As filed with the Securities and Exchange
Commission on September 20, 2010
Registration Statement
No. 333-168075
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 3
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF
1933
MERCANTILE BANCORP,
INC.
(Exact Name of Registrant as
Specified in Its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
6022
(Primary Standard Industrial
Classification Code Number)
37-1149138
(I.R.S. Employer Identification
Number)
200 N. 33rd Street
Quincy, Illinois 62301
(217) 223-7300
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Ted T. Awerkamp
President and Chief Executive Officer
Mercantile Bancorp, Inc.
200 N. 33rd Street, Quincy, Illinois 62301
(217) 223-7300
(Name, address, including zip
code, and telephone number, Including area code, of agent for
service)
Copies to:
Michael P. Reed, Esq.
Yvan-Claude Pierre, Esq.
DLA Piper LLP (US)
500 Eighth Street, NW
Washington, DC 20004
(202) 799-4000
As soon as practicable after the effective date of this
Registration Statement
(Approximate date of
commencement of proposed sale to the public)
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box:
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2
of the
Exchange Act. (Check one):
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Large
accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
þ
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Smaller
reporting
company
o
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(Do not check if a smaller reporting company)
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with section 8(a)
of the securities act of 1933 or until the Registration
Statement shall become effective on such date as the securities
and exchange commission, acting pursuant to section 8(a),
may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
SEPTEMBER 20, 2010
PRELIMINARY PROSPECTUS
Mercantile Bancorp,
Inc.
8,703,330 Subscription
Rights
Up to 8,703,330 shares of
Common Stock issuable as part of the Units
issuable upon exercise of the
Subscription Rights
Up to 8,703,330 Warrants to
purchase Common Stock issuable as part of
the Units issuable upon
exercise of the Subscription Rights
Up to 8,703,330 shares of
Common Stock issuable upon exercise of the Warrants
We are distributing at no charge to the holders of our common
stock, $0.4167 par value per share, on September 23,
2010, which we refer to as the record date, subscription rights
to purchase up to 8,703,330 Units. One Unit consists of one
share of our common stock and one warrant to purchase one share
of our common stock.
You will receive one subscription right for each share of our
common stock that you owned as of 5:00 p.m., New York City
time, September 23, 2010. You will not receive any
fractional rights, as the aggregate number of subscription
rights you receive will be rounded up to the next largest whole
number. Subscribers who exercise their rights in full may
over-subscribe for additional Units, subject to certain
limitations, to the extent Units are available. Each
subscription right entitles you to purchase one Unit at a
subscription price equal to $[ ] per whole
Unit. As of [ ], 2010, the last reported sale
price of a share of our common stock is [ ].
The subscription rights are exercisable beginning on the date of
this prospectus and continuing until 5:00 p.m., New York
City time, on October 29, 2010, which is the expiration
date of the offering period for this rights offering. We may
extend the period for exercising subscription rights in our sole
discretion. If you want to participate in this rights offering
and you are the record holder of your shares, we recommend that
you submit your subscription documents to the subscription
agent, Illinois Stock Transfer Co., before that deadline. If you
want to participate in this rights offering and you hold shares
through your broker, dealer, bank or other nominee, you should
promptly contact your broker, dealer, bank or other nominee and
submit your subscription documents in accordance with the
instructions and within the time period provided by your broker,
dealer, bank or other nominee. Please see page 33 for
further instructions on submitting subscriptions. Subscriptions
will, in our discretion, be accepted when received, and if so
accepted will not be held in escrow by the subscription agent
through the expiration of this rights offering. We reserve the
right to cancel this rights offering at any time prior to the
acceptance of any subscriptions.
Stockholders who do not participate in this rights offering will
continue to own the same number of shares of our common stock,
but will own a smaller percentage of the total shares of our
common stock issued and outstanding after this rights offering
to the extent that other stockholders participate in this rights
offering. Subscription rights that are not exercised prior to
the expiration of this rights offering will expire and have no
value. Subscription rights are not transferable, other than by
operation of law. There is no minimum number of Units that we
must sell in order to complete this rights offering.
As of [ ], 2010, the aggregate market value of
our outstanding common stock held by non-affiliates was
approximately $[ ], based on approximately
[ ] shares held by non-affiliates, and a
per share price of $[ ] based on the last
reported sale price of our common stock on [ ],
2010.
You should carefully consider whether to exercise your
subscription rights before the expiration date. All exercises of
subscription rights are irrevocable. Our board of directors is
making no recommendation regarding your exercise of the
subscription rights.
Investing in our securities involves a
high degree of risk. In addition, your holdings in our company
will be diluted if you do not exercise the full amount of your
basic subscription rights. See Risk Factors
beginning on page 11 of this prospectus.
Our common stock is quoted on the NYSE Amex under the symbol
MBR. The last reported sale price of our common
stock on [ ], 2010 was $[ ]
per share.
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Dealer Manager
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Proceeds, Before
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Subscription Price
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Fee(1)
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Expenses, to Us
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Per Unit
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Total(2)
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(1)
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We have agreed to pay to McClendon,
Morrison & Partners, Inc. as compensation an advisory
fee equal to 2% of the gross proceeds from the exercise of
rights in this rights offering, subject to certain exceptions
(including with respect to any proceeds from rights exercised by
R. Dean Phillips or his related entities or affiliates),
upon completion of this rights offering, and up to $75,000 in
expenses. We are also obligated to pay any broker-dealer where
the holder exercising such rights indicates in writing that such
broker-dealer has solicited such exercise, a cash commission of
up to 3% of the gross proceeds from the exercise of such right
by the rights holder.
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(2)
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Assumes that this offering is fully
subscribed and that the maximum offering amount in the aggregate
of $[ ] is subscribed.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
None of the subscription rights, units, common
stock, warrants or common stock underlying the warrants are
deposits, savings accounts, or other obligations of a bank or
savings association and none of them is insured by the FDIC or
any other governmental agency. The securities are not being
offered in any jurisdiction where the offer is not permitted
under applicable local laws.
Dealer-Manager
McClendon, Morrison &
Partners, Inc.
The date of this prospectus is [ ], 2010.
TABLE OF
CONTENTS
You may rely on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to
provide information different from that contained or
incorporated by reference in this prospectus. When you make a
decision about whether to invest in the Units, you should not
rely upon any information other than the information contained
or incorporated by reference in this prospectus. Neither the
delivery of this prospectus nor the sale of Units pursuant to
exercise of the subscription rights means that the information
contained in this prospectus is correct after the date of this
prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these Units in any circumstances
under which the offer or solicitation is unlawful.
i
ABOUT
THIS PROSPECTUS
Unless the context otherwise requires, all references to
Mercantile we, us,
our, the company, or similar language in
this prospectus refer to Mercantile Bancorp, Inc., an Illinois
banking corporation, and its consolidated subsidiaries.
You should rely only on the information contained in this
document or in a document to which we have referred you. We have
not authorized anyone to provide you with information that is
different. If anyone provides you with different or inconsistent
information, you should not rely on it. For further information,
please see the section of this prospectus entitled Where
You Can Find More Information. We are not making an offer
to sell these securities in any jurisdiction where the offer or
sale is not permitted or in which the person making the offer or
solicitation is not qualified to do so or to anyone to whom it
is unlawful to make the offer or solicitation. You should assume
that the information appearing in this prospectus is accurate as
of any date other than the dates on the front cover of this
prospectus, regardless of the time of delivery of this
prospectus, the time of any exercise of the subscription rights
or any sale of a security. Our business, financial condition,
results of operations and prospects may have changed since that
date of this prospectus.
We obtained statistical data, market data and other industry
data and forecasts used throughout this prospectus and the
documents incorporated herein by reference from market research,
publicly available information and industry publications.
Industry publications generally state that they obtain their
information from sources that they believe to be reliable, but
they do not guarantee the accuracy and completeness of the
information. Similarly, while we believe that the statistical
data, industry data and forecasts and market research are
reliable, we have not independently verified the data, and we do
not make any representation as to the accuracy of the
information. We have not generally sought the consent of the
sources to refer to their reports appearing in this prospectus
or the documents incorporated herein by reference.
This prospectus and the documents incorporated herein by
reference contain trademarks, tradenames, service marks and
service names of Mercantile Bancorp, Inc.
OTHER
INFORMATION
Our principal executive office is located at 200 North
33rd Street, Quincy, Illinois 62301. Our telephone number
is
217-223-7300.
Our website address is www.mercbanx.com. The information found
on, or otherwise accessible through, our website is not
incorporated into, and does not form a part of, this prospectus
or any other document we file or furnish to the Securities and
Exchange Commission, or the SEC. If you have any questions or
need further information about this offering, please contact
Morrow & Company, LLC, our information agent for this
offering, at
(203) 658-9400
(for brokerage firms and banks) or toll-free at
(800) 607-0088
(for stockholders).
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including information incorporated by
reference, contains forward-looking statements (as
that term is defined in the Private Securities Litigation Reform
Act of 1995). These forward-looking statements may be identified
by the use of such words as: believe,
expect, anticipate, intend,
plan, estimate, or words of similar
meaning, or future or conditional verbs such as
will, would, should,
could, or may.
Examples of forward-looking statements include, but are not
limited to, estimates or projections with respect to our future
financial condition, results of operations or business, such as:
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projections of revenues, income, earnings per share, capital
expenditures, assets, liabilities, dividends, capital structure,
or other financial items;
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descriptions of plans or objectives of management for future
operations, products, or services, including pending acquisition
transactions;
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forecasts of future economic performance; and
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descriptions of assumptions underlying or relating to any of the
foregoing.
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ii
Many possible factors or events could affect our future
financial results and performance and could cause those
financial results or performance to differ materially from those
expressed in the forward-looking statements. These possible
events or factors include, without limitation:
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the effects of current and future business and economic
conditions in the markets we serve change or are less favorable
than we expected;
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deposit attrition, operating costs, customer loss and business
disruption are greater than we expected;
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competitive factors, including product and pricing pressures
among financial services organizations may increase;
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the effects of changes in interest rates on the level and
composition of deposits, loan demand, the values of loan
collateral, securities and interest sensitive assets and
liabilities may lead to a reduction in our net interest margins;
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changes in market rates and prices may adversely impact our
securities, loans, deposits, mortgage servicing rights, and
other financial instruments;
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the legislative or regulatory developments, including changes in
laws and regulations concerning taxes, banking, securities,
insurance and other aspects of the financial securities
industry, such as the recently enacted Dodd-Frank Wall Street
Reform and Consumer Protection Act (the Dodd-Frank
Act), and the extensive rule making it requires to be
undertaken by various regulatory agencies may adversely affect
our business, financial condition and results of operations;
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personal or commercial bankruptcies increase;
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our ability to expand and grow our business and operations,
including the establishment of additional branches and
acquisition of additional banks or branches of banks may be more
difficult or costly than we expected;
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any future acquisitions may be more difficult to integrate than
expected and we may be unable to realize any cost savings and
revenue enhancements we may have projected in connection with
such acquisitions;
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changes in accounting principles, policies or guidelines;
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credit risks, including credit risks resulting from the
devaluation of collateral debt obligations
and/or
structured investment vehicles on the capital markets to which
we currently have no direct exposure;
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the failure of assumptions underlying the establishment of our
allowance for loan losses;
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construction and development loans are based upon estimates of
costs and value associated with the complete project. These
estimates may be inaccurate, and cause us to be exposed to more
losses on these projects than on other loans;
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changes that occur in the securities markets;
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technology-related changes may be harder to make or more
expensive than we anticipated;
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worldwide political and social unrest, including acts of war and
terrorism; and
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changes in monetary and fiscal policies of the
U.S. government, including policies of the
U.S. Treasury and the Federal Reserve Board.
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Any forward-looking statements made in this prospectus or
incorporated by reference herein are made as of the date of this
prospectus and we assume no obligation to update the
forward-looking statements or to update the reasons why actual
results could differ from those projected in the forward-looking
statements. You should consider these risks and uncertainties in
evaluating forward-looking statements and you should not place
undue reliance on these statements. You should understand that
it is not possible to predict or identify all such risks and
uncertainties. Consequently, you should not consider these risks
and uncertainties, or the risks described in Risk
Factors in this prospectus, to be a complete discussion of
all potential risks and uncertainties associated with an
investment in us or our securities.
iii
QUESTIONS
AND ANSWERS ABOUT THE RIGHTS OFFERING
The following are questions that we anticipate you may have
about this rights offering. The answers are based on selected
information from this prospectus. The following questions and
answers do not contain all of the information that may be
important to you and may not address all of the questions that
you may have about whether to exercise your subscription rights.
We urge you to read the entire prospectus.
Exercising the rights and investing in our securities
involves a high degree of risk. We urge you to carefully read
the section entitled Risk Factors beginning on
page 11 of this prospectus, as well as the documents listed
under the section Incorporation of Certain Information by
Reference in their entirety before you decide whether to
exercise your rights.
What is
this rights offering?
We are distributing, at no cost or charge to our stockholders,
subscription rights, which we also refer to as rights,
consisting of a basic subscription right to purchase Units
consisting of one share of our common stock and one warrant to
acquire one share of our common stock, and an over-subscription
right to purchase additional Units. These rights may be
exercised only by the stockholders to whom they are distributed,
and may not be sold, transferred or assigned to anyone else,
other than by operation of law. Holders of our common stock will
receive one basic subscription right for each share of common
stock held of record as of 5:00 p.m., New York City time,
on September 23, 2010, the record date of this rights
offering. The subscription rights will be evidenced by
subscription rights certificates. Each basic subscription right
will entitle you to purchase one Unit at a subscription price
equal to $[ ] per Unit. You may exercise any
number of your basic subscription rights, or you may choose not
to exercise any basic subscription rights. We will not
distribute fractional subscription rights, but instead we will
round up the aggregate number of subscription rights you receive
to the next whole number.
This rights offering is an opportunity for you to purchase Units
at a fixed price and in an amount proportional to your existing
interest in our common stock. If you exercise your basic
subscription right in full, you will then be entitled to
exercise your over-subscription right. This enables you to
maintain, or if other stockholders of our common stock do not
exercise their subscription rights, to increase your current
percentage ownership interest in us.
What is a
Unit?
Each Unit is comprised of one share of our common stock and a
warrant to acquire one share of our common stock at an exercise
price of $[ ] per share.
What are
the material terms of the warrants being offered in this rights
offering?
The warrants that we are offering in this rights offering will
be a five-year warrant to purchase one share of our common stock
at an exercise price of $[ ] per share, subject
to our right to redeem the warrants for no consideration at any
time after the second anniversary of the distribution date if
the price of a share of our common stock exceeds 150% of the
exercise price of the warrant for 60 consecutive days.
Why are
we engaging in this rights offering, and how will we use the
proceeds from this rights offering?
In light of current economic conditions generally we have
decided to pursue this rights offering to raise capital which
can be used to support us and our subsidiary banks and improve
our capital position. In addition, we decided to pursue this
rights offering to raise additional capital to assist us and our
subsidiary banks in maintaining or achieving compliance with the
regulatory capital requirements of the enforcement actions that
we and our subsidiary banks have entered into with our
respective banking regulators. In general, each of the
enforcement actions require us and our subsidiary banks to
maintain a minimum Tier 1 leverage capital ratio of 8.00%
and a minimum total risk based capital ratio of 12.00%. As of
June 30, 2010, we and each of our subsidiary banks have met
all requirements of our respective enforcement actions, with the
exception of Heartland Banks Tier 1 leverage capital
ratio of 7.23%, that was below its required minimum ratio of
8.00%. Our board of directors also considered other alternatives
available for raising equity capital and determined that this
rights offering was in both our best interest and the best
interests of our stockholders. Because our stock price is well
below the current book value of
iv
our shares of common stock, we believe that giving our current
stockholders the right to purchase our shares is the fairest and
most equitable approach to raising capital. This rights offering
will give you the opportunity to participate in our capital
raising and maintain, or if other stockholders do not exercise
their subscription rights, to increase your proportional
ownership interest in us. We will have broad discretion in
determining how the net proceeds of this rights offering will be
used. We currently intend to use the net proceeds of this rights
offering for general corporate purposes, including contribution
of amounts to the capital of, and to support, our subsidiary
banks.
How was
the $[ ] per Unit subscription price
determined?
Our board of directors determined that the subscription price
should be designed to provide a reasonable price for our current
stockholders to exercise their subscription rights and our board
of directors concluded that the subscription price was a
reasonable price. Factors considered by our board of directors
in determining the subscription price included the amount of
proceeds desired, the market price of our common stock
historically and during the last 30 days, the volatility of
the market price of our common stock, general conditions in the
securities markets, our recent operating results, our financial
condition, general conditions in the financial services
industry, alternatives available to us for raising equity
capital, the liquidity of our common stock and the fact that we
are providing subscribers with an additional benefit in the form
of the warrants. Ultimately, the subscription price was set
using the approximate midpoint of a range between the price
equal to 90% of the volume weighted average price of our common
stock during the 30 trading days preceding the announcement of
this rights offering and the most recent low closing price of
our common stock. In addition, our board of directors engaged
McClendon, Morrison & Partners, Inc. to advise them
with respect to whether this rights offering was a reasonable
means, from a financial point of view, of raising capital to
address the capital and liquidity needs of us and our subsidiary
banks.
The subscription price is not necessarily related to our book
value, results of operations, cash flows, financial condition,
net worth or any other established criteria of value and may or
may not be considered the fair value of our common stock at the
time this rights offering was approved by our board of directors
or during the rights offering period. Because the subscription
price is based on a range that included the
30-day
volume weighted average of the trading price of our common stock
preceding the announcement of this rights offering, it may be
above the trading price of our common stock as of the date
hereof and if the trading price is above the subscription price,
it may be advantageous for stockholders to purchase additional
shares of our common stock on the NYSE Amex rather than pursuant
to this rights offering. We cannot assure you that the trading
price of our common stock will not decline during or after this
rights offering. We also cannot assure you that you will be able
to sell shares purchased in this offering at a price equal to or
greater than the subscription price. We do not intend to change
the subscription price in response to changes in the trading
price of our common stock prior to the closing of this rights
offering.
Am I
permitted to purchase additional Units other than what my basic
subscription right entitles me to purchase?
Yes. There are over-subscription rights available in this rights
offering.
Are we
requiring a minimum subscription to complete the rights
offering?
We are not requiring minimum subscriptions to complete this
rights offering.
What is
the over-subscription right?
The over-subscription right contained in each subscription right
entitles you, if you have fully exercised your basic
subscription right, to subscribe for additional Units at the
same subscription price per share on a pro rata basis, if any
Units are not purchased by other holders of subscription rights
under their basic subscription rights as of the expiration date.
Pro rata means in proportion to the aggregate number
of Units that all subscription rights holders who have requested
to purchase pursuant to their respective over-subscription
rights. No subscriber can own, as a result of the exercise of
their rights or the oversubscription rights, a number of shares,
and warrants to acquire shares, of our common stock which would
result in such subscriber owning, as of the consummation of the
rights
v
offering, in excess of 9.9% of our common stock, on a
fully-diluted basis. See The Rights Offering
Over-Subscription Right.
What if
there is an insufficient number of Units to satisfy the
over-subscription requests?
If there is an insufficient number of Units available to fully
satisfy the over-subscription requests of rights holders,
subscription rights holders who exercised their
over-subscription right will receive the available Units pro
rata based on the aggregate number of Units each subscription
rights holder who has subscribed for pursuant to their
over-subscription right. Any excess subscription payments will
be returned, without interest or deduction, promptly after the
expiration of the rights offering. See The Rights
Offering Over-Subscription Right.
Who may
participate in this rights offering?
Holders of record of our common stock as of 5:00 p.m., New
York City time, on September 23, 2010, are entitled to
participate in this rights offering.
Am I
required to subscribe in this rights offering?
No. However, any stockholder who chooses not to fully exercise
its basic subscription rights will experience dilution of its
equity interest in the company to the extent that other
stockholders exercise their subscription rights.
How long
will this rights offering last?
You will be able to exercise your subscription rights only
during a limited period. To exercise your subscription rights,
you must do so by 5:00 p.m., New York City time, on the
expiration date of the subscription rights period which is
October 29, 2010, unless we extend this rights offering.
Accordingly, if a rights holder desires to exercise its
subscription rights, unless the guaranteed delivery procedures
are followed, the subscription agent must actually receive all
required documents and payments from the rights holder before
the expiration time. We may extend the expiration date for any
reason.
When will
subscriptions be accepted?
We may, in our discretion, accept basic subscriptions from time
to time when received rather than at the expiration of the
rights offering period. If we accept any basic subscriptions
prior to expiration of the offering period, all basic
subscriptions then received in due form will be accepted.
Over-subscription rights will not be accepted until the rights
offering period has terminated.
How do I
exercise my subscription rights?
You may exercise your subscription rights by properly completing
and signing your subscription rights certificate and delivering
it, with full payment of the subscription price for the Units
for which you are subscribing for the exercise of your basic
subscription right and, if you so choose, your over-subscription
right, to the subscription agent at or prior to the expiration
time. If you send the subscription rights certificate and other
items by mail, we recommend that you send them by registered
mail, properly insured, with return receipt requested. If you
cannot deliver your subscription rights certificate to the
subscription agent on time, you may follow the guaranteed
delivery procedures described under The Rights
Offering Guaranteed Delivery Procedures. If
you are exercising your subscription rights through your broker,
dealer, bank or other nominee, you should promptly contact your
broker, dealer, bank or other nominee and submit your
subscription documents and payment for the Units subscribed for
in accordance with the instructions and within the time period
provided by your broker, dealer, bank or other nominee.
What if
my shares are not held in my name?
If you hold your shares of our common stock in the name of a
broker, dealer, bank or other nominee, then your broker, dealer,
bank or other nominee is the record holder of the shares you
own. The record holder must exercise the
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subscription rights on your behalf for the Units you wish to
subscribe for. Therefore, you will need to have your record
holder act for you.
