|
4.6
|
|
|
|
38.7
|
|
|
|
642.3
|
|
|
|
8.7
|
|
|
|
0.29
|
|
|
|
1.72
|
|
|
|
2.88
|
|
Heartland Financial USA Inc.
|
|
IA
|
|
Morrill Bancshares Inc.
|
|
|
KS
|
|
|
|
06/12/13
|
|
|
|
61.5
|
|
|
|
11.0
|
|
|
|
NA
|
|
|
|
102
|
|
|
|
125
|
|
|
|
2.3
|
|
|
|
NA
|
|
|
|
752.3
|
|
|
|
6.6
|
|
|
|
0.64
|
|
|
|
1.12
|
|
|
|
0.48
|
|
Home BancShares Inc.
|
|
AR
|
|
Liberty Bancshares Inc
|
|
|
AR
|
|
|
|
05/21/13
|
|
|
|
280.0
|
|
|
|
12.7
|
|
|
|
NA
|
|
|
|
106
|
|
|
|
162
|
|
|
|
3.3
|
|
|
|
NA
|
|
|
|
2,853.1
|
|
|
|
6.3
|
|
|
|
0.80
|
|
|
|
1.87
|
|
|
|
3.39
|
|
First Merchants Corp.
|
|
IN
|
|
CFS Bancorp Inc.
|
|
|
IN
|
|
|
|
05/13/13
|
|
|
|
114.7
|
|
|
|
19.8
|
|
|
|
25.0
|
|
|
|
101
|
|
|
|
101
|
|
|
|
0.2
|
|
|
|
13.8
|
|
|
|
1,146.4
|
|
|
|
9.8
|
|
|
|
0.53
|
|
|
|
1.81
|
|
|
|
4.89
|
|
CBFH Inc.
|
|
TX
|
|
VB Texas Inc.
|
|
|
TX
|
|
|
|
03/06/13
|
|
|
|
76.8
|
|
|
|
17.1
|
|
|
|
NA
|
|
|
|
91
|
|
|
|
100
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
605.6
|
|
|
|
12.8
|
|
|
|
0.76
|
|
|
|
1.16
|
|
|
|
0.35
|
|
SI Financial Group Inc.
|
|
CT
|
|
Newport Bancorp Inc.
|
|
|
RI
|
|
|
|
03/05/13
|
|
|
|
63.9
|
|
|
|
38.2
|
|
|
|
NM
|
|
|
|
116
|
|
|
|
116
|
|
|
|
4.1
|
|
|
|
6.5
|
|
|
|
449.4
|
|
|
|
11.8
|
|
|
|
0.34
|
|
|
|
1.12
|
|
|
|
1.17
|
|
SCBT Financial Corp.
|
|
SC
|
|
First Financial Holdings Inc.
|
|
|
SC
|
|
|
|
02/19/13
|
|
|
|
298.6
|
|
|
|
12.0
|
|
|
|
15.3
|
|
|
|
127
|
|
|
|
132
|
|
|
|
0.3
|
|
|
|
10.2
|
|
|
|
3,215.6
|
|
|
|
7.1
|
|
|
|
0.89
|
|
|
|
1.73
|
|
|
|
1.54
|
|
F.N.B. Corp.
|
|
PA
|
|
PVF Capital Corp.
|
|
|
OH
|
|
|
|
01/29/13
|
|
|
|
109.6
|
|
|
|
22.8
|
|
|
|
34.2
|
|
|
|
141
|
|
|
|
141
|
|
|
|
6.9
|
|
|
|
76.7
|
|
|
|
781.8
|
|
|
|
9.6
|
|
|
|
1.04
|
|
|
|
2.52
|
|
|
|
4.73
|
|
Lakeland Bancorp
|
|
NJ
|
|
Somerset Hills Bancorp
|
|
|
NJ
|
|
|
|
01/28/13
|
|
|
|
65.7
|
|
|
|
18.8
|
|
|
|
18.2
|
|
|
|
152
|
|
|
|
152
|
|
|
|
7.9
|
|
|
|
31.5
|
|
|
|
368.9
|
|
|
|
11.3
|
|
|
|
0.95
|
|
|
|
1.27
|
|
|
|
0.29
|
|
Renasant Corp.
|
|
MS
|
|
First M&F Corp.
|
|
|
MS
|
|
|
|
01/16/13
|
|
|
|
151.0
|
|
|
|
23.3
|
|
|
|
16.1
|
|
|
|
121
|
|
|
|
127
|
|
|
|
3.0
|
|
|
|
64.8
|
|
|
|
1,601.7
|
|
|
|
6.0
|
|
|
|
0.44
|
|
|
|
1.76
|
|
|
|
3.49
|
|
First Financial Bankshares
|
|
TX
|
|
Orange SB SSB
|
|
|
TX
|
|
|
|
11/07/12
|
|
|
|
57.4
|
|
|
|
13.2
|
|
|
|
NA
|
|
|
|
127
|
|
|
|
130
|
|
|
|
3.8
|
|
|
|
NA
|
|
|
|
442.8
|
|
|
|
10.0
|
|
|
|
1.60
|
|
|
|
1.02
|
|
|
|
0.97
|
|
PacWest Bancorp
|
|
CA
|
|
First California Financial
Grp
|
|
|
CA
|
|
|
|
11/06/12
|
|
|
|
235.2
|
|
|
|
21.1
|
|
|
|
20.0
|
|
|
|
111
|
|
|
|
170
|
|
|
|
5.4
|
|
|
|
17.5
|
|
|
|
1,990.8
|
|
|
|
7.2
|
|
|
|
0.64
|
|
|
|
1.55
|
|
|
|
1.95
|
|
F.N.B. Corp.
|
|
PA
|
|
Annapolis Bancorp Inc.
|
|
|
MD
|
|
|
|
10/22/12
|
|
|
|
50.5
|
|
|
|
18.6
|
|
|
|
NA
|
|
|
|
160
|
|
|
|
160
|
|
|
|
5.2
|
|
|
|
53.7
|
|
|
|
437.5
|
|
|
|
7.0
|
|
|
|
0.79
|
|
|
|
2.32
|
|
|
|
1.91
|
|
NBT Bancorp Inc.
|
|
NY
|
|
Alliance Financial Corp.
|
|
|
NY
|
|
|
|
10/07/12
|
|
|
|
230.7
|
|
|
|
19.1
|
|
|
|
21.0
|
|
|
|
157
|
|
|
|
212
|
|
|
|
12.4
|
|
|
|
22.4
|
|
|
|
1,422.8
|
|
|
|
7.9
|
|
|
|
0.78
|
|
|
|
0.99
|
|
|
|
0.62
|
|
Crescent Financial Bancshares
|
|
NC
|
|
ECB Bancorp Inc.
|
|
|
NC
|
|
|
|
09/25/12
|
|
|
|
54.4
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
81
|
|
|
|
81
|
|
|
|
(4.2
|
)
|
|
|
59.5
|
|
|
|
944.3
|
|
|
|
7.0
|
|
|
|
0.21
|
|
|
|
2.12
|
|
|
|
4.00
|
|
Prosperity Bancshares Inc.
|
|
TX
|
|
Coppermark Bancshares Inc.
|
|
|
OK
|
|
|
|
09/21/12
|
|
|
|
194.4
|
|
|
|
13.1
|
|
|
|
NA
|
|
|
|
159
|
|
|
|
159
|
|
|
|
6.9
|
|
|
|
NA
|
|
|
|
1,325.0
|
|
|
|
9.2
|
|
|
|
1.11
|
|
|
|
1.32
|
|
|
|
1.71
|
|
Pacific Premier Bancorp
|
|
CA
|
|
First Associations Bank
|
|
|
TX
|
|
|
|
09/11/12
|
|
|
|
54.2
|
|
|
|
17.7
|
|
|
|
NA
|
|
|
|
118
|
|
|
|
118
|
|
|
|
2.7
|
|
|
|
NA
|
|
|
|
356.2
|
|
|
|
12.9
|
|
|
|
1.40
|
|
|
|
1.07
|
|
|
|
0.00
|
|
First PacTrust Bancorp Inc.
|
|
CA
|
|
Private Bank of California
|
|
|
CA
|
|
|
|
07/23/12
|
|
|
|
52.0
|
|
|
|
25.4
|
|
|
|
NA
|
|
|
|
122
|
|
|
|
122
|
|
|
|
0.3
|
|
|
|
27.0
|
|
|
|
638.7
|
|
|
|
6.4
|
|
|
|
0.33
|
|
|
|
1.84
|
|
|
|
0.43
|
|
WesBanco Inc.
|
|
WV
|
|
Fidelity Bancorp Inc.
|
|
|
PA
|
|
|
|
07/19/12
|
|
|
|
72.9
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
157
|
|
|
|
167
|
|
|
|
5.5
|
|
|
|
82.9
|
|
|
|
665.8
|
|
|
|
6.4
|
|
|
|
0.20
|
|
|
|
1.12
|
|
|
|
2.96
|
|
Investors Bancorp Inc. (MHC)
|
|
NJ
|
|
Marathon Banking
Corporation
|
|
|
NY
|
|
|
|
06/14/12
|
|
|
|
135.0
|
|
|
|
23.8
|
|
|
|
NA
|
|
|
|
123
|
|
|
|
151
|
|
|
|
7.4
|
|
|
|
NA
|
|
|
|
902.1
|
|
|
|
10.1
|
|
|
|
0.72
|
|
|
|
1.68
|
|
|
|
0.79
|
|
Berkshire Hills Bancorp Inc.
|
|
MA
|
|
Beacon Federal Bancorp
Inc.
|
|
|
NY
|
|
|
|
05/31/12
|
|
|
|
130.4
|
|
|
|
22.6
|
|
|
|
24.2
|
|
|
|
111
|
|
|
|
111
|
|
|
|
3.7
|
|
|
|
48.9
|
|
|
|
1,024.7
|
|
|
|
11.1
|
|
|
|
0.50
|
|
|
|
1.81
|
|
|
|
4.00
|
|
Park Sterling Corporation
|
|
NC
|
|
Citizens South Banking
Corp.
|
|
|
NC
|
|
|
|
05/13/12
|
|
|
|
77.8
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
112
|
|
|
|
114
|
|
|
|
(1.6
|
)
|
|
|
35.2
|
|
|
|
1,073.8
|
|
|
|
6.4
|
|
|
|
(0.80
|
)
|
|
|
1.58
|
|
|
|
3.62
|
|
Independent Bank Corp.
|
|
MA
|
|
Central Bancorp Inc.
|
|
|
MA
|
|
|
|
04/30/12
|
|
|
|
64.8
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
154
|
|
|
|
165
|
|
|
|
8.4
|
|
|
|
70.7
|
|
|
|
521.4
|
|
|
|
6.3
|
|
|
|
0.21
|
|
|
|
0.97
|
|
|
|
2.75
|
|
PacWest Bancorp
|
|
CA
|
|
American Perspective Bank
|
|
|
CA
|
|
|
|
04/30/12
|
|
|
|
58.1
|
|
|
|
20.3
|
|
|
|
NA
|
|
|
|
132
|
|
|
|
132
|
|
|
|
9.3
|
|
|
|
31.7
|
|
|
|
259.2
|
|
|
|
16.7
|
|
|
|
1.14
|
|
|
|
1.78
|
|
|
|
1.01
|
|
FVNB Corp.
|
|
TX
|
|
First State Bank
|
|
|
TX
|
|
|
|
04/04/12
|
|
|
|
52.0
|
|
|
|
17.7
|
|
|
|
NA
|
|
|
|
179
|
|
|
|
179
|
|
|
|
10.5
|
|
|
|
NA
|
|
|
|
272.7
|
|
|
|
10.7
|
|
|
|
1.66
|
|
|
|
1.30
|
|
|
|
1.51
|
|
United Financial Bancorp
|
|
MA
|
|
New England Bancshares
|
|
|
CT
|
|
|
|
03/19/12
|
|
|
|
86.2
|
|
|
|
19.1
|
|
|
|
NA
|
|
|
|
118
|
|
|
|
155
|
|
|
|
6.5
|
|
|
|
38.2
|
|
|
|
726.5
|
|
|
|
7.9
|
|
|
|
0.64
|
|
|
|
1.02
|
|
|
|
2.71
|
|
Cadence Bancorp LLC
|
|
TX
|
|
Encore Bancshares Inc.
|
|
|
TX
|
|
|
|
03/05/12
|
|
|
|
251.3
|
|
|
|
NM
|
|
|
|
24.8
|
|
|
|
171
|
|
|
|
240
|
|
|
|
13.8
|
|
|
|
37.7
|
|
|
|
1,522.6
|
|
|
|
6.8
|
|
|
|
0.49
|
|
|
|
1.75
|
|
|
|
1.12
|
|
Carlile Bancshares Inc.
|
|
TX
|
|
Northstar Financial Corp.
|
|
|
TX
|
|
|
|
02/21/12
|
|
|
|
114.5
|
|
|
|
18.2
|
|
|
|
NA
|
|
|
|
173
|
|
|
|
174
|
|
|
|
7.4
|
|
|
|
NA
|
|
|
|
949.8
|
|
|
|
6.9
|
|
|
|
1.08
|
|
|
|
1.78
|
|
|
|
2.00
|
|
Tompkins Financial Corporation
|
|
NY
|
|
VIST Financial Corp.
|
|
|
PA
|
|
|
|
01/25/12
|
|
|
|
109.1
|
|
|
|
28.8
|
|
|
|
12.8
|
|
|
|
71
|
|
|
|
116
|
|
|
|
1.4
|
|
|
|
83.8
|
|
|
|
1,485.7
|
|
|
|
5.0
|
|
|
|
0.30
|
|
|
|
1.57
|
|
|
|
2.79
|
|
Old National Bancorp
|
|
IN
|
|
Indiana Community
Bancorp
|
|
|
IN
|
|
|
|
01/24/12
|
|
|
|
105.2
|
|
|
|
NM
|
|
|
|
19.3
|
|
|
|
123
|
|
|
|
123
|
|
|
|
2.2
|
|
|
|
65.4
|
|
|
|
984.6
|
|
|
|
6.8
|
|
|
|
(0.17
|
)
|
|
|
2.10
|
|
|
|
4.35
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
|
298.6
|
|
|
|
38.2
|
|
|
|
34.2
|
|
|
|
179
|
|
|
|
240
|
|
|
|
13.8
|
|
|
|
83.8
|
|
|
|
3,215.6
|
|
|
|
16.7
|
|
|
|
1.66
|
|
|
|
3.65
|
|
|
|
4.89
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
|
|
50.5
|
|
|
|
11.0
|
|
|
|
12.8
|
|
|
|
71
|
|
|
|
81
|
|
|
|
(4.2
|
)
|
|
|
(3.5
|
)
|
|
|
259.2
|
|
|
|
5.0
|
|
|
|
(0.80
|
)
|
|
|
0.97
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
|
116.1
|
|
|
|
19.2
|
|
|
|
21.0
|
|
|
|
128
|
|
|
|
143
|
|
|
|
5.1
|
|
|
|
40.8
|
|
|
|
981.3
|
|
|
|
8.8
|
|
|
|
0.65
|
|
|
|
1.68
|
|
|
|
2.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
|
95.7
|
|
|
|
18.7
|
|
|
|
20.0
|
|
|
|
123
|
|
|
|
136
|
|
|
|
5.2
|
|
|
|
37.7
|
|
|
|
841.9
|
|
|
|
8.3
|
|
|
|
0.66
|
|
|
|
1.70
|
|
|
|
1.75
|
|
85
The third set of mergers and acquisitions included 20 transactions announced from
January 1, 2006 through August 12, 2013 in which the targets were Nationwide commercial bank and thrifts and targets pro forma ownership was greater than 40%. Sandler ONeill deemed these transactions to be reflective of the
proposed Firstbank and Mercantile combination. Sandler ONeill reviewed the following multiples: transaction price to book value, transaction price to tangible book value, transaction price to last twelve months earnings per share,
transaction price to estimated next twelve months earnings per share, core deposit premium and 1-day market premium. As illustrated in the following table, Sandler ONeill compared the proposed merger multiples to the median multiples of
these comparable transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar Values in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction Information
|
|
|
Seller Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deal
Value
($)
|
|
|
Target
Pro Forma
Ownership
(%)
|
|
|
Price/
|
|
|
Core
Deposit
Premium
(%)
|
|
|
1-Day
Market
Premium
(%)
|
|
|
Total
Assets
($)
|
|
|
TCE/
TA
(%)
|
|
|
YTD
ROAA
(%)
|
|
|
Res./
Loans
(%)
|
|
|
NPAs/
Assets
(%)
|
|
Acquiror
|
|
St
|
|
|
Target
|
|
St
|
|
|
Annc.
Date
|
|
|
|
|
LTM
Earnings
(x)
|
|
|
Est.
EPS
(x)
|
|
|
Book
Value
(%)
|
|
|
TBV
(%)
|
|
|
|
|
|
|
|
|
PacWest Bancorp
|
|
|
CA
|
|
|
CapitalSource Inc.
|
|
|
CA
|
|
|
|
07/22/13
|
|
|
|
2,381.9
|
|
|
|
60.0
|
|
|
|
5.4
|
|
|
|
19.1
|
|
|
|
150
|
|
|
|
169
|
|
|
|
35.4
|
|
|
|
20.1
|
|
|
|
8,482.7
|
|
|
|
16.2
|
|
|
|
1.38
|
|
|
|
1.91
|
|
|
|
2.11
|
|
Peoples Financial Services
|
|
|
PA
|
|
|
Penseco Financial
Services
|
|
|
PA
|
|
|
|
06/28/13
|
|
|
|
155.9
|
|
|
|
59.2
|
|
|
|
15.1
|
|
|
|
NA
|
|
|
|
117
|
|
|
|
147
|
|
|
|
7.6
|
|
|
|
26.1
|
|
|
|
929.8
|
|
|
|
11.7
|
|
|
|
1.10
|
|
|
|
1.12
|
|
|
|
0.43
|
|
Union First Market Bkshs Corp.
|
|
|
VA
|
|
|
StellarOne Corp.
|
|
|
VA
|
|
|
|
06/09/13
|
|
|
|
444.5
|
|
|
|
46.9
|
|
|
|
19.9
|
|
|
|
18.8
|
|
|
|
103
|
|
|
|
142
|
|
|
|
6.0
|
|
|
|
20.3
|
|
|
|
3,013.9
|
|
|
|
10.7
|
|
|
|
0.79
|
|
|
|
1.34
|
|
|
|
1.96
|
|
Provident New York Bancorp
|
|
|
NY
|
|
|
Sterling Bancorp
|
|
|
NY
|
|
|
|
04/03/13
|
|
|
|
343.1
|
|
|
|
46.9
|
|
|
|
17.1
|
|
|
|
15.4
|
|
|
|
150
|
|
|
|
168
|
|
|
|
8.1
|
|
|
|
11.4
|
|
|
|
2,750.8
|
|
|
|
7.5
|
|
|
|
0.78
|
|
|
|
1.26
|
|
|
|
0.49
|
|
WashingtonFirst Bankshares Inc
|
|
|
VA
|
|
|
Alliance
Bankshares Corp.
|
|
|
VA
|
|
|
|
05/03/12
|
|
|
|
24.2
|
|
|
|
43.8
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
86
|
|
|
|
86
|
|
|
|
(1.2
|
)
|
|
|
15.4
|
|
|
|
506.5
|
|
|
|
5.6
|
|
|
|
(1.20
|
)
|
|
|
1.76
|
|
|
|
3.55
|
|
Hancock Holding Co.
|
|
|
MS
|
|
|
Whitney
Holding Corp.
|
|
|
LA
|
|
|
|
12/21/10
|
|
|
|
1,768.4
|
|
|
|
53.1
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
109
|
|
|
|
164
|
|
|
|
7.4
|
|
|
|
46.5
|
|
|
|
11,517.2
|
|
|
|
8.1
|
|
|
|
(0.61
|
)
|
|
|
2.87
|
|
|
|
4.51
|
|
Nara Bancorp Inc.
|
|
|
CA
|
|
|
Center Financial
Corp.
|
|
|
CA
|
|
|
|
12/09/10
|
|
|
|
286.3
|
|
|
|
45.1
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
7.6
|
|
|
|
2,267.4
|
|
|
|
9.6
|
|
|
|
0.97
|
|
|
|
3.45
|
|
|
|
3.03
|
|
Old Line Bancshares Inc
|
|
|
MD
|
|
|
Maryland
Bankcorp Inc
|
|
|
MD
|
|
|
|
09/01/10
|
|
|
|
19.8
|
|
|
|
40.3
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
78
|
|
|
|
78
|
|
|
|
(2.2
|
)
|
|
|
NA
|
|
|
|
348.1
|
|
|
|
7.2
|
|
|
|
(0.65
|
)
|
|
|
2.89
|
|
|
|
5.19
|
|
BCB Bancorp Inc.
|
|
|
NJ
|
|
|
Pamrapo
Bancorp Inc.
|
|
|
NJ
|
|
|
|
06/29/09
|
|
|
|
46.9
|
|
|
|
51.5
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
(2.7
|
)
|
|
|
592.4
|
|
|
|
9.2
|
|
|
|
0.29
|
|
|
|
1.19
|
|
|
|
1.29
|
|
Hampton Roads Bankshares Inc.
|
|
|
VA
|
|
|
Gateway Financial
Holdings
|
|
|
VA
|
|
|
|
09/23/08
|
|
|
|
86.5
|
|
|
|
42.4
|
|
|
|
8.5
|
|
|
|
13.6
|
|
|
|
61
|
|
|
|
96
|
|
|
|
(2.0
|
)
|
|
|
22.1
|
|
|
|
2,127.7
|
|
|
|
4.3
|
|
|
|
0.51
|
|
|
|
1.04
|
|
|
|
0.47
|
|
MutualFirst Financial Inc.
|
|
|
IN
|
|
|
MFB Corp.
|
|
|
IN
|
|
|
|
01/07/08
|
|
|
|
52.8
|
|
|
|
40.1
|
|
|
|
15.7
|
|
|
|
NA
|
|
|
|
119
|
|
|
|
131
|
|
|
|
5.5
|
|
|
|
41.2
|
|
|
|
510.4
|
|
|
|
7.3
|
|
|
|
0.36
|
|
|
|
1.30
|
|
|
|
1.02
|
|
CCFNB Bancorp Inc.
|
|
|
PA
|
|
|
Columbia
Financial Corp.
|
|
|
PA
|
|
|
|
11/29/07
|
|
|
|
26.2
|
|
|
|
45.6
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
22.4
|
|
|
|
315.1
|
|
|
|
5.3
|
|
|
|
0.43
|
|
|
|
1.24
|
|
|
|
0.39
|
|
First National Bancshares Inc.
|
|
|
SC
|
|
|
Carolina
National Corp.
|
|
|
SC
|
|
|
|
08/26/07
|
|
|
|
59.3
|
|
|
|
41.8
|
|
|
|
29.7
|
|
|
|
NA
|
|
|
|
177
|
|
|
|
177
|
|
|
|
25.0
|
|
|
|
59.2
|
|
|
|
225.7
|
|
|
|
14.0
|
|
|
|
0.91
|
|
|
|
1.22
|
|
|
|
0.27
|
|
Virginia Financial Group
|
|
|
VA
|
|
|
FNB Corp.
|
|
|
VA
|
|
|
|
07/26/07
|
|
|
|
240.2
|
|
|
|
52.0
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
2.9
|
|
|
|
1,529.7
|
|
|
|
8.7
|
|
|
|
1.07
|
|
|
|
1.23
|
|
|
|
0.45
|
|
LSB Bancshares Inc.
|
|
|
NC
|
|
|
FNB Financial
Services Corp.
|
|
|
NC
|
|
|
|
02/26/07
|
|
|
|
127.7
|
|
|
|
50.1
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
19.1
|
|
|
|
1,010.8
|
|
|
|
7.1
|
|
|
|
0.90
|
|
|
|
1.87
|
|
|
|
NA
|
|
First Busey Corp.
|
|
|
IL
|
|
|
Main Street
Trust Inc.
|
|
|
IL
|
|
|
|
09/20/06
|
|
|
|
348.7
|
|
|
|
41.9
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
13.1
|
|
|
|
1,556.1
|
|
|
|
7.9
|
|
|
|
1.19
|
|
|
|
1.40
|
|
|
|
0.40
|
|
UnionBancorp Inc.
|
|
|
IL
|
|
|
Centrue Financial
Corporation
|
|
|
IL
|
|
|
|
06/30/06
|
|
|
|
54.3
|
|
|
|
41.9
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
5.3
|
|
|
|
626.3
|
|
|
|
4.4
|
|
|
|
0.43
|
|
|
|
1.02
|
|
|
|
0.70
|
|
Citizens Banking Corp.
|
|
|
MI
|
|
|
Republic
Bancorp Inc.
|
|
|
MI
|
|
|
|
06/26/06
|
|
|
|
1,033.5
|
|
|
|
43.7
|
|
|
|
15.0
|
|
|
|
15.2
|
|
|
|
251
|
|
|
|
254
|
|
|
|
25.5
|
|
|
|
31.9
|
|
|
|
6,243.7
|
|
|
|
6.5
|
|
|
|
1.07
|
|
|
|
0.89
|
|
|
|
1.00
|
|
National Mercantile Bancorp
|
|
|
CA
|
|
|
FCB Bancorp
|
|
|
CA
|
|
|
|
06/15/06
|
|
|
|
88.4
|
|
|
|
51.4
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
32.6
|
|
|
|
481.0
|
|
|
|
6.4
|
|
|
|
0.85
|
|
|
|
1.21
|
|
|
|
0.00
|
|
ChoiceOne Financial Services
|
|
|
MI
|
|
|
Valley Ridge
Financial Corp.
|
|
|
MI
|
|
|
|
04/25/06
|
|
|
|
29.0
|
|
|
|
49.0
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NA
|
|
|
|
216.4
|
|
|
|
9.7
|
|
|
|
0.99
|
|
|
|
1.11
|
|
|
|
0.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
|
2,381.9
|
|
|
|
60.0
|
|
|
|
29.7
|
|
|
|
19.1
|
|
|
|
251
|
|
|
|
254
|
|
|
|
35.4
|
|
|
|
59.2
|
|
|
|
11,517.2
|
|
|
|
16.2
|
|
|
|
1.38
|
|
|
|
3.45
|
|
|
|
5.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
|
|
19.8
|
|
|
|
40.1
|
|
|
|
5.4
|
|
|
|
13.6
|
|
|
|
61
|
|
|
|
78
|
|
|
|
(2.2
|
)
|
|
|
(2.7
|
)
|
|
|
216.4
|
|
|
|
4.3
|
|
|
|
(1.20
|
)
|
|
|
0.89
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
|
380.9
|
|
|
|
47.3
|
|
|
|
15.8
|
|
|
|
16.4
|
|
|
|
127
|
|
|
|
147
|
|
|
|
10.5
|
|
|
|
21.9
|
|
|
|
2,262.6
|
|
|
|
8.4
|
|
|
|
0.58
|
|
|
|
1.57
|
|
|
|
1.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
|
108.1
|
|
|
|
46.3
|
|
|
|
15.4
|
|
|
|
15.4
|
|
|
|
117
|
|
|
|
147
|
|
|
|
7.4
|
|
|
|
20.2
|
|
|
|
970.3
|
|
|
|
7.7
|
|
|
|
0.82
|
|
|
|
1.25
|
|
|
|
0.98
|
|
86
Pro Forma Merger Analysis
Sandler ONeill analyzed certain potential pro forma effects of the merger, assuming the following: (1) the merger is completed
in the fourth quarter of 2013; (2) an exchange ratio of 1.00 share of Mercantile common stock for each share of Firstbank common stock; (3) Firstbank options exchanged into Mercantile options; (4) purchase accounting marks including
$24.5 million gross credit mark, $8.1 million interest rate write-up accreted straight line over 5 years, $2.3 million deposit write-up accreted over 1 year, $1.1 million borrowings write-up accreted straight line over 3 years and $15 million trust
preferred write-down amortized straight line over 23 years; (5) cost savings of Firstbank projected operating expenses up to $5.5 million annually of which 60% realized in 2014 and 100% in 2015 and thereafter; (6) incremental provision
expense of the pro forma company based on 20% of Firstbanks projected stand-alone provision expense; (7) approximately $11.2 million in pre-tax transaction costs and expenses; (8) Firstbanks performance was calculated in
accordance with Firstbank managements prepared earnings projections; (9) Mercantiles performance was calculated in accordance with Mercantile managements prepared earnings projections; (10) Mercantile pays a special
one-time cash dividend of $2.00 per Mercantile common share immediately prior to closing; (11) certain other assumptions pertaining to costs and expenses associated with the transaction, intangible amortization, opportunity cost of cash and
other items. The analyses indicated that, for the full years 2014 and 2015, the merger (excluding transaction expenses) would be accretive to Mercantiles projected earnings per share and would be accretive to tangible book value per share by
2018. The actual results achieved by the combined company may vary from projected results and the variations may be material.
Sandler ONeills Compensation and Other Relationships with Firstbank
Sandler ONeill has also acted as financial advisor to the Firstbank board of directors and senior management of Firstbank and its
subsidiaries in connection with the merger. The Firstbank board of directors and senior management of Firstbank and its subsidiaries agreed to pay Sandler ONeill a transaction fee based on the aggregate consideration to be received in the
merger, $25,000 of which was paid upon execution of the engagement letter, $100,000 was paid upon delivery of Sandler ONeills opinion, $250,000 was paid upon signing of the definitive merger agreement, and approximately $1,111,000 of
which is contingent upon completion of the merger. Sandler ONeill also acted as financial advisor to the Firstbank board of directors and senior management in connection with Firstbanks ongoing strategic planning and received a fee of
$75,000. Firstbank has also agreed to indemnify Sandler ONeill against certain liabilities arising out of its engagement and to reimburse Sandler ONeill for certain of its reasonable out-of-pocket expenses.
In addition to the compensation payable by Firstbank to Sandler ONeill in connection with the merger, within the past two years,
Firstbank paid Sandler ONeill $10,000 in July 2012 for services rendered in connection with Firstbanks repurchase of a common stock warrant previously issued by Firstbank to the U.S. Treasury. Except for the $10,000 payment and
merger-related compensation disclosed above, Sandler ONeill has received no other compensation from Firstbank during the two-year period prior to the delivery of its opinion.
In the ordinary course of their respective broker and dealer businesses, Sandler ONeill may purchase securities from and sell
securities to Firstbank and Mercantile and their affiliates. Sandler ONeill may also actively trade the debt and/or equity securities of Firstbank and Mercantile or their affiliates for their own accounts and for the accounts of their
customers and, accordingly, may at any time hold a long or short position in such securities.
Certain Prospective Information Reviewed by
Firstbank
Firstbank does not as a matter of course make public projections as to future sales, earnings, or other results.
However, the management of Firstbank has prepared the prospective financial information set forth below in connection with its evaluation of the proposed merger. The accompanying prospective financial information was not prepared with a view toward
public disclosure or with a view toward complying with the guidelines
87
established by the American Institute of Certified Public Accountants with respect to prospective financial information, but in the view of Firstbanks management, was prepared on a
reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of the knowledge and belief of Firstbanks management, the expected course of action and the expected future financial performance of
Firstbank and Mercantile. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and the readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on
the prospective financial information. Neither Firstbanks independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein,
nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.
The prospective financial information regarding Firstbanks and Mercantiles anticipated future operations were prepared by
Firstbank for the years 2013 through 2018. In the case of Firstbanks projections of Mercantiles future performance, Firstbanks management based these projections in part on estimates of certain expected 2013 financial and operating
data provided by Mercantile to Firstbank. The projections were reviewed by the Firstbank board of directors and provided by management to Firstbanks financial advisors in connection with the proposed merger. The projections were independently
prepared by Firstbank management based on assumptions that Firstbank management believed to be reasonable at the time and were provided to and reviewed by Mercantile or its financial advisors prior to the announcement of the transaction.
The financial projections were based on numerous variables and assumptions (including but not limited to those related to industry
performance, competition, general business, economic, market and financial conditions) that are inherently uncertain and are beyond the control of Mercantile and Firstbank. Financial projections for both Mercantile and Firstbank are subject to many
risks and uncertainties, including, but not limited to, the impact of general economic factors outside the control of Mercantile or Firstbank, volatility in interest rates, economic conditions generally and in the markets that Mercantile and
Firstbank serve, consumer sentiment, and other risks and uncertainties relating to Mercantiles and Firstbanks business (including their ability to achieve strategic goals, objectives and targets over applicable periods) and other factors
described under Special Note Regarding Forward-Looking Statements, all of which are subject to change. As a result, actual results may differ materially from those contained in the financial projections.
The inclusion of a summary of the financial projections in this joint proxy statement/prospectus should not be regarded as an indication
that any of Mercantile, Firstbank or their respective affiliates, officers, directors or other representatives consider the financial projections to be necessarily predictive of actual future events, and the financial projections should not be
relied upon as such. None of Mercantile, Firstbank or their respective affiliates, officers, directors or other representatives can give you any assurance that actual results will not differ materially from the financial projections, and none of
them undertakes any obligation to update or otherwise revise or reconcile the financial projections to reflect circumstances existing after the date the financial projections were generated or to reflect the occurrence of future events, even in the
event that any or all of the assumptions underlying the projections are shown to be in error. None of Mercantile, Firstbank or their respective affiliates, officers, directors or other representatives has made or makes any representation to any
shareholder or other person regarding Mercantiles or Firstbanks ultimate performance compared to the information contained in the financial projections or that the projected results will be achieved. The summary of the financial
projections included below is not being included to influence your decision whether to vote for the merger and the transactions contemplated in connection with the merger, but are being provided because the financial projections were considered in
connection with the merger.
Firstbank has made no representations to Mercantile, and Mercantile has made no representations
to Firstbank, in the merger agreement or otherwise, concerning the financial projections or the estimates on which they are based. Mercantile and Firstbank urge all shareholders to review Mercantiles and Firstbanks most recent SEC
filings for a description of Mercantiles and Firstbanks reported financial results.
88
Mercantile Summary Financial Projections
(Prepared by Firstbank)
($000s, except per share)
(Assumes payment of $2.00 special dividend in
2013)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31
|
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Net income to common shareholders
|
|
$
|
15,500
|
|
|
$
|
12,200
|
|
|
$
|
12,600
|
|
|
$
|
13,600
|
|
|
$
|
14,900
|
|
|
$
|
16,100
|
|
Total assets
|
|
$
|
1,388,200
|
|
|
$
|
1,408,800
|
|
|
$
|
1,461,100
|
|
|
$
|
1,511,700
|
|
|
$
|
1,565,600
|
|
|
$
|
1,626,900
|
|
Total stockholders equity
|
|
$
|
138,700
|
|
|
$
|
146,700
|
|
|
$
|
155,100
|
|
|
$
|
164,100
|
|
|
$
|
173,900
|
|
|
$
|
184,500
|
|
Tier 1 capital/Total assets (5%)
|
|
|
11.55
|
%
|
|
|
12.18
|
%
|
|
|
12.83
|
%
|
|
|
13.25
|
%
|
|
|
13.44
|
%
|
|
|
13.62
|
%
|
Tier 1 capital/Risk weighted assets (6%)
|
|
|
13.14
|
%
|
|
|
13.95
|
%
|
|
|
14.51
|
%
|
|
|
15.01
|
%
|
|
|
15.23
|
%
|
|
|
15.43
|
%
|
Total RBC/Risk weighted assets (10%)
|
|
|
14.40
|
%
|
|
|
15.20
|
%
|
|
|
15.76
|
%
|
|
|
16.26
|
%
|
|
|
16.48
|
%
|
|
|
16.69
|
%
|
Diluted EPS
|
|
$
|
1.78
|
|
|
$
|
1.41
|
|
|
$
|
1.45
|
|
|
$
|
1.57
|
|
|
$
|
1.71
|
|
|
$
|
1.85
|
|
Firstbank Summary Financial Projections
(Prepared by Firstbank)
($000s, except per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31
|
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Net income to common shareholders
|
|
$
|
12,100
|
|
|
$
|
14,500
|
|
|
$
|
14,200
|
|
|
$
|
14,900
|
|
|
$
|
15,700
|
|
|
$
|
17,000
|
|
Total assets
|
|
$
|
1,512,500
|
|
|
$
|
1,547,200
|
|
|
$
|
1,594,500
|
|
|
$
|
1,632,900
|
|
|
$
|
1,672,300
|
|
|
$
|
1,713,500
|
|
Total stockholders equity
|
|
$
|
137,900
|
|
|
$
|
149,700
|
|
|
$
|
160,300
|
|
|
$
|
171,500
|
|
|
$
|
183,300
|
|
|
$
|
196,100
|
|
Tier 1 capital/Total assets (5%)
|
|
|
9.40
|
%
|
|
|
9.91
|
%
|
|
|
10.43
|
%
|
|
|
10.87
|
%
|
|
|
11.34
|
%
|
|
|
11.84
|
%
|
Tier 1 capital/Risk weighted assets (6%)
|
|
|
13.71
|
%
|
|
|
14.49
|
%
|
|
|
15.12
|
%
|
|
|
15.74
|
%
|
|
|
16.36
|
%
|
|
|
17.01
|
%
|
Total RBC/Risk weighted assets (10%)
|
|
|
14.97
|
%
|
|
|
15.75
|
%
|
|
|
16.37
|
%
|
|
|
16.99
|
%
|
|
|
17.61
|
%
|
|
|
18.26
|
%
|
Diluted EPS
|
|
$
|
1.49
|
|
|
$
|
1.79
|
|
|
$
|
1.74
|
|
|
$
|
1.83
|
|
|
$
|
1.92
|
|
|
$
|
2.07
|
|
In preparing the foregoing projections, Firstbank made a number of assumptions and estimates regarding,
among other things, loan growth rates, deposit growth rates, borrowing growth rates, ratio of loan loss reserves to gross loans, ratio of net charge-offs to gross loans, net interest spread, net interest margin, non-interest income and non-interest
expense. Firstbank believed these assumptions and estimates were reasonable at the time the projections were prepared, but these assumptions and estimates may not be realized and are inherently subject to significant business, economic, competitive
and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under the sections entitled Special Note Regarding Forward-Looking Statements beginning on page 29 and Risk
Factors beginning on page 31. These uncertainties and contingencies are difficult to estimate or predict and many are or will be beyond the control of Firstbank, Mercantile, or the combined company.
Readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the projections set forth above. The
inclusion of the above projections in this joint proxy statement/prospectus should not be regarded as an indication that Firstbank, Mercantile, or their respective officers, directors, agents or other affiliates consider such information to be an
accurate prediction of future results or necessarily achievable. There can be no assurance that the underlying assumptions will prove to be accurate or that the projected results will be
89
realized, and actual results likely will differ, and may differ materially, from those reflected in the projections, whether or not the merger is completed. In addition, the above projections do
not give effect to the merger nor do they take into account the effect of any failure of the merger to occur, and should not be viewed as necessarily accurate or continuing in that context.
Readers of this joint proxy statement/prospectus are urged to review Firstbanks and Mercantiles most recent SEC filings for a
description of each companys results of operations and financial condition during the prior year. Firstbank does not intend to update or otherwise revise the above projections to reflect events that occur or circumstances that exist after the
date of this joint proxy statement/prospectus, except as may be required by applicable law.
Interests of
Mercantile Directors and Executive Officers in the Merger
In considering the recommendation of the Mercantile board of
directors that you vote to approve the proposals submitted for the Mercantile shareholder vote set forth in this joint proxy statement and prospectus, you should be aware that some of Mercantiles directors and executive officers have financial
interests in the merger that are different from, or in addition to, those of Mercantiles shareholders generally. The Mercantile board of directors was aware of and considered these potential interests, among other matters, in evaluating the
merger agreement and the merger and in recommending to you that you approve the proposals submitted for the Mercantile shareholder vote set forth in this joint proxy statement and prospectus.
Positions with the Combined Company
As detailed below under The Merger Board of Directors and Management Following the Merger, the merger agreement provides that upon consummation of the merger, the board of directors of
Mercantile will consist of six directors, which will include (i) the President and Chief Executive Officer of Mercantile plus two members of the Mercantile board of directors selected by the Mercantile board of directors and (ii) the
President and Chief Executive Officer of Firstbank plus two members of the Firstbank board of directors selected by the Firstbank board of directors. In addition, it is expected that, upon consummation of the merger:
|
|
|
Michael H. Price, the Chairman of the Board, President and Chief Executive Officer of Mercantile, will serve as the President and Chief Executive
Officer of the combined company;
|
|
|
|
Robert B. Kaminski, Jr., the Executive Vice President, Chief Operating Officer and Secretary of Mercantile, will serve as Executive Vice President and
Chief Operating Officer of the combined company; and
|
|
|
|
Charles E. Christmas, the current Senior Vice President, Chief Financial Officer and Treasurer of Mercantile will serve as Senior Vice President and
Chief Financial Officer of the combined company.
|
In addition, the Mercantile board of directors has made a
non-binding determination to select David Cassard and Calvin Murdock to serve as directors of the combined company. The fees and/or other remuneration to be provided to the non-employee directors of the combined company have not been determined.
Merger-Related Compensation
Under Mercantiles compensation arrangements with its named executive officers, other than the payments set forth in the table below, no named executive officers will receive any compensation on
account of the Merger.
The following table sets forth the information required by Item 402(t) of Regulation S-K
regarding certain compensation related to the merger for Mercantiles named executive officers, assuming the merger is consummated. This compensation is referred to as golden parachute compensation. The golden parachute
compensation payable by Mercantile to these individuals is subject to a non-binding advisory vote of Mercantile shareholders, as described under The Mercantile Special Meeting on page 39.
90
The amounts set forth below are or may become payable in connection with the consummation of
the Merger, as detailed in the footnotes below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
($)
|
|
|
Equity
($)
(1)
|
|
|
Pension/
NQDC
($)
(2)
|
|
|
Per-
quisites/
Benefits
($)
|
|
|
Tax
Reimbursement
($)
|
|
|
Other
($)
|
|
|
Total
($)
|
|
Michael H. Price
|
|
$
|
0
|
|
|
$
|
162,512
|
|
|
$
|
137,462
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
299,974
|
|
Robert B. Kaminski
|
|
$
|
0
|
|
|
$
|
101,570
|
|
|
$
|
4,403
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
105,973
|
|
Charles E. Christmas
|
|
$
|
0
|
|
|
$
|
101,570
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
101,570
|
|
(1)
|
Because current Mercantile directors will not constitute a majority of the board of directors of the combined company, the completion of the merger will constitute a
change in control for the purposes of the Mercantile Bank Corporation Stock Incentive Plan of 2006. Under the terms of that plan, outstanding stock options and shares of restricted stock become fully vested upon a change in control. All
previously awarded stock options are fully vested and will not become exercisable by virtue of the merger. The amounts shown in the table represent the aggregate value of shares of restricted stock that would otherwise vest on November 29,
2014, based on a per share price of $20.31, which represents the average closing price of Mercantile common stock as reported on Nasdaq for the five trading days following the first public announcement of the merger.
|
(2)
|
Represents the distribution of the named executive officers account pursuant to the Mercantile Bank of Michigan Amended and Restated Executive Deferred
Compensation Agreement with the named executive officer. The account balance is as of August 31, 2013. This is a double-trigger arrangement, meaning that the executive will receive a distribution only if his employment terminates
within 12 months after a change in control.
|
In addition, each non-employee member of the board of directors of
Mercantile holds 1,000 shares of restricted stock having a value of $20,310 based on a per share price of $20.31. The restricted stock was granted under the Mercantile Stock Incentive Plan of 2006 and will become fully vested as of the effective
time of the merger. The shares would otherwise vest on November 29, 2014.
As of November 1, 2013, the record date for
the Mercantile special meeting, the directors and executive officers of Mercantile and their affiliates beneficially owned and were entitled to vote 294,653 shares of Mercantile common stock, collectively representing approximately 3.4% of the
shares of Mercantile common stock outstanding and entitled to vote. Mercantiles directors have entered into agreements obligating them to vote their shares in favor of the merger agreement and the issuance of shares of Mercantile common stock
to Firstbank shareholders in connection with the Merger.
Interests of Certain Firstbank Directors and Executive
Officers in the Merger
In considering the unanimous recommendations of the Firstbank board of directors that Firstbank
shareholders vote in favor of the Firstbank merger and compensation proposals, Firstbank shareholders should be aware that Firstbank directors and executive officers may have interests in the merger that differ from, or are in addition to, their
interests as shareholders of Firstbank. The Firstbank board of directors was aware of these interests and took them into account in its decision to approve the merger agreement and the merger. The following discussion sets forth certain of these
interests in the merger of directors and certain key officers of Firstbank.
Director Appointments
Thomas R. Sullivan, current President and Chief Executive Officer of Firstbank, Jeff A. Gardner and Edward B. Grant have been chosen by
Firstbanks board of directors to serve on the six-member board of directors of Mercantile following the merger. Additionally, after the merger, Thomas R. Sullivan will serve as chairman of Mercantiles board of directors for a period of
one year following the merger.
91
If the merger is completed, it is expected that Firstbank and Keystone Community Bank,
Firstbanks wholly-owned bank subsidiaries, will be consolidated with Mercantile Bank of Michigan, Mercantiles wholly-owned bank subsidiary, after the effective date of the merger. Effective at the time of the consolidation, the current
directors of Mercantile Bank of Michigan will continue to be directors of the consolidated bank and an equal number of additional directors of the consolidated bank will be designated by Firstbank or by the chairman of Mercantiles board of
directors, if the bank consolidation occurs after the effective time of the merger, from among the incumbent directors of the boards of directors of Firstbanks subsidiary banks and other qualified individuals. The individuals who will become
directors of the consolidated bank have not been determined as of the date of this joint proxy statement and prospectus, other than as noted in the description of the employment agreements below.
Potential Payments to Firstbank Executive Officers Upon a Change in Control Resulting from the Merger
The table below shows the amounts that would be realized with respect to each of Firstbanks executive officers severance
payments and benefits, including certain benefits that have been previously earned and/or are currently fully vested, (i) upon a change in control pursuant to the merger and (ii) in the event each executive officer incurs a qualifying termination
following the merger, in each case, assuming the merger and qualifying termination occurred on August 31, 2013.
Firstbanks executive officers will be entitled to certain amounts disclosed below that are payable upon the change of control
resulting from the merger and (except for Mr. Benear) will be further entitled to certain severance benefits under their employment agreements only if their employment is terminated by Mercantile without cause or if they terminate their employment
for good reason as defined in their employment agreement. The executives will receive the full Cash Severance disclosed in the table below only if their employment is terminated after the effective date of the merger without
cause or if they terminate under circumstances that qualify as good reason under the terms of their respective employment agreements. The amount of cash severance payable to any of the executives will decrease over time as their
employment continues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
($)
(1)
|
|
|
Restricted
Stock
($)
(2)
|
|
|
Subtotal
Upon a
Change in
Control
Without a
Qualifying
Termination
($)
|
|
|
Health &
Welfare
Benefits
($)
(3)
|
|
|
Excise
Tax &
Gross-Up
($)
(4)
|
|
|
Cash
Severance
($)
(5)
|
|
|
Total
Upon a
Change in
Control
With a
Qualifying
Termination
($)
|
|
Thomas R. Sullivan
|
|
|
752,405
|
|
|
|
56,327
|
|
|
|
808,732
|
|
|
|
85,988
|
|
|
|
|
|
|
|
364,750
|
|
|
|
1,259,470
|
|
Samuel G. Stone
|
|
|
530,774
|
|
|
|
36,340
|
|
|
|
567,114
|
|
|
|
79,432
|
|
|
|
431,197
|
|
|
|
411,000
|
|
|
|
1,488,743
|
|
William L. Benear
|
|
|
395,584
|
|
|
|
23,985
|
|
|
|
419,569
|
|
|
|
66,974
|
|
|
|
|
|
|
|
0
|
|
|
|
486,543
|
|
Douglas J. Ouellette
|
|
|
60,938
|
|
|
|
25,438
|
|
|
|
86,376
|
|
|
|
|
|
|
|
|
|
|
|
304,687
|
|
|
|
391,063
|
|
James E. Wheeler, II
|
|
|
60,938
|
|
|
|
23,985
|
|
|
|
84,923
|
|
|
|
|
|
|
|
|
|
|
|
304,687
|
|
|
|
389,610
|
|
Daniel H. Grenier
|
|
|
52,500
|
|
|
|
21,804
|
|
|
|
74,304
|
|
|
|
|
|
|
|
|
|
|
|
262,500
|
|
|
|
336,804
|
|
Thomas O. Schlueter
|
|
|
55,625
|
|
|
|
23,985
|
|
|
|
79,610
|
|
|
|
|
|
|
|
|
|
|
|
278,125
|
|
|
|
357,735
|
|
David L. Miller
|
|
|
42,540
|
|
|
|
23,621
|
|
|
|
66,161
|
|
|
|
|
|
|
|
|
|
|
|
212,700
|
|
|
|
278,861
|
|
Richard D. Rice
|
|
|
42,750
|
|
|
|
23,985
|
|
|
|
66,735
|
|
|
|
|
|
|
|
|
|
|
|
213,750
|
|
|
|
280,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer Totals
|
|
$
|
1,994,054
|
|
|
$
|
259,470
|
|
|
$
|
2,253,524
|
|
|
$
|
232,394
|
|
|
$
|
431,197
|
|
|
$
|
2,352,199
|
|
|
$
|
5,269,314
|
|
(1)
|
For each of Mr. Sullivan, Mr. Stone and Mr. Benear, the lump sum cash payment is set forth in their employment agreements described below, and is
calculated based on each of their respective salaries, target incentive compensation and pro-rata bonuses. These calculations assume that no bonus or incentive compensation for 2013 has been previously paid to any of Mr. Sullivan, Mr. Stone or Mr.
Benear. In the case of Mr. Benear, the cash payment becomes payable after his brief employment with Mercantile terminates, but
|
92
|
such termination is intended to be on or soon after the effective date of the merger. For Mr. Ouellette, Mr. J. Wheeler, Mr. Grenier, Mr. Schlueter, Mr. Miller, and Mr. Rice, the
cash payment represents the first retention bonus payable on the first payroll period following the effective time of the merger.
|
(2)
|
Represents acceleration of outstanding Firstbank restricted stock awards which are unvested at the time of the merger, expressed as an aggregate dollar value which
represents $18.17 (the average closing market price of Firstbank common stock over the first five business days following the first public announcement of the merger) for each unvested share of restricted common stock for which vesting will be
accelerated as a result of the merger.
|
(3)
|
Mr. Sullivans health and welfare benefits include: (a) $25,298 for continuation of his and his dependents elected health, dental and prescription drug
benefit coverage, based on Mercantiles 2013 COBRA rates, for 18 months following a qualifying termination, (b) $9,000 as a lump sum payable at the end of such 18 month period, and (c) $51,690 for coverage or reimbursement for life
insurance for two years following a qualifying termination. Mr. Stones health and welfare benefits include: (a) $25,049 for continuation of his and his dependents elected health, dental and prescription drug benefit coverage, based on
Mercantiles 2013 COBRA rates, for 18 months following a qualifying termination, (b) $9,000 as a lump sum payable at the end of such 18 month period, and (c) $45,383 for coverage or reimbursement for life insurance for two years following
a qualifying termination. Mr. Benears health and welfare benefits include: (a) $25,298 for continuation of his and his dependents elected health, dental and prescription drug benefit coverage, based on Mercantiles 2013 COBRA rates,
for 18 months following a qualifying termination, (b) $9,000 as a lump sum payable at the end of such 18 month period, and (c) $32,676 for coverage or reimbursement for life insurance for two years following a qualifying termination.
|
(4)
|
Under certain circumstances, Mr. Stone may be subject to certain excise taxes pursuant to Section 280G of the Internal Revenue Code. Mr. Stones employment
agreement provides that he will be reimbursed for all excise taxes that are imposed on the executive under Section 280G and any income and excise taxes that are payable by the executive as a result of any reimbursements for Section 280G excise taxes
only if Mercantile terminates the executives employment without cause or the executive terminates his employment for good reason. The total 280G tax gross-up amount in the above table assumes that the executive is entitled to a full
reimbursement by us of (i) any excise taxes that are imposed upon the executive as a result of the change in control, (ii) any income and excise taxes imposed upon the executive as a result of our reimbursement of the excise tax amount and (iii) any
additional income and excise taxes that are imposed upon the executive as a result of our reimbursement of the executive for any excise or income taxes. The calculation of the 280G gross-up amount in the above table is based upon his average
compensation for the years 2008 through 2012, a 280G excise tax rate of 20%, a 35% federal income tax rate, a 1.45% Medicare tax rate and a 4.25% state income tax rate. For the purposes of the 280G calculation it is assumed that no amounts will be
discounted as attributable to reasonable compensation or noncompetition covenants. The payment of the 280G tax gross-up will be payable to the executive for an excise tax incurred only if Mercantile terminates the executives employment without
cause or the executive terminates his employment for good reason. However, the amount of the 280G tax gross-up will change based upon whether the executives employment with us is terminated and when it is terminated because the amount of
compensation subject to Section 280G will change.
|
(5)
|
Each of Mr. Sullivan and Mr. Stone would be entitled to a continuation of each of their respective salaries through the end of the term of their respective employment
agreements. Amounts disclosed assume a qualifying termination occurs immediately following the effective date of the merger. Mr. Benears cash severance would be paid as a change in control payment, as described above. These calculations assume
that no bonus or incentive compensation for 2013 have been paid. Each of Mr. Ouellette, Mr. J. Wheeler, Mr. Grenier, Mr. Schlueter, Mr. Miller and Mr. Rice would be entitled to the lump sum cash payments set forth in their employment agreements
described above, and is calculated based on each of their respective salaries, target incentive compensation and retention bonuses. These calculations assume that only the retention bonuses payable on the first payroll period following the effective
time of the merger have been paid.
|
93
Golden Parachute Compensation
The following table sets forth the information required by Item 402(t) of Regulation S-K promulgated by the SEC regarding certain
compensation which Firstbank named executive officers may receive that is based on or that otherwise relates to the merger. The amounts are calculated assuming that the effective date of the merger and a subsequent qualifying termination of
employment both occurred on August 31, 2013 and that all required conditions to the payment of the below amounts have been satisfied. The merger-related compensation payable to the Firstbank named executive officers is the subject of a non-binding
advisory vote of Firstbank shareholders, as described under Advisory Vote on Golden Parachute Compensation Firstbank beginning on page 151.
As discussed above, Firstbanks executive officers (except for Mr. Benear) will be entitled to certain severance benefits under their employment agreements in addition to the change of control
payments resulting from the merger, but only if their employment is terminated by Mercantile without cause or if they terminate their employment for good reason as defined in their employment agreement. The executives will receive
the full Cash amount disclosed in the table below under the section entitled Upon termination by Mercantile without cause or by executive for good reason only if their employment is terminated immediately after the effective
date of the merger without cause or if they terminate under circumstances that qualify as good reason under the terms of their respective employment agreements. The amount of cash severance payable to any of the executives will
decrease over time as their employment continues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
($)
(1)
|
|
|
Equity
($)
(2)
|
|
|
Pension/
NQDC
($)
(3)
|
|
|
Perquisites/
Benefits
($)
(4)
|
|
|
Tax
Reimbursement
($)
(5)
|
|
|
Other
($)
|
|
|
Total
($)
|
|
Upon a change in control
|
|
|
|
|
|
|
|
|
|
Thomas R. Sullivan
|
|
|
752,405
|
|
|
|
56,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
808,732
|
|
Samuel G. Stone
|
|
|
530,774
|
|
|
|
36,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
567,114
|
|
William L. Benear
|
|
|
395,584
|
|
|
|
23,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419,569
|
|
Douglas J. Ouellette
|
|
|
60,938
|
|
|
|
25,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,376
|
|
James E. Wheeler, II
|
|
|
60,938
|
|
|
|
23,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,923
|
|
|
Upon termination by Mercantile without cause or by executive for good reason
|
|
|
|
|
|
|
|
|
|
Thomas R. Sullivan
|
|
|
1,117,155
|
|
|
|
56,327
|
|
|
|
|
|
|
|
85,988
|
|
|
|
|
|
|
|
|
|
|
|
1,259,470
|
|
Samuel G. Stone
|
|
|
941,774
|
|
|
|
36,340
|
|
|
|
|
|
|
|
79,432
|
|
|
|
431,197
|
|
|
|
|
|
|
|
1,488,743
|
|
William L. Benear
|
|
|
395,584
|
|
|
|
23,985
|
|
|
|
|
|
|
|
66,974
|
|
|
|
|
|
|
|
|
|
|
|
486,543
|
|
Douglas J. Ouellette
|
|
|
304,687
|
|
|
|
25,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330,125
|
|
James E. Wheeler, II
|
|
|
304,687
|
|
|
|
23,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
328,672
|
|
(1)
|
For Mr. Sullivan, the cash amount due upon a qualifying termination is the sum of two components: (a) the $752,405 he will receive as a lump sum change of control
payment in the first payroll period following the effective time of the merger and (b) a severance payment of $364,750, which is 12 months base salary, payable through the end of the 12 month term of his agreement. For Mr. Stone, the cash
amount due upon a qualifying termination is the sum of two components: (a) the $530,774 he will receive as a lump sum change of control payment in the first payroll period following the effective time of the merger and (b) a severance payment of
$411,000, which is 18 months base salary, payable through the end of the 18 month term of his agreement. For Mr. Benear, the cash amount is a change in control payment he will receive as severance upon termination of his brief employment at
the same time as or soon after the effective time of the merger. These calculations assume that no bonus or incentive compensation for 2013 have been paid. For Mr. Ouellette and Mr. J. Wheeler, the cash amount is their respective lump sum
severance payment to which they will be entitled if Mercantile terminates their employment or if they terminate employment for certain specified good reasons, in each case within 12 months of the effective date of the merger. These calculations
assume that only the retention bonuses payable on the first payroll period following the effective time of the merger have been paid.
|
94
(2)
|
Represents acceleration of outstanding Firstbank restricted stock awards which are unvested at the time of the merger, expressed as an aggregate dollar value which
represents $18.17 (the average closing market price of Firstbank common stock over the first five business days following the first public announcement of the merger) for each unvested share of restricted common stock for which vesting will be
accelerated as a result of the merger. These values are different from the restricted stock valuation for purposes of Section 280G of the Code (the 280G restricted stock value). The 280G restricted stock value is determined as of
the date of the change of control and is based on several factors, including the stocks fair market value, and the length of time until the unvested shares would otherwise have vested, assuming no change of control.
|
(3)
|
The named executive officers do not participate in any pension or deferred compensation plan.
|
(4)
|
Consists of the costs of continuing each applicable named executive officers and dependents elected health, dental and prescription drug benefit coverage
for a period of 18 months following a qualifying termination, as well as a $9,000 lump sum payment at the end of such extended coverage period. Also includes, for each applicable named executive officer, the maximum payment obligation or
reimbursable cost of premiums for life insurance coverage for a period of two years following a qualifying termination. These aggregated amounts are broken down in footnotes to the preceding table above.
|
(5)
|
Mr. Sullivan, Mr. Benear, Mr. Ouellette and Mr. Wheeler will not receive tax reimbursements in connection with the merger. Mr. Stone will receive tax reimbursements in
connection with the merger under certain specific circumstances. The employment agreement for Mr. Stone provides for certain tax reimbursement payments if Mercantile terminates his employment without cause or if he terminates his
employment for good reason resulting in a severance payment that causes him to be subject to an excise tax under Sections 280G and 4999 of the Internal Revenue Code and if such excise tax cannot be avoided by a 2% reduction in the
termination payment.
|
Stock Options and Restricted Stock Awards
Firstbank has awarded certain employees, officers and directors stock options and grants of restricted stock pursuant to its equity
compensation plans. To the extent the options have not been exercised, upon completion of the merger the options will be converted into options to acquire Mercantile common stock, subject to any accelerated vesting as a result of the merger to the
extent provided by the terms of the applicable plan or agreements under such plans. The vesting of the restricted stock awards will accelerate as a result of the merger. Those shares will become shares of Mercantile common stock upon consummation of
the merger.
