<PAGE>
As filed with the Securities and Exchange Commission on August 17, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NORTHERN STAR FINANCIAL INC.
(Name of small business issuer in its charter)
MINNESOTA 6021 41-1912467
(State or other
jurisdiction of
incorporation or
organization)
(Primary Standard Industrial Classification Code)
(I.R.S. Employer
Identification Number)
Northern Star Financial, Inc.
410 Jackson Street, Suite 510
Mankato, Minnesota 56001
(507) 388-4855
(Address and telephone number of registrant's
principal executive offices and principal place of business)
--------------
Thomas Stienessen, Chief Executive Officer
Northern Star Financial, Inc.
410 Jackson Street, Suite 510
Mankato, Minnesota 56001
(507) 388-4855
(Name, address, and telephone number of agent for service)
Copies to:
Daniel A. Yarano, Esq. William K. Theodore L. Eissfeldt, Esq. Howard &
Sjostrom, Esq. Fredrikson & Byron, Howard 321 Liberty Street, Suite 200
P.A. 900 Second Avenue South, Suite Peoria, Illinois 61602 (309) 672-1483
1100 Minneapolis, Minnesota 55402
(612) 347-7000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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 number of the earlier effective
registration statement for the same offering: [_]
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: [_]
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: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock ($.01 par
value) ................ 329,000 Shares $10.00 $3,290,000 $971
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933, as amended.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS 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 COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
Disclosure alternative used (check one): Alternative 1 [_] ; Alternative 2 [X]
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 17, 1998
NORTHERN STAR FINANCIAL, INC.
A PROPOSED HOLDING COMPANY FOR
NORTHERN STAR BANK
329,000 SHARES
OF
COMMON STOCK
This Prospectus relates to the offer (the "Offering") of a minimum of 157,000
(the "Minimum") and a maximum of 329,000 (the "Maximum") shares of common
stock, par value $.01 per share (the "Common Stock"), to be issued by Northern
Star Financial, Inc., a Minnesota corporation ("the Company"), which has been
organized to own all of the capital stock of Northern Star Bank (the "Bank").
Neither the Company nor the Bank has ever conducted any business operations
other than matters related to initial organization and capital raising. See
"Proposed Business." The Company's temporary address is 410 Jackson Street,
Suite 510, Mankato, Minnesota 56001 and its temporary telephone number is (507)
388-4855.
This is a "best efforts" Offering by the Company, and it will be terminated
upon the sale of 329,000 shares of Company Common Stock or [Date], 1998,
whichever occurs first, unless the Offering is extended, at the discretion of
the Company, for an additional period ending no later than [Date], 1998.
However, the Company reserves the right to terminate the Offering at any time
after the sale of the Minimum. Subscriptions are binding on subscribers and may
not be revoked by subscribers without the consent of the Company.
Prior to this Offering, there has been no public market for the Common Stock.
The Company intends to make arrangements to quote the Common Stock on the OTC
Bulletin Board. See "Risk Factors Absence of Trading Market."
--------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) THE COMPANY(3)
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<S> <C> <C> <C>
Per Share ............................. $10.00 $0.65 $9.35
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Total (Minimum 157,000 shares)......... $1,570,000 $102,050 $1,467,950
(Minimum 157,000 shares)............... $3,290,000 $213,850 $3,076,150
</TABLE>
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(1) The Offering price has been arbitrarily established by the Company. See
"Risk Factors Offering Price."
(2) The Offering will be made on a best-efforts basis by Banc Stock Financial
Services, Inc. as Sale Agent. The Sales Agent's commission will be 5.5%
with respect to up to 100,000 shares sold in the Offering to certain
investors identified by the Organizers (as defined on page 4) and 6.5%
with respect to other shares sold in the Offering. The commissions
described above reflect the payment of a 6.5% commission on all sales. The
Company has agreed to sell to the Sales Agent a Warrant to purchase 10,000
shares of the Company's Common Stock. The Company has agreed to indemnify
the Sales Agent against certain civil liabilities, including liabilities
under the Securities Act of 1933. See "The Offering."
(3) Before deducting expenses related of this Offering, estimated to be
approximately $75,000. See "Use of Proceeds By the Company."
--------------------
BANC STOCK FINANCIAL SERVICES, INC.
A subsidiary of The Banc Stock Group
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THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
NORTHERN STAR BANK PRINCIPAL MARKET AREA
[ART]
[Map showing the geographic location of the Bank in the State of Minnesota]
-----------------------------
Prospective investors should carefully review this Prospectus before
subscribing for shares. Subscribers must represent in the Subscription
Agreement that they have received a copy of this Prospectus. See "The
Offering--How to Subscribe." The Company has established a minimum
subscription of 100 shares and a maximum subscription by any subscriber of
4.9% of the total number of shares sold in the Offering. However, the Company
reserves the right to waive these limits without notifying any subscriber.
Proceeds of the Offering will be deposited in an escrow account at Resource
Trust Company, as escrow agent, pending receipt of subscriptions and
subscription proceeds for the Minimum and satisfaction of certain other
conditions of the Offering. Any subscription proceeds accepted after the
closing of the Minimum but before termination of this Offering will not be
deposited in escrow but will be available for immediate use by the Company.
See "The Offering--Conditions of the Offering and Release of Funds."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE SALES AGENT MAY BID FOR AND PURCHASE SHARES OF THE COMMON
STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "THE
OFFERING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR
ANY OTHER GOVERNMENTAL AGENCY.
THE COMPANY
Northern Star Financial, Inc. (the "Company") was formed to hold all the
capital stock of Northern Star Bank (the "Bank"), a proposed state bank
currently being organized to serve the community of Mankato, Minnesota and
surrounding area. The Company has filed an application with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") to operate as a
bank holding company. The Company has no operating history, nor will it
commence business until the Organizers and the Company have obtained all
necessary approvals from government authorities. Assuming timely receipt of all
necessary government approvals and receipt of subscriptions for the Minimum,
the Company currently anticipates commencing business in October 1998. The
major asset of the Company will be the ownership of all the issued and
outstanding capital stock of the Bank.
The Company intends to concentrate its efforts on the banking needs of the
Minnesota counties of Blue Earth and Nicollet, which includes the communities
of Mankato, North Mankato, LeHillier and Skyline, Minnesota. All of the
Organizers and directors of the Company are residents of the Mankato area. The
Company intends to focus on customers' needs for personalized and community
oriented banking service. It believes that, as a locally-owned community bank
holding company, it will be well positioned to provide local banking services
and compete with other financial institutions in Mankato, most of which are
owned and controlled by companies outside of the local area.
The Company was incorporated under the laws of the State of Minnesota in
January 1998. The Company currently maintains offices at 410 Jackson Street,
Suite 510, Mankato, Minnesota 56001. The Company's temporary telephone number
is (507) 388-4855.
THE BANK
The Organizers filed applications with the Minnesota Department of Commerce
(the "DOC") and the Federal Deposit Insurance Corporation (the "FDIC") in July
1998 to charter the Bank as a state bank and obtain federal deposit insurance.
The Bank has no operating history and will not commence operations until: (i)
the Organizers obtain all necessary approvals from the DOC and FDIC; (ii) the
Company obtains approval from the Federal Reserve to operate as a bank holding
company; and (iii) the Company closes on the Minimum. The Bank is expected to
provide a wide range of commercial and consumer banking services. The
Organizers are active in area civic organizations and the Company believes they
have strong networks of personal and business contacts within the Mankato
region. The Bank intends to distinguish itself from its competitors by
responding to the changing needs of the region's residents. The Company
believes that the insight gained by the Organizers from their years of living
in the Mankato region will aid the Bank in determining which products and
services to offer its customers. The Company expects that the Organizers will
be substantial customers of the Bank and will be able to provide valuable
referrals.
The Bank plans to offer a full range of deposit products and services, as
well as credit and operational services. Depository services will include (i)
IRA plans, (ii) tax depository and payment services, (iii) automatic transfers,
(iv) bank by mail, (v) direct deposits, (vi) no-fee savings accounts, (vii)
money-market savings accounts, (viii) passbook savings, and (ix) various forms
and terms of certificates of deposit ("CDs"), both fixed and variable rate. The
Bank intends to attract deposits by advertising and by pricing depository
services competitively. Credit services will likely include (i) commercial and
industrial loans, (ii) real estate construction and land development loans,
(iii) conventional and adjustable rate real estate loans secured by residential
properties, (iv) real estate loans secured by commercial properties, (v)
consumer loans for items such as home
3
<PAGE>
improvements, vehicles, boats and education offered on installment and single
payment bases, as well as overdraft protection, (vi) government guaranteed
loans including the Small Business Administration ("SBA"), Veterans
Administration ("VA") and Federal Housing Administration ("FHA"), and (vii)
letters of credit. Bank operation services are expected to include (i)
cashier's checks, (ii) traveler's checks, (iii) money orders, (iv) collections,
(v) currency and coin processing, (vi) wire transfer services, (vii) deposit
bag rentals, (viii) stop payments, and (ix) savings bonds. Other services are
expected to include servicing of secondary market real estate loans, notary
services, photocopying, faxing and signature guarantees. The Bank does not plan
to offer trust services at this time.
Following receipt of all necessary governmental approvals and the closing of
the Minimum, the Bank will be fully charted as a Minnesota state bank. Upon
commencement of banking operations, the Bank's address will be 1650 Madison
Avenue, Mankato, Minnesota.
THE ORGANIZERS
The organizers of the Company and the Bank (the "Organizers") are Dean
Doyscher, Frank Gazzola, Michael Reynolds, Thomas Reynolds and Thomas
Stienessen. Additional individuals may be added as Organizers, subject to
regulatory approval. All of the Organizers serve as directors of the Company
and, following the closing of the Minimum, will serve as directors of the Bank.
In June 1998, in order to meet certain DOC requirements with respect to the
Bank's application for a state bank charter, the Organizers entered into
binding subscription agreements with the Company for the purchase of an
aggregate of 121,000 shares of Common Stock at $10.00 per share in a separate
private offering (the "Private Offering"). Proceeds from such subscriptions
will be deposited in an escrow account on the effective date of this Offering.
The closing on the Private Offering is contingent upon and will occur
simultaneously with the closing of the Minimum. If this Offering terminates
prior to the closing of the Minimum, the subscription proceeds from the Private
Offering will be refunded without interest. Taking the Private Offering
subscriptions into account and assuming none of the Organizers purchase shares
in this Offering or exercise any options to purchase shares of Common Stock,
following completion of the Minimum or the Maximum, the Organizers, as a group,
will beneficially own approximately 43.5% or 26.9%, respectively, of the
outstanding Common Stock. See "Principal Shareholders."
Although there is no formal agreement to do so, the Organizers may purchase
additional shares in this Offering, if necessary to complete the Minimum, and
some Organizers may decide to purchase additional shares even if the Minimum
has been achieved.
COMPANY AND BANK MANAGEMENT
As of the date of this Prospectus, the Company's management consists of Mr.
Thomas Stienessen, who serves as the Company's President and Chief Executive
Officer and Mr. Frank Gazzola who serves as the Company's temporary Chief
Financial Officer. The Bank intends to enter into an employment agreement with
Mr. Stienessen following the closing of the Minimum. See "Management--
Employment Agreement."
Following completion of the Minimum, Mr. Stienessen will serve as the Bank's
President and Chief Executive Officer, and the Bank anticipates it will hire
qualified persons with banking experience for the following key management
positions: (i) vice president and chief financial officer; (ii) vice president
of lending; and (iii) vice president of operations. Although the Company has
not entered into any agreement with any person to serve in any of the positions
identified above, it has interviewed and identified potential qualified
candidates. No assurance can be made, however, that a formal offer will be made
to any of the potential qualified candidates or that such candidates will
accept employment with the Bank.
The Company anticipates that persons hired for such key management positions
will not be employed pursuant to formal employment agreements, and the Company
expects that the Bank will pay approximately an aggregate of $130,000 as the
base salaries of such positions. See "Management--Executive Officers and
Directors." In addition, the Company anticipates that it will grant each key
manager incentive stock options to purchase 1,000 shares of Company Common
Stock. See "Management 1998--Equity Incentive Plan."
4
<PAGE>
THE OFFERING
Securities Offered .......... Up to 329,000 shares of Common Stock of the Com-
pany, par value $.01 per share.
Offering Price............... $10.00 per share
Use of Proceeds ............. The Company plans to use approximately
$1,390,000 of the estimated net proceeds from
the sale of the Minimum plus $1,210,000 in net
proceeds from the sale of shares to the Organ-
izers in the Private Offering, a total of ap-
proximately $2,600,000, to capitalize the Bank
by purchasing all the Bank's common stock to be
issued. The Company expects that the DOC and
FDIC will require the Bank to be capitalized at
a level of at least $2,500,000 before it can
commence banking operations. Approximately
$75,000 of net proceeds will be used to pay the
Company's organizational and offering expenses.
The Company plans to initially invest all re-
maining sums in excess of the Minimum in United
States government securities or as a deposit at
the Bank. The Company may use such remaining
sums to purchase additional capital stock of
the Bank or make loans to the Bank as necessary
to maintain compliance with regulatory capital
requirements and borrowing restrictions as the
Bank grows
If the conditions for releasing subscription
funds from escrow are met and such funds are
released but final regulatory approval to com-
mence banking operations is not obtained from
the DOC or FDIC or the Bank does not open for
any other reason, it is possible that subscrib-
ers could be returned an amount less than their
original investment. See "Risk Factors--Return
of Less Than Subscription Amount."
The Bank will use the $2,600,000 received from
the sale of its stock to the Company for pre-
opening expenses, working capital and general
corporate purposes. See "Use of Proceeds."
Conditions to Offering....... This Offering will be terminated and all sub-
scription funds (without interest, except to
residents of certain states, as described in
"The Offering") will be returned promptly to
subscribers unless on or before [termination
date] (or such later date if the offering is
extended by the Company for additional periods
not to extend beyond [extension date]), (i) the
Company has accepted subscriptions and payment
in full for at least the Minimum; (ii) the Es-
crow Agent has received an aggregate of
$1,210,000 from the Organizers for their Pri-
vate Offering subscriptions; and (iii) the Com-
pany has received approval from the Federal Re-
serve to become a bank holding company under
the BHCA and the Organizers have received rea-
sonable assurances from the DOC and FDIC that
the Bank will receive a certificate of deposi-
tory insurance from the FDIC and a state char-
ter from the DOC. Subscription proceeds from
this Offering and the Private Offering will be
deposited promptly, in an escrow account with
5
<PAGE>
Resource Trust Company, as escrow agent (the
"Escrow Agent"), under the terms of an escrow
agreement (the "Escrow Agreement"), pending the
satisfaction of the conditions set forth above
or the termination of the Offering. Upon satis-
faction of the conditions set forth above, all
subscription funds held in escrow and any in-
terest earned thereon, will be released to the
Company for immediate use. Any subscription
proceeds accepted after satisfaction of the
conditions set forth above but before termina-
tion of this Offering will not be deposited in
escrow but will be immediately available to the
Company. See "The Offering."
Plan of Distribution......... The Company has established a minimum investment
by any subscriber (together with his or her af-
filiates) of 100 shares and a maximum invest-
ment of 4.9% of the total number of shares sold
in the Offering, unless the Company, in its
sole discretion, elects to waive these limits
with respect to any subscriber. The Company has
engaged Banc Stock Financial Services, Inc. of
Columbus, Ohio, as the Company's Sales Agent to
sell shares in the Offering on a best-efforts
basis. The Sales Agent's business address is
1105 Schrock Road, Suite 437, Columbus, Ohio
43229. The Sales Agent will receive a 5.5% com-
mission with respect to shares sold in the Of-
fering to certain investors identified by the
Organizers (up to an aggregate of 100,000
shares) and 6.5% with respect to other shares
sold in the Offering. The Company will issue to
the Sales Agent a Warrant to purchase 10,000
Shares of Common Stock at $10.00 per share. The
Company will also pay the Sales Agent's ex-
penses of this Offering, including the Sales
Agent counsel's fees and expenses up to $20,000
and other out-of-pocket expenses up to a maxi-
mum of $15,000
Listing...................... The Company intends to make arrangements to
quote the Common Stock on the OTC Bulletin
Board.
RISK FACTORS
Prospective investors should consider certain risk factors in connection with
the purchase of the Common Stock offered hereby. See "Risk Factors."
SELECT SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
JUNE 30, 1998
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AS ADJUSTED(1)
---------------------
ACTUAL MINIMUM MAXIMUM
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Balance Sheet Data:
Cash, cash equivalents and investments........ $ -0- $2,780,000 $4,500,000
Total assets.................................. 14,806 2,794,806 4,514,806
Total liabilities............................. 18,665 18,665 18,665
Total stockholder's equity.................... (3,859) 2,776,141 4,496,141
</TABLE>
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(1) Adjusted to reflect the sale of 121,000 shares sold to the Organizers in
the Private Offering, plus the Minimum and the Maximum of this Offering and
the application of the estimated net proceeds from both offerings and the
redemption of 10 shares of Common Stock at $10.00 per share concurrently
with the closing of the Minimum. See "Use of Proceeds."
6
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. A subscription for shares should be made only after careful
consideration of the risk factors set forth below and elsewhere in this
Prospectus and should be undertaken only by persons who can afford an
investment involving such risks. THE SHARES OF COMMON STOCK OFFERED HEREBY ARE
NOT DEPOSITS OR SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED OR
GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
RETURN OF LESS THAN SUBSCRIPTION AMOUNT
The amounts paid by subscribers in this Offering will be held in escrow
until (i) the Company has accepted subscriptions and payment in full for at
least the Minimum (ii) the Escrow Agent has received an aggregate of
$1,210,000 from the Organizers for their Private Offering subscriptions, and
(iii) the Company has received approval from the Federal Reserve to become a
bank holding company under the BHCA, and the Organizers have received
reasonable assurances from the DOC and FDIC that the Bank will receive a
certificate of depository insurance from the FDIC and a state charter from the
DOC. If these conditions are not met by [termination date], or by such
subsequent date, not beyond [extension date], to which the offering may be
extended by the Company, all subscriptions will be returned to subscribers
promptly in full, without interest except to residents of those states the
securities commissions of which require the payment of interest (currently
expected to be California, Michigan, Ohio and Pennsylvania). See "The
Offering--Conditions to the Offering and Release of Funds." All interest
earned thereon shall be used by the Company to fund organizational expenses,
except that the Company would include with any subscriptions returned to
residents of states in which interest must be returned the actual interest
earned on such amounts while the subscriptions were held in the escrow
account. If these conditions are satisfied, the subscription amounts held in
escrow may be paid to the Company and shares issued to subscribers, and all
interest earned on the subscription proceeds will be retained by the Company.
Once the Company has met the conditions for the Offering, the Escrow Agreement
will be terminated and any subscription proceeds accepted after satisfaction
of the conditions set forth above but before termination of this Offering will
not be deposited in escrow but will be available for immediate use by the
Company to fund offering and organizational expenses and for working capital.
When subscription amounts are received by the Company, the Company will use a
portion of the proceeds to repay the Organizers the amounts advanced by them
for organizational and offering expenses. The Company will then fund future
expenses out of the subscription amounts received.
Even after release of subscription funds from escrow, there can be no
assurance that the Bank will open for business. If the conditions for
releasing subscription funds from escrow are met and such funds are released
but final regulatory approval to commence banking operations is not obtained
from the DOC or FDIC or the Bank does not open for any other reason, the
Company's board of directors intends to propose that the shareholders approve
a plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in this Offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and Bank, including the
salaries of employees of the Bank and other pre-opening expenses) would be
distributed to the shareholders; provided that, in this event, no
distributions would be made to the Organizers until shareholders other than
the Organizers have received an amount equal to their initial investment in
the Company.
RECENT FORMATION OF COMPANY, LACK OF OPERATING HISTORY AND OPERATING LOSSES
EXPECTED
The Company was formed as a Minnesota corporation in January 1998, and has
not engaged in any operations other than matters related to its initial
organization and capital raising. It is a development stage enterprise,
subject to all risks inherent in any new business venture, as well as those
risks specifically relating to banking. As a consequence, there is only
limited information and financial data on which to base an investment
decision. The Company intends to operate as a bank holding company, presuming
the successful organization of the Bank and, as such, the Company's
profitability, if any, depends entirely on the Bank's operations. The Bank's
proposed operations are subject to the risks inherent in the establishment of
any new business, and specifically a bank. There can be no assurance that the
Company will be able to realize its business goals of forming and
7
<PAGE>
operating the Bank and achieving and maintaining profitability. The Company
expects that the Bank will lose money at least during its first year of
operation. Banks are rarely profitable immediately after establishment, and
substantial time is required before profits and surplus will be realized, if
at all. Investors face a high risk of experiencing little or no return on
their investment for a lengthy period of time. No assurance can be given that
the Bank's activities will achieve or maintain profitability in the future.
COMPETITION
The banking business is highly competitive, and the Bank will encounter
strong competition from other banks, as well as from commercial banks,
mortgage banking firms, consumer finance companies, securities brokerage
firms, insurance companies, money market mutual funds, and other financial
institutions operating in the Mankato, Minnesota area and elsewhere.
Specifically, the Bank will compete with branches of four large commercial
banks, TCF Bank, U.S. Bank, Norwest Bank and Mid-American Bank, as well as
branch offices of four other community banks. A number of these competitors
are well established in the Mankato, Minnesota area. The main offices of
Security State Bank of Mankato and Norwest Bank are located within two miles
of the proposed Bank. All of these banks have substantially greater resources
and lending limits, as well as a lower cost of funds, than the Bank and may
offer certain services, such as extensive and established branch networks and
trust services, that the Bank either does not expect to provide or will not
provide initially. As a result of these competitive factors, the Bank may have
to pay higher rates of interest to attract deposits. In addition, non-
depository institution competitors are generally not subject to the extensive
regulations applicable to the Company and the Bank. Recent federal legislation
permits commercial banks to establish operations nationwide, further
increasing competition from out-of-state financial institutions. See
"Proposed--Business Competition" and "Supervision and Regulation." Although
the Organizers believe that the Bank will be able to compete effectively with
these institutions, no assurances can be given in this regard.
INTEREST RATE RISK
The Company's financial condition is substantially dependent on the Bank's
cash flow and net income. The net income of the Bank depends to a great extent
upon its net interest rate spread, which is the difference between the average
interest rate earned by the Bank on its loans, securities and other interest-
earning assets, and the average interest rate it pays on deposits and other
interest-bearing liabilities. Interest rates are highly sensitive to many
factors beyond the control of the Bank, including general economic conditions
and policies of various governmental and regulatory authorities. Economic
conditions such as inflation, recession, unemployment, high interest rates,
short money supply and other factors beyond the control of the Company and the
Bank may adversely affect the Bank's deposit levels and loan demand, and
therefore, the profitability of the Company. Increases or decreases in
interest rates may cause significant decreases in the net interest income and
net income of the Bank. At any given time, the Bank's assets and liabilities
will be such that they are affected differently by a given change in interest
rates. As a result, an increase or decrease in rates, the length of loan terms
or the mix of adjustable and fixed rate loans in the Bank's portfolio could
have a positive or negative effect on the Bank's net income, capital and
liquidity.
LENDING RISKS AND LIMITS
The risk of nonpayment of loans is inherent in commercial banking, and such
nonpayment, if it occurs, may have a material adverse effect on the Company's
earnings and overall financial condition as well as the value of the Common
Stock. Moreover, the Bank expects to focus on small-to-medium sized
businesses, which may result in a larger concentration by the Bank of loans to
such businesses. As a result, the Bank may assume greater lending risks than
banks which have a lesser concentration of such loans and tend to make loans
to larger, better capitalized, companies. Management will attempt to minimize
the Bank's credit exposure by carefully monitoring the concentration of its
loans within specific industries and through prudent loan application and
approval procedures, but there can be no assurance that such monitoring and
procedures will reduce such lending risks.
8
<PAGE>
Furthermore, the Bank is limited in the amount it can loan a single borrower
(including the borrower's related interests) by the amount of the Bank's
capital. These limits will increase and decrease as the Bank's capital
increases and decreases. Unless the Bank is able to sell participations in its
loans to other financial institutions, the Bank will not be able to meet all
of the lending needs of loan customers requiring aggregate extensions of
credit above these limits.
LOCAL ECONOMIC CONDITIONS
The success of the Company depends to a great extent upon general economic
conditions in the communities it serves, primarily the Mankato, Minnesota
area, and particularly conditions affecting small and medium sized businesses
which are expected to be a significant portion of the Bank's borrowers. A
decline in the economy of this area could have an adverse effect on the
Company's business, including the demand for new loans, refinancing activity,
the ability of borrowers to repay outstanding loans and the value of loan
collateral, and could adversely affect the Bank's net income. See "Business--
Banks" and "Business--Lending and Investments."
NEED FOR CAPITAL
Although the Company does not currently anticipate the need for additional
capital in the next 12 months, because of regulatory capital requirements and
borrowing limits additional capital beyond that which will be provided by this
Offering and amounts generated by the Bank's operations will likely be
necessary for the Bank to grow significantly, especially if only the Minimum
is sold. There can be no assurance that funds necessary to enable such growth
will be available. To the extent the Company relies upon the sale of
additional equity securities to finance future expansion, such sale could
result in significant dilution to the interests of investors purchasing shares
in this Offering. See "Use of Proceeds."
SUPERVISION AND REGULATION
The banking industry is heavily regulated by both state and federal
regulatory authorities. These regulations are primarily intended to protect
depositors, not shareholders. The Bank will be subject to supervision and
regular examination by agents of the DOC and FDIC. Under state and federal
banking law, the Bank is subject to substantial supervision and limitations
with respect to making loans, extending credit, purchasing securities, paying
dividends, making acquisitions, branching and many other aspects of the
banking business. Regulation includes, among other things, capital reserve
requirements, dividend limitations, limitations on products and services
offered, geographical limits, consumer credit regulations, community
investment requirements and restrictions on transactions with affiliated
parties. Regulation of the financial institutions industry is undergoing
continued changes, and the ultimate effect of such changes cannot be
predicted. In December 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was enacted, and FDICIA and the regulations
thereunder have increased the regulatory and supervisory requirements for
financial institutions, which has resulted and will continue to result in
increased operating expenses. Additional regulations affecting financial
institutions have been proposed and may be enacted, none of which is within
the Company's control. This regulation substantially affects the business and
financial results of all financial institutions and holding companies,
including the Company and Bank. The Company is not able to predict the impact
of changes in such regulations on the Company's business and profitability.
Regulations now affecting the Company and the Bank may be modified at any
time, and there is no assurance that such modifications will not adversely
affect the business of the Company and the Bank. See "Supervision and
Regulation."
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the financial assurances and personal
efforts and abilities of its Board of Directors. The loss of the services of
any of the directors could have a material adverse impact upon the Company.
Success of the Bank will also be highly dependent on the retention of Mr.
Stienessen, the proposed president and chief executive officer of the Bank, as
well as upon the Bank's ability to hire and retain additional
9
<PAGE>
qualified personnel in the future. The Bank intends to enter into an
employment agreement with Mr. Stienessen following the closing of the Minimum.
See "Management--Employment Agreement." The Company is not expected to enter
into formal employment agreements with any other prospective managers of the
Bank. The loss of services of Mr. Stienessen or the inability of the Company
to attract, hire and retain qualified management personnel could have a
material adverse effect on the Company and the Bank. The Company does not
currently have, but expects in the foreseeable future to obtain, key person
life insurance on Mr. Stienessen.