If you wish to participate in this rights offering and purchase
Units, please promptly contact the record holder of your shares.
We will ask the record holder of your shares, who may be your
broker, dealer, bank or other nominee, to notify you of this
rights offering.
May the
board of directors cancel this rights offering?
Yes. The board of directors may decide to cancel this rights
offering prior to the acceptance of any subscriptions at any
time for any reason.
If this
rights offering is terminated, will my subscription payment be
refunded to me?
Yes. If we terminate this rights offering, all subscription
payments will be returned as soon as practicable following the
termination. We will not pay interest on, or deduct any amounts
from, subscription payments if we terminate this rights
offering. If we terminate this rights offering, we will not be
obligated to issue Units to rights holders who have exercised
their subscription rights prior to termination.
May I
transfer, sell or give away my subscription rights?
No. You may not sell, give away or otherwise transfer your
subscription rights. However, your subscription rights may be
transferred to your affiliates or by operation of law, for
example, upon death. See The Rights Offering
Non-Transferability of Subscription Rights.
How many
Units may I purchase?
You will receive one subscription right for each share of our
common stock that you owned as a holder of record as of
5:00 p.m., New York City time, on September 23, 2010.
We will not distribute fractional subscription rights, but
instead we will round up the aggregate number of subscription
rights you receive to the next whole number. Each subscription
right entitles you to purchase one Unit at a subscription price
equal to $[ ] per Unit. In addition, you may
exercise your over-subscription right, subject to proration and
limited to that number of shares and warrants to acquire shares
which would result in you owning, as of the consummation of the
rights offering, no more than 9.9% of our common stock, on a
fully-diluted basis. See The Rights Offering
Over-Subscription Right.
Are there
risks associated with exercising my subscription
rights?
Yes. The exercise of your subscription rights involves buying
additional shares of our common stock and warrants to acquire
shares of our common stock and should be considered as carefully
as you would consider the acquisition of additional shares of
our common stock in the market or any other equity investment.
Among other things, you should carefully consider the risks
described under the heading Risk Factors beginning
on page 11.
After I
exercise my subscription rights, may I change my mind and cancel
my purchase?
No. Once you send in your subscription rights certificate and
payment, you cannot revoke the exercise of your subscription
rights, even if you later learn information about us that you
consider to be unfavorable and even if the market price of our
common stock is below the $[ ] per Unit
subscription price. However, if we amend this rights offering in
a way which we believe is material, we will extend this rights
offering and offer all rights holders the right to revoke any
subscription submitted prior to such amendment upon the terms
and conditions we set forth in the amendment. The extension of
the expiration date of this rights offering will not, in and of
itself, be considered a material amendment for these purposes.
You should not exercise your subscription rights unless you are
certain that you wish to purchase Units at a price of
$[ ] per Unit. See The Rights
Offering No Revocation of Exercised Subscription
Rights.
What
happens if I choose not to exercise my subscription
rights?
You will retain your current number of shares of our common
stock even if you do not exercise your subscription rights.
However, if other stockholders exercise their subscription
rights and you do not, the percentage
vii
of our issued and outstanding common stock that you own will
diminish, and your voting and other rights will be diluted. Your
subscription rights will expire and have no value if they are
not exercised by the expiration time.
Will I be
charged any fees if I exercise my subscription rights?
We will not charge a fee to holders for exercising their
subscription rights. However, any holder exercising its
subscription rights through a broker, dealer, bank or other
nominee will be responsible for any fees charged by its broker,
dealer, bank or other nominee.
What
should I do if I want to participate in the rights offering, but
I am a stockholder with a foreign address?
Subscription rights certificates will not be mailed to foreign
stockholders whose address of record is outside the United
States and Canada, or is an Army Post Office (APO) address or
Fleet Post Office (FPO). If you are a foreign stockholder, you
will be sent written notice of this offering. The subscription
agent will hold your rights, subject to you making satisfactory
arrangements with the subscription agent for the exercise of
your rights, and follow your instructions for the exercise of
the rights if such instructions are received by the subscription
agent at or before 11:00 a.m., New York City time, on
October 26, 2010, three business days prior to the
expiration date (or, if this offering is extended, on or before
three business days prior to the extended expiration date). If
no instructions are received by the subscription agent by that
time, your rights will expire without any payment to you of
those unexercised rights.
Will our
officers, directors and significant stockholders be exercising
their rights?
Our officers, directors and greater than 5% beneficial
stockholders may participate in this offering, but none of our
officers, directors or greater than 5% beneficial stockholders
are obligated to so participate.
Will the
subscription rights be listed on a stock exchange or trading
market?
No. The subscription rights may not be sold, transferred or
assigned to anyone else and will not be listed on the NYSE Amex
or any other stock exchange or trading market or on the OTC
Bulletin Board. Our common stock trades on the NYSE Amex
under the symbol MBR and the shares of our common
stock to be issued in connection with this rights offering
(either directly or pursuant to exercise of the warrants issued
in connection with this rights offering) will also be listed on
the NYSE Amex under the same symbol. The warrants will not be
listed on the NYSE Amex or any other stock exchange or trading
market or on the OTC Bulletin Board. See The Rights
Offering Non Transferability of Subscription
Rights.
If I
exercise my subscription rights, when will I receive the shares
and warrants for which I have subscribed?
We will issue the shares of our common stock and warrants
comprising the Units for which subscriptions have been properly
received as soon as practicable after this rights offering
expires or, in our discretion, after acceptance, from time to
time, of subscriptions relating to basic subscription rights.
How many
shares of our common stock are currently issued and outstanding,
and how many shares will be issued and outstanding after this
rights offering?
As of [ ], 2010, we had a total of
8,703,330 shares of our common stock issued and
outstanding. The number of shares of our common stock that will
be issued and outstanding after this rights offering will depend
on the number of shares of our common stock that are purchased
in this rights offering. If we sell all of the shares of our
common stock being offered, then we will issue
8,703,330 shares of our common stock and warrants to
acquire an additional 8,703,330 shares of our common stock.
In that case, there will be approximately 17,406,660 shares
of our common stock issued and outstanding after this rights
offering, as well as warrants issued and outstanding to acquire
an additional 8,703,330 shares of our common stock. This
would represent an increase of approximately 100% in the number
of issued and outstanding shares of our common stock and an
increase of approximately 200% in our fully-diluted common stock.
viii
How much
money will we receive from this rights offering?
If we sell all of the Units being offered, we will receive gross
proceeds (before expenses) of approximately
$[ ] million. We are offering the Units in
this rights offering with no minimum purchase requirement. As a
result, we may not sell all or any of the Units being offered.
What are
the United States federal income tax consequences to me of
exercising my subscription rights?
The receipt and exercise of your subscription rights are
intended to be nontaxable events. You should seek specific tax
advice from your personal tax advisor. See Material
U.S. Federal Income Tax Considerations Taxation
of Stockholders.
Has the
board of directors made a recommendation as to whether I should
exercise my subscription rights?
No. Our board of directors has not made any recommendation as to
whether you should exercise your subscription rights. You should
decide whether to subscribe for Units or simply take no action
with respect to your subscription rights based upon your own
assessment of your best interests. We cannot assure you that the
market price for our common stock will be above the subscription
price or that anyone purchasing shares at the subscription price
will be able to sell those shares in the future at the same
price or a higher price. We urge you to make your decision based
on your own assessment of our business and financial condition,
our prospects for the future, the terms of this rights offering,
and the information in, or incorporated by reference into, this
prospectus. Please see Risk Factors on page 11
for a discussion of some of the risks involved in investing in
our Units.
Who is
the subscription agent for the rights offering?
The subscription agent is Illinois Stock Transfer Co. The
address for delivery to the subscription agent is 209 West
Jackson Boulevard, Suite 903, Chicago, Illinois 60606.
What if I
have other questions?
If you have any questions or need further information about this
offering, please contact
Morrow & Company, LLC, our information agent
for this offering, at
(203) 658-9400
(for brokerage firms and banks) or toll-free at
(800) 607-0088
(for shareholders).
In addition, McClendon, Morrison & Partners, Inc. will
act as dealer-manager for this offering. Pursuant to the
engagement letter and the dealer-manager agreement with
McClendon, Morrison & Partners, Inc., we are obligated
to pay to McClendon, Morrison & Partners, Inc., as
compensation, an advisory fee for the advisory services
enumerated above, equal to 2% of the gross proceeds from the
exercise of rights in this rights offering, subject to certain
exceptions (including with respect to any proceeds from rights
exercised by R. Dean Phillips or his related entities or
affiliates), upon completion of this rights offering, and up to
$75,000 in expenses. We are also obligated to pay any
broker-dealer where the holder exercising such rights indicates
in writing that such broker-dealer has solicited such exercise,
a cash commission of up to 3% of the gross proceeds from the
exercise of such right by the rights holder. We have also agreed
to indemnify the dealer-manager for, or contribute to losses
arising out of, certain liabilities, including liabilities under
the Securities Act of 1933. Pursuant to the dealer-manager
agreement we will enter into with McClendon,
Morrison & Partners, Inc., McClendon,
Morrison & Partners, Inc. will not be subject to any
liability to us in rendering the services contemplated by the
dealer-manager agreement except for any act of bad faith or
gross negligence of McClendon, Morrison & Partners,
Inc.
For purposes of the commissions payable to McClendon,
Morrison & Partners, Inc. and other broker-dealers in
connection with the exercise of rights in this rights offering,
the Company has assumed (with McClendon, Morrison &
Partners, Inc.s permission) that the warrant included in
each Unit has no current fair market value and therefore that
the commission is payable solely on the shares of common stock
included in the Unit and on the shares of common stock issued
upon exercise of the warrant, if exercised.
ix
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere in
this prospectus or incorporated by reference in this prospectus.
This summary does not contain all of the information that you
should consider before making an investment decision. Before
making an investment decision, you should read carefully this
entire prospectus, including the matters discussed in Risk
Factors beginning on page 11 in this prospectus, our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, and our
Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010, as such risk factors may be amended, updated or modified
periodically in our reports filed with the SEC, and the
financial data and related notes and the reports incorporated by
reference in this prospectus.
Mercantile
Bancorp, Inc.
We are a multi-state bank holding company, headquartered in
Quincy, Illinois. We were incorporated on April 15, 1983
for the purpose of enabling Mercantile Bank (formerly known as
Mercantile Trust & Savings Bank), an Illinois banking
corporation, to operate within a bank holding company structure.
Several of our subsidiary banks serve rural communities, and a
significant portion of our business is related directly or
indirectly to the agricultural industry. However, we have
diversified in recent years by expanding into metropolitan areas.
As of June 30, 2010, we had total assets of approximately
$1.0 billion and total deposits of approximately
$868 million, and as of December 31, 2009, we had
total assets of approximately $1.4 billion and total
deposits of approximately $955 million. Mercantile Bank has
represented on average approximately 75% of our revenue from
continuing operations and 48% of our pre-consolidated assets
annually. Most of our loans are related to real estate with, on
average, approximately 70% being farmland, construction,
commercial and mortgage loans.
Through our subsidiaries, we conduct a full-service consumer and
commercial banking business, which includes mainly deposit
gathering, safekeeping and distribution; lending for commercial,
financial and agricultural purposes, real estate purposes
(including farmland, construction and mortgages), and consumer
purposes; and asset management including trust, estate and
agency management, retail brokerage services, and agricultural
business management. Notwithstanding the broad range of services
and products, approximately 76% of our revenue is derived on
average annually from our subsidiaries lending activities.
The other principal revenue sources are interest and dividends
on investment securities with approximately 9% of revenue on
average, service charges and fees on customer accounts with
approximately 4% of revenue on average, and all asset management
services combined with approximately 6% of revenue on average.
Our principal, direct activities consist of owning and
supervising our subsidiary banks, through which we derive most
of its revenues. We direct the policies and coordinate the
financial resources of the banks. We provide and perform various
technical and advisory services for the banks, coordinate the
banks general policies and activities, and participate in
the banks major decisions.
Wholly
Owned Subsidiaries
As of June 30, 2010, we were the sole shareholder of the
following subsidiary banks:
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Mercantile Bank, located in Quincy, Illinois; and
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Royal Palm Bancorp, Inc., which we refer to as Royal Palm, and
which is the sole shareholder of The Royal Palm Bank of Florida,
which we refer to as Royal Palm Bank, located in Naples, Florida
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On February 26, 2010, we consummated the sale of two other
subsidiary banks of which we had been the sole shareholder:
Marine Bank & Trust, located in Carthage, Illinois,
and Brown County State Bank, located in Mt. Sterling,
Illinois.
Majority-Owned
Subsidiaries
As of June 30, 2010, we were the majority, but not sole,
shareholder of
Mid-America
Bancorp, Inc., which we refer to as
Mid-America,
which is the sole shareholder of Heartland Bank, located in
Leawood, Kansas. We own 55.5% (84,600 shares) of the
outstanding voting stock of
Mid-America.
As of June 30, 2010, we held approximately
1
$10.9 million of secured subordinated debt of
Mid-America,
convertible at any time into voting stock of
Mid-America.
If we were to convert all of the secured subordinated debt, as
of June 30, 2010, assuming all other holders of
subordinated debt of
Mid-America
also fully convert their secured subordinated debt into voting
stock, we would have held approximately 86.4% of the voting
stock of
Mid-America.
Recent
Developments
On August 16, 2010, we reported results for second quarter
and six months 2010. For the quarter ended June 30, 2010,
we reported an unaudited net loss from both continuing and
discontinued operations of $4.5 million or $(0.51) per
share compared with a net loss of $52.0 million or $(5.98)
per share in second quarter 2009. Our 2009 financial statements
have been restated to reflect discontinued operations due to the
sale or exchange for debt of three of our subsidiary banks in
December 2009 and February 2010.
Our second quarter 2010 results reflected a 25% decrease in our
loan loss provision and a 20% increase in net interest income.
Our provision for loan losses was $7.2 million for second
quarter 2010, compared to $9.5 million in the same period a
year ago. Our net interest income was $6.3 million in the
second quarter of 2010, compared with $5.2 million in the
prior year quarter. In second quarter 2009, we also recorded a
$30.4 million goodwill impairment loss (adjusted to reflect
only our continuing operations). Since that date, we have
carried no goodwill on our balance sheet.
On a consecutive quarter basis, our second quarter 2010 net
interest income of $6.3 million reflected an increase of
$147 thousand over $6.1 million compared to the first
quarter of 2010. This was the third consecutive
quarter-over-quarter improvement in net interest income,
reflecting both improved cost of funds management at our banks
and our reduced debt. Total noninterest income in second quarter
2010 was $2.2 million compared with $1.9 million in
first quarter 2010 and $2.1 million in second quarter 2009.
Second quarter and first half 2010 results were negatively
impacted by a loan loss provision of $2.0 million to
increase the specific reserve to 50% of the carrying value of
subordinated debentures (essentially a bank-to-bank loan) held
by two of our subsidiary banks. The issuer of the debentures is
a financial institution in a weakened capital position, although
it is current on all interest payments due on the debentures.
While this institution is actively seeking a sale or merger, we
deemed it prudent to reserve half of the $4.5 million
exposure.
Our total assets at June 30, 2010 declined to
$1.0 billion, compared with $1.4 billion at
December 31, 2009, primarily reflecting elimination of the
assets held by the two subsidiary banks sold in February 2010,
as well as the reduction of loan portfolios at our remaining
subsidiary banks. Our total loans, net of allowance for losses,
from continuing operations at June 30, 2010 were
$703.4 million versus $757.8 million at
December 31, 2009 as we continued to eliminate troubled
loans and specific lending relationships that were not able to
meet stronger credit standards.
Our total deposits from continuing operations at June 30,
2010 decreased to $868.2 million compared with
$954.5 million at December 31, 2009, reflecting
decreased funding required for the loan portfolio that allowed
for a reduction in higher-cost time deposits, with a focus on
further developing core deposit relationships.
First
Half Results
In the first half of 2010, we generated $20.2 million in
interest income and fees from loans, compared with
$22.7 million in first half 2009. Our net interest margin
for the first half of 2010 was 2.58% compared with 1.90% a year
ago. Our allowance for loan losses as a percentage of total
loans at June 30, 2010 was 3.11%, compared with 2.43% at
June 30, 2009.
As of June 30, 2010, we held $24.7 million in other
real estate owned (OREO). Approximately $20.3 million or
82% was in construction, land development and other land
(primarily unimproved land), 10% or $2.6 million was in
commercial real estate and 7% or approximately $1.7 million
was residential real estate. Mercantile Bank had
$17.8 million in OREO at June 30, 2010, representing a
significant increase from $2.8 million held at the end of
first half 2009.
2
Subsidiary
Bank Operating Highlights
Mercantile Bank, which represents approximately 75% of our
consolidated assets, continues to generate solid performance
despite relatively flat loan demand. The banks served
markets, including Quincy, Illinois, St. Joseph, Missouri and
Carmel, Indiana, did not suffer dramatic economic declines that
were seen in other areas of the country, but did not show
meaningful growth in first half 2010.
For the six months of 2010, Mercantile Bank recorded net
interest income of $11.1 million, a 9.3% increase compared
with $10.2 million in first half 2009. A 39% reduction in
interest expense contributed to a rise in net interest margin of
3.21% compared with 2.80% for the same period in 2009.
Deposits grew to $623.5 million at June 30, 2010,
compared with $607.2 million for the prior year. Mercantile
Banks efficiency ratio improved to 64.8% in the first half
of 2010 compared with 84.5% in first half 2009.
Heartland Bank, the wholly owned subsidiary of
Mid-America
Bancorp, Inc., in which we hold a 55.5% ownership, continued to
make operational improvements in the first half of 2010. Net
interest income rose to $1.3 million compared with
$1.1 million in first half 2009, interest expense declined
to $1.8 million versus $2.6 million the prior
years first half and it reduced its non-interest expense
to $2.3 million compared with $3.1 million in first
half 2009.
Royal Palm Bank recorded net interest income of
$1.5 million for the first six months of 2010, a slight
increase over the same period in 2009. Loan loss provision
declined significantly to $3.6 million for the six months
of 2010, compared with $7.4 million in first half 2009.
Recent
Legislation
On July 21, 2010, President Obama signed the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act), into law. The Dodd-Frank Act will
have a broad impact on the financial services industry,
including significant regulatory and compliance changes such as,
among other things, (1) enhanced resolution authority of
troubled and failing banks and their holding companies;
(2) increased capital and liquidity requirements;
(3) increased regulatory examination fees; (4) changes
to assessments to be paid to the FDIC for federal deposit
insurance; and (5) numerous other provisions designed to
improve supervision and oversight of, and strengthening safety
and soundness for, the financial services sector. Additionally,
the Dodd-Frank Act establishes a new framework for systemic risk
oversight within the financial system to be distributed among
new and existing federal regulatory agencies, including the
Financial Stability Oversight Council, the Board of Governors of
the Federal Reserve System (the Federal Reserve),
the Office of the Comptroller of the Currency (the
OCC), and the Federal Deposit Insurance Corporation
(the FDIC).
The following items provide a brief description of the impact of
the Dodd-Frank Act on the operations and activities, both
currently and prospectively, of the Company and its subsidiaries.
Deposit Insurance.
The Dodd-Frank Act makes
permanent the $250,000 deposit insurance limit for insured
deposits. Amendments to the Federal Deposit Insurance Act also
revise the assessment base against which an insured depository
institutions deposit insurance premiums paid to the
FDICs Deposit Insurance Fund (the DIF), will
be calculated. Under the amendments, the assessment base will no
longer be the institutions deposit base, but rather its
average consolidated total assets less its average equity.
Additionally, the Dodd-Frank Act makes changes to the minimum
designated reserve ratio of the DIF, increasing the minimum from
1.15%to 1.35% of the estimated amount of total insured deposits,
and eliminating the requirement that the FDIC pay dividends to
depository institutions when the reserve ratio exceeds certain
thresholds. Several of these provisions could increase the FDIC
deposit insurance premiums paid by our insured depository
institution subsidiaries. The Dodd-Frank Act also provides that,
effective one year after the date of enactment, depository
institutions may pay interest on demand deposits.
Trust Preferred Securities.
Under the
Dodd-Frank Act, bank holding companies are prohibited from
including in their regulatory Tier 1 capital hybrid debt
and equity securities issued on or after May 19, 2010.
Among the hybrid debt and equity securities included in this
prohibition are trust preferred securities, which the Company
has used in the past as a tool for raising additional
Tier 1 capital and otherwise improving its regulatory
3
capital ratios. Although the Company is permitted to continue to
include our existing trust preferred securities as Tier 1
capital, the prohibition on the use of these securities as
Tier 1 capital going forward may limit the Companys
ability to raise capital in the future.
The Consumer Financial Protection Bureau.
The
Dodd-Frank Act creates a new, independent Consumer Financial
Protection Bureau (the Bureau) within the Federal
Reserve. The Bureau is tasked with establishing and implementing
rules and regulations under certain federal consumer protection
laws with respect to the conduct of providers of certain
consumer financial products and services. The Bureau has
rulemaking authority over many of the statutes governing
products and services offered to bank consumers. In addition,
the Dodd-Frank Act permits states to adopt consumer protection
laws and regulations that are stricter than those regulations
promulgated by the Bureau and state attorneys general are
permitted to enforce consumer protection rules adopted by the
Bureau against certain state-chartered institutions. Although
our bank subsidiaries do not currently offer many of these
consumer products or services, compliance with any such new
regulations would increase our cost of operations and, as a
result, could limit our ability to expand into these products
and services.
Increased Capital Standards and Enhanced
Supervision.