The number of shares of unvested restricted stock that will vest at the effective time of the merger for each of
Firstbanks directors and executive officers is as follows: Thomas R. Sullivan (3,100 shares), Samuel G. Stone (2,000 shares), William L. Benear (1,320 shares), Douglas J. Ouellette (1,400 shares), James E. Wheeler, II (1,320 shares), Thomas O.
Schlueter (1,320 shares), Daniel H. Grenier (1,200 shares), Richard D. Rice (1,320 shares) and David L. Miller (1,300 shares).
Prior Employment Agreements
Prior to August 14, 2013, Firstbank and
each of Firstbanks nine executive officers had entered into separate agreements requiring Firstbank to provide compensation to each executive officer following a change of control and certain terminations of employment. Those agreements
provided for severance equal to 150% of the executives highest rate of annual base salary during the 12 months prior to the date of termination plus 150% of any incentive bonus that may have been earned through the date of termination, plus
continued health insurance, life insurance and disability insurance benefits. In connection with the merger, on August 14, 2013, those prior agreements were amended to confirm the amounts payable under certain circumstances involving a
change of control and to eliminate the disability insurance benefit.
On August 14, 2013, Firstbank and each of
Firstbanks executive officers entered into new employment agreements, as described
below
, that become effective as of the effective date of the merger, at which time they will supersede the prior employment agreements. The
new agreements describe the position and duties of each
95
officer after the effective date of the merger. Under the new agreements, the Firstbank executive officers (other than Mr. Sullivan, Mr. Stone and Mr. Benear) no longer have
the right to obtain a severance payment by terminating their employment for a substantial change based on a significant reduction or material change in their authority or responsibility after the merger compared to their authority or
responsibility prior to the merger. In addition, the new employment agreements for all of Firstbanks executive officers include noncompetition and nonsolicitation covenants designed to protect the combined organization, as described in
more detail below.
Employment Agreements with Firstbank Executive Officers
In connection with the contemplated merger, Firstbank and Mercantile entered into new employment agreements with each of Thomas R.
Sullivan, William L. Benear, Samuel G. Stone, Douglas J. Ouellette, James E. Wheeler, II, David L. Miller, Daniel H. Grenier, Richard D. Rice and Thomas O. Schlueter, each of whom is an executive officer of Firstbank. At the effective time of the
merger, these new employment agreements supersede the prior agreements providing for change of control benefits.
Employment Agreement with Mr. Sullivan
Mr. Sullivans employment agreement provides that he will be employed by Mercantile for a period of one year from the effective date of the merger as the Chairman of the Board of Directors of
Mercantile and as a director and Vice-Chairman of the Board of Directors of the consolidated bank. The board of directors of Mercantile will nominate and vote for Mr. Sullivans re-election to the board of directors of Mercantile at any
meeting of Mercantiles shareholders within three years of the effective date of the agreement. Mr. Sullivan will be paid an annual salary of $364,750 and fringe and welfare benefits (other than life insurance, as described below)
consistent with those provided to the Chief Executive Officer of Mercantile. Mr. Sullivan may also purchase the company vehicle he used while employed by Firstbank at its depreciated value as of December 31, 2013.
Mr. Sullivans employment agreement entitles him to certain change in control benefits if the merger becomes effective.
Following the effective date of the merger, Mercantile will pay Mr. Sullivan a lump sum cash change in control payment equal to the sum of (i) $525,000 (150% of his salary, plus (ii) $157,500 (150% of his target incentive
compensation), plus (iii) a pro-rated cash bonus, being $105,000 multiplied by a fraction, the numerator of which is the number of days from and including January 1, 2013 through the effective date of the merger and the denominator of
which is 365, minus (iv) amount of any bonus or incentive compensation previously paid for 2013.
Under
Mr. Sullivans new employment agreement, if Mercantile terminates his employment prior to the end of the one year term, then as severance Mercantile will continue to pay his salary through the end of the 12 month term.
When Mr. Sullivans employment with Mercantile terminates, Mercantile will also reimburse Mr. Sullivan for COBRA
continuation coverage premiums to continue his and his dependents then current health, dental and prescription drug coverage beginning on the date of his termination and continuing for 18 months thereafter, subject to certain conditions. In
addition, following the 18 month COBRA continuation period, Mr. Sullivan will be paid a lump sum cash payment of $9,000 which may be used to offset the cost of obtaining individual health insurance or for any other purpose. When
Mr. Sullivans employment with Mercantile terminates, he will further be entitled to life insurance coverage or reimbursement for the cost of such coverage for a period of two years following the termination of his employment, with a death
benefit equal to the largest death benefit provided to him under Firstbanks group life insurance plan in the 12 month period prior to the merger.
If any part of the benefits to Mr. Sullivan under his new employment agreement constitute a parachute payment under Section 280G of the Internal Revenue Code of 1986, as amended,
then, if the aggregate present value of such payments exceeds 2.99 times Mr. Sullivans base amount as defined in such Section 280G, the parachute payments will be reduced to an amount equal to 2.99 times
Mr. Sullivans base amount.
96
Employment Agreement with Mr. Stone
Mr. Stones employment agreement provides that he will be employed by Mercantile for a period of 18 months from the effective
date of the merger as the Executive Vice President Corporate Finance and Strategic Planning. Mr. Stone will be paid an annual salary of $274,000 and fringe and welfare benefits (other than life insurance, as described below) consistent
with those provided to similarly situated executives of Mercantile. Mr. Stone may also purchase the company vehicle he used while employed by Firstbank at its depreciated value as of December 31, 2013.
Mr. Stones employment agreement entitles him to certain change in control benefits if the merger becomes effective. Following
the effective date of the merger, Mercantile will pay Mr. Stone a lump sum cash change in control payment equal to the sum of (i) $390,000 (150% of his salary), plus (ii) $97,500 (150% of his target incentive compensation), plus
(iii) a pro-rated cash bonus, being $65,000 multiplied by a fraction, the numerator of which is the number of days from and including January 1, 2013 through the effective date of the merger and the denominator of which is 365, minus
(iv) amount of any bonus or incentive compensation previously paid for 2013.
Under Mr. Stones new employment
agreement, if Mercantile terminates his employment prior to the end of the 18 month term, then as severance Mercantile will continue to pay his salary through the end of the 18 month term.
When Mr. Stones employment with Mercantile terminates, Mercantile will also reimburse Mr. Stone for COBRA continuation
coverage premiums to continue his and his dependents then current health, dental and prescription drug coverage beginning on the date of his termination and continuing for 18 months thereafter, subject to certain conditions. In addition,
following the 18 month COBRA continuation period, Mr. Stone will be paid a lump sum cash payment of $9,000 which may be used to offset the cost of obtaining individual health insurance or for any other purpose. When Mr. Stones
employment with Mercantile terminates, he will further be entitled to life insurance coverage or reimbursement for the cost of such coverage for a period of two years following the termination of his employment, with a death benefit equal to the
largest death benefit provided to him under Firstbanks group life insurance plan in the 12 month period prior to the merger.
If any part of the benefits to Mr. Stone under his new employment agreement constitute a parachute payment under Section 280G of the Internal Revenue Code of 1986, as amended, then,
if the aggregate present value of such payments exceeds 2.99 times Mr. Stones base amount as defined in such Section 280G, by 2% or less, then the parachute payments will be reduced to an amount equal to 2.99 times
Mr. Stones base amount. If the federal excise tax intended to be avoided by the above adjustment cannot be avoided without reducing the amounts otherwise owing to Mr. Stone by more than 2%, then Mercantile will make a gross-up
payment to Mr. Stone to make him whole for the excise tax and associated interest and penalties. However, Mr. Stone will be entitled to this gross-up payment only if Mercantile terminates his employment without cause or he
terminates his employment for good reason as such terms are defined in his new employment agreement.
Employment Separation Agreement with Mr. Benear
Mr. Benears employment agreement provides that he will be employed by Mercantile for a period of up to 30 days from the effective date of the merger as an employee of Mercantile.
Mr. Benear will be paid at an annual salary rate of $180,000. Mr. Benear may also purchase the company vehicle he used while employed by Firstbank at its depreciated value as of December 31, 2013.
Mr. Benears employment agreement entitles him to certain change in control benefits if the merger becomes effective payable
after his employment terminates, which is expected to occur within 30 days following the effective date of the merger. Mercantile will pay Mr. Benear a lump sum cash change in control payment equal to the sum of (i) $292,500 (150% of his
salary), plus (ii) $73,125 (150% of his target incentive compensation), plus (iii) a pro-rated cash bonus, being $45,000 multiplied by a fraction, the numerator of which
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is the number of days from and including January 1, 2013 through the effective date of the merger and the denominator of which is 365, minus (iv) amount of any bonus or incentive
compensation previously paid for 2013.
When Mr. Benears employment with Mercantile terminates, Mercantile will
also reimburse Mr. Benear for COBRA continuation coverage premiums to continue his and his dependents then current health, dental and prescription drug coverage beginning on the date of his termination and continuing for 18 months
thereafter, subject to certain conditions. In addition, following the 18 month COBRA continuation period, Mr. Benear will be paid a lump sum cash payment of $9,000 which may be used to offset the cost of obtaining individual health insurance or
for any other purpose. When Mr. Benears employment with Mercantile terminates, he will further be entitled to life insurance coverage or reimbursement for the cost of such coverage for a period of two years following the termination of
his employment, with a death benefit equal to the largest death benefit provided to him under Firstbanks group life insurance plan in the 12 month period prior to the merger.
If any part of the benefits to Mr. Benear under his new employment agreement constitute a parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended, then, if the aggregate present value of such payments exceeds 2.99 times Mr. Benears base amount as defined in such Section 280G, the parachute payments
will be reduced to an amount equal to 2.99 times Mr. Benears base amount.
Employment Agreement with
Mr. Ouellette
Mr. Ouellettes employment agreement provides that he will be employed by Mercantile for a
period of 12 months from the effective date of the merger as the Senior Vice President & Director, Central Region President and President Mt. Pleasant. Mr. Ouellette will be paid an annual salary of $215,000 and fringe and
welfare benefits consistent with those provided to similarly situated executives of Mercantile. Mr. Ouellette may also purchase the company vehicle he used while employed by Firstbank at its depreciated value as of December 31, 2013.
Under the new employment agreement, Mercantile will make a severance payment to Mr. Ouellette if (i) during the
first 12 months of his employment, Mr. Ouellette has his employment terminated or his salary reduced, is assigned a position or duties that are substantially diminished from his initial position or duties with Mercantile, or is relocated more
than 25 miles from his initial primary work location with Mercantile and (ii) Mr. Ouellette terminates his employment with Mercantile. The severance payment will be a lump sum cash payment equal to the sum of (i) $292,500 (150% of his
salary), plus (ii) $73,125 (150% of his target incentive compensation), minus (iii) amount of any bonus or incentive compensation previously paid for 2013.
Under the new employment agreement, Mercantile will pay Mr. Ouellette retention bonuses of $60,937.50 each (25% of his salary and target incentive compensation), payable on the first payroll
following each of: (i) the effective date of the merger, (ii) six months of his employment with Mercantile, and (iii) 12 months of his employment with Mercantile.
If any part of the benefits to Mr. Ouellette under his new employment agreement constitute a parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended, then, if the aggregate present value of such payments exceeds 2.99 times Mr. Ouellettes base amount as defined in such Section 280G, the parachute
payments will be reduced to an amount equal to 2.99 times Mr. Ouellettes base amount.
Employment Agreement with
Mr. J. Wheeler
Mr. J. Wheelers employment agreement provides that he will be employed by Mercantile for a
period of 12 months from the effective date of the merger as Senior Vice President, Senior Loan Officer Central Region and President Alma. Mr. J. Wheeler will be paid an annual salary of $191,400 and fringe and welfare benefits
consistent with those provided to similarly situated executives of Mercantile. Mr J. Wheeler may also purchase the company vehicle he used while employed by Firstbank at its depreciated value as of December 31, 2013.
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Under the new employment agreement, Mercantile will make a severance payment to Mr. J.
Wheeler if (i) during the first 12 months of his employment, Mr. J. Wheeler has his employment terminated or his salary reduced, is assigned a position or duties that are substantially diminished from his initial position or duties with
Mercantile, or is relocated more than 25 miles from his initial primary work location with Mercantile and (ii) Mr. J. Wheeler terminates his employment with Mercantile. The severance payment will be a lump sum cash payment equal to the sum
of (i) $292,500 (150% of his salary), plus (ii) $73,125, (150% of his target incentive compensation), minus (iii) amount of any bonus or incentive compensation previously paid for 2013.
Under the new employment agreement, Mercantile will pay Mr. J. Wheeler retention bonuses of $60,937.50 each (25% of his salary and
target incentive compensation), payable on the first payroll following each of: (i) the effective date of the merger, (ii) six months of his employment with Mercantile, and (iii) 12 months of his employment with Mercantile.
If any part of the benefits to Mr. J. Wheeler under his new employment agreement constitute a parachute
payment under Section 280G of the Internal Revenue Code of 1986, as amended, then, if the aggregate present value of such payments exceeds 2.99 times Mr. J. Wheelers base amount as defined in such Section 280G,
the parachute payments will be reduced to an amount equal to 2.99 times Mr. J. Wheelers base amount.
Employment
Agreements with Other Firstbank Executive Officers
The agreements with Thomas O. Schlueter, David L. Miller, Richard D.
Rice and Daniel H. Grenier specify (i) their respective titles and duties as of the effective time of the Merger, (ii) their respective initial annual salary and benefits, (iii) their respective severance benefits if during the first
twelve months of their employment with Mercantile they are terminated or if certain adverse changes occur, (iv) certain retention bonuses they will earn if they remain an active employee of Mercantile for specified periods and (v) that
they are at will employees who may be terminated by Mercantile at any time, without or without cause. Each agreement provides that under certain circumstances, payments to the individual upon termination of employment may be reduced to
avoid the application of federal excise taxes under Section 280G of the Internal Revenue Code of 1986, as amended.
Non-Competition and Non-Solicitation Agreements with Firstbank Executive Officers
In addition to entering into the new agreements described above, each executive officer entered into a Non-Compete and Non-Solicitation
Agreement with Mercantile and its subsidiaries and affiliates that will become effective as of the effective date of the merger. These non-competition agreements were entered into as a condition to entering into the new employment agreements
described above.
Generally, the restrictions in the non-competition agreements prohibit the officers for a period of one year
from the date their employment with Mercantile terminates (unless terminated without cause, as defined in the agreement) or, if earlier, until a change in control of Mercantile occurs, from directly or indirectly competing with
Mercantile or its subsidiaries or affiliates within a 50 mile radius of any of Mercantiles bank branches or offices and from soliciting customers and employees of Mercantile or its subsidiaries or affiliates. For purposes of these
non-competition agreements, cause generally means an act of dishonesty intended for personal gain, intentional neglect that continues unremedied after notice, conviction of a felony, an intentional breach of certain duties, or regulatory
or court order.
Indemnification and Insurance
Mercantile has agreed to indemnify the officers and directors of Firstbank for a period of six years following the merger against certain liabilities arising on or before the effective date of the merger.
Mercantile has also agreed for a period of six years to continue in effect the current policies of directors and officers liability insurance and fiduciary liability insurance maintained by Firstbank, or, alternatively, substitute
policies of substantially the same coverage, subject to a cap on the cost of such policies equal to an annual premium not to exceed 300% of Firstbanks last annual premium.
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Employee Benefit Plans
On or as soon as reasonably practicable following the merger, employees of Firstbank or its subsidiary banks will continue on as employees
of Mercantile or Mercantile Bank of Michigan will be entitled to participate in the Mercantile or Mercantile Bank of Michigan health and welfare benefit and similar plans on the same terms and conditions as employees of Mercantile and Mercantile
Bank of Michigan. Subject to certain exceptions, these employees will receive credit for their years of service to Firstbank or its subsidiary banks for participation, vesting and benefit accrual purposes.
Share Ownership
As of the close of business on November 1, 2013, the record date for the special meeting, Firstbanks directors and executive officers beneficially owned in the aggregate, 551,156 shares of Firstbank
common stock, or 565,436 shares of common stock giving effect to the receipt of shares thereby upon vesting of outstanding restricted stock awards under the restricted stock award plan, in each case, without reduction for any cashless tax
withholding of shares, representing approximately 6.8% of Firstbanks outstanding shares of common stock. Additional details of the voting interests of Firstbanks directors and executive officers are described under Security
Ownership of Management in Firstbanks Proxy Statement on Schedule 14A for its Annual Meeting of Shareholders filed with the SEC on March 15, 2013.
Board of Directors and Management Following the Merger
Immediately following the effective time of the merger, the board of directors of the combined company will consist of six members, which will include the President and Chief Executive Officer of
Mercantile plus two members of the Mercantile board of directors as of the date of the merger agreement who are independent for purposes of the rules of Nasdaq selected by the Mercantile board of directors, and the President and Chief Executive
Officer of Firstbank plus two members of the Firstbank board of directors who are independent for purposes of the rules of Nasdaq selected by the Firstbank board of directors. The Firstbank board of directors has selected Edward Grant and Jeff
Gardner, who are currently independent directors of Firstbank, to serve as directors of the combined company. The Mercantile board of directors has made a non-binding determination to select David Cassard and Calvin Murdock to serve as directors of
the combined company.
Thomas R. Sullivan will serve as Mercantiles Chairman of the Board for one year following the
merger, Michael H. Price will continue to serve as President and Chief Executive Officer, Robert B. Kaminski, Jr. will continue to serve as an Executive Vice President and Chief Operating Officer, Charles E. Christmas will continue to service as
Senior Vice President and Chief Financial Officer, and Samuel G. Stone will serve as an Executive Vice President.
Regulatory Clearances Required for the Merger
The merger must be approved by the Federal Reserve System, which will review, among other things, the effect of the merger on competition, the companies capital position, safety and soundless, legal
and regulatory compliance matters and Community Investment Act matters. There can be no assurance as to whether this and other regulatory approvals will be obtained, the timing of such approvals or whether any conditions will be imposed on such
approvals.
Mercantile and Firstbank have agreed to use their reasonable best efforts to obtain as promptly as practicable
applicable regulatory approvals, and any other approval required under any applicable federal or state law. Mercantile and Firstbank have agreed to cooperate with one another to determine which regulatory filings or approvals are required to be made
or obtained prior to the effective date of the merger and to timely make all such filings and seek all such approvals. Mercantile and Firstbank are currently reviewing which such regulatory filings and approvals, if any, are required and expect to
timely make all such filings and seek all such approvals.
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Mercantile and Firstbank cannot assure you that other government agencies or private parties
will not initiate actions to challenge the merger before or after it is completed. Any such challenge to the merger could result in a court order enjoining the merger or in restrictions or conditions that would have a material adverse effect on the
combined company following the merger if the merger is completed. Such restrictions and conditions could include requiring the divestiture or spin-off of assets or businesses. Under the terms of the merger agreement, neither Mercantile nor Firstbank
is required to agree to separate or divest any of its assets, facilities, properties or businesses, or to agree to any limitations on its conduct or business practices. No additional shareholder approval is expected to be required or sought for any
decision by Mercantile or Firstbank after the Mercantile special meeting and the Firstbank special meeting to agree to any terms and conditions necessary to resolve any regulatory objections to the merger.
Exchange of Shares in the Merger
Prior to the effective time of the merger, Mercantile will appoint an exchange agent to handle the exchange of shares of Firstbank common stock for shares of Mercantile common stock. At the effective time
of the merger, each share of Firstbank common stock will be converted into the right to receive one share of Mercantile common stock without the need for any action by the holders of Firstbank common stock.
Promptly after the effective time of the merger, but in no event later than three business days after the closing of the merger,
Mercantile will cause the exchange agent to mail to each holder of a Firstbank stock certificate a letter of transmittal specifying, among other things, that delivery will be effected, and risk of loss and title to any certificates representing
Firstbank common stock shall pass, only upon proper delivery of such certificates to the exchange agent. The letter will also include instructions explaining the procedure for surrendering Firstbank stock certificates in exchange for shares of
Mercantile common stock. Firstbank shareholders should
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return Firstbank stock certificates with the enclosed proxy card.
After the effective time of the merger, shares of Firstbank common stock will no longer be outstanding, will be automatically canceled and will cease to exist and each certificate, if any, that previously
represented shares of Firstbank common stock will represent only the right to receive the merger consideration as described above. With respect to such shares of Mercantile common stock deliverable upon the surrender of Firstbank stock certificates,
until holders of such Firstbank stock certificates have surrendered such stock certificates to the exchange agent for exchange, those holders will not receive dividends or distributions with respect to such shares of Mercantile common stock with a
record date after the effective time of the merger.
Firstbank shareholders will not receive any fractional shares of
Mercantile common stock pursuant to the merger. Instead of any fractional shares, Firstbank shareholders will be paid an amount in cash for such fraction calculated by multiplying the fractional share interest to which such holder would otherwise be
entitled by the closing price for a share of Mercantile common stock as reported on Nasdaq on the first trading day immediately following the date on which the merger is effective. Because the exchange ratio is 1.0 to 1.0, fractional share payments
are not expected.
Mercantile shareholders need not take any action with respect to their shares of Mercantile common stock.
Treatment of Firstbank Equity-Based Awards
Upon completion of the merger, each right of any kind to receive Firstbank common stock or benefits measured by the value of a number of
shares of Firstbank common stock granted under the Firstbank stock plans will be converted into an award with respect to a number of shares of Mercantile common stock equal to the aggregate number of shares of Firstbank common stock subject to such
award. Such converted awards shall otherwise continue to have, and be subject to, the same terms and conditions set forth in the applicable Firstbank stock plan (or any other agreement to which such converted award was subject immediately prior to
the effective time of the merger). The exercise or strike price (if any) per share of Mercantile common stock applicable to any such converted award shall be equal to the per share exercise price of such converted award immediately prior to the
effective time of the merger. Firstbank restricted stock and unvested stock options will become fully vested as of the effective time of the merger.
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Bank Consolidation Following the Merger
In connection with planning the integration of the businesses of Mercantile and Firstbank after the merger, the management teams of
Firstbank and Mercantile have been evaluating and expect to continue evaluating the possible consolidation of Mercantile Bank, Firstbank, and Keystone Community Bank, each a Michigan bank. The consolidation would be subject to, among other things,
regulatory approval, the continuing evaluation of such consolidation and approval of the board of directors of the combined company and each of the banks following the completion of the merger.
Mercantile Dividend Policy
Mercantile currently pays quarterly cash dividends of $0.12 per share on shares of its common stock and currently intends to consider the declaration of a dividend on a quarterly basis. Any future
determination regarding dividend or distribution payments will be at the discretion of the Mercantile board of directors, subject to applicable limitations under Michigan law, and will depend upon many factors, including results of operations,
financial condition, liquidity, capital requirements and legal requirements.
Mercantile Special Dividend
As part of the merger, the Mercantile board of directors expects to declare and pay a special cash dividend of $2.00 per
share to Mercantile shareholders prior to the effective time of the merger, subject to the satisfaction of the closing conditions set forth in the merger agreement.
Listing of Mercantile Common Stock
It is a
condition to the completion of the merger that the shares of Mercantile common stock to be issued to Firstbank shareholders pursuant to the merger (including those shares of Mercantile common stock to be issued upon conversion of the Firstbank
share-based awards) be authorized for listing on Nasdaq, subject to official notice of issuance.
De-Listing and
Deregistration of Firstbank Stock
Upon completion of the merger, the Firstbank common stock currently listed on Nasdaq
will cease to be listed on Nasdaq and will subsequently be deregistered under the Exchange Act.
No Appraisal or
Dissenters Rights
Under Michigan law, as well as the governing instruments of each company, neither the holders of
Mercantile common stock nor the holders of Firstbank common stock are entitled to appraisal rights or dissenters rights in connection with the merger. See the section entitled No Appraisal Rights or Dissenters Rights
beginning on page 150.
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THE MERGER AGREEMENT
The following describes the material provisions of the merger agreement, which is included as Annex A to this joint proxy statement
and prospectus and incorporated by reference herein. The summary of the material provisions of the merger agreement below and elsewhere in this joint proxy statement and prospectus is qualified in its entirety by reference to the merger agreement.
This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. Mercantile and Firstbank encourage you to read carefully the merger agreement in its entirety before making
any decisions regarding the merger as it is the legal document governing the merger and related transactions.
The
merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement and are not intended to provide any factual information about Mercantile or Firstbank. Mercantile and
Firstbank are responsible for considering whether additional disclosure of material information is required to make the statements in this joint proxy statement and prospectus not misleading. Factual disclosures about Mercantile or Firstbank
contained in this joint proxy statement and prospectus or Mercantiles or Firstbanks public reports filed with the SEC may supplement, update or modify the factual disclosures about Mercantile or Firstbank contained in the merger
agreement and described in the summary. The representations, warranties and covenants made in the merger agreement by Mercantile and Firstbank are qualified and subject to important limitations agreed to by Mercantile and Firstbank in connection
with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and
warranties were made solely for the benefit of the parties to the merger agreement, and were negotiated with the principal purpose of allocating risk between the parties to the merger agreement rather than establishing matters as facts. The
representations and warranties may also be subject to a contractual standard of materiality that may be different from that generally relevant to shareholders or applicable to reports and documents filed with the SEC, and in some cases are qualified
by confidential disclosures that were made by each party to the other, which disclosures are not reflected in the merger agreement or otherwise publicly disclosed. The representations and warranties in the merger agreement will not survive the
completion of the transactions. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, and subsequent developments or new information qualifying a
representation or warranty may have been included or incorporated by reference into this joint proxy statement and prospectus. For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should
not be read alone, but instead should be read together with the information provided elsewhere in this joint proxy statement and prospectus and in the documents incorporated by reference into this joint proxy statement and prospectus. See
Where You Can Find More Information beginning on page 154.
General; The Merger
At the effective time of the merger, upon the terms and subject to the satisfaction or waiver of the conditions of the
merger agreement and in accordance with the Michigan Business Corporation Act, Firstbank will be merged with and into Mercantile, the separate corporate existence of Firstbank shall cease, and Mercantile shall be the surviving corporation of the
merger. As of the effective time of the merger, the articles of incorporation of the surviving corporation will be the articles of incorporation of Mercantile as in effect immediately prior to the effective time, and the bylaws of Mercantile as in
effect immediately prior to the effective time will be the bylaws of the surviving corporation. Effective as of the effective time of the merger, Mercantile will cause the size of the board of directors of the surviving corporation to be six
directors and will cause the members of the board of directors of the Surviving Corporation to be comprised of (i) the President and Chief Executive Officer of Mercantile plus two members of the Mercantile board of directors as of the date of
the merger agreement who are independent for purposes of the rules of Nasdaq selected by the Mercantile board of directors and (ii) the President and Chief Executive Officer of Firstbank plus two members of the Firstbank board of directors as
of the date of the merger agreement who are independent for purposes of the rules of Nasdaq selected by the Firstbank board of directors.
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When the Merger Becomes Effective
Mercantile and Firstbank will file a certificate of merger (referred to as the Certificate of Merger) with the Michigan
Department of Legal and Regulatory Affairs as soon as practical on a date to be agreed upon by Mercantile and Firstbank, which will be no later than two business days immediately following the day on which the last of the conditions to the closing
of the merger described under The Merger Agreement Conditions to Completion of the Transaction beginning on page 116 have been satisfied or waived (other than those conditions that by their nature are to be satisfied or
waived at the closing of the merger), or at such other date and time as the parties may agree. For further discussion of the conditions to the closing of the transactions, see The merger agreement Conditions to Completion of the
Transaction. The merger will be effective when the Certificate of Merger is duly filed with the Michigan Department of Legal and Regulatory Affairs or at such later time as is agreed to by the parties and specified in the Certificate of
Merger.
Mercantile and Firstbank currently expect to complete the transaction by December 31, 2013, subject to receipt
of required shareholder approvals and regulatory approvals and to the satisfaction or waiver of the other conditions to the transactions described below.
Consideration to be Received Pursuant to the Merger
Conversion of Firstbank Common Stock
The merger agreement provides that,
at the effective time of the merger, each share of Firstbank common stock issued and outstanding immediately prior to the effective time of the merger (except those shares of Firstbank common stock owned by Firstbank or any of its wholly owned
subsidiaries or Mercantile or any of its wholly owned subsidiaries immediately before the effective time of the merger, which will be cancelled and cease to exist for no consideration) shall be converted into the right to receive one (referred to as
the exchange ratio) fully paid and nonassessable share of Mercantile common stock (referred to as the merger consideration) and, whereupon, such shares of Firstbank common stock will no longer be outstanding and all rights
with respect to such shares will cease to exist, except for the right to receive the merger consideration (and cash in lieu of fractional shares).
Pursuant to the merger, Mercantile will not, in exchange for shares of Firstbank common stock, issue any certificates or scrip representing fractional shares of Mercantile common stock or pay any
dividends or distributions with respect to such fractional share interests, and such fractional share interests will not entitle the holder thereof to vote or to have any rights as a holder of shares of Mercantile common stock. Instead, a
shareholder of Firstbank who otherwise would have been entitled to receive a fraction of a share of Mercantile common stock in connection with the merger will receive, in lieu thereof, cash (without interest) in an amount equal to the product of
(a) such fractional part of a share of Mercantile common stock, multiplied by (b) the closing price for a share of Mercantile common stock as reported on Nasdaq on the trading day immediately before the date on which the effective time of
the merger occurs.
At 5:00 p.m., eastern time, on the date of the closing of the merger, the share transfer books of
Firstbank shall be closed, and there shall be no further registrations of transfers on the share transfer books of Firstbank of shares of Firstbank common stock that were outstanding immediately prior to the effective time of the merger.
Dividends and Distributions
No dividends or other distributions with respect to Mercantile common stock with a record date on or after the effective time of the merger will be paid to the holder of any unsurrendered certificate or
book-entry share, and no cash payment in lieu of fractional shares of Mercantile common stock will be paid to any such holder, until the holder of such certificate or book-entry share will have surrendered such certificate or book-entry share.
Following such surrender, there will be paid, without interest, with respect to whole shares of Mercantile common stock (a) at the time of such surrender, the amount of dividends or other distributions with a record date
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and a payment date on or after the effective time of the merger and on or prior to the date of such surrender and (b) the amount of any cash payable in lieu of a fractional share of
Mercantile common stock to which such holder is entitled.
Treatment of Firstbank Awards
As of the effective time of the merger, each right of any kind, contingent or accrued, to receive Firstbank common stock or benefits
measured in whole or in part by the value of a number of shares of Firstbank common stock granted under Firstbank employee equity award plans, whether vested or unvested, that is outstanding immediately prior to the effective time of the merger
shall cease to represent an award with respect to Firstbank common stock and shall be converted into an award with respect to a number of shares of Mercantile common stock equal to the aggregate number of shares of Firstbank common stock subject to
such award. The value of any fractional shares related to any converted award will be paid in cash at the time such converted award is otherwise settled pursuant to its terms under the applicable Firstbank equity award plan. All such converted
awards shall continue to have, and be subject to, the terms set forth in the applicable Firstbank employee equity award plan to which it was subject immediately prior to the effective time of the merger, with an exercise price per share of
Mercantile common stock equal to the per share exercise price of such award immediately prior to the effective time of the merger. Prior to the effective time of the merger, Firstbank will make such amendments and take such other actions with
respect to the Firstbank stock plans as necessary to effect the adjustment, including notifying all participants in the Firstbank equity award plans of such adjustment. Firstbank restricted stock and unvested stock options will become fully vested
as of the effective time of the merger.
Procedure for Receiving Merger Consideration
Prior to, or at the effective time of the merger, Mercantile shall deposit with the exchange agent shares of Mercantile common stock, in
the aggregate amount equal to the number of shares of Mercantile common stock to which holders of Firstbank common stock are entitled based on the exchange ratio. In addition, Mercantile shall deposit with the exchange agent, as necessary, from time
to time after the effective time of the merger, cash in an amount sufficient to make payments in lieu of any fractional shares and payments of any dividends or other distributions payable pursuant to the merger agreement. The shares deposited
pursuant to the foregoing are referred to as the exchange fund.
As soon as reasonably practicable after the
effective time of the merger (but in any event, no later than three business days after the effective time of the merger), Mercantile shall cause the exchange agent to mail to each holder of record of shares of Firstbank common stock (other than
excluded shares), as of the effective time of the merger, (a) a form of letter of transmittal and (b) instructions for use in effecting the surrender of such certificates or book-entry shares of Firstbank common stock in exchange for the
merger consideration and any cash in lieu of fractional shares and any dividends or other distributions payable pursuant to the merger agreement. Each holder of Firstbank common stock will be entitled to receive the appropriate merger consideration
and cash in lieu of any fractional shares payable and any dividends or distributions payable pursuant to the merger agreement upon surrendering to the exchange agent such shareholders certificates or book-entry shares, together with a properly
executed letter of transmittal and any other documents required by the exchange agent. The merger consideration and any other consideration paid under the merger agreement may be reduced by any applicable withholding taxes as required by law. You
should not return your certificates representing shares of Firstbank common stock to the exchange agent without a letter of transmittal, and you should not return your certificates representing Firstbank common stock to Firstbank.
If payment of the merger consideration is to be made to a person other than the person in whose name the certificates or book-entry
shares representing shares of Firstbank common stock are registered, it will be a condition of exchange that such certificate or book-entry share is properly endorsed or otherwise in proper form for transfer and that the person requesting payment
will have paid all applicable taxes relating to the person requesting such payment and any transfer or other taxes required by reason of the transfer or establish, to the reasonable satisfaction of Mercantile, that such taxes have been paid or are
not applicable.
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The exchange agent shall invest any cash included in the exchange fund as directed by
Mercantile subject to certain restrictions, provided, however, that no gain or loss thereon shall affect the amounts payable to holders of Firstbank common stock. No interest will be paid or will accrue on the merger consideration payable in respect
of any certificate or book-entry share of Firstbank common stock.
Unclaimed Amounts
Any portion of the exchange fund that remains undistributed to Firstbank shareholders after the first anniversary of the effective time of
the merger shall be delivered to Mercantile, upon demand, and any Firstbank shareholders shall thereafter look only to Mercantile for, and Mercantile shall remain liable for, payment of their claims for the merger consideration, any cash in lieu of
any fractional shares payable and any dividends or other distributions payable pursuant to the merger agreement.
Lost, Stolen or Destroyed Certificates
If any certificate representing shares of Firstbank common stock has been lost, stolen or destroyed, Mercantile or the exchange agent will deliver the applicable merger consideration, any cash in lieu of
any fractional shares payable and any dividends or other distributions payable pursuant to the merger agreement with respect to the shares formerly represented by such certificate if the shareholder asserting the claim of a lost, stolen or destroyed
certificate has delivered an affidavit of that fact to Mercantile or the exchange agent, as the case may be, provided that Mercantile or the exchange agent, as the case may be, may require such shareholder to deliver a bond as indemnity against any
claim that may be made against Mercantile or the exchange agent with respect to such certificate.
Representations and Warranties
The merger agreement contains a number of representations and warranties made by each of Firstbank and Mercantile that relate to, among other things:
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corporate existence, organization, qualification and corporate power;
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capital structure and capitalization
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approval and authorization of the merger agreement and the transactions contemplated by the merger agreement by the relevant board of directors and the
receipt by the relevant board of directors of a fairness opinion from its financial advisors;
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any conflicts created by the transactions contemplated by the merger agreement, including the merger;
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required consents and approvals of governmental entities in connection with merger and the other transactions contemplated by the merger agreement;
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documents filed with the SEC and other regulatory authorities, financial statements included in those documents and regulatory reports filed with
governmental entities;
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absence of undisclosed liabilities;
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compliance with applicable laws, orders and permits;
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agreements with bank regulators
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absence of certain changes or events;
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labor and employment matters;
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information supplied in connection with this joint proxy statement and prospectus and the registration statement of which it is a part;
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investment bankers and brokers;
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loans and investments; and
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loan origination and servicing.
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Many of the representations and warranties in the merger agreement are qualified by a materiality or material adverse effect standard (that is, they will not be deemed to be untrue
or incorrect unless their failure to be true or correct, individually or in the aggregate, as the case may be, would be material or have a material adverse effect, as the case may be). For purposes of the merger agreement, a material adverse
effect with respect to any person is any event, occurrence, fact, condition or change that (a) is, individually or in the aggregate, materially adverse to the business, results of operations, condition (financial or otherwise) or assets
of such person and its subsidiaries, taken as a whole, or (b) prohibits or materially impairs the ability of such person to consummate the transactions contemplated by the merger agreement on a timely basis, except, in the case of clause (a),
for any event, occurrence, fact, condition or change arising out of, relating to or resulting from (either alone or in combination):
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i.
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conditions or changes generally affecting the economy, or the financial or securities markets;
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ii.
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any outbreak or escalation of hostilities, war (whether or not declared) or military action or any act of terrorism, the occurrence of any natural disaster, or
occurrence of any
man-made
disaster of wide-spread consequences;
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iii.
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general conditions in or changes generally affecting the industry or geographic regions in which such party or its subsidiaries operate;
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iv.
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changes in laws (or interpretations thereof);
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v.
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changes in generally accepted accounting principles or accounting standards (or interpretations thereof);
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vi.
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compliance with the terms of, or the taking of any action required by, the merger agreement;
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vii.
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any decline in the market price, or change in trading volume, of Firstbank common stock or Mercantile common stock, as applicable (except that any event, occurrence,
fact, condition or change that caused or contributed to any decline in market price, or change in trading volume, of Firstbank common stock or Mercantile common stock, as applicable, will not be excluded unless otherwise specifically excluded);
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viii.
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the announcement or pendency of the merger or any other transaction contemplated by the merger agreement;
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ix.
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acts or omissions of (1) Firstbank prior to the effective time of the merger taken at the written request of Mercantile or with the prior written consent of
Mercantile, or (2) Mercantile prior to the effective time of the merger taken at the written request of Firstbank or with the prior written consent of Firstbank, in each case in connection with the transactions contemplated by the merger
agreement or applicable law;
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provided, however, that any event, occurrence, fact, condition or change referred to in clauses (i), (ii),
(iii), (iv) and (v) above shall be taken into account for purposes of such clause only to the extent such event, occurrence, fact, condition or change has a disproportionate effect on such person or its subsidiaries, taken as a whole,
compared to other participants in the industries or geographic regions in which such person and its subsidiaries conduct their businesses.
The representations and warranties of the parties to the merger agreement will expire upon the effective time of the merger or the termination of the merger agreement pursuant to its terms.
Conduct of Business Pending the Completion of the Transaction
Each of Firstbank and Mercantile has agreed to certain covenants in the merger agreement restricting the conduct of its business between
the date of the merger agreement and the effective time of the merger. In general, except as expressly contemplated by the merger agreement or as required by applicable law or with the prior written consent of the other party (which consent will not
be unreasonably withheld, conditioned or delayed), each party will conduct its business in the ordinary course of business generally consistent with past practice and, to the extent consistent therewith, will use its commercially reasonable efforts
to preserve substantially intact each partys and each partys respective subsidiaries business organization, to keep available the services of each partys and each partys respective subsidiaries current officers
and employees and to preserve each partys and each partys respective subsidiaries present relationships with customers, licensors and other persons having business relationships with it.
In addition, each of Firstbank and Mercantile have agreed to reciprocal specific restrictions relating to the conduct of their respective
businesses between the date of the merger agreement and the effective time of the merger, including, but not limited to, taking the following actions (subject, in each case, to exceptions specified below and in the merger agreement or previously
disclosed in writing to the other party as provided in the merger agreement):
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the amendment of its articles of incorporation or bylaws (or other comparable organizational documents);
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(A) the split, combination or reclassification of any securities issued by such party or its subsidiaries, (B) the repurchase, redemption or other
acquisition of, or offer to repurchase, redeem or otherwise acquire, any securities issued by such party or its respective subsidiaries, except for the acceptance of shares of common stock delivered in satisfaction of the exercise price or tax
withholding obligations by holders of awards under Firstbank stock plans or holders of Mercantile stock options, as applicable that are outstanding as of the date of the merger agreement who exercise such Firstbank awards or Mercantile options, as
applicable, and shares of common stock submitted for cancellation to satisfy tax withholding obligations that occur upon the vesting of restricted stock that are outstanding as of the date of the merger agreement, or (C) the declaration,
setting aside or payment of any dividend or distribution (whether in cash, stock, property or otherwise) in respect of, or enter into any contract with respect to the voting of, any shares of its capital stock, except (1) payment of quarterly
cash dividends by Firstbank in an amount not to exceed $0.06 per share of Firstbank common stock or by Mercantile in an amount not to exceed $0.12 per share of Mercantile common stock and in a manner consistent with past practice with respect to the
timing of the declaration, payment and record date of such dividend, and (2) distributions to or from such partys subsidiaries;
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the issuance, sale, pledge, disposal or encumbrance of any securities issued by such party or any of its respective subsidiaries, other than the
issuance of shares of common stock upon the exercise of any award granted pursuant to a Firstbank or Mercantile employee stock plan, as applicable;
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except in the ordinary course of business consistent with past practice or as required by applicable law or the express terms of any Firstbank or
Mercantile, as applicable, benefit plan, multiemployer plan, or contract in effect as of the date of the merger agreement, (A) the increase of the compensation
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(including bonus opportunities) payable or that could become payable by such party or any of its respective subsidiaries to directors or officers or to any substantial class of employees;
(B) the entry into any new or amendment in any material respect of any existing employment, consulting, severance, termination, retention or change in control agreement with any of its past or present officers, directors or employees;
(C) the establishment, adoption, entry into, amendment of, termination of, or the taking of any action to accelerate rights under any Firstbank or Mercantile, as applicable, benefit plan; (D) the promotion of any officer or any nonofficer
employee to an officer position; (E) the granting of any severance or termination pay unless provided under any Firstbank or Mercantile, as applicable, benefit plan; (F) the granting of any compensatory awards that are payable in, relate
to, or are determined by reference to the value of Firstbank or Mercantile, as applicable, common stock; (G) the entry into any new or amendment of any collective bargaining agreement; or (H) the funding or in any other way securing of any
payment of compensation or benefit under any Firstbank or Mercantile, as applicable, benefit plan;
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the hiring or termination of employment of any officer except for termination for cause and hiring to replace;
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appointment or election of any director except for (A) removal for cause and appointments or elections to replace or (B) election of any
director as of the date of the merger agreement at any annual meeting of shareholders;
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the acquisition, by merger, consolidation, acquisition of stock or assets, or otherwise, of any business or division of a business or, except among
wholly-owned Subsidiaries, make any capital contributions to any person, other than (a) incident to foreclosures in connection with debts previously contracted in good faith, or (b) acquisitions of personal property in the ordinary course
of business generally consistent with past practice;
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the (A) transfer, license, sale, lease or other disposition of any assets, including capital stock or other equity interests in any Firstbank or
Mercantile, as applicable, subsidiary, provided that such party and any of its subsidiaries may transfer, license, sell, lease or dispose of any obsolete or unused equipment, fixtures or assets in the ordinary course of business consistent
with past practice; or (B) adoption or effecting of a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
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the repurchase, prepayment or incurrence of any indebtedness for borrowed money or guarantee of any such indebtedness of another person, the issuance
or sale of any debt securities or options, warrants, calls or other rights to acquire any debt securities of such party or any of its subsidiaries, the guarantee of any debt securities of another person, the entry into any keep well or
other contract to maintain any financial statement condition of any other person (other than any wholly owned subsidiary), other than in the ordinary course of business consistent with past practice;
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the application for the opening, relocation, or closing of any branch office, loan production office or other material office or facility, or the
opening of any such material office or facility;
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the entry into or amendment or modification of, in any material respect, or the consent to the termination of (other than at its stated expiry date),
any material contract, other than in the ordinary course of business consistent with past practice;
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the institution, settlement or compromise of any actions pending or threatened before any arbitrator, court or other governmental entity
(A) involving the payment of monetary damages by such party or any of its subsidiaries of any amount exceeding $250,000, (B) involving an admission of any liability or injunctive or similar relief, or (C) having a material impact on
such partys business;
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the making of any material change in any method of financial accounting principles or practices, in each case except for any such change required or to
be required by a change in generally accepted accounting principles or applicable law;
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the settlement or compromise of any material tax claims, audits or assessments in excess of the amount reserved for such claims, audits or assessments
as set forth on the books and records of Firstbank or Mercantile, as applicable; (B) the making or changing of any material tax election, changing of any annual tax accounting period, adoption or changing of any method of tax accounting; or
(C) the entry into any material closing agreement, surrender in writing any right to claim a material tax refund, offset or other reduction in tax liability or consent to any extension or waiver of the limitation period applicable to any
material tax claim or assessment relating to such party or any of its respective subsidiaries;
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the entry into any joint venture, strategic partnership or alliance;
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the abandonment, encumbrance, conveyance of title (in whole or in part), exclusive licensing or granting of any right or other licenses to material
intellectual property owned by such party or any of its respective subsidiaries, other than in the ordinary course of business consistent with past practice;
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the making of any capital expenditures or permit of any of such partys subsidiaries to make any capital expenditures, except for (A) capital
expenditures not to exceed the aggregate amount set forth in Firstbanks or Mercantiles, as applicable, capital expenditure plans delivered or made available to the other party prior to the date of the merger agreement, or
(B) capital expenditures required by law or governmental authorities or incurred in connection with the repair or replacement of facilities destroyed or damaged due to casualty or accident (whether or not covered by insurance);
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the acquisition of or causing of its affiliates to acquire, directly or indirectly, any shares of the other partys capital stock;
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the entry into any material new line of business or the change in any material respect of its lending, investment, risk and asset liability management,
interest rate, or fee pricing with respect to depository accounts, hedging and other material banking or operating policies or practices, except in the ordinary course of business consistent with past practice or as required by law or any regulatory
agency;
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the (a) making of any loan in material violation of, or other failure to comply in all material respects with, the underwriting and credit
policies of Firstbank or Mercantile, as applicable, or such partys subsidiaries as such policies are in effect as of the date of the date of the merger agreement, or (b) making of any loan or entry into any credit relationship with any
customer who is not indebted to Firstbank or Mercantile, as applicable, including any loan participation, in an amount in excess of $3,000,000 or make any additional or new loan or increase the size of any credit relationship, including any loan
participation, to any customer who is indebted to Firstbank or Mercantile, as applicable, or any subsidiary of such party, in the following amounts: (i) for any loan customer with one or more loans solely with loan grades of 1 through 4, in an
amount greater than $3,000,000; (ii) for any loan customer with one or more loans with a loan grade of 5 or 6, in an amount greater than $1,000,000; and (iii) for any loan customer with one or more loans with a loan grade of 7 or worse, in
any amount;
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the restructuring or material changing of its investment securities portfolio through purchases, sales or otherwise, or its policies with respect to
the classification and reporting of such portfolios;
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the purchasing, committing to purchase, or otherwise acquiring of any derivative or synthetic mortgage product or entry into any interest rate swap
transaction, other than the purchase and sale of collateralized mortgage obligations and interest rate swap transactions in the ordinary course of business and consistent with past practice;
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the taking of any action that would prevent the merger from qualifying for its intended tax treatment or unreasonably delay the effectiveness of the
registration statement issued in accordance with the merger agreement;
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the taking of any action that would be materially inconsistent with or contrary to the representations, warranties and covenants made by Firstbank or
Mercantile, as applicable, in the merger agreement, or the taking of any action that would cause its representations and warranties to become untrue in any material respect, except as and to the extent required by applicable law, regulatory agencies
or the merger agreement;
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the failure to comply in all material respects with applicable law and formally adopted internal policies and procedures applicable to the conduct of
its business, except to the extent that the application of any law is being contested in good faith and Mercantile or Firstbank, as applicable, has notified the other party of such contest;
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the failure to maintain its books, accounts, and records in the usual and regular manner, and in material compliance with applicable law, governmental
policy issuances, generally accepted accounting principles and accounting standards and formally adopted internal policies and procedures;
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the failure to use commercially reasonable efforts to maintain its property and assets in their present state of repair, order, and condition,
reasonable wear and tear and damage by fire or other casualty covered by insurance excepted;
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the failure to use commercially reasonable efforts to maintain and keep in full force and effect insurance coverage, so long as such insurance is
reasonably available, on its assets, properties, premises, operations, directors, and personnel in such amounts, against such risks and losses, and with such self-insurance requirements as are presently in force;
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the failure to charge off loans and maintain its allowance for loan and lease losses, in each case in a manner in conformity with the prior respective
practices of Mercantile or Firstbank, as applicable, and such partys subsidiaries, and applicable industry, regulatory, and general accepted accounting principles standards;
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the failure to promptly notify Firstbank or Mercantile, as applicable of the threat or commencement of any material action against, relating to, or
affecting: (a) Firstbank or Mercantile, as applicable, or such partys subsidiaries; (b) Firstbanks or Mercantiles, as applicable, or such partys subsidiaries directors, officers or employees in their
capacities as such; (c) Firstbanks or Mercantiles, as applicable, or such partys subsidiaries assets, liabilities, businesses, or operations; or (d) the merger or the merger agreement;
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the making of any loan or make any loan commitment, renewal, or extension to any director, officer or principal shareholder of Mercantile or Firstbank,
as applicable, or any of such party partys subsidiaries, or any affiliate of any such person, which would, when aggregated with all outstanding
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loans, commitments, renewals, or extensions made by such party or such partys subsidiaries to the person and to such and such persons immediate family and affiliates,
exceed $500,000, except for the renewing or advancement on existing lines of credit or the renegotiation or restructuring of any problem or delinquent loan or to the making of any residential mortgage loan in the ordinary course of business
consistent with past practice and on terms available to Firstbanks or Mercantiles, as applicable, customers generally;
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the taking of any action to discharge or satisfy any mortgage, lien, charge or encumbrance, other than as a result of the payment of liabilities in
accordance with their terms or except in the ordinary course of business consistent with past practice, if the cost to Firstbank or Mercantile, as applicable, or to any of such partys subsidiaries to discharge or satisfy any mortgage, lien,
charge or encumbrance is in excess of $100,000, unless the discharge or satisfaction is covered by general or specific reserves;
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the taking of any action to pay any liability, absolute or contingent, in excess of $100,000, except liabilities shown on Mercantiles financial
statements set forth in Firstbanks or Mercantiles, as applicable, Annual Report on Form 10-K for the year ended December 31, 2012 or in any Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, each as filed with
the SEC, except in the ordinary course of business consistent with past practice, or except in connection with the transactions contemplated by the merger agreement;
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the entry into or amendment of any contract or other transaction with a related person, except as contemplated or permitted by the merger agreement; or
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the agreement or commitment to take any of the foregoing actions.
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Restrictions on Solicitation
Except as described below, each of Mercantile and Firstbank has agreed that, from the time of the execution of the merger agreement until
the earlier of the effective time of the merger or the termination of the merger agreement in accordance with the terms of the merger agreement, it will not and will cause its subsidiaries and representatives to not: (A) solicit, initiate,
facilitate or encourage (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes or could reasonably be expected to lead to, a proposal that constitutes takeover
proposal; or (B) engage or enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other party material nonpublic information in connection with any proposal, or otherwise cooperate with or
assist or participate in, or encourage or knowingly facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make a takeover. Each of Mercantile and Firstbank will, and will cause each of its respective
subsidiaries and each of its and its respective subsidiaries representatives to, immediately upon execution of the merger agreement, cease any solicitation, encouragement, discussions or negotiations with any person that may be ongoing with
respect to any takeover proposal.
A takeover proposal with respect to Mercantile means any inquiry, proposal or
offer from any person (other than Firstbank and its subsidiaries) or group, within the meaning of Section 13(d) of the Exchange Act, relating to, in a single transaction or series of related transactions, any (i) acquisition of
assets of Mercantile and its subsidiaries equal to more than ten percent (10%) of Mercantiles consolidated assets or to which more than ten percent (10%) of Mercantiles revenues or earnings on a consolidated basis are
attributable, (ii) acquisition of more than ten percent (10%) of the outstanding Mercantile common stock or the capital stock of any subsidiary of Mercantile, (iii) tender offer or exchange offer that if consummated would result in
any person beneficially owning more than ten percent (20%) of the outstanding Mercantile common stock, (iv) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction
involving Mercantile or any of its subsidiaries or (v) any combination of the foregoing types of transactions if the sum of the percentage of consolidated assets, consolidated revenues or earnings and Mercantile common stock involved is more
than ten percent (10%); in each case, other than the merger.
A takeover proposal with respect to Firstbank means
any inquiry, proposal or offer from any person (other than Mercantile and its subsidiaries) or group, within the meaning of Section 13(d) of the Exchange Act, relating to, in a single transaction or series of related transactions,
any (i) acquisition of assets of Firstbank and its subsidiaries equal to more than ten percent (10%) of Firstbanks consolidated assets or to which more than ten percent (10%) of Firstbanks revenues or earnings on a
consolidated basis are attributable, (ii) acquisition of more than ten percent (10%) of the outstanding Firstbank common stock or the capital stock of any subsidiary of Firstbank, (iii) tender offer or exchange offer that if
consummated would result in any person beneficially owning more than ten percent (10%) of the outstanding Firstbank common stock, (iv) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Firstbank or any of its subsidiaries or (v) any combination of the foregoing types of transactions if the sum of the percentage of consolidated assets, consolidated revenues or earnings and Firstbank common
stock involved is more than ten percent (10%); in each case, other than the merger.
Notwithstanding the restrictions
described above, at any time prior to obtaining the relevant shareholder approval, if a party receives a takeover proposal, it and its representatives are permitted, subject to certain conditions, to furnish information with respect to Mercantile or
Firstbank, as applicable, contact the person who made such proposal to request written clarifications of any term or condition of the takeover proposal such partys board of directors determines in good faith to be ambiguous or unclear and
enter into negotiations or discussion with the person who has made such takeover proposal if the board of directors of such party determines in good faith, after consultation with its independent financial advisors and outside legal counsel, that
such takeover proposal constitutes superior proposal.
A superior proposal means, with respect to each of
Firstbank and Mercantile, any bona fide written takeover proposal that the relevant partys board of directors has determined in its good-faith judgment, after
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consultation with its independent financial advisors and outside legal counsel, is reasonably likely to be consummated in accordance with its terms and that is reasonably likely to result in the
consummation of a transaction more favorable to the relevant partys shareholders from a financial point of view than the merger, taking into account (A) all relevant legal, regulatory and financial aspects of the proposal (including
certainty of closing) and the person making the proposal, and (B) any changes to the terms of the merger agreement proposed by the other party to the merger agreement in response to such proposal or otherwise, provided that for purposes of the
definition of superior proposal, the references to ten percent (10%) in the definitions of takeover proposal above shall be deemed to be references to fifty percent (50%).
The merger agreement requires that the parties notify each other promptly of, among other things, the status of any takeover proposal,
including any material developments, discussions or negotiations regarding any takeover proposal. The parties must provide to each other promptly, subject to any confidentiality agreements, any written material nonpublic information provided to a
third party in connection with a takeover proposal, if such information has not already been provided to the other party, and must provide to each other within two business days any written materials received by the other party in connection with
any takeover proposal.
If the board of directors of either party changes, qualifies, withholds, withdraws or modifies (in a
manner adverse to the other party) its recommendation, such party will nonetheless continue to be obligated to hold its shareholder meeting and submit the proposals as set forth herein to its shareholders.