RISKS ASSOCIATED WITH THE YEAR 2000
Like many financial institutions, the Company and the Bank will rely upon
computers for the daily conduct of their businesses and for information
systems processing. There is concern among industry experts that on January 1,
2000 computers will be unable to "read" the new year resulting in widespread
computer malfunctions. The Company and the Bank will generally rely on
software and hardware developed by independent third parties to provide the
information systems used by the Company and the Bank. The Company intends to
seek assurances about the Year 2000 compliance with respect to any third party
hardware or software system it intends to use. The Company is negotiating with
Fiserv Solutions, Inc. ("Fiserv") to use the ITT client-server core retail
banking system, and the Company has been advised that Fiserv believes this
system is Year 2000 compliant. The Company also believes that its other
internal systems and software and the network connections it will maintain
will be adequately programmed to address the Year 2000 issue. Based on
information currently available, management does not believe that the Company
or the Bank will incur significant costs in connection with the year 2000
issue. Nevertheless, there can be no assurances that all hardware and software
that either the Company or the Bank uses will be Year 2000 compliant, and the
Company cannot predict with any certainty the costs the Company or the Bank
will incur to respond to any Year 2000 issues. Further, the business of many
of the Bank's customers may be negatively affected by the Year 2000 issue, and
any financial difficulties incurred by the Bank's customers in solving Year
2000 issues could negatively affect such customer's ability to repay any loans
which the Bank may have extended. Therefore, even if the Company and the Bank
do not incur significant direct costs in connection with responding to the
year 2000 issue, there can be no assurance that the failure or delay of the
Bank's customers or other third parties in addressing the Year 2000 issue or
the costs involved in such process will not have a material adverse effect on
the Bank's business, financial condition and results of operations.
NO IMMEDIATE PAYMENT OF DIVIDENDS
The Company has no plans to pay any cash dividends to its shareholders in
the foreseeable future. Since the Company and the Bank are both start-up
operations and will likely incur initial losses, both the Company and the Bank
intend to retain any earnings for the period of time management believes
necessary to ensure the success of their respective operations. The Company
will be dependent upon the Bank for its earnings and funds to pay dividends on
the Common Stock. The payment of dividends by the Company and the Bank is also
subject to legal and regulatory restrictions. Any payment of dividends by the
Company in the future will depend on the Bank's earnings, capital
requirements, financial condition, and other factors considered relevant by
the Board of Directors. See "Dividend Policy," "Proposed Business," and
"Supervision and Regulation."
CONTROL OF THE COMPANY; PURCHASES BY ORGANIZERS
Assuming no officers or directors purchase shares in this Offering or
exercise options to purchase shares of Common Stock, following completion of
the Minimum or the Maximum, the officers and directors of the Company, as a
group, will beneficially own approximately 43.5% or 26.9%, respectively of the
outstanding Common Stock. See "Principal Shareholders." As of the date of this
Prospectus, options to purchase 36,200 shares at $10.00 per share are
outstanding, of which option to purchase 24,200 shares are immediately
exercisable. Following the closing of the Minimum, the Company expects to
issue up to 6,000 incentive stock options to the Company's management
personnel and a warrant to purchase 40,000 shares of Common Stock at $10.00
per share to the Sales Agent. Because of such share ownership, officers and
directors as a group may be able to control the election of the members of the
Company's board of directors and the outcome of other
10
<PAGE>
corporate activity. Furthermore, although there is no formal agreement to do
so, the Organizers may purchase additional shares in the Offering, if
necessary to complete the minimum amount, and some Organizers may decide to
purchase additional shares even if the minimum subscription amount has been
achieved. See "Principal Shareholders."
ABSENCE OF TRADING MARKET
Prior to this Offering, there has been no public trading market for the
Common Stock. The Company expects that the Common Stock will be quoted on the
OTC Bulletin Board. The Sales Agent has advised the Company that, upon the
closing of the Minimum, it presently intends to act as a market maker in the
Common Stock, subject to applicable laws and regulatory requirements. The
development of a public trading market depends, however, upon the existence of
willing buyers and sellers, the presence of which is not within the control of
the Company, the Bank or any market maker. Even with a market maker, factors
such as the limited size of the Offering, the lack of earnings history of the
Company and the absence or a reasonable expectation of dividends in the near
future mean that there can be no assurance of the development of an active and
liquid market for the Common Stock. Even if a market develops, there can be no
assurance that a market will continue, or that shareholders will be able to
sell their shares at or above the public offering price. Furthermore, the
Sales Agent has no obligation to make a market in the Common Stock and, if
commenced, may cease market making activities at any time. As a result, an
investment in the Common Stock is likely to be relatively illiquid for the
foreseeable future. Thus, investors who may need or wish to dispose of all or
part of their shares may be unable to do so except in private, directly
negotiated sales.
ADVERSE EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors may authorize the issuance of additional
shares of Common Stock or, from the 5,000,000 shares of undesignated stock,
Preferred Stock without further action by the Company shareholders, unless
such action is required in a particular case by applicable laws or regulation.
The authority to issue additional Common Stock or Preferred Stock provides the
Company with the flexibility necessary to meet its future needs without the
delay resulting from seeking shareholder approval. The unissued Common Stock
or Preferred Stock may be issued from time to time for any corporate purposes,
including without limitation, stock splits, stock dividends, employee benefit
and compensation plans, acquisitions and public and private sales for cash as
a means of raising capital. Such shares could be used to dilute the stock
ownership of persons seeking to obtain control of the Company. In addition,
the sale of a substantial number of shares of Common Stock or Preferred Stock
to persons who have an understanding with the Company concerning the voting of
such shares, or the distribution or dividend of Common Stock or Preferred
Stock (or right to receive such shares) to the Company's shareholders, may
have the effect of discouraging or otherwise increasing the cost of
unsolicited attempts to acquire control of the Company. Further, because the
Company's Board has the power to determine the voting, conversion or other
rights of the Preferred Stock, the issuance of a series of Preferred Stock to
persons friendly to management could effectively discourage or preclude
consummation of a change in control transaction or have the effect of
maintaining the position of the Company's incumbent management. The Company
does not currently have any plans or commitments to use its authority to
effect any such issuance, but reserves the right to take any action that the
Board of Directors deems to be in the best interests of the Company and its
shareholders. Furthermore, as a Minnesota corporation, the Company is subject
to provisions of the Minnesota Business Corporations Act ("MBCA") that could
have an anti-takeover effect on the Company. In addition, certain provisions
of the Company's Bylaws will impede changes in majority control of the
Company's Board of Directors. The Company's Bylaws provides that the Board of
Directors will be divided into three classes, with directors in each class
elected for three-year staggered terms. Thus assuming five directors, as
currently is the case, it would take two annual meetings for the election of
directors to replace a majority of the Board. The Company may also consider
adopting additional anti-takeover measures. The authority of the Board to
issue additional shares of Common Stock or undesignated stock and the anti-
takeover provisions of the MBCA, as well as any future anti-takeover measures
adopted by the Company, may, in certain circumstances, delay, deter or prevent
takeover attempts and other changes in control of the Company not approved by
11
<PAGE>
management and the Board of Directors. As a result, the Company's stockholders
may lose opportunities to dispose of their shares at a premium over prevailing
prices in the event of a change in control, and the market price, voting and
other rights of the holders of Common Stock may also be affected. See
"Description of Capital Stock--Anti-Takeover Provisions."
DILUTION FROM ISSUANCE OF STOCK OPTIONS AND OTHER ISSUANCES OF SECURITIES
In August, 1998, the Company's Board of Directors and stockholders of the
Company adopted the 1998 Equity Incentive Plan (the "Plan") in order to
provide for the granting of stock options to officers, directors and key
employees of the Company. See "Management--1998 Equity Incentive Plan." The
Plan permits the granting of incentive stock options to Company employees
meeting the requirements of Section 422A of the Internal Revenue Code of 1996
and nonqualified options to non-employee directors, consultants and advisors.
The Plan provides that no stock options will be granted at less than the fair
market value of the Common Stock on the date of the grant. The Company has
reserved 41,700 shares of Common Stock for issuance upon exercise of options
under the Plan. As of the date of this Prospectus, the Company has granted
nonqualified options to purchase 12,000 shares of Common Stock at $10.00 per
share to its non-employee directors under the Plan. The Company has also
granted nonqualified options, that are immediately exercisable, to purchase an
aggregate of 24,200 shares of Company stock at $10.00 per share to the
Organizers in consideration for their services to the Company. In addition,
upon completion of this Offering, the Company will issue to the Sales Agent
warrants to purchase 40,000 shares of Company Common Stock at $10.00 per
share. Exercise of these options and the Sales Agent's warrants could have a
dilutive effect on the shareholders' interest in the Company's earnings and
book value. In addition, the Company may issue additional stock options,
warrants or shares of Common Stock or preferred stock in the future. Any such
stock offering by its nature could be dilutive to the holdings of purchasers
in this Offering.
ARBITRARY DETERMINATION OF OFFERING PRICE
Because the Company and the Bank are in organization, the offering price of
$10.00 per share was determined by the Organizers without reference to
traditional criteria for determining stock value such as book value or
historical or projected earnings since such criteria are not applicable to
companies with no history of operations. The price per share was set to enable
the Company to raise gross proceeds of between $1,570,000 and $3,290,000 in
this Offering through the sale of a reasonable number of shares of Common
Stock, and the price per share is essentially equivalent to the initial book
value per share prior to the payment of the Company's and the Bank's
organizational expenses. No assurance is or can be given that any of the
shares could be resold for the offering price or any other amount.
12
<PAGE>
THE OFFERING
GENERAL
The Company is offering for sale a minimum of 157,000 shares and a maximum
of 329,000 shares of its Common Stock at a price of $10.00 per share to raise
gross proceeds of between $1,570,000 and $3,290,000 for the Company. The
minimum purchase for any one investor (together with the investor's
affiliates) is 100 shares and the maximum purchase is 4.9% of the offering
unless the Company, in its sole discretion, accepts a subscription for a
lesser or greater number of shares.
In June 1998, in order to meet certain DOC requirements with respect to the
Bank's application for a state bank charter, the Organizers entered into
binding subscription agreements with the Company for the purchase of an
aggregate of 121,000 shares of Common Stock at $10.00 per share in a separate
private offering (the "Private Offering"). Proceeds from such subscriptions
will be deposited in the same escrow account as the subscribers of this
Offering, on the effective date of this Offering. The closing on the Private
Offering is contingent upon and will occur simultaneously with the closing of
the Minimum. If this Offering terminates prior to closing on the Minimum, the
subscription proceeds from the Private Offering will be refunded without
interest.
The Organizers may subscribe for up to 100% of the shares in this Offering
if necessary to help the Company achieve the Minimum, and some Organizers may
decide to purchase additional shares even if the Minimum has been achieved.
Any additional shares purchased by the Organizers will be purchased for
investment and not with a view to resale. Because purchases by the Organizers
may be substantial, investors should not place any reliance on the sale of a
specified minimum offering amount as an indication of the merits of this
Offering or that an Organizer's investment decision is shared by unaffiliated
investors. See "Management."
Subscriptions to purchase shares will be received until midnight,
Minneapolis, Minnesota time, on [termination. date], unless all of the shares
are earlier sold or the Offering is earlier terminated or extended by the
Company. See "Conditions to the Offering and Release of Funds." The Company
reserves the right to terminate the Offering at any time or to extend the
expiration date for additional periods not to extend beyond [extension date].
The date the Offering terminates is referred to herein as the "Expiration
Date." No written notice of an extension of the Offering period need be given
prior to any extension and any such extension will not alter the binding
nature of subscriptions already accepted by the Company. Once the Company is
subject to the reporting requirements of the Securities Exchange Act of 1934
(the "Exchange Act"), it will file annual reports on Form 10-KSB and quarterly
reports on Form 10-QSB and will make such documents available to subscribers
who request a copy. In addition, the Company intends to provide quarterly
communications to all subscribers which will include information concerning
any extensions of the Offering. Extension of the Expiration Date might cause
an increase in the expenses incurred with this Offering. The Company intends
to use the Sales Agent to sell the shares. See "Plan of Distribution."
Following acceptance by the Company, subscriptions will be binding on
subscribers and may not be revoked by subscribers except with the consent of
the Company. In addition, the Company reserves the right to cancel accepted
subscriptions at any time and for any reason until the proceeds of this
Offering are released from escrow (as discussed in greater detail in
"Conditions to the Offering and Release of Funds" below), and the Company
reserves the right to reject, in whole or in part and in its sole discretion,
any subscription. The Company may, in its sole discretion, allocate shares
among subscribers in the event of an oversubscription for the shares. In
determining which subscriptions to accept, in whole or in part, the Company
may take into account any factors it considers relevant, including the order
in which subscriptions are received, a subscriber's potential to do business
with, or to direct customers to, the Bank, and the Company's desire to have a
broad distribution of stock ownership. If the Company rejects any
subscription, or accepts a subscription but in its discretion subsequently
elects to cancel all or part of such subscription, the Company will refund
promptly the amount remitted that corresponds to $10.00 multiplied by the
number of shares as to which the subscription is rejected or canceled.
Certificates representing shares duly subscribed and paid for will be issued
by the Company promptly after the offering conditions are satisfied and
escrowed funds are delivered to the Company.
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<PAGE>
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
Subscription proceeds accepted by the Company for the initial 157,000 shares
subscribed for in this Offering will be promptly deposited in an escrow
account with the Escrow Agent until the conditions to this Offering have been
satisfied or the Offering has been terminated. The Offering will be
terminated, no shares will be issued, and no subscription proceeds will be
released from escrow to the Company, unless on or before the Expiration Date
(i) the Company has accepted subscriptions and payment in full for a minimum
of 157,000 shares in this Offering, and (ii) the Company has received payment
in full from the Organizers for 121,000 shares in the Private Offering, and
(iii) the Company has received approval from the Federal Reserve to become a
bank holding company under the BHCA, and the Organizers have received
reasonable assurances from the DOC and FDIC that the Bank will receive a
certificate of depository insurance from the FDIC and a state charter from the
DOC. If the above conditions are satisfied, the subscription amounts for this
Offering and the Private Offering held in escrow may be paid to the Company
and shares issued to subscribers and Organizers. Once the Company has closed
on the Minimum, the Escrow Agreement will be terminated, and any subscription
proceeds accepted after satisfaction of the conditions before termination of
this Offering will not be deposited in escrow but will be available for
immediate use by the Company to fund offering and organizational expenses and
for working capital. Following release of proceeds to the Company, the Company
will use a portion of the proceeds to repay the Organizers the amounts
advanced by them for organizing the Company and Bank. See "Use of Proceeds"
and "Interest of Management and Other Certain Transactions."
If the conditions for releasing subscription funds from escrow are met and
such funds are released but final regulatory approval to commence banking
operations is not obtained from the FDIC or DOC or the Bank does not open for
any other reason, the Board of Directors intends to propose that the
shareholders approve a plan to liquidate the Company. Upon such a liquidation,
the Company would be dissolved and the Company's net assets (generally
consisting of the amounts received in this Offering plus any interest earned
thereon, less the amount of all costs and expenses incurred by the Company and
the Bank, including the salaries of employees of the Bank and other pre-
opening expenses) would be distributed to the shareholders; provided that, in
this event, no distributions would be made to the Organizers until
shareholders other than the Organizers have received an amount equal to their
initial investment in the Company.
If the above conditions are not satisfied by the Expiration Date or the
Offering is otherwise earlier terminated, (i) accepted subscription agreements
will be of no further force or effect and subscribers in this Offering and the
Private Offering will not be shareholders of the Company, (ii) the funds held
in the escrow account shall not be subject to the claims of any creditor of
the Company or available to defray the expenses of this Offering, and (iii)
the full amount of all subscription funds will be returned promptly to
subscribers and Organizers, without interest, except to residents of states
the securities commissions of which require the payment of interest (currently
expected to be California, Michigan, Ohio and Pennsylvania). The Company will
retain any interest earned thereon to repay the expenses incurred by the
Organizers in organizing the Company and the Bank, except that the Company
would include with any subscriptions returned to residents of states where
interest is required the actual interest earned on such amounts while the
subscriptions were held in the escrow account. Any expenses not paid with such
interest will be paid by the Organizers pro rata in proportion to each
Organizer's respective proposed ownership, based solely on the subscriptions
from the Private Offering.
The Escrow Agent has not investigated the desirability or advisability of an
investment in the shares by prospective investors and has not approved,
endorsed, or passed upon the merits of an investment in the shares.
Subscription funds held in escrow will be invested in interest-bearing savings
accounts, short-term United States Treasury securities, FDIC-insured bank
deposits, or such other investments as the Escrow Agent and the Company shall
agree. The Organizers do not intend to invest the subscription proceeds held
in escrow in instruments that would mature after the Expiration Date of the
offering.
PLAN OF DISTRIBUTION
The Company has entered into an Agency Agreement with Banc Stock Financial
Services, Inc. (the "Sales Agent"), pursuant to which the Sales Agent has
agreed, subject to the terms of the Agency Agreement, to offer and sell to the
public as the Company's agent, on a "best efforts" basis, a minimum of 157,000
shares of
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<PAGE>
Common Stock up to a maximum of 329,000 shares of Common Stock at $10.00 per
share. The Sales Agent is required to use its best efforts through the
Expiration Date to sell the shares. The Sales Agent and the Company have
agreed that: (i) with respect to shares purchased by the Organizers, no
commission will be payable by the Company to the Sales Agent, and (ii) with
respect to shares purchased by certain persons introduced to the Sales Agent
by the Company (up to an aggregate of 100,000 shares), the commission will be
5.5% of the aggregate price of such shares. The Sales Agent's commission will
be 6.5% on all other shares it sells in the Offering. The Sales Agent may
select other dealers who are members of the National Association of Securities
Dealers, Inc. to sell shares and who will receive a selling commission not to
exceed 4.0% of the gross offering proceeds. The Company will also pay the
Sales Agent's expenses of this Offering, including Sales Agent counsel's fees
and expenses up to $20,000, and other out-of-pocket expenses of the Sales
Agent up to a maximum of $15,000. In addition, subject to FDIC approval, upon
closing of the Minimum, the Company will issue the Sales Agent warrants to
purchase 10,000 shares of Common Stock at $10.00 per share.
The Sales Agent has the right to terminate the Agency Agreement under
certain circumstances (for example, if conditions exist in the over-the-
counter market which cause the Sales Agent to believe that no favorable public
market exists for the sale of the shares). In such event, offers and sales may
be made on behalf of the Company by certain of its officers and directors, or
the Company may engage one or more other broker/dealers to make sales on its
behalf. The Company does not currently have any other arrangements in place.
As described above, until the Minimum has been sold, all funds received by the
Sales Agent or the Company in connection with the sale of shares will be
promptly transmitted to the Escrow Agent.
The Agency Agreement provides for reciprocal indemnification between the
Company and the Sales Agent against certain liabilities in connection with
this Offering, including liabilities under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted pursuant to the Agency Agreement, the Company has been advised that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed by the Securities Act and is, therefore,
unenforceable. The Company has also agreed to provide the Sales Agent with a
right of first refusal to serve as a managing underwriter on any financing or
to act as an adviser on any merger or similar transaction occurring within one
year of this Offering, in each case for compensation that is reasonable and
customary within the industry.
Prior to the date of the Prospectus, there has been no public market for the
shares. The initial offering price of the shares offered hereby has been
established by the Company based upon its assessment of the capital needs of
the Company and the commercial potential of the services to be offered by the
Company. The Company has had discussions with the Sales Agent regarding the
establishment and maintenance of a market for the shares after the Offering.
Based upon such discussions, the Company expects that a secondary market may
eventually develop for the shares, although the Company can make no assurances
in this regard. In general, if a secondary market develops, the shares will be
freely transferable and assignable by the holder thereof (except shares held
by affiliates), and nonaffiliate shareholders may sell any number of shares in
such secondary market. See "Description of the Capital Stock of the Company--
Shares Available for Future Sale." In addition, factors such as the degree to
which the secondary market is active will determine the willingness of the
market makers, once a secondary market is established, to continue to maintain
the secondary market.
HOW TO SUBSCRIBE
Shares may be subscribed for by delivering the subscription agreement (the
"Subscription Agreement") attached hereto as Attachment A, completed and
executed in full, to the Sales Agent, on or prior to the Expiration Date.
Subscribers should retain a copy of the completed Subscription Agreement for
their records. The subscription price is due and payable when the Subscription
Agreement is delivered. Payment must be made in United States dollars by cash
or by check, bank draft or money order drawn to the order of "RESOURCE TRUST
COMPANY, ESCROW ACCOUNT FOR NORTHERN STAR FINANCIAL, INC." in the amount of
$10.00 multiplied by the number of shares subscribed for.
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<PAGE>
USE OF PROCEEDS
BY THE COMPANY
Upon satisfaction of all of the conditions discussed in "The Offering--
Conditions to the Offering and Release of Funds," all subscription funds held
in escrow for this Offering and the Private Offering will be released and will
become capital of the Company. The Company expects that net proceeds from the
sale of the Minimum and Maximum will be $1,467,950 and $3,076,150,
respectively, after deducting the Sales Agent's commission (which the Company
anticipates will be $102,050 if the Minimum is sold and $213,850 if the
Maximum is sold). The net proceeds from the Private Offering will be
$1,210,000.
The Company plans to use $1,390,000 of the estimated net proceeds from the
sale of the Minimum plus $1,210,000 in net proceeds from the sale of shares to
the Organizers in the Private Offering, a total of $2,600,000, to capitalize
the Bank by purchasing all the Bank's common stock to be issued. The Company
expects that the DOC and FDIC will require the Bank to be capitalized at a
level of at least $2,500,000 before it can commence banking operations.
Approximately $75,000 of net proceeds will be used to pay organizational and
offering expenses of the Company, including legal and accounting fees,
printing expenses and blue sky fees and expenses, some of which have been
advanced by the Organizers. The Company plans to initially invest all
remaining sums in United States government securities or as a deposit at the
Bank. Such funds may be used to purchase additional capital stock of the Bank
or make loans to the Bank as necessary to maintain compliance with regulatory
capital requirements and borrowing restrictions as the Bank grows.
The following table sets forth the anticipated use of proceeds by the
Company from this Offering and the Private Offering based on the sale of the
Minimum and Maximum number of shares in this Offering.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING(1) OFFERING(2)
----------- ----------
<S> <C> <C>
Gross proceeds from Private Offering (3)........... $1,210,000 $1,210,000
Gross proceeds from this Offering.................. 1,570,000 3,290,000
Sales Agent's commission (4)....................... (102,050) (213,850)
Organizational and Offering expenses............... (75,000) (75,000)
Investment in capital stock of the Bank............ (2,600,000) (2,600,000)
---------- ----------
Remaining proceeds................................. $ 2,950 $1,611,150
========== ==========
</TABLE>
- --------
(1) Assumes that 157,000 shares of Common Stock are sold in this Offering.
(2) Assumes that 329,000 shares of Common Stock are sold in this Offering.
(3) Includes proceeds from subscriptions purchased by the Organizers in the
amount of $1,210,000.
(4) The Sales Agent's commission will be 5.5% with respect to shares sold in
this Offering to certain investors identified by the Organizers (up to an
aggregate of 100,000 shares) and 6.5% with respect to other shares sold in
this Offering, except that the Sales Agent will not receive any commission
on shares to be purchased by the Organizers in this Offering and the
Private Offering. The commissions described in this table reflect the
payment of a 6.5% commission on all sales.
BY THE BANK
The Company anticipates that approximately $433,000 will be used for pre-
opening expenses of the Bank including leasehold improvements and the
acquisition of furniture, fixtures, and equipment (including computer
equipment), and $70,000 for organizational expenses of the Bank including
consulting fees, expenses for market analysis and feasibility studies, and
legal fees and expenses. The balance of the proceeds to be received by the
Bank and available for use in the first year (estimated at $2,097,000 if the
Minimum or the Maximum is sold) will be used for loans to customers,
investments, and other general corporate purposes.
The following table depicts the anticipated use of proceeds by the Bank. All
proceeds received by the Bank will be in the form of an investment by the
Company in the Bank's capital stock.
16
<PAGE>
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING(1) OFFERING(2)
----------- ----------
<S> <C> <C>
Investment by the Company in the Bank's capital
stock (3)........................................ $2,600,000 $2,600,000
Pre-Opening Expenses.............................. (433,000) (433,000)
Organizational Expenses........................... (70,000) (70,000)
---------- ----------
Remaining Proceeds................................ $2,097,000 $2,097,000
========== ==========
</TABLE>
- --------
(1) Assumes that 157,000 shares of Common Stock are sold in this Offering.
(2) Assumes that 329,000 shares of Common Stock are sold in this Offering.
(3) Includes proceeds from subscriptions purchased by the Organizers in the
amount of $1,210,000.
Although the amounts set forth above provide an indication of the proposed
use of funds based on the Organizers' plans and estimates, actual expenses may
vary from the estimates. These estimates were based on assumptions that the
Organizers believed were reasonable, but as to which no assurances can be
given. The Organizers believe that the estimated minimum net proceeds of this
Offering will satisfy the cash requirements of the Company and the Bank for
their respective first three years of operations and that neither the Company
nor the Bank will need to raise additional funds for operations during this
period, but there can be no assurance that this will be the case.
Pending utilization of the net proceeds of this Offering, the Company plans
to invest net proceeds in short-term money market investments, high grade
commercial paper and interest-bearing bank accounts.
17
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of the
Company as of June 30, 1998, and the pro forma capitalization as adjusted to
reflect the cancellation of ten shares concurrently with the closing of the
Minimum, the sale of the Minimum and Maximum number of shares offered hereby
and the 121,000 shares offered in the Private Offering and the application of
the estimated proceeds from such offerings as set forth in "Use of Proceeds."
This table should be read in conjunction with the Company's Consolidated
Financial Statements (including the Notes thereto) included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------------------
AS ADJUSTED(3)
----------------------
ACTUAL MINIMUM MAXIMUM
------- ---------- ----------
<S> <C> <C> <C>
Shareholders' equity:
Common stock, $0.01 par value; 20,000,000
shares authorized; 10 shares issued and
outstanding (278,000 shares as adjusted for
the Minimum and 450,000 shares as adjusted
for the Maximum) (1)....................... $0.10 $2,780 $4,500
Paid-in capital............................. 99.90 2,777,220 4,595,500
Accumulated deficit(2)...................... (3,959) (3,959) (3,959)
------- ---------- ----------
Total shareholders' equity.................... $(3,859) $2,776,041 $4,496,041
======= ========== ==========
</TABLE>
- --------
(1) Does not include: (i) 12,000 shares of Common Stock issuable upon exercise
of outstanding nonqualified stock options granted to the Company's non-
employee directors pursuant to the Company's 1998 Equity Incentive Plan;
(ii) 24,200 shares of Common Stock issuable upon exercise of outstanding
nonqualified options issued to the Organizers and 10,000 shares of Common
Stock reserved for issuance under the Sales Agent's warrants. Following
the closing of the Minimum, the Company intends to grant incentive stock
options to Mr. Stienessen to purchase 3,000 shares of Common Stock and an
aggregate of an additional 3,000 incentive stock options to key management
personnel at the initial public offering price. See "Management."
(2) The accumulated deficit as of June 30, 1998, is comprised of operating
expenses.
(3) Concurrently with the closing of the Minimum, the Company will redeem the
10 shares of Common Stock presently outstanding at $10.00 per share, the
same price per share at which the Common Stock was issued.
DIVIDEND POLICY
The Board of Directors expects initially to follow a policy of retaining any
earnings to provide funds to operate and expand the business. Consequently, it
is unlikely that any cash dividends will be paid in the near future. The
Company's ability to pay any cash dividends to its shareholders in the future
will depend primarily on the Bank's ability to pay dividends to the Company.
In order to pay dividends to the Company, the Bank must comply with the
requirements of all applicable laws and regulations. For example, before any
dividend can be paid by the Bank to the Company, Minnesota statutes require
the Bank to set aside all of its net profits to a surplus fund until the fund
equals a certain percentage of the Bank's capital. See "Supervision and
Regulation Bank Regulation--Payment of Dividend by the Bank." In addition to
the availability of funds from the Bank, the future dividend policy of the
Company is subject to the discretion of the Board of Directors and will depend
upon a number of factors, including future earnings, financial condition, cash
needs, and general business conditions. The discretion of the Company's Board
of Directors is constrained by Minnesota law, which provides that the Board of
Directors may only authorize a dividend in good faith and only after the Board
determines that the Company will be able to pay its debts in the ordinary
course of business after paying the dividend.