The federal banking agencies are
required to establish minimum leverage and risk-based capital
requirements for banks and bank holding companies. These new
standards will be no lower than existing regulatory capital and
leverage standards applicable to insured depository institutions
and may, in fact, be higher when established by the agencies.
Compliance with heightened capital standards may reduce our
ability to generate or originate revenue-producing assets and
thereby restrict revenue generation from banking and non-banking
operations. The Dodd-Frank Act also increases regulatory
oversight, supervision and examination of banks, bank holding
companies and their respective subsidiaries by the appropriate
regulatory agency. Compliance with new regulatory requirements
and expanded examination processes could increase our cost of
operations.
Transactions with Affiliates.
The Dodd-Frank
Act enhances the requirements for certain transactions with
affiliates under Section 23A and 23B of the Federal Reserve
Act, including an expansion of the definition of covered
transactions and increasing the amount of time for which
collateral requirements regarding covered transactions must be
maintained.
Transactions with Insiders.
Insider
transaction limitations are expanded through the strengthening
on loan restrictions to insiders and the expansion of the types
of transactions subject to the various limits, including
derivative transactions, repurchase agreements, reverse
repurchase agreements and securities lending or borrowing
transactions. Restrictions are also placed on certain asset
sales to and from an insider to an institution, including
requirements that such sales be on market terms and, in certain
circumstances, approved by the institutions board of
directors.
Enhanced Lending Limits.
The Dodd-Frank Act
strengthens the existing limits on a depository
institutions credit exposure to one borrower. Federal
banking law currently limits a national banks ability to
extend credit to one person (or group of related persons) in an
amount exceeding certain thresholds. The Dodd-Frank Act expands
the scope of these restrictions to include credit exposure
arising from derivative transactions, repurchase agreements, and
securities lending and borrowing transactions. It also
eventually will prohibit state-chartered banks (such as the
Companys banking subsidiaries) from engaging in derivative
transactions unless the state lending limit laws take into
account credit exposure to such transactions.
Corporate Governance.
The Dodd-Frank Act
addresses many corporate governance and executive compensation
matters that will affect most U.S. publicly traded
companies, including us. The Dodd-Frank Act (1) grants
shareholders of U.S. publicly traded companies an advisory
vote on executive compensation; (2) enhances independence
requirements for compensation committee members;
(3) requires companies listed on national securities
exchanges to adopt incentive-based compensation clawback
policies for executive officers; and (4) provides the SEC
with authority to adopt proxy access rules that would allow
shareholders of publicly traded companies to nominate candidates
for election as a director and have those nominees included in a
companys proxy materials.
Many of the requirements called for in the Dodd-Frank Act will
be implemented over time and most will be subject to
implementing regulations over the course of several years. While
our current assessment is that the
4
Dodd-Frank
Act will not have a material effect on the Companys
operations, given the uncertainty associated with the manner in
which the provisions of the Dodd-Frank Act will be implemented
by the various regulatory agencies and through regulations, the
full extent of the impact such requirements will have on our
operations is unclear. The changes resulting from the Dodd-Frank
Act may impact the profitability of business activities, require
changes to certain of our business practices, impose upon us
more stringent capital, liquidity and leverage requirements or
otherwise adversely affect our business. These changes may also
require us to invest significant management attention and
resources to evaluate and make any changes necessary to comply
with new statutory and regulatory requirements. Failure to
comply with the new requirements may negatively impact our
results of operations and financial condition. While we cannot
predict what effect any presently contemplated or future changes
in the laws or regulations or their interpretations would have
on us, these changes could be materially adverse to our
investors.
5
THE
RIGHTS OFFERING
For a more complete description of the terms of this offering
being made by this prospectus, see The Rights
Offering and Description of Securities in this
prospectus.
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Securities Offered
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We are distributing at no cost or charge to you one subscription
right for each share of common stock that you owned as of
5:00 p.m., New York City time, on the record date,
September 23, 2010, either as a holder of record or, in the
case of shares held of record by brokers, custodian banks or
other nominees on your behalf, as beneficial owner of the
shares. These rights may be exercised only by you, and cannot be
sold, transferred or assigned to anyone else.
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We will not distribute fractional subscription rights, but
instead we will round up the aggregate number of subscription
rights you receive to the next whole number.
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Basic Subscription Right
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For each subscription right that you own, you will have a basic
subscription right to buy from us one Unit at the subscription
price. Each Unit consists of one share of our common stock and a
warrant to purchase one share of our common stock. You may
exercise your basic subscription right for some or all of your
basic subscription rights, or you may choose not to exercise any
of your basic subscription rights.
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Over-Subscription Right
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If you elect to exercise your basic subscription right in full,
you may also subscribe for additional Units at the same
subscription price per Unit. If an insufficient number of Units
are available to fully satisfy the over-subscription right
requests, the available Units will be distributed pro rata among
rights holders who exercised their over-subscription right based
on the aggregate number of Units requested pursuant to
over-subscription rights. No subscriber can own, as a result of
the exercise of its over-subscription right, a number of shares
and warrants to acquire shares which would result in such
subscriber owning, as of the consummation of this rights
offering, in excess of 9.9% of our common stock, on a
fully-diluted basis. The subscription agent will return any
excess payments by mail without interest or deduction promptly
after the expiration of the rights offering.
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Subscription Price
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The subscription price per Unit shall be equal to
$[ ], which is the approximate midpoint of a
range between the price equal to 90% of the volume weighted
average price of our common stock during the 30 trading days
preceding the announcement of this rights offering and the most
recent low closing price of our common stock. You may pay the
purchase price for the Units either by wire transfer or by
check, or as instructed by your broker-dealer, bank or other
nominee who is the record holder of your shares of our common
stock. Your exercise of subscription rights will not be
considered effective until your payment has cleared. In the case
of immediately available funds, such as a wire transfer, funds
will be deemed to clear upon receipt, but in the case of a
check, up to five business days may be required for clearing and
the check must clear prior to the expiration of the rights
offering period.
|
|
Minimum Subscriptions
|
|
There is no minimum subscription amount under which we would be
required to cancel or terminate the rights offering.
|
|
Record Date
|
|
September 23, 2010.
|
6
|
|
|
Expiration Date
|
|
The subscription rights will expire at 5:00 p.m., New York
City time, on October 29, 2010, unless the expiration date
is extended. We reserve the right to extend the subscription
rights period at our sole discretion.
|
|
Procedures for Exercising Subscription Rights
|
|
The subscription rights may be exercised at any time during the
subscription period, which commences on the date of this
prospectus. To exercise your subscription rights, you must
properly complete the enclosed subscription rights certificate
and deliver it, along with the full subscription price, to the
subscription agent, Illinois Stock Transfer Co., before
5:00 p.m., New York City time, on October 29, 2010,
unless the expiration date is extended.
|
|
|
|
If you use the mail, we recommend that you use insured,
registered mail, return receipt requested. If you cannot deliver
your subscription rights certificate to the subscription agent
on time, you may follow the guaranteed delivery procedures
described below under the heading entitled The Rights
Offering Guaranteed Delivery Procedures.
|
|
Net Proceeds of Offering
|
|
The net proceeds to us will depend on the number of subscription
rights that are exercised. If we issue all 8,703,330 Units
available for the exercise of subscription rights in the rights
offering, the net proceeds to us, after deducting estimated
offering expenses, will be approximately
$[ ] million. We currently intend to use
the net proceeds of this rights offering for general corporate
purposes, including contribution to the capital of, and to
support, our subsidiary banks as needed. See Use of
Proceeds.
|
|
Non-Transferability of Subscription Rights
|
|
The subscription rights may not be sold, transferred or assigned
to anyone else and will not be listed for trading on the NYSE
Amex or any other stock exchange or trading market or on the OTC
Bulletin Board. See The Rights Offering
Non-Transferability of Subscription Rights.
|
|
No Revocation of Exercise by Stockholders
|
|
All exercises of subscription rights are irrevocable, even if
you later learn information about us that you consider
unfavorable. You should not exercise your subscription rights
unless you are certain that you wish to purchase the Units
offered pursuant to the rights offering. See The Rights
Offering No Revocation of Exercised Subscription
Rights.
|
|
Conditions to the Rights Offering
|
|
The completion of the rights offering is subject to the
conditions described in the section below entitled The
Rights Offering Cancellation and Amendment of Rights
Offering.
|
|
Amendment; Cancellation
|
|
We may amend the terms of the rights offering or extend the
rights offering period. If the rights offering is cancelled, all
subscription payments received by the subscription agent or by
us will be returned, without interest or penalty, as soon as
practicable to those persons who subscribed for shares in the
rights offering.
|
|
No Board Recommendation
|
|
Our board of directors is making no recommendations regarding
your exercise of the subscription rights. You are urged to make
your own decision whether or not to exercise your subscription
rights based on your own assessment of our business and the
rights offering. See Risk Factors beginning on
page 11.
|
7
|
|
|
Issuance of Shares of Common Stock and Warrants Comprising Units
|
|
If you purchase Units through the rights offering, we will issue
the shares of common stock and warrants comprising those Units
to you as soon as practicable after the completion of the rights
offering or, if we accept subscriptions relating to basic
subscription rights sooner, as soon as practicable after any
such acceptance.
|
|
Listing of Common Stock
|
|
Neither the subscription rights nor the warrants will be listed
on the NYSE Amex or any other stock exchange or trading market
or on the OTC Bulletin Board. Our common stock trades on
the NYSE Amex under the symbol MBR, and the shares
to be issued in connection with the rights offering, as well as
those underlying the warrants, will also be listed on the NYSE
Amex under the same symbol.
|
|
Certain Material U.S. Federal Income Tax Considerations
|
|
The receipt and exercise of your subscription rights will
generally not be taxable under U.S. federal income tax laws.
However, you should seek specific tax advice from your tax
advisor in light of your tax situation and as to the
applicability and effect of any other tax laws. See
Material U.S. Federal Income Tax Considerations.
|
|
Subscription Agent
|
|
Illinois Stock Transfer Co.
|
|
Shares of Common Stock Outstanding Before the Rights Offering
|
|
As of [ ], 2010, 8,703,330 shares of our
common stock were outstanding.
|
|
Shares of Common Stock Outstanding After Completion of the
Rights Offering
|
|
We will issue up to 8,703,330 shares of our common stock in
the rights offering, depending on the number of subscription
rights that are exercised. Assuming there are no changes in the
number of outstanding shares of our common stock prior to the
expiration of the rights offering period, and based on the
number of shares of our common stock outstanding as of
[ ], 2010, if we issue all
8,703,330 shares of our common stock available for the
exercise of subscription rights in the rights offering, we would
have 17,406,660 shares of our common stock outstanding
following the completion of the rights offering.
|
|
|
|
In addition, we will issue warrants to purchase up to
8,703,330 shares of our common stock in the rights
offering, depending on the number of subscription rights that
are exercised.
|
|
Risk Factors
|
|
Stockholders considering making an investment by exercising
subscription rights in the rights offering should carefully read
and consider the information set forth in the section entitled
Risk Factors beginning on page 11 of this
prospectus, together with the other information contained in or
incorporated by reference into this prospectus supplement and
the accompanying prospectus, including the information contained
under the heading Risk Factors in our Annual Report
on
Form 10-K
for our fiscal year ended December 31, 2009, filed with the
SEC and any updates of those Risk Factors contained in our
Quarterly Reports on
Form 10-Q,
before making a decision to invest in Units.
|
|
Fees and Expenses
|
|
We will pay the fees and expenses related to this rights
offering.
|
8
SUMMARY
CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following table presents our selected consolidated financial
data for the six months ended June 30, 2010 and each of the
five years in the period ended December 31, 2009. We
derived our balance sheet and income statement data for the
years ended December 31, 2009, 2008, 2007, 2006 and 2005,
from our audited consolidated financial statements. We derived
our balance sheet and income statement data for the six-month
period ended June 30, 2010 from our unaudited condensed
consolidated financial statements, which include all
adjustments, consisting only of normal, recurring adjustments
that our management considers necessary for the fair
presentation of our financial condition and results of
operations for that period. The data has been revised to
separately state income (loss) from discontinued operations for
each period represented. Operating results for the period ended
June 30, 2010 are not necessarily indicative of results
that may be expected for the entire year ended December 31,
2010. See Risk Factors beginning on page 11 and
the notes to our consolidated financial statements. The selected
consolidated financial data should be read in conjunction with,
and are qualified in their entirety by, our consolidated
financial statements and the accompanying notes and the other
information included elsewhere, or incorporated by reference, in
this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended June 30,
|
|
Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(Dollars in thousands, except per share data)
|
|
BALANCE SHEET ITEMS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
$
|
124,443
|
|
|
$
|
130,484
|
|
|
$
|
194,097
|
|
|
$
|
205,757
|
|
|
$
|
188,579
|
|
|
$
|
165,066
|
|
Loans held for sale
|
|
|
2,199
|
|
|
|
681
|
|
|
|
4,366
|
|
|
|
3,338
|
|
|
|
1,660
|
|
|
|
3,635
|
|
Loans
|
|
|
723,812
|
|
|
|
775,989
|
|
|
|
1,339,374
|
|
|
|
1,212,051
|
|
|
|
1,031,656
|
|
|
|
857,648
|
|
Allowance for loan losses
|
|
|
22,608
|
|
|
|
18,851
|
|
|
|
23,467
|
|
|
|
12,794
|
|
|
|
10,613
|
|
|
|
8,082
|
|
Discontinued operations, assets held for sale
|
|
|
N/A
|
|
|
|
285,992
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total assets
|
|
|
1,008,792
|
|
|
|
1,390,482
|
|
|
|
1,774,983
|
|
|
|
1,639,145
|
|
|
|
1,422,827
|
|
|
|
1,137,824
|
|
Total deposits
|
|
|
868,173
|
|
|
|
954,524
|
|
|
|
1,462,276
|
|
|
|
1,319,459
|
|
|
|
1,166,814
|
|
|
|
946,129
|
|
Short-term borrowings
|
|
|
13,823
|
|
|
|
30,740
|
|
|
|
49,227
|
|
|
|
45,589
|
|
|
|
26,338
|
|
|
|
32,587
|
|
Long-term debt
|
|
|
76,858
|
|
|
|
87,030
|
|
|
|
146,519
|
|
|
|
143,358
|
|
|
|
107,249
|
|
|
|
51,720
|
|
Discontinued operations, liabilities held for sale
|
|
|
N/A
|
|
|
|
264,044
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Noncontrolling interest
|
|
|
1,790
|
|
|
|
3,901
|
|
|
|
5,735
|
|
|
|
9,446
|
|
|
|
9,198
|
|
|
|
7,561
|
|
Stockholders equity, net of noncontrolling interest
|
|
|
38,005
|
|
|
|
41,302
|
|
|
|
98,957
|
|
|
|
108,282
|
|
|
|
100,658
|
|
|
|
91,488
|
|
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
22,775
|
|
|
$
|
50,317
|
|
|
$
|
58,906
|
|
|
$
|
67,075
|
|
|
$
|
52,291
|
|
|
$
|
38,722
|
|
Interest expense
|
|
|
10,354
|
|
|
|
29,101
|
|
|
|
37,152
|
|
|
|
40,489
|
|
|
|
28,470
|
|
|
|
17,314
|
|
Net interest income
|
|
|
12,421
|
|
|
|
21,216
|
|
|
|
21,754
|
|
|
|
26,586
|
|
|
|
23,821
|
|
|
|
21,408
|
|
Provision for loan losses
|
|
|
11,140
|
|
|
|
22,083
|
|
|
|
23,176
|
|
|
|
2,724
|
|
|
|
3,401
|
|
|
|
1,828
|
|
Noninterest income
|
|
|
4,125
|
|
|
|
7,791
|
|
|
|
9,157
|
|
|
|
10,445
|
|
|
|
11,196
|
|
|
|
6,195
|
|
Noninterest expense
|
|
|
17,255
|
|
|
|
71,483
|
|
|
|
38,574
|
|
|
|
27,766
|
|
|
|
21,620
|
|
|
|
18,450
|
|
Income tax expense (benefit)
|
|
|
(3,037
|
)
|
|
|
(12,137
|
)
|
|
|
(11,371
|
)
|
|
|
952
|
|
|
|
3,062
|
|
|
|
1,578
|
|
Income (loss) from continuing operations
|
|
|
(8,812
|
)
|
|
|
(52,422
|
)
|
|
|
(19,468
|
)
|
|
|
5,589
|
|
|
|
6,934
|
|
|
|
5,747
|
|
Income (loss) from discontinued operations
|
|
|
3,210
|
|
|
|
(7,958
|
)
|
|
|
7,326
|
|
|
|
5,034
|
|
|
|
4,177
|
|
|
|
4,405
|
|
Noncontrolling interest
|
|
|
(2,111
|
)
|
|
|
(1,833
|
)
|
|
|
(3,321
|
)
|
|
|
622
|
|
|
|
792
|
|
|
|
648
|
|
Net income (loss)
|
|
|
(3,491
|
)
|
|
|
(58,547
|
)
|
|
|
(8,821
|
)
|
|
|
10,001
|
|
|
|
10,319
|
|
|
|
9,504
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended June 30,
|
|
Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(Dollars in thousands, except per share data)
|
|
CAPITAL RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
|
12.39
|
%
|
|
|
10.62
|
%
|
|
|
9.25
|
%
|
|
|
10.49
|
%
|
|
|
10.92
|
%
|
|
|
11.75
|
%
|
Tier 1 capital to risk-weighted assets
|
|
|
6.19
|
|
|
|
5.31
|
|
|
|
6.10
|
|
|
|
7.86
|
|
|
|
9.70
|
|
|
|
10.88
|
|
Tier 1 capital to average assets
|
|
|
4.64
|
|
|
|
3.31
|
|
|
|
5.08
|
|
|
|
6.72
|
|
|
|
8.09
|
|
|
|
9.00
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share continuing
operations(1)
|
|
$
|
(0.77
|
)
|
|
$
|
(5.81
|
)
|
|
$
|
(1.85
|
)
|
|
$
|
0.57
|
|
|
$
|
0.72
|
|
|
$
|
0.61
|
|
Basic earnings (loss) per share discontinued
operations(1)
|
|
|
0.37
|
|
|
|
(0.91
|
)
|
|
|
(0.84
|
)
|
|
|
0.58
|
|
|
|
0.46
|
|
|
|
0.47
|
|
Cash dividends
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0.24
|
|
|
|
0.24
|
|
|
|
0.21
|
|
|
|
0.20
|
|
Book value
|
|
|
4.37
|
|
|
|
4.75
|
|
|
|
11.37
|
|
|
|
12.43
|
|
|
|
11.50
|
|
|
|
10.35
|
|
OTHER INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets(2)
|
|
|
(0.62
|
)%
|
|
|
(4.43
|
)%
|
|
|
(1.46
|
)%
|
|
|
0.48
|
%
|
|
|
0.76
|
%
|
|
|
0.77
|
%
|
Return on average equity(2)
|
|
|
(16.84
|
)
|
|
|
(68.42
|
)
|
|
|
(15.38
|
)
|
|
|
4.77
|
|
|
|
6.59
|
|
|
|
5.95
|
|
Dividend payout ratio
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
(23.68
|
)
|
|
|
20.87
|
|
|
|
17.80
|
|
|
|
18.52
|
|
Net interest margin(2)
|
|
|
2.58
|
|
|
|
2.01
|
|
|
|
2.20
|
|
|
|
2.86
|
|
|
|
3.38
|
|
|
|
3.55
|
|
Average stockholders equity to average assets
|
|
|
3.67
|
|
|
|
4.27
|
|
|
|
6.19
|
|
|
|
7.08
|
|
|
|
7.87
|
|
|
|
8.33
|
|
Allowance for loan losses to total gross loans
|
|
|
3.11
|
|
|
|
2.43
|
|
|
|
1.75
|
|
|
|
1.06
|
|
|
|
1.03
|
|
|
|
0.94
|
|
Allowance for loan losses to total net loans
|
|
|
3.21
|
|
|
|
2.49
|
|
|
|
1.78
|
|
|
|
1.06
|
|
|
|
1.04
|
|
|
|
0.95
|
|
Allowance for loan losses to non-performing loans
|
|
|
58.92
|
|
|
|
37.09
|
|
|
|
61.74
|
|
|
|
55.62
|
|
|
|
165.98
|
|
|
|
162.29
|
|
Total non-performing assets to total assets
|
|
|
6.26
|
|
|
|
4.83
|
|
|
|
2.71
|
|
|
|
1.60
|
|
|
|
0.47
|
|
|
|
0.48
|
|
Non-performing loans to total loans
|
|
|
5.29
|
|
|
|
6.54
|
|
|
|
2.83
|
|
|
|
1.89
|
|
|
|
0.62
|
|
|
|
0.58
|
|
Full service offices
|
|
|
12
|
|
|
|
17
|
|
|
|
26
|
|
|
|
27
|
|
|
|
22
|
|
|
|
18
|
|
|
|
|
(1)
|
|
In December 2007, our board of directors approved a
three-for-two
stock split. Share and per share data in the selected
consolidated financial information have been retroactively
restated for the stock split as if it occurred on
January 1, 2005.
|
|
(2)
|
|
Information reflected is from continuing operations.
|
10
RISK
FACTORS
An investment in our Units, or any of the securities
comprising the Units, involves a high degree of risk. You should
carefully consider the following risk factors, along with the
other information contained or incorporated in this prospectus,
including our consolidated financial statements and the notes
thereto, before making an investment in our Units. These various
risks and uncertainties, some of which are difficult to predict
and beyond our control, could negatively impact us. Adverse
experience with the risks described below could have a material
impact on our financial condition and results of operations, as
well as the value of our common stock. In such an event, the
price of our common stock could decline, and you may lose part
or all of your investment.