Changes in Board Recommendations
The respective boards of directors of Mercantile and Firstbank have each agreed, subject to certain exceptions discussed below, not to (i) fail to recommend the approval of the transaction,
(ii) change, qualify, withhold, withdraw or modify, or publicly propose to take such action, in a manner adverse to the other party, their respective recommendations with respect to the merger, (iii) take any formal action or make any
recommendation or public statement in connection with a tender offer of exchange offer other than a recommendation of rejection of such offer, taking no position with respect to such offer, or a temporary stop, look and listen
communication pursuant to Rule 14d-9(f) of the Exchange Act, or (iv) adopt, approve or recommend a takeover proposal.
Notwithstanding the restrictions described above, prior to obtaining the relevant shareholder approval, the board of directors of each of
Mercantile or Firstbank is permitted to change, qualify, withhold, withdraw or modify in a manner adverse to the other party their respective recommendations with respect to the merger if, subject to certain conditions, the board of directors of
Mercantile or Firstbank, as applicable, among other things, determines in good faith that a takeover proposal constitutes a superior proposal.
Prior to making a change in recommendation as described above, the applicable party whose board of directors is making such change must inform the other party in writing of its board of directors
intention to change its recommendation and provide to such other party the material terms and conditions of and identity of the person making the takeover proposal, and must allow five (5) business days (or three (3) business days in the
case of any amendment to the financial or other material terms of the takeover proposal) to elapse following such other partys receipt of such written notice. During such time, if requested by such other party, the party whose board of
directors is intending to make a change in recommendation must negotiate in good faith changes to the merger agreement that would allow such board of directors not to make such recommendation change.
Efforts to Obtain Required Shareholder Approvals
Mercantile has agreed to hold its special meeting, as soon as practicable following the date of the merger agreement, for the purposes of
seeking the required Mercantile shareholder approvals related to the merger agreement and the merger and to use its commercially reasonable efforts to solicit the requisite shareholder approval for such proposal. The merger agreement requires
Mercantile to submit these proposals to a shareholder vote even if its board of directors has changed its recommendation related to the merger.
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Firstbank has agreed to hold a special meeting of its shareholders, as soon as practicable
following the date of the merger agreement, for the purpose of seeking the Firstbank shareholder approval of the merger agreement, and to use its commercially reasonable efforts to solicit the requisite shareholder approval for such proposal. The
merger agreement requires Firstbank to submit this proposal to a shareholder vote even if its board of directors has changed its recommendation related to the merger.
Efforts to Complete the Transactions
Mercantile and Firstbank have each agreed to, among other things:
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take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under any applicable law to
consummate and make effective the merger and the other transactions contemplated by the merger agreement as promptly as reasonably practicable;
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obtain from each applicable governmental entity any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained
or made by or to Firstbank or Mercantile or any of their respective subsidiaries, and avoid any action by any governmental entity in connection with the authorization, execution and delivery of the merger agreement and the consummation of the merger
and the other transactions contemplated by the merger agreement;
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make or cause to be made the applications or filings required to be made by Firstbank or Mercantile or any of their respective subsidiaries under or
with respect to any laws in connection with the authorization, execution and delivery of the merger agreement and the consummation of the merger and other transactions contemplated by the merger agreement, and to pay any fees due by such party in
connection with such applications or filings, as promptly as is reasonably practicable;
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Mercantile Special Dividend
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As permitted by the merger agreement, the Mercantile board of directors expects to declare and pay a special cash dividend of $2.00 per share to
Mercantile shareholders prior to the effective time of the merger, subject to the satisfaction of the closing conditions set forth in the merger agreement.
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Other Covenants and Agreements
The merger
agreement contains certain other covenants and agreements, including the following covenants:
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Mercantile and Firstbank agreed to cooperate in the preparation of this joint proxy statement and prospectus;
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neither of the parties will issue any press release or make any public announcement relating to the merger agreement, the merger or the other
transactions contemplated by the merger agreement without the prior written approval of the other party, unless the disclosing party believes in good faith that such press release or public announcement is required to be made by applicable law, rule
or regulation promulgated by any applicable securities exchange after consultation with outside legal counsel, in which case the disclosing party will use its commercially reasonable efforts to advise and consult with the other party regarding such
press release or other announcement prior to making any such disclosure;
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each party, commencing on the date of the merger agreement through the effective time of the merger, will permit the other party to have reasonable
access to the officers and senior management, the premises, agents, books, records and contracts of or pertaining to the other party, as may reasonably be requested in writing;
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each party will give prompt written notice to the other party of (i) any event that would reasonably be expected to give rise to a material
adverse effect, (ii) any notice or other communication received by such party from any governmental entity or other person in connection with the merger or from any person alleging that the consent of such person is or may be required in
connection with the merger and (iii) any actions commenced or threatened against, relating to or involving or otherwise affecting such party which relate to the merger agreement or the merger;
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each party will hold and treat in confidence all documents and information concerning the other party and its subsidiaries furnished in connection with
the merger or merger agreement pursuant to the confidentiality agreement between Mercantile and Firstbank;
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if any anti-takeover laws of any governmental entity are or may become applicable to the merger, the parties agree to use their respective commercially
reasonable efforts to take such action as reasonably necessary so that the merger may be consummated as promptly as practicable under the terms of the merger agreement or so as to eliminate or minimize the effects of any such law on the merger;
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each party will take all such steps as may be required to cause (a) any dispositions of Firstbank common stock (including derivative securities
with respect to Firstbank common stock and awards) resulting from the merger and the other transactions contemplated by the merger agreement, by each individual who will be subject to the reporting requirements of Section 16(a) of the Exchange
Act with respect to Firstbank immediately prior to the effective time of the merger, to be exempt under Rule 16b-3 promulgated under the Exchange Act, and (b) any acquisitions or dispositions of Mercantile common stock (including derivative
securities with respect to Mercantile common stock and converted stock-based awards) resulting from the merger and the other transactions contemplated by the merger agreement, by each individual who may become or is reasonably expected to become
subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Mercantile immediately following the effective time of the merger, to be exempt under Rule 16b-3 promulgated under the Exchange Act;
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each party will take all necessary action to suspend each of its respective employee or director stock purchase plans, and all monies contributed for
the purchase of stock pursuant to such plans that have not been applied to the purchase of stock will be promptly refunded to participants;
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Mercantile will, at the effective time of the merger, assume all obligations of Firstbank, including payment of any amounts due on debt securities
issued pursuant to certain trust preferred securities agreements to which Firstbank is a party;
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Firstbank will, upon Mercantiles request, cooperate with Mercantile to prepare documentation and take such other steps as may be necessary to
effect the consolidation of the parties respective subsidiary banks at the effective time of the merger;
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each party will keep the other party reasonably informed with respect to the defense or settlement of any securityholder action against it and its
directors relating to the merger, will give the other party opportunity to consult with it regarding the defense or settlement of any such securityholder action, and will not settle any such action without the other partys prior written
consent (such consent not to be unreasonably withheld, conditioned or delayed);
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the parties agree that each party will not, and will not permit any of their respective subsidiaries to, take any action, or fail to take any action,
that would reasonably be expected to jeopardize the qualification of the merger as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, and each party will use commercially reasonable efforts to cause the merger to so
qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986; and
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the parties will coordinate with each other regarding the declaration, setting of record dates and payment dates of dividends with respect to shares of
Mercantile common stock and Firstbank common stock for the purpose of minimizing the risk that holders of shares of Firstbank common stock (a) in respect of any calendar quarter, receive dividends on both shares of Firstbank common stock and
shares of Mercantile common stock received as merger consideration, or (b) in respect of any calendar quarter, fail to receive a dividend on shares of Firstbank common stock or shares of Mercantile common stock received as merger consideration.
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Conditions to Completion of the Transaction
The obligations of Mercantile and Firstbank to consummate the transactions are subject to the satisfaction of the following conditions:
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the approval of the merger agreement by holders of a majority of the outstanding shares of Firstbank common stock;
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the approval of the merger agreement by holders of a majority of the outstanding shares of Mercantile common stock and the approval of the issuance of
Mercantile common stock constituting the merger consideration by the holders of the majority of the votes cast by the holders of shares of Mercantile common stock entitled to vote on the action;
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the receipt and effectiveness of all required regulatory approvals;
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the absence of any law making illegal or otherwise preventing the consummation of the merger
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the absence of any temporary, preliminary or permanent restraining order preventing the consummation of the merger;
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the absence of any order of a court or agency enjoining or prohibiting the consummation of the merger;
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the declaration of effectiveness by the SEC of this registration statement of which this joint proxy statement and prospectus forms a part, which
registration statement must not be subject to any stop order or proceedings initiated or threatened by the SEC; and
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the authorization for listing on Nasdaq of the Mercantile common stock to be issued pursuant to the merger, subject to official notice of issuance.
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In addition, the obligations of Mercantile to effect the merger are subject to satisfaction, or waiver, of
the following additional conditions:
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(i) the representations and warranties of Firstbank (other than certain representations related to Firstbanks ownership of subsidiaries,
Firstbanks capitalization and Firstbanks authorization, board recommendation, fairness opinion and shareholder approval related to the merger) being true and correct as of the closing date as though made as of such date (or, if made as
of a specific date, as of such date), except where the failure of such representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, a material adverse effect with respect to Firstbank,
provided, however, that a failure of any condition related to regulatory approvals will not be deemed a material adverse effect with respect to Firstbank for the purpose of this condition, (ii) certain representations and warranties related to
Firstbanks ownership of subsidiaries and Firstbanks capitalization being true and correct in all but de minimus respects as of the closing date as though made as of the closing (or, if made as of a specific date, in all but de minimus
respects as of such date), and (iii) the representations and warranties of Firstbank related to Firstbanks authorization, board recommendation, fairness opinion and shareholder approval related to the merger being true and correct as of
the closing date as though made as of such date (or, if made as of a specific date, as of such date) in all material respects;
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Firstbank having performed in all material respects all of the covenants required to be performed by it under the merger agreement at or prior to the
closing;
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the receipt by Mercantile of a certificate, dated as of the closing date, executed by the chief executive officer or chief financial officer of
Firstbank certifying as to the satisfaction of the conditions described in the preceding two bullets;
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the absence of any change, state of facts, event, development or effect since December 31, 2012, that has had or would reasonably be expected to
have a material adverse effect with respect to Firstbank (except that that a failure of any condition related to regulatory approvals will not be deemed a material adverse effect with respect to Firstbank for the purpose of this condition); and
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the receipt by Mercantile from Warner Norcross & Judd LLP of a written opinion, dated as of the closing date, to the effect that the merger
will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.
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In addition, the obligations of Firstbank to effect the merger are subject to satisfaction, or waiver, of the following additional conditions:
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(i) the representations and warranties of Mercantile (other than certain representations related to Mercantiles ownership of subsidiaries,
Mercantiles capitalization and Mercantiles authorization, board recommendation, fairness opinion and shareholder approval related to the merger) being true and correct as of the closing date as though made as of such date (or, if made as
of a specific date, as of such date), except where the failure of such representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, a material adverse effect with respect to Mercantile,
provided, however, that a failure of any condition related to regulatory approvals will not be deemed a material adverse effect with respect to Mercantile for the purpose of this condition, (ii) certain representations and warranties related to
Mercantiles ownership of subsidiaries and Mercantiles capitalization being true and correct in all but de minimus respects as of the closing date as though made as of the closing (or, if made as of a specific date, in all but de minimus
respects as of such date), and (iii) the representations and warranties of Mercantile related to Mercantiles authorization, board recommendation, fairness opinion and shareholder approval related to the merger being true and correct as of
the closing date as though made as of such date (or, if made as of a specific date, as of such date) in all material respects;
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Mercantile having performed in all material respects all of the covenants required to be performed by it under the merger agreement at or prior to the
closing;
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the receipt by Firstbank of a certificate, dated as of the closing date, executed by the chief executive officer or chief financial officer of
Mercantile certifying as to the satisfaction of the conditions described in the preceding two bullets;
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the absence of any change, state of facts, event, development or effect since December 31, 2012, that has had or would reasonably be expected to
have a material adverse effect with respect to Mercantile (except that that a failure of any condition related to regulatory approvals will not be deemed a material adverse effect with respect to Mercantile for the purpose of this condition); and
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the receipt by Firstbank from Varnum LLP of a written opinion, dated as of the closing date, to the effect that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.
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Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the effective time of the merger, and, except as described below, whether before or after the receipt of the required shareholder approvals,
under the following circumstances:
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by mutual written consent of Mercantile and Firstbank;
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by either Mercantile or Firstbank:
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if any governmental entity has issued an order or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation
of the merger and such order or other action is final and nonappealable, except in the event that the party seeking to terminate has failed to perform any of its obligations under the merger agreement required to be performed at or prior to the
effective time of the merger and such failure has been the primary cause of, or the primary factor that resulted in, the issuance of such an order or the taking of such an action;
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if the merger does not occur before March 31, 2014, except in the event that the party seeking to terminate has failed to perform any of its
obligations under the merger agreement required to be performed at or prior to the effective time of the merger and such failure has been the primary cause of, or the primary factor that resulted in, the failure of the effective time of the merger
to occur on or before March 31, 2014;
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(i) if the Mercantile shareholder meeting (including any postponements or adjournments thereof) has concluded and been finally adjourned and the
Mercantile shareholder approval has not been obtained, or (ii) if the Firstbank shareholder meeting (including any postponements or adjournments thereof) has concluded and been finally adjourned and the Firstbank shareholder approval has not
been obtained, except in the event that the party seeking to terminate has failed to perform any of its obligations under the merger agreement required to be performed at or prior to the Mercantile shareholder meeting or the Firstbank shareholder
meeting, as applicable, and such failure has been the primary cause of, or is the primary factor that resulted in, the Mercantile shareholder approval or the Firstbank shareholder approval, as applicable, not having been obtained;
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by Mercantile, if Firstbank has breached or failed to perform any of its representations, warranties, covenants or other agreements contained in the
merger agreement, such that the conditions to Mercantiles obligations to complete the transaction are not satisfied, and which either (A) cannot be cured by March 31, 2014, or (B) if capable of being cured by March 31,
2014, have not been cured within thirty (30) business days following receipt of written notice from Mercantile of such breach or failure, except in the event that Mercantile is then in breach of any representations, warranties, covenants or
other agreements contained in the merger agreement and such breach would give rise to the failure of Mercantiles satisfaction of conditions to closing;
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by Firstbank, if Mercantile has breached or failed to perform any of its representations, warranties, covenants or other agreements contained in the
merger agreement, such that the conditions to Firstbanks obligations to complete the transaction are not satisfied, and which either (A) cannot be cured by March 31, 2014 or (B) if capable of being cured by March 31, 2014,
have not been cured within thirty (30) business days following receipt of written notice from Mercantile of such breach or failure, except in the event that Firstbank is then in breach of any representations, warranties, covenants or other
agreements contained in the merger agreement and such breach would give rise to the failure of Firstbanks satisfaction of conditions to closing;
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by Mercantile prior to the receipt of the Firstbank shareholder approval if: (i) the Firstbank board of directors has taken any of the actions in
items 1-4 described above under the section entitled The Merger Agreement Changes in Board Recommendations beginning on page 113; (ii) the Firstbank board of directors has failed to reject or takes no position with respect to
a Firstbank takeover proposal and fails to reaffirm the Firstbank board recommendation, in each case, within five (5) business days following the public announcement of such Firstbank takeover proposal, and in any event at least two
(2) business days prior to the Firstbank shareholder meeting; (iii) Firstbank enters into an agreement with respect to any Firstbank takeover proposal; (iv) Firstbank has materially breached its obligations under the merger agreement
regarding third-party takeover proposals, as described under the section entitled No Solicitation of Alternative Proposals; (v) subject to Firstbanks rights to adjourn or postpone the Firstbank Shareholder Meeting in
accordance with the merger agreement, Firstbank has failed to call, give proper notice of, convene and hold the Firstbank Shareholder Meeting; or (vi) Firstbank or the Firstbank board of directors has publicly announced its intention to do any
of the foregoing;
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by Firstbank prior to the receipt of the Mercantile shareholder approval if: (i) the Mercantile board of directors has taken any of the actions in
items 1-4 described above under the section entitled The Merger Agreement Changes in Board Recommendations beginning on page 113; (ii) the Mercantile board of directors has failed to reject or takes no position with respect
to a Mercantile takeover proposal and fails to reaffirm the Mercantile board recommendation, in each case, within five
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(5) business days following the public announcement of such Mercantile takeover proposal, and in any event at least two (2) business days prior to the Mercantile shareholder meeting;
(iii) Mercantile enters into an agreement with respect to any Mercantile takeover proposal; (iv) Mercantile has materially breached its obligations under the merger agreement regarding third-party takeover proposals, as described under the
section entitled No Solicitation of Alternative Proposals; (v) subject to Mercantiles rights to adjourn or postpone the Mercantile Shareholder Meeting in accordance with the merger agreement, Mercantile has failed to
call, give proper notice of, convene and hold the Mercantile Shareholder Meeting; or (vi) Mercantile or the Mercantile board of directors has publicly announced its intention to do any of the foregoing;
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by Mercantile prior to receipt of the Mercantile shareholder approval, in order to enter into a definitive merger agreement or other definitive
purchase or acquisition agreement that constitutes a superior proposal, provided that (i) such agreement has not resulted from Mercantiles breach of its obligations described under the section entitled The Merger Agreement
Restrictions on Solicitation beginning on page 112, and (ii) Mercantile pays (or causes to be paid) the termination fee, as described below under the section entitled The Merger Agreement Termination Fees and Expenses;
Liability for Breach beginning on page 119 prior to or simultaneously with such termination; or
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by Firstbank prior to receipt of the Firstbank shareholder approval, in order to enter into a definitive merger agreement or other definitive purchase
or acquisition agreement that constitutes a superior proposal, provided that (i) such agreement has not resulted from Firstbanks breach of its obligations described under the section entitled The Merger Agreement Restrictions
on Solicitation beginning on page 112, and (ii) Firstbank pays (or causes to be paid) the termination fee, as described below under the section entitled The Merger Agreement Termination Fees and Expenses; Liability for
Breach beginning on page 119 prior to or simultaneously with such termination.
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Termination Fees and Expenses; Liability for Breach
Firstbank will be obligated to pay:
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a termination fee of $7,900,000 (referred to as the termination fee) upon the occurrence of the event giving rise to termination if:
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Mercantile terminates the merger agreement because, prior to the receipt of the Firstbank shareholder approval: (i) the Firstbank board of
directors has taken any of the actions in items 1-4 described above under the section entitled The Merger Agreement Changes in Board Recommendations beginning on page 113; (ii) the Firstbank board of directors has failed to
reject or takes no position with respect to a Firstbank takeover proposal and fails to reaffirm the Firstbank board recommendation, in each case, within five (5) business days following the public announcement of such Firstbank takeover
proposal, and in any event at least two (2) business days prior to the Firstbank shareholder meeting; (iii) Firstbank enters into an agreement with respect to any Firstbank takeover proposal; (iv) Firstbank has materially breached its
obligations under the merger agreement regarding third-party takeover proposals, as described under the section entitled No Solicitation of Alternative Proposals; (v) subject to Firstbanks rights to adjourn or postpone
the Firstbank Shareholder Meeting in accordance with the merger agreement, Firstbank has failed to call, give proper notice of, convene and hold the Firstbank Shareholder Meeting; or (vi) Firstbank or the Firstbank board of directors has
publicly announced its intention to do any of the foregoing;
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(A) the merger agreement is terminated by Firstbank because the merger does not occur on or before March 31, 2014 or the merger agreement is
terminated by Mercantile or Firstbank because the Firstbank shareholder meeting has concluded and been finally adjourned and the Firstbank shareholder approval has not been obtained; (B) any person has made (whether or not subsequently
withdrawn) a takeover proposal to Firstbank on or after the date of the merger agreement but prior to (1) the date that the merger agreement is terminated, in the event the
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merger agreement is terminated by Firstbank because the merger does not occur on or before March 31, 2014, or (2) the Firstbank shareholder meeting, in the case of a termination because
the Firstbank shareholder meeting has concluded and been finally adjourned and the Firstbank shareholder approval has not been obtained; and (C) (1) within twelve (12) months after the date of termination, Firstbank or any of its
affiliates consummates a takeover proposal, or (2) Firstbank or any of its affiliates enters into a definitive agreement with respect to a takeover proposal within 12 months after the date of termination (provided that, for purposes of this
bullet, the references to more than ten percent (10%) in the definition of takeover proposal contained above under the section entitled The Merger Agreement Restrictions on Solicitation beginning on
page 112 will be deemed to be references to more than fifty percent (50%));
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Mercantile terminates the merger agreement because Firstbank has breached or failed to perform any of its representations, warranties, covenants or
other agreements contained in the merger agreement, such that the conditions to Mercantiles obligations to complete the transaction are not satisfied, and which either (A) cannot be cured by March 31, 2014 or (B) if capable of
being cured by March 31, 2014, have not been cured within thirty (30) business days following receipt of written notice from Mercantile of such breach or failure, provided that Mercantile is not then in breach of any representations,
warranties, covenants or other agreements contained in the merger agreement and such breach would give rise to the failure of Firstbanks satisfaction of conditions to closing, and (1) any person has made (whether or not subsequently
withdrawn) a takeover proposal to Firstbank on or after the date of the merger agreement but prior to the date that the merger agreement is terminated, and (2) within twelve (12) months after the date of termination, Firstbank or any of
its affiliates consummates a takeover proposal or enters into a definitive agreement with respect to a takeover proposal within 12 months after the date of termination (except that, for purposes of this bullet, the references to more than ten
percent (10%) in the definition of takeover proposal contained above under the section entitled The Merger Agreement Restrictions on Solicitation beginning on page 112 will be deemed to be references to
more than fifty percent (50%)); or
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Firstbank terminates the merger agreement prior to receipt of the Firstbank shareholder approval, in order to enter into a definitive merger agreement
or other definitive purchase or acquisition agreement that constitutes a Firstbank superior proposal; and
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all documented out-of-pocket fees and expenses incurred by Mercantile or its affiliates in connection with the merger agreement and the transactions
contemplated thereby, in an aggregate amount not to exceed $2,000,000 (referred to as the expense reimbursement), if Mercantile terminates the agreement because Firstbank has breached its representations, warranties or covenants under
the merger agreement and such breach remains uncured and would give rise to the failure of Firstbanks satisfaction of conditions to closing.
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Mercantile will be obligated to pay:
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a termination fee of $7,900,000 (referred to as the termination fee) upon the occurrence of the event giving rise to termination if:
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Firstbank terminates the merger agreement because, prior to the receipt of the Mercantile shareholder approval: (i) the Mercantile board of
directors has taken any of the actions in items 1-4 described above under the section entitled The Merger Agreement Changes in Board Recommendations beginning on page 113; (ii) the Mercantile board of directors has
failed to reject or takes no position with respect to a Mercantile takeover proposal and fails to reaffirm the Mercantile board recommendation, in each case, within five (5) business days following the public announcement of such Mercantile
takeover proposal, and in any event at least two (2) business days prior to the Mercantile shareholder meeting; (iii) Mercantile enters into an agreement with respect to any Mercantile takeover proposal; (iv) Mercantile has materially
breached its obligations under the merger agreement regarding third-party takeover proposals, as described
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under the section entitled No Solicitation of Alternative Proposals; (v) subject to Mercantiles rights to adjourn or postpone the Mercantile Shareholder Meeting in
accordance with the merger agreement, Mercantile has failed to call, give proper notice of, convene and hold the Mercantile Shareholder Meeting; or (vi) Mercantile or the Mercantile board of directors has publicly announced its intention to do
any of the foregoing;
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(A) the merger agreement is terminated by Mercantile because the merger does not occur on or before March 31, 2014 or the merger agreement is
terminated by Firstbank or Mercantile because the Mercantile shareholder meeting has concluded and been finally adjourned and the Mercantile shareholder approval has not been obtained; (B) any person has made (whether or not subsequently
withdrawn) a takeover proposal to Mercantile on or after the date of the merger agreement but prior to (1) the date that the merger agreement is terminated, in the event the merger agreement is terminated by Mercantile because the merger does
not occur on or before March 31, 2014, or (2) the Mercantile shareholder meeting, in the case of a termination because the Mercantile shareholder meeting has concluded and been finally adjourned and the Mercantile shareholder approval has
not been obtained; and (C) (1) within twelve (12) months after the date of termination, Mercantile or any of its affiliates consummates a takeover proposal, or (2) Mercantile or any of its affiliates enters into a definitive
agreement with respect to a takeover proposal within 12 months after the date of termination (provided that, for purposes of this bullet, the references to more than ten percent (10%) in the definition of takeover proposal
contained above under the section entitled The Merger Agreement Restrictions on Solicitation beginning on page 112 will be deemed to be references to more than fifty percent (50%));
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Firstbank terminates the merger agreement because Mercantile has breached or failed to perform any of its representations, warranties, covenants or
other agreements contained in the merger agreement, such that the conditions to Firstbanks obligations to complete the transaction are not satisfied, and which either (A) cannot be cured by March 31, 2014 or (B) if capable of
being cured by March 31, 2014, have not been cured within thirty (30) business days following receipt of written notice from Firstbank of such breach or failure, provided that Firstbank is not then in breach of any representations,
warranties, covenants or other agreements contained in the merger agreement and such breach would give rise to the failure of Mercantiles satisfaction of conditions to closing, and (1) any person has made (whether or not subsequently
withdrawn) a takeover proposal to Mercantile on or after the date of the merger agreement but prior to the date that the merger agreement is terminated, and (2) within twelve (12) months after the date of termination, Mercantile or any of
its affiliates consummates a takeover proposal or enters into a definitive agreement with respect to a takeover proposal within 12 months after the date of termination (except that, for purposes of this bullet, the references to more than ten
percent (10%) in the definition of takeover proposal contained above under the section entitled The Merger Agreement Restrictions on Solicitation beginning on page 112 will be deemed to be references to
more than fifty percent (50%)); or
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Mercantile terminates the merger agreement prior to receipt of the Mercantile shareholder approval, in order to enter into a definitive merger
agreement or other definitive purchase or acquisition agreement that constitutes a Mercantile superior proposal; and
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all documented out-of-pocket fees and expenses incurred by Firstbank or its affiliates in connection with the transactions contemplated by the merger
agreement, in an aggregate amount not to exceed $2,000,000, if Firstbank terminates the agreement because Mercantile has breached its representations, warranties or covenants under the merger agreement and such breach remains uncured and would give
rise to the failure of Mercantiles satisfaction of conditions to closing.
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In no event will either of
Firstbank or Mercantile be required to pay the termination fee or the expense reimbursement on more than one occasion.
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Upon the termination of the merger agreement in accordance with its terms and payment of the
termination fee or expense reimbursement, as applicable, neither Firstbank nor Mercantile will have any continuing liability to the other (except with respect to press releases, confidentiality and certain miscellaneous provisions). However, each
party will remain liable for damages arising from a willful or intentional breach of the merger agreement.
In the event that
the termination fee or expense reimbursement is in fact paid to the relevant party when and as required by the merger agreement as described above, such payment will be the sole and exclusive remedy of the receiving party against the paying party
and its affiliates and representatives for any loss arising or relating to the merger agreement and the transactions contemplated thereby, except that neither party will be relieved or released from any liability or damages arising from fraud.
Governance of the Combined Company Following the Completion of the Transaction
Mercantile has agreed to take all requisite action, effective as of the effective time of the merger, to cause the Mercantile board of
directors to consist of six (6) directors, which will include: (i) the President and Chief Executive Officer of Mercantile, (ii) two members of the Mercantile board of directors as of the date of the merger agreement who are
independent for purposes of the rules of Nasdaq (at least one of whom shall be an audit committee financial expert as defined in Item 407(d)(5) of Regulation S-K under the Exchange Act) selected by the Mercantile board of directors,
(iii) the President and Chief Executive Officer of Firstbank, and (iv) two members of the Firstbank board of directors who are independent for purposes of the rules of Nasdaq (at least one of whom shall be an audit committee
financial expert as defined in Item 407(d)(5) of Regulation S-K under the Exchange Act) selected by the Firstbank board of directors, each to serve for a term expiring on the earlier of his or her death, resignation or removal or the next
annual meeting of Mercantile shareholders and, despite the expiration of his or her term, until his or her successor has been elected and qualified or there is a decrease in the size of the Mercantile board of directors.
The current President and Chief Executive Officer of Firstbank will serve as Chairman of the board of directors of the Mercantile board
of directors for one year following the effective time. Additionally, after the effective time, the current President and Chief Executive Officer of Mercantile will serve as the President and Chief Executive Officer of Mercantile, the current Chief
Operating Officer of Mercantile will serve as an Executive Vice President and Chief Operating Officer of Mercantile, the current Chief Financial Officer of Mercantile will serve as Senior Vice President and Chief Financial Officer of Mercantile, and
the current Chief Financial Officer of Firstbank will serve as an Executive Vice President of Mercantile.
Indemnification and Insurance
Mercantile has agreed that all rights to exculpation, indemnification and advancement of expenses now existing in favor of the current or former directors, officers or employees, as the case may be, of
Firstbank or its subsidiaries, as provided in their respective articles of incorporation or bylaws or other organizational documents or in any agreement with Firstbank or its subsidiaries, will survive the merger and will continue in full force and
effect in accordance with their relevant terms. The obligations of the combined company to exculpate, indemnify and advance expenses will continue for a period of six (6) years from the effective time of the merger (except with respect to any
action pending or asserted or any claim made during such six (6)-year period, in which case the obligations will continue until the disposition of such action or resolution of such claim), and provisions for such obligations will be no less
favorable to officers and directors than those set forth in the articles of incorporation and bylaws or similar organizational documents of Firstbank and its subsidiaries in effect immediately prior to the date of the merger agreement, and the
combined company may not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any individuals who at the effective time of the merger were current or former directors, officers or
employees of Firstbank or any of its subsidiaries.
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For a period of six (6) years following the effective time of the merger, the surviving
corporation will indemnify and hold harmless each current or former director or officer of Firstbank and any of its subsidiaries against any costs or expenses (including advancing attorneys fees and expenses in advance of the final disposition
of any claim, suit, proceeding or investigation to each such indemnified party to the fullest extent permitted by law and following receipt of any undertaking required by applicable law), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any actual or threatened actions arising out of, relating to or in connection with any action or omission occurring or alleged to have occurred at or before the effective time of the merger in such
partys capacity as a director or officer of Firstbank or its subsidiaries or in such partys capacity as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other
employee benefit plan or enterprise at the request or for the benefit of Firstbank (including acts or omissions in connection with such persons serving as an officer, director or other fiduciary in any entity if such service in such capacity
was at the request or for the benefit of Firstbank), including in connection with the transactions contemplated by the merger agreement, except that all rights to indemnification or advancement of expenses in respect of any action pending or
asserted or any claim made within such six (6)-year period will continue until the disposition of such action or resolution of such claim. In the event of any such action, the combined company will reasonably cooperate with the indemnified party in
the defense of any such action.
For a period of six (6) years following the effective time of the merger, the surviving
corporation will maintain the current policies (or policies of substantially the same coverage) of directors and officers liability insurance and fiduciary liability insurance maintained by Firstbank and its subsidiaries for the
indemnified parties and any other employees, agents or other individuals otherwise covered by such insurance policies prior to the effective time of the merger with respect to matters occurring at or prior to the effective time of the merger,
including the transactions contemplated by the merger agreement. However, after the effective time of the merger, the combined company will not be required to pay annual premiums for insurance coverages in excess of three hundred percent
(300%) of the last annual premium (referred to as the maximum amount) paid by Firstbank prior to the date of the merger agreement in respect of the coverages required to be obtained, but in such case will purchase the greatest
coverage available for a cost not exceeding the maximum amount. Alternatively, at the combined companys option, the combined company may purchase at or after the effective time of the merger, at a cost not exceeding three (3) times the
maximum amount, a six (6)-year prepaid tail policy on terms and conditions providing substantially equivalent benefits as the current policies of directors and officers liability insurance and fiduciary liability insurance
maintained by Firstbank and its subsidiaries for the insured parties with respect to matters occurring at or prior to the effective time of the merger, including the transactions contemplated by the merger agreement.
Amendments, Extensions and Waivers
The merger agreement may be amended by the parties at any time before or after the receipt of the Firstbank shareholder approval or the Mercantile shareholder approval; however, after receipt of any such
approval, no amendment will be made which by law or in accordance with the rules of any relevant stock exchange requires further approval by the Firstbank shareholders or the Mercantile shareholders, as applicable, without such further approval. The
merger agreement may not be amended except by an instrument in writing signed on behalf of Mercantile and Firstbank.
Governing Law
The merger agreement is governed by the laws of the State of Michigan.
No Third Party Beneficiaries
While the merger agreement is not intended to confer upon you or any other person other than Mercantile and Firstbank any rights or remedies, it provides limited exceptions for (i) Firstbanks
and its subsidiaries directors and officers to continue to have indemnification and liability insurance coverage after the completion of
123
the merger, and (ii) holders of Firstbank common stock after the effective time of the merger and any holder of an award granted under a Firstbank stock plan to properly convert their shares
of common stock and awards pursuant to the merger agreement.
Specific Performance
Mercantile and Firstbank agreed that irreparable damage would occur in the event that any of the provisions of the merger agreement were
not performed in accordance with their specific terms or were otherwise breached, and that any breach of the merger agreement could not be adequately compensated in all cases by monetary damages alone. The parties agreed that, so long as the party
seeking remedy is not in breach of any representations, warranties, covenants or other agreements contained in the merger agreement that would result in a failure of a condition to the other partys obligation to close, such party will be
entitled to seek an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement by the other party or to enforce specifically the terms and provisions of the merger agreement.
124
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Varnum LLP, tax counsel to Firstbank, and Warner Norcross & Judd LLP, tax counsel to Mercantile, the following
are the material U.S. federal income tax consequences of the merger to holders of Firstbank common stock that exchange their shares of Firstbank common stock for shares of Mercantile common stock in the merger.
This discussion addresses only holders of Firstbank common stock who hold that stock as a capital asset and are U.S.
persons, each as defined for U.S. federal income tax purposes. For these purposes a U.S. person is:
|
|
|
an individual citizen or resident of the United States;
|
|
|
|
a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
|
|
|
|
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
|
|
|
|
a trust that (i) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
|
The disclosure in this section is the opinion of Varnum LLP and Warner Norcross & Judd LLP.
Tax Consequences of the Merger Generally
Mercantile has received the opinion of Warner Norcross & Judd LLP, and Firstbank has the received the opinion of Varnum LLP, that the merger will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and subject to the assumptions and limitations set forth in this section, that U.S. holders of Firstbank common stock will not recognize gain or loss for shares received as merger
consideration, except with respect to cash received in lieu of fractional shares.
The U.S. federal income tax consequences of
the merger and the special dividend to U.S. persons generally will be as follows:
Receipt of Mercantile Common Stock
Each holder of Firstbank common stock who exchanges such holders Firstbank common stock for Mercantile common stock
generally will not recognize gain or loss, except with respect to cash received instead of fractional shares of Mercantile common stock (as discussed below). The aggregate tax basis of the Mercantile common stock each holder receives in the merger
(including any fractional shares deemed received and redeemed for cash as described below) will equal the aggregate adjusted tax basis in the shares of Firstbank common stock such holder surrenders in the merger. The holding period for the shares of
Mercantile common stock received in the merger (including any fractional shares deemed received and redeemed for cash as described below) will include the holding period of the shares of Firstbank common stock surrendered in the merger. If a holder
acquired different blocks of Firstbank common stock at different times or at different prices, the Mercantile common stock such holder receives will be allocated pro rata to each block of Firstbank common stock, and the basis and holding period of
each block of Mercantile common stock received will be determined on a block-for-block basis depending on the basis and holding period of the blocks of Firstbank common stock exchanged for such block of Mercantile common stock.
Mercantile Special Dividend
As permitted by the terms of the merger agreement, the Mercantile board of directors expects to declare and pay a one-time special cash dividend of $2.00 per share per share to Mercantile shareholders
prior to the effective time of the merger, subject to the satisfaction of the closing conditions set forth in the merger agreement. Generally, holders will be taxed on the pre-merger special dividend at applicable U.S. Federal income tax rates.
125
Tax Consequences to Mercantile and Firstbank
Neither of Mercantile nor Firstbank will recognize any gain or loss for U.S. federal income tax purposes as a result of the merger.
These opinions do not address any state, local or foreign tax consequences of the merger. These opinions are based on facts
and representations contained in representation letters provided by Firstbank and Mercantile and on customary factual assumptions, as well as on certain covenants and undertakings by Mercantile and Firstbank. Neither of the opinions described above
will be binding on the IRS or any court. Firstbank and Mercantile have not sought and will not seek any ruling from the IRS regarding any matters relating to the merger, and as a result, there can be no assurance that the IRS will not assert, or
that a court would not sustain, a position contrary to any of the conclusions set forth below. In addition, if any of the representations, assumptions, covenants or undertakings upon which those opinions are based are inconsistent with the actual
facts, the U.S. federal income tax consequences of the merger could be different than set forth in the opinions. Neither Firstbank nor Mercantile is aware of any facts or circumstances that would cause the assumptions, representations, covenants and
undertakings to be incorrect, incomplete, inaccurate or violated in any material respect.
This discussion does not address
any non-income taxes (including the unearned income Medicare contribution tax enacted under the Health Care and Education Reconciliation Act of 2010) or any foreign, state or local tax consequences of the merger. This discussion does not address all
aspects of U.S. federal income taxation that may be relevant to a holder of Firstbank common stock in light of that holders particular circumstances or to a holder subject to special rules (such as, for example, dealers or brokers in
securities, commodities or foreign currencies, traders in securities that elect to apply a mark-to-market method of accounting, banks and certain other financial institutions, insurance companies, mutual funds, tax-exempt organizations, holders
subject to the alternative minimum tax provisions of the Code, partnerships, S corporations or other pass-through entities or investors in partnerships, S corporations or such other pass-through entities, regulated investment companies, real
estate investment trusts, controlled foreign corporations, passive foreign investment companies, former citizens or residents of the United States, U.S. expatriates, holders whose functional currency is not the U.S. dollar, holders who hold shares
of Firstbank common stock as part of a hedge, straddle, constructive sale or conversion transaction or other integrated investment, holders who acquired Firstbank common stock pursuant to the exercise of employee stock options, through a tax
qualified retirement plan or otherwise as compensation or holders who actually or constructively own more than 5% of Firstbank common stock). This discussion is based on the Code, applicable Treasury regulations, administrative interpretations and
court decisions, each as in effect as of the date of this joint proxy statement and prospectus and all of which are subject to change, possibly with retroactive effect.
If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Firstbank common stock, the tax treatment of a partner will generally depend on the
status of the partner and the activities of the partnership. Partners of partnerships holding Firstbank common stock should consult their own tax advisors.
Holders of Firstbank common stock are urged to consult their independent tax advisors with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax
consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.
126
ACCOUNTING TREATMENT
Mercantile prepares its financial statements in accordance with GAAP. The merger will be accounted for using the acquisition method of
accounting with Mercantile being considered the acquiror of Firstbank for accounting purposes. This means that Mercantile will allocate the purchase price to the fair value of Firstbanks tangible and intangible assets and liabilities at the
acquisition date, with the excess purchase price being recorded as goodwill. Under the acquisition method of accounting, goodwill is not amortized but is tested for impairment at least annually.
127
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information combines the historical consolidated financial
position and results of operations of Mercantile and its subsidiaries and of Firstbank and its subsidiaries, as an acquisition by Mercantile of Firstbank using the acquisition method of accounting and giving effect to the related pro forma
adjustments described in the accompanying notes. Under the acquisition method of accounting, the assets and liabilities of Firstbank will be recorded by Mercantile at their respective fair values as of the date the merger is completed. The pro forma
financial information should be read in conjunction with Mercantiles and Firstbanks Quarterly Report on Form 10-Q for the period ended June 30, 2013, and Annual Report on Form 10-K for the calendar year ended December 31, 2012,
which are incorporated by reference herein. See Where You Can Find More Information on page 154.
The merger
was announced on August 15, 2013, and provides that each outstanding share of Firstbank common stock will be canceled and converted into the right to receive one share of Mercantile common stock. Any shares of Firstbank common stock that are
owned by Firstbank, Mercantile or any of their respective subsidiaries, other than in a fiduciary capacity, will be canceled without any consideration.
The merger will be a reorganization for Federal income tax purposes and Mercantile and Firstbank shareholders generally will not recognize, for Federal income tax purposes, any gain or loss on
the merger, or the receipt of shares of Mercantile common stock.
The unaudited pro forma condensed combined balance sheet
gives effect to the merger as if the transactions had occurred on June 30, 2013. The unaudited pro forma condensed combined income statements for the six months ended June 30, 2013, and the year ended December 31, 2012, give effect to
the merger as if the transactions had become effective at the beginning of January 1, 2012.
The unaudited pro forma
condensed combined financial information included herein is presented for informational purposes only and does not necessarily reflect the financial results of the combined companies had the companies actually been combined at the beginning of the
periods presented. The adjustments included in this unaudited pro forma condensed combined financial information are preliminary and may be revised as additional information becomes available and as additional analysis is performed. This information
also does not reflect the benefits of the expected cost savings and operating efficiencies, opportunities to earn additional revenue, potential impacts of current market conditions on revenues, or asset dispositions, among other factors, and
includes various preliminary estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or
which may be attained in the future. The unaudited pro forma condensed combined financial information should be read in conjunction with and is qualified in its entirety by reference to the historical consolidated financial statements and related
notes thereto of Mercantile and its subsidiaries and Firstbank and its subsidiaries, which are incorporated in this document by reference. See Where You Can Find More Information on page 154.
128
Mercantile Bank Corporation and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Mercantile
As Reported
|
|
|
Firstbank
As Reported
|
|
|
Ref
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma
Combined
Mercantile
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
57,977
|
|
|
$
|
54,430
|
|
|
|
K
|
|
|
$
|
(12,055
|
)
|
|
$
|
100,352
|
|
Investment securities
|
|
|
142,095
|
|
|
|
358,288
|
|
|
|
|
|
|
|
|
|
|
|
500,383
|
|
Loans, including loans held for sale
|
|
|
1,058,662
|
|
|
|
975,796
|
|
|
|
A
|
|
|
|
(24,500
|
)
|
|
|
2,015,958
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
|
|
6,000
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(24,947
|
)
|
|
|
(20,239
|
)
|
|
|
C
|
|
|
|
20,239
|
|
|
|
(24,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
1,033,715
|
|
|
|
955,557
|
|
|
|
|
|
|
|
1,739
|
|
|
|
1,991,011
|
|
Premises and equipment
|
|
|
25,382
|
|
|
|
24,322
|
|
|
|
|
|
|
|
|
|
|
|
49,704
|
|
Goodwill
|
|
|
0
|
|
|
|
35,513
|
|
|
|
D
|
|
|
|
6,374
|
|
|
|
41,887
|
|
Intangible assets
|
|
|
0
|
|
|
|
761
|
|
|
|
E
|
|
|
|
12,239
|
|
|
|
13,000
|
|
Other assets
|
|
|
84,581
|
|
|
|
28,175
|
|
|
|
I
|
|
|
|
(9,218
|
)
|
|
|
103,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,343,750
|
|
|
$
|
1,457,046
|
|
|
|
|
|
|
$
|
(921
|
)
|
|
$
|
2,799,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,061,315
|
|
|
$
|
1,208,302
|
|
|
|
F
|
|
|
$
|
2,300
|
|
|
$
|
2,271,917
|
|
Borrowings
|
|
|
92,328
|
|
|
|
71,523
|
|
|
|
G
|
|
|
|
1,100
|
|
|
|
173,951
|
|
|
|
|
|
|
|
|
|
|
|
|
K
|
|
|
|
9,000
|
|
|
|
|
|
Subordinated debentures
|
|
|
32,990
|
|
|
|
36,084
|
|
|
|
H
|
|
|
|
(15,000
|
)
|
|
|
54,074
|
|
Other liabilities
|
|
|
6,179
|
|
|
|
8,693
|
|
|
|
|
|
|
|
|
|
|
|
14,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,192,812
|
|
|
|
1,324,602
|
|
|
|
|
|
|
|
2,600
|
|
|
|
2,514,814
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Common stock
|
|
|
164,548
|
|
|
|
116,369
|
|
|
|
J
|
|
|
|
35,154
|
|
|
|
298,671
|
|
|
|
|
|
|
|
|
|
|
|
|
K
|
|
|
|
(17,400
|
)
|
|
|
|
|
Retained earnings (deficit)
|
|
|
(12,718
|
)
|
|
|
15,679
|
|
|
|
J
|
|
|
|
(15,679
|
)
|
|
|
(12,718
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(892
|
)
|
|
|
396
|
|
|
|
J
|
|
|
|
(396
|
)
|
|
|
(892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
150,938
|
|
|
|
132,444
|
|
|
|
|
|
|
|
1,679
|
|
|
|
285,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
1,343,750
|
|
|
$
|
1,457,046
|
|
|
|
|
|
|
$
|
(921
|
)
|
|
$
|
2,799,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
|
|
8,707,003
|
|
|
|
8,070,268
|
|
|
|
|
|
|
|
|
|
|
|
16,777,271
|
|
Book value per common share
|
|
$
|
17.34
|
|
|
$
|
16.41
|
|
|
|
|
|
|
|
|
|
|
$
|
16.99
|
|
129
Mercantile Bank Corporation and Subsidiaries
Unaudited Pro Forma Condensed Combined Income Statement
For the six months ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Mercantile
As Reported
|
|
|
Firstbank
As Reported
|
|
|
Ref
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma
Combined
Mercantile
|
|
Interest income
|
|
$
|
28,201
|
|
|
$
|
29,423
|
|
|
|
L
|
|
|
$
|
(701
|
)
|
|
$
|
56,923
|
|
Interest expense
|
|
|
5,435
|
|
|
|
3,220
|
|
|
|
M
|
|
|
|
(99
|
)
|
|
|
8,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
22,766
|
|
|
|
26,203
|
|
|
|
|
|
|
|
(602
|
)
|
|
|
48,367
|
|
Provision for loan losses
|
|
|
(3,000
|
)
|
|
|
1,830
|
|
|
|
N
|
|
|
|
|
|
|
|
(1,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
25,766
|
|
|
|
24,373
|
|
|
|
|
|
|
|
(602
|
)
|
|
|
49,537
|
|
Noninterest income
|
|
|
3,599
|
|
|
|
5,868
|
|
|
|
|
|
|
|
|
|
|
|
9,467
|
|
Noninterest expense
|
|
|
17,397
|
|
|
|
21,508
|
|
|
|
O
|
|
|
|
931
|
|
|
|
39,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
11,968
|
|
|
|
8,733
|
|
|
|
|
|
|
|
(1,533
|
)
|
|
|
19,168
|
|
Income tax expense (benefit)
|
|
|
3,552
|
|
|
|
2,527
|
|
|
|
P
|
|
|
|
(537
|
)
|
|
|
5,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
8,416
|
|
|
|
6,206
|
|
|
|
|
|
|
|
(996
|
)
|
|
|
13,626
|
|
Preferred stock dividends
|
|
|
0
|
|
|
|
481
|
|
|
|
|
|
|
|
|
|
|
|
481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income to common shareholders
|
|
$
|
8,416
|
|
|
$
|
5,725
|
|
|
|
|
|
|
$
|
(996
|
)
|
|
$
|
13,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.97
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
$
|
0.79
|
|
Diluted
|
|
|
0.97
|
|
|
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
0.78
|
|
|
|
|
|
|
|
Average Shares Outstanding
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,705,673
|
|
|
|
8,033,006
|
|
|
|
|
|
|
|
|
|
|
|
16,738,679
|
|
Diluted
|
|
|
8,718,627
|
|
|
|
8,084,816
|
|
|
|
|
|
|
|
|
|
|
|
16,803,443
|
|
(a)
|
The adjustments to earnings per share and average shares outstanding are shown in the comparative data section.
|
130
Mercantile Bank Corporation and Subsidiaries
Unaudited Pro Forma Condensed Combined Income Statement
For the year ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Mercantile
As Reported
|
|
|
Firstbank
As Reported
|
|
|
Ref
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma
Combined
Mercantile
|
|
Interest income
|
|
$
|
59,917
|
|
|
$
|
62,866
|
|
|
|
L
|
|
|
$
|
(1,403
|
)
|
|
$
|
121,380
|
|
Interest expense
|
|
|
13,216
|
|
|
|
8,374
|
|
|
|
M
|
|
|
|
(360
|
)
|
|
|
21,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
46,701
|
|
|
|
54,492
|
|
|
|
|
|
|
|
(1,043
|
)
|
|
|
100,150
|
|
Provision for loan losses
|
|
|
(3,100
|
)
|
|
|
7,690
|
|
|
|
N
|
|
|
|
|
|
|
|
4,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
49,801
|
|
|
|
46,802
|
|
|
|
|
|
|
|
(1,043
|
)
|
|
|
95,560
|
|
Noninterest income
|
|
|
7,994
|
|
|
|
12,670
|
|
|
|
|
|
|
|
|
|
|
|
20,664
|
|
Noninterest expense
|
|
|
39,624
|
|
|
|
44,682
|
|
|
|
O
|
|
|
|
2,014
|
|
|
|
86,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
18,171
|
|
|
|
14,790
|
|
|
|
|
|
|
|
(3,057
|
)
|
|
|
29,904
|
|
Income tax expense (benefit)
|
|
|
5,636
|
|
|
|
4,256
|
|
|
|
P
|
|
|
|
(1,070
|
)
|
|
|
8,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
12,535
|
|
|
|
10,534
|
|
|
|
|
|
|
|
(1,987
|
)
|
|
|
21,082
|
|
Preferred stock dividends
|
|
|
1,030
|
|
|
|
1,275
|
|
|
|
|
|
|
|
|
|
|
|
2,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income to common shareholders
|
|
$
|
11,505
|
|
|
$
|
9,259
|
|
|
|
|
|
|
$
|
(1,987
|
)
|
|
$
|
18,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.33
|
|
|
$
|
1.17
|
|
|
|
|
|
|
|
|
|
|
$
|
1.13
|
|
Diluted
|
|
|
1.30
|
|
|
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
1.12
|
|
|
|
|
|
|
|
Average Shares Outstanding
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,625,198
|
|
|
|
7,932,799
|
|
|
|
|
|
|
|
|
|
|
|
16,557,997
|
|
Diluted
|
|
|
8,849,627
|
|
|
|
7,956,501
|
|
|
|
|
|
|
|
|
|
|
|
16,806,128
|
|
(a)
|
The adjustments to earnings per share and average shares outstanding are shown in the comparative data section.
|
131
Notes to Unaudited Pro Forma
FUTURE SHAREHOLDER PROPOSALS
Mercantile
To be considered timely, shareholder proposals intended to be presented at the Mercantile 2014 annual meeting of shareholders, whether or not intended to be included in the proxy statement and form of
proxy relating to that meeting, must be received by Mercantile at its principal executive offices not later than November 15, 2013. Shareholder proposals intended for consideration for inclusion in Mercantiles proxy statement and form of
proxy relating to that meeting should be made in accordance with SEC Rule 14a-8.
All shareholder proposals must be delivered
to the Secretary of Mercantile at the principal executive offices of Mercantile, 310 Leonard St., N.W., Grand Rapids, Michigan 49504. You should address all shareholder proposals to the attention of the Corporate Secretary.
Firstbank
If the merger is completed, Firstbank will merge with and into Mercantile and, consequently, will not hold an annual meeting of its shareholders in 2014. Firstbank shareholders will be entitled to
participate as shareholders of the combined company in the 2014 annual meeting of shareholders of the combined company and any shareholder proposals intended to be presented at the 2014 annual meeting of the shareholders of the combined company must
be delivered to the Secretary of the combined company in accordance with the instructions above.
If the merger is not
completed for any reason, then Firstbank will hold an annual meeting of its shareholders in 2014.
Shareholder proposals
intended to be presented at the Firstbank 2014 annual meeting must be received by Firstbank for inclusion in its proxy statement and form of proxy relating to that meeting by November 15, 2013. Shareholder proposals should be made in accordance
with SEC Rule 14a-8 and should be addressed to Samuel G. Stone, Secretary, Firstbank Corporation, 311 Woodworth Avenue, Alma, Michigan 48801.
152
OTHER MATTERS PRESENTED AT THE MEETINGS
As of the date of this joint proxy statement and prospectus, neither the Mercantile board of directors nor the Firstbank board of
directors knows of any matters that will be presented for consideration at either the Mercantile special meeting or the Firstbank special meeting, respectively, other than as described in this joint proxy statement and prospectus. If any other
matters come before either the Mercantile special meeting or the Firstbank special meeting or any adjournment or postponement thereof and are voted upon, the proposed proxy will be deemed to confer authority to the individuals named as authorized
therein to vote the shares represented by the proxy and the persons named in the enclosed proxy and acting thereunder will vote in accordance with their discretion on such matters.
153
WHERE YOU CAN FIND MORE INFORMATION
Mercantile and Firstbank each file annual, quarterly and current reports, proxy statements and other information with the SEC under the
Exchange Act. You may read and copy any of this information at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC
also maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including Mercantile and Firstbank, who file electronically with the SEC. The address of that site is www.sec.gov.
Investors may also consult Mercantiles or Firstbanks website for more information about Mercantile or Firstbank,
respectively. Mercantiles website is www.mercbank.com. Firstbanks website is www.firstbankmi.com. Information included on these websites is not incorporated by reference into this joint proxy statement and prospectus.
Mercantile has filed with the SEC a registration statement of which this joint proxy statement and prospectus forms a part. The
registration statement registers the shares of Mercantile common stock to be issued to Firstbank shareholders pursuant to the merger. The registration statement, including the attached exhibits, contains additional relevant information about
Mercantile and Mercantile common stock. The rules and regulations of the SEC allow Mercantile and Firstbank to omit certain information included in the registration statement from this joint proxy statement and prospectus.
In addition, the SEC allows Mercantile and Firstbank to disclose important information to you by referring you to other documents filed
separately with the SEC. This information is considered to be a part of this joint proxy statement and prospectus.
This joint
proxy statement and prospectus incorporates by reference the documents listed below that Mercantile has previously filed with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K).
These documents contain important information about Mercantile, its financial condition or other matters.
|
|
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
|
|
|
|
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2013 and June 30, 2013.
|
|
|
|
Current Reports on Form 8-K, filed January 23, 2013, April 26, 2013, May 30, 2013, August 15, 2013 and October 15, 2013.
|
|
|
|
The description of Mercantiles common stock in Item 1 of Mercantiles amended Form 8-A registration statement filed November 23,
2005, including any amendments or reports filed for the purpose of updating the description.
|
In addition,
Mercantile incorporates by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this joint proxy statement and prospectus and prior to the effective time of the merger
(other than information furnished pursuant to Item 2.02 or Item 7.01 of any Current Report on Form
8-K,
unless expressly stated otherwise therein). Such documents are considered to be a part of this
joint proxy statement and prospectus, effective as of the date such documents are filed.
You can obtain any of these
documents from the SEC, through the SECs website at the address described above, or Mercantile will provide you with copies of these documents, without charge, upon written or oral request to:
Mercantile Bank Corporation
310 Leonard St.,
N.W.
Grand Rapids, Michigan 49504
Attn: Investor Relations
(616) 406-3000
154
This joint proxy statement and prospectus also incorporates by reference the documents
listed below that Firstbank has previously filed with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K). These documents contain important information about Firstbank, its
financial condition or other matters.
|
|
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
|
|
|
|
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2013 and June 30, 2013.
|
|
|
|
Current Reports on Form 8-K, filed January 29, 2013, February 26, 2013, April 23, 2013, April 24,
2013, May 7, 2013, May 23, 2013, June 17, 2013, August 15, 2013, August 27, 2013 and October 24, 2013.
|
In addition, Firstbank incorporates by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this joint proxy statement and
prospectus and prior to the date of the Firstbank special meeting (other than information furnished pursuant to Item 2.02 or Item 7.01 of any Current Report on Form 8-K, unless expressly stated otherwise therein). Such documents are
considered to be a part of this joint proxy statement and prospectus, effective as of the date such documents are filed.
You
can obtain any of these documents from the SEC, through the SECs website at the address described above, or Firstbank will provide you with copies of these documents, without charge, upon written or oral request to:
Firstbank Corporation
311 Woodworth Avenue
Alma, Michigan 48801
Attention:
Investor Relations
(989) 463-3131
In the event of conflicting information in this joint proxy statement and prospectus in comparison to any document incorporated by reference into this joint proxy statement and prospectus, or among
documents incorporated by reference, the information in the latest filed document controls.
You should rely only on the
information contained or incorporated by reference into this joint proxy statement and prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint
proxy statement and prospectus. This joint proxy statement and prospectus is dated November 6, 2013. You should not assume that the information contained in this joint proxy statement and prospectus is accurate as of any date other than that date.
You should not assume that the information incorporated by reference into this joint proxy statement and prospectus is accurate as of any date other than the date of such incorporated document. Neither the mailing of this joint proxy statement and
prospectus to Mercantile shareholders or Firstbank shareholders nor the issuance by Mercantile of shares of common stock pursuant to the merger will create any implication to the contrary.
This document contains a description of the representations and warranties that each of Mercantile and Firstbank made to the other in the
merger agreement. Representations and warranties made by Mercantile, Firstbank and other applicable parties are also set forth in contracts and other documents (including the merger agreement) that are attached or filed as exhibits to this document
or are incorporated by reference into this document. These materials are included or incorporated by reference only to provide you with information regarding the terms and conditions of the agreements, and not to provide any other factual
information regarding Mercantile, Firstbank or their businesses. Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read only in conjunction with the other
information provided elsewhere in this document or incorporated by reference into this document.