18
<PAGE>
PLAN OF OPERATION
Northern Star Financial, Inc. was formed to organize and own all of the
capital stock of Northern Star Bank. The Organizers filed an application with
the DOC and FDIC in July 1998 to charter the Bank with the State of Minnesota
and to obtain deposit insurance. The issuance of a charter will depend, among
other things, upon compliance with certain legal requirements that may be
imposed by the DOC and FDIC, including capitalization of the Bank with at
least a specified minimum amount of capital, which the Organizers believe will
be $2,500,000. Additionally, the Company must obtain the approval of the
Federal Reserve to become a bank holding company before acquiring the capital
stock of the Bank. The Organizers expect to receive all regulatory approvals
by October 15, 1998.
As of June 30, 1998, the Company had total assets of $14,806, consisting
primarily of deferred organization costs ($9,226) and prepaid expenses
($5,580). The Company incurred a net loss of $(3,959) for the period from
inception (January 22, 1998) to June 30 1998. Management believes that the
current level of expenditures is within the financial capabilities of the
Organizers and is adequate to meet existing obligations and fund current
operations.
Upon the completion of the sale of the Minimum and opening of the Bank,
incurred organization and Private Offering expenses of the Company, estimated
to be $5,000 (consisting principally of legal, regulatory and incorporation
fees), will be deferred and amortized over the Company's initial 60 months of
operations. Offering expenses, estimated to be $75,000 (consisting principally
of direct incremental costs of this Offering), will be deducted from the
proceeds of this Offering and result in an decrease in additional paid-in
capital.
Following the opening of the Bank, the Bank is expected to incur
approximately: (1) $403,000 in expenses relating to leasehold improvements,
and the acquisition of furniture, fixtures and equipment which will be
collectively depreciated over approximately 10 years; (2) $30,000 in pre-
opening expenses which will be expensed currently; and (3) $70,000 in
organizational expenses including consulting fees, and expenses for market
analysis and feasibility studies and legal expenses which will be amortized to
expense over 60 months upon commencement of operations.
During the first twelve months of the Bank's operation, the Company
anticipates that it will focus on developing a strong community banking
organization. In doing so, the Bank intends to initially focus on the many
operational issues associated with opening a new bank, including attracting
deposits, developing and implementing loan policies and procedures and
originating loans, hiring new employees, and marketing. Thereafter, the
Company may seek opportunities to expand operations through branch purchases
or through acquisitions.
The Company believes that this Offering will provide the Company with
sufficient capital to successfully implement its current business plan during
the three year period following the closing of the Minimum, although there can
be no assurance that the Company will not modify its current business plan or
require additional capital to execute its current or modified plan.
Like many financial institutions, the Company and the Bank will rely upon
computers to conduct of their respective businesses and for information
systems processing. There is concern among industry experts that on January 1,
2000 computers will be unable to "read" the new year resulting in widespread
computer malfunctions. The Company and the Bank will generally rely on
software and hardware developed by independent third parties to provide the
information systems used by the Company and the Bank. The Company intends to
seek assurances about the Year 2000 compliance with respect to any third party
hardware or software system it intends to use. The Company intends to contract
with Fiserv to use the ITT client-server core retail banking system, and the
Company has been advised that Fiserv believes this system is Year 2000
compliant. The Company also believes that its other internal systems and
software and the network connections it will maintain will be adequately
programmed to address the Year 2000 issue. Based on information currently
available, management does not believe that either the Company or the Bank
will incur significant costs in
19
<PAGE>
connection with the year 2000 issue. Nevertheless, there can be no assurances
that all hardware and software that the Company or the Bank uses will be Year
2000 compliant, and the Company cannot predict with any certainty the costs
the Company and the Bank will incur to respond to any Year 2000 issues.
The Company has developed a "Year 2000 Project Plan" whereby it plans to
create a "Year 2000 Project Team" to be formed from the Bank's management and
staff to address the issues and problems associated with the Year 2000 issues.
Pursuant to the Company's "Year 2000 Project Plan" the Company has chosen to
follow the statement of the "Year 2000 Project Management Awareness" dated May
5, 1997 by the Federal Financial Institutional Examinatory Council.
20
<PAGE>
PROPOSED BUSINESS
GENERAL
The Company, a Minnesota corporation, was formed for the purpose of becoming
a bank holding company to own all of the issued and outstanding capital stock
of the Bank. The Company intends to engage in the business of owning the bank
as its primary asset. In the future, the Company may engage in certain
activities permitted by the Bank Holding Company Act of 1956, as amended (the
"BHCA"), pursuant to approvals which may be sought and granted hereafter by
the Federal Reserve. Any such activities would consist primarily of financial
activities closely related to the business of banking. For the near future,
subject to the completion of the transactions contemplated herein, the
business of the Company will essentially be the operation of the Bank.
In July 1998, the Organizers filed an application to charter the Bank with
the State of Minnesota Department of Commerce (the "DOC"). The DOC is expected
to make a determination of the Bank's application within sixty (60) days after
the submission. Concurrently with the submission of the application to the
DOC, the Organizers submitted to the FDIC an application for deposit insurance
coverage. It is anticipated that the FDIC will act on the Bank's application
within sixty (60) days of its submission. Following initial approval of the
charter application from the DOC, if obtained, the Company will submit an
application to the Federal Reserve for prior approval of the Company to become
a bank holding company under the BHCA. The Federal Reserve is expected to make
a determination on the Company's application within sixty (60) days following
submission of the application. Although the Company expects approval of all of
these applications by October 15, 1998, no assurances can be given that all
approvals will be obtained or if obtained, that such approvals will be within
the stated time frames.
The Bank is expected to provide a wide range of commercial and consumer
banking services primarily to residents of the Minnesota counties of Blue
Earth and Nicollet, which include the Mankato, Minnesota area. The Bank's
Organizers are active in area civic organizations and have developed strong
networks of personal and business contacts within the community. The Bank
intends to distinguish itself by responding quickly to the changing needs of
its market. The Company believes that the insight gained by the Organizers
from their years of living in the community will aid the Bank in determining
what products and services to offer the Bank's customers. The Company expects
that many of the Organizers will be substantial customers of the Bank and will
be able to provide valuable referrals.
The Bank plans to offer a full range of deposit products and services, as
well as credit and operational services. Depository services will likely
include (i) IRA plans, (ii) tax depository and payment services,
(iii) automatic transfers, (iv) bank by mail, (v) direct deposits, (vi) no-fee
savings account, (vii) money-market savings accounts, (viii) passbook savings,
and (ix) various forms and terms of certificates of deposit ("CDs"), both
fixed and variable rate. The Bank intends to attract deposits through
advertising and by pricing depository services competitively. Credit services
are expected to include (i) commercial and industrial loans, (ii) real estate
construction and land development loans, (iii) conventional and adjustable
rate real estate loans secured by residential properties, (iv) real estate
loans secured by commercial properties, (v) consumer loans for items such as
home improvements, vehicles, boats and education offered on installment and
single payment bases, as well as overdraft protection, (vi) government
guaranteed loans including SBA, VA and FHA, and (vii) letters of credit. Bank
operation services are expected to include (i) cashier's checks, (ii)
traveler's checks, (iii) money orders, (iv) collections, (v) currency and coin
processing, (vi) wire transfer services, (vii) deposit bag rentals, (viii)
stop payments, and (ix) savings bonds. Other services are expected to include
servicing of secondary market real estate loans, notary services,
photocopying, faxing and signature guarantees. The Bank does not plan to offer
trust services at this time.
DEPOSITS
The Bank intends to leverage its location, near Mankato's retail,
residential and industrial areas, to attract and retain core deposits. The
Bank intends to offer a full range of deposit services that are typically
available in most banks, including commercial and consumer checking accounts,
pass book accounts, time deposits of various
21
<PAGE>
types, ranging from daily money market accounts to longer-term certificates of
deposit, Individual Retirement Accounts ("IRAs") and Keogh accounts. The
accounts' terms will vary with principal differences being the minimum balance
required, the time period funds must remain on deposit and interest rate, and
will be tailored to the Bank's principal market area at rates competitive to
those in the Mankato, Minnesota area. The Bank intends to solicit these
accounts from individuals, businesses, associations and organizations, and
government authorities through advertising and by pricing depository services
competitively.
LENDING ACTIVITIES
General. The Bank plans to emphasize a range of lending activities,
including commercial, agricultural, construction, residential and consumer
loans, to individuals and small- to- medium-sized businesses and professional
concerns that are located in or conduct a substantial portion of their
business in the Bank's market area. The Bank will initially focus on
commercial and consumer lending, emphasizing its philosophy of becoming a
community bank with an expertise in residential lending.
Real Estate Loans. The Bank intends to provide residential and non-
residential loans secured by first or second mortgages on real estate. The
Bank intends to emphasize the origination of adjustable-rate mortgage ("ARM")
loans and loans with shorter terms to maturity than traditional 30-year fixed-
rate loans. Generally, the Bank will limit the term of residential loans held
in its portfolio to 15 years. The Bank's strategy will be to have a high
percentage of assets in portfolio with more frequent re-pricing or shorter
maturity, and in some cases, higher yields, than long-term fixed rate mortgage
loans. In addition, the Bank may originate fixed-rate mortgages. As general
market interest rates decrease, the Bank expects that borrowers will favor
fixed-rate loans over adjustable-rate loans which provide borrowers a more
predictable payment schedule. As a result, the origination of adjustable-rate
loans is expected to decrease while fixed-rate loans are expected to be in
greater favor with borrowers. The relative demand for adjustable-rate and
fixed-rate loans is expected to vary considerably, depending upon such factors
as the level of interest rates, expectations regarding future interest rates
and the relationship between long-term and short-term interest rates. Current
loan demand is expected to remain strong because of low interest rates and
damage to area homes by summer storms. The Federal Emergency Management
Administration estimates that over 700 homes in the Bank's market area were
totally destroyed as a result of spring and summer storms, with hundreds more
severely damaged. The Bank anticipates that many of the homeowners will be
seeking new mortgages. Substantially all of the Bank's fixed-rate one-to-four
family loans will be originated in accordance with criteria which permits
their sale in the secondary market, and substantially all such loans with
terms in excess of 15 years will be sold on a best efforts basis. As a result,
the bank believes it will not be subject to exposure to losses incurred as a
result of changes in interest rates.
The Bank will also seek to originate nonresidential real estate loans
consisting of office, office warehouse and owner occupied commercial property.
The Bank intends to originate commercial real estate loans in amounts of up to
75% of the appraised value of the property. Such appraised value will likely
be determined by an independent appraiser previously approved by the Bank. The
Bank's commercial real estate loans will likely be permanent loans secured by
approved property such as small office buildings, retail stores, small strip
plazas, and other non-residential buildings. The Bank intends to originate
commercial real estate loans with amortization periods of up to 25 years,
primarily as adjustable rate mortgages.
Loans secured by commercial real estate involve a greater degree of risk
than do residential real estate loans. Consequently, the Bank intends to place
great reliance on the cash flow from the project being financed as well as the
borrower's ability to support the debt obligation in periods of reduced cash
flows. The increased credit risk is the result of several factors, including
the concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties and the
increased difficulty of evaluating and monitoring these types of loans. The
repayment of loans secured by commercial real estate is typically dependent
upon the successful operation of the related real estate project.
Risks associated with residential and nonresidential mortgage loans include
the inherent risk of the credit worthiness of the Bank's borrowers, the Bank's
inability to sell foreclosed real estate in a down market or
22
<PAGE>
economy, shifts in the demographics of a given market from residential zoning
to commercial, the displacement of individual consumers due to corporate
downsizing/loss of income, and an overall economic downturn creating
unemployment due to lack of product demand.
Commercial Loans. The Bank intends to make secured and unsecured loans to
businesses and professional concerns. Such loans are expected to include
commercial and industrial loans for plant and equipment, operating loans,
deposit secured loans, loans guaranteed by the Small Business Administration
and letters of credit. Short-term loans secured by commercial or residential
property will likely be classified as commercial loans rather than mortgage
loans if they are not taken out for the purpose of acquiring real estate.
Variable rate loans will generally have a floor rate but not a ceiling rate.
In a falling interest rate environment, the floor rates should help limit the
Bank's interest rate risk exposure. The Bank intends to develop its own risk
rating system, defined in terms of both loan and borrower characteristics, to
measure credit risk in its commercial and industrial loan portfolio. The
principal economic risk associated with each category of anticipated loans,
including commercial loans, is the creditworthiness of the Bank's borrowers.
The risks associated with commercial loans will vary with many economic
factors, including the economy in the Mankato area. The well-established banks
in the Mankato area will make proportionately more loans to medium- to large-
sized businesses than the Bank. Many of the Bank's anticipated commercial
loans will likely be made to small- to medium-sized businesses which may be
less able than larger borrowers to withstand competitive, economic and
financial conditions.
Consumer Loans. The Bank considers consumer loans to be an important
component of its strategic plan because such loans generally have shorter
terms to maturity, thereby reducing the Bank's exposure to interest rate
changes, and generally carry higher rates of interest than do commercial or
residential loans. The Bank intends to make a variety of loans to individuals
for personal and household purposes, including secured and unsecured
installment and term loans, home equity and home improvement loans and lines
of credit. Additionally, the Bank will make loans for the purchase of cars,
recreation vehicles and household appliances, including computers, lawn and
stereo equipment. The Bank expects to originate student loans and sell such
loans in the secondary market. The underwriting standards employed by the Bank
for consumer loans will include a determination of the applicant's payment
history on other debts and an assessment of his ability to meet existing
obligations and payments on the proposed loan. Although creditworthiness of
the applicant will be a primary consideration, the underwriting process will
generally also include a comparison of the value of the security, if any, in
relation to the proposed loan amount. The underwriting criteria for home
equity loans and lines of credit will generally be the same as applied by the
Bank when making a first mortgage loan, as described above. Home equity lines
of credit will typically expire ten years or less after origination. As with
other categories of loans, the principal economic risk associated with
consumer loans is the creditworthiness of the Bank's borrowers, and the
principal competitors for consumer loans will be the established banks in the
Bank's market area.
Agricultural. The Bank intends to make credit available to farmers for feed,
seed, fertilizer, livestock, machinery and equipment, and to meet operating
expenses. The related loans will are expected to be both secured and unsecured
and payable on time or on demand.
Construction Loans. The Bank will seek to make construction loans to
builders and to single-family owner-occupied home owners for which the Bank
also provides permanent financing. Construction financing is generally
considered to involve a higher degree of risk of loss than long-term financing
on improved, occupied real estate. Risk of loss on a construction loan is
dependent upon the accuracy of the initial estimate of the property's value at
completion of the project and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result
in delays and cost overruns. If the estimate of construction proves to be
inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the project. If the estimate of
value proves to be inaccurate, the Bank may be confronted, at or prior to
maturity of the loan, with a project having a value which is insufficient to
assure full repayment. As a result, the Bank will place a strong emphasis on
the availability of "take-out" financing, and upon the borrower's ability to
repay principal and interest and of the experience a expertise of the builder
who is constructing the property.
23
<PAGE>
Loan Approval and Review. The Bank's loan approval policies will provide for
various levels of officer lending authority. When the amount of aggregate
loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with
a higher lending limit or the officers' loan committee. The Bank will
establish an officers' loan committee that has lending limits, and any loan in
excess of this lending limit will be approved by the directors' loan
committee. The Bank will not make any loans to any director, officer, or
employee of the Bank unless the loan is approved by the board of directors of
the Bank and is made on terms not more favorable to any person than would be
available to a person not affiliated with the Bank.
Lending Limits. The Bank's lending activities will be subject to a variety
of lending limits imposed by Minnesota law. While differing limits apply in
certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general the Bank will
be subject to a loan-to-one-borrower limit. Pursuant to Minnesota law, the
Bank may not loan or guaranty more than 20% of its actual paid-in-capital and
its actual surplus to any individual. Unless the Bank is able to sell
participations in its loans to other financial institutions, the Bank will not
be able to meet all of the lending needs of the loan customers requiring
aggregate extensions of credit above these limits. It is not currently
anticipated that the Bank will have an initial loan loss reserve when it
commences operations.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services, safe
deposit boxes, travelers checks, direct deposit of payroll and social security
checks, and automatic drafts for various accounts. The Bank plans to become
associated with a shared network of automatic teller machines that may be used
by the Bank customers throughout the Mankato area. The Organizers believe that
by being associated with a shared network of ATMs, the Bank will be better
able to serve its customers and will be able to attract customers who are
accustomed to the convenience of using ATMs, although the Organizers do not
believe that maintaining this association will be critical to the Bank's
success. The Bank intends to begin offering these services shortly after the
Bank's opening. The Bank also plans to offer MasterCard and Visa credit card
services through a correspondent bank as an agent for the Bank. The Bank does
not plan to exercise trust powers during its initial years of operation.
MARKET AND COMPETITION
The Bank's principal market area is the Minnesota counties of Blue Earth and
Nicollet, which areas include the communities of Mankato, North Mankato,
LeHillier and Skyline, Minnesota, from which it is expected to draw at least
80% of its business. The population of the market area is approximately 85,000
people. The 1997 median household income for the area was approximately
$43,000. Management believes that the Bank's local ownership provides it an
advantage within this market area.
The business of operating a community bank is highly competitive. The Bank
will compete with community and national banks, credit unions, thrifts, and
non-financial institutions such as insurance companies and investment banks.
As of the date of this Memorandum, the two Minnesota counties of Blue Earth
and Nicollet are served by 42 offices of 22 different banks, three federal
savings banks and five credit unions. The communities of Mankato and North
Mankato are served by four locally chartered commercial banks and one locally
chartered savings bank. The acquisition of two of the four bank charters and
the relocation of the savings bank charter are pending. Banks and credit
unions located outside of the counties of Blue Earth and Nicollet also will
compete with the Bank. Most, if not all, of the Bank's competitors have
substantially greater financial resources than the Company. The Organizers,
however, believe that the Mankato region can support and benefit from the
Bank. The Bank believes its competitive strength will lie in providing long-
term, relationship-oriented banking services by management and employees with
strong ties to the Mankato area. The Bank expects to target all members of the
area, especially local business and home owners.
24
<PAGE>
The Bank intends to utilize newspaper, radio and billboard advertising in
the two county region which it serves. It intends to focus on image building
and name recognition and emphasize its deposit products and services.
FACILITIES
The Bank has entered into a 10-year lease agreement to lease a banking
office at 1650 Madison Avenue, Mankato, Minnesota. The lease is subject to the
Bank obtaining all government approvals necessary to begin banking operations.
The Company believes this site is desirable because of the high visibility of
its location and the amount of traffic which passes it each day. The Bank will
occupy approximately 5,000 square feet of a 18,000 square foot colonial style
office building. The building will include a teller line with three tellers,
two platform positions, a drive-through and adjacent executive and
administrative offices and other facilities necessary to operate a full-
service consumer and commercial bank. The Bank will pay monthly rent of
approximately $6,042 during the first three years of the lease, $6,250 for the
next three years, and $6,458 for the last four years, and will have the option
to extend the lease term for two consecutive five year periods with a right of
first refusal on any additional space that becomes available. A company
affiliate is also an affiliate of the lessor. See "Interest of Management and
Others in Certain Transaction."
EMPLOYEES
Currently, the Company has only one employee, Thomas Stienessen, who will be
the President and Chief Executive Officer of the Bank. Assuming regulatory
approval is obtained, the Company will recruit other appropriate employees for
the Bank staff as its opening date approaches. The Bank intends that its
operating staff will consist of 8-10 people at the time of its opening.
LITIGATION
The Company is not a party to any significant pending legal proceedings.
25
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's directors and executive officers, as of the date of this
Prospectus, and the proposed directors and executive officers of the Bank,
upon completion of this Offering, are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY POSITION WITH BANK
- ---- --- ------------------------------- -------------------------------
<S> <C> <C> <C>
Thomas Stienessen 52 Chief Executive Officer, Director; Chief Executive
President and a Director Officer and President
Dean Doyscher (1) 53 Director Director
Frank Gazzola (1) 70 Chief Financial Officer,
Treasurer, Secretary and a
Director Director
Michael Reynolds (1) 55 Director Director
Thomas Reynolds (1) 61 Director Director
</TABLE>
- --------
(1) Member of the Compensation and Audit Committees of the Board of
Directors.
THOMAS P. STIENESSEN--has been Chief Executive Officer, President and a
Class II Director of the Company since its formation. Prior to forming the
Company, Mr. Stienessen served as Chief Executive Officer and President of
SGL, Inc., a holding company for the Family Bank, where Mr. Stienessen served
as Chairman, Chief Executive Officer, President and Director as well as a
member of the Executive and Operating Committees since January 1991. Mr.
Stienessen has more than 25 years of experience in banking and in mortgage
banking including consumer, residential, construction, commercial and
commercial real estate lending. Mr. Stienessen's experience includes bank
marketing, branch management, branch operations, accounting, planning and
budgeting, underwriting and correspondent/ending. Previous banking experiences
include positions as Senior Vice President of TCF Mortgage Corporation and
Vice President and Regional Manager of TCF Bank. Mr. Stienessen's residential
address is 11 Marie Lane Lake Emily, St. Peter, Minnesota 56082.
DEAN DOYSCHER--has been a Class III Director of the Company since its
formation. Mr. Doyscher, a Minnesota native, has served as President of
Security Management and Realty, Inc. since 1978. Security Management and
Realty, Inc. owns and manages commercial property throughout all of rural
Minnesota including rural housing projects in over 55 Minnesota cities. Mr.
Doyscher attended Mankato State University where he earned both undergraduate
and graduate degrees in Urban and Regional Planning. Mr. Doyscher was employed
as the Deputy Director of the Model Cities Program for Lewiston, Maine before
becoming the Director of Planning for the City of Mankato and Blue Earth
County in 1972. During 1973-1976 Mr. Doyscher served as the first Executive
Director of the Region Nine Development Commission serving nine counties in
South Central Minnesota. Prior to forming his own management and realty
company in 1988, Mr. Doyscher served from 1976-1988 as a consultant with
Professional Planning and Development providing rural Minnesota cities with
tax increment financing, economic development, zoning and housing plans.
Professional Planning and Development was named Minnesota's Economic Developer
of the Year in 1988. Mr. Doyscher's other relevant experience includes service
as President, Minnesota Planning Association; Director, Minnesota Council for
Affordable and Rural Housing; and past member of the Board of Directors, Mid-
America, Bank South. Mr. Doyscher's residential address is 78 Cree Point,
Mankato, Minnesota 56001.
FRANK GAZZOLA--has been Chief Financial Officer, Treasurer, Secretary and a
Class II Director of the Company since its formation. Mr. Gazzola has served
as President of Frank L. Gazzola, Chartered, Certified Public Accountants
since 1987. Mr. Gazzola has been engaged in public accounting for over 25
years, for most of that time as the founder and managing partner of one of
Southern Minnesota's largest CPA firms. Mr. Gazzola was a founder of SGL,
Inc., a holding company for the Family Bank and served as an officer and
director until April 1998. He has served on the boards of numerous civic,
commercial and financial enterprises including Mankato District 77 School
Board and Director and Treasurer of American Western Corporation, a
manufacturer of extruded plastic products. Mr. Gazzola attended Columbia
University, the University of Minnesota, and
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Mankato State University from which he received a B.S. in Business
Administration. Mr. Gazzola's residential address is 224 Crestwood Drive,
North Mankato, Minnesota 56003.
MICHAEL REYNOLDS--has been a Class I Director of the Company since its
formation. Mr. Reynolds served as Vice-President of Reynolds Welding Supply
Company in Mankato, Minnesota and Welders Supply Company in Wilmar, Minnesota
since 1963. Reynolds Welding Supply Company is engaged in the sale of
industrial gases and welding supplies and operates in three states. Mr.
Reynolds has been involved in many fund raising efforts for the Mankato State
University Athletic Department. He previously served as volunteer for the
Mankato United Way and is a past president of the Mankato Golf Club. Mr.
Reynolds is the brother of Thomas Reynolds. Mr. Reynold's residential address
is 74 Cree Point, Mankato, Minnesota 56001.
THOMAS REYNOLDS--has been a Class III Director of the Company since its
formation. Mr. Reynolds is a Mankato native and has served as President of
Welders Supply Company and Reynolds Welding Supply, since 1952. Mr. Reynolds
served on the Board of Directors for the National Bank of Commerce, presently
called Mid-America Bank, for six years from 1984 to 1990. Mr. Reynolds is the
brother of Michael Reynolds. Mr. Reynold's residential address is 19 Dellview
Lane, Mankato, Minnesota 56001.
As of the date of this Prospectus, the Company's management consists of Mr.
Thomas Stienessen, who serves as the Company's President and Chief Executive
Officer and Frank Gazzola who serves as the Company's temporary Chief
Financial Officer. The Bank intends to enter into an employment agreement with
Mr. Stienessen following the closing of the Minimum. See "Management--
Employment Agreement." Following completion of the Minimum, the Bank
anticipates it will hire qualified persons with banking experience for the
following key management positions: (i) vice president and chief financial
officer; (ii) vice president of lending; and (iii) vice president of
operations. Although the Company has not entered into any agreement with any
person to serve in any of the positions identified above, it has interviewed
and identified potential qualified candidates. No assurance can be made,
however, that a formal offer will be made to any of the potential qualified
candidates or that such candidates will accept employment with the Bank. The
Company anticipates that it will pay the three key managers an aggregate of
$130,000 per year in annual base salary compensation and each manager will be
granted an incentive stock option to purchase 1,000 shares of Common Stock.
The number of directors is determined by the shareholders at their annual
meeting, subject to the right of the shareholders to change such number
between annual meetings and the right of the Board to increase such number
between annual meetings. The Board of Directors consists of three classes of
directors: Class I who hold office until the 1999 Annual Shareholders Meeting,
Class II who hold office until the 2000 Annual Shareholders Meeting and Class
III who hold office until the 2001 Annual Shareholders Meeting, or in all
cases until their successors are elected. Executive officers of the Company
and Bank are appointed by and serve at the discretion of the Board of
Directors. The Board of Directors has a Compensation Committee which provides
recommendations concerning salaries and other compensation to be paid to
executive officers of the Company and administers the Company's 1998 Equity
Incentive Plan and an Audit Committee which is responsible for reviewing the
Company's audit process.
DIRECTOR COMPENSATION
Directors of the Company and the Bank will be reimbursed for their expenses
incurred in attending board meetings and will receive director compensation in
an amount consistent with industry standards. Company board meetings are
expected to be held at least every quarter, as necessary, and Bank board
meetings are expected to be held at least once each month. Pursuant to the
Company's 1998 Equity Incentive Plan, non-employee directors upon initial
election to the Board of Directors are automatically granted a nonqualified
option to purchase 3,000 shares of Common Stock at fair market value. Each
non-employee director who is re-elected as a director or whose term of office
continues after a meeting of shareholders at which directors are elected, is
automatically granted an option to purchase 3,000 shares of Common Stock at
fair market value. The non-employee directors currently hold nonqualified
options to purchase an aggregate of 12,000 shares of Common Stock at an
exercise price of $10.00 per share. See "Management--1998 Equity Incentive
Plan."
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<PAGE>
EMPLOYMENT AGREEMENT
The Bank intends to enter into a three-year employment agreement with Mr.
Stienessen, following the closing of the Minimum, pursuant to which Mr.
Stienessen will serve as the President and Chief Executive Officer of the
Bank. During the term of the agreement, Mr. Stienessen will be paid an annual
salary of $100,000 and is eligible to participate in discretionary bonuses
that may be authorized by the board of directors to its senior management. Mr.
Stienessen will be eligible to participate in any management incentive program
of the Bank or any long-term equity incentive program and will be eligible for
grants of stock options and other awards thereunder. Additionally, Mr.
Stienessen will participate in the Bank's retirement, welfare and other
benefit programs and is entitled to a life insurance policy and an accident
liability policy and reimbursement for automobile expenses, club dues, and
travel and business expenses. Furthermore, if in connection with a change of
control of the Bank, Mr. Stienessen is terminated without cause or voluntarily
quits because of certain specified reasons, he is entitled to a lump sum
payment of 2.99 times his annual base salary. As of the date of this
Prospectus, neither the Company nor the Bank has paid any compensation to its
executive officers. The Company will pay Mr. Stienessen additional
compensation of $25,000, upon receipt of approval of the Organizers'
applications with the FDIC and the DOC and the Company's application with the
Federal Reserve, for organizational services he rendered prior to approval of
the applications.