This prospectus, including the matters addressed under the
caption Cautionary Statement Re: Forward-Looking
Information, contains forward-looking statements that
involve risks and uncertainties, including statements about our
future plans, objectives, intentions and expectations. Past
results are not a reliable indicator of future results, and
historical trends should not be used to anticipate results or
trends in future periods. Many factors, including those
described below, could cause actual results to differ materially
from those discussed in forward-looking statements.
Risks
Related to Our Company
We and
our banking subsidiaries are subject to regulatory agreements
and orders that restrict us and our subsidiaries from taking
certain actions.
General.
As is more fully discussed in the
Regulatory Matters section in Part II,
Item 7 of our Annual Report on
Form 10-K
for the year ended December 31, 2009, and Part I,
Item 2 of our Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010, we, Mercantile Bank, Royal Palm, Royal Palm Bank,
Mid-America
and Heartland Bank are subject to various bank regulatory
enforcement actions. As of June 30, 2010, we and each of
our subsidiary banks have met all regulatory requirements, with
the exception of Heartland Banks Tier 1 leverage
ratio of 7.23%, that was below its required minimum ratio of
8.00%. Heartland Bank is developing a plan to restore its
Tier 1 leverage ratio to the required level, and along with
each of the other subsidiaries, continues to work diligently to
maintain compliance with the enforcement actions. If we are
unable to comply with such requirements, the regulatory agencies
could force a sale, liquidation or federal conservatorship or
receivership of our subsidiaries.
The Company.
We executed a Written Agreement
(WA) with the Federal Reserve Bank (FRB)
in February 2010. Under the terms of the WA, we must, among
other requirements, provide our subsidiary banks with financial
and managerial resources as needed, update our capital and cash
flow plans for the FRB, and provide periodic performance updates
to the FRB. In addition, we are prohibited from paying any
special salaries or bonuses to insiders, paying dividends,
paying interest related to trust preferred securities, or incur
any additional debt, without the prior written approval of the
FRB.
On May 19, 2010, we submitted to the FRB, and the FRB
accepted, a revised three-year strategic and capital plan that
outlines the proposed strategies to maintain our regulatory
capital status of at least adequately capitalized,
maintain positive cash balances at the parent company level,
ensure that each of our subsidiaries meets the capital
requirements directed by their respective regulatory orders, and
meet our debt service requirements, including distributions on
our trust preferred securities.
Banking Subsidiaries.
Generally, the
enforcement actions pertaining to our subsidiaries require the
banking subsidiaries provide certain information to each
supervisory authority including, but not limited to, financial
performance updates, loan performance updates, written plan for
reducing classified assets and concentrations of credit, written
plan to improve liquidity and reduce dependency on volatile
liabilities, written capital plan, and written reports of
progress. In addition, there are restrictions on the
subsidiaries ability to declare any dividends or make any
distributions of capital without the prior approval of the
supervisory authorities and, with respect to the bank
subsidiaries, to maintain certain Tier 1 leverage capital
and total risk based capital ratios at prescribed levels.
As of June 30, 2010, Mercantile Bank, Royal Palm, Royal
Palm Bank,
Mid-America
and Heartland Bank were in compliance with substantially all of
the requirements of the enforcement actions pertaining to them.
Specifically, with respect to capital ratios, as of
June 30, 2010, Mercantile Bank had a Tier 1 leverage
capital ratio of 8.60% and a
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total risk based capital ratio of 12.57%. As of June 30,
2010, Royal Palm Bank had a Tier 1 leverage capital ratio
of 8.03%, Tier 1 risk based capital ratio of 12.39% and a
total risk based capital ratio of 13.75%, and Heartland Bank had
a Tier 1 leverage capital ratio of 7.23%, below its
required minimum ratio of 8.00%, and total risk based capital
ratio of 12.23%.
Capital Injections and Ongoing Compliance.
Our
and our subsidiaries ability to remain in compliance with
the enforcement actions depends on various factors, including,
but not limited to, the maintenance of adequate capital levels.
A significant part of the plan presented to the FRB was our
initiative to sell one or more subsidiary banks in order to
generate liquidity to reduce debt, improve capital ratios and
provide necessary capital contributions to our remaining
subsidiary banks. The result of this initiative was the exchange
for debt of HNB National Bank in December 2009 and the sale of
Marine Bank & Trust and Brown County State Bank in
February 2010. The next step in raising capital is to
successfully consummate this rights offering. If we are not
successful in raising additional capital through this rights
offering, our ability to remain compliant with the enhanced
capital levels required under the enforcement actions will be
reduced. We could be compelled by banking regulators under those
circumstances to sell, liquidate or place in federal
conservatorship or receivership one or more of our remaining
subsidiaries. Also, while these enforcement actions remain in
place, our ability to address opportunities and challenges in
our business, our markets and the banking industry generally
will be curtailed.
Non-performing
assets take significant time to resolve and adversely affect our
results of operations and financial condition, and could result
in further losses in the future.
At June 30, 2010 and December 31, 2009, our
non-performing loans (which consist of non-accrual loans and
loans past due 90 days or more and still accruing loans)
totaled $38.4 million and $50.8 million, or 5.29% and
6.54% of our loan portfolio, respectively. At June 30, 2010
and December 31, 2009, total non-performing assets (which
include non-performing loans plus other real estate owned) were
$63.1 million and $67.2 million, or 8.70% and 8.66% of
total loans, respectively. Non-performing assets adversely
affect net income in various ways. While we pay interest expense
to fund non-performing assets, no interest income is recorded on
non-accrual loans or other real estate owned, thereby adversely
affecting income and returns on assets and equity, and loan
administration costs increase and the efficiency ratio is
adversely affected. When we take collateral in foreclosures and
similar proceedings, we are required to mark the collateral to
its then-fair market value, which, when compared to the value of
the loan, may result in a loss. These non-performing loans and
other real estate owned also increase our risk profile and the
capital that regulators believe is appropriate in light of such
risks. The resolution of non-performing assets requires
significant time commitments from management, which can be
detrimental to the performance of their other responsibilities.
We may experience further increases in non-performing loans in
the future, and
non-performing
assets may result in further losses in the future, either of
which could have a material adverse effect on our results of
operations.
We
incurred net losses for the six months ended June 30, 2010,
as well as in 2009 and 2008 and we may incur further
losses.
We incurred a net loss of $3.5 million, $58.5 million
and $8.8 million for the six months ended June 30,
2010, and for the years ended December 31, 2009 and 2008,
respectively, due to high levels of provision for loan losses
and goodwill impairment. We may incur future losses, especially
in light of economic conditions that continue to adversely
affect our borrowers, particularly those in the southwest
Florida market.
If the
value of real estate in our market area were to decline
materially, a significant portion of the loan portfolio could
become under-collateralized, which might have a material adverse
affect on our financial condition and results of
operations.
In addition to considering the financial strength and cash flow
characteristics of borrowers, we often secure loans with real
estate collateral, which provides an alternate source of
repayment in the event of default by the borrower. This real
property may deteriorate in value during the time the credit is
extended, and if it is necessary to liquidate the collateral
securing a loan to satisfy the debt during a period of reduced
real estate values, earnings and capital could be adversely
affected.
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Real
estate construction, land acquisition and development loans are
based upon estimates of costs and values associated with the
complete project. These estimates may be inaccurate, and we may
be exposed to significant losses on loans for these
projects.
Construction, land acquisition, and development loans involve
additional risks because funds are advanced upon the security of
the project, which is of uncertain value prior to its
completion, and costs may exceed realizable values in declining
real estate markets. Because of the uncertainties inherent in
estimating construction costs and the realizable market value of
the completed project and the effects of governmental regulation
of real property, it is relatively difficult to evaluate
accurately the total funds required to complete a project and
the related
loan-to-value
ratio. As a result, construction loans often involve the
disbursement of substantial funds with repayment dependent, in
part, on the success of the ultimate project and the ability of
the borrower to sell or lease the property, rather than the
ability of the borrower or guarantor to repay principal and
interest. If appraisal of the value of the completed project
proves to be overstated or market values or rental rates
decline, we may have inadequate security for the repayment of
the loan upon completion of construction of the project. If we
are forced to foreclose on a project prior to or at completion
due to a default, we may not be able to recover all of the
unpaid balance of, and accrued interest on, the loan as well as
related foreclosure and holding costs. In addition, we may be
required to fund additional amounts to complete the project and
may have to hold the property for an unspecified period of time
while attempting to dispose of it.
If
economic conditions worsen, we may suffer from credit risk and
our allowance for loan losses may not be adequate to cover
actual losses.
Credit risk is the risk that loan customers or other
counter-parties will be unable to perform their contractual
obligations resulting in a negative impact on earnings. Like all
financial institutions, we maintain an allowance for loan losses
to provide for loan defaults and non-performance. The allowance
for loan losses is based on historical loss experience as well
as an evaluation of the risks associated with the loan
portfolio, including the size and composition of the portfolio,
current economic conditions and geographic concentrations within
the portfolio. If the economy in our primary geographic market
areas should worsen, this may have an adverse impact on the loan
portfolio. If for any reason the quality of the portfolio should
weaken, the allowance for loan losses may not be adequate to
cover actual loan losses, and future provisions for loan losses
could materially and adversely affect financial results.
Recent,
ongoing unfavorable economic conditions may continue or
worsen.
Unfavorable conditions that have affected the economy and
financial markets since mid-2007, further intensified in 2008
and 2009, as did a global economic slowdown, resulting in an
overall decrease in the confidence in the markets and with
negative effects on the business, financial condition and
results of operations of financial institutions in the United
States and other countries. Our business activities and earnings
are affected by these general business conditions. Dramatic
declines in the housing market over the past two years, with
falling home prices and increasing foreclosures and
unemployment, have negatively impacted the credit performance of
real estate related loans and resulted in significant
write-downs of asset values by financial institutions. These
write-downs have caused many financial institutions to seek
additional capital, to reduce or eliminate dividends, to merge
with larger and stronger institutions and, in some cases, to
fail. Reflecting concern about the stability of the financial
markets generally and the strength of counterparties, many
lenders and institutional investors have reduced or ceased
providing funding to borrowers, including to other financial
institutions. This market turmoil and tightening of credit have
led to an increased level of commercial and consumer
delinquencies, lack of consumer confidence, increased market
volatility and widespread reduction of business activity
generally. Market developments may further erode consumer
confidence levels and may cause adverse changes in payment
patterns, causing increases in delinquencies and default rates,
which may impact our charge-offs and provision for loan losses.
Continuing economic deterioration that affects household
and/or
corporate incomes could also result in reduced demand for loan
or fee-based products and services. In addition, changes in
securities market conditions and monetary fluctuations could
adversely affect the availability and terms of funding necessary
to meet our liquidity needs. A worsening of these conditions
would likely exacerbate the adverse effects of these difficult
market conditions on us and others in the financial institution
industry.
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Current
levels of market volatility are unprecedented.
The market for certain investment securities has become highly
volatile or inactive, and may not stabilize or resume in the
near term. This volatility has resulted in significant
fluctuations in the prices of those securities, and additional
market volatility may continue to adversely affect our results
of operations.
The
recently enacted legislation may not stabilize the U.S.
financial markets.
The Emergency Economic Stabilization Act of 2008, or EESA, was
signed into law in October 2008 for the purpose of stabilizing
and providing liquidity to the U.S. financial markets.
Shortly thereafter, the U.S. Department of the Treasury
announced a program under the EESA, known as the Capital
Purchase Program, pursuant to which it would make senior
preferred stock investments in participating financial
institutions. In February 2009, the American Recovery and
Reinvestment Act of 2009, or the Recovery Act, was passed, which
is intended to stabilize the financial markets and slow or
reverse the downturn in the U.S. economy, and which revised
certain provisions of the EESA. The FDIC has also commenced a
guarantee program under which the FDIC would offer a guarantee
of certain financial institution indebtedness in exchange for an
insurance premium to be paid to the FDIC by issuing financial
institutions. EESA and its implementing regulations, the
Recovery Act, the FDIC programs, or any other governmental
program may not have a positive impact on the financial markets.
The failure of the EESA, the Recovery Act, the FDIC programs, or
any other actions of the U.S. government to stabilize the
financial markets and a continuation or worsening of current
financial market conditions could materially and adversely
affect our business, financial condition, results of operations,
access to credit or the trading price of our common stock.
We may
be adversely affected by recently enacted or contemplated
legislation and rulemaking.
The programs established or to be established under the EESA and
Troubled Asset Relief Program, as well as restrictions contained
in current or future rules implementing or related to them and
those contemplated by the Recovery Act, may adversely affect us
if we elect to participate in these programs in the future. In
specific, any governmental or regulatory action having the
effect of requiring us to obtain additional capital, whether
from governmental or private sources, could have a material
dilutive effect on current shareholders. We would face increased
regulation of our business and increased costs associated with
these programs. The EESA, as amended by the Recovery Act,
contains, among other things, significant restrictions on the
payment of executive compensation, which may have an adverse
effect on the retention or recruitment of key members of senior
management. Also, our participation in the Capital Purchase
Program would limit (without the consent of the Department of
Treasury) our ability to increase our dividend and to repurchase
our common stock for up to three years. Similarly, programs
established by the FDIC may have an adverse effect on us, due to
the costs of participation.
Recently
enacted legislative reforms and future regulatory reforms
required by such legislation could have a significant impact on
our business, financial condition and results of
operations.
On July 21, 2010, President Obama signed the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act) into law. The Dodd-Frank Act will
have a broad impact on the financial services industry,
including significant regulatory and compliance changes. Many of
the requirements called for in the Dodd-Frank Act will be
implemented over time and most will be subject to implementing
regulations over the course of several years. Given the
uncertainty associated with the manner in which the provisions
of the Dodd-Frank Act will be implemented by the various
regulatory agencies and through regulations, the full extent of
the impact such requirements will have on our operations is
unclear. The changes resulting from the Dodd-Frank Act may
impact the profitability of our business activities, require
changes to certain of our business practices, impose upon us
more stringent capital, liquidity and leverage requirements or
otherwise adversely affect our business. In particular, the
potential impact of the Dodd-Frank Act on our operations and
activities, both currently and prospectively, include, among
others:
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a reduction in our ability to generate or originate
revenue-producing assets as a result of compliance with
heightened capital standards;
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increased cost of operations due to greater regulatory
oversight, supervision and examination of banks and bank holding
companies, and higher deposit insurance premiums;
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the limitation on our ability to raise capital through the use
of trust preferred securities as these securities may no longer
be included as Tier 1 capital going forward; and
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the limitation on our ability to expand consumer product and
service offerings due to anticipated stricter consumer
protection laws and regulations.
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Further, we may be required to invest significant management
attention and resources to evaluate and make any changes
necessary to comply with new statutory and regulatory
requirements under the Dodd-Frank Act. Failure to comply with
the new requirements may negatively impact our results of
operations and financial condition. While we cannot predict what
effect any presently contemplated or future changes in the laws
or regulations or their interpretations would have on us, these
changes could be materially adverse to our investors.
We may
be adversely affected by government regulation.
All banks are subject to extensive federal and state banking
regulations and supervision. Banking regulations are intended
primarily to protect depositors funds and the federal
deposit insurance funds, not the shareholders. Regulatory
requirements affect lending practices, capital structure,
investment practices, dividend policy and growth. Failure to
meet minimum capital requirements could result in the imposition
of limitations that would adversely impact operations and could,
if capital levels dropped significantly, result in being
required to cease operations. Changes in governing law,
regulations or regulatory practices could impose additional
costs on us or adversely affect the ability to obtain deposits
or make loans and thereby hurt revenues and profitability.
We are
subject to the local economies where we operate, and unfavorable
economic or market conditions in these areas could have a
material adverse effect on our financial condition and results
of operations.
Our success depends upon the general business and economic
conditions in the United States and in its primary areas of
operation. Economic conditions in the local market areas,
including the agricultural prices for land and crops and
commercial and residential real estate values, may have an
adverse effect on the quality of our loan portfolio and
financial performance. An economic downturn within our footprint
could negatively impact household and corporate incomes. This
impact may lead to decreased demand for loan and deposit
products and increase the number of customers who fail to pay
interest or principal on their loans.
We may
not be able to influence the activities of the banking
organizations in which we own a minority interest.
We own a minority interest in several banking organizations
throughout the United States. As minority shareholders, we may
be unable to influence the activities of these organizations,
and may suffer losses due to these activities.
Higher
FDIC deposit insurance premiums and assessments could adversely
affect our financial condition.
FDIC insurance premiums increased substantially in 2009, and we
expect to pay significantly higher FDIC premiums in the future.
Bank failures have significantly depleted the FDICs
Deposit Insurance Fund and reduced the Deposit Insurance
Funds ratio of reserves to insured deposits. The FDIC
adopted a revised risk-based deposit insurance assessment
schedule on February 27, 2009, which raised deposit
insurance premiums. On May 22, 2009, the FDIC also
implemented a special assessment equal to five basis points of
each insured depository institutions assets minus
Tier 1 capital as of June 30, 2009, but no more than
10 basis points times the institutions assessment
base for the second quarter of 2009, which was paid on
September 30, 2009. Additional special assessments may be
imposed by the FDIC for future periods. We participate in the
FDICs Temporary Liquidity Guarantee Program, or TLGP, for
noninterest-bearing transaction deposit accounts. Banks that
participate in the TLGPs noninterest-bearing transaction
account guarantee will pay the FDIC an annual assessment of
10 basis points on the amounts in such accounts above the
amounts covered by FDIC deposit insurance. To the extent that
these TLGP assessments are insufficient to cover any loss or
expenses arising from the TLGP program, the FDIC is authorized
to impose an emergency special assessment on all FDIC-insured
depository institutions. The FDIC has authority to impose
charges for the TLGP upon depository institution holding
companies, as well. The TLGP was scheduled to end
December 31, 2009, but the FDIC extended it to
June 30, 2010 at an increased charge of 15 to 25 basis
points,
15
depending on the depository institutions risk assessment
category rating assigned with respect to regular FDIC
assessments if the institution elects to remain in the TLGP.
These changes have caused the premiums and TLGP assessments
charged by the FDIC to increase. The Dodd-Frank Act makes
permanent the $250,000 deposit insurance limit for insured
deposits. Amendments to the Federal Deposit Insurance Act also
revise the assessment base against which an insured depository
institutions deposit insurance premiums paid to the
FDICs Deposit Insurance Fund (the DIF), will
be calculated. Under the amendments, the assessment base will no
longer be the institutions deposit base, but rather its
average consolidated total assets less its average equity.
Additionally, the Dodd-Frank Act makes changes to the minimum
designated reserve ratio of the DIF, increasing the minimum from
1.15%to 1.35% of the estimated amount of total insured deposits,
and eliminating the requirement that the FDIC pay dividends to
depository institutions when the reserve ratio exceeds certain
thresholds. Several of these provisions could increase the FDIC
deposit insurance premiums paid by our insured depository
institution subsidiaries. The Dodd-Frank Act also provides that,
effective one year after the date of enactment, depository
institutions may pay interest on demand deposits. These actions
are expected to increase our costs for the foreseeable future.
We may
continue to suffer increased losses in our loan portfolio and in
foreclosed assets held for sale despite our underwriting
practices.
We seek to mitigate the risks inherent in our loan portfolio by
adhering to specific underwriting practices. These practices
often include: analysis of a borrowers credit history,
financial statements, tax returns and cash flow projections;
valuation of collateral based on reports of independent
appraisers; and verification of liquid assets. Although we
believe that our underwriting criteria are, and historically
have been, appropriate for the various kinds of loans it makes,
we have already incurred higher than expected levels of losses
on loans that have met these criteria, and may continue to
experience higher than expected losses depending on economic
factors and consumer behavior.
Declines
in the value of securities held in our investment portfolio may
negatively affect earnings.
The value of an investment in our portfolio could decrease due
to changes in market factors. The market value of certain
investment securities is volatile and future declines or
other-than-temporary
impairments could materially adversely affect future earnings
and regulatory capital. Continued volatility in the market value
of certain investment securities, whether caused by changes in
market perceptions of credit risk, as reflected in the expected
market yield of the security, or actual defaults in the
portfolio could result in significant fluctuations in the value
of the securities. This could have a material adverse impact on
our accumulated other comprehensive income and
stockholders equity depending upon the direction of the
fluctuations.
Furthermore, future downgrades or defaults in these securities
could result in future classifications as
other-than-temporarily
impaired. We have invested in common stock of other financial
institutions and the Federal Home Loan Bank of Chicago.
Deterioration of the financial stability of the underlying
financial institutions for these investments could result in
other-than-temporary
impairment charges to us and could have a material impact on
future earnings.
The
soundness of other financial institutions could adversely affect
us.
Our ability to engage in routine funding transactions could be
adversely affected by the actions and commercial soundness of
other financial institutions. Financial services institutions
are interrelated as a result of trading, clearing, counterparty
or other relationships. We have exposure to many different
counterparties, and we routinely execute transactions with
counterparties in the financial industry. As a result, defaults
by, or even rumors or questions about, one or more financial
services institutions, or the financial services industry
generally, have led to market-wide liquidity problems and could
lead to losses or defaults by us or by other institutions. Many
of these transactions expose us to credit risk in the event of
default of our counterparty or client. In addition, our credit
risk may be exacerbated when the collateral held by us cannot be
realized upon or is liquidated at prices not sufficient to
recover the full amount of the financial instrument exposure due
us. Any such losses could materially and adversely affect our
results of operations.
16
We
have a significant deferred tax asset and cannot assure it will
be fully realized.
We had net deferred tax assets of $11.4 million as of
June 30, 2010, and believe that it is more likely than not
that these assets will be realized. In evaluating the need for a
valuation allowance, management estimated future taxable income
based on forecasts and tax planning strategies that may be
available to us. This process required significant judgment by
management about matters that are by nature uncertain. If future
events differ significantly from the current forecasts, we may
need to establish additional valuation allowances, which could
have a material adverse effect on our results of operations and
financial condition.
