Item 1.01
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Entry into a Material Definitive Agreement
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On May 22, 2017, Berkshire Hills Bancorp,
Inc. (the “Company” or “Berkshire Hills”) and Commerce Bancshares Corp. (“Commerce”) entered
into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Commerce will merge with and into Berkshire
Hills (the “Merger”). Immediately following the Merger, Commerce Bank and Trust Company will merge with and into Berkshire
Bank (the “Bank Merger”).
Under the terms of the Merger Agreement,
each outstanding share of Commerce common stock will be converted into the right to receive 0.93 shares of Company common stock;
provided, however, any Commerce stockholder, either individually or aggregated pursuant to 12 C.F.R. 225.41 of Regulation Y, who
would exceed 9.9% of the then-outstanding Company common stock as of the closing of the Merger will receive 0.465 shares
of Series B Non-Voting Company Preferred Stock for each share of Commerce common stock in excess of
the 9.9% limitation. It is anticipated that the Company will issue approximately 4.9 million shares of Company common stock
and approximately 500,000 shares of Series B Non-Voting Company Preferred Stock, with an aggregate
merger consideration value of $209.0 million.
Following the closing of the Merger, the
Company and Berkshire Bank will appoint Pamela Massad and David Brunelle, who each currently serve on the Commerce Board of Directors,
to the Boards of Directors of the Company and Berkshire Bank.
The proposed Merger is subject to customary
closing conditions, including the receipt of regulatory approvals and approval by the stockholders of Commerce. The Merger is
currently expected to be completed in six to nine months.
The directors of Commerce have agreed to vote their shares in favor of the approval of the Merger Agreement at the Commerce stockholders
meeting to be held to vote on the proposed transaction. If the merger is not consummated under specified circumstances, Commerce
has agreed to pay the Company a termination fee of $8.6 million. If the Company fails to obtain regulatory approvals due to specified
circumstances, the Company has agreed to pay Commerce a termination fee of $4.3 million.
In addition, concurrent with the execution
of the Merger Agreement, David G. Massad, a majority-shareholder of Commerce, entered into an agreement with the Company (the
“Shareholder Agreement”). The Agreement provides that, so long as Mr. Massad and any affiliates or immediate family
members (the “Acting in Concert Group”) that collectively own 5% or more of the Company from the date of the closing
of the Merger, must
(1) refrain from acquiring shares of Company common stock in excess of the 9.9%
common stock ownership limit, (2) refrain from selling shares of Company common stock without prior Company approval, except for
specified monthly amounts permissible under the terms of the Shareholder Agreement, (3) vote up to 5% of the Acting in Concert
Group’s outstanding Company common stock at their discretion and any additional shares of Company common stock above 5%
in favor of Board nominees and proposals. The foregoing summary of the Shareholder Agreement is qualified
in its entirety by reference to the complete text of such document, which is filed as Exhibit 10.1 to this Form 8-K and which
is incorporated herein by reference in its entirety.
The Merger Agreement also contains usual
and customary representations and warranties that the Company and Commerce have made to each other as of specific dates. Each party
has
also agreed to customary covenants, including, among other things,
covenants relating to the conduct of its business during the interim period between the execution of the Merger Agreement and the
consummation of the Merger.
The foregoing summary of the Merger Agreement
is qualified in its entirety by reference to the complete text of such document, which is filed as Exhibit 2.1 to this Form 8-K
and which is incorporated herein by reference in its entirety. The representations, warranties and covenants of each party set
forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties to, the
Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential
disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing
these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those
applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date
they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations
and warranties (1) will not survive consummation of the Merger, unless otherwise specified therein, and (2) were made only as of
the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the
subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information
may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with
this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors
with other factual information regarding Berkshire Hills or Commerce, their respective affiliates or their respective businesses.
The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding Berkshire
Hills, Commerce, their respective affiliates or their respective businesses, that will be contained in, or incorporated by reference
into, the registration statement on Form S-4 that will include a proxy statement of Commerce and a prospectus of Berkshire Hills,
as well as in the Forms 10-K, Forms 10-Q, Forms 8-K and other filings that Berkshire Hills makes with the Securities and Exchange
Commission (“SEC”).