STOCK OPTIONS
In August 1998, the Board of Directors and shareholders adopted the Northern
Star Financial, Inc. 1998 Equity Incentive Plan (the "Plan"), and reserved
41,700 shares of Common Stock for issuance pursuant to the Plan. As of the
date of this Prospectus, the Company has outstanding under the Plan options to
purchase an aggregate of 12,000 shares at an exercise price of $10.00 per
share. In addition, the Company has outstanding nonqualified options, granted
to the Organizers outside the Plan, to purchase an aggregate of 24,200 shares
of Common Stock. Following the closing of the Minimum, the Company anticipates
that it will issue incentive stock options to Mr. Stienessen to purchase 3,000
shares of Common Stock at $10.00 per share and incentive stock options to
purchase an aggregate of 3,000 shares to key management personnel.
1998 EQUITY INCENTIVE PLAN
A general description of the basic features of the Plan is presented below,
but such description is qualified in its entirety by reference to the full
text of the Plan, a copy of which may be obtained without charge upon written
request to Thomas Stienessen, the Company's Chief Executive Officer.
Purpose. The purpose of the Plan is to promote the success of the Company by
facilitating the employment and retention of competent personnel and by
furnishing incentive to directors, officers and employees of the Company and
consultants and advisors to the Company, upon whose efforts the success of the
Company will depend to a large degree.
Term. Incentive stock options may be granted pursuant to the Plan during a
period of ten (10) years from the date the Plan was adopted by the Board of
Directors (until August 2008), and nonqualified stock options may be granted
until the Plan is discontinued or terminated by the Board of Directors.
Administration. With the exception of the stock options automatically issued
to Non-Employee Directors as described below, the Plan is administered by the
Board of Directors or the Compensation Committee of the Board of Directors,
all of the members of which are "non-employee directors" under Rule 16b-3 of
the Securities Exchange Act of 1934 (collectively referred to as the
"Administrator"). The Plan gives broad powers to the Administrator to
administer and interpret the Plan, including the authority to select the
individuals to be granted options and to prescribe the particular form and
conditions of each option granted.
Eligibility. All employees of the Company or any subsidiary are eligible to
receive incentive stock options pursuant to the Plan. All employees, officers
and directors of and consultants and advisors to the Company or
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<PAGE>
any subsidiary are eligible to receive nonqualified stock options. As of the
date of this Prospectus, the Company had two employees, whom are officers, and
four directors who are not employees.
Options. When an option is granted under the Plan, the Administrator, at its
discretion, specifies the option price and the number of shares of Common
Stock which may be purchased upon exercise of the option. The exercise price
of an incentive stock option set by the Administrator may not be less than
100% of the fair market value of the Company's Common Stock, as that term is
defined in the Plan. Unless otherwise determined by the Administrator, the
exercise price of a nonqualified stock option will not be less than 100% of
the fair market value on the date of grant; provided, however, that the
exercise price may not be less than 85% of the fair market value on the date
of grant. The period during which an option may be exercised and whether the
option will be exercisable immediately, in stages, or otherwise is set by the
Administrator. Generally, an incentive stock option may not be exercisable
more than ten (10) years from the date of grant. Optionees may pay for shares
upon exercise of options with cash, certified check or Common Stock of the
Company valued at the stock's then "fair market value" as defined in the Plan.
Each option granted under the Plan is generally nontransferable during the
lifetime of the optionee; however, the Administrator may, in its sole
discretion, permit the transfer of a nonqualified stock option to immediate
family members or to certain family trusts or family partnerships.
Generally, under the form of option agreement which the Administrator is
currently using for options granted under the Plan, if the optionee's
affiliation with the Company terminates before expiration of the option for
reasons other than death or disability, the optionee has a right to exercise
the option for three months after termination of such affiliation or until the
option's original expiration date, whichever is earlier. If the termination is
because of death or disability, the option typically is exercisable until its
original stated expiration or until the 12-month anniversary of the optionee's
death or disability, whichever is earlier. The Administrator may impose
additional or alternative conditions and restrictions on the incentive or
nonqualified stock options granted under the Plan; however, each incentive
option must contain such limitations and restrictions upon its exercise as are
necessary to ensure that the option will be an incentive stock option as
defined under the Internal Revenue Code.
Change of Control. In the event that (i) the Company is acquired through the
sale of substantially all of its assets or through a merger or other
transaction (a "Transaction"), (ii) after the effective date of the Plan a
person or entity becomes the holder of 30% or more the Company's outstanding
Common Stock, or (iii) individuals who constituted the Board on the effective
date of the Plan ceased for any reason thereafter to constitute at least a
majority of the Board of Directors (with exceptions for individuals who are
nominated by the current Board of Directors), all outstanding options will
become immediately exercisable in full and will remain exercisable during the
remaining terms of such outstanding options, whether or not the participants
to whom the options have been granted remain employees of the Company or a
subsidiary. The acceleration of the exercisability of outstanding options may
be limited, however, if the acquiring party seeks to account for a Transaction
on a "pooling of interests" basis which would be precluded if such options are
accelerated. The Board may also take certain additional actions, such as
terminating the Plan, providing cash or stock valued at the amount equal to
the excess of the fair market value of the stock over the exercise price, or
allowing exercise of the options for stock of the succeeding company.
Automatic Grants to Non-Employee Directors. The Plan provides for automatic
option grants to each director who is not an employee of the Company (a "Non-
Employee Director"). Each Non-Employee Director who is a director on the date
the Plan was adopted by the Board of Directors or who is elected for the first
time as a director shall automatically be granted a nonqualified option to
purchase 3,000 shares of the Common Stock at an option price per share equal
to 100% of the fair market value of the common stock on the date of the Non-
Employee Director's initial election, which option is exercisable, to the
extent of 1,000 shares immediately and on each of the first two anniversaries
of the date of grant. Each Non-Employee Director who is re-elected as a
director of the Company or whose term of office continues after a meeting of
shareholders at which directors are elected shall, as of the date of such re-
election or shareholder meeting, automatically be granted an immediately
exercisable nonqualified option to purchase 3,000 shares of the common stock
at an option price per share equal to 100% of the fair market value of the
common stock on the date of such re-election or shareholder meeting. No
director shall receive more than one option to purchase 3,000 shares pursuant
to the formula plan in any one
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<PAGE>
fiscal year. All options granted pursuant to these provisions shall expire on
the earlier of (i) three months after the optionee ceases to be a director
(except by death) and (ii) ten (10) years after the date of grant.
Notwithstanding the foregoing, in the event of the death of a Non-Employee
Director, any option granted to such Non-Employee Director pursuant to this
formula plan may be exercised at any time within six months of the death of
such Non-Employee Director or on the date on which the option, by its terms
expires, whichever is earlier.
Amendment. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment may impair the terms and conditions of any
outstanding option to the material detriment of the optionee without the
consent of the optionee, except as authorized in the event of a sale, merger,
consolidation or liquidation of the Company. The Plan may not be amended in
any manner that will cause incentive stock options to fail to meet the
requirements of Code Section 422, and may not be amended in any manner that
will: (i) materially increase the number of shares subject to the Plan except
as provided in the case of stock splits, consolidations, stock dividends or
similar events; (ii) change the designation of the class of employees eligible
to receive options; (iii) decrease the price at which options will be granted;
or (iv) materially increase the benefits accruing to optionees under the Plan,
without the approval of the shareholders, if such approval is required to
comply with Code Section 422 or the requirements of Section 16(b) of the Act.
The Board of Directors will equitably adjust the maximum number of shares of
Common Stock reserved for issuance under the Plan, the number of shares
covered by each outstanding option and the option price per share in the event
of stock splits or consolidations, stock dividends or other transactions in
which the Company receives no consideration. Generally, the Board of Directors
may also provide for the protection of optionees in the event of a merger,
liquidation or reorganization of the Company.
Federal Income Tax Consequences of the Plan. Under present law, an optionee
will not realize any taxable income on the date a nonqualified stock option is
granted to the optionee pursuant to the Plan. Upon exercise of the
nonqualified stock option, however, the optionee will realize, in the year of
exercise, ordinary income to the extent of the difference between the option
price and the fair market value of the Company's Common Stock on the date of
exercise. Upon the sale of the shares, any resulting gain or loss will be
treated as capital gain or loss. The Company will be entitled to a tax
deduction in its fiscal year in which nonqualified stock options are
exercised, equal to the amount of compensation required to be included as
ordinary income by those optionees exercising such options.
Incentive stock options granted pursuant to the Plan are intended to qualify
for favorable tax treatment to the optionee under Code Section 422. Under Code
Section 422, an employee realizes no taxable income when the incentive stock
option is granted. If the employee has been an employee of the Company or any
subsidiary at all times from the date of grant until three months before the
date of exercise, the employee will realize no taxable income when the option
is exercised. If the employee does not dispose of shares acquired upon
exercise for a period of two years from the granting of the incentive stock
option and one year after receipt of the shares, the employee may sell the
shares and report any gain as capital gain. The Company will not be entitled
to a tax deduction in connection with either the grant or exercise of an
incentive stock option. If the employee should dispose of the shares prior to
the expiration of the two-year or one-year periods described above, the
employee will be deemed to have received compensation taxable as ordinary
income in the year of the early sale in an amount equal to the lesser of (i)
the difference between the fair market value of the Company's Common Stock on
the date of exercise and the option price of the shares, or (ii) the
difference between the sale price of the shares and the option price of
shares. In the event of such an early sale, the Company will be entitled to a
tax deduction equal to the amount recognized by the employee as ordinary
income. The foregoing discussion ignores the impact of the alternative minimum
tax, which may particularly be applicable to the year in which an incentive
stock option is exercised.
Plan Benefits. Except for the automatic grants to Non-Employee Directors,
future grants of stock options are subject to the discretion of the
Administrator. Therefore, the future benefits under the Plan cannot be
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<PAGE>
determined at this time. Following the closing of the Minimum, the Company
expects to grant incentive stock options to purchase 3,000 shares of Common
Stock at $10.00 per share to Mr. Stienessen and, subsequently, following the
organization of the Bank, grant options to purchase an aggregate of 3,000
shares of Common Stock to the key managers who will be employed by the Bank.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company and the Bank expect to have banking and other transactions in
the ordinary course of business with Organizers, directors, and officers of
the Company and the Bank and their affiliates, including members of their
families or corporations, partnerships, or other organizations in which such
Organizers, officers, or directors have a controlling interest, on
substantially the same terms (including price, or interest rates and
collateral) as those prevailing at the time for comparable transactions with
unrelated parties. Such transactions are not expected to involve more than the
normal risk of collectibility nor present other unfavorable features to the
Company and the Bank. Loans to individual directors and officers must also
comply with the Bank lending policies and regulatory lending limits and
restrictions on loans to affiliates, and directors with a personal interest in
any loan application will be excluded from the consideration of such loan
application.
The Bank has entered into a 10-year lease agreement with Colonial Square
Partners, Inc. to lease approximately 5,000 square feet of a 18,000 square
foot single level, multi-tenant colonial style office building. The lease is
subject to the Bank obtaining all governmental approvals necessary to begin
banking operations. Dean Doyscher, an Organizer, director and principal
shareholder of the Company, is a partner of Colonial Square Partners, Inc. The
Bank anticipates that it will invest approximately $195,000 for leasehold
improvements including the construction of walls, windows, and doors, paint,
floor tile and carpet, electrical and a drive-through canopy. See "Proposed
Business--Facilities." The Company has obtained an independent appraisal of
market rents in the Bank's proposed market. The Company believes that this
transaction is on terms no less favorable to the Bank than could be obtained
from an unaffiliated third party.
The Company believes that all prior transactions between the Company and its
officers, directors or other affiliates of the Company were on terms no less
favorable than could have been obtained from unaffiliated third parties on an
arm's-length basis. All future transactions, loans and any forgiveness of
loans, with directors, officers or stockholders holding more than 5% of the
Company's outstanding Common Stock, or affiliates of any such persons, will be
made for bona fide business purposes and will be on terms no less favorable
than could be obtained from an unaffiliated third party and will be approved
by a majority of the independent outside directors who do not have an interest
in the transactions and who have access, at the Company's expense, to the
Company's independent legal counsel.
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PRINCIPAL SHAREHOLDERS
The following table sets forth as of June 30, 1998, and as adjusted to
reflect the sale of shares from the Private Offering and the Minimum and
Maximum shares offered hereby, certain information with respect to the
beneficial ownership of the Company's Common Stock, by (i) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) each director of the company, and (iii) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES
BENFICIALLY
OWNED AFTER
OFFERING
-------------
NUMBER OF
SHARES NUMBER OF
BENEFICIALLY SHARES
OWNED PRIOR TO BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL THE OWNED AFTER THE
OWNED OFFERING(1) OFFERING(1) MINIMUM MINIMUM
- ------------------------------ -------------- --------------- ------- -------
<S> <C> <C> <C> <C>
Thomas Stienessen (2)(3)........ 6,410 38,400 13.5% 8.4%
Dean Doyscher (2)(4)............ 6,000 31,000 10.9% 6.8%
Frank Gazzola (2)(5)............ 7,400 39,400 13.8% 8.6%
Michael Reynolds (2)(6)......... 2,000 7,000 3.2% 1.5%
Thomas Reynolds (2)(7).......... 6,400 33,400 11.7% 7.3%
All directors and executive
officers as a group
(5 persons) (8)................ 28,200 149,200 48.7% 31.2%
</TABLE>
- --------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of August 1, 1998, or within 60 days
of such date, are treated as outstanding when determining the percent of
the class owned by such individual and when determining the percent owned
by the group. For purposes of calculating the percent of class owed after
this Offering, it was assumed that the officers, directors and principal
shareholders will not be purchasing shares in this Offering. Unless
otherwise indicated, each person named or included in the group has sole
voting and investment power with respect to the shares of common stock set
forth opposite his name.
(2) The business address of the directors and executive offices of the Company
is 410 Jackson Street, Suite 510, Mankato, Minnesota 56001.
(3) Includes 6,400 shares purchasable upon exercise of nonqualified options.
In June 1998, Mr. Stienessen purchased 10 shares of Company Common Stock
at $10.00 per share in order to capitalize and organize the Company and
approve the Plan. Concurrently with the closing of the Minimum, the
Company will redeem the 10 shares purchased by Mr. Stienessen.
(4) Includes 6,000 shares purchasable upon exercise of options.
(5) Includes 7,400 shares purchasable upon exercise of options.
(6) Includes 2,000 shares purchasable upon exercise of options.
(7) Includes 6,400 shares purchasable upon exercise of options.
(8) Includes 28,200 shares purchasable upon exercise of options.
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SUPERVISION AND REGULATION
The following discussion of statutes and regulations affecting bank holding
companies and banks is a summary thereof and is qualified in its entirety by
reference to such statutes and regulations.
GENERAL
Commercial banking is highly regulated at both the federal and state level.
Deposits, reserves, investments, loans, consumer law compliance, issuance of
securities, payment of dividends, mergers and consolidations, electronic funds
transfers, management practices and other aspects of a holding company's and a
bank's operations are subject to regulation. This regulation is designed
primarily to protect depositors and not to benefit holders of securities of
the holding company or the bank. The highly regulated environment in which
commercial banks operate is subject to frequent change. Federal banking bills
are currently under consideration in Congress which, if enacted, could have a
variety of effects on this regulatory environment. In general, pending
legislation would repeal portions of the Glass-Steagall Act and would broaden
the permissible range of affiliations between commercial banks and investment
banks. In addition, these bills could limit the authority of the Office of the
Comptroller of the Currency to authorize new insurance activities for banks,
and could provide relief from a variety of federal banking regulations. The
Company cannot fully predict the nature or the extent of any effects which
these proposed regulatory changes or other possible regulatory changes may
have on its business and earnings. Such changes may have the effect of
increasing or decreasing the cost of doing business, modifying permissible
activities, or enhancing the competitive position of other financial
institutions.
BANK HOLDING COMPANY REGULATION
In addition to a variety of generally applicable state and federal laws
governing businesses and employers, the Company is extensively regulated by
special laws applicable only to financial institutions. Virtually all aspects
of the Company's operations are subject to specific requirements or
restrictions and general regulatory oversight. With few exceptions, state and
federal banking laws have as their principal objective either the maintenance
of the safety and soundness of the financial institution and the federal
deposit insurance system or the protection of consumers or classes of
consumers, rather than the specific protection of shareholders of the Company.
Supervision. As a bank holding company, the Company is subject to regulation
by the Federal Reserve Board under the BHC Act and various regulations adopted
by the Federal Reserve Board. The Company is required to file with the Federal
Reserve Board quarterly and annual reports and such additional information as
the Federal Reserve Board may require pursuant to the BHC Act. The Federal
Reserve Board also may examine the Company. The Company is not subject to any
formal or informal enforcement actions by any bank regulatory office as a
result of such examination or for any other reason. The Federal Reserve Board
also has authority, in certain circumstances, to approve or disapprove stock
redemptions, changes in ownership or control, and dividend payments. The
Federal Reserve Board may also require that the Company terminate an activity
or terminate control of or liquidate or divest certain non-bank subsidiaries
or affiliates when the Federal Reserve Board believes the activity or the
control of the subsidiary or affiliate constitutes a significant risk to the
financial safety, soundness or stability of any of its banking subsidiaries.
Under the BHC Act and regulations adopted by the Federal Reserve Board, a bank
holding company and its non-banking subsidiaries are prohibited from requiring
certain tie-in arrangements in connection with any extension of credit, lease
or sale of property or furnishing of services. Further, the Company is
required by the Federal Reserve Board to maintain certain levels of capital.
Payment of Dividends by the Company. The Federal Reserve Board has indicated
that banking organizations should generally pay cash dividends out of current
operating earnings and the current rate of earnings retention should be
consistent with the organization's capital needs, asset quality and overall
financial condition. The Federal Reserve Board policy strongly discourages a
bank holding company from declaring or paying a cash dividend which would
impose undue pressure on the capital of subsidiary banks or would be funded
only through
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<PAGE>
borrowings or other arrangements that might adversely affect the holding
company's financial position. The Federal Reserve may, and in certain
circumstances must, prohibit a bank holding company from making any capital
distributions without prior approval of the Federal Reserve Board, if the
subsidiary institution is undercapitalized. The Federal Reserve Board also may
impose limitations on the payment of dividends as a condition to its approval
of certain applications, including applications for approval of mergers or
acquisitions.
In addition to the restrictions on dividends imposed by the Federal Reserve,
under the Minnesota Business Corporation Act, the discretion of the Company's
Board of Directors is constrained by Minnesota Statutes, section 302A.551.
Under that section, the Board may only authorize a dividend if in good faith,
in a manner that the directors reasonably believe to be in the best interests
of the corporation, and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances, the board determines that
the corporation will be able to pay its debts in the ordinary course of
business after making a distribution.
Regulatory Capital Requirements. The Federal Reserve Board's capital
guidelines establish the following minimum regulatory capital requirements for
bank holding companies: (i) a capital leverage requirements expressed as a
percentage of total assets, (ii) a risk-based requirement expressed as a
percentage of total risk-weighted assets, and (iii) a Tier 1 leverage
requirement expressed as a percentage of total assets. Tier 1 capital consists
of common stockholders' equity, qualifying preferred stock, and minority
interests in the equity accounts of consolidated subsidiaries. On October 21,
1996, the Federal Reserve Board approved the use of certain cumulative
preferred stock instruments in Tier 1 capital as minority interest in the
equity accounts of consolidated subsidiaries. The failure of a bank holding
company to meet its risk-weighted capital ratios may result in supervisory
action, as well as an inability to obtain approval of any regulatory
applications and, potentially, increased frequency of examination. The federal
bank regulators have previously indicated a desire to raise minimum capital
requirements for banking organizations and have suggested that revisions to
the risk-based capital requirements should be made. The effect of any future
change in the required capital ratios of the Company cannot be determined at
this time.
Activity Limitations. The BHC Act, in general, limits the activities that
may be engaged in by a bank holding company and its subsidiaries to those so
closely related to banking, managing or controlling banks as to be a proper
incident thereto. The Federal Reserve Board, in making such determinations,
considers whether performance of the activities by a bank holding company can
reasonably be expected to produce benefits to the public without any adverse
effects such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. A bank
holding company may engage, subject to Federal Reserve Board guidelines and
approvals, in such closely-related activities as: (1) making or acquiring
loans and other extensions of credit of the type made by mortgage, finance,
credit card, or factoring companies; (2) operating an industrial bank; (3)
servicing loans and other extensions of credit; (4) performing the functions
of a trust company; (5) acting as an investment or financial advisor; (6)
leasing certain real estate or personal property; (7) making investments to
promote community welfare; (8) providing data processing and data transmission
services; (9) acting as an underwriter for credit life insurance and credit
health and accident insurance directly related to extensions of credit by the
holding company system; (10) providing courier services for checks and certain
other instrument exchanges among banks and for audit and accounting media of a
banking or financial nature; (11) providing certain kinds of management
consulting advice; (12) selling, at retail, money orders, travelers' checks
and U.S. savings bonds; (13) performing real estate appraisals; (14) arranging
commercial real estate equity financing; (15) providing securities brokerage
services; (16) underwriting or dealing in government obligations and money
market instruments; (17) engaging in foreign exchange advisory and
transactional services; and (18) acting as a futures commission merchant.
Recently enacted legislation allows well capitalized bank holding companies to
engage in certain activities without the advance approval of the Federal
Reserve Board. Well capitalized bank holding companies are required merely to
notify the Federal Reserve Board within ten business days of engaging in such
activity. [The Federal Reserve Board recently proposed amendments to its
regulations defining the scope of permissible bank holding company activities
which will, if adopted, broaden the scope of such activities.] The Company
may, in the future, if appropriate
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opportunities arise, engage in the acquisition of additional banks, subject to
the approval of the Federal Reserve Board.
Under the BHC Act, the Company must obtain prior Federal Reserve approval
before it acquires direct or indirect ownership or control of any voting
shares of any bank or other bank holding company if, after such acquisition,
it will own or control directly or indirectly more than 5% of the voting stock
of the entity, unless it already owns a majority of the voting stock of the
entity. The Company also must obtain prior Federal Reserve approval before it
acquires all or substantially all of the assets of a bank or merges or
consolidates with another bank holding company. The Company will be, with
limited exceptions, prohibited from acquiring direct or indirect ownership or
control of a company which is not a bank or a bank holding company, and must
engage in the business of banking or managing or controlling banks or
furnishing services to or performing services for its subsidiary Banks. The
Federal Reserve, by order or regulation, may authorize the Company to engage
in or acquire stock in a company engaged in activities so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
In reviewing any application or proposal by the Company, the Federal Reserve
is required to consider the financial and managerial resources and future
prospects of the Company and the banks concerned, the convenience and needs of
the community to be served, as well as the probable effect of the transaction
upon competition. Recent decisions by the Federal Reserve under the BHC Act
have underscored the importance placed by the Federal Reserve upon the record
of the applicant and its subsidiary banks in meeting the credit needs of its
community in accordance with the Community Reinvestment Act of 1977. See
"Community Reinvestment Act and Other Consumer Protection Statutes" below.
BANK REGULATION
The continued earnings and growth of the Company's Banks will be influenced
by general economic conditions, the monetary and fiscal policies of the
federal government and the policies of regulatory agencies, particularly the
Federal Reserve Board. The Federal Reserve Board implements national monetary
policies by its open-market operations in United States Government securities,
by adjusting the required level of reserves for financial institutions subject
to its reserve requirement and by varying the discount rate applicable to
borrowings by banks which are members of the Federal Reserve System. The
actions of the Federal Reserve Board in these areas influence the growth of
bank loans, investments and deposits and also affect interest rates charged on
loans and deposits. The nature and impact of any future changes in monetary
policies cannot be predicted.
Supervision. Northern Star Bank, as a state chartered banking corporation,
is subject to primary supervision, examination and regulation by the Minnesota
Department of Commerce and the Federal Deposit Insurance Corporation. Various
requirements and restrictions under the laws of the State of Minnesota and the
United States also affect the operation of the Bank. These statutes and
regulations relate to many aspects of the operations of the Bank, including
reserves against deposits, loans, investments, mergers and acquisitions,
borrowings, dividends and locations of branch offices. Some of these statutes
and regulations and their effect on the Bank are discussed below. Moreover,
from time to time, legislation is enacted which has the effect of increasing
the cost of doing business, limiting or expanding permissible activities or
affecting the competitive balance between banks and other financial
intermediaries. Proposals to change the laws and regulations governing the
operations and taxation of banks, bank holding companies and other financial
intermediaries are frequently made. The likelihood of any major changes and
the impact of such changes are impossible to predict.
Deposit Insurance. As an FDIC-insured institution, the Bank will be required
to pay deposit insurance premium assessments to the FDIC. The amount each
insured depository institution pays for FDIC deposit insurance coverage is
determined in accordance with a risk-based assessment system under which all
insured depository institutions are placed into one of nine categories and
assessed insurance premiums based upon their level of capital and supervisory
evaluation. BIF-member institutions classified as well capitalized (as defined
by the FDIC) and considered healthy pay the lowest premium currently 0% of
deposits while BIF-member institutions that are under capitalized (as defined
by the FDIC) and considered of substantial supervisory concern pay the highest
premium (currently up to 0.27% of deposits).
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The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution has
engaged in or is engaging in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, order, or any condition imposed in writing by, or when agreement
with, the FDIC. The FDIC may also suspend deposit insurance temporarily during
the hearing process for a permanent termination of insurance if the
institution has no tangible capital. Management of the Company is not aware of
any activity or condition that could result in termination of the deposit
insurance of the Bank.
Payment of Dividends by the Bank. There are state and federal statutory and
regulatory requirements limiting the amount of dividends which may be paid to
the Company by the Bank. Generally, a bank may pay cash dividends out of
current operating earnings to the extent that the current rate of earnings
retention is consistent with the bank's capital needs, asset quality and
overall financial condition. The governing regulatory agency has the authority
to prohibit a bank from engaging in business practices which the governing
regulatory agency considers to be unsafe or unsound. It is possible, depending
upon the financial condition of the Bank, that the governing regulatory agency
may assert that the payment of dividends to the Company by the Bank might,
under some circumstances, be such an unsafe and unsound practice.
For Example, as a prerequisite to the payment of dividends, Minnesota
Statutes, section 48.09, subd. 1, requires the Bank to set aside all of its
net profits to a surplus fund until the surplus fund is equal to 20% of the
Bank's capital stock, and 10% of its net profits while the surplus fund is
equal to between 20% and 50% of the Bank's capital stock. Even when the
surplus fund requirements are met, all bank decisions regarding dividends are
subject to the DOC approval.
Common Liability. Under federal law, a depository institution insured by the
FDIC can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with the default of a commonly controlled
FDIC-insured depository institution or any assistance provided by the FDIC to
a commonly controlled FDIC-insured institution in danger of default.
Affiliate Transaction Limitations. Financial institutions are subject to
certain restrictions imposed by federal law on any extensions of credit to, or
the issuance of a guarantee or letter of credit on behalf of, the Company or
other affiliates, the purchase of or investment in stock or other securities
thereof, the taking of such securities as collateral for loans and the
purchase of assets from the Company or other affiliates. Such restrictions
prevent the Company and such other affiliates from borrowing from the Bank and
any other subsequently acquired bank unless the loans are secured by
marketable obligations of specified amounts. Further, such secured loans,
investments and other transactions between any of the Bank and the Company or
any other affiliate are limited to 10% of the Bank's capital and surplus (as
defined by federal regulations) and such secured loans, investments and other
transactions are limited, in the aggregate, to 20% of the Bank's capital and
surplus (as defined by federal regulations). Such transactions must also
comply with regulations prohibiting terms that would be preferential to the
Company or other affiliates of the Bank.