Our
stock price can be volatile.
Our stock price can fluctuate widely in response to a variety of
factors, including: actual or anticipated variations in
quarterly operating results; recommendations by securities
analysts; significant acquisitions or business combinations;
operating and stock price performance of other companies that
investors deem comparable; new technology used or services
offered by competitors; news reports relating to trends,
concerns and other issues in the financial services industry,
and changes in government regulations. Many of these factors
that may adversely affect our stock price do not directly
pertain to our operating results, including general market
fluctuations, industry factors and economic and political
conditions and events, including terrorist attacks, economic
slowdowns or recessions, interest rate changes, credit loss
trends or currency fluctuations.
Even
if we successfully raise funds through this rights offering, we
may not be able to implement successfully our capital
plan.
We have developed and are continuing to develop and implement a
capital raising plan to address its future needs for capital,
which includes this rights offering. We have engaged an
investment-banking firm to assist with this process. While we
are committed to the completion and execution of the plan and is
devoting necessary resources to achieve that result, we may not
be able to execute on the plan successfully under current market
conditions.
We may
not be able to operate profitably without the revenue stream
from our discontinued operations.
Our losses in 2008 and 2009 were largely due to the operating
losses at Royal Palm Bank and Heartland Bank. These losses were
partially offset by the operating profits (net of goodwill
impairment charges) of Marine Bank & Trust, Brown
County State Bank, and HNB National Bank, which were
subsequently sold. While we believe we have addressed the
majority of the asset quality issues responsible for the
operating losses at Royal Palm Bank and Heartland Bank,
additional unforeseen losses could have a material adverse
effect on our results of operations and financial condition.
In 2009, we reported a consolidated net loss of
$58.5 million, which included net operating profits of
$5.0 million attributable to the discontinued operations.
In the first half of 2010, we reported consolidated net loss of
$3.5 million comprised of a net loss from continuing
operations of $6.7 million, offset by net income from
discontinued operations (including the gain on the sale of
Marine Bank & Trust and Brown County State Bank in
February 2010) of $3.2 million.
The discontinued operations accounted for approximately 41% of
total consolidated revenues in 2009, and approximately 7.50% in
the first half of 2010.
Changes
in the domestic interest rate environment could negatively
affect our net interest income.
Interest rate risk is the risk that changes in market rates and
prices will adversely affect financial condition or results of
operations. Net interest income is our largest source of revenue
and is highly dependent on achieving a positive spread between
the interest earned on loans and investments and the interest
paid on deposits and borrowings. Changes in interest rates could
negatively impact the ability to attract deposits, make loans,
and achieve a positive spread resulting in compression of the
net interest margin.
Liquidity
risk may affect our ability to meet future contractual
obligations.
Liquidity risk is the risk that we will have insufficient cash
or access to cash to satisfy current and future financial
obligations, including demands for loans and deposit
withdrawals, funding operating costs, and for other
17
corporate purposes. Liquidity risk arises whenever the
maturities of financial instruments included in assets and
liabilities differ. Our liquidity could be constrained in
particular by an unexpected inability to access the capital
markets due to a variety of market dislocations or
interruptions. Results of operations could be affected if we
were unable to satisfy current or future financial obligations.
The
financial services industry is highly competitive, and
competitive pressures could intensify and adversely affect our
financial results.
We operate in a highly competitive industry that could become
even more competitive as a result of legislative, regulatory and
technological changes and continued consolidation. We compete
with other commercial banks, savings and loan associations,
mutual savings banks, finance companies, mortgage banking
companies, credit unions and investment companies. In addition,
technology has lowered barriers to entry and made it possible
for non-banks to offer products and services traditionally
provided by banks. Many of these competitors have fewer
regulatory constraints and some have lower cost structures.
We
face operational risks, including systems failure
risks.
We may suffer from operational risks, which may create loss
resulting from human error, inadequate or failed internal
processes and systems, and other external events. Losses may
occur due to violations of, or noncompliance with, laws, rules,
regulations, prescribed practices, or ethical standards. In
addition, our computer systems and network infrastructure, like
that used by competitors, is always vulnerable to unforeseen
problems. These problems may arise in both internally developed
systems and the systems of third-party service providers. Our
operations are dependent upon the ability to protect computer
equipment against physical damage as well as security risks,
which include hacking or identity theft.
We
rely on other companies to provide key components of our
business infrastructure.
Third party vendors provide key components of business
infrastructure such as internet connections and network access.
These parties are beyond our control, and any problems caused by
these third parties, including their not providing their
services for any reasons or their performing their services
poorly, could adversely affect the ability to deliver products
and services to customers and otherwise to conduct business.
Significant
legal actions could subject us to substantial uninsured
liabilities.
From time to time we are subject to claims related to
operations. These claims and legal actions, including
supervisory actions by regulators, could involve large monetary
claims and significant defense costs. To protect us from the
cost of these claims, insurance coverage is maintained in
amounts and with deductibles believed to be appropriate, but
this insurance coverage may not cover all claims or continue to
be available at a reasonable cost. As a result, we may be
exposed to substantial uninsured liabilities, which could
adversely affect results of operations and financial condition.
Changes
in accounting standards may materially impact our financial
statements.
From time to time, the Financial Accounting Standards Board
(FASB) changes the financial accounting and reporting standards
that govern the preparation of financial statements. These
changes can be hard to predict and can materially impact how we
record and report financial condition and results of operations.
In some cases, it may be necessary to apply a new or revised
standard retroactively, resulting in the significant restatement
of prior period financial statements.
Risks
Related to the Rights Offering
As a
holder of common shares, you may suffer significant dilution of
your percentage ownership of our common shares if you do not
fully exercise your basic subscription right.
If you do not exercise your basic subscription rights in full
and your Units not purchased are purchased by other stockholders
in the rights offering, your proportionate voting and ownership
interest will be reduced and the percentage that your original
shares represent of our expanded equity after exercise of the
subscription rights will be diluted. The magnitude of the
reduction of your percentage ownership will depend upon the
extent to which you and others subscribe in the rights offering.
18
We may
cancel the rights offering.
We may unilaterally withdraw or terminate this rights offering
in our discretion prior to the acceptance of any subscriptions
until the expiration of the rights offering. If we elect to
withdraw or terminate the rights offering, neither we nor the
subscription agent will have any obligation with respect to the
subscription rights except to return, without interest or
penalty, any subscription payments.
To
exercise your subscription rights, you need to act promptly and
follow subscription instructions.
If you desire to purchase Units in this rights offering, you
must act promptly to ensure that all required forms and basic
subscription payments and over-subscription payments, if any,
are actually received by the subscription agent at or prior to
5:00 p.m., New York City time, on October 29, 2010,
the expiration date of the rights offering. If you fail to
complete and sign the required subscription forms, send an
incorrect payment amount, or otherwise fail to follow the
subscription procedures that apply to your desired transaction,
we may, depending on the circumstances, reject your subscription
or accept it to the extent of the payment received. If your
exercise is rejected, your payment of the exercise price will be
promptly returned. Neither we nor our subscription agent
undertakes to contact you concerning, or attempt to correct, an
incomplete or incorrect subscription form or payment. We have
the sole discretion to determine whether a subscription exercise
properly follows the subscription procedures and to decide all
questions as to the validity, form and eligibility (including
times of receipt and beneficial ownership). Alternative,
conditional or contingent subscriptions will not be accepted. We
reserve the absolute right to reject any subscriptions not
properly submitted. In addition, we may reject any subscription
if the acceptance of the subscription would be unlawful. We also
may waive any irregularities (or conditions) in the
subscription. If you are given notice of a defect in your
subscription, you will have five business days after the giving
of notice to correct it. You will not, however, be allowed to
cure any defect later than 5:00 p.m., New York City time,
on the expiration date. We are not obligated to give you
notification of defects in your subscription. We will not
consider an exercise to be made until all defects have been
cured or waived.
The
subscription price is not a reflection of our
value.
The subscription price of $[ ] per Unit was
determined by our board of directors. Our board of directors set
the $[ ] per Unit subscription price after
considering a variety of factors discussed under The
Rights Offering Determination of Subscription
Price. The price, however, does not necessarily bear any
relationship to the book value of our assets or our past
operations, cash flows, earnings or financial condition or any
other established criteria for value. Because the subscription
price is based on an approximate midpoint in a range, it may be
above the trading price of our common stock as of the date
hereof and if the trading price is above that level, it would be
advantageous for stockholders to purchase additional shares of
our common stock on the NYSE Amex rather than pursuant to the
rights offering. Our shares of common stock may trade at prices
below the subscription price after the completion of this
offering, and we cannot assure you that you will be able to sell
shares purchased during this offering at a price equal to or
greater than the $[ ] per Unit subscription
price.
You
may not revoke your subscription exercise, even if the rights
offering is extended by our board of directors, and you could be
committed to buying shares above the prevailing market
price.
Once you exercise your subscription rights, you may not revoke
the exercise of such rights. If our board of directors decides
to exercise its option to extend the rights offering, you still
may not revoke the exercise of your subscription rights. Because
the subscription price is based on an approximate midpoint in a
range, it may be above the trading price of our common stock as
of the date hereof and if the trading price is above that level,
it would be advantageous for stockholders to purchase additional
shares of our common stock on the NYSE Amex rather than pursuant
to the rights offering. The public trading market price of our
common stock may decline before the subscription rights expire.
If you exercise your subscription rights and, afterwards, the
public trading market price of our common stock remains below
the subscription price, you will have committed to buying shares
of our common stock at a price above the prevailing market
price, in which case you will have an immediate, unrealized
loss. Following the exercise of your rights, you might not be
able to sell your shares of common stock at a price equal to or
greater than the subscription price, and you may lose all or
part of your investment in our common stock.
19
Our common stock is traded on the NYSE Amex under the symbol
MBR, and the last reported sales price of our common
stock on the NYSE Amex on [ ], 2010 was
$[ ] per share.
You
may not be able to resell any shares of our common stock that
you purchase pursuant to the exercise of subscription rights
immediately upon expiration of the subscription rights offering
period or be able to sell your shares at a price equal to or
greater than the subscription price.
If you exercise subscription rights, you may not be able to
resell the common stock purchased by exercising your
subscription rights until you, or your broker, custodian bank or
other nominee, if applicable, have received those shares.
Moreover, you will have no rights as a stockholder of the shares
you purchased in the rights offering until we issue the shares
to you. Although we will endeavor to issue the shares as soon as
practicable after completion of the rights offering or the
acceptance earlier of subscriptions relating to basic
subscription rights, including the guaranteed delivery period
and after all necessary calculations have been completed, there
may be a delay between the expiration date of the rights
offering and the time that the shares are issued. In addition,
we cannot assure you that, following the exercise of your
subscription rights, you will be able to sell your common stock
at a price equal to or greater than the subscription price.
The
market price of our common stock may never exceed the exercise
price of the warrants issued in connection with this
offering.
The warrants being issued in connection with this offering
become exercisable on their date of issuance and will expire
five years thereafter. The market price of our common stock may
never exceed the exercise price of these warrants prior to their
date of expiration. Any warrants not exercised by their date of
expiration will expire, and we will be under no further
obligation to the warrant holder.
We may
choose to redeem outstanding warrants at a time that is
disadvantageous to our warrant holders.
We may redeem the warrants for no consideration at any time
after the second anniversary of the closing of the rights
offering, in whole and not in part, upon a minimum of
30 days prior written notice of redemption, if and only if,
the last sales price of our common stock equals or exceeds 150%
of the exercise price of the warrant for any 60 consecutive
days in a period ending three business days before the notice of
redemption is sent. Redemption of the warrants could force the
warrant holders to exercise the warrants and pay the exercise
price therefore at a time when it may be disadvantageous for the
holders to do so.
Since
the warrants are executory contracts, they may have no value in
a bankruptcy or reorganization proceeding.
In the event a bankruptcy or reorganization proceeding is
commenced by or against us, a bankruptcy court may hold that any
unexercised warrants are executory contracts that are subject to
rejection by us with the approval of the bankruptcy court. As a
result, holders of the warrants may, even if we have sufficient
funds, not be entitled to receive any consideration for their
warrants or may receive an amount less than they would be
entitled to if they had exercised their warrants prior to the
commencement of any such bankruptcy or reorganization proceeding.
The
receipt of the subscription rights may be treated as a taxable
dividend to you.
We intend to take the position that the distribution of the
subscription rights in this rights offering is a non-taxable
stock dividend under the Internal Revenue Code of 1986, as
amended, referred to in this prospectus as the Code. See
Material U.S. Federal Income Tax Consequences
below. This position is not binding on the Internal Revenue
Service, or IRS, or the courts, however. If the IRS or a court
were to successfully assert that the distribution of the
subscription rights is a taxable distribution of property, your
receipt of subscription rights in this rights offering may be
treated as a receipt of a distribution in an amount equal to the
fair market value of the rights. Any such distribution would be
treated as dividend income to the extent of our current and
accumulated earnings and profits, with any excess being treated
as a return of capital to the extent thereof and then as capital
gain. If you are not a U.S. stockholder (as defined in
Material U.S. Federal Income Tax Consequences),
you may be subject to tax in respect of any taxable stock
dividend. See Material U.S. Federal Income Tax
Consequences below.
20
USE OF
PROCEEDS
Assuming that all subscription rights are exercised, we estimate
that the net proceeds from this rights offering will be
approximately $[ ] million, after
deducting offering expenses. We will have broad discretion in
determining how the net proceeds of this rights offering will be
used. We currently intend to use the net proceeds of this rights
offering for general corporate purposes, including contribution
of amounts to the capital of, and to support, our subsidiary
banks as needed. The net proceeds may be temporarily invested in
short-term investment grade instruments or U.S. government
securities.
21
CAPITALIZATION
The following table sets forth our consolidated capitalization
as of June 30, 2010, on an actual basis, and as adjusted to
reflect the effect of this rights offering. We have assumed net
proceeds of approximately $[ ] will result from
the sale of the Units offered by this prospectus, after
deducting estimated offering expenses. You should read this
information together with our consolidated financial statements
and related notes, which are included or incorporated in this
prospectus.
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As of June 30, 2010
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Equity
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Actual
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As Adjusted
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(Dollars in thousands except per share amount)
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Common Stock, $0.42 par value; authorized
30,000,000 shares; 8,887,113 issued and 8,703,330
outstanding
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$
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3,629
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Additional paid-in capital
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11,919
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|
|
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Retained earnings
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21,604
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|
|
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Accumulated other comprehensive income
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3,148
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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40,300
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|
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Less treasury stock, at cost, 183,783 shares
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(2,295
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)
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Total stockholders equity
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38,005
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Non-controlling interest
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1,790
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|
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Total equity
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$
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39,795
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22
MARKET
FOR COMMON STOCK AND DIVIDEND POLICY
Our common stock is listed on the NYSE Amex under the symbol
MBR. The last reported sales price of our common
stock on the NYSE Amex on [ ], 2010, was
$[ ] per share. As of [ ],
2010, we had [ ] shares of common stock
outstanding, held of record by approximately
[ ] stockholders of record.
The following table sets forth, for the periods indicated, the
high and low sales prices per share for the common stock as
reported on the NYSE Amex for the periods shown as well as the
quarterly dividends declared.
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Low
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High
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Dividends
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2010
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3
rd
(through [ ], 2010)
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$
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$
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2
nd
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$
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3.53
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$
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2.35
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N/A
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1
st
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$
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2.90
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$
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2.22
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|
|
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N/A
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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N/A
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|
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2009
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4
th
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$
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3.90
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|
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$
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2.25
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N/A
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3
rd
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$
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4.98
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$
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2.90
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N/A
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2
nd
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|
$
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7.75
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$
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4.25
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|
|
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N/A
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|
|
|
|
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1
st
|
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$
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10.67
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|
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$
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5.29
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|
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N/A
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|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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N/A
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2008
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4
th
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$
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17.11
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$
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10.55
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$
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0.06
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3
rd
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$
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17.94
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$
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15.22
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$
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0.06
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|
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2
nd
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$
|
18.39
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$
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14.77
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|
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$
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0.06
|
|
|
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1
st
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$
|
18.03
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$
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16.51
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$
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0.06
|
|
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|
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|
|
|
|
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$
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0.24
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|
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|
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23
DESCRIPTION
OF SECURITIES
Common
Stock
We are authorized under Delaware law to issue up to
30,000,000 shares of common stock. There were
8,703,330 shares of common stock issued and outstanding as
of [ ], 2010.
Each share of common stock has the same relative rights and is
identical in all respects with every other share of stock. The
holders of common stock possess exclusive voting rights in the
company. Each holder of common stock is entitled to only one
vote for each share held of record on all matters submitted to a
vote of holders of common stock and is not permitted to cumulate
votes in the election of our directors. Holders do not possess
any dividend or liquidation rights.
Holders of common stock do not have preemptive rights with
respect to any additional shares of common stock that may be
issued. Therefore, we may sell shares of common stock without
first offering such shares to existing stockholders. The common
stock is not subject to call for redemption and may not be
converted to any other class of securities, and the outstanding
shares of common stock are fully paid and non-assessable.
We are also subject to the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In
general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination
with an interested stockholder for a period of three
years after the date of the transaction in which the person
became an interested stockholder, unless the business
combination is approved in a prescribed manner. For purposes of
Section 203, a business combination includes a
merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an interested
stockholder is a person who, together with affiliates and
associates, owns, or within three years prior, did own, 15% or
more of the voting stock of the Delaware corporation.
Also, under federal law, the acquisition by any holder of ten
percent (10%) or more (or five percent (5%) or more if the
acquirer is another bank holding company) of the issued and
outstanding shares of common stock generally requires prior
regulatory approval.
We also have the authority to issue 100,000 shares of
preferred stock having a par value of $0.01, of which no shares
were issued and outstanding as of [ ], 2010.
None of the shares of preferred stock will be issued as part of
the offering. Preferred stock may be issued with preferences and
designations as our board of directors may from time to time
determine. Our board of directors may, without stockholder
approval, issue shares of preferred stock with voting, dividend,
liquidation and conversion rights that could dilute the voting
strength of the holders of the common stock.
Illinois Stock Transfer Co. is our transfer agent common with
respect to the common stock.
Warrants
Common
Stock Subject to Warrants
Each warrant initially represents the right to purchase one
share of our common stock. The number of shares deliverable upon
the exercise of each warrant is subject to the adjustments
described below under the heading Adjustments
to the Warrants.
Exercise
of the Warrants
Each warrant to be issued as part of the Units will have a five
year term and will give the holder the right to purchase one
share of our common stock at an exercise price of
$[ ] per share, subject to our right to redeem
the warrants after the second anniversary of the distribution
date, upon a minimum of 30 days prior written notice of
redemption, if the trading price of a share of our common stock
exceeds 150% of the exercise price of the warrant for 60
consecutive days in a period ending three business days before
the notice of redemption is sent. All or any portion of the
warrants may be exercised in whole or in part at any time or
from time to time on or before 5:00 p.m., New York City
time, on the fifth anniversary of the distribution date, by
surrender to the warrant agent of the warrant and a completed
notice of exercise attached as an annex to the warrant and the
payment of the exercise price per share for the shares of common
stock for which the warrants are being exercised. The exercise
price applicable to
24
the warrants is subject to adjustment described below under the
heading Adjustments to the Warrants. So
long as the warrants are in global form, any exercise notice
will be delivered to the warrant agent through and in accordance
with the procedures of the depository for the warrants.
Upon exercise of warrants, the shares of common stock issuable
upon exercise will be issued by our transfer agent for the
account of the exercising warrantholder. Shares issued upon
exercise of warrants will be issued in the name or names
designated by the exercising warrantholder and will be delivered
by the transfer agent to the exercising warrantholder (or its
nominee or nominees) either via book-entry transfer crediting
the account of such warrantholder (or the relevant participant
of The Depository Trust Company, or DTC for the benefit of
such warrantholder) through DTCs DWAC system, or otherwise
in certificated form by physical delivery to the address
specified by such warrantholder in the exercise notice. We will
not issue fractional shares upon any exercise of the warrants.
Instead, the exercising warrantholder will be entitled to a cash
payment equal to the pro-rated per share market price of our
common stock on the date of exercise of the warrants for any
fractional share that would have otherwise been issuable upon
exercise of the warrants. We will at all times reserve the
aggregate number of shares of our common stock for which the
warrants may be exercised.
Issuance of any shares of our common stock deliverable upon the
exercise of warrants will be made without charge to the
warrantholder for any issue or transfer tax or other incidental
expense in respect of the issuance of those shares (other than
liens or charges created by a warrantholder, income and
franchise taxes incurred in connection with the exercise of the
warrant or taxes in respect of any transfer occurring
contemporaneously therewith).
The shares of common stock issuable upon the exercise of the
warrants will be listed on the NYSE Amex under the symbol
MBR.
Right as
a Stockholder
The warrantholders will have no rights or privileges of holders
of our common stock, including any voting rights or rights to
dividend payments, until (and then only to the extent) the
warrants have been exercised.
Adjustments
to the Warrants
Pursuant to the terms of the warrants, the number of shares of
our common stock issuable upon exercise of each warrant, which
we refer to as the warrant shares, and the warrant exercise
price will be adjusted upon occurrence of certain events as
follows.