155
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FIRSTBANK CORPORATION
AND
MERCANTILE BANK CORPORATION
Dated as of August 14, 2013
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
ARTICLE I THE MERGER
|
|
|
A-1
|
|
|
|
|
|
|
|
|
1.1
|
|
|
Merger
|
|
|
A-1
|
|
|
|
|
1.2
|
|
|
The Closing
|
|
|
A-2
|
|
|
|
|
1.3
|
|
|
Effective Time of Merger
|
|
|
A-2
|
|
|
|
|
1.4
|
|
|
Additional Actions
|
|
|
A-2
|
|
|
|
|
1.5
|
|
|
Surviving Corporation
|
|
|
A-2
|
|
|
|
ARTICLE II EFFECT OF MERGER ON CAPITAL STOCK
|
|
|
A-2
|
|
|
|
|
|
|
|
|
2.1
|
|
|
Conversion of Securities
|
|
|
A-2
|
|
|
|
|
2.2
|
|
|
Stock Plans
|
|
|
A-3
|
|
|
|
|
2.3
|
|
|
Surrender of Shares
|
|
|
A-4
|
|
|
|
|
2.4
|
|
|
Distributions with Respect to Unexchanged Shares
|
|
|
A-4
|
|
|
|
|
2.5
|
|
|
Termination of Exchange Fund
|
|
|
A-5
|
|
|
|
|
2.6
|
|
|
No Further Ownership Rights in Firstbank Common Stock
|
|
|
A-5
|
|
|
|
|
2.7
|
|
|
No Fractional Shares
|
|
|
A-5
|
|
|
|
|
2.8
|
|
|
No Liability
|
|
|
A-5
|
|
|
|
|
2.9
|
|
|
Lost, Stolen or Destroyed Certificates
|
|
|
A-5
|
|
|
|
|
2.10
|
|
|
Withholding Rights
|
|
|
A-6
|
|
|
|
|
2.11
|
|
|
Investment of Exchange Fund
|
|
|
A-6
|
|
|
|
|
2.12
|
|
|
Adjustments
|
|
|
A-6
|
|
|
|
ARTICLE III FIRSTBANKS REPRESENTATIONS AND WARRANTIES
|
|
|
A-6
|
|
|
|
|
|
|
|
|
3.1
|
|
|
Authorization, No Conflicts, Etc.
|
|
|
A-6
|
|
|
|
|
3.2
|
|
|
Organization and Good Standing
|
|
|
A-7
|
|
|
|
|
3.3
|
|
|
Subsidiaries
|
|
|
A-7
|
|
|
|
|
3.4
|
|
|
Capital Stock
|
|
|
A-8
|
|
|
|
|
3.5
|
|
|
Financial Statements
|
|
|
A-9
|
|
|
|
|
3.6
|
|
|
Absence of Certain Changes or Events
|
|
|
A-9
|
|
|
|
|
3.7
|
|
|
Legal Proceedings
|
|
|
A-9
|
|
|
|
|
3.8
|
|
|
Regulatory Filings
|
|
|
A-10
|
|
|
|
|
3.9
|
|
|
No Indemnification Claims
|
|
|
A-10
|
|
|
|
|
3.10
|
|
|
Conduct of Business
|
|
|
A-10
|
|
|
|
|
3.11
|
|
|
Transaction Documents
|
|
|
A-10
|
|
|
|
|
3.12
|
|
|
Agreements With Bank Regulators
|
|
|
A-10
|
|
|
|
|
3.13
|
|
|
Tax Matters
|
|
|
A-11
|
|
|
|
|
3.14
|
|
|
Properties
|
|
|
A-11
|
|
|
|
|
3.15
|
|
|
Intellectual Property
|
|
|
A-12
|
|
|
|
|
3.16
|
|
|
Required Licenses, Permits, Etc.
|
|
|
A-12
|
|
|
|
|
3.17
|
|
|
Material Contracts and Change of Control
|
|
|
A-13
|
|
|
|
|
3.18
|
|
|
Labor and Employment Matters
|
|
|
A-14
|
|
|
|
|
3.19
|
|
|
Employee Benefits
|
|
|
A-16
|
|
|
|
|
3.20
|
|
|
Environmental Matters
|
|
|
A-17
|
|
|
|
|
3.21
|
|
|
Duties as Fiduciary
|
|
|
A-18
|
|
|
|
|
3.22
|
|
|
Investment Bankers and Brokers
|
|
|
A-18
|
|
|
|
|
3.23
|
|
|
Fairness Opinion
|
|
|
A-18
|
|
|
|
|
3.24
|
|
|
Firstbank-Related Persons
|
|
|
A-18
|
|
|
|
|
3.25
|
|
|
Change in Business Relationships
|
|
|
A-18
|
|
|
|
|
3.26
|
|
|
Insurance
|
|
|
A-18
|
|
|
|
|
3.27
|
|
|
Books and Records
|
|
|
A-19
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.28
|
|
|
Loan Guarantees
|
|
|
A-19
|
|
|
|
|
3.29
|
|
|
Data Security and Customer Privacy
|
|
|
A-19
|
|
|
|
|
3.30
|
|
|
Allowance for Loan and Lease Losses
|
|
|
A-19
|
|
|
|
|
3.31
|
|
|
Loans and Investments
|
|
|
A-19
|
|
|
|
|
3.32
|
|
|
Loan Origination and Servicing
|
|
|
A-19
|
|
|
|
|
3.33
|
|
|
Securities Laws Matters
|
|
|
A-20
|
|
|
|
|
3.34
|
|
|
Joint Ventures; Strategic Alliances
|
|
|
A-20
|
|
|
|
|
3.35
|
|
|
Policies and Procedures
|
|
|
A-20
|
|
|
|
|
3.36
|
|
|
Shareholder Rights Plan
|
|
|
A-20
|
|
|
|
|
3.37
|
|
|
No Other Representations and Warranties
|
|
|
A-20
|
|
|
|
ARTICLE IV MERCANTILES REPRESENTATIONS AND WARRANTIES
|
|
|
A-21
|
|
|
|
|
|
|
|
|
4.1
|
|
|
Authorization, No Conflicts, Etc.
|
|
|
A-21
|
|
|
|
|
4.2
|
|
|
Organization and Good Standing
|
|
|
A-22
|
|
|
|
|
4.3
|
|
|
Subsidiaries
|
|
|
A-22
|
|
|
|
|
4.4
|
|
|
Capital Stock
|
|
|
A-23
|
|
|
|
|
4.5
|
|
|
Financial Statements
|
|
|
A-23
|
|
|
|
|
4.6
|
|
|
Absence of Certain Changes or Events
|
|
|
A-24
|
|
|
|
|
4.7
|
|
|
Legal Proceedings
|
|
|
A-24
|
|
|
|
|
4.8
|
|
|
Regulatory Filings
|
|
|
A-24
|
|
|
|
|
4.9
|
|
|
No Indemnification Claims
|
|
|
A-24
|
|
|
|
|
4.10
|
|
|
Conduct of Business
|
|
|
A-25
|
|
|
|
|
4.11
|
|
|
Transaction Documents
|
|
|
A-25
|
|
|
|
|
4.12
|
|
|
Agreements With Bank Regulators
|
|
|
A-25
|
|
|
|
|
4.13
|
|
|
Tax Matters
|
|
|
A-25
|
|
|
|
|
4.14
|
|
|
Properties
|
|
|
A-26
|
|
|
|
|
4.15
|
|
|
Intellectual Property
|
|
|
A-27
|
|
|
|
|
4.16
|
|
|
Required Licenses, Permits, Etc.
|
|
|
A-27
|
|
|
|
|
4.17
|
|
|
Material Contracts and Change of Control
|
|
|
A-27
|
|
|
|
|
4.18
|
|
|
Labor and Employment Matters
|
|
|
A-29
|
|
|
|
|
4.19
|
|
|
Employee Benefits
|
|
|
A-30
|
|
|
|
|
4.20
|
|
|
Environmental Matters
|
|
|
A-32
|
|
|
|
|
4.21
|
|
|
Duties as Fiduciary
|
|
|
A-32
|
|
|
|
|
4.22
|
|
|
Investment Bankers and Brokers
|
|
|
A-32
|
|
|
|
|
4.23
|
|
|
Fairness Opinion
|
|
|
A-33
|
|
|
|
|
4.24
|
|
|
Mercantile-Related Persons
|
|
|
A-33
|
|
|
|
|
4.25
|
|
|
Change in Business Relationships
|
|
|
A-33
|
|
|
|
|
4.26
|
|
|
Insurance
|
|
|
A-33
|
|
|
|
|
4.27
|
|
|
Books and Records
|
|
|
A-33
|
|
|
|
|
4.28
|
|
|
Loan Guarantees
|
|
|
A-34
|
|
|
|
|
4.29
|
|
|
Data Security and Customer Privacy
|
|
|
A-34
|
|
|
|
|
4.30
|
|
|
Allowance for Loan and Lease Losses
|
|
|
A-34
|
|
|
|
|
4.31
|
|
|
Loans and Investments
|
|
|
A-34
|
|
|
|
|
4.32
|
|
|
Loan Origination and Servicing
|
|
|
A-34
|
|
|
|
|
4.33
|
|
|
Securities Laws Matters
|
|
|
A-34
|
|
|
|
|
4.34
|
|
|
Joint Ventures; Strategic Alliances
|
|
|
A-35
|
|
|
|
|
4.35
|
|
|
Policies and Procedures
|
|
|
A-35
|
|
|
|
|
4.36
|
|
|
Shareholder Rights Plan
|
|
|
A-35
|
|
|
|
|
4.37
|
|
|
No Other Representations and Warranties
|
|
|
A-35
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE V COVENANTS
|
|
|
A-35
|
|
|
|
|
|
|
|
|
5.1
|
|
|
Conduct of Business by Firstbank
|
|
|
A-35
|
|
|
|
|
5.2
|
|
|
Conduct of Business by Mercantile
|
|
|
A-39
|
|
|
|
|
5.3
|
|
|
Disclosure Letters; Additional Information
|
|
|
A-43
|
|
|
|
|
5.4
|
|
|
No Solicitation by Firstbank
|
|
|
A-44
|
|
|
|
|
5.5
|
|
|
No Solicitation by Mercantile
|
|
|
A-46
|
|
|
|
|
5.6
|
|
|
Preparation of the Joint Proxy Statement and Registration Statement; Shareholders Meetings
|
|
|
A-49
|
|
|
|
|
5.7
|
|
|
Stock Exchange Listing
|
|
|
A-51
|
|
|
|
|
5.8
|
|
|
Regulatory Matters and Approvals
|
|
|
A-51
|
|
|
|
|
5.9
|
|
|
Bank Consolidation
|
|
|
A-53
|
|
|
|
|
5.10
|
|
|
Governance Matters
|
|
|
A-54
|
|
|
|
|
5.11
|
|
|
Press Releases and Public Announcement
|
|
|
A-54
|
|
|
|
|
5.12
|
|
|
Access to Information
|
|
|
A-55
|
|
|
|
|
5.13
|
|
|
Indemnification and Insurance
|
|
|
A-56
|
|
|
|
|
5.14
|
|
|
Takeover Laws
|
|
|
A-57
|
|
|
|
|
5.15
|
|
|
Section 16 Matters
|
|
|
A-57
|
|
|
|
|
5.16
|
|
|
Stock Purchase Plans
|
|
|
A-57
|
|
|
|
|
5.17
|
|
|
Securityholder Litigation
|
|
|
A-57
|
|
|
|
|
5.18
|
|
|
Tax-Free Reorganization Treatment
|
|
|
A-57
|
|
|
|
|
5.19
|
|
|
Pre-Merger Special Dividend
|
|
|
A-58
|
|
|
|
|
5.20
|
|
|
Dividends
|
|
|
A-58
|
|
|
|
|
5.21
|
|
|
Trust Preferred Securities
|
|
|
A-58
|
|
|
|
|
5.22
|
|
|
Expenses
|
|
|
A-58
|
|
|
|
|
5.23
|
|
|
Fairness Opinion
|
|
|
A-59
|
|
|
|
|
5.24
|
|
|
Years of Service Credit
|
|
|
A-59
|
|
|
|
|
5.25
|
|
|
Employee Severance
|
|
|
A-59
|
|
|
|
|
5.26
|
|
|
Dividend Reinvestment Plans
|
|
|
A-59
|
|
|
|
ARTICLE VI CLOSING CONDITIONS
|
|
|
A-59
|
|
|
|
|
|
|
|
|
6.1
|
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
|
|
A-59
|
|
|
|
|
6.2
|
|
|
Conditions to Firstbanks Obligation to Effect the Merger
|
|
|
A-60
|
|
|
|
|
6.3
|
|
|
Conditions to Mercantiles Obligation to Effect the Merger
|
|
|
A-60
|
|
|
|
ARTICLE VII TERMINATION
|
|
|
A-61
|
|
|
|
|
|
|
|
|
7.1
|
|
|
Termination of Plan of Merger
|
|
|
A-61
|
|
|
|
|
7.2
|
|
|
Effect of Termination
|
|
|
A-63
|
|
|
|
ARTICLE VIII CERTAIN DEFINITIONS
|
|
|
A-65
|
|
|
|
ARTICLE IX MISCELLANEOUS
|
|
|
A-72
|
|
|
|
|
|
|
|
|
9.1
|
|
|
No Third-Party Beneficiaries
|
|
|
A-72
|
|
|
|
|
9.2
|
|
|
Specific Performance
|
|
|
A-73
|
|
|
|
|
9.3
|
|
|
Entire Agreement
|
|
|
A-73
|
|
|
|
|
9.4
|
|
|
Succession and Assignment
|
|
|
A-73
|
|
|
|
|
9.5
|
|
|
Construction
|
|
|
A-73
|
|
|
|
|
9.6
|
|
|
Exclusive Jurisdiction
|
|
|
A-73
|
|
|
|
|
9.7
|
|
|
Waiver of Jury Trial
|
|
|
A-73
|
|
|
|
|
9.8
|
|
|
Notices
|
|
|
A-74
|
|
|
|
|
9.9
|
|
|
Governing Law
|
|
|
A-74
|
|
|
|
|
9.10
|
|
|
Counterparts
|
|
|
A-74
|
|
|
|
|
9.11
|
|
|
Headings
|
|
|
A-74
|
|
|
|
|
9.12
|
|
|
Calculation of Dates and Deadlines
|
|
|
A-74
|
|
|
|
|
9.13
|
|
|
Severability
|
|
|
A-74
|
|
|
|
|
9.14
|
|
|
Non-Survival of Representations, Warranties and Agreements
|
|
|
A-75
|
|
|
|
|
9.15
|
|
|
Amendments
|
|
|
A-75
|
|
A-iii
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this
Plan of Merger
) is made as of August 14, 2013, by and between
Firstbank Corporation, a Michigan corporation (
Firstbank
), and Mercantile Bank Corporation, a Michigan corporation (
Mercantile
).
PRELIMINARY STATEMENT
1. The respective Boards of Directors of each of Firstbank and Mercantile have determined that it is in the best interests of their respective corporations and shareholders that Firstbank and Mercantile
engage in a business combination in order to continue and advance their respective long-term business strategies and goals; and
2. The respective Boards of Directors of each of Firstbank and Mercantile have approved the merger of Firstbank with and into Mercantile
(the
Merger
) in accordance with the terms of this Plan of Merger, the Michigan Business Corporation Act (the
MBCA
) and any other applicable Law; and
3. The Firstbank Board of Directors has, in light of and subject to the terms and conditions set forth in this Plan of Merger
(a) determined that the terms of this Plan of Merger are fair to and in the best interests of Firstbank and the Firstbank Shareholders, and (b) resolved to adopt this Plan of Merger, to authorize the transactions contemplated by it and to
recommend approval by the Firstbank Shareholders of this Plan of Merger; and
4. This Plan of Merger is a memorandum of
understanding within the meaning of Article X(B) of Firstbanks articles of incorporation and it has been approved by the Firstbank Board of Directors pursuant to and in accordance with Article X(B) of Firstbanks articles of
incorporation; and
5. The Mercantile Board of Directors has, in light of and subject to the terms and conditions set forth in
this Plan of Merger (a) determined that the terms of this Plan of Merger are fair to and in the best interests of Mercantile and the Mercantile Shareholders, and (b) resolved to adopt this Plan of Merger, to authorize the transactions
contemplated by it and to recommend approval by the Mercantile Shareholders of this Plan of Merger and the issuance of shares of Mercantile Common Stock constituting the Merger Consideration; and
6. For federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
Code
), and this Plan of Merger is intended to be and is adopted as a Plan of Reorganization for the purposes of Sections 354 and
361 of the Code.
In consideration of the representations, warranties, mutual covenants and agreements contained in this Plan
of Merger, Firstbank and Mercantile agree as follows:
ARTICLE I
THE MERGER
1.1
Merger
. Subject to the terms and conditions of this Plan of Merger, at the Effective Time, Firstbank shall be merged with and
into Mercantile and the separate corporate existence of Firstbank shall cease. Firstbank and Mercantile are each sometimes referred to as a
Constituent Corporation
prior to the Merger. At the Effective Time, the Constituent
Corporations shall become a single corporation, which corporation shall be Mercantile (the
Surviving Corporation
). The effect of the Merger upon each of the Constituent Corporations and the Surviving Corporation shall be as
provided in Chapter Seven of the MBCA with respect to the merger of domestic corporations. Without limiting the generality of the foregoing, and subject to the MBCA, at the Effective Time: (a) all the rights, privileges, powers, franchises,
licenses, and interests in and to every type of property (whether real, personal, or mixed) of Firstbank and Mercantile, shall vest in the Surviving Corporation, (b) all choses in action of Firstbank and Mercantile shall continue unaffected and
uninterrupted by the Merger and shall accrue to the Surviving Corporation, and (c) all debts, liabilities and duties of Firstbank and Mercantile shall become the debts, liabilities and duties of the Surviving Corporation.
A-1
1.2
The Closing
. Firstbank and Mercantile shall consummate the Merger (the
Closing
) (a) at the offices of Warner Norcross & Judd LLP, 900 Fifth Third Center, 111 Lyon Street N.W., Grand Rapids, Michigan, at 10:00 a.m., local time, on a date to be agreed upon by Firstbank and
Mercantile, which will be no later than five Business Days immediately following the day on which the last of the conditions to Closing contained in
Article VI
(other than any conditions that by their nature are to be satisfied at the
Closing) is satisfied or waived in accordance with this Plan of Merger or (b) at such other place and time or on such other date as Firstbank and Mercantile may mutually determine (the date on which the Closing actually occurs is referred to as
the
Closing Date
).
1.3
Effective Time of Merger
. Upon completion of the Closing, Firstbank
and Mercantile shall each promptly execute and file a certificate of merger as required by the MBCA to effect the Merger (the
Certificate of Merger
). No party shall take any action to revoke the Certificate of Merger after
its filing without the written consent of the other party. The
Effective Time
of the Merger shall be as of the time and date when the Merger becomes effective as set forth in the Certificate of Merger, but not later than
two Business Days after the Closing occurs.
1.4
Additional Actions
. At any time after the Effective Time, the
Surviving Corporation may determine that deeds, assignments, or assurances or any other acts are necessary or desirable to vest, perfect, or confirm, of record or otherwise, in the Surviving Corporation its rights, title, or interest in, to, or
under any of the rights, properties, or assets of Firstbank and Mercantile acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, or to otherwise carry out the purposes of this Plan of Merger.
Firstbank and Mercantile grant to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, assignments, and assurances and to do all acts necessary, proper, or convenient to accomplish this purpose. This
irrevocable power of attorney shall only be operative following the Effective Time and at such time the officers and directors of the Surviving Corporation shall be fully authorized in the name of Firstbank and Mercantile to take any and all such
actions contemplated by this Plan of Merger.
1.5
Surviving Corporation
. At the Effective Time, the Surviving
Corporation shall have the following attributes until they are subsequently changed in the manner provided by Law:
1.5.1
Name
. The name of the Surviving Corporation shall be Mercantile Bank Corporation.
1.5.2
Articles of
Incorporation
. The articles of incorporation of the Surviving Corporation shall be the articles of incorporation of Mercantile as in effect immediately prior to the Effective Time, without change.
1.5.3
Bylaws
. The bylaws of the Surviving Corporation shall be the bylaws of Mercantile as in effect immediately prior to the
Effective Time, without change.
1.5.4
Officers
. The officers of the Surviving Corporation shall be as set forth in
Section 5.10
.
1.5.5
Directors
. The directors of the Surviving Corporation shall be as set forth in
Section
5.10
.
ARTICLE II
EFFECT OF MERGER ON CAPITAL STOCK
2.1
Conversion of Securities
. At
the Effective Time, by virtue of the Merger and without any action on the part of Firstbank, Mercantile or any other Person:
2.1.1
Cancellation of Excluded Shares
. Each share of Firstbank Common Stock that is owned by Firstbank (or by any of its
wholly-owned Subsidiaries) or Mercantile (or by any of its wholly-owned Subsidiaries) (collectively, the
Excluded Shares
) immediately before the Effective Time will automatically be canceled and cease to exist without
delivery of any consideration in exchange for or in respect of any Excluded Share.
A-2
2.1.2
Conversion of Common Stock
. Each share of Firstbank Common Stock issued and
outstanding immediately prior to the Effective Time (other than the Excluded Shares) shall be converted into the right to receive 1.00 (the
Exchange Ratio
) fully paid and nonassessable share of Mercantile Common Stock (the
Merger Consideration
), whereupon such shares of Firstbank Common Stock will no longer be outstanding and all rights with respect to such shares of Firstbank Common Stock will cease to exist, except the right to receive the
Merger Consideration, any cash in lieu of fractional shares payable pursuant to
Section 2.7
, and any dividends or other distributions payable pursuant to
Section 2.4
, upon surrender of Certificates or Book-Entry Shares, in
accordance with
Section 2.3
. No interest shall be paid or will accrue on any payment to holders of Certificates or Book-Entry Shares pursuant to the provisions of this
Article II
.
2.2
Stock Plans
.
2.2.1 Firstbank and Mercantile shall take all requisite action so that, as of the Effective Time, each Firstbank Stock Option and share of Firstbank Restricted Stock (each, an
Award
), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall cease to represent an Award with respect to Firstbank Common Stock, and shall be converted by virtue of the Merger and
without any action on the part of the holder of that Award, into an award with respect to a number of shares of Mercantile Common Stock equal to the product of (a) the aggregate number of shares of Firstbank Common Stock subject to such Award,
multiplied by (b) the Exchange Ratio (as converted, a
Converted Stock-Based Award
). The value of any fractional shares related to any Converted Stock-Based Award shall be paid in cash at the time such Converted
Stock-Based Award is otherwise settled pursuant to its terms. As of the Effective Time, Mercantile will assume each of the Firstbank Stock Plans.
2.2.2 All Converted Stock-Based Awards shall continue to have, and be subject to, the same terms and conditions set forth in the applicable Firstbank Stock Plan (or any other agreement to which such
Converted Stock-Based Award was subject immediately prior to the Effective Time), except as otherwise provided in this Plan of Merger. The exercise or strike price (if any) per share of Mercantile Common Stock applicable to any Converted Stock-Based
Award which was a Firstbank Stock Option shall be equal to (a) the per share exercise price of such Award immediately prior to the Effective Time divided by (b) the Exchange Ratio. Prior to the Effective Time, Firstbank shall make such
amendments and take such other actions with respect to the Firstbank Stock Plans as shall be necessary to effect the adjustment referred to in this
Section 2.2
, including notifying all participants in the Firstbank Stock Plans of such
adjustment.
2.2.3 Mercantile shall take all corporate action necessary to reserve for issuance a sufficient number of shares
of Mercantile Common Stock for delivery upon exercise or settlement of the Converted Stock-Based Awards in accordance with this
Section 2.2
. As soon as reasonably practicable after the Effective Time, if and to the extent necessary to
cause a sufficient number of shares of Mercantile Common Stock to be registered and issuable under Converted Stock-Based Awards, Mercantile shall file a post-effective amendment to the Registration Statement or one or more registration statements on
Form S-8 (or any successor or other appropriate form) with respect to the shares of Mercantile Common Stock subject to Converted Stock-Based Awards and shall use its commercially reasonable efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such Converted Stock-Based Awards remain outstanding.
2.2.4 Each share of Firstbank Restricted Stock shall vest as of the Effective Time and be converted into a share of Mercantile Common
Stock on the same basis as other shares of Firstbank Common Stock pursuant to this
Section 2.2
. Each holder of Firstbank Restricted Stock which is converted pursuant to this
Section 2.2
shall be permitted to surrender shares
of Mercantile Common Stock in satisfaction of applicable Tax withholding obligations.
A-3
2.3
Surrender of Shares
.
2.3.1
Exchange Agent; Exchange Fund
. Prior to or at the Effective Time, Mercantile shall deposit with a bank or trust company
designated by Mercantile and reasonably satisfactory to Firstbank (the
Exchange Agent
), for the benefit of the holders of Firstbank Common Stock as of immediately prior to the Effective Time, whether represented by
Certificates or held as Book-Entry Shares, shares of Mercantile Common Stock, in the aggregate amount equal to the number of shares of Mercantile Common Stock to which holders of Firstbank Common Stock are entitled based on the Exchange Ratio
pursuant to
Section 2.1.2
. In addition, Mercantile shall deposit with the Exchange Agent, prior to or at the Effective Time and as necessary from time to time after the Effective Time, cash in an amount sufficient to make payment in lieu of
any fractional shares pursuant to
Section 2.7
and payment of any dividends or other distributions payable pursuant to
Section 2.4
. All such shares of Mercantile Common Stock and cash deposited with the Exchange Agent pursuant to this
Section 2.3.1
is referred to as the
Exchange Fund
.
2.3.2
Exchange Procedure
. As soon
as reasonably practicable after the Effective Time, Mercantile shall cause the Exchange Agent to mail to each holder of record of shares of Firstbank Common Stock (other than the Excluded Shares), as of the Effective Time, a form of letter of
transmittal (which shall be in customary form and shall specify that delivery will be effected, and risk of loss and title to Certificates or Book-Entry Shares will pass, only upon proper delivery of such Certificates or Book-Entry Shares to the
Exchange Agent upon adherence to the procedures set forth in the letter of transmittal) and instructions for use in effecting the surrender of Certificates or Book-Entry Shares in exchange for the Merger Consideration, any cash in lieu of fractional
shares payable pursuant to
Section 2.7
and any dividends or other distributions payable pursuant to
Section
2.4
.
Upon surrender of a Certificate or of Book-Entry Shares for cancellation to the Exchange Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, each holder of a Certificate or of Book-Entry Shares shall be entitled to receive in exchange therefor (a) book-entry shares representing the
number of whole shares of Mercantile Common Stock to which such holder is entitled pursuant to
Section 2.1.2
, (b) cash in lieu of any fractional shares payable pursuant to
Section 2.7
, and (c) any dividends or distributions
payable pursuant to
Section 2.4
,
and such Certificates and Book-Entry Shares so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Firstbank Common Stock that is not registered in the transfer records of Firstbank, payment of the Merger Consideration may be made to a Person other than the
Person in whose name the Certificates or Book-Entry Shares so surrendered are registered if properly endorsed or otherwise in proper form for transfer and the Person requesting such payment shall pay any transfer or other Taxes required by reason of
the transfer or establish, to the reasonable satisfaction of Mercantile, that such Taxes have been paid or are not applicable. Until surrendered as contemplated by this
Section 2.3.2
, each Certificate and Book-Entry Share shall be deemed
at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration, any cash in lieu of fractional shares payable pursuant to
Section 2.7
and any dividends or other distributions payable
pursuant to
Section 2.4
.
2.4
Distributions with Respect to Unexchanged Shares
. No dividends or other
distributions with respect to Mercantile Common Stock with a record date on or after the Effective Time shall be paid to the holder of any unsurrendered Certificate or Book-Entry Share with respect to the shares of Mercantile Common Stock that the
holder of such unsurrendered Certificate or Book-Entry Share has the right to receive upon the surrender of such unsurrendered Certificate or Book-Entry Share, and no cash payment in lieu of fractional shares of Mercantile Common Stock shall be paid
to any such holder pursuant to
Section 2.7
, until the holder of such Certificate or Book-Entry Share shall have surrendered such Certificate or Book-Entry Share in accordance with this
Article II
. Subject to escheat or other
applicable Law, following the surrender of any Certificate or Book-Entry Share, there shall be paid to the record holder of whole shares of Mercantile Common Stock issued in exchange therefor, without interest, with respect to such whole shares of
Mercantile Common Stock (a) at the time of such
A-4
surrender, the amount of dividends or other distributions with a record date and a payment date on or after the Effective Time and on or prior to the date of such surrender and the amount of any
cash payable in lieu of a fractional share of Mercantile Common Stock to which such holder is entitled pursuant to
Section 2.7
and (b) at the appropriate payment date, the amount of dividends or other distributions with a record
date on or after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Mercantile Common Stock.
2.5
Termination of Exchange Fund
. Any portion of the Exchange Fund that remains undistributed to holders of Certificates or
Book-Entry Shares for one year after the Effective Time shall be delivered to Mercantile, upon demand, and any holders of Certificates or Book-Entry Shares who have not then complied with this
Article II
shall thereafter look only to
Mercantile for, and Mercantile shall remain liable for, payment of their claims for the Merger Consideration, any cash in lieu of any fractional shares payable pursuant to
Section 2.7
, and any dividends or other distributions payable
pursuant to
Section 2.4
, in accordance with this
Article II
.
2.6
No Further Ownership Rights in
Firstbank Common Stock
. The Merger Consideration, any cash in lieu of any fractional shares payable pursuant to
Section 2.7
, and any dividends or other distributions payable pursuant to
Section 2.4
upon the surrender of
Certificates or Book-Entry Shares in accordance with the terms of this
Article II
shall be deemed to have been in full satisfaction of all rights pertaining to the Firstbank Common Stock formerly represented by such Certificates or Book-Entry
Shares. At the close of business on the Closing Date, the share transfer books of Firstbank shall be closed, and there shall be no further registration of transfers on the share transfer books of Firstbank of shares of Firstbank Common Stock that
were outstanding immediately prior to the Effective Time. From and after the Effective Time, the holders of Certificates or Book-Entry Shares shall cease to have any rights with respect to shares of Firstbank Common Stock, except as otherwise
provided in this Plan of Merger or by applicable Law.
2.7
No Fractional Shares
.
No certificates or scrip
representing fractional shares of Mercantile Common Stock shall be issued upon the surrender for exchange of Certificates or Book-Entry Shares, no dividends or other distributions of Mercantile shall be paid with respect to such fractional share
interests, and such fractional share interests will not entitle the owner to vote or to have any rights of a holder of shares of Mercantile Common Stock. Notwithstanding any other provision of this Plan of Merger, each holder of Certificates or
Book-Entry Shares who would otherwise have been entitled to receive a fraction of a share of Mercantile Common Stock (determined after taking into account all Certificates and Book-Entry Shares delivered by such holder) shall receive, in lieu of
such fractional part of a share of Mercantile Common Stock, cash (without interest) in an amount equal to the product of (a) such fractional part of a share of Mercantile Common Stock multiplied by (b) the closing price for a share of
Mercantile Common Stock as reported on NASDAQ on the trading day immediately before the date on which the Effective Time occurs.
2.8
No Liability
. To the fullest extent permitted by applicable Law, none of Firstbank, Mercantile, the Surviving Corporation or the Exchange Agent will be liable to any Firstbank Shareholder or
any other Person in respect of any cash properly delivered to a Governmental Entity pursuant to any applicable abandoned property, escheat or similar Laws. Any portion of the Exchange Fund remaining unclaimed by Firstbank Shareholders as of a date
that is immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Entity will, to the extent permitted by applicable Law, become the property of Mercantile free and clear of any claims or
interest of any Person previously entitled thereto.
2.9
Lost, Stolen or Destroyed Certificates
. In the event that any
Certificate has been lost, stolen or destroyed, Mercantile or the Exchange Agent will, upon the receipt of an affidavit of that fact by the holder of such Certificate in form and substance reasonably satisfactory to Mercantile or the Exchange Agent,
as the case may be, pay in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration, any cash in lieu of fractional shares payable pursuant to
Section 2.7
and any dividends or other distributions payable pursuant
to
Section 2.4
payable in respect of the shares of Firstbank Common Stock previously evidenced by such lost, stolen or destroyed Certificate. Mercantile or the Exchange Agent, as the case may be, may, in its discretion and as a
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condition precedent to the payment of the Merger Consideration, any cash in lieu of fractional shares payable pursuant to
Section 2.7
and any dividends or other distributions payable
pursuant to
Section 2.4
, require the owner of such lost, stolen or destroyed Certificate to deliver a bond in such sum as Mercantile or the Exchange Agent, as the case may be, may reasonably direct as indemnity against any claim that may
be made against Mercantile or the Exchange Agent with respect to such Certificate.
2.10
Withholding Rights
. Mercantile
shall be entitled to deduct and withhold, or cause to be deducted or withheld, from the consideration otherwise payable pursuant to this Plan of Merger such amounts as it is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant Governmental Entity by Mercantile, such withheld amounts shall be treated for all purposes
of this Plan of Merger as having been paid to the Person in respect of which such deduction and withholding was made by Mercantile.
2.11
Investment of Exchange Fund
. The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Mercantile from time to time provided that no gain or loss thereon shall
affect the amounts payable or the timing of the amounts payable to Firstbank Shareholders pursuant to this
Article II
. The Exchange Fund shall not be used for any purpose except as set forth herein. Any interest and other income resulting
from such investments shall be for Mercantiles account.
2.12
Adjustments
. Notwithstanding anything to the
contrary in this
Article II
, if, between the date of this Plan of Merger and the Effective Time, there is declared (with an effective time prior to the Effective Time) or effected a reorganization, reclassification, recapitalization, stock
split (including a reverse stock split), split-up, stock dividend or stock distribution (including any dividend or distribution of securities convertible into Mercantile Common Stock or Firstbank Common Stock), combination, exchange, or readjustment
of shares with respect to, or rights issued in respect of, Mercantile Common Stock or Firstbank Common Stock, the Exchange Ratio shall be proportionately adjusted accordingly to provide to the holders of Firstbank Common Stock the same economic
effect as contemplated by this Plan of Merger prior to such event.
ARTICLE III
FIRSTBANKS REPRESENTATIONS AND WARRANTIES
Except as specifically disclosed in the Firstbank SEC Reports filed with or furnished to the SEC prior to the date of this Plan of Merger (excluding any risk factor disclosures set forth under the heading
Risk Factors, any disclosure of risks included in any
forward-looking
statements disclaimer or any other forward-looking statement of risk that does not contain a reasonable level of
detail about the risks of which the statement warns) or as specifically disclosed in the disclosure letter delivered by Firstbank to Mercantile prior to or concurrently with the execution of this Plan of Merger (the
Firstbank Disclosure
Letter
), it being understood and agreed that the disclosure of any item in the Firstbank SEC Reports shall be deemed disclosure only to the extent the relevance of such disclosure to the sections or subsections of this
Article
III
is reasonably apparent on the face of such disclosure, Firstbank represents and warrants to Mercantile that:
3.1
Authorization, No Conflicts, Etc
.
3.1.1
Authorization of Plan of Merger
. Firstbank has the requisite corporate
power and authority to execute and deliver this Plan of Merger, and subject to the affirmative vote of the holders of at least a majority of the outstanding shares of Firstbank Common Stock entitled to vote to approve the Plan of Merger (the
Firstbank Shareholder Approval
), to consummate the transactions contemplated by this Plan of Merger. This Plan of Merger has been duly adopted, and the consummation of the Merger and the other transactions contemplated by
this Plan of Merger have been duly authorized, by the Firstbank Board of Directors. The Firstbank Board of Directors has (a) determined that the terms of this Plan of Merger are fair to and in the best
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interests of Firstbank and the Firstbank Shareholders, and (b) adopted this Plan of Merger and authorized the transactions contemplated by this Plan of Merger and resolved to recommend
approval by the Firstbank Shareholders of this Plan of Merger and the transactions contemplated by it (such recommendation, the
Firstbank Board
Recommendation
). This Plan of Merger is a memorandum of
understanding within the meaning of Article X(B) of Firstbanks articles of incorporation and it has been approved by the Firstbank Board of Directors pursuant to and in accordance with Article X(B) of Firstbanks articles of
incorporation. Except for the Firstbank Shareholder Approval, no other corporate proceedings on the part of Firstbank are necessary to authorize this Plan of Merger or to consummate the Merger. This Plan of Merger has been duly executed and
delivered by, and (assuming due authorization, execution and delivery by Mercantile) constitutes valid and binding obligations of, Firstbank and is enforceable against Firstbank in accordance with its terms, except to the extent that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to creditors rights generally and (ii) equitable remedies of specific performance and
injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
3.1.2
No Conflict, Breach, Violation, Etc
. The execution, delivery, and performance of this Plan of Merger by Firstbank and the consummation of the Merger, do not and will not violate, conflict
with, or result in a breach of: (a) any provision of the articles of incorporation or bylaws (or similar organizational documents) of Firstbank or any Subsidiary of Firstbank (each a
Firstbank
Subsidiary
and collectively, the
Firstbank
Subsidiaries
); or (b) any Law or Order applicable to Firstbank or any Firstbank Subsidiary, assuming the timely receipt of each of the approvals referred to in
Section
3.1.4
.
3.1.3
Regulatory Restrictions
. The execution, delivery, and performance of this Plan of Merger by Firstbank
and the consummation of the Merger do not and will not violate, conflict with, result in a breach of, constitute a default under, or require any consent, approval, waiver, extension, amendment, authorization, notice, or filing under, any cease and
desist order, written agreement, memorandum of understanding, board resolutions or other regulatory agreement or commitment with or from a Governmental Entity to which Firstbank or any Firstbank Subsidiary is a party or subject, or by which
Firstbank or any Firstbank Subsidiary is bound or affected.
3.1.4
Required Approvals
. No notice to, filing with,
authorization of, exemption by, or consent or approval of, any Governmental Entity is necessary for the consummation of the transactions contemplated by this Plan of Merger by Firstbank other than in connection or compliance with the provisions of
the MBCA, compliance with federal and state securities laws, and the consents, authorizations, approvals, or exemptions required under the Bank Holding Company Act, the FDI Act, and the Michigan Banking Code. Firstbank has no Knowledge of any reason
why the regulatory approvals referred to in this
Section 3.1.4
cannot be obtained or why the regulatory approval process would be materially impeded.
3.2
Organization and Good Standing
. Firstbank is a corporation duly organized, validly existing, and in good standing under the laws of the State of Michigan. Firstbank has all requisite corporate
power and authority to own, operate, and lease its properties and assets and to carry on its business as it is now being conducted in all material respects. Firstbank is a bank holding company duly registered as such with the Federal Reserve Board
under the Bank Holding Company Act. Firstbank is not, and is not required to be, qualified or admitted to conduct business as a foreign corporation in any other state, except where such failure to be so qualified has not had, and would not
reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect.
3.3
Subsidiaries
.
3.3.1
Ownership
. Firstbank has provided to Mercantile a true and complete list of each Firstbank
Subsidiary as of the date of this Plan of Merger. Other than the Firstbank Subsidiaries, Firstbank does not have control (as defined in Section 2(a)(2) of the Bank Holding Company Act, using 5 percent rather than 25 percent), either
directly or indirectly, of any Person engaged in an active trade or business or that holds any
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significant assets. Firstbank or a Firstbank Subsidiary owns all of the issued and outstanding capital stock or other equity interests of each of the Firstbank Subsidiaries, free and clear of any
claim or Lien of any kind. There is no legally binding and enforceable subscription, option, warrant, right to acquire, or any other similar agreement pertaining to the capital stock or other equity interests of any Firstbank Subsidiary.
3.3.2
Organization and Good Standing
. Each of the Firstbank Subsidiaries (a) is duly organized and validly existing under the
laws of its jurisdiction of organization; (b) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, or local) where its ownership or leasing of property or the conduct of its business requires it to
be so qualified, and (c) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted, except in each of (a) through (c) as has not had, and would not reasonably be
expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect.
3.3.3
Deposit Insurance; Other
Assessments
. The deposits of each Firstbank Subsidiary that is a depository institution are insured by the FDIC to the fullest extent permitted by Law, and all premiums and assessments to be paid in connection therewith have been paid by each
such Firstbank Subsidiary when due. No proceeding for the revocation or termination of such deposit insurance is pending or, to the Knowledge of Firstbank, threatened. Firstbank and each Firstbank Subsidiary has paid as and when due all material
fees, charges, assessments, and the like as required by Law to each and every Governmental Entity having jurisdiction over Firstbank or each Firstbank Subsidiary.
3.4
Capital Stock
.
3.4.1
Classes and Shares
. The authorized
capital stock of Firstbank consists of 20,300,000 shares, divided into two classes, as follows (i) 20,000,000 shares of common stock, no par value (the
Firstbank
Common Stock
), of which 8,073,821 shares were
issued and outstanding as of the date of this Plan of Merger; and (ii) 300,000 shares of preferred stock, no par value (the
Firstbank
Preferred Stock
), of which no shares were issued and outstanding as of the
date of this Plan of Merger. Except for the Firstbank Share-Based Awards, as of the date of this Plan of Merger, there is no security or class of securities outstanding that represents or is convertible into capital stock of Firstbank.
3.4.2
Share-Based Awards
. Section 3.4.2 of the Firstbank Disclosure Letter sets forth, as of the date of this Plan of Merger, the
number of shares of Firstbank Common Stock that are authorized and reserved for issuance under each Firstbank Stock Plan, and the number of shares of Firstbank Common Stock that are subject to outstanding Firstbank Stock Options and Firstbank
Restricted Stock (collectively,
Firstbank
Share-Based Awards
) issued under a Firstbank Stock Plan. All Firstbank Share-Based Awards have been awarded under a Firstbank Stock Plan, and, as of the date of this
Plan of Merger, there are no other compensatory awards outstanding pursuant to which Firstbank Common Stock has issued or is issuable, or that relate to or are determined by reference to the value of Firstbank Common Stock. All outstanding shares of
Firstbank Common Stock, and all Firstbank Common Stock reserved for issuance under the Firstbank Stock Plans when issued in accordance with the respective terms of the Firstbank Stock Plans, are or will be duly authorized, validly issued, fully paid
and non-assessable and not issued in violation of any preemptive rights, purchase option, call or right of first refusal rights.
3.4.3
Issuance of Shares
. After the date of this Plan of Merger, the number of issued and outstanding shares of Firstbank Common Stock and Firstbank Preferred Stock is not subject to change before
the Effective Time, other than the issuance of shares of Firstbank Common Stock upon the exercise of any Firstbank Stock Options granted pursuant to a Firstbank Stock Plan prior to the date of this Plan of Merger.
3.4.4
Voting Rights
. Other than the issued and outstanding shares of Firstbank Common Stock described in
Section 3.4.1
, neither Firstbank nor any Firstbank Subsidiary has outstanding any security or issue of securities the holder or holders of which have the right to vote on the approval of the Merger or this Plan of Merger, or that entitle
the holder or holders to consent to, or withhold consent on, the Merger or this Plan of Merger.
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3.4.5
Appraisal Rights
. No Firstbank Shareholder will be entitled to appraisal rights
pursuant to the MBCA as a result of the consummation of the Merger.
3.5
Financial Statements
.
3.5.1
Financial Statements
. The consolidated financial statements of Firstbank as of and for each of the three years ended
December 31, 2012, 2011, and 2010, as reported on by Firstbanks independent accountants, and the unaudited consolidated financial statements of Firstbank as of and for each quarter in 2013 ended before the date of this Plan of Merger,
including all schedules and notes relating to such statements, as previously delivered to Mercantile (collectively,
Firstbanks Financial Statements
), fairly present, and the unaudited consolidated financial statements
of Firstbank as of and for each quarter ending after the date of this Plan of Merger until the Effective Time, including all schedules and notes relating to such statements, will fairly present, the financial condition and the results of operations,
changes in shareholders equity, and cash flows of Firstbank as of the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, consistently applied, subject, in the case of unaudited
interim financial statements, to normal, recurring year-end adjustments (the effect of which has not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect) and the absence of notes
(that, if presented, would not differ materially from those included in Firstbanks Financial Statements). No financial statements of any entity or enterprise other than the Firstbank Subsidiaries are required by GAAP to be included in the
consolidated financial statements of Firstbank.
3.5.2
Call Reports
. The following reports (including all related
schedules, notes, and exhibits) were prepared and filed in conformity with applicable regulatory requirements and were correct and complete in all material respects when filed:
3.5.2.1 The Consolidated Reports of Condition and Income (Form FFIEC 041) of each Firstbank Subsidiary required to file such reports
(including any amendments) as of and for each of the fiscal years ended December 31, 2012, 2011, and 2010, and as of and for each quarter ended in 2013 before the date of this Plan of Merger as filed with the FDIC; and
3.5.2.2 The Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) and Parent Company Only Financial Statements for
Large Bank Holding Companies (Form FR Y-9LP) (including any amendments) for Firstbank as of and for each of the fiscal years ended December 31, 2012, 2011, and 2010, and as of and for each quarter ended in 2013 before the date of this Plan of Merger
as filed with the Federal Reserve Board. All of such reports required to be filed prior to the Effective Time by Firstbank or any Firstbank Subsidiary will be prepared and filed in conformity with applicable regulatory requirements applied
consistently throughout their respective periods (except as otherwise noted in such reports) and will be correct and complete in all material respects when filed. All of the reports identified in this
Section 3.5.2
are collectively referred
to as the
Firstbank
Call Reports
.
3.6
Absence of Certain Changes or Events
.
Since December 31, 2012, (a) Firstbank and the Firstbank Subsidiaries have conducted their respective businesses in the ordinary course consistent with past practice and (b) no event has occurred that has had, or would reasonably be expected to
have, individually or in the aggregate, a Firstbank Material Adverse Effect.
3.7
Legal Proceedings
. There is no Action
pending or, to the Knowledge of Firstbank, threatened against Firstbank or any of the Firstbank Subsidiaries that (a) as of the date of this Plan of Merger, challenges or seeks to enjoin, alter, prevent or materially delay the Merger or (b) has had,
or would reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect. There is no material unsatisfied judgment, penalty or award against Firstbank or any of the Firstbank Subsidiaries. Neither Firstbank nor
any of the Firstbank Subsidiaries, nor any of their respective properties or assets, is subject to any Order or any investigation by a Governmental Entity that has had, or would reasonably be expected to have, individually or in the aggregate, a
Firstbank Material Adverse Effect. No officer or director of Firstbank or any of the Firstbank
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Subsidiaries is a defendant in any Action commenced by any shareholder of Firstbank or any of the Firstbank Subsidiaries with respect to the performance of his or her duties as an officer or a
director of Firstbank or any of the Firstbank Subsidiaries under any applicable Law, except for any Action arising out of or relating to the Merger and the transactions contemplated by this Plan of Merger.
3.8
Regulatory Filings
. In the last three years:
3.8.1
Regulatory Filings
. Firstbank and each Firstbank Subsidiary has filed in a timely manner all filings with Governmental Entities as required by applicable Law; and
3.8.2
Complete and Accurate
. All such filings, as of their respective filing dates, complied in all material respects with all
Laws, forms, and guidelines applicable to such filings.
3.9
No Indemnification Claims
. To the Knowledge of Firstbank,
there has been no event, action, or omission by or with respect to any director, officer, employee, trustee, agent, or other Person who may be entitled to receive indemnification or reimbursement of any claim, loss, or expense under any Contract or
arrangement providing for indemnification or reimbursement of any such Person by Firstbank or any Firstbank Subsidiary.
3.10
Conduct of Business
. Firstbank and each Firstbank Subsidiary has conducted its business and used its properties in compliance with all applicable Orders and Laws, including without limitation applicable federal and state laws and regulations
concerning banking, securities, truth-in-lending, truth-in-savings, mortgage origination and servicing, usury, fair credit reporting, consumer protection, occupational safety, fair lending, civil rights, employee protection, fair employment
practices, fair labor standards, real estate settlement and procedures, insurance, privacy, and Environmental Laws; except for violations that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank
Material Adverse Effect.
3.11
Transaction Documents
. None of the information supplied or to be supplied by Firstbank
for inclusion or incorporation by reference in any Transaction Document will contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (a) in the case of any Transaction Document (other than the Registration Statement and the Joint Proxy Statement) at the time it is filed or at any time it is amended or supplemented,
(b) in the case of the Registration Statement, at the time it is filed with the SEC, at any time it is amended or supplemented and at the time it becomes effective under the Securities Act, and (c) in the case of the Joint Proxy Statement,
at the date it is first mailed to the Mercantile Shareholders and the Firstbank Shareholders and at the time of the Mercantile Shareholder Meeting and the Firstbank Shareholder Meeting. The Joint Proxy Statement (other than those portions relating
solely to the Mercantile Shareholder Meeting) will at the time the Joint Proxy Statement is filed with the SEC, at any time it is amended or supplemented, at the date it is first mailed to the Mercantile Shareholders and the Firstbank Shareholders
and at the time of the Mercantile Shareholder Meeting and the Firstbank Shareholder Meeting, comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation
is made by Firstbank with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Mercantile for inclusion or incorporation by reference in the Joint Proxy Statement.
3.12
Agreements With Bank Regulators
. Neither Firstbank nor any Firstbank Subsidiary is a party to any Contract, cease and desist
order, written agreement or memorandum of understanding with, or a party to any commitment letter, board resolution or similar undertaking to, or is subject to any Order by, or is a recipient of any extraordinary supervisory letter from, any
Governmental Entity that restricts materially the conduct of Firstbanks or a Firstbank Subsidiarys business, or in any manner relates to the capital adequacy, credit or reserve policies or management of Firstbank or any Firstbank
Subsidiary (a
Regulatory Agreement
), nor has Firstbank nor any Firstbank Subsidiary been advised by any Governmental Entity that a Governmental Entity is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) an Order or a
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Regulatory Agreement. Neither Firstbank nor any Firstbank Subsidiary is required by Section 32 of the FDI Act or FDIC Regulation Part 359 or the Federal Reserve Board to give prior notice to a
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 or to limit golden parachute payments or indemnification.
3.13
Tax Matters
.
3.13.1 All material Tax Returns required by applicable Law to have been filed by Firstbank and each Firstbank Subsidiary since January 1, 2007 have been filed when due (taking into account any
extensions), and each such Tax Return is complete and accurate and correctly reflects the liability for Taxes in all material respects. Since January 1, 2007, Firstbank and each Firstbank Subsidiary has withheld and paid all material Taxes required
to have been withheld and paid in connection with amounts paid or owing to any third party. Since January 1, 2007, all material Taxes that are due and payable by Firstbank and each Firstbank Subsidiary have been paid.
3.13.2 There is no audit or other proceeding pending against or with respect to Firstbank or any Firstbank Subsidiary with respect to any
material amount of Tax. There are no material Liens on any of the assets of Firstbank or any of the Firstbank Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax, other than Liens for Taxes not yet due and
payable.
3.13.3 Neither Firstbank nor any Firstbank Subsidiary has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Taxes, which waiver or extension is still open.
3.13.4 Neither Firstbank
nor any Firstbank Subsidiary is a party to any Tax allocation or sharing agreement.
3.13.5 Neither Firstbank nor any
Firstbank Subsidiary has been included in any consolidated, unitary or combined Tax Return for any taxable period for which the statute of limitations has not expired (other than a group of which Firstbank and one
or more Firstbank Subsidiaries are the only members). Neither Firstbank nor any Firstbank Subsidiary is a general partner in any partnership.
3.13.6 Within the past three years, neither Firstbank nor any Firstbank Subsidiary has been a distributing corporation or a controlled corporation in a distribution intended to
qualify for tax-free treatment under Section 355 of the Code.
3.13.7 Neither Firstbank nor any Firstbank Subsidiary has
participated in or been a party to a transaction that, as of the date of this Plan of Merger, constitutes a listed transaction for purposes of Section 6011 of the Code (or a similar provision of state Law).
3.13.8 Neither Firstbank nor any Firstbank Subsidiary has taken any action or has Knowledge of any fact that would reasonably be expected
to prevent the Merger from qualifying for the Intended Tax Treatment.
3.13.9 There has been no disallowance of a deduction
under Section 162(m) or 280G of the Code for any amount paid or payable by Firstbank or any Firstbank Subsidiary as employee compensation, whether under any contract, plan, program or arrangement, understanding or otherwise.
3.14
Properties
.
3.14.1
Title to and Interest in Properties
. Except with such exceptions that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material
Adverse Effect, Firstbank and each Firstbank Subsidiary has good and valid title to, or valid leasehold interests in, all of their respective personal and real properties and assets as used in their respective businesses as presently conducted, and
all such
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personal and real properties and assets, other than personal and real properties and assets in which Firstbank or any of the Firstbank Subsidiaries has leasehold interests, are free and clear of
all Liens, except for Permitted Liens. Firstbank and each Firstbank Subsidiary has complied in all material respects with the terms of all leases to which it is a party. All material leases to which Firstbank or any Firstbank Subsidiary is a party
and under which it is in possession of any personal or real property are valid and binding contracts and are in full force and effect and neither Firstbank nor any Firstbank Subsidiary has received any written notice alleging violation, breach, or
default of such lease. Firstbank and each Firstbank Subsidiary is in possession of the properties or assets purported to be leased under all its material leases. The tangible personal and real property and assets of Firstbank and all Firstbank
Subsidiaries are in good operating condition and repair, reasonable wear and tear excepted, and subject to maintenance and repair in the ordinary course of business consistent with past practice, are adequate for the uses to which they are being
put.
3.14.2
Notices: Owned Real Property
.
With respect to real property owned by Firstbank or any Firstbank
Subsidiary, none of Firstbank nor any Firstbank Subsidiary (a) has received written notice of any pending, and to the Knowledge of Firstbank there is no threatened, condemnation proceeding against any of such real property or (b) has
received written notice from any Governmental Entity that such real property is not in compliance with any applicable Law, except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material
Adverse Effect.
3.14.3
Notices: Leased Real Property
.
With respect to real property leased, subleased or
licensed by Firstbank or any Firstbank Subsidiary, none of Firstbank nor any Firstbank Subsidiary (a) has received any written notice alleging a violation, breach or default under any lease of such real property, except for matters being
contested in good faith for which adequate accruals or reserves have been established on the books and records of Firstbank or (b) (i) has received written notice of any pending, and to the Knowledge of Firstbank there is no threatened,
condemnation proceeding with respect to any of such real property or (ii) has received written notice from any Governmental Entity that such real property is not in compliance with any applicable Law, except as have not had, and would not
reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect.
3.15
Intellectual
Property
. Firstbank and the Firstbank Subsidiaries exclusively own, or have a valid license or other valid right to use, all material Intellectual Property as used in their business as presently conducted; it being understood that the foregoing
shall not be construed to expand or diminish the scope of the non-infringement representations and warranties that follow in this
Section 3
.1
5
. No Actions, suits or other proceedings are pending or, to the Knowledge of
Firstbank, threatened that Firstbank or any of the Firstbank Subsidiaries is infringing, misappropriating or otherwise violating the rights of any Person with regard to any Intellectual Property. To the Knowledge of Firstbank, no Person is
infringing, misappropriating or otherwise violating the rights of Firstbank or any of the Firstbank Subsidiaries with respect to any Intellectual Property owned or purported to be owned by Firstbank or any of the Firstbank Subsidiaries (collectively
the
Firstbank
-Owned Intellectual Property
). Except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect, to the Knowledge of
Firstbank: (a) no circumstances exist which could reasonably be expected to give rise to any (i) Action that challenges the rights of Firstbank or any of the Firstbank Subsidiaries with respect to the validity or enforceability of the
Firstbank-Owned Intellectual Property or (ii) claim of infringement, misappropriation, or violation of the Intellectual Property rights of any Person, and (b) the consummation of the transactions contemplated by this Plan of Merger will
not give rise to any claim by any Person to a right to own, purchase, transfer, use, alter, impair, extinguish or restrict any Firstbank-Owned Intellectual Property or Intellectual Property licensed to Firstbank or any Firstbank Subsidiary.
3.16
Required Licenses, Permits, Etc
. Firstbank and each Firstbank Subsidiary hold all material Permits and other
rights from all appropriate Governmental Entities necessary for the conduct of its business as presently conducted. All such material Permits and rights are in full force and effect. Each Firstbank Subsidiary, as applicable, is an approved
seller-servicer for each mortgage investor with whom it conducts business, and holds all material Permits, authorizations, and approvals necessary to carry on a mortgage banking business.
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3.17
Material Contracts and Change of Control
.