Regulatory Capital Requirements. The Bank is required to comply with capital
adequacy standards set by the respective primary federal regulatory agency.
The regulations may establish higher minimum requirements if, for example, a
bank has previously received special attention or has a high susceptibility to
interest rate risk. Banks with capital ratios below the required minimum are
subject to certain administrative actions. More than one capital adequacy
standard applies, and all applicable standards must be satisfied for an
institution to be considered to be in compliance. There are two basic measures
of capital adequacy: a risk-based capital measure, and a Tier 1 leverage
measure.
The risk-based capital measure was adopted to assist in the assessment of
capital adequacy of financial institutions by, (i) making regulatory capital
requirements more sensitive to differences in risk profiles among
organizations; (ii) introducing off-balance-sheet items into the assessment of
capital adequacy; (iii) reducing the disincentive to holding liquid, low-risk
assets; and (iv) achieving greater consistency in evaluation of capital
adequacy of major banking organizations throughout the world. The risk-based
guidelines include both a
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definition of capital and a framework for calculating risk-weighted assets by
assigning assets and off-balance-sheet items to broad risk categories. An
institution's risk-based capital ratios are calculated by dividing its
qualifying capital by its risk-weighted assets.
Qualifying capital consists of two types of capital components: "core
capital elements" ("Tier 1" capital) and "supplementary capital elements"
("Tier 2" capital). Tier 1 capital is generally defined as the sum of core
capital elements less goodwill and other intangibles. Core capital elements
consist of (i) common shareholders' equity, (ii) qualifying perpetual
preferred stock, subject to certain limitations, and (iii) minority interests
in the equity accounts of consolidated subsidiaries. Supplementary capital
("Tier 2" capital) consists of such additional capital elements as (i)
allowance for loan and lease losses (subject to limitations); (ii) perpetual
preferred stock which does not qualify as Tier 1 capital (subject to certain
conditions); (iii) hybrid capital instruments, perpetual debt and mandatory
convertible debt securities; and (iv) term subordinated debt and intermediate-
term preferred stock (subject to limitations). The maximum amount of Tier 2
capital that may be included in qualifying total capital is limited to 100% of
Tier 1 capital (net of goodwill).
Under current capital adequacy standards, financial institutions must meet a
minimum ratio of qualifying capital to risk-weighted assets of 8%. Of that
ratio, at least half, or 4%, must be in the form of Tier 1 capital.
The Bank also must maintain an allowable leverage ratio. The leverage ratio
is defined as the ratio of Tier 1 capital to average total assets. Under
current capital adequacy standards, financial institutions must meet a minimum
leverage ratio of 4%.
As a result of the FDIC Improvement Act of 1991, the federal bank regulatory
agencies are directed to adopt regulations defining banks as "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." Under the law, depending
upon the bank's classification, a bank may be directed to prepare and
implement a capital restoration plan, to be guaranteed by its parent bank
holding company. Further, banks are subject to increased restrictions upon
activities and heightened regulatory management as capital classifications
decline.
Generally, under regulations adopted by all of the bank federal regulatory
agencies, "well capitalized" has been defined as an institution with a total
capital to risk-based asset ratio of 10%, a Tier 1 capital to risk-based asset
ratio of 6% and a Tier 1 leverage ratio of 5%. The regulations further provide
that an "adequately capitalized" institution must have a total capital to
risk-based asset ratio of at least 8%, a Tier 1 capital to risk-based asset
ratio of 4% and a Tier 1 leverage ratio of 4%. Institutions not satisfying the
requirements for "adequately capitalized" will be deemed "undercapitalized."
Institutions with a total capital to risk-based asset ratio of 6% or less, a
Tier 1 capital to risk-based asset ratio of 3% or less, or a Tier 1 leverage
ratio of 3% or less will be deemed "significantly undercapitalized." Finally,
the regulations provide that an institution with a Tier 1 leverage ratio of
less than 2% will be deemed "critically undercapitalized." Federal bank
regulatory agencies, including the FDIC, are authorized to down-grade a
financial institution from one capital category to the next if an examination
reveals that the asset quality, management, earnings or liquidity of that
institution are less than satisfactory. Under the regulations, the Bank would
be deemed an institution based upon its equity capital as of June 30, 1998 and
would be deemed "well capitalized" if the minimum is sold or "well
capitalized" if the maximum is sold.
Standards for Safety and Soundness. Federal law requires each federal
banking agency to prescribe for depository institutions under its jurisdiction
standards relating to, among other things: internal controls; information
systems and audit systems; loan documentation; credit underwriting; interest
rate risk exposure; asset growth; compensation; fees and benefits; and such
other operational and managerial standards as the agency deems appropriate.
The federal banking agencies adopted final regulations and Interagency
Guidelines Establishing Standards for Safety and Soundness (the "Guidelines")
to implement these safety and soundness standards. The Guidelines set forth
the safety and soundness standards that the federal banking agencies use to
identify and address problems at insured depository institutions before
capital becomes impaired. The Guidelines address internal controls and
information systems, internal audit system, credit writing, loan
documentation,
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interest rate risk exposure, asset growth, asset quality, earnings and
compensation, and fees and benefits. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
Guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard.
Acquisitions and Branching. Banks, such as the Bank, have the authority
under Minnesota law to establish branches (referred to under Minnesota law as
"detached facilities") in any municipality in the state of Minnesota, subject
to receipt of all require regulatory approvals, except a municipality having a
population of 10,000 or less, unless all the banks having a principal office
in the municipality have consented in writing to the establishment of the
branch (this rule is often called the "home town protection rule.")
Effective June 1, 1997, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "RNA") allows the responsible Federal banking
agency to approve applications for mergers of depository institutions across
state lines without regard to whether such activity is contrary to state law.
Any statue could, however, by adoption of a non-discriminatory law after
September 29, 1994 and before June 1, 1997, either elect to have this
provision take effect before June 1, 1997 or opt-out of the provision. The
effect of opting out is to prevent banks chartered by, or having their main
office located in, such state from participating in any interstate branch
merger. Each state is permitted to retain a minimum age requirement of up to
five years, a non-discriminatory deposit cap, and non-discriminatory notice or
filing requirements The RNA also imposes limitations on the aggregate amount
of depository that may be held by the surviving bank and all of its insured
depository institution affiliates. Only Texas opted-out of the interstate
merger provision. The Minnesota legislature has taken action to opt in and has
authorized interstate branching effective June 1, 1997. It exercised its
discretion, however, to retain a minimum age requirement (or "seasoning
requirement") of 5 years. Therefore, the Bank may not be acquired by an out-
of-state bank nor may the Bank merge into an out-of-state bank for 5 years
after its creation. Nevertheless, the RNA could present acquisition and
branching opportunities to the Company, and could allow out-of-state banks
easy access to markets currently served by the Company thereby increasing
competition. See "Business--Competition."
Community Reinvestment Act. The Community Reinvestment Act of 1977 ("CRA")
requires a financial institution to help meet the credit needs of its entire
community, including low-income and moderate-income areas. On May 3, 1995, the
federal banking agencies issued final regulations which change the manner in
which they measure a bank's compliance with its CRA obligations. The final
regulations adopt a performance-based evaluation system which bases CRA
ratings on an institution's actual lending, service and investment
performance, rather than the extent to which the institution conducts needs
assessments, documents community outreach or complies with other procedural
requirements. Federal banking agencies may take CRA compliance into account
when regulating and supervising bank and holding company activities; for
example, CRA performance may be considered in approving proposed bank
acquisitions. The Banks are also subject to a variety of consumer protection
laws and fair lending laws. Violations of these laws may cause regulators to
impose substantial penalties or take other administrative action.
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DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
GENERAL
The Company's Amended and Restated Articles of Incorporation (the
"Articles") authorize the issuance of 20,000,000 shares of capital stock
having a par value of $0.01 per share, of which 15,000,000 shares are Common
Stock and 5,000,000 shares are undesignated.
COMMON STOCK
General. As of June 30, 1998, 10 shares of Common Stock were issued and
outstanding and held of record by Mr. Stienessen. No share of Common Stock is
entitled to preference over any other share and each such share is equal to
other shares of Common Stock in all respects. In any distribution of capital
assets, whether voluntary or involuntary, holders of Common Stock are entitled
to receive pro rata the assets remaining after creditors and holders, if any,
of stock with a liquidation preference have been paid in full.
Voting. Common shareholders are entitled to one vote for each share held of
record on each matter submitted to a vote of the common shareholders.
Dividends, Distributions and Redemptions. Subject to the preferential
dividend rights of any subsequent classes or series of stock with such rights
and preferences superior to the Common Stock as the Board of Directors may
designate, the Common Stock shareholders are entitled to receive dividends as
and when declared by the Board of Directors of the Company. However, dividends
on the Company's Common Stock are not contemplated in the foreseeable future.
Under the Minnesota Business Corporation Act (the "MBCA"), the Company may
declare and pay dividends on the Common Stock only if the Company will be able
to pay its debts in the ordinary course of business after making the
distribution. In addition, the Company's primary source of cash to make
dividend payments is dividends that the Company receives from the Bank, which
may be unable to make payments to the Company under various applicable
regulations. See "--Dividend Policy" and "Supervision and Regulation."
Federal and state banking laws regulate the Company's ability to pay
dividends and redeem its equity securities. No redemptions of any equity
securities are permitted without the approval of the Federal Reserve Board if
the aggregate amount of such redemptions exceeds 10% of the net worth of the
Company over a 12-month period. In addition, no redemption of or dividend on
the Common Stock is permitted if it would constitute an unsafe or unsound
practice according to the Federal Reserve Board.
If the Company were liquidated, the common stockholders would be entitled to
receive, pro rata, all assets available for distribution to them after
satisfaction of the Company's liabilities and any payment applicable to any
preferred stock then outstanding.
No Cumulative Voting. The Articles of the Company provide that the Company
shareholders will not have cumulative voting rights in the electing of
directors. Under cumulative voting, a shareholder could cast that number of
votes equal to such shareholder's shares multiplied by the number of directors
to be elected in favor of one candidate or among several candidates.
Cumulative voting makes it possible for less than a majority of the
shareholders to elect one or more members of the board of directors. Under
non-cumulative voting, a majority of the shareholders can elect the entire
board of directors.
No Preemptive Rights. The Articles of the Company provide that the Company
shareholders will not have any preemptive rights to subscribe for or purchase
additional shares of the Company capital stock. This means that a Company
shareholder will not be entitled to acquire a certain fraction of the unissued
securities or rights to purchase securities of the Company before the Company
may offer them to other persons. Preemptive rights enable a shareholder to
maintain the shareholder's proportional voting power and proportional rights
to receive and other distributions by the company.
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UNDESIGNATED STOCK
Under governing Minnesota law and the Company's Articles, no action by the
Company's stockholders is necessary, and only action of the Board of Directors
is required, to authorize the issuance of any of the undesignated stock. The
Board of Directors is empowered to establish and to designate each class or
series of the undesignated shares and to set the terms of such shares
(including terms with respect to redemption, sinking fund, dividend,
liquidation, preemptive, conversion and voting rights and preferences).
Accordingly, the Board of Directors, without stockholder approval, may issue
such undesignated shares in one or more series of preferred stock having
rights, preferences, privileges or restrictions, including voting rights, that
may be greater than the rights of holders of Common Stock.
It is not possible to state the actual effect of the issuance of any shares
of preferred stock upon the rights of holders of the Common Stock until the
Board of Directors determines the specific rights of the holders of such
preferred stock. However, the effects might include, among other things,
restricting dividends on the Common Stock, diluting the voting power of the
Common Stock, impairing the liquidation rights of the Common Stock and
delaying or preventing a change in control of the Company without further
action by the stockholders. The Company has no present plans to issue any
shares of preferred stock.
LIMITATION OF DIRECTOR LIABILITY, INDEMNIFICATION
The Minnesota Business Corporations Act ("MBCA") permits Minnesota
corporations, in their Articles of Incorporation or Bylaws, to limit or
eliminate the personal liability of directors to corporations and their
shareholders for monetary damages for breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of a corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
the MBCA, directors are accountable to corporations and their shareholders for
monetary damages for conduct constituting gross negligence in the exercise of
their duty of care. Although the MBCA provision does not change directors'
duty of care, it enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Company's Bylaws state that a
director of the Company will not be personally liable for monetary damages for
breach of their fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) corporate distributions which
are in contravention of restrictions in the MBCA, the Company's Articles of
Incorporation or Bylaws, or any agreement to which the Company is a party, or
(iv) any transaction from which the director derives an improper personal
benefit. The Company's Bylaws also provide that if the MBCA is later amended,
then the liability of the directors of the Company will be eliminated or
limited to the fullest extent permitted by the MBCA, as so amended. The
inclusion of this provision in the Bylaws may have the effect of reducing the
likelihood of derivative litigation against directors and may discourage or
deter shareholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefited the Company and its shareholders.
Minnesota Statutes Section 302A.521 provides that officers and directors of
the Company have the right to indemnification from the Company for liability
arising out of certain actions. The Company has included in its Bylaws a
provision to indemnify its directors and officers for expenses and liabilities
to the fullest extent permitted by Minnesota law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in
the Securities Act, and is, therefore, unenforceable.
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ANTI-TAKEOVER PROVISIONS
Certain provisions of Minnesota law and the Company's Articles described
below could have an anti-takeover effect. These provisions are intended to
provide management flexibility to enhance the Company shareholder value, the
likelihood of continuity and stability in the composition of the Company's
Board of Directors and in the policies formulated by the Board and to
discourage an unsolicited takeover of the Company, if the Board determines
that such a takeover is not in the best interests of the Company and its
shareholders. However, these provisions could have the effect of discouraging
certain attempts to acquire the Company which could deprive the Company's
shareholders of opportunities to sell their shares of Common Stock at prices
higher than prevailing market prices.
Section 302A.671 of the Minnesota Statutes applies, with certain exceptions,
to any acquisitions of voting stock of the Company (from a person other than
the Company, and other than in connection with certain mergers and exchanges
to which the Company is a party) resulting in the beneficial ownership of 20%
or more of the voting stock then outstanding. Section 302A.671 requires
approval of the granting of voting rights for the shares received pursuant to
any such acquisition by a majority vote of the shareholders of the Company. In
general, shares acquired without such approval are denied voting rights and
are redeemable at their then fair market value by the Company within 30 days
after the acquiring person has failed to deliver a timely information
statement to the Company or the date the shareholders voted not to grant
voting rights to the acquiring person's shares.
Section 302A.673 of the Minnesota Statutes generally prohibits any business
combination by the Company, or any subsidiary of the Company, with any
shareholder who purchases 10% or more of the Company's voting shares (an
"interested shareholder") within four years following such interested
shareholder's share acquisition date, unless the business combination is
approved by a committee of all of the disinterested members of the Board of
Directors of the Company before the interested shareholder's share acquisition
date.
The Company's Board of Directors may authorize the issuance of additional
shares of Common Stock or, from the 5,000,000 shares of undesignated stock,
Preferred Stock without further action by the Company shareholders, unless
such action is required in a particular case by applicable laws or regulation.
The authority to issue additional Common Stock or Preferred Stock provides the
Company with the flexibility necessary to meet its future needs without the
delay resulting from seeking shareholder approval. The unissued Common Stock
or Preferred Stock may be issued from time to time for any corporate purposes,
including without limitation, stock splits, stock dividends, employee benefit
and compensation plans, acquisitions and public and private sales for cash as
a means of raising capital. Such shares could be used to dilute the stock
ownership of persons seeking to obtain control of the Company. In addition,
the sale of a substantial number of shares of Common Stock or Preferred Stock
to persons who have an understanding with the Company concerning the voting of
such shares, or the distribution or dividend of Common Stock or Preferred
Stock (or right to receive such shares) to the Company's shareholders, may
have the effect of discouraging or otherwise increasing the cost of
unsolicited attempts to acquire control of the Company. Further, because the
Company's Board has the power to determine the voting, conversion or other
rights of the Preferred Stock, the issuance of a series of Preferred Stock to
persons friendly to management could effectively discourage or preclude
consummation of a change in control transaction or have the effect of
maintaining the position of the Company's incumbent management. The Company
does not currently have any plans or commitments to use its authority to
effect any such issuance, but reserves the right to take any action that the
Board of Directors deems to be in the best interests of the Company and its
shareholders. Furthermore, as a Minnesota corporation, the Company is subject
to provisions of the Minnesota Business Corporations Act ("MBCA") that could
have an anti-takeover effect on the Company.
In addition, certain provisions of the Company's Bylaws will impede changes
in majority control of the Company's Board of Directors. The Company's Bylaws
provides that the Board of Directors will be divided into three classes, with
directors in each class elected for three-year staggered terms. Thus assuming
five directors, as currently is the case, it would take two annual meetings
for the election of directors to replace a majority of the Board.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar with respect to the Company's Common Stock
is Continental Stock Transfer and Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the open market
may adversely affect the price of the Common Stock offered hereby and the
ability of the Company to raise equity capital in the future.
Upon completion of this Offering, the Company will have a minimum of 278,000
and a maximum of 450,000 shares of Common Stock outstanding, assuming no
exercise of the Sales Agent's warrants and outstanding options to purchase
10,000 and 28,200 shares of Common Stock, respectively. Of the aggregate
amount outstanding, 121,000 shares of Common Stock issued to the Organizers,
pursuant to the Private Offering will be "restricted securities" as that term
is defined in Rule 144 under the Securities Act, and may be sold in the public
market only if registered or if they qualify for an exemption from
registration under Rule 144, 144(k) or 701 or otherwise.
The shares sold in this Offering will be freely tradable, without resale
restrictions or further registration under the Securities Act, unless
purchased by an "Affiliate" of the Company, whose sales would be subject to
certain volume limitations and other restrictions described below. An
affiliate of the issuer is defined in Rule 144 under the Securities Act as a
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the issuer. Rule
405 under the Securities Act defines the term "control" to mean the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of the person whether through the ownership of
voting securities, by contract or otherwise. Directors of the Company and the
Bank will likely be deemed to be affiliates.
In general, under Rule 144, an affiliate of the Company or a person holding
restricted shares may sell, within any three-month period, a number of shares
not greater than 1% of the then outstanding shares of the Common Stock or the
average weekly trading volume of the Common Stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that
the securities must be sold in "brokers' transactions," as defined in the
Securities Act, and the person selling the securities may not solicit order or
make any payment in connection with the offer or sale of securities to any
person other than the broker who executes the order to sell the securities.
This requirement may make the sale of the Common Stock by affiliates of the
Company pursuant to Rule 144 difficult if no trading market develops in the
Common Stock. Rule 144 also requires persons holding restricted securities to
hold the shares for at least one year prior to sale.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or
contract is entitled to rely on the resale provisions of Rule 701, which
permits non-Affiliates to sell their Rule 701 shares without complying with
the public information, holding period, volume limitation or notice provisions
of Rule 144 and which permits Affiliates to sell their Rule 701 shares without
complying with the Rule 144 holding period restrictions, in each case
commencing 90 days after the date of this Prospectus.
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LEGAL MATTERS
Certain legal matters relating to the Company will be passed upon for the
Company by Farrish, Johnson & Maschka, P.L.L.P., whose business address is
P.O. Box 550, Mankato, Minnesota 56002. The validity of the issuance of the
shares offered hereby will be passed upon for the Company by Fredrikson &
Byron, P.A., whose business address is 900 Second Avenue South, Minneapolis,
Minnesota 55402. Certain legal matters relating to this Offering will be
passed upon for the Sales Agent by Howard & Howard, whose business address is
321 Liberty Street, Suite 200, Peoria, Illinois 61602.
EXPERTS
The audited financial statements of Northern Star Financial, Inc. as of June
30, 1998, included in this Prospectus and elsewhere in the Registration
Statement, have been audited by Bertram Cooper & Co., LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to such Registration Statement, exhibits and
schedules. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference. The Registration
Statement of which this Prospectus is a part and the exhibits and schedules
thereto, may be inspected by anyone without charge at the principal office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, or at one of
the Commission's regional offices: Room 3190, John C. Kluzzynsk Building,
Inc., 230 South Dearborn, Chicago, Illinois 60604 and 75 Park Place, 14th
Floor, New York, New York 10007. Copies of all or any part of such material
may be obtained upon payment of the prescribed fees from the Public Reference
Section of the Commission at 450 Fifth Street, N.W. Washington, D.C. The
Commission maintains a World Wide Website at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the
Company.
Prior to this Offering, the Company has not been subject to the reporting
requirements of the Exchange Act. After completion of this Offering, the
Company intends to comply with such requirements, including distributing to
its shareholders an annual report containing audited financial statements.
43
<PAGE>
NORTHERN STAR FINANCIAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JUNE 30, 1998
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report................................................ F-2
Balance Sheet--June 30, 1998................................................ F-3
Statement of Operations for the Period from Inception
(January 22, 1998) to June 30, 1998........................................ F-4
Statement of Changes in Stockholders' Equity for the Period
From Inception (January 22, 1998) to June 30, 1998......................... F-5
Statement of Cash Flows for the Period from Inception
(January 22, 1998) to June 30, 1998........................................ F-6
Notes to Financial Statements as of and for the Period from
Inception (January 22, 1998) to June 30, 1998.............................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Northern Star Financial, Inc.
(A Development Stage Company)
Mankato, Minnesota 56001
We have audited the accompanying balance sheet of Northern Star Financial,
Inc. (a development stage company), as of June 30, 1998, and the related
statements of operations, changes in stockholders' equity and cash flows for
the period from inception (January 22, 1998) to June 30, 1998. These financial
statements are the responsibility of Northern Star Financial, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Northern Star Financial,
Inc. as of June 30, 1998, and the results of its operations, changes in
stockholders' equity and cash flows for the period from inception (January 22,
1998) to June 30, 1998, in conformity with generally accepted accounting
principles.
Bertram Cooper & Co., LLP
Waseca, Minnesota 56093
July 29, 1998
F-2
<PAGE>
NORTHERN STAR FINANCIAL, INC.
(A DEVELOPMENTAL STAGE COMPANY)
BALANCE SHEET
JUNE 30, 1998
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets
Cash................................................................. $ --
Other Assets
Deferred organizational costs........................................ 9,226
Prepaid expenses..................................................... 5,580
-------
Total Other Assets................................................. 14,806
-------
TOTAL ASSETS....................................................... $14,806
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
</TABLE>
<TABLE>
<S> <C>
Current Liabilities
Advance from organizers............................................. $18,665
-------
Total Current Liabilities......................................... 18,665
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share; 15,000,000 shares
authorized,
10 shares issued and outstanding................................... 0
Undesignated stock, par value $0.01 per share; 5,000,000 shares
authorized,
no shares issued................................................... --
Paid-in surplus..................................................... 100
Stock subscriptions (Note 1)........................................ --
Deficit accumulated during the development stage.................... (3,959)
-------
Total Stockholders' Equity (Deficit).............................. (3,859)
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $14,806
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
NORTHERN STAR FINANCIAL, INC.
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JANUARY 22, 1998) TO JUNE 30, 1998
EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Other operating..................................................... $ 3,959
Income tax expense (benefit)........................................ --
-------
NET LOSS.......................................................... $(3,959)
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
NORTHERN STAR FINANCIAL, INC.
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 22, 1998) TO JUNE 30, 1998
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
COMMON PAID-IN DEVELOPMENT
STOCK SURPLUS STAGE TOTAL
------ ------- ----------- -------
<S> <C> <C> <C> <C>
Net Loss................................... $ -- $-- $(3,959) $(3,959)
Issuance of 10 shares of common stock at
$0.01 par value........................... 0 100 -- 100
----- ---- ------- -------
Balance June 30, 1998...................... $ 0 $100 $(3,959) $(3,859)
===== ==== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NORTHERN STAR FINANCIAL, INC.
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JANUARY 22, 1998) TO JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss............................................................ $(3,959)
Adjustments to reconcile net loss to net cash used by operating
activities:
Increase in prepaid assets........................................ (5,580)
-------
NET CASH USED IN OPERATING ACTIVITIES........................... (9,539)
CASH FLOWS FROM INVESTING ACTIVITIES
Deferred organizational costs....................................... (9,226)
-------
NET CASH USED IN INVESTING ACTIVITIES........................... (9,226)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from organizers............................................ 18,665
Proceed from issuance of common stock............................... 100
-------
NET CASH PROVIDED BY FINANCING ACTIVITIES....................... 18,765
-------
NET CHANGE IN CASH AND CASH EQUIVALENTS............................... --
-------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...................... --
-------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................ $ --
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
NORTHERN STAR FINANCIAL, INC. (A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (JANUARY 22, 1998) TO JUNE 30, 1998
NOTE 1--ORGANIZATION
Northern Star Financial, Inc. was formed to organize and own all of the
capital stock of Northern Star Bank (the "Bank"); together they are herein
referred to as the "Company." The Organizers of the Company have filed an
application to charter the Bank as a state bank with the Minnesota Department
of Commerce ("DOC") and the Federal Deposit Insurance Corporation ("FDIC").
Provided the necessary capital is raised and the necessary regulatory
approvals are received, it is expected that banking operations will commence
in the fourth quarter of calendar 1998.
The Company plans to raise a minimum of $2,780,000, to a maximum of
$4,500,000, through an offering of its $0.01 par value common stock at a
subscription price of $10.00 per share. The Organizers and directors have
subscribed to purchase 121,000 shares of the Common Stock at $10 per share for
a total of $1,210,000 due upon the Company's receipt of all appropriate
regulatory approvals, including bank charter approval from the DOC and FDIC.
Upon the completion of the sale of common stock and the opening of the Bank,
incurred organization costs, estimated to be $145,000 ($70,000 for the Bank
and $75,000 for the Company, consisting principally of legal, regulatory,
consulting and incorporation fees) will be deferred and amortized over the
Bank's and the Company's initial 60 months of operations. Offering expenses,
estimated to be a minimum of $102,050 to maximum of $213,850 (consisting
principally of direct incremental costs of the stock offering) will be
deducted from the proceeds of the offering, and pre-opening expenses,
estimated to be $30,000 (consisting principally of salaries, overhead and
other operating costs) will be charged against the operating results.
The Company's Articles of Incorporation originally authorized 20,000,000
shares of stock at a par value of $1.00 per share. The Articles of
Incorporation were amended subsequent to June 30, 1998 to reduce the par value
to $0.01 per share and allocate the authorized shares as 15,000,000 of common
shares and 5,000,000 of undesignated shares. The balance sheet at June 30,
1998 reflects the authorized stock shares and par value as amended.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practices within the banking
industry.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at the date of
the financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
Deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. The measurement of deferred tax
assets is reduced, if necessary, by the amount of any tax benefits that, based
on available evidence, are not expected to be realized.
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". Basic earnings per share is based on the weighted
average outstanding common shares. Dilutive net income per share is based on
the weighted average outstanding shares reduced by the effect of stock options
and warrants. Ten shares were outstanding at June 30, 1998, and presentation
of earnings per share for the initial development state operating period would
not be meaningful.
F-7
<PAGE>
NORTHERN STAR FINANCIAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--LIQUIDITY AND GOING CONCERN CONSIDERATIONS
The Company incurred a net loss of $3,959 for the period from inception
(January 22, 1998) to June 30, 1998. Operations through June 30, 1998, related
primarily to expenditures for incorporating and organizing the Company. At
June 30, 1998, the Company had been funded by an $18,665 advance from the
Organizers.
Management believes that the current level of expenditures is well within
the financial capabilities of the Organizers and is adequate to meet existing
obligations and fund current operations, but commencing banking operations is
dependent upon the Company successfully completing the stock offering and
obtaining regulatory approval.
To provide permanent funding for its operation, the Organizers have
subscribed to purchase 121,000 shares at $10 per share and the Company is
currently anticipating offering a minimum of 157,000 and a maximum of 329,000
shares of its common stock $0.01 par value, at $10 per share in an initial
public offering. Costs related to the organization and registration of the
Company's common stock will be paid from the gross proceeds of the offering.
Should subscriptions for the minimum offering not be obtained, amounts paid by
subscribers with their subscriptions will be returned, net of expenses, and
the offer will be withdrawn.