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In the case of stock splits, subdivisions, reclassifications
or combinations of common stock
. If we declare
and pay a dividend or make a distribution on our common stock in
shares of common stock, subdivide or reclassify the outstanding
shares of our common stock into a greater number of shares, or
combine or reclassify the outstanding shares of our common stock
into a smaller number of shares, the number of warrant shares at
the time of the record date for such dividend or distribution or
the effective date of such subdivision, combination or
reclassification will be proportionately adjusted so that the
holder of a warrant after such date will be entitled to purchase
the number of shares of our common stock that it would have
owned or been entitled to receive in respect of the number of
warrant shares had such warrant been exercised immediately prior
to such date. The exercise price in effect immediately prior to
the record date for such dividend or distribution or the
effective date of such subdivision, combination or
reclassification will be adjusted by multiplying such exercise
price by the quotient of (x) the number of warrant shares
immediately prior to such adjustment divided by (y) the new
number of warrant shares as determined in accordance with the
immediately preceding sentence.
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In the case of cash dividends or other
distributions.
If we fix a record date for making
a distribution to all holders of our common stock of securities,
evidences of indebtedness, assets, cash, rights or warrants
(excluding ordinary cash dividends (as defined below), dividends
of our common stock and other dividends or distributions
referred to in the preceding bullet point), the exercise price
in effect prior to such record date will be reduced immediately
thereafter to the price determined by multiplying the exercise
price in effect immediately prior to the reduction by the
quotient of (x) the market price (as defined below) of our
common stock on the last trading day preceding the first date on
which our common stock trades regular way on the
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principal national securities exchange on which our common stock
is listed or admitted to trading without the right to receive
such distribution, minus the amount of cash
and/or
the
fair market value of the securities, evidences of indebtedness,
assets, rights or warrants to be so distributed in respect of
one share of our common stock (such subtracted amount
and/or
fair
market value, the Per Share Fair Market Value)
divided by (y) such market price on the date specified in
clause (x). Any such adjustment will be made successively
whenever such a record date is fixed. The number of warrant
shares will be increased to the number obtained by multiplying
the number of warrant shares deliverable upon exercise of a
warrant immediately prior to such adjustment by the quotient of
(a) the exercise price in effect immediately prior to the
distribution giving rise to this adjustment divided by
(b) the new exercise price as determined in accordance with
the immediately preceding sentence. In the case of adjustment
for a cash dividend that is, or is coincident with, a regular
quarterly cash dividend, the Per Share Fair Market Value would
be reduced only by the per share amount of the portion of the
cash dividend that would constitute an ordinary cash dividend.
If, after the declaration of any such record date, the related
distribution is not made, the exercise price and the number of
warrant shares then in effect will be readjusted, effective as
of the date when our board of directors determines not to make
such distribution, to the exercise price and the number of
warrant shares that would then be in effect if such record date
had not been fixed.
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In the case of a pro rata repurchase of common
stock.
A pro rata repurchase is
defined as any purchase of shares of our common stock by us or
an affiliate of ours pursuant to any tender offer or exchange
offer subject to Section 13(e) or 14(e) of the Exchange
Act, or Regulation 14E thereunder, or any other offer
available to substantially all holders of our common stock. If
we effect a pro rata repurchase of our common stock, then the
exercise price will be reduced to the price determined by
multiplying the exercise price in effect immediately prior to
the effective date (as defined below) of such pro rata
repurchase by a fraction of which (A) the numerator will be
(i) the product of (x) the number of shares of our
common stock outstanding immediately before such pro rata
repurchase and (y) the market price of a share of our
common stock on the trading day immediately preceding the first
public announcement by us or any of our affiliates of the intent
to effect such pro rata repurchase, minus (ii) the
aggregate purchase price of the pro rata repurchase, and
(B) the denominator will be the product of (i) the
number of shares of our common stock outstanding immediately
prior to such pro rata repurchase minus the number of shares of
our common stock so repurchased and (ii) the market price
per share of our common stock on the trading day immediately
preceding the first public announcement by us or any of our
affiliates of the intent to effect such pro rata repurchase. The
number of warrant shares will be increased to the number
obtained by multiplying the number of warrant shares immediately
prior to such adjustment by the quotient of (x) the
exercise price in effect immediately prior to the pro rata
repurchase giving rise to this adjustment divided by
(y) the new exercise price as determined in accordance with
the immediately preceding sentence. For the avoidance of doubt,
no increase to the exercise price or decrease in the number of
warrant shares deliverable upon exercise of a warrant will be
made pursuant to this adjustment provision. The effective
date of a pro rata repurchase means (a) the date of
acceptance of shares for purchase or exchange by us under any
tender offer or exchange offer which is a pro rata repurchase or
(b) the date of purchase of any pro rata repurchase that is
not a tender offer or an exchange offer.
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In the case of a merger, consolidation, statutory share
exchange or similar transaction that requires the approval of
our stockholders (any such transaction, a business
combination)
. In the event of any business
combination or reclassification of our common stock (other than
a reclassification referenced in the first bullet point above),
a warrantholders right to receive shares of our common
stock upon exercise of a warrant will be converted into the
right to exercise that warrant to acquire the number of shares
of stock or other securities or property (including cash) which
our common stock issuable (at the time of such business
combination or reclassification) upon exercise of such warrant
immediately prior to such business combination or
reclassification would have been entitled to receive upon
consummation of such business combination or reclassification.
In determining the kind and amount of stock, securities or the
property receivable upon exercise of a warrant following the
consummation of such business combination, if the holders of our
common stock have the right to elect the kind or amount of
consideration receivable upon consummation of such business
combination, then the consideration that a warrantholder will be
entitled to receive upon exercise will be deemed to be the types
and amounts of consideration received by the majority
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of all holders of the shares of our common stock that
affirmatively make an election (or of all such holders if none
make an election). For purposes of determining any amount of
warrant shares to be withheld by us as payment of the exercise
price from stock, securities or the property that would
otherwise be delivered to a warrantholder upon exercise of
warrants following any business combination, the amount of such
stock, securities or property to be withheld will have a market
price equal to the aggregate exercise price as to which such
warrants are so exercised, based on the fair market value of
such stock, securities or property on the trading day on which
such warrants are exercised and notice is delivered to the
warrant agent. If any such property is not a security, the
market price of such property will be deemed to be its fair
market value as determined in good faith by our board of
directors in reliance on an opinion of a nationally recognized
independent investment banking corporation retained by us for
this purpose. If making such determination requires the
conversion of any currency other than U.S. dollars into
U.S. dollars, such conversion will be done in accordance
with customary procedures based on the rate for conversion of
such currency into U.S. dollars displayed on the relevant
page by Bloomberg L.P. (or any successor or replacement service)
on or by 4:00 p.m., New York City time, on such exercise
date.
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Neither the exercise price nor the number of shares issuable
upon exercise of a warrant will be adjusted in the event of a
change in the par value of our common stock or a change in our
jurisdiction of incorporation. If an adjustment in the exercise
price made in accordance with the adjustment provisions above
would reduce the exercise price to an amount below the par value
of our common stock, then that adjustment will reduce the
exercise price to that par value.
The warrant agent will notify the warrantholders of any
adjustments. If the warrant agent fails to give such notice, the
exercise price and the number of shares issuable upon exercise
of the warrants will nevertheless be adjusted.
If more than one adjustment provision applies to a single event,
the adjustment provision that produces the largest adjustment
with respect to such event will be applied, and no single event
will cause an adjustment under more than one adjustment
provision so as to result in duplication. All such adjustments
will be made to the nearest one-tenth (1/10th) of a cent or to
the nearest one-hundredth (1/100th) of a share, as the case may
be. No adjustment in the exercise price or the number of shares
issuable upon exercise of a warrant will be made if the amount
of such adjustment would be less than $0.01 or one-tenth
(1/10th) of a share of our common stock, but any such amount
will be carried forward and an adjustment with respect thereto
will be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount
or amounts so carried forward, will aggregate $0.01 or
1/10th of a share of our common stock, or more, or on
exercise of a warrant if that occurs earlier.
For purposes of these adjustment provisions:
ordinary cash dividends
means a regular
quarterly cash dividend on shares of our common stock out of
surplus or net profits legally available therefor (determined in
accordance with generally accepted accounting principles in
effect from time to time). Ordinary cash dividends will not
include any cash dividends paid subsequent to December 31,
2008 to the extent the aggregate per share dividends paid on our
outstanding common stock in any quarter exceed $0.06, as
adjusted for any stock split, stock dividend, reverse stock
split, reclassification or similar transaction.
market price
means, with respect to a
particular security, on any given day, the last reported sale
price regular way or, in case no such reported sale takes place
on such day, the average of the last closing bid and ask prices
regular way, in either case on the principal national securities
exchange on which the applicable securities are listed or
admitted to trading, or if not listed or admitted to trading on
any national securities exchange, the average of the closing bid
and ask prices as furnished by two FINRA members selected from
time to time by us for that purpose, and will be determined
without reference to after hours or extended hours trading. If
such security is not listed and traded in a manner that the
quotations referred to above are available for the period
required under the warrants, the market price will be deemed to
be the fair market value per share of such security as
determined in good faith by our board of directors in reliance
on an opinion of a nationally recognized independent investment
banking corporation retained by us for this purpose. If any such
security is listed or traded on a
non-U.S. market,
such fair market value will be determined by reference to the
closing price of such security as of the end of the most
recently ended business day in such market prior to the date of
determination. If making any such determination
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requires the conversion of any currency other than
U.S. dollars into U.S. dollars, such conversion will
be done in accordance with customary procedures based on the
rate for conversion of such currency into U.S. dollars
displayed on the relevant page by Bloomberg L.P. (or any
successor or replacement service) on or by 4:00 p.m., New
York City time, on such exercise date. For the purposes of
determining the market price of our common stock on the
trading day preceding, on or following the
occurrence of an event, (i) that trading day will be deemed
to commence immediately after the regular scheduled closing time
of trading on the Exchange or, if trading is closed at an
earlier time, such earlier time and (ii) that trading day
will end at the next regular scheduled closing time, or if
trading is closed at an earlier time, such earlier time (for the
avoidance of doubt, and as an example, if the market price is to
be determined as of the last trading day preceding a specified
event and the closing time of trading on a particular day is
4:00 p.m. and the specified event occurs at 5:00 p.m.
on that day, the market price would be determined by reference
to such 4:00 p.m. closing price).
Amendment
Any warrants may be amended and the observance of any material
term of such warrants may be waived with the consent of a
majority of the holders of such warrants; provided, that the
consent of each affected warrantholder is necessary for any
amendment (i) to increase the exercise price or to decrease
the number of shares issuable upon exercise of the warrants
(other than pursuant to the terms of the adjustment provisions
in the warrant certificate described above), (ii) that
would shorten the time period during which the warrants are
exercisable or (iii) that would change in a manner adverse
to such warrantholder the terms of the adjustment provisions in
the warrant certificate described above.
Description
of the Warrant Agreement
Under the warrant agreement, Illinois Stock Transfer Co. is
appointed as the warrant agent to act on our behalf in
connection with the transfer, exchange, redemption, exercise and
cancellation of the warrants and required to maintain a registry
recording the names and addresses of all registered holders of
warrants. The warrant agent will receive a fee in exchange for
performing these duties under the warrant agreement and will be
indemnified by us for liabilities not involving gross
negligence, willful misconduct or bad faith and arising out of
its service as warrant agent.
The warrants will initially be issued in the form of one or more
global warrants as specified in the warrant agreement. Each
global warrant will be deposited upon issuance with, or on
behalf of, DTC, and will be registered in the name of DTC or a
nominee of DTC, in each case for credit to the account of a
direct or indirect participant in DTC. For a description of
book-entry procedures and settlement mechanics generally
applicable to securities held through DTC participants, see the
section entitled Book-Entry Issuance below. Owners
of a beneficial interest in any global warrant are entitled to
receive a warrant in definitive form not held by a depository or
the warrant agent only if (i) DTC is unwilling or unable to
continue as depository for the global warrant or ceases to be a
clearing agency under the Exchange Act (and, in each
case, no successor depository is appointed within 90 days),
(ii) we, in our sole discretion, notify the warrant agent
of our election to issued warrants in definitive form under the
warrant agreement or (iii) we have been adjudged bankrupt,
consented to the filing of bankruptcy proceedings, or filed a
petition, answer or consent seeking to reorganize under federal
or state law.
Governing
Law
The warrants will be governed by New York law.
Book-Entry
Issuance
The warrants may be issued as global warrants and deposited with
a depositary. The following is a summary of the depositary
arrangements applicable to warrants issued in permanent global
form and for which DTC will act as depositary (the global
warrants). The information in this section concerning DTC
and DTCs book-entry system has been obtained from sources
that we believe to be reliable, but we take no responsibility
for the accuracy thereof.
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Each global warrant will be deposited with, or on behalf of,
DTC, as depositary, or its nominee and registered in the name of
a nominee of DTC. Except under the limited circumstances
described below, global warrants will not be exchangeable for
certificated warrants.
Only institutions that have accounts with DTC or its nominee
(DTC participants) or persons that may hold
interests through DTC participants may own beneficial interests
in a global warrant. DTC will maintain records evidencing
ownership of beneficial interests by DTC participants in the
global warrants and transfers of those ownership interests. DTC
participants will maintain records evidencing ownership of
beneficial interests in the global warrants by persons that hold
through those DTC participants and transfers of those ownership
interests within those DTC participants. DTC has no knowledge of
the actual beneficial owners of the warrants. You will not
receive written confirmation from DTC of your purchase, but we
do expect that you will receive written confirmations providing
details of the transaction, as well as periodic statements of
your holdings from the DTC participant through which you entered
the transaction. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of those
securities in certificated form. Those laws may impair your
ability to transfer beneficial interests in a global warrant.
DTC has advised us that upon the issuance of a global warrant
and the deposit of that global warrant with DTC, DTC will
immediately credit, on its book-entry registration and transfer
system, the number of warrants represented by that global
warrant to the accounts of DTC participants.
We will make any payments on warrants represented by a global
warrant to DTC or its nominee, as the case may be, as the
registered owner and holder of the global warrant representing
those securities. DTC has advised us that upon receipt of any
payment on a global warrant, DTC will immediately credit
accounts of DTC participants with payments in amounts
proportionate to their respective beneficial interests in that
warrant, as shown in the records of DTC. Standing instructions
and customary practices will govern payments by DTC participants
to owners of beneficial interests in a global warrant held
through those DTC participants, as is now the case with
securities held for the accounts of customers in bearer form or
registered in street name. Those payments will be
the sole responsibility of those DTC participants, subject to
any statutory or regulatory requirements in effect from time to
time.
Neither we nor our agents will have any responsibility or
liability for any aspect of the records of DTC, any nominee or
any DTC participant relating to, or payments made on account of,
beneficial interests in a global warrant or for maintaining,
supervising or reviewing any of the records of DTC, any nominee
or any DTC participant relating to those beneficial interests.
A global warrant is exchangeable for certificated warrants
registered in the name of a person other than DTC or its nominee
only if:
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DTC notifies us that it is unwilling or unable to continue as
depository for that global warrant or DTC ceases to be
registered under the Exchange Act;
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we determine in our discretion that the global warrant will be
exchangeable for certificated warrants in registered form;
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we are adjudged bankrupt or insolvent, make an assignment for
the benefit of our creditors or upon certain similar events.
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Any global warrant that is exchangeable as described in the
preceding sentence will be exchangeable in whole for
certificated warrants in registered form. The registrar will
register the certificated warrants in the name or names
instructed by DTC. We expect that those instructions may be
based upon directions received by DTC from DTC participants with
respect to ownership of beneficial interests in the global
warrant.
Except as provided above, as an owner of a beneficial interest
in a global warrant, you will not be entitled to receive
physical delivery of warrants in certificated form and will not
be considered a holder of warrants for any purpose. No global
warrant will be exchangeable except for another global warrant
of like denomination and tenor to be registered in the name of
DTC or its nominee. Accordingly, you must rely on the procedures
of DTC and the DTC participant through which you own your
interest to exercise any rights of a holder under the global
warrant.
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We understand that, under existing industry practices, in the
event that we request any action of holders, or an owner of a
beneficial interest in a global warrant desires to take any
action that a holder is entitled to take under the terms of the
warrants, DTC would authorize the DTC participants holding the
relevant beneficial interests to take that action, and those DTC
participants would authorize beneficial owners owning through
those DTC participants to take that action or would otherwise
act upon the instructions of beneficial owners owning through
them.
DTC has advised us that DTC is a limited-purpose trust company
organized under the New York Banking Law, a banking
organization within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform
Commercial Code and a clearing agency registered
under the Exchange Act.
Global
Clearance and Settlement Procedures
Initial settlement for global securities will be made in
immediately available funds. DTC participants will conduct
secondary market trading with other DTC participants in the
ordinary way in accordance with DTC rules. Thereafter, secondary
market trades will settle in immediately available funds using
DTCs same day funds settlement system.
Although DTC has agreed to the procedures described above in
order to facilitate transfers of interests in global warrants
among DTC participants, DTC is under no obligation to perform
those procedures and those procedures may be discontinued at any
time.
THE
RIGHTS OFFERING
Before exercising any subscription rights, you should read
carefully the information set forth under Risk
Factors beginning on page 11.
The
Subscription Rights
General
We are distributing to you, at no charge, as of the close of
business on September 23, 2010, the record date,
subscription rights to purchase one Unit, which consists of one
share of our common stock and a warrant to purchase one share of
our common stock. You will receive one subscription right for
every share of common stock you own at the close of business on
the record date. Each right carries with it a basic subscription
right and an over-subscription right.
If you wish to exercise your subscription rights, you must do so
before 5:00 p.m., New York City time, on October 29,
2010, unless we extend this rights offering. After the
expiration of this rights offering, the subscription rights will
expire and will no longer be available.
The subscription rights will be evidenced by subscription rights
certificates, which may be physical certificates or may be
electronic certificates issued through the facilities of DTC.
Over-Subscription
Right
General.
In addition to your basic
subscription right, you may subscribe for additional Units upon
delivery of the required documents and payment of the
subscription price of $[ ] per Unit,
before the expiration of the rights offering. You may only
exercise your over-subscription right if you exercised your
basic subscription right in full and other holders of
subscription rights do not exercise their basic subscription
rights in full. No subscriber can own, as a result of the
exercise of its over-subscription right, a number of shares and
warrants to acquire shares which would result in such subscriber
owning, as of the consummation of the rights offering, in excess
of 9.9% of our common stock, on a fully-diluted basis.
Pro Rata Allocation.
If there are not enough
available Units to satisfy all subscriptions made under the
over-subscription right, we will allocate the remaining Units
pro rata among those over-subscribing rights holders. Pro
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rata means in proportion to the number of Units that all
over-subscribing rights holders have requested to purchase
pursuant to their respective over-subscription rights.
Full Exercise of Basic Subscription Right.
You
may exercise your over-subscription right only if you exercise
your basic subscription right in full. To determine if you have
fully exercised your basic subscription right, we will consider
only the basic subscription right held by you in the same
capacity. For example, suppose that you were granted
subscription rights for shares of our common stock that you own
individually and shares of our common stock that you own
collectively with your spouse. If you wish to exercise your
over-subscription right with respect to the subscription rights
you own individually, but not with respect to the subscription
rights you own collectively with your spouse, you only need to
fully exercise your basic subscription right with respect to
your individually owned subscription rights. You do not have to
subscribe for any Units under the basic subscription right owned
collectively with your spouse to exercise your individual
over-subscription right. When you complete the portion of your
subscription rights certificate to exercise your
over-subscription right, you will be representing and certifying
that you have fully exercised your subscription rights as to
shares of our common stock that you hold in that capacity. You
must exercise your over-subscription right at the same time you
exercise your basic subscription right in full.
Return of Excess Payment.
If you exercised
your over-subscription right and are allocated less than all of
the Units for which you wished to subscribe, your excess payment
for shares that were not allocated to you will be returned to
you by mail, without interest or deduction, promptly after the
expiration date of the rights offering.
Subscription
Price
The subscription price under the subscription rights is
$[ ] per Unit. The subscription price
does not necessarily bear any relationship to our past or
expected future results of operations, cash flows, current
financial condition or any other established criteria for value.
No change will be made to the subscription price by reason of
changes in the trading price of our common stock or other
factors prior to the expiration of this rights offering.
Determination
of Subscription Price
Our board of directors unanimously set the terms and conditions
of this rights offering, including the subscription price, the
number of Units to be offered, the exercise price of the
warrants, the offering period and prohibitions on
transferability. The board of directors determined that the
subscription price should, among other things, be designed to
provide a reasonable price to our current stockholders to
exercise their subscription rights and our board of directors
concluded that the subscription price is a reasonable price. The
board of directors considered many factors, including the amount
of proceeds desired, the market price of our common stock
historically and during the 30 days prior to the
announcement of this rights offering as well as prior to the
commencement of this rights offering, the volatility of the
market price of our common stock, general conditions in the
securities markets, our recent operating results, our financial
condition, general conditions in the financial services
industry, alternatives available to us for raising equity
capital and the liquidity of our common stock and the fact that
we are providing subscribers with an additional benefit in the
form of warrants. Ultimately the subscription price is an
approximate midpoint of a range between the price equal to 90%
of the volume weighted average price of our common stock during
the 30 trading days preceding the announcement of this rights
offering and the most recent low closing price of our common
stock. In addition, the board of directors engaged McClendon,
Morrison & Partners, Inc. to advise them with respect
to whether the rights offering was a reasonable means, from a
financial point of view, of raising capital to address the
capital and liquidity needs of us and our subsidiary banks.
The subscription price is not necessarily related to our book
value, results of operations, cash flows, financial condition,
net worth or any other established criteria of value and may or
may not be considered the fair value of our common stock at the
time this rights offering was approved by our board of directors
during the rights offering period. You should not consider the
subscription price as an indication of the value of our company
or our common stock. We cannot assure you that you will be able
to sell shares of our common stock purchased in this rights
offering at a price equal to or greater than the subscription
price. On [ ], 2010, the closing sale price of
our common stock on the NYSE Amex was $[ ] per
share. In addition, there is currently no market for our
warrants and, unless you choose to exercise the warrants for
shares of common stock, you may not be able to re-sell such
warrants.