3.17.1
Material Contracts
Defined
. For the purposes of this Plan of Merger, the term
Firstbank
Material Contract
means any of the following Contracts to which Firstbank or any of the Firstbank Subsidiaries is a party or bound as of the date of this Plan of Merger:
3.17.1.1 Each Contract that (a) has been or (b) would be required to be, but has not been, filed by Firstbank as a material
contract pursuant to Item 601(b)(10) of Regulation S-K on Form 10-K under the Exchange Act as if such Form 10-K were filed as of the date of this Plan of Merger;
3.17.1.2 Each Contract, other than any Contracts contemplated by this Plan of Merger, that limits (or purports to limit) in any material respect the ability of Firstbank or any of the Firstbank
Subsidiaries to engage or compete in any business (including geographic restrictions and exclusive or preferential arrangements);
3.17.1.3 Each Contract that creates a partnership or joint venture to which Firstbank or any of the Firstbank Subsidiaries is a party;
3.17.1.4 Each Contract between or among Firstbank and any Firstbank Subsidiary;
3.17.1.5 Each Contract with a correspondent banker;
3.17.1.6 Each Contract relating to the borrowing of money by Firstbank or any Firstbank Subsidiary or guarantee by Firstbank or any Firstbank Subsidiary of such obligation (other than Contracts evidencing
deposit liabilities, purchases of federal funds, fully-secured repurchase agreements, FHLB advances of depository institution Firstbank Subsidiaries, trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of
business consistent with past practice) in excess of $500,000;
3.17.1.7 Each Contract that relates to the acquisition or
disposition of any material business (whether by merger, sale of stock, sale of assets or otherwise) or material asset, other than this Plan of Merger, pursuant to which Firstbank or any of the Firstbank Subsidiaries has any continuing obligations,
contingent or otherwise;
3.17.1.8 Each Contract that grants any right of first refusal or right of first offer or similar
right or that limits or purports to limit the ability of Firstbank or any of the Firstbank Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any material amount of assets or businesses;
3.17.1.9 Each voting agreement or registration rights agreement with respect to the capital stock of Firstbank or any of the Firstbank
Subsidiaries;
3.17.1.10 Each Contract granting Firstbank or any Firstbank Subsidiary the right to use, restricting
Firstbanks or any Firstbank Subsidiarys right to use, or granting any other Person the right to use Intellectual Property that is material to the conduct of Firstbanks or any Firstbank Subsidiarys business (including any
license, franchise agreement, co-existence agreement, concurrent-use agreement, settlement agreement or other similar type Contract);
3.17.1.11 Each Contract that limits the payment of dividends by Firstbank or any Firstbank Subsidiary;
3.17.1.12 Each Contract involving a standstill or similar obligation of Firstbank or any of the Firstbank Subsidiaries relating to the purchase of securities of Firstbank or any other Person;
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3.17.1.13 Except transactions made in accordance with Regulation O and agreements entered
into in the ordinary course of business consistent with past practice for compensation or indemnity, any Contract between Firstbank or any Firstbank Subsidiary, on the one hand, and, on the other hand (a) any officer or director of Firstbank or
a Firstbank Subsidiary, or (b) to the Knowledge of Firstbank, any (i) record or beneficial owner of five percent or more of the voting securities of Firstbank, (ii) Affiliate or family member of any such officer, director, or record
or beneficial owner, or (iii) other Affiliate of Firstbank, except those Contracts of a type available to employees of Firstbank generally;
3.17.1.14 Each Contract for any one capital expenditure or a series of capital expenditures, the aggregate amount of which is in excess of $250,000;
3.17.1.15 Each Contract or commitment to make a loan not yet fully disbursed or funded to any Person, wherein the undisbursed or
unfunded amount exceeds $3,000,000;
3.17.1.16 Each Contract or commitment for a loan participation agreement with any other
Person in excess of $3,000,000; and
3.17.1.17 Each Contract that is material to the financial condition, results of
operations or business of Firstbank or any Firstbank Subsidiary.
3.17.2
Full Force and Effect
. Prior to the date of
this Plan of Merger, Firstbank has provided or made available to Mercantile a true and complete copy of each Material Contract in effect as of the date of this Plan of Merger. Except for matters that have not had, and would not reasonably be
expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect, (a) all Firstbank Material Contracts are in full force and effect as of the date of this Plan of Merger, (b) neither Firstbank nor any of the
Firstbank Subsidiaries is in violation or breach of or default under (or with notice or lapse of time, or both, would be in violation or breach of or default under) the terms of any Firstbank Material Contract, (c) to the Knowledge of
Firstbank, no other party to any Firstbank Material Contract is in breach of or in default under any Firstbank Material Contract, and (d) neither Firstbank nor any Firstbank Subsidiary has received written notice of breach or termination (or
proposed breach or termination) of any Firstbank Material Contract.
3.17.3
Effect of Merger and Related Transactions
.
There is no Firstbank Material Contract under which (a) a consent or approval is required, (b) a prohibited assignment by operation of Law could occur, (c) a waiver or loss of any right could occur, or (d) an acceleration of any
obligation could occur, in each case as a result of the execution and delivery of this Plan of Merger or the consummation of the transactions contemplated herein, where any such occurrence would reasonably be expected to (i) materially
interfere with the ordinary course of business conducted by Firstbank, any Firstbank Subsidiary or the Surviving Corporation or (ii) have a Firstbank Material Adverse Effect.
3.18
Labor and Employment Matters
.
3.18.1
Compliance with Labor and Employment Laws
. (a) Firstbank and all of the Firstbank Subsidiaries are in compliance with all applicable Laws relating to labor and employment practices,
including those relating to wages, employee benefits, hours and overtime, workplace safety and health, immigration, individual and collective termination, non-discrimination and data privacy, the identification of particular employees or job
classifications as exempt or non-exempt for purposes of such obligations, and any and all other matters involving compensation or benefits afforded to or not afforded to employees, contractors or consultants except for such
noncompliance as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect; (b) as of the date of this Plan of Merger there is no unfair labor practice charge or complaint
pending before the NLRB or, to the Knowledge of Firstbank, threatened against Firstbank or any of the Firstbank Subsidiaries; (c) as of the date of this Plan of Merger and during the past three years there has been no labor strike, slowdown,
work stoppage or lockout, pending or, to the
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Knowledge of Firstbank, threatened against or affecting Firstbank or any of the Firstbank Subsidiaries; (d) there is no representation claim or petition pending before the NLRB or any
similar foreign agency relating to the employees of Firstbank or any Firstbank Subsidiary; (e) as of the date of this Plan of Merger, Firstbank has not received written notice of charges with respect to or relating to Firstbank or any Firstbank
Subsidiary pending before the Equal Employment Opportunity Commission or other Governmental Entity responsible for the prevention of unlawful employment practices; and (f) neither Firstbank nor any Firstbank Subsidiary has received any written
notice from any Governmental Entity responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of Firstbank or any Firstbank Subsidiary and, to the Knowledge of Firstbank, no such investigation is in
progress.
3.18.2
Collective Bargaining Agreements
. Neither Firstbank nor any Firstbank Subsidiary is party to, bound
by, or negotiating any Collective Bargaining Agreement or any other Contract with any labor organization, union, works council, employee representative or association.
3.18.3
At-Will Employment
. All salaried employees, hourly employees, and temporary employees of Firstbank and any of the Firstbank Subsidiaries are employed on an at-will basis by Firstbank or any
of the Firstbank Subsidiaries and may be terminated at any time with or without cause and without any severance or other liabilities to Firstbank or any Firstbank Subsidiary, or have signed an agreement or acknowledged in writing that their
employment is at will. There has been no written representation by Firstbank or any Firstbank Subsidiary made to any employees that commits Firstbank, any Firstbank Subsidiary, or the Surviving Corporation to retain them as employees for any period
of time subsequent to the Closing.
3.18.4
WARN Act
. Since January 1, 2010, neither Firstbank nor any Firstbank
Subsidiary has effectuated a plant closing or a mass lay off (in each case, as defined in the WARN Act), in either case affecting any site of employment or facility of Firstbank or any Firstbank Subsidiary, except in
compliance with the WARN Act.
3.18.5
Occupational Health and Safety
. There is no audit, investigation, charge or
proceeding with respect to a material violation of any occupational health and safety standards that is pending or unremedied, or to the Knowledge of Firstbank, threatened against Firstbank or any Firstbank Subsidiary. Firstbank and all of the
Firstbank Subsidiaries are in compliance with all applicable occupational health and safety Laws, except for such failures to comply as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank
Material Adverse Effect.
3.18.6
Certain Contracts
. Neither Firstbank nor any Firstbank Subsidiary is a party or
subject to any Contract which restricts Firstbank or any Firstbank Subsidiary from relocating, closing or terminating any of its operations or facilities or any portion of its operations or facilities.
3.18.7
Liabilities under Employment and Benefit Contracts
. The consummation of the transactions contemplated by this Plan of
Merger will not create Liabilities for any act by Firstbank or any Firstbank Subsidiary on or prior to the Closing under any Collective Bargaining Agreement, Contract or Firstbank Benefit Plan.
3.18.8
Eligibility Verification
. Firstbank has implemented commercially reasonable procedures to ensure that all employees who are
performing services for Firstbank or any Firstbank Subsidiary in the United States are legally permitted to work in the United States and will be legally permitted to work in the United States for the Surviving Corporation or any of its Subsidiaries
following the consummation of the transactions contemplated by this Plan of Merger.
3.18.9
Employment Policies, Programs,
and Procedures
. The policies, programs, and practices of Firstbank and all Firstbank Subsidiaries relating to equal opportunity and affirmative action, wages, employee classifications (including independent contractor versus employee and exempt
versus non-exempt), hours of work, employee disabilities, employment termination, employment discrimination, employee safety, labor relations, and other terms and conditions of employment are in compliance in all material respects with applicable
Law governing or relating to employment and employer practices and facilities.
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3.19
Employee Benefits
.
3.19.1 Firstbank has delivered or made available to Mercantile true and complete copies of all material Firstbank Benefit Plans. Each
Firstbank Benefit Plan is in compliance with all applicable requirements of ERISA, the Code and all other applicable Laws and has been administered in accordance with its terms and such Laws, except for such noncompliance that has not had, and would
not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect.
3.19.2 Each
Firstbank Benefit Plan that is intended to be qualified within the meaning of Section 401 of the Code is so qualified and has at all times since its adoption been so qualified, and to the Knowledge of Firstbank, no condition exists and no event
has occurred that could reasonably be expected to result in the loss or revocation of such qualification in any material respect.
3.19.3 All contributions, payments or premiums required to be made with respect to any Firstbank Benefit Plan by Firstbank on or before the date of this Plan of Merger have been timely made, and all
benefits accrued under any unfunded Firstbank Benefit Plan have been paid, accrued or otherwise adequately reserved in accordance with GAAP, and each of Firstbank and the Firstbank Subsidiaries have performed all material obligations required to be
performed under all Firstbank Benefit Plans with respect to which Firstbank or any ERISA Affiliate of Firstbank has an obligation to contribute.
3.19.4 Neither Firstbank nor any ERISA Affiliate of Firstbank participates in nor since December 31, 1973 has ever participated in any Multiemployer Plan, and neither Firstbank nor any ERISA
Affiliate of Firstbank maintains or contributes to, or is party to, and, at no time since January 1, 2007 maintained, contributed to, or was a party to, any plan, program, agreement or policy that (a) is a defined benefit plan
within the meaning of section 414(j) of the Code or 3(35) of ERISA, (b) is a multiple employer plan as defined in ERISA or the Code (whether or not subject thereto), (c) is described in Section 401(a)(1) of ERISA (whether
or not subject thereto), (d) is a multiple employer welfare arrangement within the meaning of Section 3(40)(A) of the Code, (e) is a voluntary employees beneficiary association within the meaning of Code Section 501(c)(9), or
(vi) is primarily for the benefit of employees who reside outside of the United States.
3.19.5 Except as required by
Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any state Laws requiring continuation of benefits coverage following termination of employment, neither Firstbank nor any Firstbank Subsidiary provides health or welfare
benefits for any retired or former employee following such employees retirement or other termination of service.
3.19.6
The execution, delivery of, and performance by Firstbank of its obligations under the transactions contemplated by this Plan of Merger (either alone or upon the occurrence of any additional or subsequent event) will not (a) result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any current, former or retired employees, officers, consultants,
independent contractors, agents or directors of Firstbank or any of the Firstbank Subsidiaries; (b) result in the triggering or imposition of any restrictions or limitations on the right of Firstbank or any of the Firstbank Subsidiaries to
amend or terminate any Firstbank Benefit Plan; or (c) result in any excess parachute payments within the meaning of Section 280G(b)(1) of the Code.
3.19.7 Firstbank and the Firstbank Subsidiaries may, subject to the limitations imposed by applicable Law and the terms of the applicable Firstbank Benefit Plan, without the consent of any employee,
beneficiary, or other person, prospectively terminate, modify, or amend any such Firstbank Benefit Plan effective as of any date on or after the date of this Plan of Merger.
3.19.8 Each Firstbank Benefit Plan that is a nonqualified deferred compensation plan (as defined under Section 409A(d)(1) of the Code) (a) has been operated and administered in
compliance with Section 409A of the Code or (b) any payments under such plans have been earned and vested on or prior to December 31, 2004
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and such plans have not been materially modified other than modifications to comply with Code Section 409A and the regulations promulgated thereunder. Neither Firstbank nor any of the
Firstbank Subsidiaries have entered into any agreement or arrangement to, and do not otherwise have any obligation to, indemnify or hold harmless any Person for any Liability that results from the failure to comply with the requirements of
Section 409A of the Code and the regulations promulgated thereunder.
3.19.9 There is no pending or, to the Knowledge of
Firstbank, threatened Action with respect to any Firstbank Benefit Plans, other than ordinary and usual claims for benefits by participants and beneficiaries.
3.19.10 Since January 1, 2013, neither Firstbank nor any of the Firstbank Subsidiaries have agreed or otherwise committed to, whether in writing or otherwise, adopt any new plan, program, agreement
or policy that would constitute a Firstbank Benefit Plan or result in participation in a Multiemployer Plan or increase or improve the compensation, benefits, or terms and conditions of employment or service of any director, officer, employee, or
consultant, except (a) in the ordinary course of business consistent with past practice with respect to individual employees who are not officers (and not with respect to a substantial class of employees) or (b) as required by applicable
Law or any applicable Firstbank Benefit Plan.
3.19.11 Each of the Firstbank Benefit Plans which is an employee welfare
benefit plan within the meaning of Section 3(1) of ERISA is in compliance with the Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation Act of 2010, to the extent applicable, except for
such noncompliance that has not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect. Neither Firstbank nor any of the Firstbank Subsidiaries have any liability in the nature of
retroactive rate adjustment, loss sharing arrangement or other material Liability arising wholly or partially out of events occurring on or before the Closing.
3.20
Environmental Matters
.
3.20.1 Except for any matters that have not
had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect: (a) Firstbank and each of the Firstbank Subsidiaries is and has been in compliance with and has no Liability under
applicable Environmental Laws; (b) Firstbank and each of the Firstbank Subsidiaries possesses, has possessed and is and has been in compliance with all required Environmental Permits; (c) there are no Environmental Claims pending or, to
the Knowledge of Firstbank, threatened against Firstbank or any of the Firstbank Subsidiaries, and, to the Knowledge of Firstbank, there are no facts or circumstances which could reasonably be expected to form the basis for any Environmental Claim
against Firstbank or any of the Firstbank Subsidiaries; (d) no Releases of Hazardous Materials have occurred and no Person has been exposed to any Hazardous Materials at, from, in, to, on, or under any Firstbank Site and no Hazardous Materials
are present in, on, about or migrating to or from any Firstbank Site that could give rise to an Environmental Claim against Firstbank or any of the Firstbank Subsidiaries; (e) neither Firstbank nor any of the Firstbank Subsidiaries has entered
into or is subject to, any judgment, decree, order or other similar requirement of or agreement with any Governmental Entity under any Environmental Laws; (f) neither Firstbank nor any of the Firstbank Subsidiaries has assumed responsibility
for or agreed to indemnify or hold harmless any Person for any Liability, arising under or relating to Environmental Laws; and (g) neither Firstbank nor any of the Firstbank Subsidiaries, any predecessors of Firstbank or any of the Firstbank
Subsidiaries, nor any entity previously owned by Firstbank or any of the Firstbank Subsidiaries, has transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-Site location which
has or could result in an Environmental Claim against Firstbank or any of the Firstbank Subsidiaries.
3.20.2 No Firstbank
Site contains, and to the Knowledge of Firstbank has ever contained, any underground storage tanks. With respect to any underground storage tank that is listed in the Firstbank Disclosure Letter as an exception to the foregoing, each such
underground storage tank presently or previously located on any Firstbank Site has been operated, maintained and removed or closed in place, as applicable, in compliance with all applicable Environmental Laws, and has not been the source of any
Release of a Hazardous Material to the environment that has not been fully remediated.
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3.21
Duties as Fiduciary
. To the Knowledge of Firstbank, Firstbank and each Firstbank
Subsidiary has performed all of its respective duties in any capacity as trustee, executor, administrator, registrar, guardian, custodian, escrow agent, receiver, or other fiduciary in a fashion that complies in all material respects with all
applicable Laws, Contracts, wills, instruments and common law standards. Neither Firstbank nor any Firstbank Subsidiary has received any notice of any Action, claim, allegation or complaint from any Person that Firstbank or any Firstbank Subsidiary
failed to perform these duties in a manner that complies in all material respects with all applicable Laws, Contracts, wills, instruments and common law standards, except for notices involving matters that have been resolved and any cost of such
resolution is reflected in Firstbanks Financial Statements.
3.22
Investment Bankers and Brokers
. Firstbank has
employed Sandler ONeill & Partners, L.P. (
Firstbank Investment Banker
) in connection with the Merger. Firstbank, the Firstbank Subsidiaries, and their respective Representatives have not employed, engaged, or
consulted with any broker, finder, or investment banker other than Firstbank Investment Banker in connection with this Plan of Merger or the Merger. Other than the fees and expenses payable by Firstbank to Firstbank Investment Banker in connection
with the Merger, as described in Section 3.22 of the Firstbank Disclosure Letter, there is no investment banking fee, financial advisory fee, brokerage fee, finders fee, commission, or compensation of a similar type payable by Firstbank
or any Firstbank Subsidiary to any Person with respect to the Plan of Merger or the consummation of the Merger. Firstbank has provided to Mercantile true and complete copies of each agreement, arrangement, and understanding between Firstbank and
Firstbank Investment Banker prior to the date of this Plan of Merger.
3.23
Fairness Opinion
. The Firstbank Board of
Directors has received the oral opinion of the Firstbank Investment Banker, to the effect that, as of such date and based on and subject to the assumptions, qualifications and limitations contained therein, the Exchange Ratio is fair to the
Firstbank Shareholders from a financial point of view. Such oral opinion has not been amended or rescinded as of the date of this Agreement.
3.24
Firstbank-Related Persons
.
3.24.1
Insider Loans
. No
Firstbank-Related Person has any loan, credit or other Contract outstanding with Firstbank or any Firstbank Subsidiary that does not conform to applicable rules and regulations of the FDIC, the Federal Reserve Board, or any other Governmental Entity
with jurisdiction over Firstbank or any Firstbank Subsidiary.
3.24.2
Control of Material Assets
. Other than in a
capacity as a shareholder, director, or executive officer of Firstbank or any Firstbank Subsidiary, no Firstbank-Related Person owns or controls any assets or properties that are used in the business of Firstbank or any Firstbank Subsidiary.
3.24.3
Contractual Relationships
. Other than ordinary and customary banking relationships, no Firstbank-Related Person
has any contractual relationship with Firstbank or any Firstbank Subsidiary.
3.24.4
Loan Relationships
. No
Firstbank-Related Person has any outstanding loan or loan commitment from, or on whose behalf an irrevocable letter of credit has been issued by, Firstbank or any Firstbank Subsidiary in a principal amount of $500,000 or more.
3.25
Change in Business Relationships
. As of the date of this Plan of Merger, no director or executive officer of Firstbank has
Knowledge, whether on account of the Merger or otherwise, that any customer, agent, representative, supplier of Firstbank or any Firstbank Subsidiary, or other person with whom Firstbank or any Firstbank Subsidiary has a contractual relationship,
intends to discontinue, diminish, or change its relationship with Firstbank or any Firstbank Subsidiary, the effect of which would reasonably be expected to have a Firstbank Material Adverse Effect.
3.26
Insurance
. Firstbank and the Firstbank Subsidiaries maintain in full force and effect insurance on their respective assets,
properties, premises, operations, and personnel in such amounts and against such risks and
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losses as are customary and adequate for comparable entities engaged in the same business and industry. There is no unsatisfied claim of $100,000 or more under such insurance as to which the
insurance carrier has denied liability. Since January 1, 2007, no insurance company has canceled or refused to renew a policy of insurance covering Firstbanks or any Firstbank Subsidiarys assets, properties, premises, operations,
directors or personnel. Firstbank and the Firstbank Subsidiaries have given adequate and timely notice to each insurance carrier, and have complied with all policy provisions, with respect to any material known claim for which a defense or
indemnification or both may be available to Firstbank or the Firstbank Subsidiaries.
3.27
Books and Records
. The books
of account, minute books, stock record books, and other records of Firstbank are complete and correct in all material respects, represent bona fide transactions, and have been maintained in accordance with sound business practices, including the
maintenance of an adequate internal control system. The corporate minute books of Firstbank and the Firstbank Subsidiaries contain accurate and complete records of all meetings of, and corporate action taken by, their shareholders, boards, and
committees in all material respects. Since January 1, 2012, the minutes of each meeting (or corporate action without a meeting) of any such shareholders, boards, or committees have been duly prepared and are contained in such minute books. All
such minute books and related exhibits or attachments for all meetings since January 1, 2012, have been made available for Mercantiles review prior to the date of this Plan of Merger without material omission or redaction (other than with
respect to the minutes relating to the Merger or recent and similarly proposed transactions).
3.28
Loan Guarantees
.
Except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect, all guarantees of indebtedness owed to Firstbank or any Firstbank Subsidiary, including without limitation
those of the Federal Housing Administration, the Small Business Administration, and any other Governmental Entity, are valid and enforceable, except as limited by bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting the
rights of creditors generally and the availability of equitable remedies.
3.29
Data Security and Customer Privacy
.
Firstbank and each Firstbank Subsidiary is in compliance in all material respects with (a) all applicable Laws and applicable requirements of Governmental Entities regarding the security of each of their customers data and the systems
operated by Firstbank and each Firstbank Subsidiary, and (b) their respective privacy policies, including as relates to the use of individually identifiable personal information relating to identifiable or identified natural persons.
3.30
Allowance for Loan and Lease Losses
. The allowance for loan and lease losses as reflected in Firstbanks
consolidated financial statements and the Firstbank Call Reports as of December 31, 2012 and as of each quarter ended after December 31, 2012 was, in the reasonable opinion of Firstbanks management, (a) adequate to meet all
reasonably anticipated loan and lease losses, net of recoveries related to loans previously charged off as of those dates, (b) consistent with GAAP and reasonable and sound banking practices, and (c) conforms to recommendations and
comments in reports of examination in all material respects.
3.31
Loans and Investments
. All investments and, to the
Knowledge of Firstbank, all loans of Firstbank and each Firstbank Subsidiary are: (a) evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be; (b) legal and enforceable in
accordance with their terms, except as may be limited by any bankruptcy, insolvency, moratorium, or other laws affecting the rights of creditors generally or by the exercise of judicial discretion; (c) authorized under all applicable Laws; and
(d) to the extent secured, secured by valid Liens which have been perfected.
3.32
Loan Origination and Servicing
.
In originating, underwriting, servicing, selling, transferring, and discharging loans, mortgages, land contracts, and other contractual obligations, either for its own account or for the account of others, Firstbank and each Firstbank Subsidiary has
complied with all applicable terms and conditions of such obligations and with all applicable Laws, Contracts, rules, and procedures, except for incidents of noncompliance that have not had, and would not reasonably be expected to have, individually
or in the aggregate, a Firstbank Material Adverse Effect.
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3.33
Securities Laws Matters
.
3.33.1 Since January 1, 2010, Firstbank has filed or furnished all forms, documents and reports required to be filed or furnished
with the SEC under the Securities Act or the Exchange Act (collectively with any amendments thereto, but excluding the Joint Proxy Statement and the Registration Statement, the
Firstbank SEC Reports
). Each of the Firstbank
SEC Reports, in each case as of its filing or furnishing date, or, if amended, as finally amended prior to the date of this Plan of Merger (with respect to those Firstbank SEC Reports filed or furnished prior to the date of this Plan of
Merger), has complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, and none of the Firstbank SEC Reports, when filed or furnished or, if amended, as finally amended prior
to the date of this Plan of Merger, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Firstbank Subsidiaries are or ever has been required to file periodic reports with the SEC. As of the date of this Plan of Merger, there are no material outstanding or unresolved comments received
from the SEC with respect to any of the Firstbank SEC Reports.
3.33.2 Firstbank has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) as required by Rule 13a-15(a) under the Exchange Act, and Firstbank has established and maintains internal controls over financial reporting (as such term is
defined in Rule 13a-15(f) under the Exchange Act) as required by Rule 13a-15(a) under the Exchange Act. Firstbank has disclosed, based on its most recent evaluation prior to the date of this Plan of Merger, to Firstbanks auditors and the audit
committee of the Firstbank Board of Directors (a) any significant deficiencies and material weaknesses in the design or operation of its internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are
reasonably likely to adversely affect Firstbanks ability to record, process, summarize and report financial information and (b) any fraud that involves management or other employees who have a significant role in Firstbanks internal
controls over financial reporting. Since January 1, 2010, neither Firstbank nor any of the Firstbank Subsidiaries has Knowledge of any written complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures,
methodologies or methods of Firstbank or any Firstbank Subsidiary or their respective internal accounting controls, including any written complaint, allegation, assertion or claim that Firstbank or any Firstbank Subsidiary has engaged in
questionable accounting or auditing practices, which, if true, would constitute a significant deficiency or a material weakness. Since January 1, 2010, subject to any applicable grace periods, Firstbank has been and is in compliance with
(i) the applicable provisions of the Sarbanes Oxley Act of 2002 and (ii) the applicable listing and corporate governance rules and regulations of NASDAQ, except in each case as has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Firstbank Material Adverse Effect.
3.34
Joint Ventures; Strategic Alliances
.
Neither Firstbank nor any Firstbank Subsidiary is, directly or indirectly, a party to or bound by any joint venture, partnership, limited partnership, limited liability company, or strategic alliance agreement or arrangement with or through any
unaffiliated Person providing for their joint or cooperative development, marketing, referrals, or sales of banking, securities, insurance, or other financial products or services, or their joint investment in and management of any active business
enterprise.
3.35
Policies and Procedures
. Firstbank and each Firstbank Subsidiary have complied in all material
respects with the policies and procedures as formally adopted and disclosed to Mercantile as applicable to the periods when those policies and procedures were in effect.
3.36
Shareholder Rights Plan
. Firstbank does not have in effect any shareholder rights plan, poison pill, or similar plan or arrangement.
3.37
No Other Representations and Warranties
. Except for the representations and warranties made by Firstbank and the Firstbank
Subsidiaries in this
Article III
, neither Firstbank nor any other Person makes or has made any representation or warranty with respect to Firstbank or the Firstbank Subsidiaries or their respective
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business, operations, assets, Liabilities, condition (financial or otherwise) or prospects, notwithstanding the delivery or disclosure to Mercantile or any of its Affiliates or Representatives of
any documentation, projections, forecasts, estimates, budgets, prospect information or other information with respect to any one or more of the foregoing.
ARTICLE IV
MERCANTILES REPRESENTATIONS AND WARRANTIES
Except as specifically disclosed in the Mercantile SEC Reports filed with or furnished to the SEC prior to the date of
this Plan of Merger (excluding any risk factor disclosures set forth under the heading Risk Factors, any disclosure of risks included in any
forward-looking
statements disclaimer or any
other forward-looking statement of risk that does not contain a reasonable level of detail about the risks of which the statement warns) or as specifically disclosed in the disclosure letter delivered by Mercantile to Firstbank prior to or
concurrently with the execution of this Plan of Merger (the
Mercantile Disclosure Letter
), it being understood and agreed that the disclosure of any item in the Mercantile SEC Reports shall be deemed disclosure only to the
extent the relevance of such disclosure to the sections or subsections of this
Article IV
is reasonably apparent on the face of such disclosure, Mercantile represents and warrants to Firstbank that:
4.1
Authorization, No Conflicts, Etc
.
4.1.1
Authorization of Plan of Merger
. Mercantile has the requisite corporate power and authority to execute and deliver this Plan of Merger, and subject to the affirmative vote of the holders of
at least a majority of the outstanding shares of Mercantile Common Stock entitled to vote to approve this Plan of Merger and the affirmative vote of at least a majority of the votes cast by the holders of shares of Mercantile Common Stock entitled
to vote to approve the issuance of shares of Mercantile Common Stock constituting the Merger Consideration (the
Mercantile Shareholder Approval
), to consummate the transactions contemplated by this Plan of Merger. This Plan
of Merger has been duly adopted, and the consummation of the Merger and the other transactions contemplated by this Plan of Merger have been duly authorized, by the Mercantile Board of Directors. The Mercantile Board of Directors has
(a) determined that the terms of this Plan of Merger are fair to and in the best interests of Mercantile and the Mercantile Shareholders, and (b) adopted this Plan of Merger and authorized the transactions contemplated by this Plan of
Merger and resolved to recommend approval by the Mercantile Shareholders of this Plan of Merger and the transactions contemplated by it and the issuance of shares of Mercantile Common Stock constituting the Merger Consideration (such recommendation,
the
Mercantile Board Recommendation
). Except for the Mercantile Shareholder Approval, no other corporate proceedings on the part of Mercantile are necessary to authorize this Plan of Merger or to consummate the Merger. This
Plan of Merger has been duly executed and delivered by, and (assuming due authorization, execution and delivery by Firstbank) constitutes valid and binding obligations of, Mercantile and is enforceable against Mercantile in accordance with its
terms, except to the extent that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to creditors rights generally and
(ii) equitable remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
4.1.2
No Conflict, Breach, Violation, Etc
. The execution, delivery, and performance of this Plan of Merger by Mercantile, the
issuance of shares of Mercantile Common Stock constituting the Merger Consideration, and the consummation of the Merger, do not and will not violate, conflict with, or result in a breach of: (a) any provision of the articles of incorporation or
bylaws (or similar organizational documents) of Mercantile or any Subsidiary of Mercantile (each a
Mercantile Subsidiary
and collectively, the
Mercantile Subsidiaries
); or (b) any Law or Order
applicable to Mercantile or any Mercantile Subsidiary, assuming the timely receipt of each of the approvals referred to in
Section 4.1.4
.
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4.1.3
Regulatory Restrictions
. The execution, delivery, and performance of this Plan
of Merger by Mercantile, the issuance of shares of Mercantile Common Stock constituting the Merger Consideration, and the consummation of the Merger do not and will not violate, conflict with, result in a breach of, constitute a default under, or
require any consent, approval, waiver, extension, amendment, authorization, notice, or filing under, any cease and desist order, written agreement, memorandum of understanding, board resolutions or other regulatory agreement or commitment with or
from a Governmental Entity to which Mercantile or any Mercantile Subsidiary is a party or subject, or by which Mercantile or any Mercantile Subsidiary is bound or affected.
4.1.4
Required Approvals
. No notice to, filing with, authorization of, exemption by, or consent or approval of, any Governmental Entity is necessary for the consummation of the transactions
contemplated by this Plan of Merger by Mercantile other than in connection or compliance with the provisions of the MBCA, compliance with federal and state securities laws, and the consents, authorizations, approvals, or exemptions required under
the Bank Holding Company Act, the FDI Act, and the Michigan Banking Code. Mercantile has no Knowledge of any reason why the regulatory approvals referred to in this
Section 4.1.4
cannot be obtained or why the regulatory approval process
would be materially impeded.
4.2
Organization and Good Standing
. Mercantile is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Michigan. Mercantile has all requisite corporate power and authority to own, operate, and lease its properties and assets and to carry on its business as it is now being conducted in all
material respects. Mercantile is a bank holding company duly registered as such with the Federal Reserve Board under the Bank Holding Company Act. Mercantile is not, and is not required to be, qualified or admitted to conduct business as a foreign
corporation in any other state, except where such failure to be so qualified has not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.3
Subsidiaries
.
4.3.1 Ownership. Mercantile has provided to Firstbank a true and complete list of each Mercantile Subsidiary as of the date of this Plan of Merger. Other than the Mercantile Subsidiaries, Mercantile does
not have control (as defined in Section 2(a)(2) of the Bank Holding Company Act, using 5 percent rather than 25 percent), either directly or indirectly, of any Person engaged in an active trade or business or that holds any
significant assets. Mercantile or a Mercantile Subsidiary owns all of the issued and outstanding capital stock or other equity interests of each of the Mercantile Subsidiaries, free and clear of any claim or Lien of any kind. There is no legally
binding and enforceable subscription, option, warrant, right to acquire, or any other similar agreement pertaining to the capital stock or other equity interests of any Mercantile Subsidiary.
4.3.2 Organization and Good Standing. Each of the Mercantile Subsidiaries (a) is duly organized and validly existing under the laws
of its jurisdiction of organization; (b) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, or local) where its ownership or leasing of property or the conduct of its business requires it to be
so qualified, and (c) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted, except in each of (a) through (c) as has not had, and would not reasonably
be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.3.3 Deposit Insurance; Other
Assessments. The deposits of each Mercantile Subsidiary that is a depository institution are insured by the FDIC to the fullest extent permitted by Law, and all premiums and assessments to be paid in connection therewith have been paid by each such
Mercantile Subsidiary when due. No proceeding for the revocation or termination of such deposit insurance is pending or, to the Knowledge of Mercantile, threatened. Mercantile and each Mercantile Subsidiary has paid as and when due all material
fees, charges, assessments, and the like as required by Law to each and every Governmental Entity having jurisdiction over Mercantile or each Mercantile Subsidiary.
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4.4
Capital Stock
.
4.4.1
Classes and Shares
. The authorized capital stock of Mercantile consists of 21,000,000 shares, divided into two classes, as
follows (a) 20,000,000 shares of common stock, no par value (the Mercantile Common Stock), of which 8,707,003 shares were issued and outstanding as of the date of this Plan of Merger; and (b) 1,000,000 shares of preferred
stock, no par value (the Mercantile Preferred Stock), of which no shares were issued and outstanding as of the date of this Plan of Merger. Except for the Mercantile Share-Based Awards, as of the date of this Plan of Merger, there is no
security or class of securities outstanding that represents or is convertible into capital stock of Mercantile.
4.4.2
Share-Based Awards
. Section 4.4.2 of the Mercantile Disclosure Letter sets forth, as of the date of this Plan of Merger, the number of shares of Mercantile Common Stock that are authorized and reserved for issuance under each Mercantile
Stock Plan, and the number of shares of Mercantile Common Stock that are subject to outstanding Mercantile Stock Options and Mercantile Restricted Stock (collectively,
Mercantile Share-Based Awards
) issued under a
Mercantile Stock Plan. All Mercantile Share-Based Awards have been awarded under a Mercantile Stock Plan, and, as of the date of this Plan of Merger, there are no other compensatory awards outstanding pursuant to which Mercantile Common Stock has
issued or is issuable, or that relate to or are determined by reference to the value of Mercantile Common Stock. All outstanding shares of Mercantile Common Stock, and all Mercantile Common Stock reserved for issuance under the Mercantile Stock
Plans when issued in accordance with the respective terms of the Mercantile Stock Plans, are or will be duly authorized, validly issued, fully paid and non-assessable and not issued in violation of any preemptive rights, purchase option, call or
right of first refusal rights.
4.4.3
Issuance of Shares
. After the date of this Plan of Merger, the number of issued
and outstanding shares of Mercantile Common Stock and Mercantile Preferred Stock is not subject to change before the Effective Time, other than the issuance of shares of Mercantile Common Stock upon the exercise of any Mercantile Stock Options
granted pursuant to a Mercantile Stock Plan prior to the date of this Plan of Merger.
4.4.4
Voting Rights
. Other than
the issued and outstanding shares of Mercantile Common Stock described in Section 4.4.1, neither Mercantile nor any Mercantile Subsidiary has outstanding any security or issue of securities the holder or holders of which have the right to vote
on the approval of the Merger, this Plan of Merger, or the issuance of Mercantile Common Stock that constitutes the Merger Consideration, or that entitle the holder or holders to consent to, or withhold consent on, the Merger, this Plan of Merger or
the issuance of Mercantile Common Stock that constitutes the Merger Consideration.
4.4.5
Appraisal Rights
. No
Mercantile Shareholder will be entitled to appraisal rights pursuant to the MBCA as a result of the consummation of the Merger.
4.5
Financial Statements
.
4.5.1
Financial Statements
. The consolidated financial statements of Mercantile as of and for each of the three years ended December 31, 2012, 2011, and 2010, as reported on by
Mercantiles independent accountants, and the unaudited consolidated financial statements of Mercantile as of and for each quarter in 2013 ended before the date of this Plan of Merger, including all schedules and notes relating to such
statements, as previously delivered to Firstbank (collectively, Mercantiles Financial Statements), fairly present, and the unaudited consolidated financial statements of Mercantile as of and for each quarter ending after the date
of this Plan of Merger until the Effective Time, including all schedules and notes relating to such statements, will fairly present, the financial condition and the results of operations, changes in shareholders equity, and cash flows of
Mercantile as of the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, consistently applied, subject, in the case of unaudited interim financial statements, to normal, recurring year-end
adjustments (the effect of which has not had, and would not reasonably be expected to
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have, individually or in the aggregate, a Mercantile Material Adverse Effect) and the absence of notes (that, if presented, would not differ materially from those included in Mercantiles
Financial Statements). No financial statements of any entity or enterprise other than the Mercantile Subsidiaries are required by GAAP to be included in the consolidated financial statements of Mercantile.
4.5.2
Call Reports
. The following reports (including all related schedules, notes, and exhibits) were prepared and filed in
conformity with applicable regulatory requirements and were correct and complete in all material respects when filed:
4.5.2.1
The Consolidated Reports of Condition and Income (Form FFIEC 041) of each Mercantile Subsidiary required to file such reports (including any amendments) as of and for each of the fiscal years ended December 31, 2012, 2011, and 2010, and as of
and for each quarter ended in 2013 before the date of this Plan of Merger as filed with the FDIC; and
4.5.2.2 The
Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) and Parent Company Only Financial Statements for Large Bank Holding Companies (Form FR Y-9LP) (including any amendments) for Mercantile as of and for each of the fiscal
years ended December 31, 2012, 2011, and 2010, and as of and for each quarter ended in 2013 before the date of this Plan of Merger as filed with the Federal Reserve Board. All of such reports required to be filed prior to the Effective Time by
Mercantile or any Mercantile Subsidiary will be prepared and filed in conformity with applicable regulatory requirements applied consistently throughout their respective periods (except as otherwise noted in such reports) and will be correct and
complete in all material respects when filed. All of the reports identified in this
Section 4.5.2
are collectively referred to as the
Mercantile Call Reports
.
4.6
Absence of Certain Changes or Events
. Since December 31, 2012, (a) Mercantile and the Mercantile Subsidiaries have
conducted their respective businesses in the ordinary course consistent with past practice and (b) no event has occurred that has had, or would reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse
Effect.
4.7
Legal Proceedings
. There is no Action pending or, to the Knowledge of Mercantile, threatened against
Mercantile or any of the Mercantile Subsidiaries that (a) as of the date of this Plan of Merger, challenges or seeks to enjoin, alter, prevent or materially delay the Merger or (b) has had, or would reasonably be expected to have,
individually or in the aggregate, a Mercantile Material Adverse Effect. There is no material unsatisfied judgment, penalty or award against Mercantile or any of the Mercantile Subsidiaries. Neither Mercantile nor any of the Mercantile Subsidiaries,
nor any of their respective properties or assets, is subject to any Order or any investigation by a Governmental Entity that has had, or would reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect. No
officer or director of Mercantile or any of the Mercantile Subsidiaries is a defendant in any Action commenced by any shareholder of Mercantile or any of the Mercantile Subsidiaries with respect to the performance of his or her duties as an officer
or a director of Mercantile or any of the Mercantile Subsidiaries under any applicable Law, except for any Action arising out of or relating to the Merger and the transactions contemplated by this Plan of Merger.
4.8
Regulatory Filings
. In the last three years:
4.8.1
Regulatory Filings
. Mercantile and each Mercantile Subsidiary has filed in a timely manner all filings with Governmental Entities as required by applicable Law; and
4.8.2
Complete and Accurate
. All such filings, as of their respective filing dates, complied in all material respects with all
Laws, forms, and guidelines applicable to such filings.
4.9
No Indemnification Claims
. To the Knowledge of Mercantile,
there has been no event, action, or omission by or with respect to any director, officer, employee, trustee, agent, or other Person who may be entitled to receive indemnification or reimbursement of any claim, loss, or expense under any Contract or
arrangement providing for indemnification or reimbursement of any such Person by Mercantile or any Mercantile Subsidiary.
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4.10
Conduct of Business
. Mercantile and each Mercantile Subsidiary has conducted its
business and used its properties in compliance with all applicable Orders and Laws, including without limitation applicable federal and state laws and regulations concerning banking, securities, truth-in-lending, truth-in-savings, mortgage
origination and servicing, usury, fair credit reporting, consumer protection, occupational safety, fair lending, civil rights, employee protection, fair employment practices, fair labor standards, real estate settlement and procedures, insurance,
privacy, and Environmental Laws; except for violations that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.11
Transaction Documents
. None of the information supplied or to be supplied by Mercantile for inclusion or incorporation by
reference in any Transaction Document will contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading, (a) in the case of any Transaction Document (other than the Registration Statement and the Joint Proxy Statement) at the time it is filed or at any time it is amended or supplemented, (b) in the case of the
Registration Statement, at the time it is filed with the SEC, at any time it is amended or supplemented and at the time it becomes effective under the Securities Act, and (c) in the case of the Joint Proxy Statement, at the date it is first
mailed to the Mercantile Shareholders and the Firstbank Shareholders and at the time of the Mercantile Shareholder Meeting and the Firstbank Shareholder Meeting. The Joint Proxy Statement (other than those portions relating solely to the Firstbank
Shareholder Meeting) will at the time the Joint Proxy Statement is filed with the SEC, at any time it is amended or supplemented, at the date it is first mailed to the Mercantile Shareholders and the Firstbank Shareholders and at the time of the
Mercantile Shareholder Meeting and the Firstbank Shareholder Meeting, comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation is made by Mercantile
with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Firstbank for inclusion or incorporation by reference in the Joint Proxy Statement.
4.12
Agreements With Bank Regulators
. Neither Mercantile nor any Mercantile Subsidiary is a party to any Regulatory Agreement, nor
has Mercantile nor any Mercantile Subsidiary been advised by any Governmental Entity that a Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) an Order or a Regulatory
Agreement. Neither Mercantile nor any Mercantile Subsidiary is required by Section 32 of the FDI Act or FDIC Regulation Part 359 or the Federal Reserve Board to give prior notice to a 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 or to limit golden parachute payments or indemnification.
4.13
Tax Matters
.
4.13.1 All material Tax Returns required by applicable
Law to have been filed by Mercantile and each Mercantile Subsidiary since January 1, 2007 have been filed when due (taking into account any extensions), and each such Tax Return is complete and accurate and correctly reflects the liability for
Taxes in all material respects. Since January 1, 2007, Mercantile and each Mercantile Subsidiary has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any third party. Since
January 1, 2007, all material Taxes that are due and payable by Mercantile and each Mercantile Subsidiary have been paid.
4.13.2 There is no audit or other proceeding pending against or with respect to Mercantile or any Mercantile Subsidiary with respect to
any material amount of Tax. There are no material Liens on any of the assets of Mercantile or any of the Mercantile Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax, other than Liens for Taxes not yet due
and payable.
4.13.3 Neither Mercantile nor any Mercantile Subsidiary has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Taxes, which waiver or extension is still open.
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4.13.4 Neither Mercantile nor any Mercantile Subsidiary is a party to any Tax allocation or
sharing agreement.
4.13.5 Neither Mercantile nor any Mercantile Subsidiary has been included in any consolidated,
unitary or combined Tax Return for any taxable period for which the statute of limitations has not expired (other than a group of which Mercantile and one or more Mercantile Subsidiaries are the only members). Neither
Mercantile nor any Mercantile Subsidiary is a general partner in any partnership.
4.13.6 Within the past three years, neither
Mercantile nor any Mercantile Subsidiary has been a distributing corporation or a controlled corporation in a distribution intended to qualify for tax-free treatment under Section 355 of the Code.
4.13.7 Neither Mercantile nor any Mercantile Subsidiary has participated in or been a party to a transaction that, as of the date of this
Plan of Merger, constitutes a listed transaction for purposes of Section 6011 of the Code (or a similar provision of state Law).
4.13.8 Neither Mercantile nor any Mercantile Subsidiary has taken any action or has Knowledge of any fact that would reasonably be expected to prevent the Merger from qualifying for the Intended Tax
Treatment.
4.13.9 There has been no disallowance of a deduction under Section 162(m) or 280G of the Code for any amount
paid or payable by Mercantile or any Mercantile Subsidiary as employee compensation, whether under any contract, plan, program or arrangement, understanding or otherwise.
4.14
Properties
.
4.14.1
Title to and Interest in Properties
.
Except with such exceptions that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect, Mercantile and each Mercantile Subsidiary has good and valid title to, or valid
leasehold interests in, all of their respective personal and real properties and assets as used in their respective businesses as presently conducted, and all such personal and real properties and assets, other than personal and real properties and
assets in which Mercantile or any of the Mercantile Subsidiaries has leasehold interests, are free and clear of all Liens, except for Permitted Liens. Mercantile and each Mercantile Subsidiary has complied in all material respects with the terms of
all leases to which it is a party. All material leases to which Mercantile or any Mercantile Subsidiary is a party and under which it is in possession of any personal or real property are valid and binding contracts and are in full force and effect
and neither Mercantile nor any Mercantile Subsidiary has received any written notice alleging violation, breach, or default of such lease. Mercantile and each Mercantile Subsidiary is in possession of the properties or assets purported to be leased
under all its material leases. The tangible personal and real property and assets of Mercantile and all Mercantile Subsidiaries are in good operating condition and repair, reasonable wear and tear excepted, and, subject to maintenance and repair in
the ordinary course of business consistent with past practice, are adequate for the uses to which they are being put.
4.14.2
Notices: Owned Real Property
. With respect to real property owned by Mercantile or any Mercantile Subsidiary, none of Mercantile nor any Mercantile Subsidiary (a) has received written notice of any pending, and to the Knowledge of
Mercantile there is no threatened, condemnation proceeding against any of such real property or (b) has received written notice from any Governmental Entity that such real property is not in compliance with any applicable Law, except as have
not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.14.3
Notices: Leased Real Property
. With respect to real property leased, subleased or licensed by Mercantile or any Mercantile
Subsidiary, none of Mercantile nor any Mercantile Subsidiary (a) has received any written notice alleging a violation, breach or default under any lease of such real property, except for matters
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being contested in good faith for which adequate accruals or reserves have been established on the books and records of Mercantile or (b) (i) has received written notice of any pending,
and to the Knowledge of Mercantile there is no threatened, condemnation proceeding with respect to any of such real property or (ii) has received written notice from any Governmental Entity that such real property is not in compliance with any
applicable Law, except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.15
Intellectual Property
. Mercantile and the Mercantile Subsidiaries exclusively own, or have a valid license or other valid right to use, all material Intellectual Property as used in their
business as presently conducted; it being understood that the foregoing shall not be construed to expand or diminish the scope of the non-infringement representations and warranties that follow in this
Section 4.15
. No Actions, suits or
other proceedings are pending or, to the Knowledge of Mercantile, threatened that Mercantile or any of the Mercantile Subsidiaries is infringing, misappropriating or otherwise violating the rights of any Person with regard to any Intellectual
Property. To the Knowledge of Mercantile, no Person is infringing, misappropriating or otherwise violating the rights of Mercantile or any of the Mercantile Subsidiaries with respect to any Intellectual Property owned or purported to be owned by
Mercantile or any of the Mercantile Subsidiaries (collectively the
Mercantile-Owned Intellectual Property
). Except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a
Mercantile Material Adverse Effect, to the Knowledge of Mercantile: (a) no circumstances exist which could reasonably be expected to give rise to any (i) Action that challenges the rights of Mercantile or any of the Mercantile Subsidiaries
with respect to the validity or enforceability of the Mercantile-Owned Intellectual Property or (ii) claim of infringement, misappropriation, or violation of the Intellectual Property rights of any Person, and (b) the consummation of the
transactions contemplated by this Plan of Merger will not give rise to any claim by any Person to a right to own, purchase, transfer, use, alter, impair, extinguish or restrict any Mercantile-Owned Intellectual Property or Intellectual Property
licensed to Mercantile or any Mercantile Subsidiary.
4.16
Required Licenses, Permits, Etc
. Mercantile and each
Mercantile Subsidiary hold all material Permits and other rights from all appropriate Governmental Entities necessary for the conduct of its business as presently conducted. All such material Permits and rights are in full force and effect. Each
Mercantile Subsidiary, as applicable, is an approved seller-servicer for each mortgage investor with whom it conducts business, and holds all material Permits, authorizations, and approvals necessary to carry on a mortgage banking business.
4.17
Material Contracts and Change of Control
.
4.17.1
Material Contracts Defined
. For the purposes of this Plan of Merger, the term
Mercantile Material
Contract
means any of the following Contracts to which Mercantile or any of the Mercantile Subsidiaries is a party or bound as of the date of this Plan of Merger:
4.17.1.1 Each Contract that (a) has been or (b) would be required to be, but has not been, filed by Mercantile as a material
contract pursuant to Item 601(b)(10) of Regulation S-K on Form 10-K under the Exchange Act as if such Form 10-K were filed as of the date of this Plan of Merger;
4.17.1.2 Each Contract, other than any Contracts contemplated by this Plan of Merger, that limits (or purports to limit) in any material respect the ability of Mercantile or any of the Mercantile
Subsidiaries to engage or compete in any business (including geographic restrictions and exclusive or preferential arrangements);
4.17.1.3 Each Contract that creates a partnership or joint venture to which Mercantile or any of the Mercantile Subsidiaries is a party;
4.17.1.4 Each Contract between or among Mercantile and any Mercantile Subsidiary;
4.17.1.5 Each Contract with a correspondent banker;
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4.17.1.6 Each Contract relating to the borrowing of money by Mercantile or any Mercantile
Subsidiary or guarantee by Mercantile or any Mercantile Subsidiary of such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase agreements, FHLB advances of depository institution
Mercantile Subsidiaries, trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of business consistent with past practice) in excess of $500,000;
4.17.1.7 Each Contract that relates to the acquisition or disposition of any material business (whether by merger, sale of stock, sale
of assets or otherwise) or material asset, other than this Plan of Merger, pursuant to which Mercantile or any of the Mercantile Subsidiaries has any continuing obligations, contingent or otherwise;
4.17.1.8 Each Contract that grants any right of first refusal or right of first offer or similar right or that limits or purports to
limit the ability of Mercantile or any of the Mercantile Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any material amount of assets or businesses;
4.17.1.9 Each voting agreement or registration rights agreement with respect to the capital stock of Mercantile or any of the Mercantile
Subsidiaries;
4.17.1.10 Each Contract granting Mercantile or any Mercantile Subsidiary the right to use, restricting
Mercantiles or any Mercantile Subsidiarys right to use, or granting any other Person the right to use Intellectual Property that is material to the conduct of Mercantiles or any Mercantile Subsidiarys business (including any
license, franchise agreement, co-existence agreement, concurrent-use agreement, settlement agreement or other similar type Contract);
4.17.1.11 Each Contract that limits the payment of dividends by Mercantile or any Mercantile Subsidiary;
4.17.1.12 Each Contract involving a standstill or similar obligation of Mercantile or any of the Mercantile Subsidiaries relating to the purchase of securities of Mercantile or any other Person;
4.17.1.13 Except transactions made in accordance with Regulation O and agreements entered into in the ordinary course of
business consistent with past practice for compensation or indemnity, any Contract between Mercantile or any Mercantile Subsidiary, on the one hand, and, on the other hand (a) any officer or director of Mercantile or a Mercantile Subsidiary, or
(b) to the Knowledge of Mercantile, any (i) record or beneficial owner of five percent or more of the voting securities of Mercantile, (ii) Affiliate or family member of any such officer, director, or record or beneficial owner, or
(iii) other Affiliate of Mercantile, except those Contracts of a type available to employees of Mercantile generally;
4.17.1.14 Each Contract for any one capital expenditure or a series of capital expenditures, the aggregate amount of which is in excess
of $250,000;
4.17.1.15 Each Contract or commitment to make a loan not yet fully disbursed or funded to any Person, wherein
the undisbursed or unfunded amount exceeds $3,000,000;
4.17.1.16 Each Contract or commitment for a loan participation
agreement with any other Person in excess of $3,000,000; and
4.17.1.17 Each Contract that is material to the financial
condition, results of operations or business of Mercantile or any Mercantile Subsidiary.
4.17.2
Full Force and Effect
.
Prior to the date of this Plan of Merger, Mercantile has provided or made available to Firstbank a true and complete copy of each Material Contract in effect as of the date of this Plan of
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Merger. Except for matters that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect, (a) all Mercantile
Material Contracts are in full force and effect as of the date of this Plan of Merger, (b) neither Mercantile nor any of the Mercantile Subsidiaries is in violation or breach of or default under (or with notice or lapse of time, or both, would
be in violation or breach of or default under) the terms of any Mercantile Material Contract, (c) to the Knowledge of Mercantile, no other party to any Mercantile Material Contract is in breach of or in default under any Mercantile Material
Contract, and (d) neither Mercantile nor any Mercantile Subsidiary has received written notice of breach or termination (or proposed breach or termination) of any Mercantile Material Contract.
4.17.3
Effect of Merger and Related Transactions
. There is no Mercantile Material Contract under which (a) a consent or
approval is required, (b) a prohibited assignment by operation of Law could occur, (c) a waiver or loss of any right could occur, or (d) an acceleration of any obligation could occur, in each case as a result of the execution and
delivery of this Plan of Merger or the consummation of the transactions contemplated herein, where any such occurrence would reasonably be expected to (i) materially interfere with the ordinary course of business conducted by Mercantile, any
Mercantile Subsidiary or the Surviving Corporation or (ii) have a Mercantile Material Adverse Effect.
4.18
Labor and
Employment Matters
.
4.18.1
Compliance with Labor and Employment Laws
. (a) Mercantile and all of the
Mercantile Subsidiaries are in compliance with all applicable Laws relating to labor and employment practices, including those relating to wages, employee benefits, hours and overtime, workplace safety and health, immigration, individual and
collective termination, non-discrimination and data privacy, the identification of particular employees or job classifications as exempt or non-exempt for purposes of such obligations, and any and all other matters involving
compensation or benefits afforded to or not afforded to employees, contractors or consultants except for such noncompliance as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse
Effect; (b) as of the date of this Plan of Merger there is no unfair labor practice charge or complaint pending before the NLRB or, to the Knowledge of Mercantile, threatened against Mercantile or any of the Mercantile Subsidiaries; (c) as
of the date of this Plan of Merger and during the past three years there has been no labor strike, slowdown, work stoppage or lockout, pending or, to the Knowledge of Mercantile, threatened against or affecting Mercantile or any of the Mercantile
Subsidiaries; (d) there is no representation claim or petition pending before the NLRB or any similar foreign agency relating to the employees of Mercantile or any Mercantile Subsidiary; (e) as of the date of this Plan of Merger,
Mercantile has not received written notice of charges with respect to or relating to Mercantile or any Mercantile Subsidiary pending before the Equal Employment Opportunity Commission or other Governmental Entity responsible for the prevention of
unlawful employment practices; and (f) neither Mercantile nor any Mercantile Subsidiary has received any written notice from any Governmental Entity responsible for the enforcement of labor or employment laws of an intention to conduct an
investigation of Mercantile or any Mercantile Subsidiary and, to the Knowledge of Mercantile, no such investigation is in progress.
4.18.2
Collective Bargaining Agreements
. Neither Mercantile nor any Mercantile Subsidiary is party to, bound by, or negotiating any Collective Bargaining Agreement or any other Contract with any
labor organization, union, works council, employee representative or association.
4.18.3
At-Will Employment
. All
salaried employees, hourly employees, and temporary employees of Mercantile and any of the Mercantile Subsidiaries are employed on an at-will basis by Mercantile or any of the Mercantile Subsidiaries and may be terminated at any time with or without
cause and without any severance or other liabilities to Mercantile or any Mercantile Subsidiary, or have signed an agreement or acknowledged in writing that their employment is at will. There has been no written representation by Mercantile or any
Mercantile Subsidiary made to any employees that commits Mercantile, any Mercantile Subsidiary, or the Surviving Corporation to retain them as employees for any period of time subsequent to the Closing.
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4.18.4
WARN Act
. Since January 1, 2010, neither Mercantile nor any Mercantile
Subsidiary has effectuated a plant closing or a mass lay off (in each case, as defined in the WARN Act), in either case affecting any site of employment or facility of Mercantile or any Mercantile Subsidiary, except in
compliance with the WARN Act.
4.18.5
Occupational Health and Safety
. There is no audit, investigation, charge or
proceeding with respect to a material violation of any occupational health and safety standards that is pending or unremedied, or to the Knowledge of Mercantile, threatened against Mercantile or any Mercantile Subsidiary. Mercantile and all of the
Mercantile Subsidiaries are in compliance with all applicable occupational health and safety Laws, except for such failures to comply as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile
Material Adverse Effect.
4.18.6
Certain Contracts
. Neither Mercantile nor any Mercantile Subsidiary is a party or
subject to any Contract which restricts Mercantile or any Mercantile Subsidiary from relocating, closing or terminating any of its operations or facilities or any portion of its operations or facilities.
4.18.7
Liabilities under Employment and Benefit Contracts
. The consummation of the transactions contemplated by this Plan of
Merger will not create Liabilities for any act by Mercantile or any Mercantile Subsidiary on or prior to the Closing under any Collective Bargaining Agreement, Contract or Mercantile Benefit Plan.