NOTE 4--INCOME TAXES
There was no provision (benefit) for income taxes for the period from
inception (January 22, 1998) to June 30, 1998, due to the Company's net
operating loss and its valuation reserve against deferred tax assets.
The following difference gives rise to deferred income taxes as of June 30,
1998:
<TABLE>
<CAPTION>
<S> <C>
Net operating loss carryforward................................... $1,584
Valuation reserve................................................. (1,584)
------
Net deferred tax asset............................................ $ -0-
======
</TABLE>
As of June 30, 1998, the Company has a net operating loss carryforward of
approximately $3,959.
NOTE 5--STOCK OPTION PLAN
The Company is planning to adopt a stock option plan, the Stock Option Plan
(the SOP). The Company Organizers, in consideration for their services, will
be granted options that are immediately exercisable to purchase an aggregate
of 24,200 shares of common stock. In addition, 41,700 shares of common stock
are reserved under the SOP of which 12,000 shares will be granted to directors
and 6,000 shares will be awarded to key management personnel upon completion
of the stock offering described in Note 1. All of the previously described
awarded options are at an exercise price of $10.00 per share. Option shares of
23,700 will remain available for future granting.
The Company will use the intrinsic value method as described in APB Opinion
No. 25 and related interpretations to account for the SOP and accordingly, no
compensation cost will be recognized. The Company has adopted Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock Based
Compensation", and will disclose the estimated pro forma effect on net income
of the fair value method established by SFAS No. 123, using the Black Scholes
Method.
F-8
<PAGE>
NORTHERN STAR FINANCIAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--COMMITMENTS
The Company entered into a lease agreement for office space at its planned
main office location, subject to the Bank obtaining all government approvals
necessary to begin banking operations. The anticipated commencement date of
the lease is November, 1998, with a ten-year term. The monthly base rent will
be $6,042 during its first three years of the lease, $6,250 for the next three
years and $6,458 for the last four years. Dean Doyscher, an organizer,
director and principal shareholder of the Company, is a partner of Colonial
Square Partners, Inc., owners of the leased building.
The Company is currently negotiating a software license agreement for the
data processing applications and implementation of the Company's electronic
data processing system.
The Bank will enter into a three-year employment agreement with Thomas P.
Stienessen, effective upon receipt of approval of the Company's bank charter
application to the FDIC and the DOC, pursuant to which Mr. Stienessen will
serve as the President and Chief Executive Officer of the Bank. Mr. Stienessen
will be paid an annual salary of $100,000 , and is eligible to participate in
discretionary bonuses that may be authorized by the board of directors to its
senior management. Mr. Stienessen will be eligible to participate in any
management incentive program of the Bank or any long-term equity incentive
program and will be eligible for grants of stock options and other awards
thereunder. Additionally, Mr. Stienessen will participate in the Bank's
retirement, welfare and other benefit programs. As of June 30, 1998, neither
the Company nor the Bank has paid any compensation to its executive officers.
The Company will pay Mr. Stienessen additional compensation of $25,000, upon
receipt of approval of the Company's applications with the FDIC and the DOC,
for organizational services he rendered prior to approval of the applications.
The Company has signed a Letter Agreement to finalize an Agency Agreement
for services to place on a best efforts basis common shares of the Company.
Commission and out-of-pocket costs to be paid the agent are described in Note
1. In addition, the agent will be granted warrants to purchase up to 40,000
shares at $10 per share, subject to regulatory approval.
NOTE 7--FISCAL YEAR-END
Management has elected to use June 30 as the Company's fiscal year end for
financial reporting.
F-9
<PAGE>
ATTACHMENT A
NORTHERN STAR FINANCIAL, INC.
STOCK ORDER FORM &
CERTIFICATION
NOTE: PLEASE READ THE STOCK ORDER FORM GUIDE AND INSTRUCTIONS ACCOMPANYING
THIS FORM, BEFORE COMPLETION.
- --------------------------------------------------------------------------------
DEADLINE: The Offering began September , 1998. A condition of the Offering
is that the Minimum Offering (sale of 157,000 shares of Common Stock) must be
completed on or before November , 1998, unless extended by the Board of
Directors for up to an additional 90 days, or the Offering will be
terminated. If the Minimum Offering is consummated, the Offering will
continue so long as shares remain available or until 5:00 p.m. Local Time, on
December , 1998, whichever occurs first, unless terminated by the Company
beforehand.
- --------------------------------------------------------------------------------
NUMBER OF SHARES
- --------------------------------------------------------------------------------
(1) Number of Shares Price Per Share (2) Total Amount
Due
x $10.00 = $
The minimum number of shares that may be subscribed for is 100. The maximum
any individual and their related party may subscribe for in the Offering is
13,600 shares. See the Section entitled "THE OFFERING--General" on page 12 of
the Prospectus dated September , 1998.
- --------------------------------------------------------------------------------
METHOD OF PAYMENT AND PURCHASE INFORMATION
- --------------------------------------------------------------------------------
(3) Enclosed is a check, bank draft or money order payable to: "Resource
Trust Company", Escrow Agent for Northern Star Financial, Inc. for
$ .
- --------------------------------------------------------------------------------
BROKER DEALER NAME AND ADDRESS
- --------------------------------------------------------------------------------
(4) If purchased through a broker/dealer, please list the name, address, and
phone number in the space provided.
Company Name: ___________________ City: _______________
Broker Name: ____________________ State: ______________ Zip Code: ___
Street Address: _________________ Phone Number: _______
- --------------------------------------------------------------------------------
STOCK REGISTRATION ONE OWNERSHIP PER STOCK ORDER FORM
- --------------------------------------------------------------------------------
(5)Form of stock ownership
[_] Individual [_] Uniform Transfer to Minors
[_] Partnership
minor's soc. sec. # required
[_] Joint Tenants [_] Uniform Gift to Minors
[_] IRA (Custodian name &
signature required)
[_] Tenants in Common
[_] Corporation
[_] Fiduciary/Trust (Under
Agreement Dated )
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Name Daytime Telephone
- --------------------------------------------------------------------------------
Street Address Evening Telephone
- --------------------------------------------------------------------------------
City State Zip Code State of Residence
OFFICE USE Batch # ____
Date Order # __________
Rec'd / /
Check # ________________ Category _________
Amount $ _________ Initials _________
A-1
<PAGE>
- --------------------------------------------------------------------------------
NASD AFFILIATION (This section only applies to those individuals who meet the
delineated criteria)
- --------------------------------------------------------------------------------
Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of
the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which an
NASD member or person associated with an NASD member has a beneficial
interest. To comply with conditions under which an exemption from the NASD's
Interpretation with Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD affiliation box: (1) not to sell,
transfer or hypothecate the shares subscribed for herein for a period of
three months following the issuance, and (2) to report this subscription in
writing to the applicable NASD member within one day of the payment therefor.
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENTS
- --------------------------------------------------------------------------------
1. By signing below, I acknowledge receipt of the Prospectus dated September
, 1998, and that I have reviewed all provisions therein. I understand
that I may not change or revoke my order once it is received by the
Company. I also certify that this stock order is for my account and there
is no agreement or understanding regarding any further sale or transfer of
these shares.
2. Under penalties of perjury, I further certify that:
(i) the social security number of taxpayer identification number given
herein is correct; and
(ii) I am not subject to backup withholding.
If you have been notified by the Internal Revenue Service that you are
subject to backup withholding because of under-reporting interest or
dividends on your tax return, you must cross out Item (ii) above.
3. By signing below, I also acknowledge that I have not waived any rights
under the Securities Act of 1933 and the Securities Exchange Act of 1934.
4. By signing below, I hereby represent to the Company that the purchase of
shares subscribed for complies with the "Purchase Limitations" set forth
in the Prospectus dated September , 1998.
5. By signing below, I certify that before purchasing the Common Stock of the
Company that I received a copy of the Prospectus dated, September ,
1998, which discloses the nature of the Common Stock being offered thereby
and describes certain risks involved in an investment in the Common Stock
under the heading "Risk Factors" beginning on page 7 of the Offering
Circular.
6. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the Company
shall have the right to accept or reject this subscription in whole or in
part, for any reason whatsoever. The Company may reduce the number of
shares for which the Subscriber has subscribed, indicating acceptance of
less than all of the shares subscribed on the Company's written form of
acceptance.
7. RESIDENCE. The Subscriber represents and warrants that the Subscriber is a
bona fide resident (or if an entity is organized or incorporated under the
laws of, and is domiciled in) of the State indicated on the signature page
hereof.
THIS FORM MUST BE SIGNED AND DATED. THIS ORDER IS NOT VALID IF THE STOCK
ORDER FORM IS NOT SIGNED. YOUR ORDER WILL BE FILLED IN ACCORDANCE WITH THE
PROVISIONS OF THE PROSPECTUS.
When purchasing as a custodian, corporate officer, etc.; include your full
title.
<TABLE>
<CAPTION>
SIGNATURE TITLE (IF APPLICABLE) DATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
1.
- ---------------------------------------------------------------------------------------------
2.
- ---------------------------------------------------------------------------------------------
3.
</TABLE>
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
RETURN THIS FORM TO:
RESOURCE TRUST COMPANY
ATTN: EVONNE M. COSTELLO
300 INTERNATIONAL CENTRE
900 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402-3380
A-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE SALES AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES
OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE ANY OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
The Company................................................................ 3
The Bank................................................................... 3
Risk Factors............................................................... 7
The Offering............................................................... 12
Use of Proceeds............................................................ 15
Capitalization............................................................. 17
Dividend Policy............................................................ 17
Plan of Operation.......................................................... 18
Proposed Business.......................................................... 20
Management................................................................. 25
Principal Shareholders..................................................... 31
Supervision and Regulation................................................. 32
Description of the Company's Capital Stock................................. 37
Shares Eligible for Future Sale............................................ 40
Legal Matters.............................................................. 41
Experts.................................................................... 41
Available Information...................................................... 41
Index to Financial Statements.............................................. F-1
</TABLE>
----------------
UNTIL , 1998 (90 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOGO
COMMON STOCK
----------------
PROSPECTUS
----------------
BANC STOCK FINANCIAL SERVICES, INC.
A subsidiary of The Banc Stock Group
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 302A.521, subd. 2, of the Minnesota Statutes requires the Company to
indemnify a person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of the person with respect
to the Company, against judgments, penalties, fines, including, without
limitation, excise taxes assessed against the person with respect to an
employee benefit plan, settlements and reasonable expenses, including
attorneys' fees and disbursements, incurred by the person in connection with
the proceeding with respect to the same acts or omissions if such person (1)
has not been indemnified by another organization or employee benefit plan for
the same judgments, penalties or fines: (2) acted in good faith; (3) received
no improper personal benefit and statutory procedure has been followed in the
case of any conflict of interest by director; (4) in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and
(5) in the case of acts or omissions occurring in the person's official
capacity as a director, officer, board committee member or employee,
reasonably believed that the conduct was in the best interests of the Company,
or, in the case of acts or omissions occurring in the person's official
capacity as a director, officer or employee of the Company involving service
as a director, officer, partner, trustee, employee or agent of another
organization or employee benefit plan, reasonably believed that the conduct
was not opposed to the best interests of the Company. In addition, Section
302A.521, subd. 3, requires payment by the Company, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in
certain circumstances. A decision as to required indemnification is made by a
disinterested majority of the Board of Directors present at a meeting at which
a disinterested quorum is present, or by a designated committee of the Board,
by special legal counsel, by the shareholders or by a court.
The Company's Bylaws provide for indemnification to the full extent
permitted by the laws of the state of Minnesota, pursuant to Minnesota
Statutes Section 302A.521, as now enacted or hereafter amended, against and
with respect to threatened, pending or completed actions, suits or proceedings
arising from, or alleged to arise from, a party's actions or omissions as a
director, officer, employee or agent of the Company or any subsidiary of the
Company or of any other corporation, partnership, joint venture, trust or
other enterprise which has served in such capacity at the request of the
Company if such acts or omissions occurred or were or are alleged to have
occurred, while said party was a director or officer of the Company.
Generally, under Minnesota law, indemnification will only be available where
an officer or director can establish that he/she acted in good faith and in a
manner he/she reasonably believed to be in or not opposed to the best
interests of the Company.
ITEM 2. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses will be paid by the Company in connection with the
distribution of the securities registered hereby and do not include the
underwriting discount to be paid to the Sales Agent. All of such expenses,
except for the SEC registration fee and NASD fee, are estimated.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee............................................. $ 971
NASD Fee......................................................... 829
Sales Agent Expenses............................................. 35,000
Legal Fees....................................................... 20,000
Accountants' Fees and Expenses................................... 8,000
Printing Expenses................................................ 8,000
Blue Sky Fees and Expenses....................................... 5,000
Miscellaneous.................................................... 200
-------
Total.......................................................... $75,000
</TABLE>
II-1
<PAGE>
ITEM 3. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities
Act of 1933 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 of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrant further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
ITEM 4. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR.
1. In June 1998, the Registrant issued and sold 10 shares of Common Stock to
the Company's President and CEO, an accredited investor, at $10.00 per share
in reliance upon Section 4(2) of the Securities Act. The purchaser acquired
such shares for his own account and not with a view to any distribution
thereof to the public. The certificate evidencing the shares bears a legend
stating that the shares are not to be offered, sold or transferred other than
pursuant to an effective registration statement under the Securities Act or an
exemption from such registration requirements. No underwriting commissions or
discounts were paid with respect to the sale of such shares
2. In June 1998, the Registrant accepted binding subscription agreements for
the purchase of an aggregate of 121,000 shares of Common Stock at a price of
$10.00 per share by the Company's five directors who are all accredited
investors. Pursuant to the subscription agreements, the directors' obligations
to purchase the shares are conditioned upon the Bank and the Registrant
receiving all necessary governmental approvals to begin banking operations and
the closing of the Minimum. The Registrant intends to rely upon Section 4(2)
of the Securities Act and Regulation D thereunder for the issuance and sale of
such shares. The subscribers have represented that they are acquiring the
shares for their own accounts and not with a view to any distribution thereof
to the public. The certificates evidencing the shares will bear a legend
stating that the shares are not to be offered, sold or transferred other than
pursuant to an effective registration statement under the Securities Act or an
exemption from such registration requirements. No underwriting commissions or
discounts will be paid with respect to the sale of such shares.
II-2
<PAGE>
Item 5. Index to Exhibits and Item 6. Description of Exhibits
EXHIBIT DESCRIPTION
1.1 Form of Agency Agreement
1.2 Form of Selected Dealer's Agreement between Banc Stock Financial
Services, Inc. and selected dealers.
2.1 Amended and Restated Articles of Incorporation
2.2 Bylaws
3.1 Amended and Restated Articles of Incorporation (Filed as Exhibit 2.1)
3.2 Bylaws (Filed as Exhibit 2.2)
3.3 Form of Stock Certificate
4.1 Form of Subscription Agreement to be used in connection with the purchase
of shares in this Offering
6.1 Lease Agreement between the Bank and Colonial Square Partners relating
to the space located at 1650 Madison Avenue, Mankato, Minnesota
6.2 Form of Employment Agreement between the Bank and Thomas P. Stienessen
6.3 Form of Subscription Agreement executed by the Organizers in connection
with the Private Offering
6.4 Letter of Intent dated April 29, 1998 between the Company and Banc Stock
Financial Services, Inc.
6.5 Company's Incentive 1998 Stock Option Plan, including specimen of
Incentive Stock Option Agreement and Nonqualified Stock Option
Agreement
6.6 Form of Nonqualified Stock Option Agreement governing option granted to
Organizers
6.7 Form of Warrant issued to Banc Stock Financial Services, Inc. to
purchase 10,000 shares of Company Common Stock
9.1 Escrow Agreement among the Company, Banc Stock Financial Services, Inc.
and Resource Trust Company
10.1Consent of Fredrikson & Byron, P.A. (Included in Exhibit 11.1)
10.2 Consent of Bertram Cooper & Co., LLP
11.1 Opinion and Consent of Fredrikson & Byron, P.A.
15.1 Power of Attorney (included on signature page of Registration Statement)
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Mankato, State of Minnesota, on August 12, 1998.
Northern Star Financial, Inc.
By /s/ Thomas Stienessen
---------------------------------
Thomas Stienessen, President and
Chief Executive Officer
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
and on the dates indicated. Each person whose signature to this Registration
Statement appears below hereby constitutes and appoints Thomas Stienessen and
Frank Gazzola, and each of them, as his or her true and lawful attorney-in-
fact and agent, with full power of substitution, to sign on his or her behalf
individually and in the capacity stated below and to perform any acts
necessary to be done in order to file all amendments and post-effective
amendments to this Registration Statement, any registration statement filed
pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and any and
all instruments or documents filed as part of or in connection with any of
such amendments or registration statements, and each of the undersigned does
hereby ratify and confirm all that said attorney-in-fact and agent, or his or
her substitutes, shall do or cause to be done by virtue hereof.
SIGNATURES TITLE DATE
/s/ Thomas Stienessen President and Chief August 12,
- ------------------------------------- Executive Officer, 1998
Thomas Stienessen Chairman of the
Board and Director
(principal
executive officer)
/s/ Dean Doyscher Director August 12,
- ------------------------------------- 1998
Dean Doyscher
/s/ Frank Gazzola Chief Financial August 12,
- ------------------------------------- Officer, Treasurer, 1998
Frank Gazzola Secretary and
Director (principal
accounting and
financial officer)
/s/ Michael Reynolds Director August 12,
- ------------------------------------- 1998
Michael Reynolds
/s/ Thomas Reynolds Director August 12,
- ------------------------------------- 1998
Thomas Reynolds
II-4
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
NORTHERN STAR FINANCIAL, INC.
EXHIBIT INDEX TO FORM SB-1 REGISTRATION STATEMENT
EXHIBIT DESCRIPTION
1.1 Form of Agency Agreement
1.2 Form of Selected Dealer's Agreement between Banc Stock Financial
Services, Inc. and selected dealers.
2.1 Amended and Restated Articles of Incorporation
2.2 Bylaws
3.1 Amended and Restated Articles of Incorporation (Filed as Exhibit 2.1)
3.2 Bylaws (Filed as Exhibit 2.2)
3.3 Form of Stock Certificate
4.1 Form of Subscription Agreement to be used in connection with the purchase
of shares in this Offering
6.1 Lease Agreement between the Bank and Colonial Square Partners relating
to the space located at 1650 Madison Avenue, Mankato, Minnesota
6.2 Form of Employment Agreement between the Bank and Thomas P. Stienessen
6.3 Form of Subscription Agreement executed by the Organizers in connection
with the Private Offering
6.4 Letter of Intent dated April 29, 1998 between the Company and Banc Stock
Financial Services, Inc.
6.5 Company's Incentive 1998 Stock Option Plan, including specimen of
Incentive Stock Option Agreement and Nonqualified Stock Option
Agreement
6.6 Form of Nonqualified Stock Option Agreement governing option granted to
Organizers
6.7 Form of Warrant issued to Banc Stock Financial Services, Inc. to
purchase 10,000 shares of Company Common Stock
9.1 Escrow Agreement among the Company, Banc Stock Financial Services, Inc.
and Resource Trust Company
10.1Consent of Fredrikson & Byron, P.A. (Included in Exhibit 11.1)
10.2 Consent of Bertram Cooper & Co., LLP
11.1 Opinion and Consent of Fredrikson & Byron, P.A.
15.1 Power of Attorney (included on signature page of Registration Statement)
<PAGE>
Exhibit 1.1
157,000 - 329,000 SHARES
NORTHERN STAR FINANCIAL, INC.
COMMON STOCK
AGENCY AGREEMENT
_________________, 1998
BANC STOCK FINANCIAL SERVICES, INC.
1105 Schrock Road, Suite 437
Columbus, Ohio 43229
ATTN: MR. ANTHONY J. REILLY
PRESIDENT
Dear Sirs:
Northern Star Financial, Inc., a Minnesota corporation (the "Company"),
proposes to issue and sell a minimum of 157,000 and a maximum of 329,000 shares
of Common Stock, $0.01 par value per share (the "Common Stock") of the Company
(the "Shares").
The Company will be offering its common stock pursuant to an SB-1
registered offering. The Shares will be offered to the public by the Company at
a price of $10.00 per share (the "Offering"). The purpose of this Agreement is
to set forth the understanding of the parties relating to the right of Banc
Stock Financial Services, Inc., an Ohio corporation ("Banc Stock") to
participate in the sale of the Shares as the underwriter exercising its best
efforts to sell the Shares.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with Banc Stock that:
(a) A registration statement on Form SB-1 (File No. 333-__________)
with respect to the Shares has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "1933 Act"), and
the applicable rules and regulations (the "1933 Act Regulations") of the
Securities and Exchange Commission (the "Commission"), and has been filed with
the Commission; and such amendments to such registration statement as may have
been required prior to the date hereof have been filed with the Commission, and
such amendments have been similarly prepared. Such registration statement went
effective with the
<PAGE>
Commission on ______________________, 1998. Copies of such registration
statement and amendment or amendments of each related preliminary prospectus,
and the exhibits, financial statements and schedules, as finally amended and
revised, have been delivered to you.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement became
effective and, in the event any post-effective amendment thereto becomes
effective prior to the closing of the Offering, shall also mean such
registration statement as so amended. The term "Prospectus" as used in this
Agreement shall mean the prospectus relating to the Shares in the form in which
it is first filed with the Commission pursuant to Rule 424(b) of the 1933 Act
Regulations or, if no filing pursuant to Rule 424(b) of the 1933 Act Regulations
is required, shall mean the form of final prospectus included in the
Registration Statement at the time such Registration Statement becomes
effective.
(b) When the Registration Statement became effective, when the
Prospectus was first filed pursuant to Rule 424(b) of the 1933 Act Regulations,
when any amendment to the Registration Statement becomes effective, and when any
supplement to the Prospectus is filed with the Commission, (i) the Registration
Statement, the Prospectus and any amendments thereof and supplements thereto
will conform in all material respects with the applicable requirements of the
1933 Act and the 1933 Act Regulations, and (ii) neither the Registration
Statement, the Prospectus nor any amendment or supplement thereto will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by Banc Stock
expressly for use in the Registration Statement.
(c) Each of the Company and its subsidiary, Northern Star Bank (the
"Bank"), has been duly incorporated and is validly existing as a corporation, or
banking corporation, as applicable, in good standing under the laws of the state
of Minnesota with all requisite corporate power and authority to own, lease and
operate its properties and the properties it proposes to own, lease and operate
as described in the Registration Statement and the Prospectus and to conduct its
business as now conducted and as proposed to be conducted as described in the
Registration Statement and the Prospectus. Neither the Company nor the Bank have
any properties or conduct any business outside of the State of Minnesota which
would require either of them to be qualified as a foreign corporation or bank,
as the case may be, in any jurisdiction outside of Minnesota. Neither the
Company nor the Bank has any directly or indirectly held subsidiary other than
the Bank. The Company has all power, authority, authorizations, approvals,
consents, orders, licenses, certificates and permits needed to enter into,
deliver and perform this Agreement and to issue and sell the Shares.
(d) The Company has full legal right, power and authority to enter into
this Agreement, to issue, sell and deliver the Shares as provided herein and to
consummate the
-2-
<PAGE>
transactions contemplated herein. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or affecting
creditors, rights, or by general equity principles and except to the extent the
indemnification provisions set forth in Section 0 of this Agreement may be
limited by federal or state securities laws or the public policy underlying such
laws.
(e) Each consent, approval, authorization, order, license, certificate,
permit, registration, designation or filing by or with any governmental agency
or body necessary for the valid authorization, issuance, sale and delivery of
the Shares, the execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby, has been
made or obtained and is in full force and effect.
(f) Neither the issuance, sale and delivery by the Company of the
Shares, nor the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby by the Company will
conflict with or result in a breach or violation of any of the terms and
provisions of, or (with or without the giving of notice or the passage of time
or both) constitute a default under, the articles of incorporation, by-laws of
the Company; any indenture, mortgage, deed of trust, loan agreement, note, bond
or other agreement or instrument to which the Company, is a party or to which
it, any of its properties or other assets; or any applicable statute, law,
judgment, decree, order, rule or regulation of any court or governmental agency
or body applicable to the Company or its property; or result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of the Company.
(g) The Shares to be issued and sold hereunder have been validly
authorized by the Company. When issued and delivered against payment therefor,
the Shares will be duly and validly issued, fully paid and non-assessable. No
preemptive rights of shareholders exist with respect to any of the Shares. No
person or entity holds a right to require or participate in the registration
under the 1933 Act of the Shares pursuant to the Registration Statement; and,
except as set forth in the Prospectus, no person holds a right to require
registration under the 1933 Act of any shares of Common Stock of the Company at
any other time. No person or entity has a right of participation or first
refusal with respect to the sale of the Shares by the Company. The form of
certificates evidencing the Shares complies with all applicable requirements of
Minnesota law.
(h) The Common Stock purchase warrants to be issued to Banc Stock (the
"Warrants") and the Common Stock to be issued upon exercise of the Warrants are
duly authorized, and the Common Stock when issued and delivered pursuant to this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and free of pre-emptive rights of any security holder of the
Company. Neither the filing of the Registration Statement nor the offering or
sale of the Shares gives rise to any rights, other than those which have been
waived or satisfied, for or relating to the registration of any shares of Common
Stock, except as
-3-
<PAGE>
described in the Registration Statement.
(i) This Agreement has been duly and validly authorized, executed and
delivered by the Company. The Company has full power and lawful authority to
issue and sell the shares of Common Stock to be sold by it upon exercise of the
Warrants (the "Warrant Shares") on the terms and conditions set forth herein,
and no consent, approval, authorization or other order of any governmental
authority is required in connection with such authorization, execution and
delivery or with the authorization, issue and sale of the Warrant Shares or the
Warrants, except such as may be required under the 1933 Act or state securities
laws.
(j) Ten (10) shares of the Company's Common Stock are issued and
outstanding. The Company has no other issued and outstanding capital stock. The
Company's authorized capitalization is as set forth in the Prospectus under the
caption "DESCRIPTION OF THE COMPANY'S CAPITAL STOCK." Upon issuance, sale, and
delivery thereof against payment therefor pursuant to the subscription
agreement, all of the capital stock of the Bank will be duly authorized and
validly issued, fully paid and nonassessable and will be owned by the Company
free and clear of all liens, encumbrances and security interests. There is no
outstanding option, warrant or other right calling for the issuance of, and no
commitment, plan or arrangement to issue, any share of stock of the Company or
the Bank or any security convertible into or exchangeable for stock of the
Company or the Bank, except for the Warrants and the stock options described in
the Registration Statement (the "Stock Options").
(k) The financial statements of the Company in the Registration
Statement and the Prospectus present fairly the financial position of the
Company as of the dates indicated and the results of operations and cash flows
for the periods specified, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods specified. The
financial statement schedule included in the Registration Statement and the
amounts in the Prospectus under the caption "Prospectus Summary" fairly presents
the information shown therein and has been compiled on a basis consistent with
the financial statements included in the Registration Statement and the
Prospectus. No other financial statements or schedules are required by Form SB-1
or otherwise to be included in the Registration Statement or the Prospectus. The
unaudited pro forma combined financial information (including the related notes)
included in the Prospectus complies as to form in all material respects to the
applicable accounting requirements of the 1933 Act and the 1933 Act Regulations
and management of the Company believes that the assumptions underlying the pro
forma adjustments are reasonable. Such pro forma adjustments have been properly
applied to the historical amounts in the compilation of the information and such
information fairly presents with respect to the Company the pro forma financial
position, results of operations and other information purported to be shown
therein at the respective dates and for the respective periods specified.