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The board of directors agreed to pay McClendon,
Morrison & Partners, Inc. a fee equal to 2% of the
gross proceeds from the exercise of rights in this rights
offering, subject to certain exceptions (including with respect
to any proceeds from rights exercised by R. Dean Phillips or his
related entities or affiliates), upon completion of this rights
offering, and up to $75,000 in expenses. No portion of the fee
was contingent upon approval or completion of the rights
offering. We have further agreed to indemnify McClendon,
Morrison & Partners, Inc. and certain other parties
affiliated or associated with McClendon, Morrison &
Partners, Inc. against certain claims, liabilities and expenses
related to or arising in connection with the rendering by
McClendon, Morrison & Partners, Inc. of its services
as described above. For purposes of the commissions payable to
McClendon, Morrison & Partners, Inc. in connection
with the exercise of rights in this rights offering, the Company
has assumed (with McClendon, Morrison & Partners,
Inc.s permission) that the warrant included in each Unit
has no current fair market value and therefore that the
commission is payable solely on the shares of common stock
included in the Unit and on the shares of common stock issued
upon exercise of the warrant, if exercised.
Expiration
Time
The subscription rights will expire at 5:00 p.m., New York
City time, on October 29, 2010, unless we decide to extend
this rights offering. If you do not validly exercise your
subscription rights prior to that time, your subscription rights
will be null and void. We will not be required to issue Units to
you if the subscription agent receives your subscription rights
certificate or your payment after that time, regardless of when
you sent the subscription rights certificate and payment, unless
you send them in compliance with the guaranteed delivery
procedures described below.
Minimum
Subscriptions
We are not requiring minimum subscriptions to complete the
rights offering.
Cancellation
and Amendment of Rights Offering
We may cancel this rights offering in our sole discretion at any
time prior to the acceptance of any subscriptions for any
reason, including as a result of a change in the market price of
our common stock, or if at any time before completion of the
rights offering there is any judgment, order, decree,
injunction, statute, law or regulation entered, enacted, amended
or held to be applicable to the rights offering that in the sole
judgment of our board of directors would or might make the
rights offering or its completion, whether in whole or in part,
illegal or otherwise restrict or prohibit completion of the
rights offering. If we cancel the rights offering, in whole or
in part, all affected subscription rights will expire without
value. If we cancel this rights offering, any funds you paid
will be refunded, without interest or deduction.
We reserve the right to amend the terms of this rights offering.
If we make an amendment that we consider material, we will
extend this rights offering and offer all rights holders the
right to revoke any subscription submitted prior to such
amendment upon the terms and conditions we set forth in the
amendment. The extension of the expiration date of this rights
offering will not, in and of itself, be a material amendment for
these purposes.
Acceptance
of Subscriptions
We may, in our discretion, accept from time to time
subscriptions relating to basic subscription rights when
received rather than at the expiration of the rights offering
period. If so accepted, funds relating thereto will not be held
by the subscription agent but will be released to us. If we
later cancel or terminate the rights offering, all subscriptions
whether or not then accepted will be returned to subscribers
without interest or deduction. Over-subscription rights will be
accepted, if then available, only at the expiration of the
rights offering period.
Non-Transferability
of Subscription Rights
Except in the limited circumstances described below, only you
may exercise your subscription rights, and you may not sell,
give away or otherwise transfer your subscription rights.
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You may, however, transfer your subscription rights to any of
your affiliates. As used in this rights offering for this
purpose, an affiliate means any person (including a partnership,
corporation or other legal entity, such as a trust or estate)
which controls, is controlled by or is under common control with
you. Your subscription rights also may be transferred by
operation of law. For example, a transfer of subscription rights
to your estate upon your death would be permitted. If your
subscription rights are transferred as permitted, evidence
satisfactory to us that the transfer was proper must be received
by the subscription agent prior to the expiration time of this
rights offering.
Exercise
of Subscription Rights
You may exercise your subscription rights by delivering to the
subscription agent on or prior to the expiration time:
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a properly completed and duly executed subscription rights
certificate;
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any required signature guarantees or other supplemental
documentation; and
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payment in full of $[ ] per Unit subscribed for
pursuant to your basic subscription rights and, if you so
choose, pursuant to your over-subscription right.
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You should deliver your subscription rights certificate and
payment to the subscription agent at the address set forth in
this section under the heading Subscription Agent.
We will not pay you interest on funds delivered to the
subscription agent pursuant to the exercise of subscription
rights.
You bear all risk for the method of delivery of subscription
rights certificates, any necessary accompanying documents and
payment of the subscription price to the subscription agent. If
you send the subscription rights certificate and other items by
mail, we recommend that you send them by registered mail,
properly insured, with return receipt requested. You should
allow a sufficient number of days to ensure delivery and
clearance of cash payment prior to the expiration time.
We reserve the right to reject any exercise of subscription
rights if the exercise does not fully comply with the terms of
this rights offering or is not in proper form or if the exercise
of rights would be unlawful.
Method of
Payment
Payment for the shares of our common stock subscribed for must
be made by personal check payable to Illinois Stock
Transfer Co. acting as Subscription Agent for Mercantile
Bancorp, Inc., or wire transfer of immediately available
funds to account maintained by the subscription agent. Payment
will be deemed to have been received by the subscription agent
only upon the subscription agents receipt and clearance of
a personal check or wire transfer. Please note that funds paid
by personal check may take at least five business days to clear.
Accordingly, if you wish to pay by means of a personal check, we
urge you to make payment sufficiently in advance of the
expiration time to ensure that the subscription agent receives
cleared funds before that time.
Guaranteed
Delivery Procedures
If you wish to exercise your subscription rights, but you do not
have sufficient time to deliver the subscription rights
certificate evidencing your rights to the subscription agent
before the expiration time, you may exercise your subscription
rights by complying with the following guaranteed delivery
procedures:
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provide your payment in full of the subscription price for each
Unit being subscribed for pursuant to the basic subscription
rights and the over-subscription right to the subscription agent
before the expiration time;
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deliver a notice of guaranteed delivery to the subscription
agent at or before the expiration time; and
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deliver the properly completed subscription rights certificate
evidencing the subscription rights being exercised, with any
required signatures medallion guaranteed, to the subscription
agent, within three business days after the date on which this
rights offering expired.
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Your notice of guaranteed delivery must be substantially in the
form provided to you with your subscription rights certificate.
Your notice of guaranteed delivery must come from an eligible
institution which is a member of, or
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a participant in, a signature medallion guarantee program
acceptable to the subscription agent. In your notice of
guaranteed delivery you must state:
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your name;
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the number of subscription rights represented by your
subscription rights certificate, the number of shares of our
common stock you are subscribing for pursuant to your basic
subscription right and pursuant to your over-subscription
right; and
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your guarantee that you will deliver to the subscription agent
any subscription rights certificates evidencing the subscription
rights you are exercising within three business days following
the date on which this rights offering expired.
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You may deliver the notice of guaranteed delivery to the
subscription agent in the same manner as the subscription rights
certificate at the addresses set forth in the section
Subscription Agent.
Eligible institutions may also transmit the notice of guaranteed
delivery to the subscription agent by facsimile transmission to
(312) 427-2879.
To confirm facsimile deliveries, you may call
(800) 757-5755.
The subscription agent will send you additional copies of the
form of notice of guaranteed delivery if you need them. You may
call the subscription agent at
(800) 757-5755.
Signature
Guarantees
Signatures on the subscription rights certificate do not need to
be guaranteed if either the subscription rights certificate
provides that the Units to be purchased are to be delivered
directly to the record owner of such subscription rights, or the
subscription rights certificate is submitted for the account of
a member firm of a registered national securities exchange or a
member of FINRA, or a commercial bank or trust company having an
office or correspondent in the United States. Signatures on all
other subscription rights certificates must be guaranteed by an
Eligible Guarantor Institution, as defined in
Rule 17Ad-15
of the Exchange Act, subject to the standards and procedures
adopted by the subscription agent. Eligible Guarantor
Institutions include banks, brokers, dealers, credit unions,
national securities exchanges and savings associations.
Rights of
Subscribers
Your exercise of subscription rights in this rights offering
will give you no additional rights as a stockholder or
warrantholder until the shares of our common stock and warrants
you have subscribed for in this rights offering are issued to
you.
No
Revocation of Exercised Subscription Rights
Once you send in your subscription rights certificate and
payment, you cannot revoke the exercise of your subscription
rights, even if the subscription period has not yet ended or we
extend the subscription period, and you later learn information
about us that you consider to be unfavorable or the market price
of our common stock is below the $[ ] per Unit
purchase price. However, if we make an amendment to this rights
offering that we believe to be material, we will extend this
rights offering and offer all rights holders the right to revoke
any subscription submitted prior to such amendment upon the
terms and conditions we set forth in the amendment. The
extension of the expiration date of this rights offering will
not, in and of itself, be a material amendment for these
purposes. You should not exercise your subscription rights
unless you are certain that you wish to purchase Units at a
price of $[ ] per Unit.
Issuance
of Units
Unless we earlier terminate this rights offering, the shares of
common stock and warrants comprising the Units purchased in this
rights offering will be issued as soon as practicable following
the expiration of this rights offering to those rights holders
who have timely and properly completed, signed and delivered a
subscription rights certificate together with payment of the
subscription price for each Unit subscribed for. If we accept
subscriptions relating to basic subscription rights prior to the
termination or expiration of the offering, we will also issue
the shares
34
of common stock and warrants comprising the Units as soon as
practicable following such acceptance. We will accept
over-subscription payments only following the expiration of the
rights offering.
Your payment of the aggregate subscription price for Units
subscribed for will be retained by the subscription agent and
will not be delivered to us unless and until your subscription
is accepted and you are issued your shares of our common stock
and warrants. You will not be paid any interest on funds paid to
the subscription agent, regardless of whether the funds are
applied to the subscription price or returned to you. You will
have no rights as a stockholder of the company with respect to
the shares of our common stock subscribed for in this rights
offering until the certificates representing such shares are
issued to you (either in physical form or electronically through
the facilities of DTC). You will be deemed the owner of the
shares of our common stock you purchased pursuant to your
exercise of subscription rights upon the issuance of the
certificates representing the shares. Unless otherwise
instructed in the subscription rights certificate, the shares
issued to you pursuant to your exercise of subscription rights
will be registered in your name or the name of your nominee, if
applicable. We will not issue any fractional shares of our
common stock.
Shares Held
for Others
If you are a broker, a trustee or a depository for securities,
or you otherwise hold shares of our common stock for the account
of others as a nominee holder, you should promptly notify the
beneficial owner of such shares as soon as possible to obtain
instructions with respect to their subscription rights. If the
beneficial owner so instructs, you should complete the
appropriate subscription rights certificate and submit it,
together with any other required documentation and payment in
full for the Units subscribed for, to the subscription agent.
If you are a beneficial owner of our common stock held by a
nominee holder, such as a broker, dealer or bank, we will ask
your broker, dealer, bank or other nominee to notify you of this
rights offering. If you wish to purchase Units in this rights
offering, you should promptly contact the nominee holder and ask
him or her to effect transactions in accordance with your
instructions.
Ambiguities
in Exercise of Subscription Rights
If you do not specify the number of Units being subscribed for
on your subscription rights certificate with respect to your
basic subscription right or your over-subscription right, or if
your payment is not sufficient to pay the total purchase price
for all of the Units that you indicated you wished to purchase,
you will be deemed to have subscribed for the maximum number of
Units that could be subscribed for with the payment that the
subscription agent receives from you. If the aggregate
subscription price paid by you exceeds the amount necessary to
purchase the number of Units which you have indicated an
intention to purchase, then you will be deemed to have exercised
your basic subscription rights or over-subscription rights, as
the case may be, in full to the extent of the payment tendered
to purchase that number of Units equal to the quotient obtained
by dividing the payment tendered by the subscription price. Any
remaining amount shall be returned to you by mail, without
interest or deduction, as soon as practicable after the
expiration of this rights offering and after all prorations and
adjustments contemplated by the terms of this rights offering
have been effected.
Our
Determinations will be Binding
All questions concerning the timeliness, validity, form and
eligibility of any exercise of subscription rights will be
determined by us, and our determinations will be final and
binding. In our sole discretion, we may waive any defect or
irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported
exercise of any subscription right by reason of any defect or
irregularity in any exercise. Subscriptions will not be deemed
to have been received or accepted until all irregularities have
been waived by us or cured within such time as we determine in
our sole discretion. Neither we nor the subscription agent will
be under any duty to notify you of any defect or irregularity in
connection with the submission of a subscription rights
certificate or incur any liability for failure to give you that
notice.
35
Shares of
our Common Stock Issued and Outstanding after this Rights
Offering
As of [ ], 2010, we had issued and outstanding
8,703,330 shares of our common stock. Assuming we issue all
of the Units offered in this rights offering,
17,406,660 shares of our common stock will be issued and
outstanding after this rights offering. This would represent an
increase of 100% in the number of issued and outstanding shares
of our common stock. In addition, if we issue all of the Units
offered in this rights offering, we will issue warrants to
acquire 8,703,330 shares of our common stock. If you do not
fully exercise your subscription rights but others do, the
percentage of our common stock that you hold will decrease.
No
Fractional Shares
We will not issue fractional shares. Fractional shares of common
stock resulting from the exercise of the subscription rights
will be eliminated by rounding up to the nearest whole share,
with the total subscription payment being adjusted accordingly.
Any excess subscription payments received by the subscription
agent will be returned, without interest, as soon as practicable.
Fees and
Expenses
We will pay all fees charged by the subscription agent. You are
responsible for paying any other commissions, fees, taxes or
other expenses incurred in connection with the exercise of your
subscription rights, and neither we, the subscription agent nor
the information agent will pay those expenses.
Subscription
Agent
We have appointed Illinois Stock Transfer Co. as subscription
agent for this rights offering.
You can contact the subscription agent by mail or overnight
courier at Illinois Stock Transfer Company, 209 West
Jackson Boulevard, Suite 903, Chicago, Illinois 60606.
You should deliver your subscription rights certificate, payment
of the subscription price and notice of guaranteed delivery (if
any) to the subscription agent. We will pay the fees and certain
expenses of the subscription agent, which we estimate will total
approximately $2,000. Under certain circumstances, we may
indemnify the subscription agent from certain liabilities that
may arise in connection with this rights offering.
No
Recommendations
Neither we nor our board of directors are making any
recommendation as to whether or not you should exercise your
subscription rights. You should make your decision based on your
own assessment of your best interests.
Important
DO NOT SEND SUBSCRIPTION RIGHTS CERTIFICATES DIRECTLY TO US.
YOU ARE RESPONSIBLE FOR CHOOSING THE PAYMENT AND DELIVERY METHOD
FOR YOUR SUBSCRIPTION RIGHTS CERTIFICATE, AND YOU BEAR THE RISKS
ASSOCIATED WITH SUCH DELIVERY. IF YOU CHOOSE TO DELIVER YOUR
SUBSCRIPTION RIGHTS CERTIFICATE AND PAYMENT BY MAIL, WE
RECOMMEND THAT YOU USE REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. WE ALSO RECOMMEND THAT YOU ALLOW A
SUFFICIENT NUMBER OF DAYS TO ENSURE DELIVERY TO THE SUBSCRIPTION
AGENT AND CLEARANCE OF PAYMENT PRIOR TO THE EXPIRATION TIME.
Subscription
Agent If You Have Questions
Illinois Stock Transfer Co. will act as the subscription agent
in connection with this rights offering. The subscription agent
will receive for its administrative, processing, invoicing and
other services a fee estimated to be approximately $2,000 plus
reimbursement for all reasonable
out-of-pocket
expenses related to this offering. The subscription agent does
not make any recommendations as to whether or not you should
exercise your subscription
36
rights. We have also agreed to indemnify the subscription agent
against certain liabilities that it may incur in connection with
this offering.
Completed subscription rights certificates must be sent with
full payment of the subscription price for all shares subscribed
for through the exercise of the subscription right to the
subscription agent by one of the methods described below.
We will accept only properly completed and duly executed
subscription rights certificates actually received at any of the
addresses listed below, at or prior to 5:00 p.m., New York
City time, on the expiration date of this offering. In this
prospectus, close of business means 5:00 p.m., New York
City time, on the relevant date.
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Subscription Rights Certificate Delivery Method
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Address/Number
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By Mail
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209 West Jackson Boulevard, Suite 903 Chicago, Illinois
60606
(800) 757-5755
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By Hand/Overnight Carrier
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209 West Jackson Boulevard, Suite 903 Chicago, Illinois
60606
(800) 757-5755
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Delivery to an address other than the address listed above will
not constitute valid delivery and, accordingly, may be rejected
by us.
MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the material federal income tax
consequences to you as a U.S. stockholder of Mercantile
Bancorp, Inc. and to us as a result of the receipt, lapse or
exercise of the subscription rights distributed to you in this
rights offering. This discussion does not address the tax
consequences of the rights offering under applicable state,
local or foreign tax laws. Moreover, this discussion does not
address every aspect of taxation that may be relevant to a
particular taxpayer under special circumstances or who is
subject to special treatment under applicable law and is not
intended to be applicable in all respects to all categories of
investors. For example, this discussion does not address certain
types of investors, such as insurance companies, tax-exempt
persons, financial institutions, regulated investment companies,
dealers in securities, persons who hold their shares of our
common stock as part of a hedging, straddle, constructive sale
or conversion transaction, persons whose functional currency is
not the U.S. dollar and persons who are not treated as a
U.S. stockholder.
For purposes of this discussion, a U.S. stockholder is a
holder of our common stock that is:
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an individual who is a citizen or resident of the United States;
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a corporation, partnership or other entity created in, or
organized under the laws of, the United States or any state or
political subdivision thereof;
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an estate the income of which is includable in gross income for
U.S. federal income tax purposes regardless of its
source; or
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a trust that either:
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the administration of which is subject to the primary
supervision of a U.S. court and which has one or more
U.S. persons who have the authority to control all
substantial decisions of the trust; or
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was in existence on August 20, 1996, was treated as a
U.S. person on the previous day and elected to continue to
be so treated.
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This summary is based on the Code, the Treasury Regulations
promulgated thereunder, judicial authority and current
administrative rules and practice, any of which may subsequently
be changed, possibly retroactively, or interpreted differently
by the Internal Revenue Service, so as to result in
U.S. federal income tax consequences different from those
discussed below. The discussion that follows neither binds nor
precludes the Internal Revenue Service from adopting a position
contrary to that expressed herein, and we cannot assure you that
such a contrary position could not be asserted successfully by
the Internal Revenue Service or adopted by a court if the
position
37
were litigated. We have not obtained a ruling from the Internal
Revenue Service with respect to the federal income tax
consequences discussed below. This discussion assumes that the
shares of our common stock you currently own and the
subscription rights, shares of our common stock and warrants
issued to you in this rights offering constitute capital assets
within the meaning of Section 1221 of the Code.
Receipt and exercise of the subscription rights distributed in
this rights offering is intended to be nontaxable to
stockholders, and the following summary assumes you will qualify
for such nontaxable treatment. If, however, this rights offering
does not qualify as nontaxable, you would be treated as
receiving a taxable distribution equal to the fair market value
of the subscription rights on their distribution date. The
distribution would be taxed as a dividend to the extent made out
of our current or accumulated earnings and profits; any excess
would be treated first as a return of your basis (investment) in
your stock and then as a capital gain. Expiration of the
subscription rights would result in a capital loss.
Taxation
of Stockholders
Receipt of subscription rights.
You will not
recognize any gain or other income upon your receipt of
subscription rights in respect of your shares of our common
stock. Your tax basis in each subscription right will
effectively depend on whether you exercise the subscription
right or allow the subscription right to expire. Except as
provided in the following sentence, the basis of the
subscription rights you receive as a distribution with respect
to your shares of our common stock will be zero. If, however,
either (i) the fair market value of the subscription rights
on the date of issuance is 15% or more of the fair market value
(on the date of issuance of the rights) of the shares of our
common stock with respect to which they are received or
(ii) you properly elect, in your federal income tax return
for the taxable year in which the subscription rights are
received, to allocate part of your basis in your shares of our
common stock to the subscription rights, then upon exercise of
the subscription rights, your basis in your shares of our common
stock will be allocated between your shares of our common stock
and your subscription rights in proportion to the fair market
value of each on the date the subscription rights are issued. In
addition, your holding period for a subscription right will
include your holding period for the shares of our common stock
with respect to which the subscription right is issued.
Expiration of subscription rights.
You should
generally not recognize any loss upon the expiration of the
subscription rights, as no basis will generally be allocated to
such subscription rights, as described above. If basis is
allocated to the subscription rights, if the subscription rights
expire without exercise, and if you have previously disposed of
the common stock with respect to which the subscription rights
were received, you should consult your tax advisor regarding the
ability to recognize a loss on the expiration of the
subscription rights.
Exercise of subscription rights.
You generally
will not recognize a gain or loss upon the exercise of a
subscription right. The tax basis of any share of our common
stock that you purchase upon exercise of the subscription rights
will be equal to the portion of the basis of the subscription
right, if any, as described above, allocated to the right to
purchase the share, plus the portion of the subscription price
allocated to the common stock. The tax basis of any warrant that
you purchase upon exercise of the subscription rights will be
equal to the portion of the basis of the subscription right, if
any, as described above, allocated to the right to purchase the
warrant, plus the portion of the subscription price allocated to
the warrant. The portion of the subscription price allocated to
the share of common stock and the portion of the subscription
price allocated to the warrant will be determined for this
purpose by allocating the subscription price for each Unit
between the share of common stock and the warrant in proportion
to their respective fair market values on the date the
subscription rights are exercised. The holding period of the
shares of our common stock and warrants purchased in this rights
offering will begin on the date that you exercise your
subscription rights.