4.18.8
Eligibility Verification
. Mercantile has implemented commercially reasonable procedures to ensure that all employees who
are performing services for Mercantile or any Mercantile Subsidiary in the United States are legally permitted to work in the United States and will be legally permitted to work in the United States for the Surviving Corporation or any of its
Subsidiaries following the consummation of the transactions contemplated by this Plan of Merger.
4.18.9
Employment
Policies, Programs, and Procedures
. The policies, programs, and practices of Mercantile and all Mercantile Subsidiaries relating to equal opportunity and affirmative action, wages, employee classifications (including independent contractor
versus employee and exempt versus non-exempt), hours of work, employee disabilities, employment termination, employment discrimination, employee safety, labor relations, and other terms and conditions of employment are in compliance in all material
respects with applicable Law governing or relating to employment and employer practices and facilities.
4.19
Employee
Benefits
.
4.19.1 Mercantile has delivered or made available to Firstbank true and complete copies of all material
Mercantile Benefit Plans. Each Mercantile Benefit Plan is in compliance with all applicable requirements of ERISA, the Code and all other applicable Laws and has been administered in accordance with its terms and such Laws, except for such
noncompliance that has not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.19.2 Each Mercantile Benefit Plan that is intended to be qualified within the meaning of Section 401 of the Code is so qualified and has at all times since its adoption been so qualified, and to
the Knowledge of Mercantile, no condition exists and no event has occurred that could reasonably be expected to result in the loss or revocation of such qualification in any material respect.
4.19.3 All contributions, payments or premiums required to be made with respect to any Mercantile Benefit Plan by Mercantile on or before
the date of this Plan of Merger have been timely made, and all benefits accrued under any unfunded Mercantile Benefit Plan have been paid, accrued or otherwise adequately reserved in accordance with GAAP, and each of Mercantile and the Mercantile
Subsidiaries have performed all material obligations required to be performed under all Mercantile Benefit Plans with respect to which Mercantile or any ERISA Affiliate of Mercantile has an obligation to contribute.
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4.19.4 Neither Mercantile nor any ERISA Affiliate of Mercantile participates in nor since
December 31, 1973 ever has participated in any Multiemployer Plan, and neither Mercantile nor any ERISA Affiliate of Mercantile maintains or contributes to, or is party to, and, at no time since January 1, 2007 maintained, contributed to,
or was a party to, any plan, program, agreement or policy that (a) is a defined benefit plan within the meaning of section 414(j) of the Code or 3(35) of ERISA, (b) is a multiple employer plan as defined in ERISA or
the Code (whether or not subject thereto), (c) is described in Section 401(a)(1) of ERISA (whether or not subject thereto), (d) is a multiple employer welfare arrangement within the meaning of Section 3(40)(A) of the Code,
(e) is a voluntary employees beneficiary association within the meaning of Code Section 501(c)(9), or (vi) is primarily for the benefit of employees who reside outside of the United States.
4.19.5 Except as required by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any state Laws requiring
continuation of benefits coverage following termination of employment, neither Mercantile nor any Mercantile Subsidiary provides health or welfare benefits for any retired or former employee following such employees retirement or other
termination of service.
4.19.6 The execution, delivery of, and performance by Mercantile of its obligations under the
transactions contemplated by this Plan of Merger (either alone or upon the occurrence of any additional or subsequent event) will not (a) result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with respect to any current, former or retired employees, officers, consultants, independent contractors, agents or directors of Mercantile or any of the Mercantile
Subsidiaries; (b) result in the triggering or imposition of any restrictions or limitations on the right of Mercantile or any of the Mercantile Subsidiaries to amend or terminate any Mercantile Benefit Plan; or (c) result in any
excess parachute payments within the meaning of Section 280G(b)(1) of the Code.
4.19.7 Mercantile and the
Mercantile Subsidiaries may, subject to the limitations imposed by applicable Law and the terms of the applicable Mercantile Benefit Plan, without the consent of any employee, beneficiary, or other person, prospectively terminate, modify, or amend
any such Mercantile Benefit Plan effective as of any date on or after the date of this Plan of Merger.
4.19.8 Each Mercantile
Benefit Plan that is a nonqualified deferred compensation plan (as defined under Section 409A(d)(1) of the Code) (a) has been operated and administered in compliance with Section 409A of the Code or (b) any payments
under such plans have been earned and vested on or prior to December 31, 2004 and such plans have not been materially modified other than modifications to comply with Code Section 409A and the regulations promulgated thereunder. Neither
Mercantile nor any of the Mercantile Subsidiaries have entered into any agreement or arrangement to, and do not otherwise have any obligation to, indemnify or hold harmless any Person for any Liability that results from the failure to comply with
the requirements of Section 409A of the Code and the regulations promulgated thereunder.
4.19.9 There is no pending or,
to the Knowledge of Mercantile, threatened Action with respect to any Mercantile Benefit Plans, other than ordinary and usual claims for benefits by participants and beneficiaries.
4.19.10 Since January 1, 2013, neither Mercantile nor any of the Mercantile Subsidiaries have agreed or otherwise committed to,
whether in writing or otherwise, adopt any new plan, program, agreement or policy that would constitute a Mercantile Benefit Plan or result in participation in a Multiemployer Plan or increase or improve the compensation, benefits, or terms and
conditions of employment or service of any director, officer, employee, or consultant, except (a) in the ordinary course of business consistent with past practice with respect to individual employees who are not officers (and not with respect
to a substantial class of employees) or (b) as required by applicable Law or any applicable Mercantile Benefit Plan.
4.19.11 Each of the Mercantile Benefit Plans which is an employee welfare benefit plan within the meaning of Section 3(1) of ERISA
is in compliance with the Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation Act of 2010, to the extent applicable, except for
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such noncompliance that has not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect. Neither Mercantile nor any of the
Mercantile Subsidiaries have any liability in the nature of retroactive rate adjustment, loss sharing arrangement or other material Liability arising wholly or partially out of events occurring on or before the Closing.
4.20
Environmental Matters
.
4.20.1 Except for any matters that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect: (a) Mercantile and each of the
Mercantile Subsidiaries is and has been in compliance with and has no Liability under applicable Environmental Laws; (b) Mercantile and each of the Mercantile Subsidiaries possesses, has possessed and is and has been in compliance with all
required Environmental Permits; (c) there are no Environmental Claims pending or, to the Knowledge of Mercantile, threatened against Mercantile or any of the Mercantile Subsidiaries, and, to the Knowledge of Mercantile, there are no facts or
circumstances which could reasonably be expected to form the basis for any Environmental Claim against Mercantile or any of the Mercantile Subsidiaries; (d) no Releases of Hazardous Materials have occurred and no Person has been exposed to any
Hazardous Materials at, from, in, to, on, or under any Mercantile Site and no Hazardous Materials are present in, on, about or migrating to or from any Mercantile Site that could give rise to an Environmental Claim against Mercantile or any of the
Mercantile Subsidiaries; (e) neither Mercantile nor any of the Mercantile Subsidiaries has entered into or is subject to, any judgment, decree, order or other similar requirement of or agreement with any Governmental Entity under any
Environmental Laws; (f) neither Mercantile nor any of the Mercantile Subsidiaries has assumed responsibility for or agreed to indemnify or hold harmless any Person for any Liability, arising under or relating to Environmental Laws; and
(g) neither Mercantile nor any of the Mercantile Subsidiaries, any predecessors of Mercantile or any of the Mercantile Subsidiaries, nor any entity previously owned by Mercantile or any of the Mercantile Subsidiaries, has transported or
arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-Site location which has or could result in an Environmental Claim against Mercantile or any of the Mercantile Subsidiaries.
4.20.2 No Mercantile Site contains, and to the Knowledge of Mercantile has ever contained, any underground storage tanks. With respect to
any underground storage tank that is listed in the Mercantile Disclosure Letter as an exception to the foregoing, each such underground storage tank presently or previously located on any Mercantile Site has been operated, maintained and removed or
closed in place, as applicable, in compliance with all applicable Environmental Laws, and has not been the source of any Release of a Hazardous Material to the environment that has not been fully remediated.
4.21
Duties as Fiduciary
. To the Knowledge of Mercantile, Mercantile and each Mercantile Subsidiary has performed all of its
respective duties in any capacity as trustee, executor, administrator, registrar, guardian, custodian, escrow agent, receiver, or other fiduciary in a fashion that complies in all material respects with all applicable Laws, Contracts, wills,
instruments and common law standards. Neither Mercantile nor any Mercantile Subsidiary has received any notice of any Action, claim, allegation or complaint from any Person that Mercantile or any Mercantile Subsidiary failed to perform these duties
in a manner that complies in all material respects with all applicable Laws, Contracts, wills, instruments and common law standards, except for notices involving matters that have been resolved and any cost of such resolution is reflected in
Mercantiles Financial Statements.
4.22
Investment Bankers and Brokers
. Mercantile has employed Stifel,
Nicolaus & Company, Incorporated (
Mercantile Investment Banker
) in connection with the Merger. Mercantile, the Mercantile Subsidiaries, and their respective Representatives have not employed, engaged, or consulted
with any broker, finder, or investment banker other than Mercantile Investment Banker in connection with this Plan of Merger or the Merger. Other than the fees and expenses payable by Mercantile to Mercantile Investment Banker in connection with the
Merger, as described in Section 4.22 of the Mercantile Disclosure Letter, there is no investment banking fee, financial advisory fee, brokerage fee, finders fee, commission, or compensation of a similar type payable by
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Mercantile or any Mercantile Subsidiary to any Person with respect to the Plan of Merger or the consummation of the Merger. Mercantile has provided to Firstbank true and complete copies of each
agreement, arrangement, and understanding between Mercantile and Mercantile Investment Banker prior to the date of this Plan of Merger.
4.23
Fairness Opinion
. The Mercantile Board of Directors has received the oral opinion of the Mercantile Investment Banker, to the effect that, as of such date and based on and subject to the
assumptions, qualifications and limitations contained therein, the Exchange Ratio is fair to Mercantile from a financial point of view. Such oral opinion has not been amended or rescinded as of the date of this Agreement.
4.24
Mercantile-Related Persons
.
4.24.1 Insider Loans. No Mercantile-Related Person has any loan, credit or other Contract outstanding with Mercantile or any Mercantile Subsidiary that does not conform to applicable rules and regulations
of the FDIC, the Federal Reserve Board, or any other Governmental Entity with jurisdiction over Mercantile or any Mercantile Subsidiary.
4.24.2
Control of Material Assets.
Other than in a capacity as a shareholder, director, or executive officer of Mercantile or any Mercantile Subsidiary, no Mercantile-Related Person owns or
controls any assets or properties that are used in the business of Mercantile or any Mercantile Subsidiary.
4.24.3
Contractual Relationships.
Other than ordinary and customary banking relationships, no Mercantile-Related Person has any contractual relationship with Mercantile or any Mercantile Subsidiary.
4.24.4
Loan Relationships.
No Mercantile-Related Person has any outstanding loan or loan commitment from, or on whose behalf an
irrevocable letter of credit has been issued by, Mercantile or any Mercantile Subsidiary in a principal amount of $500,000 or more.
4.25
Change in Business Relationships
. As of the date of this Plan of Merger, no director or executive officer of Mercantile has Knowledge, whether on account of the Merger or otherwise, that any
customer, agent, representative, supplier of Mercantile or any Mercantile Subsidiary, or other person with whom Mercantile or any Mercantile Subsidiary has a contractual relationship, intends to discontinue, diminish, or change its relationship with
Mercantile or any Mercantile Subsidiary, the effect of which would reasonably be expected to have a Mercantile Material Adverse Effect.
4.26
Insurance
. Mercantile and the Mercantile Subsidiaries maintain in full force and effect insurance on their respective assets, properties, premises, operations, and personnel in such amounts
and against such risks and losses as are customary and adequate for comparable entities engaged in the same business and industry. There is no unsatisfied claim of $100,000 or more under such insurance as to which the insurance carrier has denied
liability. Since January 1, 2007, no insurance company has canceled or refused to renew a policy of insurance covering Mercantiles or any Mercantile Subsidiarys assets, properties, premises, operations, directors or personnel.
Mercantile and the Mercantile Subsidiaries have given adequate and timely notice to each insurance carrier, and have complied with all policy provisions, with respect to any material known claim for which a defense or indemnification or both may be
available to Mercantile or the Mercantile Subsidiaries.
4.27
Books and Records
. The books of account, minute books,
stock record books, and other records of Mercantile are complete and correct in all material respects, represent bona fide transactions, and have been maintained in accordance with sound business practices, including the maintenance of an adequate
internal control system. The corporate minute books of Mercantile and the Mercantile Subsidiaries contain accurate and complete records of all meetings of, and corporate action taken by, their shareholders, boards, and committees in all material
respects. Since January 1, 2012, the minutes of each meeting (or corporate action without a meeting) of any such shareholders, boards, or committees have been duly prepared and are contained in such minute
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books. All such minute books and related exhibits or attachments for all meetings since January 1, 2012, have been made available for Firstbanks review prior to the date of this Plan
of Merger without material omission or redaction (other than with respect to the minutes relating to the Merger or recent and similarly proposed transactions).
4.28
Loan Guarantees
. Except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect, all guarantees of indebtedness
owed to Mercantile or any Mercantile Subsidiary, including without limitation those of the Federal Housing Administration, the Small Business Administration, and any other Governmental Entity, are valid and enforceable, except as limited by
bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting the rights of creditors generally and the availability of equitable remedies.
4.29
Data Security and Customer Privacy
. Mercantile and each Mercantile Subsidiary is in compliance in all material respects with (a) all applicable Laws and applicable requirements of
Governmental Entities regarding the security of each of their customers data and the systems operated by Mercantile and each Mercantile Subsidiary, and (b) their respective privacy policies, including as relates to the use of individually
identifiable personal information relating to identifiable or identified natural persons.
4.30
Allowance for Loan and
Lease Losses
. The allowance for loan and lease losses as reflected in Mercantiles consolidated financial statements and the Mercantile Call Reports as of December 31, 2012 and as of each quarter ended after December 31, 2012 was,
in the reasonable opinion of Mercantiles management, (a) adequate to meet all reasonably anticipated loan and lease losses, net of recoveries related to loans previously charged off as of those dates, (b) consistent with GAAP and
reasonable and sound banking practices, and (c) conforms to recommendations and comments in reports of examination in all material respects.
4.31
Loans and Investments
. All investments and, to the Knowledge of Mercantile, all loans of Mercantile and each Mercantile Subsidiary are: (a) evidenced by notes, agreements or other
evidences of indebtedness that are true, genuine and what they purport to be; (b) legal and enforceable in accordance with their terms, except as may be limited by any bankruptcy, insolvency, moratorium, or other laws affecting the rights of
creditors generally or by the exercise of judicial discretion; (c) authorized under all applicable Laws; and (d) to the extent secured, secured by valid Liens which have been perfected.
4.32
Loan Origination and Servicing
. In originating, underwriting, servicing, selling, transferring, and discharging loans,
mortgages, land contracts, and other contractual obligations, either for its own account or for the account of others, Mercantile and each Mercantile Subsidiary has complied with all applicable terms and conditions of such obligations and with all
applicable Laws, Contracts, rules, and procedures, except for incidents of noncompliance that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.33
Securities Laws Matters
.
4.33.1 Since January 1, 2010, Mercantile has filed or furnished all forms, documents and reports required to be filed or furnished with the SEC under the Securities Act or the Exchange Act
(collectively with any amendments thereto, but excluding the Joint Proxy Statement and the Registration Statement, the
Mercantile SEC Reports
). Each of the Mercantile SEC Reports, in each case as of its filing or furnishing
date, or, if amended, as finally amended prior to the date of this Plan of Merger (with respect to those Mercantile SEC Reports filed or furnished prior to the date of this Plan of Merger), has complied as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, and none of the Mercantile SEC Reports, when filed or furnished or, if amended, as finally amended prior to the date of this Plan of Merger, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Mercantile
Subsidiaries are or ever has been required to file periodic reports with the SEC. As of the date of this Plan of Merger, there are no material outstanding or unresolved comments received from the SEC with respect to any of the Mercantile SEC
Reports.
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4.33.2 Mercantile has established and maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) under the Exchange Act) as required by Rule 13a-15(a) under the Exchange Act, and Mercantile has established and maintains internal controls over financial reporting (as such term is defined in Rule 13a-15(f) under
the Exchange Act) as required by Rule
13a-15(a)
under the Exchange Act. Mercantile has disclosed, based on its most recent evaluation prior to the date of this Plan of Merger, to Mercantiles auditors and
the audit committee of the Mercantile Board of Directors (a) any significant deficiencies and material weaknesses in the design or operation of its internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act)
which are reasonably likely to adversely affect Mercantiles ability to record, process, summarize and report financial information and (b) any fraud that involves management or other employees who have a significant role in
Mercantiles internal controls over financial reporting. Since January 1, 2010, neither Mercantile nor any of the Mercantile Subsidiaries has Knowledge of any written complaint, allegation, assertion or claim regarding the accounting or
auditing practices, procedures, methodologies or methods of Mercantile or any Mercantile Subsidiary or their respective internal accounting controls, including any written complaint, allegation, assertion or claim that Mercantile or any Mercantile
Subsidiary has engaged in questionable accounting or auditing practices, which, if true, would constitute a significant deficiency or a material weakness. Since January 1, 2010, subject to any applicable grace periods, Mercantile has been and
is in compliance with (i) the applicable provisions of the Sarbanes Oxley Act of 2002 and (ii) the applicable listing and corporate governance rules and regulations of NASDAQ, except in each case as has not had, and would not reasonably be
expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect.
4.34
Joint Ventures; Strategic
Alliances
. Neither Mercantile nor any Mercantile Subsidiary is, directly or indirectly, a party to or bound by any joint venture, partnership, limited partnership, limited liability company, or strategic alliance agreement or arrangement with or
through any unaffiliated Person providing for their joint or cooperative development, marketing, referrals, or sales of banking, securities, insurance, or other financial products or services, or their joint investment in and management of any
active business enterprise.
4.35
Policies and Procedures
. Mercantile and each Mercantile Subsidiary have complied in
all material respects with the policies and procedures as formally adopted and disclosed to Firstbank as applicable to the periods when those policies and procedures were in effect.
4.36
Shareholder Rights Plan
. Mercantile does not have in effect any shareholder rights plan, poison pill, or similar
plan or arrangement. Mercantile is not an interested shareholder of Firstbank as defined in Section 778 of the MBCA.
4.37
No Other Representations and Warranties
. Except for the representations and warranties made by Mercantile and the Mercantile Subsidiaries in this
Article IV
, neither Mercantile nor any
other Person makes or has made any representation or warranty with respect to Mercantile or the Mercantile Subsidiaries or their respective business, operations, assets, Liabilities, condition (financial or otherwise) or prospects, notwithstanding
the delivery or disclosure to Firstbank or any of its Affiliates or Representatives of any documentation, projections, forecasts, estimates, budgets, prospect information or other information with respect to any one or more of the foregoing.
ARTICLE V
COVENANTS
5.1
Conduct of Business by Firstbank
. Firstbank shall,
and shall cause each of the Firstbank Subsidiaries to, during the period from the date of this Plan of Merger and ending at the earlier of the Effective Time and the termination of this Plan of Merger in accordance with
Article V
, except
as expressly contemplated by this Plan of Merger or as required by applicable Law or with the prior written consent of Mercantile (which consent shall not be unreasonably withheld, conditioned or delayed), conduct its business in the ordinary course
of business generally consistent with past practice, and, to the extent consistent therewith, Firstbank shall, and shall cause
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each of the Firstbank Subsidiaries to, use its commercially reasonable efforts to preserve substantially intact its and the Firstbank Subsidiaries business organization, to keep available
the services of its and the Firstbank Subsidiaries current officers and employees, and to preserve its and the Firstbank Subsidiaries present relationships with customers, suppliers, distributors, licensors, licensees and other Persons
having business relationships with it. Without limiting the generality of the foregoing, between the date of this Plan of Merger and ending at the earlier of the Effective Time and the termination of this Plan of Merger in accordance with
Article
VII
, except as otherwise expressly contemplated by this Plan of Merger or as set forth on Section 5.1 of the Firstbank Disclosure Letter or as required by applicable Law, Firstbank shall not, nor shall it permit any of the Firstbank
Subsidiaries to, without the prior written consent of Mercantile (which consent shall not be unreasonably withheld, conditioned or delayed):
5.1.1 amend its articles of incorporation or bylaws (or other comparable organizational documents);
5.1.2 (a) split, combine or reclassify any securities issued by Firstbank or any of the Firstbank Subsidiaries, (b) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or
otherwise acquire, any securities issued by Firstbank or any of the Firstbank Subsidiaries, except for the acceptance of shares of Firstbank Common Stock delivered in satisfaction of the exercise price or tax withholding obligations by holders of
Awards under Firstbank Stock Plans that are outstanding as of the date of this Plan of Merger who exercise such Awards, and shares of Firstbank Common Stock submitted for cancellation to satisfy tax withholding obligations that occur upon the
vesting of Firstbank Restricted Stock that are outstanding as of the date of this Plan of Merger, or (c) except as set forth on Section 5.1.2 of the Firstbank Disclosure Letter declare, set aside or pay any dividend or distribution
(whether in cash, stock, property or otherwise) in respect of, or enter into any Contract with respect to the voting of, any shares of its capital stock, except (i) subject to Section 5.20, payment of quarterly cash dividends by Firstbank
in an amount not to exceed $0.06 per share of Firstbank Common Stock and in a manner consistent with past practice with respect to the timing of the declaration, payment and record date of such dividend, and (ii) distributions to or from the
Firstbank Subsidiaries;
5.1.3 issue, sell, pledge, dispose of or encumber any securities issued by Firstbank or any of the
Firstbank Subsidiaries, other than the issuance of shares of Firstbank Common Stock upon the exercise of any Award granted pursuant to a Firstbank Stock Plan prior to the date of this Plan of Merger;
5.1.4 except in the ordinary course of business consistent with past practice or as required by applicable Law or the express terms of
any Firstbank Benefit Plan or Contract in effect as of the date of this Plan of Merger, (a) except as set forth on Section 5.1.4 of the Firstbank Disclosure Letter, increase the compensation (including bonus opportunities) payable or that
could become payable by Firstbank or any of the Firstbank Subsidiaries to directors or officers or to any substantial class of employees; (b) enter into any new or amend in any material respect any existing employment, consulting, severance,
termination, retention or change in control agreement with any of its past or present officers, directors, or employees, (c) establish, adopt, enter into, amend, terminate, or take any action to accelerate rights under any Firstbank Benefit
Plan; (d) promote any officer or promote any non-officer employee to an officer position; (e) grant any severance or termination pay unless provided under any Firstbank Benefit Plan; (f) grant any compensatory awards that are payable
in, relate to, or determined by reference to the value of, Firstbank Common Stock; (g) enter into any new or amend any Collective Bargaining Agreement; or (h) fund or in any other way secure any payment of compensation or benefit under any
Firstbank Benefit Plan;
5.1.5 hire or terminate employment of any officer except for termination for cause and hires to
replace;
5.1.6 appoint or elect any director of Firstbank or any Firstbank Subsidiary, except for (a) removal for cause
and appointments or elections to replace, and (b) the election of any director of Firstbank as of the date of this Plan of Merger at any annual meeting of Firstbank Shareholders;
5.1.7 except as set forth in Section 5.1.7 of the Firstbank Disclosure Letter, acquire, by merger, consolidation, acquisition of
stock or assets, or otherwise, any business or division of a business or, except for
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transactions with or among wholly-owned Subsidiaries, make any capital contributions to any Person, other than (a) incident to foreclosures in connection with debts previously contracted in
good faith, or (b) acquisitions of personal property in the ordinary course of business generally consistent with past practice;
5.1.8 except as set forth in Section 5.1.8 of the Firstbank Disclosure Letter or in the ordinary course of business consistent with past practice, (a) transfer, license, sell, lease or otherwise
dispose of any material assets, including the capital stock or other equity interests in any Firstbank Subsidiary, however the foregoing shall not apply to dealings with financial assets or investment securities nor prohibit Firstbank and the
Firstbank Subsidiaries from transferring, licensing, selling, leasing or disposing of obsolete or unused equipment, fixtures or assets, in each case in the ordinary course of business consistent with past practice; or (b) adopt or effect a plan
of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
5.1.9 except as set
forth in Section 5.1.9 of the Firstbank Disclosure Letter or in the ordinary course of business consistent with past practice, repurchase, prepay or incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person,
issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Firstbank or any of the Firstbank Subsidiaries, guarantee any debt securities of another Person, or enter into any keep well
or other Contract to maintain any financial statement condition of any other Person (other than any wholly-owned Firstbank Subsidiary);
5.1.10 make any application for the opening, relocation, or closing of any branch office, loan production office or other material office or facility, or open any such material office or facility;
5.1.11 except as set forth in Section 5.1.11 of the Firstbank Disclosure Letter enter into or amend or modify in any
material respect, or consent to the termination of (other than at its stated expiry date), any Firstbank Material Contract, other than in the ordinary course of business consistent with past practice;
5.1.12 institute, settle or compromise any Actions pending or threatened before any arbitrator, court or other Governmental Entity
(a) involving the payment of monetary damages by Firstbank or any Firstbank Subsidiary of any amount exceeding $250,000 or (b) involving an admission of any Liability or injunctive or similar relief or (c) having a material impact on
Firstbanks business;
5.1.13 make any material change in any method of financial accounting principles or practices, in
each case except for any such change required or to be required by a change in GAAP or applicable Law;
5.1.14 (a) settle or
compromise any material Tax claims, audits or assessments in excess of the amount reserved for such claims, audits or assessments as set forth on the books and records of Firstbank, (b) make or change any material Tax election, change any
annual Tax accounting period, adopt or change any method of Tax accounting or (c) enter into any material closing agreement, surrender in writing any right to claim a material Tax refund, offset or other reduction in Tax liability or consent to
any extension or waiver of the limitation period applicable to any material Tax claim or assessment relating to Firstbank or the Firstbank Subsidiaries;
5.1.15 enter into any joint venture, strategic partnership or alliance;
5.1.16
abandon, encumber, convey title (in whole or in part), exclusively license or grant any right or other licenses to material Firstbank-Owned Intellectual Property, other than in the ordinary course of business consistent with past practice;
5.1.17 except for (a) capital expenditures of amounts set forth in Firstbanks capital expenditure plan included in
Section 5.1.17 of the Firstbank Disclosure Letter, or (b) capital expenditures required by Law or Governmental Entities or incurred in connection with the repair or replacement of facilities destroyed or damaged due to casualty or accident
(whether or not covered by insurance), make any capital expenditure or permit any of the Firstbank Subsidiaries to make any capital expenditure;
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5.1.18 except pursuant to the Merger, acquire or cause its Affiliates to acquire, directly
or indirectly, any shares of Mercantile capital stock;
5.1.19 enter into any material new line of business or change in any
material respect its lending, investment, risk and asset liability management, interest rate or fee pricing with respect to depository accounts, hedging and other material banking or operating policies or practices, except in the ordinary course of
business consistent with past practice or as required by Law or any regulatory agency having jurisdiction over Firstbank or any of the Firstbank Subsidiaries;
5.1.20 except as required by Law or any regulatory agency having jurisdiction over Firstbank or any of the Firstbank Subsidiaries, make any material changes in its policies and practices with respect to
underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service loans;
5.1.21 (a)
make any loan in material violation of, or otherwise fail to comply in all material respects with, the underwriting and credit policies of Firstbank and its Subsidiaries as such policies are in effect as of the date of this Plan of Merger, or
(b) make any loan or enter into any credit relationship with any customer who is not indebted to Firstbank, including any loan participation, in an amount in excess of $3,000,000 or make any additional or new loan or increase the size of any
credit relationship, including any loan participation, to any customer who is indebted to Firstbank or any Firstbank Subsidiary in the following amounts: (i) for any loan customer with one or more loans solely with loan grades of 1 through 4,
in an amount greater than $3,000,000; (ii) for any loan customer with one or more loans with a loan grade of 5 or 6, in an amount greater than $1,000,000; and (iii) for any loan customer with one or more loans with a loan grade of 7 or
worse, in any amount;
5.1.22 restructure or materially change its investment securities portfolio through purchases, sales or
otherwise, or its policies with respect to the classification or reporting of such portfolios;
5.1.23 purchase, commit to
purchase or otherwise acquire any derivative or synthetic mortgage product or enter into any interest rate swap transaction, other than the purchase and sale of collateralized mortgage obligations and interest rate swap transactions in the ordinary
course of business and consistent with past practice;
5.1.24 take any action that would prevent the Merger from qualifying
for the Intended Tax Treatment or unreasonably delay the effectiveness of the Registration Statement;
5.1.25 take any action
that would be materially inconsistent with or contrary to the representations, warranties, and covenants made by Firstbank in this Plan of Merger, or take any action that would cause its representations and warranties to become untrue in any
material respect, except as and to the extent required by applicable Law, regulatory agencies having jurisdiction over Firstbank or any of the Firstbank Subsidiaries, or this Plan of Merger;
5.1.26 fail to comply in all material respects with applicable Law, and formally adopted internal policies and procedures applicable to
the conduct of its business, except to the extent that the application of any Law is being contested in good faith and Mercantile has been notified of such contest;
5.1.27 fail to maintain its books, accounts, and records in the usual and regular manner, and in material compliance with applicable Law, governmental policy issuances, GAAP and accounting standards, and
formally adopted internal policies and procedures;
5.1.28 fail to use commercially reasonable efforts to maintain its
property and assets in their present state of repair, order, and condition, reasonable wear and tear and damage by fire or other casualty covered by insurance excepted;
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5.1.29 fail to use commercially reasonable efforts to maintain and keep in full force and
effect insurance coverage, so long as such insurance is reasonably available, on its assets, properties, premises, operations, directors, and personnel in such amounts, against such risks and losses, and with such self-insurance requirements as are
presently in force;
5.1.30 fail to charge off loans and maintain its allowance for loan and lease losses, in each case in a
manner in conformity with the prior respective practices of Firstbank and the Firstbank Subsidiaries and applicable industry, regulatory, and GAAP standards;
5.1.31 fail to promptly notify Mercantile of the threat or commencement of any material Action against, relating to, or affecting: (a) Firstbank or any Firstbank Subsidiary; (b) Firstbanks
or any Firstbank Subsidiarys directors, officers, or employees in their capacities as such; (c) Firstbanks or any Firstbank Subsidiarys assets, liabilities, businesses, or operations; or (d) the Merger or this Plan of
Merger;
5.1.32 make any loan or make any loan commitment, renewal, or extension to any director, officer or principal
shareholder of Firstbank or any Firstbank Subsidiary or any Affiliate of any such Person, which would, when aggregated with all outstanding loans, commitments, renewals, or extensions made by Firstbank and the Firstbank Subsidiaries to the Person
and the Persons immediate family and Affiliates, exceed $500,000. This restriction shall not apply to any renewals or advances on existing lines of credit or the renegotiation or restructuring of any problem or delinquent loan or to the making
of any residential mortgage loan in the ordinary course of business consistent with past practice and on terms available to Firstbanks or its Subsidiaries customers generally;
5.1.33 take any action to discharge or satisfy any mortgage, Lien, charge, or encumbrance other than as a result of the payment of
Liabilities in accordance with their terms, or except in the ordinary course of business consistent with past practice, if the cost to Firstbank or any Firstbank Subsidiary to discharge or satisfy any mortgage, lien, charge, or encumbrance is in
excess of $100,000, unless the discharge or satisfaction is covered by general or specific reserves.
5.1.34 take any action
to pay any Liability, absolute or contingent, in excess of $100,000, except Liabilities shown on Firstbanks financial statements set forth in Firstbanks Annual Report on Form 10-K for the year ended December 31, 2012 or in
Firstbanks Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, each as filed with the SEC, except in the ordinary course of business consistent with past practice, or except in connection with the transactions contemplated
by this Plan of Merger;
5.1.35 enter into or amend any Contract or other transaction with any Firstbank-Related Person,
except as contemplated or permitted by this Plan of Merger;
5.1.36 agree or commit to do any of the foregoing.
For the purposes of this
Section 5.1
, prior written consent of Mercantile shall be deemed to have been given with respect to
any matter for which Firstbank has requested consent, in writing and delivered to the chief operating officer of Mercantile and in accordance with
Section 9.8
(including by providing copies to all required parties), but Mercantile has
not responded in writing within five Business Days of such request.
5.2
Conduct of Business by Mercantile
. Mercantile
shall, and shall cause each of the Mercantile Subsidiaries to, during the period from the date of this Plan of Merger and ending at the earlier of the Effective Time and the termination of this Plan of Merger in accordance with
Article VII
, except as expressly contemplated by this Plan of Merger or as required by applicable Law or with the prior written consent of Firstbank (which consent shall not be unreasonably withheld, conditioned or delayed), conduct its
business in the ordinary course of business generally consistent with past practice, and, to the extent consistent therewith, Mercantile shall, and shall cause each of the Mercantile Subsidiaries to, use its commercially reasonable efforts to
preserve substantially intact its
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and the Mercantile Subsidiaries business organization, to keep available the services of its and the Mercantile Subsidiaries current officers and employees, and to preserve its and
the Mercantile Subsidiaries present relationships with customers, suppliers, distributors, licensors, licensees and other Persons having business relationships with it. Without limiting the generality of the foregoing, between the date of this
Plan of Merger and ending at the earlier of the Effective Time and the termination of this Plan of Merger in accordance with
Article VII
, except as otherwise expressly contemplated by this Plan of Merger or as set forth on Section 5.2 of
the Mercantile Disclosure Letter or as required by applicable Law, Mercantile shall not, nor shall it permit any of the Mercantile Subsidiaries to, without the prior written consent of Firstbank (which consent shall not be unreasonably withheld,
conditioned or delayed):
5.2.1 amend its articles of incorporation or bylaws (or other comparable organizational documents);
5.2.2 (a) split, combine or reclassify any securities issued by Mercantile or any of the Mercantile Subsidiaries,
(b) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any securities issued by Mercantile or any of the Mercantile Subsidiaries, except for the acceptance of shares of Mercantile Common Stock
delivered in satisfaction of the exercise price or tax withholding obligations by holders of Awards under Mercantile Stock Plans that are outstanding as of the date of this Plan of Merger who exercise such Awards, and shares of Mercantile Common
Stock submitted for cancellation to satisfy tax withholding obligations that occur upon the vesting of Mercantile Restricted Stock that are outstanding as of the date of this Plan of Merger, or (c) except as set forth on Section 5.2.2 of
the Mercantile Disclosure Letter declare, set aside or pay any dividend or distribution (whether in cash, stock, property or otherwise) in respect of, or enter into any Contract with respect to the voting of, any shares of its capital stock, except
(i) subject to
Section 5.20
, payment of quarterly cash dividends by Mercantile in an amount not to exceed $0.12 per share of Mercantile Common Stock and in a manner consistent with past practice with respect to the timing of the
declaration, payment and record date of such dividend, (ii) payment of the contemplated Pre-Merger Special Dividend and (iii) distributions to or from the Mercantile Subsidiaries;
5.2.3 issue, sell, pledge, dispose of or encumber any securities issued by Mercantile or any of the Mercantile Subsidiaries, other than
the issuance of shares of Mercantile Common Stock upon the exercise of any Award granted pursuant to a Mercantile Stock Plan prior to the date of this Plan of Merger;
5.2.4 except in the ordinary course of business consistent with past practice or as required by applicable Law or the express terms of any Mercantile Benefit Plan or Contract in effect as of the date of
this Plan of Merger, (a) except as set forth on Section 5.2.4 of the Mercantile Disclosure Letter, increase the compensation (including bonus opportunities) payable or that could become payable by Mercantile or any of the Mercantile
Subsidiaries to directors or officers or to any substantial class of employees; (b) enter into any new or amend in any material respect any existing employment, consulting, severance, termination, retention or change in control agreement with
any of its past or present officers, directors, or employees, (c) establish, adopt, enter into, amend, terminate, or take any action to accelerate rights under any Mercantile Benefit Plan; (d) promote any officer or promote any non-officer
employee to an officer position; (e) grant any severance or termination pay unless provided under any Mercantile Benefit Plan; (f) grant any compensatory awards that are payable in, relate to, or determined by reference to the value of,
Mercantile Common Stock; (g) enter into any new or amend any Collective Bargaining Agreement; or (h) fund or in any other way secure any payment of compensation or benefit under any Mercantile Benefit Plan;
5.2.5 hire or terminate employment of any officer except for termination for cause and hires to replace;
5.2.6 appoint or elect any director of Mercantile or any Mercantile Subsidiary, except for (a) removal for cause and appointments or
elections to replace, and (b) the election of any director of Mercantile as of the date of this Plan of Merger at any annual meeting of Mercantile Shareholders;
5.2.7 except as set forth in Section 5.2.7 of the Mercantile Disclosure Letter, acquire, by merger, consolidation, acquisition of stock or assets, or otherwise, any business or division of a business
or, except for
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transactions with or among wholly-owned Subsidiaries, make any capital contributions to any Person, other than (a) incident to foreclosures in connection with debts previously contracted in
good faith, or (b) acquisitions of personal property in the ordinary course of business generally consistent with past practice;
5.2.8 except as set forth in Section 5.2.8 of the Mercantile Disclosure Letter or in the ordinary course of business consistent with past practice, (a) transfer, license, sell, lease or
otherwise dispose of any material assets, including the capital stock or other equity interests in any Mercantile Subsidiary, however the foregoing shall not apply to dealings with financial assets or investment securities nor prohibit Mercantile
and the Mercantile Subsidiaries from transferring, licensing, selling, leasing or disposing of obsolete or unused equipment, fixtures or assets, in each case in the ordinary course of business consistent with past practice; or (b) adopt or
effect a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
5.2.9
except as set forth in Section 5.2.9 of the Mercantile Disclosure Letter or in the ordinary course of business consistent with past practice, repurchase, prepay or incur any indebtedness for borrowed money or guarantee any such indebtedness of
another Person, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Mercantile or any of the Mercantile Subsidiaries, guarantee any debt securities of another Person, or enter into any
keep well or other Contract to maintain any financial statement condition of any other Person (other than any wholly-owned Mercantile Subsidiary);
5.2.10 make any application for the opening, relocation, or closing of any branch office, loan production office or other material office or facility, or open any such material office or facility;
5.2.11 except as set forth in Section 5.2.11 of the Mercantile Disclosure Letter, enter into or amend or modify in any
material respect, or consent to the termination of (other than at its stated expiry date), any Mercantile Material Contract, other than in the ordinary course of business consistent with past practice;
5.2.12 institute, settle or compromise any Actions pending or threatened before any arbitrator, court or other Governmental Entity
(a) involving the payment of monetary damages by Mercantile or any Mercantile Subsidiary of any amount exceeding $250,000 or (b) involving an admission of any Liability or injunctive or similar relief or (c) having a material impact
on Mercantiles business;
5.2.13 make any material change in any method of financial accounting principles or practices,
in each case except for any such change required or to be required by a change in GAAP or applicable Law;
5.2.14 (a) settle
or compromise any material Tax claims, audits or assessments in excess of the amount reserved for such claims, audits or assessments as set forth on the books and records of Mercantile, (b) make or change any material Tax election, change any
annual Tax accounting period, adopt or change any method of Tax accounting or (c) enter into any material closing agreement, surrender in writing any right to claim a material Tax refund, offset or other reduction in Tax liability or consent to
any extension or waiver of the limitation period applicable to any material Tax claim or assessment relating to Mercantile or the Mercantile Subsidiaries;
5.2.15 enter into any joint venture, strategic partnership or alliance;
5.2.16
abandon, encumber, convey title (in whole or in part), exclusively license or grant any Mercantile or other licenses to material Mercantile-Owned Intellectual Property, other than in the ordinary course of business consistent with past practice;
5.2.17 except for (a) capital expenditures of amounts set forth in Mercantiles capital expenditure plan included
in Section 5.2.17 of the Mercantile Disclosure Letter, or (b) capital expenditures required by Law or Governmental Entities or incurred in connection with the repair or replacement of facilities destroyed or damaged due to casualty or
accident (whether or not covered by insurance) make any capital expenditure or permit any of the Mercantile Subsidiaries to make any capital expenditure;
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5.2.18 acquire or cause its Affiliates to acquire, directly or indirectly, any shares of
Firstbank capital stock;
5.2.19 enter into any material new line of business or change in any material respect its lending,
investment, risk and asset liability management, interest rate or fee pricing with respect to depository accounts, hedging and other material banking or operating policies or practices, except in the ordinary course of business consistent with past
practice or as required by Law or any regulatory agency having jurisdiction over Mercantile or any of the Mercantile Subsidiaries;
5.2.20 except as required by Law or any regulatory agency having jurisdiction over Mercantile or any of the Mercantile Subsidiaries, make any material changes in its policies and practices with respect to
underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service loans;
5.2.21
(a) make any loan in material violation of, or otherwise fail to comply in all material respects with, the underwriting and credit policies of Mercantile and its Subsidiaries as such policies are in effect as of the date of this Plan of Merger,
or (b) make any loan or enter into any credit relationship with any customer who is not indebted to Mercantile, including any loan participation, in an amount in excess of $3,000,000 or make any additional or new loan or increase the size of
any credit relationship, including any loan participation, to any customer who is indebted to Mercantile or any Mercantile Subsidiary in the following amounts: (i) for any loan customer with one or more loans solely with loan grades of 1
through 4, in an amount greater than $3,000,000; (ii) for any loan customer with one or more loans with a loan grade of 5 or 6, in an amount greater than $1,000,000; and (iii) for any loan customer with one or more loans with a loan grade
of 7 or worse, in any amount;
5.2.22 restructure or materially change its investment securities portfolio through purchases,
sales or otherwise, or its policies with respect to the classification or reporting of such portfolios;
5.2.23 purchase,
commit to purchase or otherwise acquire any derivative or synthetic mortgage product or enter into any interest rate swap transaction, other than the purchase and sale of collateralized mortgage obligations and interest rate swap transactions in the
ordinary course of business and consistent with past practice;
5.2.24 take any action that would prevent the Merger from
qualifying for the Intended Tax Treatment or unreasonably delay the effectiveness of the Registration Statement;
5.2.25 take
any action that would be materially inconsistent with or contrary to the representations, warranties, and covenants made by Mercantile in this Plan of Merger, or take any action that would cause its representations and warranties to become untrue in
any material respect, except as and to the extent required by applicable Law, regulatory agencies having jurisdiction over Mercantile or any of the Mercantile Subsidiaries, or this Plan of Merger;
5.2.26 fail to comply in all material respects with applicable Law, and formally adopted internal policies and procedures applicable to
the conduct of its business, except to the extent that the application of any Law is being contested in good faith and Firstbank has been notified of such contest;
5.2.27 fail to maintain its books, accounts, and records in the usual and regular manner, and in material compliance with applicable Law, governmental policy issuances, GAAP and accounting standards, and
formally adopted internal policies and procedures;
5.2.28 fail to use commercially reasonable efforts to maintain its
property and assets in their present state of repair, order, and condition, reasonable wear and tear and damage by fire or other casualty covered by insurance excepted;
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5.2.29 fail to use commercially reasonable efforts to maintain and keep in full force and
effect insurance coverage, so long as such insurance is reasonably available, on its assets, properties, premises, operations, directors, and personnel in such amounts, against such risks and losses, and with such self-insurance requirements as are
presently in force;
5.2.30 fail to charge off loans and maintain its allowance for loan and lease losses, in each case in a
manner in conformity with the prior respective practices of Mercantile and the Mercantile Subsidiaries and applicable industry, regulatory, and GAAP standards;
5.2.31 fail to promptly notify Firstbank of the threat or commencement of any material Action against, relating to, or affecting: (a) Mercantile or any Mercantile Subsidiary;
(b) Mercantiles or any Mercantile Subsidiarys directors, officers, or employees in their capacities as such; (c) Mercantiles or any Mercantile Subsidiarys assets, liabilities, businesses, or operations; or
(d) the Merger or this Plan of Merger;
5.2.32 make any loan or make any loan commitment, renewal, or extension to any
director, officer or principal shareholder of Mercantile or any Mercantile Subsidiary or any Affiliate of any such Person, which would, when aggregated with all outstanding loans, commitments, renewals, or extensions made by Mercantile and the
Mercantile Subsidiaries to the Person and the Persons immediate family and Affiliates, exceed $500,000. This restriction shall not apply to any renewals or advances on existing lines of credit or the renegotiation or restructuring of any
problem or delinquent loan or to the making of any residential mortgage loan in the ordinary course of business consistent with past practice and on terms available to Mercantiles or its Subsidiaries customers generally;
5.2.33 take any action to discharge or satisfy any mortgage, Lien, charge, or encumbrance other than as a result of the payment of
Liabilities in accordance with their terms, or except in the ordinary course of business consistent with past practice, if the cost to Mercantile or any Mercantile Subsidiary to discharge or satisfy any mortgage, lien, charge, or encumbrance is in
excess of $100,000, unless the discharge or satisfaction is covered by general or specific reserves.
5.2.34 take any action
to pay any Liability, absolute or contingent, in excess of $100,000, except Liabilities shown on Mercantiles financial statements set forth in Mercantiles Annual Report on Form 10-K for the year ended December 31, 2012 or in
Mercantiles Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, each as filed with the SEC, except in the ordinary course of business consistent with past practice, or except in connection with the transactions contemplated
by this Plan of Merger;
5.2.35 enter into or amend any Contract or other transaction with any Mercantile-Related Person,
except as contemplated or permitted by this Plan of Merger; or
5.2.36 agree or commit to do any of the foregoing.
For the purposes of this
Section 5.2
, prior written consent of Firstbank shall be deemed to have been given with respect to
any matter for which Mercantile has requested consent, in writing and delivered to the chief financial officer of Firstbank and in accordance with
Section 9.8
(including by providing copies to all required parties), but Firstbank has not
responded in writing within five Business Days of such request.
5.3 Disclosure Letters; Additional Information.
5.3.1
Form and Content.
The Firstbank Disclosure Letter and the Mercantile Disclosure Letter, respectively, shall contain
appropriate references and cross references with respect to each of the disclosures, and appropriate identifying markings with respect to each of the documents, that pertain to one or more sections or articles of this Plan of Merger. Each of
Firstbank and Mercantile has prepared and delivered two complete copies of its respective Disclosure Letter to the other party.
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5.3.2
Update.
Not less than five Business Days prior to the Closing, each party shall
deliver to the other an update to its respective Disclosure Letter describing any material changes and containing any new or amended documents, as specified below, that are not contained in its respective Disclosure Letter as initially delivered.
This update shall not cure any breach of a representation or warranty occurring on the date of this Plan of Merger.
5.3.3
Certification.
Each of Firstbanks and Mercantiles Disclosure Letter and its update shall be certified on its behalf by its chief executive officer, president and chief financial officer that such Disclosure Letter does not contain
any untrue statement of a material fact, or fail to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.
5.4
No Solicitation by Firstbank
.
5.4.1 Except as specifically permitted by this
Section 5.4
, Firstbank shall not and shall cause each of its Subsidiaries and Representatives not to, during the period from the date of this
Plan of Merger until the earlier of the Effective Time and the termination of this Plan of Merger in accordance with
Section 7.1
, directly or indirectly, (a) solicit, initiate, facilitate or encourage (including by way of furnishing
non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, a Firstbank Takeover Proposal, or (b) engage or enter into, continue or otherwise participate
in any discussions or negotiations regarding, or furnish to any other Person material non-public information in connection with any Firstbank Takeover Proposal, or otherwise cooperate with or assist or participate in, or encourage or knowingly
facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make a Firstbank Takeover Proposal. Firstbank shall, and shall cause each of the Firstbank Subsidiaries and each of its and the Firstbank
Subsidiaries Representatives to (i) immediately upon execution of this Plan of Merger, cease any solicitation, encouragement, discussions or negotiations with any Person that may be ongoing with respect to a Firstbank Takeover Proposal as
of the date of this Plan of Merger, (ii) request promptly thereafter that such Person promptly return or destroy all confidential information concerning Firstbank and the Firstbank Subsidiaries delivered or made available to such Person or its
Representatives by Firstbank, the Firstbank Subsidiaries or any Representatives thereof, in connection with its consideration of a Firstbank Takeover Proposal and any summaries, analyses or extracts thereof or based thereon, and any files, copies or
records containing such information in any computer or electronic media, and (iii) immediately upon execution of this Plan of Merger terminate all physical and electronic dataroom access previously granted to any such Person or its
Representatives.
5.4.2 Notwithstanding anything to the contrary contained herein, if at any time prior to obtaining the
Firstbank Shareholder Approval, Firstbank or any of its Representatives receives a bona fide written Firstbank Takeover Proposal from any Person or group of Persons, which Firstbank Takeover Proposal did not result from any breach of this
Section 5.4
, then Firstbank and its Representatives may, if the Firstbank Board of Directors determines in good faith, after consultation with its independent financial advisors and outside legal counsel, that such Firstbank Takeover
Proposal constitutes a Firstbank Superior Proposal (a) furnish, pursuant to an Acceptable Firstbank Confidentiality Agreement, information (including non-public information) with respect to Firstbank and its Subsidiaries to the Person or group
of Persons who has made such Firstbank Takeover Proposal and their respective Representatives;
provided
that Firstbank shall (subject to the terms of the Confidentiality Agreement) promptly make available to Mercantile (through an electronic
dataroom or otherwise), and concurrently provide express written notification, via electronic mail notification to Mercantile in accordance with the applicable provisions of
Section 9.8
, of the availability of, any written material
non-public information that is provided to any such Person or group of Persons or their respective Representatives, if such information was not previously provided to Mercantile or its Representatives, and (b) engage in or otherwise participate
in discussions or negotiations with the Person or group of Persons making such Firstbank Takeover Proposal and their respective Representatives;
provided
,
further
that Firstbank shall promptly provide to Mercantile (i) a copy of
any Firstbank Takeover Proposal made in writing by any such Person or group of Persons to Firstbank, any of its Subsidiaries, or any of their respective Representatives, and the identity of the Person making the Firstbank
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Takeover Proposal, and (ii) a written summary of the material terms of any such Firstbank Takeover Proposal not made in writing. For the purposes of this Plan of Merger,
Acceptable Firstbank Confidentiality Agreement
means any confidentiality agreement and standstill agreement that contains provisions with respect to confidentiality matters that are no less favorable to Firstbank than those
contained in the Confidentiality Agreement.
5.4.3 Firstbank shall keep Mercantile reasonably informed of any material
developments, discussions or negotiations regarding any Firstbank Takeover Proposal, including any such proposal first made or discussed with Firstbank prior to the date of this Plan of Merger (including forwarding to Mercantile any written
materials provided to Firstbank or its Representatives in connection with any such Firstbank Takeover Proposal) on a current basis, and shall notify Mercantile of the status of such Firstbank Takeover Proposal. Firstbank agrees that it and its
Subsidiaries will not enter into any confidentiality or other agreements with any Person subsequent to the date of this Plan of Merger which prohibits Firstbank from providing any information to Mercantile in accordance with this
Section 5.4
.
5.4.4 Except as permitted by
Section 5.4.5
, the Firstbank Board of Directors shall not
(a) (i) fail to recommend to the Firstbank Shareholders that the Firstbank Shareholder Approval be given or fail to include the Firstbank Board Recommendation in the Joint Proxy Statement, (ii) change, qualify, withhold, withdraw or
modify, or publicly propose to change, qualify, withhold, withdraw or modify, in a manner adverse to Mercantile, the Firstbank Board Recommendation, (iii) take any formal action or make any recommendation or public statement in connection with
a tender offer or exchange offer other than a recommendation of rejection of such offer or a temporary stop, look and listen communication by the Firstbank Board of Directors pursuant to Rule 14d-9(f) of the Exchange Act, or
(iv) adopt, approve or recommend, or publicly propose to approve or recommend to the Firstbank Shareholders, a Firstbank Takeover Proposal (actions described in this clause (a) being referred to as a
Firstbank Adverse
Recommendation Change
) or (b) cause or permit Firstbank or any of the Firstbank Subsidiaries to enter into any letter of intent, agreement or agreement in principle with respect to any Firstbank Takeover Proposal (other than an
Acceptable Firstbank Confidentiality Agreement) (each, a
Firstbank Acquisition Agreement
).
5.4.5
Notwithstanding anything to the contrary herein, prior to the time the Firstbank Shareholder Approval is obtained, the Firstbank Board of Directors may, in connection with a bona fide written Firstbank Takeover Proposal, which Firstbank Takeover
Proposal was made after the date of this Plan of Merger (or that was made prior to the date of this Plan of Merger and remade after the date of this Plan of Merger) and that did not result from any breach of this
Section 5.4
, make a
Firstbank Adverse Recommendation Change or terminate this Plan of Merger pursuant to
Section 7.1.9
to enter into a definitive merger agreement or other definitive purchase or acquisition agreement with respect to such Firstbank Takeover
Proposal, if and only if, prior to taking such action, Firstbank has complied with its obligations under this
Section 5.4
and the Firstbank Board of Directors has determined in good faith, after consultation with its independent
financial advisors and outside legal counsel, that such Firstbank Takeover Proposal constitutes a Firstbank Superior Proposal;
provided
,
however
, that prior to taking any such action (a) Firstbank has given Mercantile at
least five Business Days prior written notice of its intention to take such action (which notice shall specify the material terms and conditions of any such Firstbank Superior Proposal, including the identity of the party making such Firstbank
Superior Proposal) and has contemporaneously provided a copy to Mercantile of all written materials (including all transaction agreements and related documents) with or from the party making such Firstbank Superior Proposal, (b) Firstbank has
negotiated, and has caused its Representatives to negotiate, in good faith with Mercantile during such notice period to the extent Mercantile wishes to negotiate, to enable Mercantile to revise the terms of this Plan of Merger such that it would
cause such Firstbank Superior Proposal to no longer constitute a Firstbank Superior Proposal and (c) following the end of such notice period, the Firstbank Board of Directors shall have considered in good faith any changes to this Plan of
Merger proposed in writing by Mercantile, and shall have determined that the Firstbank Superior Proposal would continue to constitute a Firstbank Superior Proposal if such revisions were to be given effect. In the event of any material revisions to
a Firstbank Takeover Proposal that could have an impact, influence or other effect on the Firstbank Board of Directors decision or discussion
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with respect to whether such proposal is a Firstbank Superior Proposal, Firstbank shall deliver a new written notice to Mercantile pursuant to the foregoing clause (a) and again comply with
the requirements of this
Section 5.4.5
with respect to such new written notice;
provided
,
however
, that references herein to the five Business Day period shall be deemed to be references to a three Business Day period with
respect thereto.
5.4.6 Provided that Firstbank and the Firstbank Board of Directors comply with their applicable obligations
under Section 5.4.5, nothing in this Section 5.4 shall prohibit the Firstbank Board of Directors from (a) taking and disclosing to the Firstbank Shareholders a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of
Regulation M-A promulgated under the Exchange Act, or (b) making any stop-look-and-listen communications to Firstbank Shareholders pursuant to Section 14d-9(f) promulgated under the Exchange Act (or any similar communications
to the Firstbank Shareholders);
provided
,
however
, that the taking of any action pursuant to either of the preceding clauses (a) or (b) shall in no way limit or modify the effect of this Plan of Merger with respect to any
such action taken.
5.4.7 As used in this Plan of Merger,
Firstbank Takeover Proposal
shall mean any
inquiry, proposal or offer from any Person (other than Mercantile and its Subsidiaries) or group, within the meaning of Section 13(d) of the Exchange Act, relating to, in a single transaction or series of related transactions, any
(a) acquisition of assets of Firstbank and its Subsidiaries equal to more than 10% of Firstbanks consolidated assets or to which more than 10% of Firstbanks net income on a consolidated basis are attributable, (b) acquisition
of more than 10% of the outstanding Firstbank Common Stock or the capital stock of any Subsidiary of Firstbank, (c) tender offer or exchange offer that if consummated would result in any Person beneficially owning more than 10% of the
outstanding Firstbank Common Stock, (d) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving Firstbank or any of its Subsidiaries or (e) any combination of
the foregoing types of transactions if the sum of the percentage of consolidated assets, consolidated net income and Firstbank Common Stock involved is more than 10%; in each case, other than the Merger.
5.4.8 As used in this Plan of Merger,
Firstbank Superior Proposal
shall mean any bona fide written Firstbank
Takeover Proposal that the Firstbank Board of Directors has determined in its good faith judgment, after consultation with its independent financial advisors and outside legal counsel, is reasonably likely to be consummated in accordance with its
terms and that is reasonably likely to result in the consummation of a transaction more favorable to the Firstbank Shareholders from a financial point of view than the Merger, taking into account (a) all legal, regulatory and financial aspects
of the proposal (including availability of financing and certainty of closing) and the Person making the proposal; and (b) any changes to the terms of this Plan of Merger proposed by Mercantile in response to such proposal or otherwise. For
purposes of the definition of Firstbank Superior Proposal, the references to 10% in the definition of Firstbank Takeover Proposal shall be deemed to be references to 50%.
5.5
No Solicitation by Mercantile
.