(l) Bertram Cooper & Co., LLP, who have examined and are reporting upon
the audited financial statements and schedules included in the Registration
Statement, are, and were during the periods covered by their Reports included in
the Registration Statement and the
-4-
<PAGE>
Prospectus, independent public accountants, as required by the 1933 Act and the
1933 Act Regulations.
(m) The Company has not sustained any material loss or interference
with its business from fire, explosion, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
arbitrators' or court or governmental action, order or decree, otherwise than as
set forth or contemplated in the Prospectus; and, since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
and except as otherwise stated in the Registration Statement and Prospectus,
there has not been (i) any material adverse change, or any development which
could reasonably be seen as involving a prospective material adverse change, in
or affecting the business prospects, properties, assets, results of operations
or condition (financial or other) of the Company, (ii) any liability or
obligation, direct or contingent, incurred or undertaken by the Company, which
is material to the business or condition (financial or other) of the Company,
(iii) any declaration or payment of any dividend or distribution of any kind on
or with respect to the capital stock of the Company, (iv) any material change in
the capital stock of the Company, or (v) any transaction that is material to the
Company except as otherwise disclosed in the Registration Statement and the
Prospectus.
(n) Neither the Company nor the Bank is in violation of its articles of
incorporation or charter, as applicable, or by-laws, and no default exists, and
no event has occurred, nor state of facts exists, which, with notice or after
the lapse of time to cure or both, would constitute a default in the due
performance and observance of any obligation, agreement, term, covenant,
consideration or condition contained in any indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument to which the
Company is a party or by which it or any of its properties is subject. Neither
the Company nor the Bank is in violation of, or in default with respect to, any
statute, law, rule, regulation, order, judgment or decree, except as may be
properly described in the Prospectus or such as is in the aggregate does not now
have and will not in the future have a material adverse effect on the respective
financial positions, results of operations or businesses of the Company or the
Bank.
(o) Except as described in the Prospectus, there is not pending or, to
the best knowledge of the Company after reasonable investigation, threatened any
action, suit, proceeding, inquiry or investigation against the Company, its
officers and directors or to which the properties, assets or rights of the
Company are subject, before or brought by any court or governmental agency or
body or board of arbitrators, which could result in any material adverse change
in the business, prospects, properties, assets, results of operations or
condition (financial or otherwise) of the Company.
(p) The descriptions in the Registration Statement and the Prospectus
of the contracts, leases and other legal documents therein described present
fairly the information required to be shown, and there are no contracts, leases,
or other documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
-5-
<PAGE>
Registration Statement which are not described or filed as required. To the best
knowledge of the Company, there are no statutes or regulations applicable to the
Company or certificates, permits or other authorizations from governmental
regulatory officials or bodies required to be obtained or maintained by the
Company of a character required to be disclosed in the Registration Statement or
the Prospectus which have not been so disclosed and properly described therein.
All agreements between the Company and third parties expressly referenced in the
Prospectus are legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization or other laws of
general applicability relating to or affecting creditors' rights and by general
equitable principles.
(q) Each of the Company and the Bank owns, possesses or has obtained
all material permits, licenses, franchises, certificates, consents, orders,
approvals and other authorizations of governmental or regulatory authorities as
are necessary to own or lease, as the case may be, and to operate their
properties and to carry on their businesses as presently conducted, or as
contemplated in the Prospectus to be conducted, and neither the Company nor the
Bank has received any notice of proceedings relating to revocation or
modification of any such licenses, permits, certificates, consents, orders,
approvals or authorizations.
(r) The Company owns or possesses adequate license or other rights to
use all patents, trademarks, service marks, trade names, copyrights, software
and design licenses, trade secrets, manufacturing processes, other intangible
property rights and know-how (collectively "Intangibles") necessary to entitle
it to conduct its business now, and as proposed to be conducted or operated as
described in the Prospectus, and the Company has not received notice of
infringement or of conflict with (and knows of no such infringement of or
conflict with) asserted rights of others with respect to any Intangibles which
could materially and adversely affect its business, prospects, properties,
assets, results of operation or condition (financial or otherwise).
(s) To the best of the Company's knowledge, the Company's systems of
internal accounting controls taken as a whole are sufficient to meet the broad
objectives of internal accounting control insofar as those objectives pertain to
the prevention or detection of errors or irregularities in amounts that would be
material in relation to the Company's financial statements; and, to the best of
the Company's knowledge, neither the Company, nor any employee or agent thereof,
has made any payment of funds of the Company or received or retained any funds
and no funds of the Company have been set aside to be used for any payment, in
each case in violation of any law, rule or regulation.
(t) The Company has filed on a timely basis all necessary federal,
state, local and foreign income and franchise tax returns required to be filed
through the date hereof and have paid all taxes shown as due thereon; and no tax
deficiency has been asserted against the Company, nor does the Company know of
any tax deficiency which is likely to be asserted against the Company which if
determined adversely to the Company, could materially adversely
-6-
<PAGE>
affect the business, prospects, properties, assets, results of operations or
condition (financial or otherwise) of the Company.
(u) The Company maintains insurance (issued by insurers of recognized
financial responsibility) of the types and in the amounts generally deemed
adequate for its business consistent with insurance coverage maintained by
similar companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
(v) The Company and its officers, directors or affiliates have not
taken and will not take, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in or constitute the
stabilization or manipulation of any security of the Company or to facilitate
the sale or resale of the Shares in violation of any law, rule or regulation.
(w) The Company has not incurred any liability for a fee, commission or
other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than as
contemplated hereby.
(x) Except as otherwise disclosed in the Prospectus, the Company has
not authorized or conducted nor has knowledge of the generation, transportation,
storage, presence, use, treatment, disposal, release, or other handling of any
hazardous substance, hazardous waste, hazardous material, hazardous constituent,
toxic substance, pollutant, contaminant, asbestos, radon, polychlorinated
biphenyls ("PCBs"), petroleum product or waste (including crude oil or any
fraction thereof), natural gas, liquefied gas, synthetic gas or other material
defined, regulated, controlled or potentially subject to any remediation
requirement under any environmental law (collectively, "Hazardous Materials"),
on, in, under or affecting any real property currently leased or owned or by any
means controlled by the Company (the "Real Property") except as in material
compliance with applicable laws; to the knowledge of the Company, the Real
Property and the Company's operations with respect to the Real Property are in
compliance with all federal, state and local laws, ordinances, rules,
regulations and other governmental requirements relating to pollution, control
of chemicals, management of waste, discharges of materials into the environment,
health, safety, natural resources, and the environment (collectively,
"Environmental Laws"), and the Company has, and is in compliance with, all
licenses, permits, registrations and government authorizations necessary to
operate under all applicable Environmental Laws. Except as otherwise disclosed
in the Prospectus, the Company has not received any written or oral notice from
any governmental entity or any other person and there is no pending or
threatened claim, litigation or any administrative agency proceeding that:
alleges a violation of any Environmental Laws by the Company; alleges that the
Company is a liable party or a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
S 9601, et seq., or any state superfund law; has resulted in or could result in
the attachment of an environmental lien on any of the Real Property; or, alleges
that the Company is liable for any contamination of the
-7-
<PAGE>
environment, contamination of the Real Property, damage to natural resources,
property damage, or personal injury based on their activities or the activities
of their predecessors or third parties (whether at the Real Property or
elsewhere) involving Hazardous Materials whether arising under the Environmental
Laws, common law principles or other legal standards.
(y) The Company will not become as a result of the transactions
contemplated hereby or will not conduct its business in a manner in which it
would become, "an investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act").
(z) No relationship, direct or indirect, exists between or among any of
the Company or any affiliate of the Company, on the one hand, and any director,
officer, stockholder, customer or supplier of the Company or any affiliate of
the Company, on the other hand, that is required by the 1933 Act or by the 1933
Act Regulations to be described in the Registration Statement or the Prospectus
which is not so described or is not adequately described.
(aa) All offers and sales by the Company of the Company's securities
prior to the date hereof were at all relevant times duly registered under or
exempt from the registration requirements of the 1933 Act and were duly
registered in accordance with or the subject of an available exemption from
registration under the applicable blue sky laws. The Company has not effected
any sales of securities that would be required to be disclosed in response to
Item 701 of Regulation S-B that are not disclosed in the Registration Statement.
(bb) The application for permission to organize the Bank (the "DOC
Application") was approved by the Department of Commerce for the State of
Minnesota, (the "DOC") on _____________, 1998, pursuant to Order No.
____________________ (the "DOC Order)." All conditions contained in the DOC
Order required to be satisfied before the date of this Agreement have been
satisfied. The application to the Federal Deposit Insurance Corporation (the
"FDIC") to become an insured depository institution under the provisions of the
Federal Deposit Insurance Act (the "FDIC Application") was approved by order of
the FDIC dated ___________________, 1998 (the "FDIC Order"), subject to certain
conditions specified in the Order. All conditions contained in the FDIC Order
required to be satisfied before the date of this Agreement have been satisfied.
The Company's application to become a bank holding company and acquire all
issued capital stock of the Bank (the "Bank Holding Company Application") under
the Bank Holding Company Act of 1956, as amended, was approved on
_______________, 1998 (the "Federal Reserve Board Approval"), subject to certain
conditions specified in the Federal Reserve Board Approval. All conditions in
the Federal Reserve Board Approval required to be satisfied before the date of
this Agreement have been satisfied. Each of the DOC Application, FDIC
Application, and Bank Holding Company Application, at the time of their
respective filings, contained all required information and such information was
complete and accurate in all material respects. Other than the remaining
conditions to be fulfilled under the DOC Order, FDIC Order and the Federal
Reserve Board Approval specified above, no authorization, approval, consent,
order, license, certificate or permit of and from any federal, state, or local
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governmental or regulatory official, body, or tribunal, is required for the
Company or the Bank to commence and conduct their respective businesses and own
their respective properties as described in the Prospectus, except such
authorizations, approvals, consents, orders, licenses, certificates, or permits
as are not material to the commencement or conduct of their respective
businesses or to the ownership of their respective properties.
Any certificate signed by any officer of the Company on behalf of the
Company and delivered to Banc Stock shall be deemed a representation and
warranty of the Company as to the matters covered thereby.
SECTION 2. CERTAIN COVENANTS OF THE COMPANY. The Company covenants and
agrees with Banc Stock as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective (if not yet effective at the date and time that
this Agreement is executed and delivered by the parties hereto). The Company
will notify you immediately, and confirm the notice in writing, (i) when the
Registration Statement, or any post-effective amendment to the Registration
Statement, shall have become effective, or any supplement to the Prospectus or
any amended Prospectus shall have been filed, (ii) of the receipt of any
comments from the Commission, (iii) of any request by the Commission to amend
the Registration Statement or amend or supplement the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the institution or threatening of any proceeding for any
such purposes. The Company will use every reasonable effort to prevent the
issuance of any such stop order or of any order preventing or suspending such
use and, if any such order is issued, to obtain the withdrawal thereof at the
earliest possible moment.
(b) The Company will not at any time file or make any amendment to the
Registration Statement, or any amendment or supplement to the Prospectus if you
shall not have previously been advised and furnished a copy thereof a reasonable
time prior to the proposed filing, or if you or your counsel reasonably object
to such amendment or supplement.
(c) The Company will deliver to you, at the Company's expense, from
time to time as requested, such number of copies of the Prospectus (as
supplemented or amended) as you may reasonably request. If the delivery of a
Prospectus is required at any time prior to the expiration of nine (9) months
after the time of issue of the Prospectus in connection with the offering or
sale of the Shares and if at such time any events shall have occurred as result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made when such Prospectus is delivered not misleading, or, if for any
reason it shall be necessary during such same period to amend or supplement the
Prospectus in order to comply with the 1933 Act, the Company will notify you and
upon your
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request prepare and furnish without charge to you and to any dealer in
securities as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance.
(d) The Company will use its best efforts to qualify the Shares for
offering and sale under the applicable securities laws of those states listed on
Exhibit D to this Agreement and to maintain such qualifications in effect for as
long as may be necessary to complete the distribution of the Shares. The Company
will file such statements and reports as may be required by the laws of each
jurisdiction in which the Shares have been qualified as above provided.
(e) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than the end of the fiscal
quarter first occurring after the first anniversary of the "effective date of
the Registration Statement" (as defined in Rule 158(c) of the 1933 Act
Regulations), an earnings statement complying with the provisions of Section
11(a) of the 1933 Act and Rule 158 thereunder and covering a period of at least
twelve (12) months beginning after the effective date of the Registration
Statement.
(f) The Company will furnish to its security holders of record, as soon
as practicable after the end of each respective period, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of operations for each of the first three quarters
of the fiscal year. During a period of five (5) years after the date hereof, the
Company will furnish to you: (i) concurrently with furnishing such reports to
its security holders, statements of operations of the Company for each of the
first three (3) quarters in the form furnished to the Company's security
holders; (ii) concurrently with furnishing to its security holders, a balance
sheet of the Company as of the end of such fiscal year, together with statements
of operations, of cash flows and of security holders, equity of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon of
independent public accountants; (iii) as soon as they are available, copies of
all reports (financial or otherwise) mailed to security holders; (iv) as soon as
they are available, copies of all reports and financial statements furnished to
or filed with the Commission, any securities exchange or the NASD; (v) every
material press release in respect of the Company or its affairs which is
released or prepared by the Company, and (vi) any additional information of a
public nature concerning the Company or its business that you may reasonably
request. During such five (5)-year period, the foregoing financial statements
shall be on a consolidated basis to the extent that the accounts of the Company
are consolidated with any subsidiaries, and shall be accompanied by similar
financial statements for any significant subsidiary that is not so consolidated.
(g) Except as contemplated by or described in the Prospectus, for a
period of one year from the date hereof, the Company and each of its executive
officers and directors will not, without your prior written consent, directly or
indirectly, sell, offer to sell, grant any option for the sale of, or otherwise
dispose of, any shares of Common Stock or securities convertible into Common
Stock. The Company has obtained from all of its executive officers and directors
their written agreement that for a period of one (1) year from the closing of
the Offering, they will not
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offer to sell, sell, transfer, contract to sell, or grant any option for the
sale of or otherwise dispose of, directly or indirectly, any shares of Common
Stock of the Company (or any securities convertible into or exercisable for such
shares of Common Stock), except for (1) the exercise of stock options under the
Stock Option Plan or (2) gifts of Common Stock (or other securities) to a donee
or donees who agree in writing to be bound by this clause
(h) The Company will use its best efforts to arrange to have its shares
quoted on the OTC Bulletin Board.
(i) The Company is familiar with the Investment Company Act and the
rules and regulations thereunder, and has in the past conducted its affairs, and
will in the future conduct its affairs, in such a manner so as to ensure that
the Company was not and will not be an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act.
(j) The Company will not, and will use its best efforts to cause its
officers, directors and affiliates not to, (i) take, directly or indirectly
prior to termination of the distribution of the Shares contemplated by this
Agreement, any action designed to stabilize or manipulate the price of any
security of the Company, or which may cause or result in, or which might in the
future reasonably be expected to cause or result in, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of any of the Shares, (ii) sell, bid for, purchase or pay anyone any
compensation for soliciting purchases of the Shares or (iii) pay or agree to pay
to any person any compensation for soliciting any order to purchase any other
securities of the Company which, in any such case, is in violation of any law,
rule or regulation.
(k) The Company will file timely and accurate reports on Form SR with
the Commission in accordance with Rule 463 of the 1933 Act Regulations or any
successor provision.
(l) Prior to the closing of the Offering, the Company will not, and
will use its best efforts to cause any affiliate of the Company not to issue a
press release or other official communication directly or indirectly, nor hold a
press conference with respect to the Company or with respect to the financial
condition, results of operations, business, properties, assets or liabilities of
the Company, or the offering of the Shares, without your prior written input
within 72 hours which consent shall not be unreasonably withheld.
(m) The Company will notify you promptly of any material adverse change
affecting any of its representations, warranties, agreements and indemnities
herein at any time prior to the closing of the Offering and take such steps as
may be reasonably requested by you either to remedy or publicize the same, or
both.
(n) The Company will reserve and keep available that maximum number of
its authorized but unissued shares of Common Stock which are issuable upon
exercise of the
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Warrants outstanding from time to time. The Warrants will be substantially in
the form attached hereto as Exhibit A.
(o) For a period of five (5) years from the Effective Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit and without issuing any opinion
thereon) the Company's financial statements for each of the first three (3)
fiscal quarters prior to the announcement of quarterly financial information,
the filing of the Company's 10-Q quarterly report and the mailing of quarterly
financial information to Stockholders.
(p) As promptly as practicable after the closing of the Offering, the
Company will prepare, at its own expense, hard cover "bound volumes" relating to
the Offering, and will distribute such volumes to the individuals designated by
you.
(q) The Company shall acquire all of the Bank's outstanding capital
stock, free and clear of all liens, encumbrances, or other claims or
restrictions whatsoever, for not less than $1,570,000 from the proceeds of the
Offering and, in all other material respects, apply the net proceeds from the
Offering in the manner set forth under "Use of Proceeds" in the Prospectus.
(r) The Company shall cause the proper submission of such certificates
and notices necessary, and shall in all other respects use reasonable efforts,
to comply with the requirements of, and satisfy the conditions of, the DOC
Order, the FDIC Order and the Federal Reserve Board Approval, which are required
to be complied with prior to the Bank commencing the business of banking.
(s) For a period of one (1) year from the date of this Agreement, the
Company will provide Banc Stock with a right of first refusal to serve as a
managing underwriter on any public or private financing (debt or equity), or act
as an advisor on any merger, business combination, recapitalization or sale of
some or all of the equity or assets of the Company (collectively, the "future
services"). In the event Banc Stock is engaged by the Company to provide such
future services, Banc Stock will be compensated as is reasonable and customary
within the industry.
SECTION 3. ENGAGEMENT, COMPENSATION AND PAYMENT OF EXPENSES.
(a) (i) Subject to the terms and conditions of this Agreement, the
Company hereby engages Banc Stock from the date hereof until
__________, 1998, on a "best efforts" basis, as the
Company's exclusive agent in connection with the sale of a
minimum of 157,000 Shares up to a maximum of 329,000 Shares.
Each of Banc Stock and the Company agree to comply with the
terms of that certain Escrow Agreement (the "Escrow
Agreement") by and among the Company, Banc Stock, and United
Bankers Bank (the "Escrow Agent") dated _________, 1998.
(The Escrow Agreement is attached hereto as Exhibit B and is
incorporated
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herein by this reference.) The minimum amount of each sale
shall be 100 Shares. The maximum amount of any sale shall
not exceed 4.9% of the total number of Shares sold in the
Offering.
(ii) The price at which Banc Stock shall sell the Shares, as
agent for the Company, shall be $10.00 per share, and,
except with respect to the Company Directed Shares (as
defined hereinbelow), the Company shall pay to Banc Stock a
commission of $0.65 per share. The Company shall pay to Banc
Stock a commission of $0.55 per share for each Company
Directed Share (up to a maximum of 100,000 shares). All
subscriptions shall be subject to Banc Stock's acceptance,
and Banc Stock shall have the right in its sole discretion
to accept or reject any subscription, and to allocate Shares
among subscribers. Banc Stock may form a group of securities
dealers (the "Selected Dealers") pursuant to a Selected
Dealer Agreement to find subscribers for the Shares.
However, failure to engage any Selected Dealers shall not
constitute a failure to discharge its duties under this
Agreement. The allocation of Shares among Banc Stock and the
Selected Dealers shall be made by Banc Stock. "Company
Directed Shares" means those Shares subscribed to by the
persons listed on Exhibit C to this Agreement.
(iii) The Company shall deliver certificates representing the
Shares to shareholders of the Company as soon as practicable
after the distribution of the escrowed funds in accordance
with the terms of the Escrow Agreement, and thereafter, as
soon as practicable after acceptance of any subscription.
(iv) Banc Stock shall use its best efforts to assist the Company
in making sales of the Shares pursuant to the Offering. Banc
Stock makes no representations as to the amount of Shares it
will be able to sell. There is no firm commitment to sell
any certain amount of the Shares by Banc Stock. In the event
that the minimum 157,000 Shares are not subscribed and paid
for by the "Expiration Date" as such term is defined in the
Prospectus, this Agreement shall automatically be terminated
and the proceeds received from the subscriptions distributed
in accordance with the terms of the Escrow Agreement.
(v) Banc Stock will only offer the Shares in those states listed
on Exhibit D to this Agreement.
(b) Banc Stock shall offer the Shares pursuant to the Prospectus.
(c) As an incentive for Banc Stock to perform its services in a timely
manner,
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<PAGE>
Warrants shall be issued to Banc Stock or its designees as described in Section
0 hereof.
(d) The Company will pay and bear all costs, fees and expenses incident
to the performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits), as originally filed and as amended, the
Prospectus and any amendments or supplements thereto, and the cost of furnishing
copies thereof to you, (ii) the preparation of any Selected Dealers Agreement,
the certificates representing the Shares, the Blue Sky Memoranda and any
instruments relating to any of the foregoing, (iii) the issuance and delivery of
the Shares to the purchasers, including any transfer taxes payable upon the sale
of the Shares, (iv) the fees and disbursements of the Company's counsel and
accountants, (v) the qualification of the Shares under the applicable securities
laws in accordance with Section 0 of this Agreement and any filing for review of
the offering with the National Association of Securities Dealers, Inc.,
including filing fees and fees and disbursements of your counsel in connection
therewith and in connection with the Blue Sky Memoranda, (vi) all costs, fees
and expenses in connection with the application for quotation of the Shares on
the OTC Bulletin Board, (vii) costs related to travel and lodging incurred by
the Company and its representatives relating to meetings with and presentations
to prospective purchasers of the Shares reasonably determined by you to be
necessary or desirable to effect the sale of the Shares to the public, (viii)
Banc Stock's out-of-pocket expenses (up to a maximum of $15,000) and legal fees
(up to a maximum of $20,000), (ix) costs and expenses incident to the
performance of the Company's obligations under the Escrow Agreement, and (x) all
other costs and expenses incident to the performance of the Company's
obligations hereunder that are not otherwise specifically provided for in this
section.
SECTION 4. OPINION OF COUNSEL AND OTHER CONDITIONS.
As a condition to the performance of your duties and obligations
hereunder, you shall have received a favorable opinion of Fredrickson & Byron,
P.A. counsel for the Company in form and substance satisfactory to counsel for
you, to the effect that:
(a) Each of the Company and its subsidiary, Northern Star Bank, has
been duly incorporated and is validly existing as a corporation, or banking
corporation, as applicable, in good standing under the laws of the State of
Minnesota with all requisite corporate power and authority to own, lease and
operate its properties and the properties it proposes to own, lease and operate
as described in the Registration Statement and the Prospectus and to conduct its
business as now conducted and as proposed to be conducted as described in the
Registration Statement and the Prospectus. To the best of such counsel's
knowledge after due inquiry and reasonable investigation, there are no other
jurisdictions in which the ownership or leasing of the Company's or Bank's
properties or the nature or conduct of their businesses as now conducted or
proposed to be conducted as described in the Registration Statement and the
Prospectus requires such qualification, except where the failure to do so would
not have a material adverse effect on the Company. To such counsel's best
knowledge after due inquiry and reasonable investigation, neither the Company or
the Bank owns or controls, directly or indirectly, any corporation,
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association or other entity (except for the Bank in the case of the Company).
(b) The Company has full legal right, power and authority to enter
into, deliver and perform this Agreement, to issue, sell and deliver the Shares
as provided herein and to consummate the transactions contemplated herein. This
Agreement has been duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery by the other parties hereto,
constitutes a valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general applicability
relating to or affecting creditors' rights and by general equity principles and
except to the extent that enforcement of the indemnification provisions set
forth in Section 0 of this Agreement may be limited by federal or state
securities laws or the public policy underlying such laws.
(c) Each consent, approval, authorization, order, license, certificate,
permit, registration, designation or filing by or with any governmental agency
or body necessary for the valid authorization, issuance, sale and delivery of
the Shares and the execution, delivery and performance of this Agreement has
been made or obtained and is in full force and effect.
(d) Neither the issuance, sale and delivery by the Company of the
Shares to purchasers thereof, nor the execution, delivery and performance of
this Agreement, nor the consummation of the transactions contemplated hereby or
thereby by the Company will violate any of the terms and provisions of, or
constitute a default under, any of the articles of incorporation or by-laws of
the Company, or, to such counsel's best knowledge after due inquiry and
reasonable investigation, under any material indenture, mortgage, trust, deed of
trust, loan agreement, note, lease or other agreement or instrument to which the
Company is a party or to which any of its properties or other assets is subject;
or, to such counsel's best knowledge after due inquiry and reasonable
investigation, violate any applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body; or, to such counsel's
best knowledge after due inquiry and reasonable investigation, result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of any of the foregoing.
(e) The description of the Company's authorized capital stock contained
in the Registration Statement and the Prospectus under the caption "Description
of the Company's Capital Stock" meets the requirements of Item 12 of Form SB-1
under the 1933 Act, and the Common Stock conforms in all material respects as to
legal matters to the description thereof contained in the Registration Statement
and the Prospectus.
(f) The Warrants and the Shares to be issued pursuant to the Offering
have been validly authorized by the Company. When issued and delivered, the
Shares and Warrant Shares will be validly issued, fully paid and nonassessable.
No preemptive rights of shareholders exist with respect to any of the Shares. To
such counsel's best knowledge after due inquiry and reasonable investigation, no
person or entity holds a right to require or participate in the registration
under the 1933 Act of the Shares pursuant to the Registration Statement; and,
except
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as set forth in the Prospectus, no person holds a right to require registration
under the 1933 Act of any shares of Common Stock of the Company at any other
time. To such counsel's best knowledge after due inquiry and reasonable
investigation, no person or entity has a right of participation or first refusal
with respect to the sale of the Shares by the Company. The form of certificates
evidencing the Shares comply with all applicable requirements of Minnesota law.
(g) The Company has an authorized capitalization as set forth in the
Prospectus under the caption "Description of the Company's Capital Stock" as of
the date therein. At the date of this Agreement, the Company has ten (10) issued
and outstanding shares of capital stock, all of which are Common Stock. The
Common Stock conforms in all material respects to the description of the Common
Stock contained in the Prospectus. To the best knowledge of such counsel after
due inquiry and reasonable investigation, except as disclosed in the Prospectus,
there is no outstanding option, warrant or other right calling for the issuance
of, and no commitment, plan or arrangement to issue, any shares of capital stock
of the Company or any security convertible into or exchangeable for capital
stock of the Company.
(h) To the best knowledge of such counsel after due inquiry and
reasonable investigation, neither the Company nor the Bank is in violation of
its articles of incorporation or charter, as applicable, or by-laws, and no
material default exists and no event has occurred which, with notice or after
the lapse of time to cure or both, would constitute a material default in the
due performance and observance of any obligation, agreement, term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
note, lease or other agreement or instrument known to such counsel to which any
such entity is a party or by which any such entity or any of its properties is
subject. To the best knowledge of such counsel after due inquiry and reasonable
investigation, neither the Company nor the Bank is in violation of, or in
default with respect to, any statute, rule, regulation, order, judgment or
decree, except as may be properly described in the Prospectus or such as in the
aggregate does not now have and will not in the future have a material adverse
effect on the financial position, results of operations or business of each such
entity, respectively.
(i) To such counsel's best knowledge after due inquiry and reasonable
investigation and except as described in the Prospectus, there is not pending or
threatened, any action, suit, proceeding, inquiry or investigation against the
Company or any of its officers and directors or to which the properties, assets
or rights of the Company or such persons are subject, which, if determined
adversely to the Company or any such persons, would individually or in the
aggregate have a material adverse effect on the financial position, results of
operations or business of any such entity, respectively.
(j) The descriptions in the Registration Statement and the Prospectus
of the contracts, leases and other legal documents therein described present
fairly the information required to be shown and there are no contracts, leases
or other documents known to such counsel of a character required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement which are not described or filed as required. There
are
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<PAGE>
no statutes or regulations applicable to the Company or certificates, permits or
other authorizations from governmental regulatory officials or bodies required
to be obtained or maintained by the Company, known to such counsel, of a
character required to be disclosed in the Registration Statement or the
Prospectus which have not been so disclosed and properly described therein. To
such counsel's best knowledge after due inquiry and reasonable justification,
all agreements between the Company, and third parties expressly referenced in
the Prospectus are legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization or other
laws of general applicability relating to or affecting creditors' rights and to
general equitable principles.