Taxation
of the Company
We will not recognize any gain, other income or loss upon the
issuance of the subscription rights, the lapse of the
subscription rights or the receipt of payment for shares of our
common stock and warrants upon exercise of the subscription
rights.
THIS DISCUSSION IS INCLUDED FOR YOUR GENERAL INFORMATION
ONLY. YOU SHOULD CONSULT YOUR TAX ADVISOR TO DETERMINE THE TAX
CONSEQUENCES TO YOU OF THIS
38
RIGHTS OFFERING IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES,
INCLUDING ANY STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
PLAN OF
DISTRIBUTION
On or about the date hereof, we will distribute the subscription
rights, subscription rights certificates and copies of this
prospectus to individuals who owned shares of common stock of
record as of 5:00 p.m., New York City time, on
September 23, 2010, the record date for the rights
offering. If you wish to exercise your subscription rights and
purchase shares of common stock, you should complete the
subscription rights certificate and return it with payment for
the shares of our common stock, to the subscription agent,
Illinois Stock Transfer Co. See The Rights
Offering Exercise of Subscription Rights. If
you have any questions, you should contact the subscription
agent at
(800) 757-5755.
We have agreed to pay the subscription agent customary fees plus
certain expenses in connection with the rights offering. Except
as described in this section, we are not paying any other
commissions, underwriting fees or discounts in connection with
the rights offering. Some of our employees may solicit responses
from you as a holder of subscription rights, but we will not pay
our employees any commissions or compensation for these services
other than their normal employment compensation. We estimate
that our total expenses in connection with this rights offering
will be approximately $262,000.
Our board of directors agreed to pay McClendon,
Morrison & Partners, Inc. a fee equal to 2% of the
gross proceeds from the exercise of rights in this rights
offering, subject to certain exceptions (including with respect
to any proceeds from rights exercised by R. Dean Phillips or his
related entities or affiliates), upon completion of this rights
offering, and up to $75,000 in expenses. We have further agreed
to indemnify McClendon, Morrison & Partners, Inc. and
certain other parties affiliated or associated with McClendon,
Morrison & Partners, Inc. against certain claims,
liabilities and expenses related to or arising in connection
with the rendering by McClendon, Morrison & Partners,
Inc. of its services as described above. For purposes of the
commissions payable to McClendon, Morrison & Partners,
Inc. in connection with the exercise of rights in this rights
offering, the Company has assumed (with McClendon,
Morrison & Partners, Inc.s permission) that the
warrant included in each Unit has no current fair market value
and therefore that the commission is payable solely on the
shares of common stock included in the Unit and on the shares of
common stock issued upon exercise of the warrant, if exercised.
LEGAL
MATTERS
The validity of the securities offered by this prospectus will
be passed upon for us by Schmiedeskamp, Robertson,
Neu & Mitchell LLP.
EXPERTS
The audited consolidated financial statements of Mercantile
Bancorp, Inc. incorporated in this prospectus by reference from
the companys Annual Report on
Form 10-K
for the year ended December 31, 2009 have been audited by BKD
LLP, an independent registered public accounting firm, as stated
in their report dated April 7, 2010, which is incorporated
by reference. Such audited consolidated financial statements
have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and
auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special
reports, proxy statements and other information with the SEC.
You may read and copy any document we file at the SECs
Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549 on official business days during the
hours of 10:00 am to 3:00 pm. Please call the SEC at
1-800-SEC-0330
for more information about the operation of the Public Reference
Room. Our SEC filings are also available to the public at the
SECs website at
http://www.sec.gov
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39
This prospectus is only part of a Registration Statement on
Form S-1
that we have filed with the SEC under the Securities Act with
respect to the subscription rights, shares of common stock and
warrants comprising the subscription rights, and shares of
common stock underlying the warrants to be sold in this
offering. This prospectus does not contain all the information
included in the Registration Statement. For further information
about us and the securities to be sold in this offering, please
refer to the Registration Statements including its exhibits.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference the
information that we have filed with it, meaning we can disclose
important information to you by referring you to those documents
already on file with the SEC. The information incorporated by
reference is considered to be part of this prospectus except for
any information that is superseded by other information that is
included in this prospectus.
This filing incorporates by reference the following documents,
which we have previously filed with the SEC:
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Our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, as filed on
April 7, 2010 and as amended by
Form 10-K/A
filed on April 30, 2010;
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Our Quarterly Reports on
Form 10-Q
for the fiscal quarter ended March 31, 2010, as filed on
May 17, 2010 and for the fiscal quarter ended June 30,
2010, as filed on August 16, 2010;
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Our definitive Proxy Statement used in connection with the
Annual Meeting of Stockholder held on May 24, 2010, as
filed on May 7, 2010; and
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Our Current Reports on
Form 8-K,
as filed on February 22, 2010, March 1, 2010,
April 6, 2010, May 24, 2010, May 27, 2010,
July 14, 2010 and August 30, 2010.
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You should rely only on the information contained in this
prospectus or that information to which this prospectus has
referred you by reference. We have not authorized anyone to
provide you with any additional information.
These documents may also be accessed through our website at
www.mercbanx.com
or as described under Where You
Can Find More Information. The information and other
content contained on or linked from our website are not part of
this prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
We will provide, without charge, to each person, including any
beneficial owner, to whom this prospectus is delivered, on the
written or oral request of such person, a copy of any or all of
the reports or documents incorporated by reference in this
prospectus but not delivered with this prospectus. Any request
may be made by writing or calling us at the following address or
telephone number: Mercantile Bancorp, Inc., 200 North
33rd Street, Quincy, Illinois 62301, Attention: Corporate
Secretary,
(217) 223-7300.
40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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ITEM 13.
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Other
Expenses of Issuance and Distribution
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Registration Fee
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$
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3,446
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Printing and Engraving Expenses
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22,000
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Transfer Agent Fees
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2,000
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Legal Fees and Expenses
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150,000
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Accounting Expenses
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30,000
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NYSE Amex Listing Fee
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45,000
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Miscellaneous
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10,000
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Total
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$
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262,446
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*
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Other than the Registration Fee, all expenses are estimated
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ITEM 14.
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Indemnification
of Directors and Officers
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The companys Certificate of Incorporation provides that,
to the fullest extent permitted by Section 145 of the
Delaware Corporation Law, the company shall indemnify all
directors, officers, employees, and agents and persons serving
at the request of the company in any such capacity for another
corporation or business against all expenses and liabilities as
to actions in their official capacities and as to actions in all
other capacities while holding such offices. Such
indemnification shall continue to apply to former directors,
officers, employees and agents and shall inure to the benefit of
all indemnified persons heirs, executors and
administrators. The indemnification rights under the Certificate
are in addition to and not exclusive of any other rights of
indemnification to which a person may be entitled.
In addition, the Certificate provides that a director of the
company shall not be personally liable to the company or its
stockholders for monetary damages for breach of fiduciary duty
as a director except for liability (i) for any breach of
the directors duty of loyalty to the company or its
stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from
which the director derived any improper personal benefit. If the
Delaware General Corporation Law is amended in the future to
authorize broader elimination or limitation of liability for a
director, then in addition to the foregoing elimination of
liability, upon the effective date of such amendment the
liability of a director shall without further act also be
eliminated and limited to such broader extent to the fullest
extent not prohibited by the Delaware General Corporation Law,
as amended. The foregoing provisions shall be deemed to be a
contract with each director of the company who serves as such at
any time while such provisions are in effect, and each such
director shall be deemed to be serving as such in reliance on
these provisions. No repeal or amendment of the companys
Certificate of Incorporation shall adversely affect any right or
any elimination or limitation of liability of a director
existing at the time of the repeal or amendment.
The companys Bylaws provide the company shall indemnify
any person who is a party to an action (including actions by or
in the right of the company) by reason of the fact the person is
or was a director or officer of the company or serving at the
request of the company as a director or officer of another
entity, against all expenses, judgments and other amount
incurred if the person acted in good faith and in a manner he or
she reasonably believed to be in the best interest of the
company and, with respect to any criminal action, had no
reasonable basis to believe his or her conduct was unlawful.
However, with respect to an action by or in the right of the
company, no indemnification shall be made with respect to any
matter in which the person is adjudged to be liable for
negligence or misconduct in the performance of his or her duty
to the company unless and only to the extent the court
determines that, despite the adjudication, the person is
reasonably entitled to indemnification. Whether a person is
entitled to such indemnification is generally determined by the
board of directors. Such indemnification rights are not
exclusive, and the company may provide further indemnification
rights to directors, officers, employees and agents of the
company or such persons acting in those capacities for another
entity at the request of the company.
II-1
The company maintains director and officer liability insurance
policies providing for the insurance on behalf of any person who
is or was a director or officer of the company or a subsidiary
for any claim made during the policy period against the person
in any such capacity or arising out of the persons status
as such. The insurers limit of liability under the
policies is $15 million for each insured loss and
$15 million in the aggregate for all insured losses for the
policy period, which is July 15, 2010 through July 15,
2011. Under certain circumstances, there is an additional
$5 million of coverage.
The policies contain various reporting requirements and
exclusions, and the company is responsible for a $250,000
deductible. Among the various standard industry exclusions from
coverage, the insurers shall not be liable for loss on account
of any claim brought or maintained by any individual or entity
directly or beneficially owning ten percent (10%) or more of the
outstanding securities or voting rights representing the present
right to vote for election of directors of the parent
organization.
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ITEM 15.
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Recent
Sales of Unregistered Securities
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The company has sold no securities within the past three years
which were not registered under the Securities Act of 1933, as
amended.
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ITEM 16.
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Exhibits
and Financial Statement Schedules
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The exhibits listed on the Exhibit Index of this
Registration Statement are filed herewith or incorporated herein
by reference to other filings.
(h) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the Act) may be
permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of Quincy, State of Illinois, on
September 20, 2010.
Mercantile Bancorp, Inc.
Name: Ted T. Awerkamp
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Ted
T. Awerkamp
Ted
T. Awerkamp
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President and Chief Executive Officer (principal executive
officer); Director
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September 20, 2010
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/s/ Michael
P. McGrath
Michael
P. McGrath
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Executive Vice President, Treasurer, Secretary and Chief
Financial Officer (principal financial officer/principal
accounting officer)
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September 20, 2010
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*
Michael
J. Foster
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Director
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September 20, 2010
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*
William
G. Keller, Jr.
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Director
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September 20, 2010
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*
Dennis
M. Prock
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Director
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September 20, 2010
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*
James
W. Tracy
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Director
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September 20, 2010
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*
Julie
A. Brink
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Director
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September 20, 2010
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*
Alexander
J. House
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Director
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September 20, 2010
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*
John
R. Spake
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Director
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September 20, 2010
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*
Lee
R. Keith
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Director
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September 20, 2010
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*By:
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/s/ Michael
P. McGrath
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Michael P. McGrath
Attorney-in-fact
II-3
Exhibit Index
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Exhibit
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Number
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Description of Exhibit
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1
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.1#
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Form of Dealer-Manager Agreement.
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3
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.1
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Certificate of Incorporation of Mercantile Bancorp, Inc., as
amended, incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form 10 dated May 12, 2004 (File No.
000-50757) (the Form 10).
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3
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.2
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Certificate of Amendment to the Certificate of Incorporation of
Mercantile Bancorp, Inc., incorporated by reference to Exhibit
3.3 to the Annual Report on Form 10-K for the year ended
December 31, 2008 (the 2008 Form 10-K).
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3
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.3#
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Certificate of Amendment to the Certificate of Incorporation of
Mercantile Bancorp, Inc.
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3
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.4
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Bylaws of Mercantile Bancorp, Inc., as amended, incorporated by
reference to Exhibit 3.1 to
Form 10-Q
for the quarter ended June 30, 2009.
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4
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.1*
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Form of Subscription Right Certificate
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4
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.2*
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Form of Warrant
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5#
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Opinion of Schmiedeskamp, Robertson, Neu & Mitchell LLP
regarding legality of securities.
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8#
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Opinion of DLA Piper LLP (US) regarding tax matters.
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10
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.1
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Executive Employee Salary Continuation Agreement dated December
8, 1994 between Mercantile Trust & Savings Bank and Dan S.
Dugan, incorporated by reference to Exhibit 10.3 to the Form 10.
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10
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.2
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Amendment to Dugan Executive Employee Salary Continuation
Agreement dated April 26, 2004, incorporated by reference to
Exhibit 10.4 to the Form 10.
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10
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.3
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Second Amendment to Dugan Executive Employee Salary Continuation
Agreement dated December 29, 2006, incorporated by reference to
Exhibit 10.1 to the Form 8-K filed January 5, 2007.
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10
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.4
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Executive Employee Salary Continuation Agreement, as amended and
restated effective January 1, 2009 between Mercantile Bank and
Ted T. Awerkamp, incorporated by reference to Exhibit 10.4 to
the 2008 Form 10-K.
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10
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.5
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Employment Agreement dated January 1, 2008, between the Company
and Ted T. Awerkamp, incorporated by reference to Exhibit 10.8
to the Annual Report on Form 10-K for the year ended December
31, 2007 (the 2007 Form 10-K).
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10
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.6
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Amendment to Employment Agreement dated July 15, 2008, between
the Company and Ted T. Awerkamp, incorporated by reference to
Exhibit 10.1 to Form 10-Q for the quarter ended September 30,
2008 (the 2008 Third Quarter Form 10-Q).
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10
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.7
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Employment Agreement dated January 1, 2008, between the Company
and Michael P. McGrath, incorporated by reference to Exhibit
10.9 to the 2007 Form 10-K.
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10
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.8
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Amendment to Employment Agreement dated July 15, 2008, between
the Company and Michael P. McGrath, incorporated by
reference to Exhibit 10.2 to the 2008 Third Quarter Form 10-Q.
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10
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.9
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Employment Agreement dated January 1, 2008, between the Company
and Daniel J. Cook, incorporated by reference to Exhibit 10.10
to the 2007 Form 10-K.
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10
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.10
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Amendment to Employment Agreement dated July 15, 2008, between
the Company and Daniel J. Cook, incorporated by reference to
Exhibit 10.3 to the 2008 Third Quarter Form 10-Q.
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10
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.11
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Mercantile Bancorp, Inc. Profit Sharing Plan and Trust,
incorporated by reference to Exhibit 10.7 to the Form 10.
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10
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.12
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401(k) Plan Adoption Agreement, incorporated by reference to
Exhibit 10.8 to the Form 10.
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10
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.13
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Amendment to the Profit Sharing Plan and Trust, incorporated by
reference to Exhibit 10.9 to the Form 10.
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10
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.14
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Consulting Agreement dated March 2, 2007 between Mercantile
Bancorp, Inc. and Dan S. Dugan, incorporated by reference to
Exhibit 10.1 to the Form 8-K filed March 7, 2007.
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10
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.15
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Consulting Agreement dated January 15, 2008 between Mercantile
Bancorp, Inc. and Dan S. Dugan, incorporated by reference to
Exhibit 10.16 to the 2007 Form 10-K.
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10
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.16
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Consulting Agreement dated March 1, 2009 between Mercantile
Bancorp, Inc. and Dan S. Dugan, incorporated by reference to
Exhibit 10.16 to the 2008 Form 10-K.
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Exhibit
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Number
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Description of Exhibit
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10
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.17
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Third Amended and Restated Term Loan Agreement dated November
10, 2006 by and between Mercantile Bancorp, Inc., Borrower, and
U.S. Bank National Association, formerly known as Firstar Bank,
N.A., Lender, incorporated by reference to Exhibit 10.1 to Form
10-Q for the quarter ended September 30, 2006 (the 2006
Third Quarter Form 10-Q).
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10
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.18
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First Amendment to Third Amended and Restated Loan Agreement
between Mercantile Bancorp, Inc. and U.S. Bank National
Association, dated March 20, 2007, incorporated by reference to
Exhibit 10.1 to Form 8-K filed March 24, 2007.
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10
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.19
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Second Amendment to Third Amended and Restated Loan Agreement
between Mercantile Bancorp, Inc. and U.S. Bank National
Association, dated as of June 30, 2007, incorporated by
reference to Exhibit 10.1 to Form 8-K filed July 19, 2007.
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10
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.20
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Third Amendment to Third Amended and Restated Loan Agreement
between Mercantile Bancorp, Inc. and U.S. Bank National
Association, dated September 7, 2007, incorporated by reference
to Exhibit 10.1 to Form 8-K filed September 12, 2007.
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10
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.21
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Assignment Agreement among U.S. Bank National Association, Great
River Bancshares, Inc. and Mercantile Bancorp, Inc., dated
December 23, 2008, incorporated by reference to Exhibit 10.21 to
the 2008 Form 10-K.
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10
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.22
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Secured Demand Promissory Note made by Mercantile Bancorp, Inc.
to Great River Bancshares, Inc., dated December 31, 2008,
incorporated by reference to Exhibit 10.22 to the 2008 Form 10-K.
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10
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.23
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Secured Demand Promissory Note made by Mercantile Bancorp, Inc.
to Great River Bancshares, Inc., dated February 5, 2009,
incorporated by reference to Exhibit 10.23 to the 2008 Form 10-K.
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10
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.24
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Fourth Amended and Restated Loan Agreement by and between
Mercantile Bancorp, Inc. and Great River Bancshares, Inc., dated
April 30, 2009, incorporated by reference to Exhibit 99.1 to
Form 8-K filed May 6, 2009.
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10
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.25
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Waiver and Agreement by and between Mercantile Bancorp, Inc.,
and Great River Bancshares, Inc., dated March 13, 2009,
regarding certain loan covenants of the Company, incorporated by
reference to Exhibit 10.24 to the 2008 Form 10-K.
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10
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.26
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First Amendment to Waiver and Agreement by and between
Mercantile Bancorp, Inc. and Great River Bancshares, Inc., dated
March 13, 2009, incorporated by reference to Exhibit 99.2 to
Form 8-K filed May 6, 2009.
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10
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.27
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Fourth Amended and Restated Loan Agreement Waiver and Amendment
dated August 10, 2009, incorporated by reference to Exhibit 10.5
to the Form 10-Q for the quarter ended June 30, 2009 (the
2009 Second Quarter 10-Q).
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10
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.28
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Stock Purchase Agreement dated as of November 22, 2009 by and
between Mercantile Bancorp, Inc. and United Community Bancorp,
Inc., incorporated by reference to Exhibit 10.1 to Form 8-K
filed on November 25, 2009 (the November 2009 Form
8-K).
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10
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.29
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Second Waiver and Amendment dated November 21, 2009 by and
between Mercantile Bancorp, Inc. and Great River Bancshares,
Inc., incorporated by reference to Exhibit 10.3 to the November
2009 Form 8-K.
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10
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.30
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Exchange Agreement dated as of November 21, 2009 by and between
Mercantile Bancorp, Inc. and R. Dean Phillips, incorporated by
reference to Exhibit 10.2 to the November 2009 Form 8-K.
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10
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.31
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Construction Agreement dated August 24, 2006 by and between
Mercantile Trust & Savings Bank, Owner, and Clayco, Inc.,
Contractor, incorporated by reference to Exhibit 10.2 to the
2006 Third Quarter Form 10-Q.
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10
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.32
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General Conditions of the Contract for Construction by and
between Mercantile Trust & Savings Bank, Owner, and Clayco,
Inc., Contractor, incorporated by reference to Exhibit 10.3 to
the 2006 Third Quarter Form 10-Q.
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10
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.33
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Indenture dated August 25, 2005 between Mercantile Bancorp, Inc.
and Wilmington Trust Company, as trustee, incorporated by
reference to Exhibit 10.1 to the 2009 Second Quarter Form 10-Q.
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10
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.34
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Junior Subordinated Indenture dated July 13, 2006 between
Mercantile Bancorp, Inc. and Wilmington Trust Company, as
trustee, incorporated by reference to Exhibit 10.2 to the 2009
Second Quarter Form 10-Q.
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10
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.35
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Indenture dated July 13, 2006 (Fixed/Floating Rate Junior
Subordinated Debt Securities Due 2036) between Mercantile
Bancorp, Inc. and Wilmington Trust Company, as trustee,
incorporated by reference to Exhibit 10.3 to the 2009 Second
Quarter Form 10-Q.
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Exhibit
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Number
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Description of Exhibit
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10
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.36
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Junior Subordinated Indenture dated August 30, 2007 between
Mercantile Bancorp, Inc. and Wilmington Trust Company, as
trustee, incorporated by reference to Exhibit 10.4 to the 2009
Second Quarter Form 10-Q.
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10
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.37
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Mercantile Bancorp, Inc. Company and Bank Executive and Senior
Officer Incentive Compensation Plan December 2006, amended and
restated as of January 1, 2010, incorporated by reference to the
Annual Report on Form 10-K for the year ended December 31, 2009
(the 2009 10-K).
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21
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Subsidiaries of registrant, incorporated by reference to Exhibit
21 to the 2009 10-K
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23
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.1*
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Consent of BKD LLP
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23
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.2#
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Consent of Schmiedeskamp, Robertson, Neu & Mitchell LLP
(included in Exhibit 5)
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24#
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Power of Attorney (included on page
II-3
of this
Registration Statement as previously filed.)
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99
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.1#
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Form of Instructions for Use of Subscription Rights Certificate
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99
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.2#
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Notice of Guaranteed Delivery for Subscription Rights Certificate
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99
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.3#
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Form of Letter to Stockholders
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99
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.4#
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Form of Letter to Dealers, Banks, Trust Companies and Other
Nominees
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99
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.5#
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Form of Letter to Clients
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99
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.6#
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Form of Nominee Holder Certification
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99
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.7*
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Beneficial Owner Election Form
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#
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Previously filed.
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*
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Filed herewith.
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Management contract or compensatory plan or arrangement.
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