5.5.1 Except as specifically permitted by this
Section 5.5
, Mercantile shall not and shall cause each of its Subsidiaries and Representatives not to, during the period from the date of this
Plan of Merger until the earlier of the Effective Time and the termination of this Plan of Merger in accordance with
Section 7.1
, directly or indirectly, (a) solicit, initiate, facilitate or encourage (including by way of furnishing
non-public information) any inquiries regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, a Mercantile Takeover Proposal, or (b) engage or enter into, continue or otherwise participate
in any discussions or negotiations regarding, or furnish to any other Person material non-public information in connection with any Mercantile Takeover Proposal, or otherwise cooperate with or assist or participate in, or encourage or knowingly
facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make a Mercantile Takeover Proposal. Mercantile shall, and shall cause each of the Mercantile Subsidiaries and each of its and the Mercantile
Subsidiaries Representatives to (i) immediately upon execution of this Plan of Merger, cease any solicitation, encouragement, discussions or negotiations with any Person that
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may be ongoing with respect to a Mercantile Takeover Proposal as of the date of this Plan of Merger, (ii) request promptly thereafter that such Person promptly return or destroy all
confidential information concerning Mercantile and the Mercantile Subsidiaries delivered or made available to such Person or its Representatives by Mercantile, the Mercantile Subsidiaries or any Representatives thereof, in connection with its
consideration of a Mercantile Takeover Proposal and any summaries, analyses or extracts thereof or based thereon, and any files, copies or records containing such information in any computer or electronic media, and (iii) immediately upon
execution of this Plan of Merger terminate all physical and electronic dataroom access previously granted to any such Person or its Representatives.
5.5.2 Notwithstanding anything to the contrary contained herein, if at any time prior to obtaining the Mercantile Shareholder Approval, Mercantile or any of its Representatives receives a bona fide
written Mercantile Takeover Proposal from any Person or group of Persons, which Mercantile Takeover Proposal did not result from any breach of this
Section 5.5
, then Mercantile and its Representatives may, if the Mercantile Board of
Directors determines in good faith, after consultation with its independent financial advisors and outside legal counsel, that such Mercantile Takeover Proposal constitutes a Mercantile Superior Proposal (a) furnish, pursuant to an Acceptable
Mercantile Confidentiality Agreement, information (including non-public information) with respect to Mercantile and its Subsidiaries to the Person or group of Persons who has made such Mercantile Takeover Proposal and their respective
Representatives;
provided
that Mercantile shall (subject to the terms of the Confidentiality Agreement) promptly make available to Firstbank (through an electronic dataroom or otherwise), and concurrently provide express written notification,
via electronic mail notification to Firstbank in accordance with the applicable provisions of
Section 9.8
, of the availability of, any written material non-public information that is provided to any such Person or group of Persons or
their respective Representatives, if such information was not previously provided to Firstbank or its Representatives, and (b) engage in or otherwise participate in discussions or negotiations with the Person or group of Persons making such
Mercantile Takeover Proposal and their respective Representatives;
provided
,
further
that Mercantile shall promptly provide to Firstbank (i) a copy of any Mercantile Takeover Proposal made in writing by any such Person or group of
Persons to Mercantile, any of its Subsidiaries, or any of their respective Representatives, and the identity of the Person making the Mercantile Takeover Proposal, and (ii) a written summary of the material terms of any such Mercantile Takeover
Proposal not made in writing. For the purposes of this Plan of Merger,
Acceptable Mercantile Confidentiality Agreement
means any confidentiality agreement and standstill agreement that contains provisions with respect to
confidentiality matters that are no less favorable to Mercantile than those contained in the Confidentiality Agreement.
5.5.3
Mercantile shall keep Firstbank reasonably informed of any material developments, discussions or negotiations regarding any Mercantile Takeover Proposal, including any such proposal first made or discussed with Mercantile prior to the date of this
Plan of Merger (including forwarding to Firstbank any written materials provided to Mercantile or its Representatives in connection with any such Mercantile Takeover Proposal) on a current basis, and shall notify Firstbank of the status of such
Mercantile Takeover Proposal. Mercantile agrees that it and its Subsidiaries will not enter into any confidentiality or other agreements with any Person subsequent to the date of this Plan of Merger which prohibits Mercantile from providing any
information to Firstbank in accordance with this
Section 5.5
.
5.5.4 Except as permitted by
Section 5.5.5
, the Mercantile Board of Directors shall not (a) (i) fail to recommend to the Mercantile Shareholders that the Mercantile Shareholder Approval be given or fail to include the Mercantile Board Recommendation in the
Joint Proxy Statement, (ii) change, qualify, withhold, withdraw or modify, or publicly propose to change, qualify, withhold, withdraw or modify, in a manner adverse to Mercantile, the Mercantile Board Recommendation, (iii) take any formal
action or make any recommendation or public statement in connection with a tender offer or exchange offer other than a recommendation of rejection of such offer or a temporary stop, look and listen communication by the Mercantile Board
of Directors pursuant to Rule 14d-9(f) of the Exchange Act, or (iv) adopt, approve or recommend, or publicly propose to approve or recommend to the Mercantile Shareholders, a Mercantile Takeover Proposal (actions described in this clause
(a) being referred to as a
Mercantile Adverse Recommendation Change
) or (b) cause or permit Mercantile or
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any of the Mercantile Subsidiaries to enter into any letter of intent, agreement or agreement in principle with respect to any Mercantile Takeover Proposal (other than an Acceptable Mercantile
Confidentiality Agreement) (each, a
Mercantile Acquisition Agreement
).
5.5.5 Notwithstanding
anything to the contrary herein, prior to the time the Mercantile Shareholder Approval is obtained, the Mercantile Board of Directors may, in connection with a bona fide written Mercantile Takeover Proposal, which Mercantile Takeover Proposal was
made after the date of this Plan of Merger (or that was made prior to the date of this Plan of Merger and remade after the date of this Plan of Merger) and that did not result from any breach of this
Section 5.5
, make a Mercantile
Adverse Recommendation Change or terminate this Plan of Merger pursuant to
Section 7.1.10
to enter into a definitive merger agreement or other definitive purchase or acquisition agreement with respect to such Mercantile Takeover
Proposal, if and only if, prior to taking such action, Mercantile has complied with its obligations under this
Section 5.5
and the Mercantile Board of Directors has determined in good faith, after consultation with its independent
financial advisors and outside legal counsel, that such Mercantile Takeover Proposal constitutes a Mercantile Superior Proposal;
provided
,
however
, that prior to taking any such action (a) Mercantile has given Firstbank at
least five Business Days prior written notice of its intention to take such action (which notice shall specify the material terms and conditions of any such Mercantile Superior Proposal, including the identity of the party making such Mercantile
Superior Proposal) and has contemporaneously provided a copy to Firstbank of all written materials (including all transaction agreements and related documents) with or from the party making such Mercantile Superior Proposal, (b) Mercantile has
negotiated, and has caused its Representatives to negotiate, in good faith with Firstbank during such notice period to the extent Firstbank wishes to negotiate, to enable Firstbank to revise the terms of this Plan of Merger such that it would cause
such Mercantile Superior Proposal to no longer constitute a Mercantile Superior Proposal and (c) following the end of such notice period, the Mercantile Board of Directors shall have considered in good faith any changes to this Plan of Merger
proposed in writing by Firstbank, and shall have determined that the Mercantile Superior Proposal would continue to constitute a Mercantile Superior Proposal if such revisions were to be given effect. In the event of any material revisions to a
Mercantile Takeover Proposal that could have an impact, influence or other effect on the Mercantile Board of Directors decision or discussion with respect to whether such proposal is a Mercantile Superior Proposal, Mercantile shall deliver a
new written notice to Firstbank pursuant to the foregoing clause (a) and again comply with the requirements of this
Section 5.5.5
with respect to such new written notice;
provided
,
however
, that references herein to
the five Business Day period shall be deemed to be references to a three Business Day period with respect thereto.
5.5.6
Provided that Mercantile and the Mercantile Board of Directors comply with their applicable obligations under
Section 5.5.5
, nothing in this Section 5.5 shall prohibit the Mercantile Board of Directors from (a) taking and
disclosing to the Mercantile Shareholders a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act, or (b) making any stop-look-and-listen communications to
Mercantile Shareholders pursuant to Section 14d-9(f) promulgated under the Exchange Act (or any similar communications to the Mercantile Shareholders);
provided
,
however
, that the taking of any action pursuant to either of the
preceding clauses (a) or (b) shall in no way limit or modify the effect of this Plan of Merger with respect to any such action taken.
5.5.7 As used in this Plan of Merger,
Mercantile Takeover Proposal
shall mean any inquiry, proposal or offer from any Person (other than Mercantile and its Subsidiaries) or
group, within the meaning of Section 13(d) of the Exchange Act, relating to, in a single transaction or series of related transactions, any (a) acquisition of assets of Mercantile and its Subsidiaries equal to more than 10% of
Mercantiles consolidated assets or to which more than 10% of Mercantiles net income on a consolidated basis are attributable, (b) acquisition of more than 10% of the outstanding Mercantile Common Stock or the capital stock of any
Subsidiary of Mercantile, (c) tender offer or exchange offer that if consummated would result in any Person beneficially owning more than 10% of the outstanding Mercantile Common Stock, (d) merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction involving Mercantile or any of its Subsidiaries, or (e) any combination of the foregoing types of transactions if the sum of the percentage of consolidated assets,
consolidated net income and Mercantile Common Stock involved is more than 10%; in each case, other than the Merger.
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5.5.8 As used in this Plan of Merger,
Mercantile Superior Proposal
shall mean any bona fide written Mercantile Takeover Proposal that the Mercantile Board of Directors has determined in its good faith judgment, after consultation with its independent financial advisors and outside legal counsel, is reasonably
likely to be consummated in accordance with its terms and that is reasonably likely to result in the consummation of a transaction more favorable to the Mercantile Shareholders from a financial point of view than the Merger, taking into account
(a) all legal, regulatory and financial aspects of the proposal (including availability of financing and certainty of closing) and the Person making the proposal; and (b) any changes to the terms of this Plan of Merger proposed by
Firstbank in response to such proposal or otherwise. For purposes of the definition of Mercantile Superior Proposal, the references to 10% in the definition of Mercantile Takeover Proposal shall be deemed to be references to
50%.
5.6
Preparation of the Joint Proxy Statement and Registration Statement; Shareholders Meetings.
5.6.1 As promptly as practicable following the date of this Plan of Merger, Firstbank and Mercantile shall use commercially
reasonable efforts to: (a) jointly prepare and cause to be filed with the SEC a joint proxy statement to be sent to the Firstbank Shareholders and the Mercantile Shareholders relating to the Firstbank Shareholder Meeting and the Mercantile
Shareholder Meeting (together with any amendments or supplements thereto, the
Joint Proxy Statement
) and (b) jointly prepare and Mercantile shall cause to be filed with the SEC a Registration Statement on Form S-4
(the
Registration Statement
), in which the Joint Proxy Statement will be included as a prospectus, and Firstbank and Mercantile shall use their respective commercially reasonable efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after such filing and use all commercially reasonable efforts to keep the Registration Statement effective as long as reasonably necessary to consummate the Merger. Prior to the
filing of the Joint Proxy Statement or the Registration Statement, each of Firstbank and Mercantile shall consult with the other party with respect to such filings and shall afford the other party and its Representatives reasonable opportunity to
comment thereon. Each of Firstbank and Mercantile shall furnish all information concerning itself and its Affiliates to the other, and provide such other assistance, as may be reasonably requested in connection with the preparation, filing and
distribution of the Joint Proxy Statement and the Registration Statement, and the Joint Proxy Statement and the Registration Statement shall include all information reasonably requested by such other party to be included.
Each of Firstbank and Mercantile shall take any action (other than qualifying to do business in any jurisdiction in which it is not now
so qualified) required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or blue sky Laws and the rules and regulations thereunder in connection with the Merger and the issuance of
Mercantile Common Stock as Merger Consideration and under the Firstbank Stock Plans, and each of Firstbank and Mercantile shall furnish all information concerning itself, its Affiliates, and the Firstbank Shareholders and the Mercantile
Shareholders, as applicable (and rights to acquire Firstbank Common Stock pursuant to Firstbank Stock Plans or Mercantile Stock Plans, as applicable), as may be reasonably requested.
Each of Firstbank and Mercantile shall promptly provide to the other copies of all correspondence between it or its Representatives, on
the one hand, and the SEC, on the other hand, related to the Joint Proxy Statement or the Registration Statement. Each of Firstbank and Mercantile shall promptly notify the other upon the receipt of any comments from the SEC or any request from the
SEC for amendments or supplements to the Joint Proxy Statement or the Registration Statement and shall provide the other with copies of all such SEC comments or requests. Each of Firstbank and Mercantile shall use its commercially reasonable efforts
to respond to as promptly as practicable and resolve any comments from the SEC with respect to the Joint Proxy Statement or the Registration Statement.
Notwithstanding the foregoing, prior to filing the Registration Statement (or any amendment or supplement thereto) or mailing the Joint Proxy Statement (or any amendment or supplement thereto) or
responding to any comments of the SEC with respect thereto, each of Firstbank and Mercantile (a) shall provide the other an
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opportunity to review and comment on such document or response (including the proposed final version of such document or response), (b) shall include in such document or response all
comments reasonably proposed by the other and (c) shall not file or mail such document or respond to the SEC prior to receiving the approval of the other, which approval shall not be unreasonably withheld, conditioned or delayed. Each of
Firstbank and Mercantile shall advise the other, promptly after receipt of notice thereof, of the time of effectiveness of the Registration Statement, the issuance of any stop order relating thereto or the suspension of the registration or
qualification of the Merger Consideration for offering or sale in any jurisdiction, and each of Firstbank and Mercantile shall use its commercially reasonable efforts to have any such stop order or suspension lifted, reversed or otherwise
terminated. Each of the parties agree to correct any information provided by it for use in the Joint Proxy Statement or the Registration Statement that shall have become false or misleading in any material respect.
5.6.2 If, prior to the Effective Time, any event occurs with respect to Firstbank or any Firstbank Subsidiary, or any change occurs with
respect to other information supplied by Firstbank for inclusion in the Joint Proxy Statement or the Registration Statement, which is required to be described in an amendment of, or a supplement to, the Joint Proxy Statement or the Registration
Statement, Firstbank shall promptly notify Mercantile of such event, and Firstbank and Mercantile shall cooperate in the prompt filing with the SEC of any necessary amendment or supplement to the Joint Proxy Statement or the Registration Statement
and, as required by Law, in disseminating the information contained in such amendment or supplement to the Mercantile Shareholders and the Firstbank Shareholders.
5.6.3 If, prior to the Effective Time, any event occurs with respect to Mercantile or any Mercantile Subsidiary, or any change occurs with respect to other information supplied by Mercantile for inclusion
in the Joint Proxy Statement or the Registration Statement, which is required to be described in an amendment of, or a supplement to, the Joint Proxy Statement or the Registration Statement, Mercantile shall promptly notify Firstbank of such event,
and Mercantile and Firstbank shall cooperate in the prompt filing with the SEC of any necessary amendment or supplement to the Joint Proxy Statement or the Registration Statement and, as required by Law, in disseminating the information contained in
such amendment or supplement to the Mercantile Shareholders and the Firstbank Shareholders.
5.6.4 Firstbank shall, as soon as
practicable following the date of this Plan of Merger, duly call, give proper notice of, convene and hold a special meeting of the Firstbank Shareholders for the purpose of seeking the Firstbank Shareholder Approval (
Firstbank
Shareholder Meeting
). Firstbank shall use its commercially reasonable efforts to (a) cause the Joint Proxy Statement to be mailed to the Firstbank Shareholders and to hold the Firstbank Shareholder Meeting as promptly as
practicable after the Registration Statement is declared effective under the Securities Act and (b) except if the Firstbank Board of Directors shall have made a Firstbank Adverse Recommendation Change as permitted by
Section 5.4
,
solicit the Firstbank Shareholder Approval. Firstbank shall, through the Firstbank Board of Directors, recommend to the Firstbank Shareholders that they vote for the Firstbank Shareholder Approval and shall include such recommendation in the Joint
Proxy Statement, except to the extent that the Firstbank Board of Directors shall have made a Firstbank Adverse Recommendation Change as permitted by
Section 5.4
. Except as expressly contemplated by the two immediately preceding
sentences, Firstbank agrees that its obligations pursuant to this
Section 5.6
shall not be affected by the commencement, public proposal, public disclosure or communication to Firstbank of any Firstbank Takeover Proposal or by the making
of any Firstbank Adverse Recommendation Change by the Firstbank Board of Directors. For avoidance of doubt, in no event shall the making of a Firstbank Adverse Recommendation Change relieve Firstbank of any obligation to call, give proper notice of,
convene, and hold the Firstbank Shareholder Meeting, and to distribute, collect, tabulate and vote proxies for the Firstbank Shareholder Meeting, in each case to the extent generally consistent with past practice for Firstbank shareholder meetings.
Firstbank may adjourn or postpone the Firstbank Shareholder Meeting (i) to the extent necessary to ensure that any
necessary supplement or amendment to the Joint Proxy Statement is provided to the Firstbank Shareholders in advance of a vote on the Firstbank Shareholder Approval or (ii) if as of the time for which the
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Firstbank Shareholder Meeting is originally scheduled (as set forth in the Joint Proxy Statement) there are insufficient Firstbank Shareholders represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of such Firstbank Shareholder Meeting or there are insufficient votes to obtain the Firstbank Shareholder Approval, (A) at the request of Mercantile, Firstbank shall adjourn or postpone the
Firstbank Shareholder Meeting to a date no more than 10 Business Days later than the date of the initial Firstbank Shareholder Meeting;
provided
, that Mercantile may not request that Firstbank make such an adjournment or postponement more
than once and (B) Firstbank may adjourn or postpone the Firstbank Shareholder Meeting.
5.6.5 Mercantile shall, as soon
as practicable following the date of this Plan of Merger, duly call, give proper notice of, convene and hold a special meeting of the Mercantile Shareholders for the purpose of seeking the Mercantile Shareholder Approval (
Mercantile
Shareholder Meeting
). Mercantile shall use its commercially reasonable efforts to (a) cause the Joint Proxy Statement to be mailed to the Mercantile Shareholders and to hold the Mercantile Shareholder Meeting as promptly as
practicable after the Registration Statement is declared effective under the Securities Act and (b) except if the Mercantile Board of Directors shall have made a Mercantile Adverse Recommendation Change as permitted by
Section 5.5
,
solicit the Mercantile Shareholder Approval. Mercantile shall, through the Mercantile Board of Directors, recommend to the Mercantile Shareholders that they vote for the Mercantile Shareholder Approval and shall include such recommendation in the
Joint Proxy Statement, except to the extent that the Mercantile Board of Directors shall have made a Mercantile Adverse Recommendation Change as permitted by
Section 5.5
. Except as expressly contemplated by the two immediately preceding
sentences, Mercantile agrees that its obligations pursuant to this
Section 5.6
shall not be affected by the commencement, public proposal, public disclosure or communication to Mercantile of any Mercantile Takeover Proposal or by the
making of any Mercantile Adverse Recommendation Change by the Mercantile Board of Directors. For avoidance of doubt, in no event shall the making of a Mercantile Adverse Recommendation Change relieve Mercantile of any obligation to call, give proper
notice of, convene, and hold the Mercantile Shareholder Meeting, and to distribute, collect, tabulate and vote proxies for the Mercantile Shareholder Meeting, in each case to the extent generally consistent with past practice for Mercantile
shareholder meetings.
Mercantile may adjourn or postpone the Mercantile Shareholder Meeting (i) to the extent necessary
to ensure that any necessary supplement or amendment to the Joint Proxy Statement is provided to the Mercantile Shareholders in advance of a vote on the Mercantile Shareholder Approval or (ii) if as of the time for which the Mercantile
Shareholder Meeting is originally scheduled (as set forth in the Joint Proxy Statement) there are insufficient Mercantile Shareholders represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such
Mercantile Shareholder Meeting or there are insufficient votes to obtain the Mercantile Shareholder Approval, (A) at the request of Firstbank, Mercantile shall adjourn or postpone the Mercantile Shareholder Meeting to a date no more than 10
Business Days later than the date of the initial Mercantile Shareholder Meeting;
provided
, that Firstbank may not request that Mercantile make such an adjournment or postponement more than once and (B) Mercantile may adjourn or postpone
the Mercantile Shareholder Meeting.
5.6.6 Firstbank and Mercantile shall each use their commercially reasonable efforts to
hold the Firstbank Shareholder Meeting and Mercantile Shareholder Meeting on the same day at the same time.
5.7
Stock
Exchange Listing.
Mercantile shall use its commercially reasonable efforts to cause (a) the shares of Mercantile Common Stock to be issued as Merger Consideration and (b) the shares of Mercantile Common Stock to be reserved for
issuance upon the exercise, vesting or payment under any Converted Stock-Based Award, in each case to be approved for listing on NASDAQ, subject to official notice of issuance, prior to the Effective Time.
5.8
Regulatory Matters and Approvals.
5.8.1 As promptly as practicable following the execution of this Plan of Merger, each of Firstbank and Mercantile shall use commercially reasonable efforts to (a) take, or cause to be taken, all
appropriate action, and
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do, or cause to be done, all things necessary, proper or advisable under any applicable Law to consummate and make effective the Merger, the Bank Consolidation and the other transactions
contemplated by this Plan of Merger as promptly as reasonably practicable, (b) obtain from each applicable Governmental Entity any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by
Firstbank or Mercantile or any of their respective Subsidiaries, or to avoid any Action by any Governmental Entity (including those in connection with Applicable Banking Laws or Antitrust Laws), in connection with the authorization, execution and
delivery of this Plan of Merger and the consummation of the Merger, the Bank Consolidation and the other transactions contemplated herein, (c) make or cause to be made the applications or filings required to be made by Firstbank or Mercantile
or any of their respective Subsidiaries under or with respect to any Laws in connection with the authorization, execution and delivery of this Plan of Merger and the consummation of the Merger, the Bank Consolidation and the other transactions
contemplated herein, and to pay any fees due from it in connection with such applications or filings, as promptly as is reasonably practicable, (d) comply at the earliest practicable date with any request under or with respect to any such Laws
for additional information, documents or other materials received by Firstbank or Mercantile any of their respective Subsidiaries from any Governmental Entity in connection with such applications or filings or the Merger, the Bank Consolidation or
the other transactions contemplated by this Plan of Merger and (e) coordinate and cooperate with, submit to the other party for review and give due consideration to all reasonable additions, deletions or changes suggested by the other party in
connection with, making (i) any filing or application under or with respect to any such Laws, and (ii) any filings, conferences or other submissions related to resolving any investigation or other inquiry by any Governmental Entity.
Each of Firstbank and Mercantile shall, and shall cause their respective Affiliates to, furnish to the other party all
information reasonably necessary for any such application or other filings to be made in connection with the Merger, the Bank Consolidation or other transactions contemplated by this Plan of Merger, including all Banking Filings. Each of Firstbank
and Mercantile shall promptly inform the other party of any communication with, and any proposed understanding, undertaking or agreement with, any Governmental Entity regarding any such application or filing. If Firstbank or Mercantile intends to
independently participate in any meeting with any Governmental Entity in respect of any such filings, investigation or other inquiry, then Firstbank or Mercantile, as applicable, shall give the other party reasonable prior notice of, and the
opportunity to participate in, such meeting. The parties shall coordinate and cooperate with one another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party in connection with all meetings, actions and proceedings under or relating to any such application or filing.
5.8.2 As promptly as reasonably practicable following the date of this Plan of Merger, Mercantile shall, at its own expense, make all reasonably necessary filings with the Federal Reserve Board and other
applicable banking regulatory authorities under applicable banking Laws (the
Applicable Banking Laws
) in order to obtain the necessary authorizations, approvals and consents in order to consummate the Merger, the Bank
Consolidation and the other transactions contemplated by this Plan of Merger (collectively, the
Banking Filings
). In connection therewith, the parties shall use, and shall cause their respective Subsidiaries to use,
commercially reasonable efforts to promptly resolve any objections and respond to any inquiries that may arise in connection with any of the Banking Filings. Each party will furnish all information, including certificates, consents and opinions of
experts reasonably requested by the other party for the preparation of the Banking Filings and will advise each other and their respective counsel about any significant developments with respect to the Banking Filings and the status of the approvals
being sought, in each case subject to applicable Laws relating to the confidentiality of information. Each of the parties shall have the right to review a reasonable time in advance of any filing deadline all Banking Filings and related submissions
and written communications to any applicable Governmental Entity, which approval shall not be unreasonably withheld, conditioned or delayed.
5.8.3 Firstbank and Mercantile shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, commercially
reasonable efforts to obtain any third party consents necessary, proper or advisable to consummate the transactions contemplated by
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this Plan of Merger. Firstbank and Mercantile shall coordinate and cooperate in determining whether any actions, consents, approvals or waivers are required to be obtained from parties to any
Firstbank Material Contracts or Mercantile Material Contracts in connection with consummation of the Merger or the other transactions contemplated by this Plan of Merger and in seeking any such actions, consents, approvals or waivers. Except as
expressly provided in
Article VI
, no such actions, consents, approvals or waivers shall constitute conditions to Closing. In the event that either party fails to obtain any third party consent described in the first sentence of this
Section 5.8.3
, such party shall use commercially reasonable efforts, and shall take any such actions reasonably requested by the other party hereto, to mitigate any adverse effect upon Firstbank and Mercantile, their respective
Subsidiaries, and their respective businesses resulting, or, with respect to the Surviving Corporation and its Subsidiaries, which could reasonably be expected to result after the Effective Time, from the failure to obtain such consent.
5.8.4 From the date of this Plan of Merger until the Effective Time, each of Firstbank and Mercantile shall promptly notify the other
party in writing of any pending or, to the Knowledge of Firstbank or Mercantile (as the case may be), threatened Action or Order by any Governmental Entity or any other Person (a) challenging or seeking material damages in connection with the
Merger or the other transactions contemplated by this Plan of Merger or (b) seeking to restrain or prohibit the consummation of the Merger or the other transactions contemplated by this Plan of Merger.
5.8.5 If any Action or Order is instituted (or threatened to be instituted) challenging any of the transactions contemplated by this Plan
of Merger as violative of any Law, each of Firstbank and Mercantile shall, and shall cause their respective Representatives to, cooperate and use their commercially reasonable efforts to contest and resist, except insofar as Firstbank and Mercantile
may otherwise agree, any such Action or Order, including any Action or Order that seeks a temporary restraining order or preliminary injunction that would prohibit, prevent or restrict consummation of the Merger or the other transactions
contemplated by this Plan of Merger.
5.8.6 Nothing contained in this Plan of Merger shall give Firstbank, directly or
indirectly, the right to control or direct the operations of Mercantile or give Mercantile, directly or indirectly, the right to control or direct the operations of Firstbank prior to the Effective Time. Prior to the Effective Time, subject to
Sections 5.1 and 5.2
, as applicable, Firstbank and Mercantile each shall exercise, consistent with the terms and conditions of this Plan of Merger, complete control and supervision over their respective business operations.
5.8.7 Each of Firstbank and Mercantile shall, and shall cause their respective Subsidiaries to, take all commercially reasonable and
lawful actions as may be necessary or appropriate to transfer, or to allow for the Surviving Corporation to utilize after the Effective Time, or obtain, as permitted by Law, all Permits appropriate or necessary to continue the business of Firstbank
and Mercantile and their respective Subsidiaries as currently conducted.
5.9
Bank Consolidation.
Upon
Mercantiles request and contingent upon the Closing, Firstbank and its Subsidiaries shall cooperate with Mercantile to prepare documentation for a consolidation of Firstbank, a Michigan state-chartered bank, and Keystone Community Bank, a
Michigan state-chartered bank (the
Firstbank Banks
) with and into Mercantile Bank of Michigan, a Michigan state-chartered bank (the
Bank Consolidation
), in accordance with the provisions of, and
with the effect provided under, the Michigan Banking Code and applicable Law and to take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under the Michigan Banking Code and
applicable Law to consummate the Bank Consolidation, including obtaining approval of all relevant Governmental Entities. The Bank Consolidation shall be consummated at or after the Effective Time at such time as Mercantile shall determine. Firstbank
and Mercantile shall, as the sole shareholders of the Firstbank Banks and Mercantile Bank, respectively, approve, adopt, execute, and deliver (as applicable) the Bank Consolidation, the Bank Consolidation agreement and any other documents necessary
to consummate the Bank Consolidation and take other reasonable steps prior to the Effective Time to consummate the Bank Consolidation. Neither party shall be required to take any irrevocable action in connection with its obligations under this
Section 5.9
.
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5.10
Governance Matters.
5.10.1 Mercantile shall take all requisite action, effective as of the Effective Time, (a) to cause the size of the Board of
Directors of the Surviving Corporation to be six directors, and (b) to cause the members of the Board of Directors of the Surviving Corporation to be comprised of (i) the President and Chief Executive Officer of Firstbank plus two members
of the Firstbank Board of Directors as of the date of this Plan of Merger who are independent for purposes of the rules of NASDAQ (at least one of whom shall be an audit committee financial expert as defined in Item 407(d)(5) of
Regulation S-K under the Exchange Act) selected by the Firstbank Board of Directors (the
Firstbank Designees
), and (ii) the President and Chief Executive Officer of Mercantile plus two members of the Mercantile Board
of Directors as of the date of this Plan of Merger who are independent for purposes of the rules of NASDAQ (at least one of whom shall be an audit committee financial expert as defined in Item 407(d)(5) of Regulation S-K under the
Exchange Act) selected by the Mercantile Board of Directors (the
Mercantile Designees
). If any such Firstbank Designee or Mercantile Designee, as applicable, is unwilling, ineligible or otherwise not capable or qualified to
act in such capacity, the current Firstbank Board of Directors or Mercantile Board of Directors, as applicable, shall prior to the Effective Time, subject to the prior written consent of Firstbank or Mercantile, as applicable (which shall not be
unreasonably withheld, conditioned or delayed), designate another qualified person or persons to serve as a Firstbank Designee or Mercantile Designee, as applicable, in each case to serve for a term expiring on the earlier of his or her death,
resignation or removal or the next annual meeting of shareholders of the Surviving Corporation, and, despite the expiration of his or her term, until his or her successor has been elected and qualified or there is a decrease in the size of the Board
of Directors of the Surviving Corporation.
5.10.2 Effective as of the Effective Time, (a) the President and Chief
Executive Officer of Firstbank will serve as Chairman of the Board of Directors of the Surviving Corporation for one year following the date of the Effective Time, (b) the President and Chief Executive Officer of Mercantile will serve as the
President and Chief Executive Officer of the Surviving Corporation; (c) the Chief Operating Officer of Mercantile will serve as an Executive Vice President and Chief Operating Officer of the Surviving Corporation, (d) the Chief Financial
Officer of Mercantile will serve as a Senior Vice President and Chief Financial Officer of the Surviving Corporation, and (e) the Chief Financial Officer of Firstbank will serve as an Executive Vice President of the Surviving Corporation.
5.10.3 If the Bank Consolidation is not consummated at the Effective Time, (a) the directors of the Firstbank Banks
immediately prior to the Effective Time shall continue to be the directors of the Firstbank Banks after the Effective Time, and (b) the directors of Mercantile Bank immediately prior to the Effective Time shall continue to be the directors of
Mercantile Bank after the Effective Time, in each case until the effective time of the Bank Consolidation. Mercantile shall take all requisite action, effective as of the effective time of the Bank Consolidation, to cause the members of the
Board of Directors of Mercantile Bank to be comprised of all of the incumbent members of the Board of Directors of Mercantile Bank and an equal number of members (i) from the incumbent members of the Boards of Directors of the Firstbank Banks
or (ii) any individual otherwise qualified to serve as a director of Mercantile Bank, as designated by Firstbank prior to the Effective Time, if the effective time of the Bank Consolidation occurs simultaneously with the Effective Time, or by
the Chairman of the Surviving Corporation, if the effective time of the Bank Consolidation occurs after the Effective Time, in each case subject to the consent of Mercantile (which consent shall not be unreasonably withheld, delayed or conditioned).
5.11
Press Releases and Public Announcement.
Neither Firstbank nor Mercantile will issue any press release or make any
public announcement relating to this Plan of Merger, the Merger or the other transactions contemplated by this Plan of Merger without the prior written approval of, in the case of Firstbank, Mercantile, and in the case of Mercantile, Firstbank.
However, each party may issue any such press release or make such public announcement, including with respect to actions contemplated by
Sections 5.1
and
5.2
, as applicable, it believes in good faith is required to be made by
applicable Law or any applicable rule or regulation promulgated by any applicable securities exchange after consultation with outside legal counsel, in which case the disclosing party will use its commercially reasonable efforts to advise and
consult with the other party regarding any such
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press release or other announcement prior to making any such disclosure. Notwithstanding the foregoing, nothing in this
Section 5.11
shall be deemed to expand, modify or limit
Firstbanks and Mercantiles rights and obligations set forth in
Sections 5.4
and
5.5
, as applicable. Firstbank and Mercantile agree to issue a joint press release initially announcing this Plan of Merger and the transactions
contemplated by this Plan of Merger, including the Merger.
5.12
Access to Information.
5.12.1 Subject to applicable Law, during the period commencing on the date of this Plan of Merger and ending at the earlier of the
Effective Time and the termination of this Plan of Merger in accordance with
Article VII
, Firstbank and Mercantile will, and will cause each of their Subsidiaries to, upon reasonable prior written notice, permit the other party and its
respective Representatives to have reasonable access (including promptly and fully responding to all reasonable document or other information requests of the other party) at all reasonable times, and in a manner so as not to interfere with the
normal business operations of Firstbank, Mercantile and each of their Subsidiaries, to the officers and senior management, the premises, agents, books, records, and Contracts of or pertaining to Firstbank and the Firstbank Subsidiaries or Mercantile
and the Mercantile Subsidiaries as may be reasonably requested in writing;
provided
,
however
, that such access will (a) comply with all applicable Laws, (b) not result in, or reasonably be expected to result in, the waiver of
the attorney-client privilege, or (c) not result in, or reasonably be expected to result in, a material breach of any material Contract. No such access shall affect the representations, warranties, covenants or agreements of the parties (or the
remedies with respect thereto) or the conditions to the obligations of the parties under this Plan of Merger. Firstbank and Mercantile will use commercially reasonable efforts to obtain from third parties any consents or waivers of any
confidentiality restrictions with respect to any such information requested to be provided by it.
5.12.2 Firstbank will give
prompt written notice to Mercantile of any event that would reasonably be expected to give rise to a Firstbank Material Adverse Effect. Mercantile will give prompt written notice to Firstbank of any event that would reasonably be expected to give
rise to a Mercantile Material Adverse Effect. Each of Firstbank and Mercantile will give prompt written notice to the other party of (a) any notice or other communication received by such party from any Governmental Entity or other Person in
connection with the transactions contemplated by this Plan of Merger or from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Plan of Merger and (b) any Actions
commenced or, to the knowledge of such party, threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which relate to this Plan of Merger or any of the transactions contemplated by this Plan of
Merger. The delivery of any notice pursuant to this
Section 5.12.2
will not limit, expand or otherwise affect the remedies available hereunder (if any) to the party receiving such notice.
5.12.3 While this Plan of Merger is in effect, if either Firstbank or Mercantile becomes aware of any facts or the occurrence or
impending occurrence of any event that (a) would cause one or more of the representations and warranties it has given in
Article III
or
IV
, respectively, subject to the exceptions contained in the Firstbank Disclosure Letter or
the Mercantile Disclosure Letter, respectively, to become untrue or incomplete in any material respect; or (b) would have caused one or more of such representations and warranties to be untrue or incomplete in any material respect had such
facts been known or had such event occurred prior to the date of this Plan of Merger, then such party shall immediately give detailed written notice of such discovery or change, including a detailed description of the underlying facts or events,
together with all pertinent documents, to the other party.
5.12.4 Each of Firstbank, on the one hand, and Mercantile, on the
other hand, will, and will cause their respective Representatives to, hold and treat in confidence all documents and information concerning the other party and its Subsidiaries furnished to the applicable party or their respective Representatives in
connection with the transactions contemplated by this Plan of Merger in accordance with the letter agreement, dated October 30, 2012, between Firstbank and Mercantile (
Confidentiality Agreement
), which shall remain in
full force and effect in accordance with its terms.
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5.13
Indemnification and Insurance.
5.13.1 All rights to exculpation, indemnification and advancement of expenses now existing in favor of the current or former directors
and officers, as the case may be, of Firstbank or the Firstbank Subsidiaries as provided in their respective articles of incorporation or bylaws or other organization documents or in the existing indemnity agreements with Firstbank or any of the
Firstbank Subsidiaries shall survive the Merger and, except as otherwise expressly provided in this
Section 5.13
, shall continue in full force and effect in accordance with their terms. For a period of six years from the Effective Time,
the Surviving Corporation, subject to compliance with applicable Law, shall maintain in effect exculpation, indemnification and advancement of expenses provisions that are no less favorable to officers and directors than those set forth in the
articles of incorporation and bylaws or similar organization documents of Firstbank and the Firstbank Subsidiaries in effect immediately prior to the date of this Plan of Merger, and, subject to compliance with applicable Law, shall not amend,
repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any individuals who at the Effective Time were current or former directors, officers or employees of Firstbank or any of the Firstbank
Subsidiaries. All rights to indemnification or advancement of expenses in respect of any Action pending or asserted or any claim made within such period shall continue until the disposition of such Action or resolution of such claim.
5.13.2 From and after the Effective Time and until the sixth anniversary of the Effective Time, the Surviving Corporation shall indemnify
and hold harmless to the fullest extent permitted under applicable Law, each current or former director or officer of Firstbank or any of the Firstbank Subsidiaries (each, together with such persons heirs, executors or administrators, an
Indemnified Party
) against any costs or expenses (including advancing attorneys fees and expenses in advance of the final disposition of any claim, suit, proceeding or investigation to each Indemnified Party to the
fullest extent permitted by Law and following receipt of any undertaking required by applicable Law), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened Actions, arising
out of, relating to or in connection with any action or omission occurring or alleged to have occurred at or before the Effective Time in such Indemnified Partys capacity as a director or officer of Firstbank or any of the Firstbank
Subsidiaries or in such Indemnified Partys capacity as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise at the request or for the
benefit of Firstbank or any Firstbank Subsidiary, including in connection with the transactions contemplated by this Plan of Merger. All rights to indemnification or advancement of expenses in respect of any Action pending or asserted or any claim
made within such period shall continue until the disposition of such Action or resolution of such claim. In the event of any such Action, the Surviving Corporation shall reasonably cooperate with the Indemnified Party in the defense of the Action.
5.13.3 The Surviving Corporation shall maintain in effect for not less than six years from the Effective Time the current
policies of directors and officers liability insurance and fiduciary liability insurance maintained by Firstbank and the Firstbank Subsidiaries for the Indemnified Parties prior to the Effective Time with respect to matters occurring at
or prior to the Effective Time, including the transactions contemplated by this Plan of Merger. Alternatively, the Surviving Corporation may substitute therefor policies of substantially the same coverage containing terms and conditions that, taken
as a whole, are no less advantageous to the Indemnified Parties. After the Effective Time, the Surviving Corporation shall not be required to pay annual premiums for insurance coverages in excess of 300% of the last annual premium (such 300%
threshold, the
Maximum Amount
) paid by Firstbank prior to the date of this Plan of Merger in respect of the coverages required to be obtained pursuant to this
Section 5.13.3
, but in such case shall purchase the
greatest coverage available for a cost not exceeding the Maximum Amount. Alternatively, the Surviving Corporation may purchase at or after the Effective Time, at a cost not exceeding three times the Maximum Amount, a six-year prepaid
tail policy on terms and conditions providing substantially equivalent benefits as the current policies of directors and officers liability insurance and fiduciary liability insurance maintained by Firstbank and the Firstbank
Subsidiaries for the Indemnified Parties with respect to matters occurring at or prior to the Effective Time,
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including the transactions contemplated by this Plan of Merger. If such tail prepaid policy has been obtained, the Surviving Corporation shall maintain it in full force and effect for
its full term and honor all obligations thereunder.
5.13.4 The rights of each Indemnified Party hereunder shall be in
addition to, and not in limitation of, any other rights such person may have under the articles of incorporation or bylaws or other organization documents of Firstbank or any of the Firstbank Subsidiaries or the Surviving Corporation, any other
indemnification arrangement, the MBCA, directors and officers insurance claims under any policy that is or has been in existence with respect to Firstbank or the Firstbank Subsidiaries or otherwise. The provisions of this
Section 5.13
shall survive the consummation of the Merger and expressly are intended to benefit, and are enforceable by, each of the Indemnified Parties, each of whom is a third-party beneficiary of this
Section 5.13
.
5.13.5 In the event that the Surviving Corporation or its successors or assigns (a) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (b) transfers all or substantially all of its properties and assets to any Person, in each case, proper provision shall be made
so that the successors and assigns of the Surviving Corporation, as the case may be, shall assume the obligations set forth in this
Section 5.13
.
5.14
Takeover Laws.
If any moratorium, control share, fair price, affiliate transaction, business combination or other anti-takeover Law
is or may become applicable to the Merger, the parties shall use their respective commercially reasonable efforts to (a) take such actions as are reasonably necessary so that the transactions contemplated hereunder may be consummated as
promptly as practicable on the terms contemplated by this Plan of Merger and (b) otherwise take all such actions as are reasonably necessary to eliminate or minimize the effects of any such Law on the Merger and the transactions contemplated by
this Plan of Merger.
5.15
Section 16 Matters.
Prior to the Effective Time, Firstbank and Mercantile each shall
take all such steps as may be required to cause (a) any dispositions of Firstbank Common Stock (including derivative securities with respect to Firstbank Common Stock and Awards) resulting from the Merger and the other transactions contemplated
by this Plan of Merger, by each individual who will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Firstbank immediately prior to the Effective Time, to be exempt under Rule 16b-3 promulgated under
the Exchange Act and (b) any acquisitions or dispositions of Mercantile Common Stock (including derivative securities with respect to Mercantile Common Stock and Converted Stock-Based Awards) resulting from the Merger and the other transactions
contemplated by this Plan of Merger, by each individual who may become or is reasonably expected to become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Mercantile immediately following the Effective
Time, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
5.16
Stock Purchase Plans.
Effective as of the
date of this Plan of Merger, each of Firstbank and Mercantile shall take all necessary action to suspend their respective employee or director stock purchase plans, and all monies contributed for the purchase of stock pursuant to such plans that
have not been so applied to the purchase of stock shall promptly be refunded to participants.
5.17
Securityholder
Litigation.
Each party shall keep the other parties reasonably informed with respect to the defense or settlement of any securityholder Action against it or its directors or officers relating to the Merger or the other transactions contemplated
by this Plan of Merger. Each party shall give the other party the opportunity to consult with it regarding the defense or settlement of any such securityholder Action and shall not settle any such Action without the other partys prior written
consent (such consent not to be unreasonably withheld, conditioned or delayed).
5.18
Tax-Free Reorganization
Treatment.
5.18.1 Firstbank and Mercantile intend that the Merger will qualify as a reorganization under
Section 368(a) of the Code (the
Intended Tax Treatment
), and each shall not, and shall not permit any of their
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respective Subsidiaries to, take any action, or fail to take any action, that would reasonably be expected to jeopardize the qualification of the Merger as a reorganization under
Section 368(a) of the Code. Firstbank and Mercantile shall use commercially reasonable efforts, and shall cause their respective Subsidiaries to use commercially reasonable efforts, to cause the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code, including providing reasonable and customary representations, covenants and certificates requested by counsel under
Sections 6.2.5
and
6.3.5
. Within 45 days following the Effective Time, the
Surviving Corporation shall comply with the reporting requirements of Section 1.6045B-1(a)(2) of the Treasury Regulations.
5.18.2 Each of Firstbank and Mercantile shall report the Merger as a reorganization within the meaning of Section 368(a) of the Code
on its United States federal income Tax Return, unless otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code.
5.19
Pre-Merger Special Dividend
. The Mercantile Board of Directors may, subject to applicable Law and the Mercantile articles of incorporation and bylaws, declare a special cash dividend in an
amount equal to $2.00 per share of Mercantile Common Stock (subject to customary adjustments for any stock dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar event following the date of this
Plan of Merger) with a record date and payment date after the satisfaction of the conditions set forth in
Sections 6.1
,
6.2
and
6.3
(other than those conditions that by their nature are to be satisfied by actions taken at the
Closing but which conditions would be satisfied (including the delivery of officers certificates without qualifications or exceptions) if such date were the Closing Date (any such dividend, the
Pre-Merger Special
Dividend
), and set the record date and payment date for such Pre-Merger Special Dividend in its sole discretion.
5.20
Dividends.
Firstbank and Mercantile shall coordinate with each other regarding the declaration, setting of record dates, and
payment dates of dividends with respect to shares of Firstbank Common Stock and Mercantile Common Stock for the purpose of minimizing the risk that holders of shares of Firstbank Common Stock (a) in respect of any calendar quarter, receive
dividends on both shares of Firstbank Common Stock and shares of Mercantile Common Stock received as Merger Consideration or (b) in respect of any calendar quarter, fail to receive a dividend on shares of Firstbank Common Stock or shares of
Mercantile Common Stock received as Merger Consideration.
5.21
Trust Preferred Securities.
Upon the Effective Time,
the Surviving Corporation shall assume (a) the due and punctual performance and observance of all covenants and conditions to be performed or observed by Firstbank under, and (b) the due and punctual payment of the principal of and
premium, if any, and interest on all of the debt securities issued pursuant to, the Indenture, dated October 12, 2004, between Firstbank and Wilmington Trust Company, as Trustee, the Indenture, dated January 20, 2006, between Firstbank and
Wells Fargo Corporate Trust Company, as Trustee, and each of two Indentures, dated July 30, 2007 between Firstbank and Wilmington Trust Company, as Trustee. In connection therewith, the Surviving Corporation shall execute and deliver any
supplemental indentures in form reasonably acceptable to the Surviving Corporation, and the parties hereto shall provide any opinions of counsel and officers certificates to such Trustees, required to make such assumptions effective.
5.22
Expenses.
Whether or not the Merger is consummated, except as otherwise provided in this Plan of Merger, all
costs and expenses incurred in connection with this Plan of Merger and the transactions contemplated by this Plan of Merger shall be paid by the party incurring such expenses, except that Firstbank and Mercantile shall each pay and bear one-half of
(a) each regulatory filing, notification, registration or similar fee required to be paid by any party in connection with this Plan of Merger and the transactions contemplated by this Plan of Merger under the Securities Act, the Exchange Act,
Applicable Banking Laws and other applicable Laws and (b) any fees and expenses (excluding each partys internal costs and fees and expenses of attorneys, accountants and financial and other advisors) incurred in respect of printing,
filing and mailing of the Joint Proxy Statement and the Registration Statement.
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5.23
Fairness Opinion.
Firstbank will use commercially reasonable efforts to deliver
to Mercantile a copy of a written fairness opinion dated as of the date of this Agreement and received from the Firstbank Investment Banker within ten Business Days of the date of this Plan of Merger together with the form of consent of the
Firstbank Investment Banker to permit the inclusion of the text of its written opinion in its entirety in the Joint Proxy Statement, so long as the Firstbank Investment Banker and its counsel have approved any summary of, or other description of,
its written opinion in the Joint Proxy Statement in advance of its filing with the SEC. Mercantile will use commercially reasonable efforts to deliver to Firstbank a copy of a written fairness opinion dated as of the date of this Agreement and
received from the Mercantile Investment Banker within ten Business Days of the date of this Plan of Merger together with the form of consent of the Mercantile Investment Banker to permit the inclusion of the text of its written opinion in its
entirety in the Joint Proxy Statement, so long as the Mercantile Investment Banker and its counsel have approved any summary of, or other description of, its written opinion in the Joint Proxy Statement in advance of its filing with the SEC.
5.24
Years of Service Credit.
Mercantile covenants and agrees that all employees of Firstbank who are employed by
Mercantile or any of its Affiliates as of the Effective Time and as a result of the consummation of the Merger shall receive credit for all years of service credited, as of immediately before the Effective Time, to the employee by Firstbank or any
Firstbank Subsidiary in the ordinary course of business consistent with past practice for all purposes, including, without limitation, for purposes of eligibility to participate, vesting credit, entitlement to benefits, and levels of benefits of any
Mercantile Benefit Plan (including, but not limited to, Mercantiles 401(k) plan) or any other employee benefit plan of the Surviving Corporation, and for purposes of determining seniority in connection with employment with the Surviving
Corporation and its Affiliates.
5.25
Employee Severance.
Mercantile will pay severance payments as set forth in
Section 5.25 of the Mercantile Disclosure Letter.
5.26
Dividend Reinvestment Plans.
Each of Firstbank and
Mercantile shall take all requisite action to suspend its dividend reinvestment plan effective as of the date of this Plan of Merger and until the earlier of the Effective Time or the termination of this Plan of Merger pursuant to
Section 7.1.
Firstbank shall take all requisite action to terminate its dividend reinvestment plan effective as of the Effective Time.
ARTICLE VI
CLOSING CONDITIONS
6.1
Conditions to Each Partys Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger
are subject to the fulfillment (or waiver by Firstbank and Mercantile) at or prior to the Effective Time of the following conditions:
6.1.1 The Firstbank Shareholder Approval and the Mercantile Shareholder Approval shall have been obtained.
6.1.2 Firstbank and Mercantile shall have received all regulatory approvals required in connection with the transactions contemplated by this Plan of Merger, all applicable notice periods and waiting
periods shall have expired, and all such regulatory approvals shall be in effect;
provided
, that no such regulatory approvals shall contain any non-standard conditions, restrictions or requirements that would, after the Effective Time, have,
or be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the Surviving Corporation (after giving effect to the Merger) in the reasonable opinion of Firstbank or Mercantile.
6.1.3 No provision of any applicable Law making illegal or otherwise prohibiting the consummation of the Merger shall be in effect and no
temporary, preliminary or permanent restraining Order preventing the consummation of the Merger will be in effect.
6.1.4
Neither party shall be subject to any Order of a court or agency of competent jurisdiction that enjoins or prohibits the consummation of the Merger.
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6.1.5 The Registration Statement shall have become effective under the Securities Act, no
stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceedings for that purpose shall have been commenced or threatened by the SEC.
6.1.6 The shares of Mercantile Common Stock to be issued as Merger Consideration shall have been authorized for listing on NASDAQ,
subject to official notice of issuance.
6.2
Conditions to Firstbanks Obligation to Effect the Merger.
The obligation of Firstbank to effect the Merger is subject to the fulfillment (or waiver by Firstbank) at or prior to the
Effective Time of the following additional conditions:
6.2.1(a) The representations and warranties of Mercantile set
forth in this Plan of Merger (other than
Sections 4.1.1, 4.2, 4.3.1, 4.3.2
, and
4.4
) will be true and correct (without giving effect to any limitation as to materiality or Mercantile Material Adverse Effect
contained therein) as of the Closing Date as though made as of such date (except to the extent such representations and warranties speak as of another time, in which case such representations and warranties will be true and correct as of such other
time), except where the failure of such representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a Mercantile Material Adverse Effect,
provided
,
however
, that a failure of the condition set forth in
Section 6.1.2
to be satisfied shall not be deemed a Mercantile Material Adverse Effect for the purpose of this
Section 6.2.1
,
(b) the representations and
warranties of Mercantile set forth in
Sections 4.2, 4.3.1, 4.3.2
and
4.4
will be true and correct in all but de minimus respects as of the Closing Date as though made as of the Closing Date (except to the extent such
representations and warranties speak as of another time, in which case such representations and warranties will be true and correct in all but de minimus respects as of such other time), and (c) the representations and warranties of Mercantile
set forth in
Section 4.1.1
will be true and correct as of the Closing Date as though made as of such date in all material respects.
6.2.2 Mercantile shall have performed in all material respects all of the covenants required to be performed by it under this Plan of Merger at or prior to the Closing Date.
6.2.3 Mercantile shall have delivered to Firstbank a certificate, dated as of the Closing Date and signed on behalf of Mercantile by its
Chief Executive Officer or Chief Financial Officer certifying to the effect that the conditions set forth in
Sections 6.2.1
and
6.2.2
have been satisfied.
6.2.4 Since December 31, 2012, there has not been any change, state of facts, event, development or effect that has had, or would reasonably be expected to have, individually or in the aggregate, a
Mercantile Material Adverse Effect;
provided, however,
that a failure of the condition set forth in
Section 6.1.2
to be satisfied shall not be deemed a Mercantile Material Adverse Effect for purposes of this
Section
6.2.4
.
6.2.5 Firstbank shall have received the opinion of Varnum LLP, acting as counsel to Firstbank, on the basis
of certain facts, representations and assumptions set forth in such opinion, dated the Closing Date, a copy of which shall be furnished to Mercantile, to the effect that the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such opinion, such counsel shall be entitled to receive and rely upon customary representations of officers of Firstbank and Mercantile as to such matters as such counsel may
reasonably request.
6.3
Conditions to Mercantiles Obligation to Effect the Merger.
The obligation of Mercantile to effect the Merger is subject to the fulfillment (or waiver by Mercantile) at or prior to the Effective
Time of the following additional conditions:
6.3.1(a) The representations and warranties of Firstbank set forth in this
Plan of Merger (other than
Sections 3.1.1, 3.2, 3.3.1, 3.3.2
, and
3.4
) will be true and correct (without giving effect to any limitation as to
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materiality or Firstbank Material Adverse Effect contained therein) as of the Closing Date as though made as of such date (except to the extent such representations and
warranties speak as of another time, in which case such representations and warranties will be true and correct as of such other time), except where the failure of such representations and warranties to be so true and correct does not have, and
would not reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect,
provided
,
however
, that a failure of the condition set forth in
Section 6.1.2
to be satisfied shall not be
deemed a Firstbank Material Adverse Effect for the purpose of this
Section 6.3.1
, (b) the representations and warranties of Firstbank set forth in
Sections 3.2, 3.3.1, 3.3.2
and
3.4
will be true and correct in all but
de minimus respects as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties speak as of another time, in which case such representations and warranties will be true and correct in all
but de minimus respects as of such other time), and (c) the representations and warranties of Firstbank set forth in
Section 3.1.1
will be true and correct as of the Closing Date as though made as of such date in all material
respects.
6.3.2 Firstbank shall have performed in all material respects all of the covenants required to be performed by it
under this Plan of Merger at or prior to the Closing Date.
6.3.3 Firstbank shall have delivered to Mercantile a certificate,
dated as of the Closing Date and signed on behalf of Firstbank by its Chief Executive Officer or Chief Financial Officer certifying to the effect that the conditions set forth in S
ections 6.3.1
and
6.3.2
have been satisfied.
6.3.4 Since December 31, 2012, there has not been any change, state of facts, event, development or effect that has had,
or would reasonably be expected to have, individually or in the aggregate, a Firstbank Material Adverse Effect;
provided
,
however
, that a failure of the condition set forth in
Section 6.1.2
to be satisfied shall not be
deemed a Firstbank Material Adverse Effect for purposes of this
Section 6.3.4
.
6.3.5 Mercantile shall have received
the opinion of Warner Norcross & Judd LLP, acting as counsel to Mercantile, on the basis of certain facts, representations and assumptions set forth in such opinion, dated the Closing Date, a copy of which shall be furnished to Firstbank,
to the effect that the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, such counsel shall be entitled to receive and rely upon customary
representations of officers of Firstbank and Mercantile as to such matters as such counsel may reasonably request.
ARTICLE
VII
TERMINATION
7.1
Termination of Plan of Merger.
