Investor Relations
Mercantile Banorp, Inc. Statement of Policy with Respect to Related Party Transactions
Introduction
The Board of Directors of Mercantile Bancorp, Inc. ("Mercantile") recognizes that related party transactions present a heightened risk of conflicts of interest or improper valuation, or the perception of such risks. Therefore, the Board has adopted this policy, which shall apply to all transactions between Mercantile, together with its subsidiaries (collectively, the "Company") and any director, officer or significant shareholders of Mercantile (including family members and interests).
1. Basic Policy
Any "Related Party Transaction" (as defined below) between the Company and a Related Party (as defined below) shall be approved by the Audit Committee of the Board of Directors of Mercantile (the "Audit Committee"), provided, however, that if the Audit Committee is unable to make such a determination, the Related Party Transaction shall be approved by a majority of the disinterested members of the Board of Directors.
2. Related Parties
A "Related Party" for purposes of this Policy is any person who is subject to the provisions of Item 404(a) of the SEC's Regulation S-K, as the same may be amended from time to time. Currently, the group of persons subject to Item 404(a) consists of the following: (i) any "executive officer" of Mercantile (as determined by the Board from time to time, based on the SEC's definition of such term), (ii) any director or nominee for director of Mercantile from time to time; (iii) any shareholder of Mercantile beneficially owning in excess of five percent of Mercantile's common stock; (iv) any person who is an "immediate family member" of any of the foregoing (as "immediate family member" is defined in accordance with the SEC's rules); and (v) any entity which is owned or controlled directly or indirectly by someone listed in (i), (ii), (iii) or (iv) above.
3. Related Party Transactions
For purposes of this Policy, a "Related Party Transaction" is any transaction between the Company and a Related Party which, after review, management believes the Company likely will be required to disclose in the proxy statement for its annual meeting of shareholders in the next fiscal year, pursuant to Item 404(a) of Regulation S-K. The types of transactions that are required to be disclosed under Item 404 include material business transactions and relationships between the Company and Related Parties that exceed certain dollar amount thresholds as set forth in Item 404. As a result of the thresholds, very small dollar transactions and relationships (e.g., those where the aggregate dollar amount in question does not exceed $120,000) are often exempt from disclosure. In addition, there are certain types of transactions that are exempt from disclosure under Item 404, regardless of the dollar amount in question, because of the nature of the transaction, such as loans made by the Company's subsidiary banks to Related Parties, if such loans were made in accordance with federal banking rules on insider loans (Regulation O). Thus, each proposed transaction with a Related Party will have to be separately evaluated by management to determine whether under this Policy Audit Committee or Board approval will be required, i.e., whether the transaction will likely require disclosure under Item 404 in the ensuing year's proxy statement. If it appears disclosure will be required, approval by the Audit Committee (or if the Committee cannot act, by the disinterested members of the Board) will be required.
4. Standard Approval Procedures
At the first regularly scheduled Audit Committee meeting in each fiscal year, or such other meeting as the Committee shall direct, management shall prepare for the Committee's review and approval a list of transactions that management believes may be entered into between the Company and a Related Party in the forthcoming fiscal year and that likely will qualify as Related Party Transactions. The list should describe the proposed transaction including the aggregate dollar value thereof. At each subsequently scheduled meeting of the Audit Committee, management shall present for the Committee's review and approval a list of newly-contemplated Related Party Transactions, as well as updates on any material changes to previously approved transactions.
If a Related Party Transaction is presented to and deemed suitable by management, and urgent action is required before any meeting of the Audit Committee can be arranged, management acting on behalf of the Company may preliminarily enter into the transaction subject to ratification by the Audit Committee at its next meeting, provided that if ratification shall not be forthcoming, management shall make all reasonable efforts to cancel or annul such transaction.
No Related Party shall participate in any discussion or approval of a Related Party Transaction as to which he or she is a Related Party, except to provide all material information concerning the transaction to the Audit Committee. If the Audit Committee is unable to make a determination with regard to a particular Related Party Transaction, a majority of the disinterested directors of the full Board shall review and make a determination on such transaction.
If a Related Party Transaction will be ongoing, the Audit Committee may establish guidelines for management to follow in its ongoing dealings with the Related Party. Thereafter, the Audit Committee, on at least an annual basis, shall review and assess ongoing relationships with the Related Party to see that they are in compliance with the Committee's guidelines and that the transaction remains appropriate.
Mercantile Bancorp, Inc. Statement of Policy with Respect to Related Party Transactions Adopted April 17, 2007; Reapproved June, 16, 2009.
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