Notwithstanding anything contained in this Plan of Merger to the contrary, this Plan of Merger may be terminated and the Merger may be abandoned at any time prior
to the Effective Time, whether before or, subject to the terms of this Plan of Merger, after receipt of the Firstbank Shareholder Approval or the Mercantile Shareholder Approval (the date of such termination, the
Termination
Date
), as follows:
7.1.1 by mutual written consent of Firstbank and Mercantile;
7.1.2 by either Firstbank or Mercantile, if any Governmental Entity has issued an Order or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the Merger and such Order or other action is final and nonappealable. The right to terminate this Plan of Merger pursuant to this
Section 7.1.2
shall not be available to the party
seeking to terminate if (a) the failure of Firstbank, in the case of a termination by Firstbank, or (b) the failure of Mercantile, in the case of a termination by Mercantile, to perform any of its obligations under this Plan of Merger
required to be performed at or prior to the Effective Time has been a substantial cause of, or a substantial factor that resulted in, the issuance of such an Order or the taking of such an action;
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7.1.3 by either Firstbank or Mercantile, if the Merger does not occur on or before
March 31, 2014 (the
End Date
);
provided
,
however
, that the right to terminate this Plan of Merger pursuant to this
Section 7.1.3
shall not be available to the party seeking to terminate if
(a) the failure of Firstbank, in the case of a termination by Firstbank, or (b) the failure of Mercantile, in the case of a termination by Mercantile, to perform any of its obligations under this Plan of Merger required to be performed at
or prior to the Effective Time has been a substantial cause of, or a substantial factor that resulted in, the failure of the Effective Time to occur on or before the End Date;
7.1.4 by either Firstbank or Mercantile (a) if the Firstbank Shareholder Meeting (including any postponements or adjournments) shall
have concluded and been finally adjourned and the Firstbank Shareholder Approval shall not have been obtained or (b) if the Mercantile Shareholder Meeting (including any postponements or adjournments) shall have concluded and been finally
adjourned and the Mercantile Shareholder Approval shall not have been obtained. The right to terminate this Plan of Merger pursuant to this
Section 7.1.4
shall not be available to the party seeking to terminate if (i) the failure of
Firstbank, in the case of a termination by Firstbank, or (ii) the failure of Mercantile, in the case of a termination by Mercantile, to perform any of its obligations under this Plan of Merger required to be performed at or prior to the
Firstbank Shareholder Meeting or the Mercantile Shareholder Meeting, as applicable, has been a substantial cause of, or a substantial factor that resulted in, the Firstbank Shareholder Approval or the Mercantile Shareholder Approval, as applicable,
not having been obtained;
7.1.5 by Firstbank, if Mercantile shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements contained in this Plan of Merger, which breach or failure to perform (a) would result in a failure of a condition set forth in
Section 6.1
or
6.2
and
(b) (i) cannot be cured by the End Date or (ii) if capable of being cured by the End Date, shall not have been cured within 30 Business Days following receipt of written notice (which notice shall specify in reasonable detail the
nature of such breach or failure and Firstbanks intention to terminate this Plan of Merger if such breach or failure is not cured) from Firstbank of such breach or failure;
provided
, that Firstbank shall not have a right to terminate
this Plan of Merger pursuant to this
Section 7.1.5
if it is then in breach of any representations, warranties, covenants or other agreements contained in this Plan of Merger that would result in a failure of a condition set forth in
Section 6.1
or
6.3
;
7.1.6 by Mercantile, if Firstbank shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements contained in this Plan of Merger, which breach or failure to perform (a) would result in a failure of a condition set forth in
Section 6.1
or
6.3
and
(b) (i) cannot be cured by the End Date or (ii) if capable of being cured by the End Date, shall not have been cured within 30 Business Days following receipt of written notice (which notice shall specify in reasonable detail the
nature of such breach or failure and Mercantiles intention to terminate this Plan of Merger if such breach or failure is not cured) from Mercantile of such breach or failure;
provided
, that Mercantile shall not have a right to terminate
this Plan of Merger pursuant to this
Section 7.1.6
if it is then in breach of any representations, warranties, covenants or other agreements contained in this Plan of Merger that would result in a failure of a condition set forth in
Section 6.1
or
6.2
;
7.1.7 by Firstbank prior to the receipt of the Mercantile Shareholder Approval if
(a) the Mercantile Board of Directors shall have effected a Mercantile Adverse Recommendation Change; (b) the Mercantile Board of Directors shall have failed to reject a Mercantile Takeover Proposal and reaffirm the Mercantile Board
Recommendation within five Business Days following the public announcement of such Mercantile Takeover Proposal and in any event at least two Business Days prior to the Mercantile Shareholder Meeting; (c) Mercantile enters into a Mercantile
Acquisition Agreement; (d) Mercantile shall have materially breached
Section 5.5
; (e) subject to Mercantiles rights to adjourn or postpone the Mercantile Shareholder Meeting as permitted by
Section 5.6.5
,
Mercantile shall have failed to call, give proper notice of, convene and hold the Mercantile Shareholder Meeting; or (f) Mercantile or the Mercantile Board of Directors shall have publicly announced its intention to do any of the foregoing;
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7.1.8 by Mercantile prior to the receipt of the Firstbank Shareholder Approval if
(a) the Firstbank Board of Directors shall have effected a Firstbank Adverse Recommendation Change; (b) the Firstbank Board of Directors shall have failed to reject a Firstbank Takeover Proposal and reaffirm the Firstbank Board
Recommendation within five Business Days following the public announcement of such Firstbank Takeover Proposal and in any event at least two Business Days prior to the Firstbank Shareholder Meeting; (c) Firstbank enters into a Firstbank
Acquisition Agreement; (d) Firstbank shall have materially breached
Section 5.4
; (e) subject to Firstbanks rights to adjourn or postpone the Firstbank Shareholder Meeting as permitted by
Section 5.6.4
,
Firstbank shall have failed to call, give proper notice of, convene and hold the Firstbank Shareholder Meeting; or (f) Firstbank or the Firstbank Board of Directors shall have publicly announced its intention to do any of the foregoing;
7.1.9 by Firstbank prior to receipt of the Firstbank Shareholder Approval, in order to enter into a definitive merger
agreement or other definitive purchase or acquisition agreement that constitutes a Firstbank Superior Proposal;
provided
,
however,
t
hat (a) Firstbank has complied with
Section 5.4
in all material respects
and (b) Firstbank pays (or causes to be paid) the Firstbank Termination Fee and Firstbank Expense Reimbursement prior to or simultaneously with such termination;
7.1.10 by Mercantile prior to receipt of the Mercantile Shareholder Approval, in order to enter into a definitive merger agreement or other definitive purchase or acquisition agreement that constitutes a
Mercantile Superior Proposal;
provided
,
however
,
that (a) Mercantile has complied with
Section 5.5
in all material respects and (b) Mercantile pays (or causes to be paid) the Mercantile Termination
Fee and Mercantile Expense Reimbursement prior to or simultaneously with such termination.
7.2
Effect of Termination.
7.2.1 In the event that:
7.2.1.1 this Plan of Merger is terminated by Firstbank pursuant to
Section 7.1.7
(or is terminated by either party pursuant to
Section 7.1.4(b)
at a time when this Plan of Merger
was terminable pursuant to
Section 7.1.7
), Mercantile shall pay, or cause to be paid, to Firstbank cash in an amount equal to $7,900,000 (the
Mercantile Termination Fee
), plus the out-of-pocket fees and expenses
(including fees and expenses of financial advisors, outside legal counsel, accountants, experts, consultants, and other Representatives) actually incurred by or on behalf of Firstbank in connection with the authorization, preparation, negotiation,
execution or performance of this Plan of Merger and the transactions contemplated by this Plan of Merger and the due diligence and evaluation by Firstbank of the transactions contemplated by this Plan of Merger, in an aggregate amount not to exceed
$2,000,000 (the
Mercantile Expense Reimbursement
);
7.2.1.2 this Plan of Merger is terminated by
Firstbank pursuant to
Section 7.1.5
or by Firstbank or Mercantile pursuant to
Section 7.1.4(b)
, Mercantile shall pay, or cause to be paid, to Firstbank cash in an amount equal to the Mercantile Expense Reimbursement; and if
(a) any Person shall have made (whether or not subsequently withdrawn) a Mercantile Takeover Proposal prior to (i) the date that this Plan of Merger is terminated in the case of a termination pursuant to
Section 7.1.5
or
(ii) the Mercantile Shareholder Meeting in the case of a termination pursuant to
Section 7.1.4(b)
, and (b) at any time prior to the date that is 12 months after the date of any such termination, Mercantile or any of its
Affiliates enters into any definitive agreement providing for a Mercantile Takeover Proposal (
provided
that, for purposes of this
Section 7.2.1.2
, the references to 10% in the definition of
Mercantile Takeover Proposal shall be deemed to be references to 50%) or consummates a Mercantile Takeover Proposal, then Mercantile shall pay, or cause to be paid, to Firstbank cash in an amount equal to the Mercantile
Termination Fee plus the Mercantile Expense Reimbursement (to the extent such Mercantile Expense Reimbursement has not been previously paid to Firstbank);
7.2.1.3 (a) this Plan of Merger is terminated by Firstbank pursuant to
Section 7.1.3
, (b) any Person shall have made (whether or not subsequently withdrawn) a Mercantile Takeover Proposal
prior to the date of any such termination, and (c) at any time prior to the date that is 12 months after the date of any such
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termination, Mercantile or any of its Affiliates enters into any definitive agreement providing for a Mercantile Takeover Proposal (
provided
that, for purposes of this
Section 7.2.1.3
, the references to 10% in the definition of Mercantile Takeover Proposal shall be deemed to be references to 50%) or consummates a Mercantile Takeover Proposal, then Mercantile shall
pay, or cause to be paid, to Firstbank cash in an amount equal to the Mercantile Termination Fee plus the Mercantile Expense Reimbursement;
7.2.1.4 this Plan of Merger is terminated by Mercantile pursuant to
Section 7.1.10
, then Mercantile shall pay, or cause to be paid, to Firstbank, prior to or contemporaneously with such
termination, cash in an amount equal to the Mercantile Termination Fee plus the Mercantile Expense Reimbursement (and any purported termination pursuant to
Section 7.1.10
shall be void and of no force or effect unless Mercantile shall
have made such payment);
7.2.1.5 this Plan of Merger is terminated by Mercantile pursuant to
Section 7.1.8
(or
is terminated by either party pursuant to
Section 7.1.4(a)
at a time when this Plan of Merger was terminable pursuant to
Section 7.1.8
), Firstbank shall pay, or cause to be paid, to Mercantile cash in an amount equal to
$7,900,000 (the
Firstbank Termination Fee
), plus the out-of-pocket fees and expenses (including fees and expenses of financial advisors, outside legal counsel, accountants, experts, consultants, and other Representatives)
actually incurred by or on behalf of Mercantile in connection with the authorization, preparation, negotiation, execution or performance of this Plan of Merger and the transactions contemplated by this Plan of Merger and the due diligence and
evaluation by Mercantile of the transactions contemplated by this Plan of Merger, in an aggregate amount not to exceed $2,000,000 (the
Firstbank Expense Reimbursement
);
7.2.1.6 this Plan of Merger is terminated by Mercantile pursuant to
Section 7.1.6
or by Firstbank or Mercantile pursuant to
Section 7.1.4(a)
, Firstbank shall pay, or cause to be paid, to Mercantile cash in an amount equal to the Firstbank Expense Reimbursement; and if (a) any Person shall have made (whether or not subsequently withdrawn) a Firstbank
Takeover Proposal prior to (i) the date that this Plan of Merger is terminated in the case of a termination pursuant to
Section 7.1.6
or (ii) the Firstbank Shareholder Meeting in the case of a termination pursuant to
Section 7.1.4(a)
, and (b) at any time prior to the date that is 12 months after the date of any such termination, Firstbank or any of its Affiliates enters into any definitive agreement providing for a Firstbank Takeover Proposal
(
provided
that, for purposes of this
Section 7.2.1.6
, the references to 10% in the definition of Firstbank Takeover Proposal shall be deemed to be references to 50%) or consummates a Firstbank
Takeover Proposal, then Firstbank shall pay, or cause to be paid, to Mercantile cash in an amount equal to the Firstbank Termination Fee plus the Firstbank Expense Reimbursement (to the extent such Firstbank Expense Reimbursement has not been
previously paid to Mercantile);
7.2.1.7 (a) this Plan of Merger is terminated by Mercantile pursuant to
Section 7.1.3
, (b) any Person shall have made (whether or not subsequently withdrawn) a Firstbank Takeover Proposal prior to the date of any such termination, and (c) at any time prior to the date that is 12 months after the
date of any such termination, Firstbank or any of its Affiliates enters into any definitive agreement providing for a Firstbank Takeover Proposal (
provided
that, for purposes of this
Section 7.2.1.7
, the references to
10% in the definition of Firstbank Takeover Proposal shall be deemed to be references to 50%) or consummates a Firstbank Takeover Proposal, then Firstbank shall pay, or cause to be paid, to Mercantile cash in an
amount equal to the Firstbank Termination Fee plus the Firstbank Expense Reimbursement; or
7.2.1.8 this Plan of Merger is
terminated by Firstbank pursuant to
Section 7.1.9
, then Firstbank shall pay, or cause to be paid, to Mercantile, prior to or contemporaneously with such termination, cash in an amount equal to the Firstbank Termination Fee plus the
Firstbank Expense Reimbursement (and any purported termination pursuant to
Section 7.1.9
shall be void and of no force or effect unless Firstbank shall have made such payment).
7.2.2 Each of the parties hereto acknowledge and agree that the agreements contained in this
Section 7.2
are an integral part
of the transactions contemplated by this Plan of Merger, and that without these
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agreements, the other party would not enter into this Plan of Merger. Accordingly, (a) if Mercantile fails to pay the amounts due pursuant to this
Section 7.2
and, in order to
obtain such payment, Firstbank commences a suit that results in a judgment against Mercantile for the Mercantile Termination Fee or the Mercantile Expense Reimbursement, then Mercantile shall pay Firstbank its costs and expenses (including
reasonable attorneys fees and expenses) in connection with such suit, together with interest on the amount of the Firstbank Termination Fee and the Firstbank Expense Reimbursement, as applicable, from the date such payment was required to be
made until the date of payment at the prime rate published in the Wall Street Journal on the date such payment was required to be made and (b) if Firstbank fails to pay the amount due pursuant to this
Section 7.2
and, in order to
obtain such payment, Mercantile commences a suit that results in a judgment against Firstbank for the Firstbank Termination Fee or the Firstbank Expense Reimbursement, then Firstbank shall pay Mercantile its costs and expenses (including reasonable
attorneys fees and expenses) in connection with such suit, together with interest on the amount of the Firstbank Termination Fee or the Firstbank Expense Reimbursement, as applicable, from the date such payment was required to be made until
the date of payment at the prime rate published in the Wall Street Journal on the date such payment was required to be made.
7.2.3 On any termination of this Plan of Merger pursuant to
Section 7.1
, this Plan of Merger shall terminate and forthwith
become void and have no further force or effect (except for the provisions of
Sections 5.11
,
5.12.4
,
7.2
and
Article IX
), and, subject to the payment of any amounts owing pursuant to this
Section 7.2
, there
shall be no other liability on the part of Firstbank or Mercantile to the other. Notwithstanding anything in this Plan of Merger to the contrary, no party hereto will be relieved or released from any liability or damages arising from a willful or
intentional breach of any provision of this Plan of Merger or fraud, and the aggrieved party will be entitled to all rights and remedies available at law or in equity.
7.2.4 The Mercantile Termination Fee and the Mercantile Expense Reimbursement, as applicable, will be paid in the aggregate to Firstbank by or at the direction of Firstbank in immediately available funds
in the case of
Sections 7.2.1.1
,
7.2.1.2
or
7.2.1.3
, upon the occurrence of the event giving rise to the obligation to make such payment.
7.2.5 The Firstbank Termination Fee and the Firstbank Expense Reimbursement, as applicable, will be paid in the aggregate to Mercantile by or at the direction of Mercantile in immediately available funds
in the case of
Sections 7.2.1.5
,
7.2.1.6
or
7.2.1.7
, upon the occurrence of the event giving rise to the obligation to make such payment.
7.2.6 For the avoidance of doubt, (a) in no event shall Mercantile be required to pay the Mercantile Termination Fee or the Mercantile Expense Reimbursement on more than one occasion; and (b) in
no event shall Firstbank be required to pay the Firstbank Termination Fee or the Firstbank Expense Reimbursement on more than one occasion.
ARTICLE VIII
CERTAIN DEFINITIONS
8.1 When used in this Plan of Merger, the following terms will have the meanings assigned to them in this
Section 8.1
:
Action
means (a) any litigation, claim, action, suit, hearing, proceeding or arbitration,
(b) any material investigation by a Governmental Entity or (c) any demand or notice of violation by a Governmental Entity (in the case of clauses (a), (b) and (c), whether civil, criminal, administrative, labor or investigative).
Affiliate
means, with respect to a Person, any other Person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by or is under common control with, such Person.
Antitrust
Laws
means the applicable antitrust, competition or investment Laws of the United States of America.
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Bank Holding Company Act
means the Bank Holding Company Act of
1956, as amended.
Book-Entry Shares
means shares of Firstbank Common Stock represented by
book-entry immediately prior to the Effective Time (other than Excluded Shares).
Business Day
means
a day other than a Saturday, Sunday or other day on which NASDAQ is closed.
Certificates
means
outstanding certificates that immediately prior to the Effective Time represented shares of Firstbank Common Stock (other than Excluded Shares).
Collective Bargaining Agreement
means any Contract that has been entered into with any labor organization, union, works council, employee representative or association.
Contract
means any agreement, contract, commitment, arrangement, memorandum of understanding, side
letter, understanding, contractual obligation or other instrument of a contractual nature, whether written or oral.
Environmental Claim
means any and all administrative or judicial actions, suits, orders, claims, liens,
notices, notices of violations, investigations, complaints, requests for information, proceedings, or other communication (written or oral), whether criminal or civil, pursuant to or relating to any applicable Environmental Law.
Environmental Law
means any and all Laws, Environmental Permits, or binding agreements with any Governmental
Entity, relating to the protection of health and the environment, or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of or exposure to
Hazardous Materials.
Environmental Permit
means any Permit required or issued by any Governmental
Entity under or in connection with any Environmental Law, including without limitation, any and all orders, consent orders or binding agreements issued by or entered into with a Governmental Entity under any applicable Environmental Law.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.
ERISA Affiliate
means, with respect to Firstbank or Mercantile, as
applicable, any Person who is, or at any time was, a member of a controlled group (within the meaning of Section 414(n)(6)(B) of the Code) that includes, or at any time included, Firstbank or Mercantile, as applicable, or any Affiliate of
Firstbank or Mercantile, as applicable, or any predecessor of any of the foregoing.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
FDI Act
means the Federal Deposit Insurance
Act of 1950, as amended.
FDIC
means the Federal Deposit Insurance Corporation.
Federal Reserve Board
means the Board of Governors of the Federal Reserve System or its delegees.
FHLB
means the Federal Home Loan Bank.
Firstbank Benefit Plan
means, other than any Multiemployer Plan, (a) any employee benefit plan
within the meaning of Section 3(3) of ERISA, (b) any Firstbank Stock Plan, and (c) any deferred compensation, retirement, defined contribution, defined benefit, pension, profit sharing, employee welfare, fringe benefit, flexible
spending account, stock purchase, stock option, stock ownership, phantom stock, stock appreciation rights, restricted stock, restricted stock units, severance, separation, employment, change in control, vacation pay, leave of absence, layoff, salary
continuation, sick leave, excess benefit, bonus or other incentive compensation,
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day or dependent care, legal services, cafeteria, health, life, accident, disability, workers compensation or other insurance, or other employee benefit plan, or contract, program, or
practice, whether written or oral, for the benefit of Firstbanks current or former officers, employees, independent contractors, or directors, in each case either (i) existing at the Closing Date and sponsored, maintained, or contributed
to by Firstbank or any of its Subsidiaries, or (ii) existing at the Closing Date or prior thereto, in respect of which Firstbank or any of its Subsidiaries has any Liability.
Firstbank Board of Directors
shall mean the board of directors of Firstbank.
Firstbank Material Adverse Effect
means a Material Adverse Effect with respect to Firstbank.
Firstbank-Related Person
means any shareholder owning five percent or more of the issued and outstanding
Firstbank Common Stock, any director or executive officer of Firstbank or any Firstbank Subsidiary, their spouses and children, any Affiliate of or member of the same household as such persons, and any Person of which such persons, alone or
together, have control.
Firstbank Restricted Stock
means any award of Firstbank Common Stock that
is subject to restrictions based on performance or continuing service and granted under any Firstbank Stock Plan.
Firstbank Shareholders
means holders of shares of Firstbank Common Stock.
Firstbank Site
means a Site with respect to Firstbank or any Firstbank Subsidiary.
Firstbank Stock Option
means any grant of an option to purchase a share or shares of Firstbank Common Stock
under any Firstbank Stock Plan.
Firstbank Stock Plans
means the Firstbank Stock Option and
Restricted Stock Plan of 1997, the Firstbank 2006 Stock Compensation Plan, and the Firstbank Employee Stock Purchase Plan of 1999.
GAAP
means United States generally accepted accounting principles, consistently applied.
Governmental Entity
means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States federal, state
or local government or other non-United States international, multinational or other government, including any department, commission, board, agency, instrumentality, political subdivision, bureau, official or other regulatory, administrative or
judicial authority thereof and any self-regulatory organization.
Hazardous Material
means
petroleum, petroleum hydrocarbons or petroleum products, petroleum by-products, radioactive materials, asbestos or asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea formaldehyde, mold, lead or lead-containing materials,
polychlorinated biphenyls; and any other chemicals, materials, substances or wastes in any amount or concentration which are regulated under or for which liability can be imposed under any Environmental Law.
Intellectual Property
means all intellectual property and other similar proprietary rights in any jurisdiction
worldwide, whether registered or unregistered, including such rights in and to: (a) patents (including all reissues, divisions, provisionals, continuations and continuations-in-part, re-examinations, renewals and extensions thereof), patent
applications, patent disclosures or other patent rights; (b) copyrights, design, design registration, and all registrations, applications for registration, and renewals for any of the foregoing, and any moral rights;
(c) trademarks, service marks, trade names, business names, logos, trade dress, certification marks and other indicia of commercial source or origin together with all goodwill associated with the foregoing, and all registrations, applications
and renewals for any of the foregoing; (d) trade secrets and business, technical and know-how information, databases, data collections and other confidential and proprietary information and all rights therein; (e) software, including
data files, source code, object code, application programming interfaces, architecture, files, records, schematics, computerized databases and other software-related specifications and documentation; and (f) Internet domain name registrations.
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Knowledge
or any similar phrase means (a) with respect to
Firstbank, the knowledge of the Persons set forth in Section 8.1 of the Firstbank Disclosure Letter, and (b) with respect to Mercantile, the knowledge of the Persons set forth in Section 8.1 of the Mercantile Disclosure Letter,
including, in each case, any knowledge that a person holding such position would reasonably be expected to have in the performance of his or her duties.
Law
means any federal or state statute, law, ordinance, rule, code, executive order, common law, injunction, judgment, decree, Order or regulation of any Governmental Entity.
Liability
means all indebtedness, obligations and other liabilities and contingencies of a Person,
whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due.
Lien
means, with respect to any property or asset, any mortgage, lien, pledge, security interest, hypothecation or other encumbrance affecting such property or asset.
Material Adverse Effect
means with respect to any Person, any event, occurrence, fact, condition or change that (a) is, individually or in the aggregate, materially adverse
to the business, results of operations, condition (financial or otherwise), or assets of such Person and its Subsidiaries, taken as a whole, or (b) prohibits or materially impairs the ability of such Person to consummate the transactions
contemplated by this Plan of Merger on a timely basis;
provided
,
however
, that, for the purposes of clause (a), a Material Adverse Effect shall not include events, occurrences, facts, conditions or changes arising out of, relating to
or resulting from (either alone or in combination): (i) conditions or changes generally affecting the economy, financial or securities markets; (ii) any outbreak or escalation of hostilities, war (whether or not declared) or military
action or any act of terrorism, the occurrence of any natural disaster, or occurrence of any man-made disaster of wide-spread consequences; (iii) general conditions in or changes generally affecting the industry or geographic regions in which
such Person or its Subsidiaries operate; (iv) changes in Laws (or interpretations thereof); (v) changes in GAAP or accounting standards (or interpretations thereof); (vi) compliance with the terms of, or the taking of any action
required by, this Plan of Merger; (vii) any decline in the market price, or change in trading volume, of Firstbank Common Stock or Mercantile Common Stock, as applicable (
provided
,
however
, that any event, occurrence, fact,
condition or change that caused or contributed to any decline in market price, or change in trading volume, of Firstbank Common Stock or Mercantile Common Stock, as applicable, shall not be excluded unless otherwise specifically excluded by this
definition); (viii) the announcement or pendency of the Merger or any other transaction contemplated by this Plan of Merger; and (ix) acts or omissions of (A) Firstbank prior to the Effective Time taken at the written request of
Mercantile or with the prior written consent of Mercantile or (B) Mercantile prior to the Effective Time taken at the written request of Firstbank or with the prior written consent of Firstbank, in each case, in connection with the transactions
contemplated by this Plan of Merger or applicable Law;
provided
,
further
, that any event, occurrence, fact, condition or change referred to in clauses (i), (ii), (iii), (iv) and (v) immediately above shall be taken into
account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such event, change or effect has a disproportionate effect on such Person and its Subsidiaries, taken as a whole,
compared to other participants in the industries or geographic regions in which such Person and its Subsidiaries conduct their businesses.
Mercantile Benefit Plan
means (a) any employee benefit plan within the meaning of Section 3(3) of ERISA, (b) any Mercantile Stock Plan, and
(iii) any deferred compensation, retirement, defined contribution, defined benefit, pension, profit sharing, employee welfare, fringe benefit, flexible spending account, stock purchase, stock option, stock ownership, phantom stock, stock
appreciation rights, restricted stock, restricted stock units, severance, separation, employment, change in control, vacation pay, leave of absence, layoff, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, day
or dependent care, legal services, cafeteria, health, life, accident, disability, workers compensation or other insurance, or other employee benefit plan, or contract, program, or practice, whether written or oral, for the benefit of
Mercantiles current or former officers, employees, independent contractors, or directors, in each case either (i) existing at the Closing Date and sponsored, maintained, or contributed to by Mercantile or any of its Subsidiaries, or
(ii) existing at the Closing Date or prior thereto, in respect of which Mercantile or any of its Subsidiaries has any Liability.
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Mercantile Board of Directors
shall mean the board of directors of
Mercantile.
Mercantile Material Adverse Effect
means a Material Adverse Effect with respect to
Mercantile.
Mercantile-Related Person
shall mean any shareholder owning five percent or more of the
issued and outstanding Mercantile Common Stock, any director or executive officer of Mercantile or any Mercantile Subsidiary, their spouses and children, any Affiliate of or member of the same household as such persons, and any Person of which such
persons, alone or together, have control.
Mercantile Restricted Stock
means any award of Mercantile
Common Stock that is subject to restrictions based on performance or continuing service and granted under any Mercantile Stock Plan.
Mercantile Shareholders
means holders of shares of Mercantile Common Stock.
Mercantile Site
means a Site with respect to Mercantile or any Mercantile Subsidiary.
Mercantile Stock Option
means any grant of an option to purchase a share or shares of Mercantile Common Stock under any Mercantile Stock Plan.
Mercantile Stock Plans
means the Mercantile 2000 Employee Stock Option Plan, the Mercantile 2004 Employee Stock
Option Plan, the Mercantile Independent Director Stock Option Plan, the Mercantile Stock Incentive Plan of 2006 (as amended and restated), and Mercantile Employee Stock Purchase Plan of 2002.
Michigan Banking Code
means the Michigan Banking Code of 1999, as amended.
Multiemployer Plan
means a multiemployer plan within the meaning of Section 3(37) of ERISA.
NASDAQ
means the NASDAQ Global Select Market.
NLRB
means the National Labor Relations Board.
Order
means any award, injunction, judgment, decree, order, ruling or verdict or other similar decision issued,
promulgated or entered by or with any Governmental Entity of competent jurisdiction.
Permit
means
any grant, exemption, declaration, registration, filing, order, authorization, approval, consent, exception, accreditation, certificate, license, permit or franchise of, from or required by any Governmental Entity of competent jurisdiction or
pursuant to any Law.
Permitted Liens
means with respect to any Person, (a) Liens for Taxes
that are not yet due and payable or that may hereafter be paid without material penalty or that are being contested in good faith for which adequate accruals or reserves have been established on the books and records of such Person,
(b) statutory Liens of landlords and workers, carriers and mechanics or other like Liens incurred in the ordinary course of business for amounts that are not yet due and payable or that are being contested in good faith for
which adequate accruals or reserves have been established on the books and records of such Person, (c) Liens and encroachments which do not materially interfere with the present use of the properties or assets they affect, (d) Liens that
will be released prior to or as of the Closing, (e) Liens that are disclosed on the most recent consolidated balance sheet of such Person or notes thereto included in the Firstbank SEC Reports or Mercantile SEC Reports, as applicable, or
securing liabilities reflected on such balance sheet, (f) Liens that were incurred in the ordinary course of business since the date of the most recent consolidated balance sheet of such Person, (g) Liens set forth on Section 8.1 of
the Firstbank Disclosure Letter or Section 8.1 of the Mercantile Disclosure Letter, and (h) with respect to real property, whether owned or leased, any Lien that has not had and would not reasonably be expected to have, individually or in
the aggregate, a Firstbank Material Adverse Effect or a Mercantile Material Adverse Effect, as applicable.
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Person
means an individual, a corporation, a partnership, a
limited liability company, a trust, an unincorporated association, a Governmental Entity or any other entity or body.
Regulation O
means Regulation O of the Federal Reserve Board.
Release
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing of a Hazardous Material.
Representatives
means, with
respect to any Person, the respective officers, directors, managers, members, employees, consultants, accountants, brokers, financial advisors, legal counsel, agents, advisors, Affiliates and other representatives of that Person.
SEC
means the United States Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended.
Site
means, with respect to any Person, any real properties (in each case, including all soil, subsoil, surface
waters and groundwater thereat) currently or previously owned, leased or operated by: (a) such Person or any of its Subsidiaries; (b) any predecessors of such Person or any of its Subsidiaries; or (c) any entities previously owned by
such Person or any of its Subsidiaries.
Subsidiary
means, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity
interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of a non-corporate Person.
Tax
or
Taxes
means any and all federal, state, local, or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, abandoned property, escheat, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, transaction, license, lease, service, service use, occupation,
severance, energy, transfer, real property transfer, recording, documentary, stamp, registration, unemployment, social security, workers compensation, capital, premium, and other governmental taxes, assessments, customs, duties or levies,
whether disputed or not, together with any interest, penalties, additions to tax, or additional amounts with respect thereto.
Tax Returns
means any return, declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, filed or required to be filed with any Governmental Entity.
Transaction Documents
means (a) the Joint Proxy Statement, (b) the Registration Statement, and (c) any other documents to be filed with the SEC, the Federal
Reserve Board or any other Governmental Entity in connection with the Merger.
WARN Act
means the
Worker Adjustment and Retraining Notification Act of 1988, and any similar foreign, state or local Law.
8.2 For purposes of
this Plan of Merger, except as otherwise expressly provided herein or unless the context otherwise requires: (a) the meaning assigned to each term defined herein will be equally applicable to both the singular and the plural forms of such term
and vice versa, and words denoting any gender will include all genders as the context requires; (b) where a word or phrase is defined herein, each of its other grammatical forms will have a corresponding meaning; (c) the terms
hereof, herein, hereunder, hereby and herewith and words of similar import will, unless otherwise stated, be construed to refer to this Plan of Merger as a whole and
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not to any particular provision of this Plan of Merger; (d) when a reference is made in this Plan of Merger to an Article, Section, paragraph, Exhibit or Schedule without reference to a
document, such reference is to an Article, Section, paragraph, Exhibit or Schedule to this Plan of Merger; (e) a reference to a subsection without further reference to a Section is a reference to such subsection as contained in the
same Section in which the reference appears, and this rule will also apply to paragraphs and other subdivisions; (f) the word include, includes or including when used in this Plan of Merger will be deemed to
include the words without limitation, unless otherwise specified; (g) a reference to any party to this Plan of Merger or any other agreement or document will include such partys predecessors, successors and permitted assigns;
(h) a reference to any Law means such Law as amended, modified, codified, replaced or reenacted, and all rules and regulations promulgated thereunder; (i) all accounting terms used and not defined herein have the respective meanings given
to them under GAAP; and (j) any references in this Plan of Merger to dollars or $ shall be to U.S. dollars.
8.3 The following terms are defined on the following pages of this Plan of Merger:
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Acceptable Firstbank Confidentiality Agreement
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A-45
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Acceptable Mercantile Confidentiality Agreement
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A-47
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Applicable Banking Laws
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A-52
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Award
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A-3
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Bank Consolidation
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A-53
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Banking Filings
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A-52
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Certificate of Merger
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A-2
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Closing
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A-2
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Closing Date
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A-2
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Code
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A-1
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Confidentiality Agreement
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A-55
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Constituent Corporation
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A-1
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Converted Stock-Based Award
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A-3
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Effective Time
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A-2
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End Date
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A-62
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Exchange Agent
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A-4
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Exchange Fund
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A-4
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Exchange Ratio
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A-3
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Excluded Shares
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A-2
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Firstbank
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A-1
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Firstbank Acquisition Agreement
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A-45
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Firstbank Adverse Recommendation Change
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A-45
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Firstbank Banks
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A-53
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Firstbank Board Recommendation
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A-7
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Firstbank Call Reports
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A-9
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Firstbank Common Stock
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A-8
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Firstbank Designees
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A-54
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Firstbank Disclosure Letter
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A-6
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Firstbank Expense Reimbursement
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A-64
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Firstbank Investment Banker
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A-18
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Firstbank Material Contract
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A-13
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Firstbank Preferred Stock
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A-8
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Firstbank SEC Reports
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A-20
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Firstbank Share-Based Awards
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A-8
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Firstbank Shareholder Approval
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A-6
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Firstbank Shareholder Meeting
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A-50
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Firstbank Subsidiaries
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A-7
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Firstbank Subsidiary
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A-7
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A-71
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Firstbank Superior Proposal
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A-46
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Firstbank Takeover Proposal
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A-46
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Firstbank Termination Fee
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A-64
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Firstbank-Owned Intellectual Property
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A-12
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Firstbanks Financial Statements
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A-9
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Indemnified Party
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A-56
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Intended Tax Treatment
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A-57
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Joint Proxy Statement
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A-49
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Maximum Amount
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A-56
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MBCA
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A-1
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Mercantile
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A-1
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Mercantile Acquisition Agreement
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A-48
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Mercantile Adverse Recommendation Change
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A-47
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Mercantile Board Recommendation
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A-21
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Mercantile Call Reports
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A-24
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Mercantile Common Stock
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A-23
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Mercantile Designees
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A-54
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Mercantile Disclosure Letter
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A-21
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Mercantile Expense Reimbursement
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A-63
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Mercantile Investment Banker
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A-32
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Mercantile Material Contract
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A-27
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Mercantile Preferred Stock
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A-23
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Mercantile SEC Reports
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A-34
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Mercantile Share-Based Awards
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A-23
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Mercantile Shareholder Approval
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A-21
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Mercantile Shareholder Meeting
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A-51
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Mercantile Subsidiaries
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A-21
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Mercantile Subsidiary
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A-21
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Mercantile Superior Proposal
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A-49
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Mercantile Takeover Proposal
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A-48
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Mercantile Termination Fee
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A-63
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Mercantile-Owned Intellectual Property
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A-27
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Mercantiles Financial Statements
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A-23
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Merger
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A-1
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Merger Consideration
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A-3
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Plan of Merger
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A-1
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Pre-Merger Special Dividend
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A-58
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Registration Statement
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A-49
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Regulatory Agreement
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A-10
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Surviving Corporation
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A-1
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Termination Date
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A-61
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ARTICLE IX
MISCELLANEOUS
9.1
No Third-Party Beneficiaries.
This Plan of
Merger will not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns, other than
Section 5.13
(which will be for the benefit of the Persons set forth therein,
and any such Person will have the rights provided for therein) and
Article II
(which shall be for the benefit of the holders of Firstbank Common Stock after the Effective Time, whether represented by Certificates or Book-Entry Shares, and any
holder of an Award granted under a Firstbank Stock Plan.
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9.2
Specific Performance.
9.2.1 The parties agree that irreparable damage to Firstbank or Mercantile, as applicable, would occur in the event that any of the
provisions of this Plan of Merger were not performed in accordance with their specific terms or were otherwise breached and that any breach of this Plan of Merger could not be adequately compensated in all cases by monetary damages alone. The
parties acknowledge and agree that, prior to the valid termination of this Plan of Merger pursuant to
Section 7.1,
(a) Firstbank shall be entitled to seek an injunction, specific performance and other equitable relief to prevent breaches
of this Plan of Merger by Mercantile or to enforce specifically the terms and provisions of this Plan of Merger and (b) Mercantile shall be entitled to seek an injunction, specific performance and other equitable relief to prevent breaches of
this Plan of Merger by Firstbank or to enforce specifically the terms and provisions of this Plan of Merger.
9.2.2 The
parties hereby agree not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches of this Plan of Merger by Firstbank or Mercantile, as applicable, and to specifically enforce the
terms and provisions of this Plan of Merger to prevent breaches or threatened breaches of, or to enforce compliance with, the respective covenants and obligations of Firstbank and Mercantile, as applicable, under this Plan of Merger, all in
accordance with the terms of this
Section 9.2
.
9.2.3 Neither Firstbank nor Mercantile, as applicable, shall be
required to provide any bond or other security in connection with seeking an injunction or injunctions to prevent breaches of this Plan of Merger and to enforce specifically the terms and provisions of this Plan of Merger, all in accordance with the
terms of this
Section 9.2
.
9.3
Entire Agreement.
This Plan of Merger (including the exhibits and the
schedules hereto), together with the Confidentiality Agreement, constitutes the entire agreement among the parties hereto and supersedes any prior understandings, agreements or representations by or among the parties hereto, written or oral, to the
extent they are related in any way to the subject matter of this Plan of Merger.
9.4
Succession and Assignment.
This
Plan of Merger will be binding upon and inure to the benefit of the parties named herein and their respective successors and permitted assigns. No party hereto may assign either this Plan of Merger or any of its rights, interests or obligations
hereunder without the prior written approval of, in the case of assignment by Firstbank, Mercantile, and, in the case of assignment by Mercantile, Firstbank.
9.5
Construction.
The parties have participated jointly in the negotiation and drafting of this Plan of Merger, and, in the event an ambiguity or question of intent or interpretation arises, this
Plan of Merger will be construed as if drafted jointly by the parties, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Plan of Merger.
9.6
Exclusive Jurisdiction.
Each of the parties to this Plan of Merger irrevocably and unconditionally submits, for itself and its
property, to the exclusive jurisdiction of the Circuit Courts of the State of Michigan or any federal court of the United States of America sitting in the State of Michigan, and any appellate court from any thereof, in any Action or proceeding
arising out of or relating to this Plan of Merger or the transactions contemplated by this Plan of Merger, or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such Action or proceeding shall be heard and
determined in such Michigan court or, to the extent permitted by Law, in such federal court.
9.7
Waiver of Jury Trial.
Each of the parties waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any Action or proceeding directly or indirectly arising out of, under or in connection with this Plan of Merger or
the transactions contemplated by this Plan of Merger.
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9.8
Notices.
All notices, requests, demands, and other communications under this Plan
of Merger shall be in writing and shall be deemed to have been duly given and effective immediately if delivered or sent and received by a fax transmission or electronic mail (if receipt by the intended recipient is confirmed by the same means,
which confirmation each party agrees to transmit reasonably promptly) a hand delivery, or a nationwide overnight delivery service (all fees prepaid) to the following addresses:
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If to Firstbank:
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With a copy to:
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Firstbank Corporation
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Varnum LLP
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Attention: Thomas R. Sullivan
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Attention: Harvey Koning
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311 Woodworth Avenue
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Bridgewater Place
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P.O. Box 1029
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333 Bridge Street, N.W., Suite 1700
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Alma, MI 48801
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Grand Rapids, MI 49504
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Facsimile: (989) 466-2042
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Facsimile: (616) 336-7000
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Telephone: (989) 466-7347
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Telephone: (616) 336-6588
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Email: tsullivan@firstbankmi.com
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Email: hkoning@varnumlaw.com
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If to Mercantile:
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With a copy to:
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Mercantile Bank Corporation
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Warner Norcross & Judd LLP
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Attention: Michael Price
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Attention: Gordon R. Lewis
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310 Leonard Street, N.W.
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900 Fifth Third Center
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Grand Rapids, MI 49504
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111 Lyon Street, N.W.
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Grand Rapids, MI 49503-2487
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Facsimile: (616) 726-1201
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Facsimile: (616) 222-2752
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Telephone: (616) 726-1600
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Telephone: (616) 752-2752
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Email: mprice@mercbank.com
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Email: glewis@wnj.com
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9.9
Governing Law.
This Plan of Merger shall be governed, construed, and enforced accordance with
the laws of the State of Michigan, without regard to principles of conflicts of laws.
9.10
Counterparts.
This Plan of
Merger may be executed in one or more counterparts, which taken together shall constitute one and the same instrument. Executed counterparts of this Plan of Merger shall be deemed to have been fully delivered and shall become legally binding if and
when executed signature pages are received by facsimile or electronic mail transmission from a party. If so delivered by facsimile or electronic mail transmission, the parties agree to promptly send original, manually executed copies by nationwide
overnight delivery service.
9.11
Headings.
The article headings and section headings contained in this Plan of Merger
are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Plan of Merger.
9.12
Calculation of Dates and Deadlines.
Unless otherwise specified, any period of time to be determined under this Plan of Merger shall be deemed to commence at 12:01 a.m. on the first full day after the specified starting date, event, or
occurrence. Any deadline, due date, expiration date, or period-end to be calculated under this Plan of Merger shall be deemed to end at 5 p.m. on the last day of the specified period. The time of day shall be determined with reference to the then
current local time in Grand Rapids, Michigan.
9.13
Severability.
If any term, provision, covenant, or restriction
contained in this Plan of Merger is held by a final and unappealable Order of a court of competent jurisdiction to be invalid, void, or unenforceable, then the remainder of the terms, provisions, covenants, and restrictions contained in this Plan of
Merger shall remain in full force and effect, and shall in no way be affected, impaired, or invalidated unless the effect would be to cause this Plan of Merger to not achieve its essential purposes.
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9.14
Non-Survival of Representations, Warranties and Agreements.
None of the
representations, warranties, covenants and other agreements in this Plan of Merger or in any instrument delivered pursuant to this Plan of Merger, including any rights arising out of any breach of such representations, warranties, covenants and
other agreements, will survive the Effective Time, except for those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part after the Effective Time and this
Article IX
.
9.15
Amendments.
This Plan of Merger may be amended by the parties hereto, by action taken or authorized, in the case of
Firstbank, by the Firstbank Board of Directors and, in the case of Mercantile, by the Mercantile Board of Directors at any time before or after the receipt of the Firstbank Shareholder Approval or the Mercantile Shareholder Approval, but, after
receipt of any such shareholder approval, no amendment will be made which by Law or in accordance with the rules of any relevant stock exchange requires further approval by the Firstbank Shareholders or the Mercantile Shareholders, as applicable,
without such further approval. This Plan of Merger may not be amended except by an instrument in writing signed on behalf of Firstbank and Mercantile.
[Signature page follows.]
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IN WITNESS WHEREOF, the undersigned parties have duly executed and acknowledged this Plan of
Merger as of the date first written above.
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FIRSTBANK CORPORATION
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/s/ Thomas R. Sullivan
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By:
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Thomas R. Sullivan
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Its:
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President and Chief Executive Officer
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MERCANTILE BANK CORPORATION
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/s/ Michael H. Price
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By:
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Michael H. Price
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Its:
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Chairman of the Board, President
and Chief Executive Officer
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ANNEX B
PROPOSED AMENDMENT TO THE MERCANTILE BANK CORPORATION ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The proposed amendment affects only the first paragraph of Article III of the Mercantile Bank Corporation Articles of Incorporation, which is set forth below. Deleted language is stricken and new or
amended language is indicated by underlining.
ARTICLE III
CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation shall have authority to issue is
21,000,000
41,000,000
shares which shall be divided into two classes as follows:
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(1)
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1,000,000 shares of Preferred Stock (Preferred Stock); and
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(2)
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20,000,000
40,000,000
shares of Common Stock (Common Stock).
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***
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ANNEX C
August 14, 2013
The Board of Directors
Mercantile Bank Corporation
310 Leonard Street
NW
Grand Rapids, MI 49504
Members
of the Board:
You have requested the opinion of Keefe, Bruyette & Woods, Inc. (KBW or we) as
investment bankers as to the fairness, from a financial point of view, to Mercantile Bank Corporation (Mercantile) of the Exchange Ratio (as defined below), in the proposed merger (the Merger) of Firstbank Corporation
(Firstbank) with and into Mercantile, pursuant to the Agreement and Plan of Merger, dated as of August 12, 2013, by and between Mercantile and Firstbank (the Agreement). Pursuant to the terms of the Agreement, each share of
common stock, no par value per share, of Firstbank issued and outstanding immediately prior to the Effective Date (as defined in the Agreement) other than the Excluded Shares (as defined in the Agreement) shall be converted into the right to receive
1.000 fully paid and nonassessable share of common stock, no par value per share, of Mercantile (the Exchange Ratio). The terms and conditions of the Merger are more fully set forth in the Agreement.
KBW has acted as financial advisor to Mercantile and not as an advisor to or agent of any other person. As part of our investment banking
business, we are continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations
for various other purposes. As specialists in the securities of banking companies, we have experience in, and knowledge of, the valuation of banking enterprises. In the ordinary course of our business as a broker-dealer, we may, from time to time
purchase securities from, and sell securities to, Mercantile and Firstbank, and as a market maker in securities, we may from time to time have a long or short position in, and buy or sell, debt or equity securities of Mercantile and Firstbank for
our own account and for the accounts of our customers. To the extent we have any such position as of the date of this opinion it has been disclosed to Mercantile. We have acted exclusively for the Board of Directors of Mercantile in rendering this
fairness opinion and will receive a fee from Mercantile for our services. A portion of our fee is contingent upon the successful completion of the Merger. In addition, Mercantile has agreed to indemnify us for certain liabilities arising out of our
engagement.
In the past two years, an affiliate of KBW provided investment banking and financial advisory services to
Mercantile and received compensation for such services. In the past two years, we have not provided investment banking and financial advisory services to Firstbank. We may in the future provide investment banking and financial advisory services to
Mercantile and receive compensation for such services.
In connection with this opinion, we have reviewed, analyzed and relied
upon material bearing upon the financial and operating condition of Mercantile and Firstbank and the Merger, including among other things, the following: (i) a version of the Agreement dated August 12, 2013 (the most recent version made
available to us); (ii) the Annual Report to Shareholders for the year ended December 31, 2012 and Annual Reports on Form 10-K for the three years ended December 31, 2012 of Mercantile; (iii) the Annual Reports to Shareholders and
Annual Reports on Form 10-K for the three years ended December 31, 2012 of Firstbank; (iv) certain interim reports to shareholders and the Quarterly Reports on Form 10-Q for the three months ended March 31, 2013 and the three months
ended June 30, 2013 of Mercantile and Firstbank, and certain other communications from Mercantile and
Firstbank to their respective
shareholders; and (v) other financial information concerning the businesses and operations of Mercantile and Firstbank furnished to us by Mercantile and Firstbank for purposes of our analysis. Our consideration of financial information and
other factors that we deemed appropriate under the circumstances or relevant to our analyses included, among others, the following: (i) the historical and current financial position
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and results of operations of Mercantile and Firstbank; (ii) the assets and liabilities of Mercantile and Firstbank; (iii) the nature and terms of certain other merger transactions and
business combinations in the banking industry; (iv) a comparison of certain financial and stock market information for Mercantile and Firstbank with similar information for certain other companies the securities of which are publicly traded. We
have also performed such other studies and analyses as we considered appropriate and have taken into account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as our experience in
securities valuation and knowledge of the banking industry generally. We have also held discussions with senior management of Mercantile and Firstbank regarding the past and current business operations, regulatory relations, financial condition and
future prospects of their respective companies and such other matters as we have deemed relevant to our inquiry.
In
conducting our review and arriving at our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information provided to us or publicly available and we have not independently verified the accuracy
or completeness of any such information or assumed any responsibility or liability for such verification, accuracy or completeness. We have relied upon the management of Mercantile and Firstbank as to the reasonableness and achievability of the
financial and operating forecasts and projections (and the assumptions and bases therefor, including but not limited to any potential cost savings and operating synergies) prepared by and provided to us by management of Mercantile and Firstbank, and
we have assumed, at the direction of Mercantile and Firstbank that such forecasts and projections reflect the best currently available estimates and judgments of such managements and that such forecasts and projections will be realized in the
amounts and in the time periods currently estimated by such managements and that they provide a reasonable basis upon which we could form our opinion. Such forecasts and projections were not prepared with the expectation of public disclosure. All
such projected financial information is based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projected financial information. We have relied on this projected information without independent verification or analysis and do not in any respect assume any responsibility or liability for the accuracy
of completeness thereof.
We also assumed that there were no material changes in the assets, liabilities, financial condition,
results of operations, business or prospects of either Mercantile or Firstbank since the date of the last financial statements of each such entity that were made available to us. We are not experts in the independent verification of the adequacy of
allowances for loan and lease losses and we have assumed, without independent verification and with your consent that the aggregate allowances for loan and lease losses for Mercantile and Firstbank are adequate to cover such losses. In rendering our
opinion, we have not made or obtained any evaluations or appraisals or physical inspection of the property, assets or liabilities of Mercantile or Firstbank, the collateral securing any of such assets or liabilities, or the collectability of any
such assets, nor have we examined any individual loan or credit files, nor did we evaluate the solvency, financial capability or fair value of Mercantile or Firstbank under any state or federal laws, including those relating to bankruptcy,
insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to
uncertainty, we assume no responsibility or liability for their accuracy.
We have assumed that, in all respects material to
our analyses, the following: (i) the Merger will be completed substantially in accordance with the terms set forth in the Agreement (the final terms of which will not differ in any respect material to our analyses from the version reviewed)
with no additional payments or adjustments to the Exchange Ratio; (ii) the representations and warranties of each party in the Agreement and in all related documents and instruments referred to in the Agreement are true and correct;
(iii) each party to the Agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents; (iv) all conditions to the completion of the Merger will be satisfied
without any waivers or modifications to the Agreement; and (v) in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the Merger, no restrictions, including any divestiture requirements, termination
or other payments or amendments or modifications, will be imposed that will have a material adverse
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effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the Merger, including the cost savings, revenue enhancements and related
expenses expected to result from the Merger. We have assumed that the Merger will be consummated in a manner that complies with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and
all other applicable federal and state statutes, rules and regulations. We have further assumed that Mercantile has relied upon the advice of its counsel, independent accountants and other advisors (other than KBW) as to all legal, financial
reporting, tax, accounting and regulatory matters with respect to Mercantile, the Merger and the Agreement.
This opinion
addresses only the fairness, from a financial point of view, as of the date hereof, of the Exchange Ratio in the Merger to Mercantile. We express no view or opinion as to any terms or other aspects of the Merger, including without limitation, the
form or structure of the Merger, any consequences of the Merger (including but not limited to the Pre-Merger Special Dividend (as defined below)) on Mercantile, its shareholders, creditors or otherwise, or any terms, aspects or implications of any
voting, support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the Merger or otherwise. Our opinion is necessarily based upon conditions as they exist and can be evaluated on the date
hereof and the information made available to us through the date hereof. It is understood that subsequent developments may affect the conclusion reached in this opinion and that KBW does not have an obligation to update, revise or reaffirm this
opinion. Our opinion does not address, and we express no view or opinion with respect to, (i) the underlying business decision of Mercantile to engage in the Merger or enter into the Agreement, (ii) the underlying decision of the
Mercantile board of directors to announce its intention to declare and pay, and any subsequent declaration and payment of, the $2.00 special cash dividend (the Pre-Merger Special Dividend) per share of common stock of Mercantile, as
described in and contemplated by the Agreement, including the merits of such decision as compared to any other alternatives that are, have been, or may be available to Mercantile or the Mercantile board of directors, (iii) the relative merits
of the Merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by Mercantile or the Mercantile board of directors, (iv) the fairness of the amount or nature of any compensation to any of
Mercantiles officers directors or employees, or any class of such persons, relative to the compensation to the public shareholders of Mercantile, (v) the effect of the Merger on, or the fairness of the consideration to be received by,
holders of any class of securities of Mercantile or any other party to any transaction contemplated by the Agreement, (vi) any advice or opinions provided by any other advisor to any of the parties to the Merger or any other transaction
contemplated by the Agreement, or (vii) any legal, regulatory, accounting, tax or similar matters relating to Mercantile, Firstbank, their respective shareholders, or relating to or arising out of the Merger, including whether or not the Merger
would qualify as a tax-free reorganization for United States federal income tax purposes.
This opinion is for the information
of, and directed to, the Mercantile board of directors for its information and assistance in connection with its consideration of the financial terms of the Merger and is not to be relied upon by any shareholder of Mercantile or Firstbank or any
other person or entity. This opinion does not constitute a recommendation to the Mercantile board of directors as to how it should vote on the Merger or to any shareholder of Mercantile or Firstbank as to how any such shareholder should vote at any
shareholders meeting at which the Merger is considered, or whether or not any shareholder of Mercantile or Firstbank should enter into a voting, shareholders, or affiliates agreement with respect to the Merger or exercise any
dissenters or appraisal rights that may be available to such shareholder. In addition, this opinion does not in any manner address the prices at which the Mercantile common stock will trade following (i) the announcement or consummation
of the Merger, (ii) the announcement of the Mercantile board of directors intention to declare and pay the Pre-Merger Special Dividend, or (iii) any actual declaration or payment of the Pre-Merger Special Dividend (or the occurrence
of the ex-dividend date with respect thereto).
This opinion has been reviewed and approved by our Fairness Opinion Committee
in conformity with our policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority. This opinion may not be published or otherwise used or referred to, nor shall any public reference to KBW
be made, without our prior written consent.
C-3
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the
Exchange Ratio in the Merger is fair, from a financial point of view, to Mercantile.
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/s/ Keefe, Bruyette & Woods, Inc.
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ANNEX D
August 16, 2013
Board of Directors
Firstbank Corporation
311 Woodworth Avenue
P.O. Box 1029
Alma, MI 48801
Gentlemen:
Firstbank
Corporation (Firstbank) and Mercantile Bank Corporation (Mercantile) have entered into an agreement and plan of merger (the Agreement) pursuant to which Firstbank will merge with and into the Mercantile (the
Merger). Pursuant to the terms of the merger, upon the effective date of the Merger, each share of Firstbank Common Stock, excluding certain shares as specified in the Agreement, issued and outstanding immediately prior to the Effective
Time shall become and be converted into the right to receive 1.00 share of Mercantile Common Stock (the Exchange Ratio). The other terms and conditions of the Merger are more fully set forth in the Agreement, and capitalized terms used
herein without definition shall have the meanings assigned to them in the Agreement. You have requested our opinion as to the fairness, from a financial point of view, of the Exchange Ratio to the holders of Firstbank common stock.
Sandler ONeill & Partners, L.P., as part of its investment banking business, is regularly engaged in the valuation of
financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. In connection with this opinion, we have reviewed, among other things: (i) the Agreement; (ii) certain financial
statements and other historical financial information of Firstbank that we deemed relevant; (iii) certain financial statements and other historical financial information of Mercantile that we deemed relevant; (iv) internal financial
projections for Firstbank for the years ending December 31, 2013 through 2018 as provided by senior management of Firstbank; (v) internal financial projections for Mercantile for the years ending December 31, 2013 through 2018 as
provided by senior management of Mercantile; (vi) the pro forma financial impact of the Merger on the combined company based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and other synergies as
determined by the senior management of Firstbank and Mercantile; (vii) a comparison of certain financial and other information for Firstbank and Mercantile with similar publicly available information for certain other banking institutions, the
securities of which are publicly traded; (viii) the terms and structures of other recent mergers and acquisition transactions in the banking sector; (ix) the current market environment generally and in the banking sector in particular; and
(x) such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. We also discussed with certain members of senior management of Firstbank the business, financial
condition, results of operations and prospects of Firstbank and held similar discussions with the senior management of Mercantile regarding the business, financial condition, results of operations and prospects of Mercantile.
In performing our review, we have relied upon the accuracy and completeness of all of the financial and other information that was
available to us from public sources, that was provided to us by Firstbank and Mercantile or that was otherwise reviewed by us and have assumed such accuracy and completeness for purposes of preparing this letter. We have further relied on the
assurances of the management of Firstbank and Mercantile that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading in any material respect. We did not make an independent evaluation or
appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Firstbank or Mercantile or any of their respective subsidiaries. We did not make an independent evaluation of the adequacy of the
allowance for loan losses of Firstbank and Mercantile or the combined entity after the Merger and we have we not reviewed any individual credit files relating to Firstbank and Mercantile. We have assumed, with your consent, that the respective
allowances for loan losses for both Firstbank and Mercantile are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.
D-1
In preparing its analyses, Sandler ONeill used internal financial projections as
provided by the senior managements of Firstbank and Mercantile. Sandler ONeill also received and used in its analyses certain projections of transaction costs, purchase accounting adjustments, expected cost savings and other synergies which
were prepared by and/or reviewed with representatives and senior management of Firstbank and Mercantile. With respect to those projections, estimates and judgments, the respective managements of Firstbank and Mercantile confirmed to us that those
projections, estimates and judgments reflected the best currently available estimates and judgments of those respective managements of the future financial performance of Firstbank and Mercantile, respectively, and we assumed that such performance
would be achieved. We express no opinion as to such estimates or the assumptions on which they are based. We have assumed that there has been no material change in the respective assets, financial condition, results of operations, business or
prospects of Firstbank and Mercantile since the date of the most recent financial data made available to us. We have also assumed in all respects material to our analysis that Firstbank and Mercantile would remain as going concerns for all periods
relevant to our analyses. We express no opinion as to any of the legal, accounting and tax matters relating to the Merger and any other transactions contemplated in connection therewith.
Our analyses and the views expressed herein are necessarily based on financial, economic, regulatory, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. Events occurring after the date hereof could materially affect our views. We have not undertaken to update, revise, reaffirm or withdraw this letter or otherwise comment
upon events occurring after the date hereof.
We have acted as Firstbanks financial advisor in connection with the
Merger and a significant portion of our fees are contingent upon the closing of the Merger. We also will receive a fee from Firstbank for providing this opinion. Firstbank has also agreed to indemnify us against certain liabilities arising out of
our engagement. In the ordinary course of our business as a broker-dealer, we may purchase securities from and sell securities to Firstbank and Mercantile and their affiliates. We may also actively trade the debt securities of Firstbank and
Mercantile or their affiliates for our own account and for the accounts of our customers.
This letter is directed to the
Board of Directors of Firstbank in connection with its consideration of the Merger and does not constitute a recommendation to any shareholder of Firstbank as to how such shareholder should vote at any meeting of shareholders called to consider and
vote upon the Merger. Our opinion is directed only to the fairness, from a financial point of view, of the Exchange Ratio to holders of Firstbank common stock and does not address the underlying business decision of Firstbank to engage in the
Merger, the relative merits of the Merger as compared to any other alternative business strategies that might exist for Firstbank or the effect of any other transaction in which Firstbank might engage. This opinion shall not be reproduced or used
for any other purposes, without Sandler ONeills prior written consent. This Opinion has been approved by Sandler ONeills fairness opinion committee. We do not express any opinion as to the fairness of the amount or nature of
the compensation to be received in the Merger by Firstbanks officers, directors, or employees, or class of such persons, relative to the compensation to be received in the Merger by any other shareholders of Firstbank.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio is fair to the holders of
Firstbank common stock from a financial point of view.
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Very truly yours,
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/s/ Sandler ONeill & Partners, L.P.
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