(k) The Registration Statement has become effective under the 1933 Act
and no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or is pending
or contemplated under the 1933 Act. Other than financial statements and other
financial and operating data and schedules contained therein, as to which
counsel need express no opinion, the Registration Statement, the Prospectus and
any amendment or supplement thereto, conform as to form in all material respects
with the requirements of Form SB-1 under the 1933 Act Regulations.
(l) The Registration Statement, or any further amendment thereto made
prior to the date hereof, on its effective date, contained or contains no untrue
statement of a material fact and did not omitted or does not omit to state any
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
or neither the Prospectus nor any amendment or supplement thereto, as of its
issue date, contained or contains any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that such counsel need express no belief regarding the
financial statements and related schedules and other financial data contained in
the Registration Statement, any amendment thereto, or the Prospectus, or any
amendment or supplement thereto).
(m) The Company is not an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act.
(n) The descriptions in the Prospectus of statutes, regulations, legal
or governmental proceedings are accurate and present fairly a summary of the
information required to be shown under the 1933 Act and the 1933 Act
Regulations. The information in the Prospectus under the caption "Shares
Eligible for Future Sale," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel, is correct and presents
fairly the information required to be disclosed therein under the 1933 Act and
the 1933 Act Regulations.
(o) To such counsel's best knowledge after due inquiry and reasonable
investigation, no relationship, direct or indirect, exists between or among any
of the Company or any affiliate
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of the Company, on the one hand, and any director, officer, stockholder,
customer or supplier of the Company or any affiliate of the Company, on the
other hand, that is required by the 1933 Act or by the 1933 Act Regulations to
be described in the Registration Statement or the Prospectus which is not so
described or is not adequately described.
(p) All sales by the Company of the Company's securities prior to the
date hereof were at all relevant times duly registered under or effected in a
manner which was exempt from the registration requirements of the 1933 Act and
were duly registered in accordance with or the subject of an available exemption
from the registration requirements of the applicable blue sky laws. The Company
has not effected any sales of securities that would be required to be disclosed
in response to Item 701 of Regulation S-B that are not disclosed in the
Registration Statement.
In rendering the foregoing opinion, such counsel may rely on the
following:
(i) as to matters involving the application of laws other than
the laws of the United States and jurisdictions in which
they are admitted, to the extent such counsel deems proper
and to the extent specified in such opinion, upon an opinion
or opinions (in form and substance reasonably satisfactory
to Underwriters' counsel) of other counsel familiar with the
applicable laws,
(ii) as to matters of fact, to the extent they deem appropriate,
on certificates of responsible officers of the Company and
certificates or other written statements of officers or
departments of various jurisdictions having custody of
documents respecting the existence or good standing of the
Company provided that copies of all such opinions,
statements or certificates shall be delivered to your
counsel. The opinion of counsel for the Company shall state
that the opinion of any other counsel, or certificate or
written statement, on which such counsel is relying is in
form satisfactory to such counsel and that you and they are
justified in relying thereon.
SECTION 5. WARRANTS. The Company will issue one (1) warrant certificate
(a "Certificate") in favor of Banc Stock in the amount of 10,000 Warrants
substantially in the form attached hereto as Exhibit A. Each Warrant entitles
the holder thereof to purchase one (1) fully paid and nonassessable share of
Common Stock of the Company at any time from _________________, 1998 through
____________________,2003. With regard to the Warrants, the parties agree as
follows:
(a) Payment of Taxes. The Company will pay all documentary stamp taxes,
if any, attributable to the issuance and delivery of the shares upon the
exercise of the Warrants; provided, however, that the Company shall not be
required to pay any taxes which may be
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payable in respect of any transfer involved in the issuance or delivery of any
Warrant or any shares in any name other than that of Banc Stock, which transfer
taxes shall be paid by the holder thereof.
(b) Compliance with Securities Laws. The Warrants and the shares
issuable upon the exercise of the Warrants have not been and will not be
registered under the 1933 Act, or under any state or blue sky laws, and the
Warrants may not be exercised unless the Warrants and the shares issuable upon
the exercise of the Warrants have been registered under the 1933 Act and any
applicable state or blue sky laws or exemptions from the registration
requirements under the 1933 Act and any applicable state or blue sky laws are
available.
(c) Transfer of Warrants. The Warrants shall be transferrable only on
the books of the Company maintained at the Company's principal office upon
delivery of the Certificate with a form of assignment attached thereto duly
completed and signed by Banc Stock (or any subsequent registered holder of the
Warrants) or by its duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment or authority to transfer.
(d) Exchange and Replacement of Certificate; Loss or Mutilation of
Certificate.
(i) The Certificate is exchangeable without expense, upon the
surrender thereof by the holder thereof at the principal
office of the Company for a new certificate of like tenor
and date representing in the aggregate the right to purchase
the same number of shares in such denomination as shall be
designated by the holder thereof at the time of such
surrender.
(ii) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or
mutilation of the Certificate and, in case of such loss,
theft or destruction of indemnity and security reasonably
satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender
and cancellation of the Certificate, if mutilated, the
Company will make and deliver a new Certificate of like
tenor, in lieu thereof.
(e) Subdivision and Combination. In the event that the Company shall at
any time after the initial issuance date of the Warrants and before the exercise
or expiration of all the Warrants, subdivide or combine the outstanding shares
of Common Stock or declare a dividend consisting solely of shares of Common
Stock, the Purchase Price (as defined in the Certificate) shall forthwith be
proportionately (based on the change in the fully-diluted number of shares of
Common stock outstanding assuming the grant of all available options under then
existing stock option plans, and the exercise and conversion of all outstanding
options, warrants and convertible securities immediately before such subdivision
or combination) decreased in the case of a subdivision or increased in the case
of a combination.
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(f) Adjustment in Number of Shares. (i) Upon each adjustment of the
Purchase Price pursuant to the provisions of this Section 0, the number of
shares issuable upon the exercise of the Warrants held of record by the holder
thereof shall be adjusted to the nearest full share by multiplying a number
equal to the Purchase Price in effect immediately prior to such adjustment by
the number of shares issuable upon exercise of the Warrants immediately prior to
such adjustment and dividing the product so obtained by the adjusted Purchase
Price. (ii) On the happening of an event requiring an alteration or adjustment
of the shares purchasable upon exercise of the Warrants, or an alteration or
adjustment of their number of designation, the Company shall give written notice
to the registered holder or holders of the Warrants stating the adjusted number,
designation and kind of securities or other property obtainable upon exercise of
the Warrants as a result of and following the event. The notice shall set forth
in reasonable detail the method of calculation determining the securities or
property obtainable after the event, and the facts upon which the calculation is
based. The Company's Board of Directors, acting in good faith, shall determine
the calculation.
(g) Adjustment for Reclassification, Consolidation, Merger, Sale or
Conveyance.
(i) In the event of any reclassification or change in the kind
of the outstanding shares of Common Stock into different
securities (other than a change in the number of outstanding
shares or a change in par value to no par value, or from no
par value to par value, or as a result of a subdivision or
combination), or in the event of any consolidation of the
Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which
the Company is the surviving corporation and which does not
result in any reclassification or change in the kind of the
outstanding shares of Common stock into different
securities, except a change as a result of a subdivision or
combination of such shares or a change in the number of
outstanding shares or a change in par value, as aforesaid),
or in the case of a sale or conveyance to another
corporation of all or substantially all of the assets of the
Company, or in the event of a statutory share exchange
pursuant to which outstanding shares of Common Stock are
exchanged for different securities, after the initial
issuance date of the Warrants and before the Expiration Date
(as defined in the Certificate), the holder thereof shall
thereafter have the right to convert into and to purchase
the kind and respective number of shares of stock and other
securities and property receivable upon such
reclassification, change, consolidation, merger, statutory
share exchange, sale or conveyance as if the holder thereof
were the owner of the shares underlying the Warrants
immediately prior to any such events at a price equal to the
product of (x) the number of shares issuable upon exercise
of the Warrants, and (y) the Purchase Price, both as in
effect immediately prior to the record date for such
reclassification, change, consolidation,
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<PAGE>
merger, statutory share exchange, sale or conveyance.
(ii) Appropriate provisions shall be made in connection with any
reorganization, reclassification, consolidation, merger,
share exchange or sale or conveyance of assets with respect
to the rights and interests of Banc Stock (or any subsequent
registered holder of the Warrants) to the end that the
provisions of this Section 0 (including, without limitation,
the provisions for adjustments of the Purchase Price and the
number of shares purchasable on exercise of the Warrants)
shall immediately after the transaction be applicable as
nearly as possible to any shares of stock, securities or
assets deliverable immediately after the transaction upon
the exercise of the Warrants. The Company shall not effect
any consolidation, merger, share exchange or sale or
conveyance of assets unless, prior to the consummation of
the transaction, the successor corporation (if other than
the Company) resulting from the consolidation, merger or
share exchange, or the corporation purchasing the assets,
assumes by written instrument executed and delivered to Banc
Stock (or each subsequent registered holder of the Warrants)
the obligation to deliver thereto the shares of stock,
securities or assets in accordance with the foregoing
provisions that Banc Stock (or each subsequent registered
holder of the Warrants) may be entitled to purchase.
(h) Dissolution. In the event that a voluntary or involuntary
dissolution, liquidation or winding up of the Company (other than in connection
with a merger where the Company is the surviving corporation, or a merger or
consolidation with or into another corporation or a sale or lease of all or
substantially all of the assets of the Company) is at any time proposed during
the term of the Warrants, the Company shall give written notice to the
registered holder or holders of the Warrants at least thirty (30) days prior to
the record date of the proposed transaction. The notice must contain: (i) the
date on which the transaction is to take place; (ii) the record date (which must
be at least thirty (30) days after the giving of the notice) as of which holders
of the common stock are entitled to receive distributions as a result of the
transaction shall be determined; (iii) a brief description of the transaction
(iv) a brief description of the distributions, if any to be made to holders of
the common stock as a result of the transaction; and (v) an estimate of the fair
market value of the distributions.
(i) Reservation of Stock. While the Warrants are exercisable, the
Company shall at all times reserve and keep available a number of its authorized
but unissued shares of Common Stock that will be sufficient to permit the
exercise in full of all outstanding Warrants. All shares of Common Stock that
may be issued upon exercise of the Warrants shall, upon issuance, be duly and
validly issued, fully paid and non-assessable, and free from all taxes, liens
and charges with respect to the purchase and the issuance of such shares.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
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(a) The Company will indemnify and hold harmless Banc Stock (including
officers, directors, employees and agents thereof or an affiliate) and each
person, if any, who controls Banc Stock within the meaning of the 1933 Act or
the 1934 Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which it or such controlling person may become subject under the 1933
Act, the 1934 Act or insofar as such losses, claims, damages or liabilities in
respect thereof arise out of or are based upon any breach of any warranty or
covenant of the Company herein contained or by reason of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse Banc Stock for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon and in conformity with written information furnished to the
Company by Banc Stock expressly for use therein. In addition to its other
obligations under this Section 0, the Company agrees that, as an interim measure
during the pendency of any such claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 0, it will reimburse
Banc Stock on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse Banc Stock for such expenses and the possibility that
such payments might later be held to have been improper by a court of competent
jurisdiction. Any such interim reimbursement payments that are not made to Banc
Stock within thirty (30) days of a request for reimbursement shall bear interest
at the prime rate (or reference rate or other commercial lending rate for
borrowers of the highest credit standing) published from time to time by The
Wall Street Journal (the "Prime Rate") from the date of such request. The
Company will not, without the prior written consent of Banc Stock, settle or
compromise or consent to the entry of any judgment in any pending or threatened
action or claim or related cause of action or portion of such cause of action in
respect of which indemnification may be sought hereunder (whether or not Banc
Stock is a party to such action or claim), unless such settlement, compromise or
consent includes an unconditional release of Banc Stock from all liability
arising out of such action or claim (or related cause of action or portion
thereof).
The indemnity agreement in this Section 0 shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls Banc Stock within the meaning of the 1933 Act or the 1934 Act to
the same extent as such agreement applies
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<PAGE>
to Banc Stock and shall be in addition to any liabilities that the Company may
otherwise have.
(b) Banc Stock will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement or the Prospectus or
any such amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such Underwriter expressly for
use therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such loss, claim, damage, liability or action. In addition to its other
obligations under this Section 0, Banc Stock agrees that, as an interim measure
during the pendency of any such claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 0, it will reimburse
the Company on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim, action
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of its obligation
to reimburse the Company for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. Any such interim reimbursement payments that are not made to the
Company within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement shall be in addition to any liabilities that Banc Stock may otherwise
have.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; no indemnification provided for in Section 0 or 0 shall be
available to any party who shall fail to give notice as provided in this Section
0 if the party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was prejudiced by the failure to give
such notice, but the omission so to notify the indemnifying party will not
relieve the indemnifying party from any liability that it may have to any
indemnified party otherwise than under Section 0. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
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<PAGE>
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, except that if the
indemnified party has been advised by counsel in writing that there are one (1)
or more defenses available to the indemnified party which are different from or
additional to those available to the indemnifying party, then the indemnified
party shall have the right to employ separate counsel and in that event the
reasonable fees and expenses of such separate counsel for the indemnified party
shall be paid by the indemnifying party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Section 0 and 5(b) hereof,
including the amounts of any requested reimbursement payments, the method of
determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. Any such arbitration must be commenced
by service of a written demand for arbitration or a written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 0 and 0 hereof and
will not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses that is created by the provisions of Sections 0 and 0.
(e) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 0 is for
any reason judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the right of appeal) to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company on the one hand,
and Banc Stock on the other shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity incurred by the Company and Banc Stock, as incurred, in such
proportions that (i) Banc Stock is responsible pro rata for that portion
represented by the commission percentage appearing on the cover page of the
Prospectus bears to the initial public offering price (before deducting
expenses) appearing thereon, and (ii) the Company is responsible for the
balance, provided, however, that no person guilty of fraudulent
misrepresentations (within the meaning of Section 12(f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation; provided, further, that if the allocation provided
above is not permitted by applicable law, the Company, on the one hand and Banc
Stock on the other shall contribute to the aggregate losses
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<PAGE>
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company on the one hand,
and Banc Stock on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Company on the one hand, or by Banc Stock on the
other hand, and the parties, relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and Banc Stock agree that it would not be just and equitable if contributions
pursuant to this Section 0 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 0. The amount paid or payable
by a party as a result of the losses, claims, damages or liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending such action
or claim.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. The representations, warranties, indemnities, agreements and other
statements of the Company or their respective officers set forth in or made
pursuant to this Agreement will remain operative and in full force and effect
will survive the termination of this Agreement.
SECTION 8. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
This Agreement shall become effective immediately and may be terminated
only as follows:
(a) In the event that the minimum number of Shares are not sold by the
Expiration Date as described in Section 0 hereof.
(b) This Agreement may be terminated by Banc Stock by notice to the
Company in the event that the Company shall have failed or been unable to comply
with any of the terms, conditions or provisions of this Agreement on the part of
the Company to be performed, complied with or fulfilled within the respective
times herein provided for, unless compliance therewith or performance or
satisfaction thereof shall have been expressly waived by Banc Stock in writing.
(c) This Agreement may be terminated by Banc Stock by notice to the
Company if Banc Stock believes in its sole judgment that any adverse changes
have occurred in the management of the Company, that material adverse changes
have occurred in the financial condition, prospects or obligations of the
Company or if the Company shall have sustained a loss by strike, fire, flood,
accident or other calamity of such a character as, in the sole judgment of Bank
Stock, may interfere materially with the conduct of the Company's business and
operations regardless of whether or not such loss shall have been insured.
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<PAGE>
(d) This Agreement may be terminated by Banc Stock by notice to the
Company at any time if, in the sole judgment of Banc Stock, payment for and
delivery of the Shares is rendered impracticable or inadvisable because (i)
additional material governmental restrictions not in force and effect on the
date hereof shall have been imposed upon the trading in securities generally, or
minimum or maximum prices shall have been generally established on the New York
or American Stock Exchange or the over-the-counter market, or trading in
securities generally on either such Exchange or over-the-counter market shall
have been suspended, or a general moratorium shall have been established by
federal or state authorities, or (ii) a war or other national calamity shall
have occurred, or (iii) substantial and material changes in the condition of the
market (either generally or with reference to the sale of the Shares to be
offered hereby) beyond normal fluctuations are such that it would be
undesirable, impracticable or inadvisable in the sole judgment of Banc Stock to
proceed with this Agreement or with the public offering, (iv) the DOC Order, the
FDIC Order, or the Federal Reserve Board Approval shall have been withdrawn or
materially altered, or notice shall have been received to the effect that any
such approvals will not be received, or if received, will be subject to
conditions that the Company would not be able to fulfill in a reasonable time in
Banc Stock's opinion, or (v) of any matter materially adversely affecting the
Company.
(e) In the event any action or proceeding shall be instituted or
threatened against Banc Stock, either in any court of competent jurisdiction,
before the Commission or any state securities commission concerning its
activities as a broker or dealer that would prevent Banc Stock from acting as
such, at any time prior to the effective date hereunder, or in any court
pursuant to any federal, state, local or municipal statute, a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of Banc Stock's assets or if Banc Stock makes an assignment
for the benefit of creditors, the Company shall have the right on three (3)
days' written notice to Banc Stock to terminate this Agreement.
(f) Any termination of this Agreement pursuant to this Section 0 shall
be without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that in such event the Company will be responsible for Banc Stock's
accountable expenses, which shall include, but are not limited to, Banc Stock's
counsel fees, consultants' fees, entertainment expenses, travel expenses,
postage expenses, office costs, advertising costs, clerical costs, due diligence
meeting expenses, duplication expenses, long-distance telephone expenses, and
general and administrative expenses incurred in connection with the Offering
whether or not the sale of the Shares by the Company is consummated.
SECTION 9. NOTICES.
All notices or communications required or permitted hereunder shall be
in writing and shall be mailed or delivered as follows:
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If to the Company: Northern Star Financial, Inc.
410 Jackson Street, Suite 510
Mankato, Minnesota 56001
Attention: Thomas Stienessen
With a Copy to: Fredrickson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402
Attention: Robert B. Whitlock
If to Banc Stock: Banc Stock Financial Services, Inc.
1105 Schrock Road, Suite 437
Columbus, Ohio 43229
Attention: Anthony J. Reilly
With a Copy to: Howard & Howard Attorneys, P.C.
The Creve Coeur Building
Suite 200
321 Liberty Street
Peoria, IL 61602-1403
Attention: Theodore L. Eissfeldt
SECTION 10. MISCELLANEOUS. This Agreement contains and constitutes the
entire agreement between the parties hereto and supersedes all prior written or
oral and all contemporaneous agreements or negotiations with respect to the
subject matter hereof. The Agreement may only be amended, modified or waived in
writing signed by both parties hereto.
SECTION 11. GOVERNING LAW AND TIME. This Agreement shall be governed by
the laws of the State of Ohio without reference to the conflict of law
provisions thereof. Specified time of the day refers to United States Eastern
Standard Time. Time shall be of the essence of this Agreement.
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SECTION 12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company and Banc Stock in
accordance with its terms.
Very truly yours,
NORTHERN STAR FINANCIAL, INC.
By: ________________________________
Name: Thomas Stienessen
Title: President
Confirmed and accepted as of
the date first above written:
BANC STOCK FINANCIAL SERVICES. INC.
By: ______________________________
Name: Anthony J. Reilly
Title: President
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LIST OF EXHIBITS
----------------
Exhibit A Warrant Certificate
Exhibit B Escrow Agreement
Exhibit C Company Directed Shares
Exhibit D States
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EXHIBIT D
---------
STATES
------
Florida
Illinois
Iowa
Minnesota
Ohio
Pennsylvania
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Exhibit 1.2
BANC STOCK FINANCIAL SERVICES, INC.
1105 SCHROCK ROAD, SUITE 437
COLUMBUS, OHIO 43229
(614) 848-3400
NORTHERN STAR FINANCIAL, INC.
UP TO 329,000 SHARES OF COMMON STOCK
SELECTED DEALER'S AGREEMENT
---------------------------
Columbus, Ohio
_______________, 1998
[NAME AND ADDRESS OF DEALER]
Gentlemen:
Banc Stock Financial Services, Inc. (the "Sales Agent"), as Sales Agent
for Northern Star Financial, Inc., a Minnesota corporation (the "Company"),
invites your participation as a Selected Dealer ("Selected Dealer") in an
offering of up to 329,000 Shares of Common Stock, $0.01 par value (the
"Shares"). The Sales Agent is offering the Shares, as agent for the Company, on
a "157,000 Shares minimum, 329,000 Shares maximum best efforts" basis, pursuant
to a Registration Statement filed under the Securities Act of 1933, as amended
(the "Act"), subject to the terms of (a) its Agency Agreement with the Company,
(b) this Agreement and (c) the Sales Agent's instructions which may be forwarded
to the Selected Dealers from time to time. This invitation is made by the Sales
Agent only if the Shares may be lawfully offered by dealers in your state. The
terms and conditions of this invitation are as follows:
1. Acceptance of Orders. Orders received from the Selected
Dealers will be accepted only at the price, in the amounts and
on the terms which are set forth in the Company's current
Prospectus.
2. Selling Concession. All Selected Dealers will be allowed on
all Shares sold by them, a commission of 4% of the total sales
price (61.5% of the full 6.5% commission or $0.40 per Share)
as shown in the Company's current Prospectus. Each Selected
Dealer will, in connection with this participation, comply
with the provisions of Rule 2740 of the National Association
of Securities Dealers, Inc. ("NASD") Conduct Rules and will
not grant any concessions, discounts or any other allowances
which are not permitted by those rules.
3. Selected Dealer Sales. The Selected Dealer shall purchase the
Shares for its customers only through the Sales Agent, and all
such purchases shall be made only upon orders already received
by the Selected Dealer from its customers. No
<PAGE>
Shares may be purchased for the account of the Selected Dealer
or its principals. In all sales of the Shares hereunder, the
Selected Dealer shall confirm as agent for a member of the
public.
4. Delivery of Funds. The Selected Dealer shall promptly transmit
to the escrow agent, no later than 12:00 noon of the date
subsequent to the receipt of funds received from purchasers,
and a confirmation or a record of each sale which shall set
forth the name, address and social security number of each
individual purchaser, the number of Shares purchased, and, if
there is more than one registered owner, whether the
certificate or certificates evidencing the securities
comprising the Shares purchased are to be issued to the
purchaser in joint tenancy or otherwise. Also, each Selected
Dealer shall report, in writing, to the Sales Agent, the
number of persons in each such state who purchase the Shares
from Selected Dealers. Each sale may be rejected by the Sales
Agent; and if rejected, the escrow agent will directly return
funds to the rejected customer.
5. Payment for Sales. Payment for the Company's Shares shall
accompany all confirmations and applications and shall be in
clearing house funds. All checks and other orders for the
payment of money shall be made payable to the escrow agent for
deposit into an escrow account maintained at United Bankers
Bank at 1650 W. 82nd Street, Bloomington, Minnesota 55431. All
subscribers' checks are to be made payable to "United Bankers
Bank - Escrow Account (wire transfer instructions enclosed)
for the Benefit of the Subscribers to Northern Star Financial,
Inc. Securities." Shares sold by the Selected Dealer will be
available for delivery at the office of the Sales Agent,
unless other arrangements are made with the Sales Agent for
delivery.
6. Deposit of Sales Proceeds. The proceeds from the sale of all
of the Shares sold in the offering (the "Offering Proceeds")
will be deposited in the escrow account discussed in paragraph
0 hereof. In the event that Offering Proceeds in an amount of
$1,570,000 have not been deposited and cleared within
____________ (______) days from the date the Company's
Registration Statement is declared effective (unless extended
by the Sales Agent with the written consent of the Company,
for an additional _________________ (______) days), the full
amount paid will be refunded to the purchasers. No
certificates evidencing the securities comprising the Shares
will be issued unless and until Offering Proceeds in an amount
of $1,570,000 have been cleared and such funds have been
released and the net proceeds thereof delivered to the
Company. If Offering Proceeds in an amount of $1,570,000 are
cleared within the time period provided above, all amounts so
deposited will be delivered to the Company, except that the
Sales Agent may deduct its underwriting commissions and the
unpaid portion of its expense allowance from the proceeds of
the offering prior to the delivery of such proceeds to the
Company. No commissions will be paid by the Company or
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<PAGE>
concessions allowed by the Sales Agent unless and until
Offering Proceeds in the amount of $1,570,000 have been
cleared and such funds have been released and the net proceeds
thereof delivered to the Company.
7. Failure of Order. If an order is rejected or if a payment is
received which proves insufficient, any compensation paid to
the Selected Dealer shall be returned either by the Selected
Dealer in cash or by a charge against the account of the
Selected Dealer, as the Sales Agent may elect.
8. Conditions of Offering. All sales will be subject to delivery
by the Company of certificates evidencing the securities.
9. Selected Dealer's Undertakings. No person is authorized to
make any representations concerning the Company's Shares
except those contained in the Company's then current
Prospectus. The Selected Dealer will not sell the Company' s
Shares pursuant to this Agreement unless the Prospectus is
furnished to the purchaser at least forty-eight (48) hours
prior to the mailing of the confirmation of sale, or is sent
to such persons under such circumstances that it would be
received by him forty-eight (48) hours prior to his receipt of
a confirmation of the sale. The Selected Dealer agrees not to
use any supplemental sales literature of any kind without
prior written approval of the Sales Agent unless it is
furnished by the Sales Agent for such purpose. In offering and
selling the Company's Shares, the Selected Dealer will rely
solely on the representations contained in the Company's then
current Prospectus. Additional copies of the then current
Prospectus will be supplied by the Sales Agent in reasonable
quantities upon request.
The Selected Dealer understands that during the ninety (90)
day period after the first date upon which the Company's
Shares are bona fide offered to the public, all dealers
effecting transactions in the Company's Shares may be required
to deliver the Company's current Prospectus to any purchaser
thereof prior to or concurrent with the receipt of the
confirmation of sale. Additional copies of the then current
Prospectus will be supplied by the Sales Agent in reasonable
quantities upon request.
10. Representations and Agreements of Selected Dealers. By
accepting this Agreement, the Selected Dealer represents that
either (a) it is registered as a broker/dealer under the
Securities and Exchange Act of 1934, as amended; is qualified
to act as a dealer in the states or other jurisdictions in
which it offers the Company's Shares; is a member in good
standing with the National Association of Securities Dealers,
Inc. ("NASD"), and will maintain such registrations,
qualifications, and memberships throughout the terms of this
Agreement or (b) is a foreign bank, dealer or institution not
eligible for membership in the NASD
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<PAGE>
which agrees to make no sales in the United States, its
territories or possessions or to persons who are citizens
thereof or residents therein, and in making sales will comply
with the NASD's interpretation with respect to free-riding and
withholding (IM-2110-1). Further, the Selected Dealer agrees
to comply with all applicable Federal laws, the laws of the
state or other jurisdictions concerned and the Rules and
Regulations of the NASD, and the particular Selected Dealer
agrees that in connection with any purchase or sale of the
Company' s Shares wherein a selling concession, discount or
other allowance is received or granted (i) that it will comply
with the decisions of Rule 2740 of the NASD's Conduct Rules or
(ii) if a non-NASD member, broker or dealer in a foreign
country, it will also comply with the provisions of Rules 2730
and 2750 of the NASD Conduct Rules as though it were a NASD
member and with the provisions of Rule 2420 as such Rule 2420
applies to a non-NASD member, broker or dealer in a foreign
country. Further, the Selected Dealer agrees that it will not
offer to sell the Company's Shares in any state or
jurisdiction except the states in which it is licensed as a
broker/dealer under the laws of such states. The Selected
Dealer shall not be entitled to any compensation during any
period in which it has been suspended or expelled from
membership in the NASD.
11. Selected Dealer's Employees. By accepting this Agreement, the
Selected Dealer has assumed full responsibility for proper
training and instruction of its representatives concerning the
selling methods to be used in connection with the offer and
sale of the Company's Shares, giving special emphasis to the
principles of suitability and full disclosure to prospective
investors and prohibitions against "free-riding and
withholding."
12. Indemnification. The Company has agreed in the Agency
Agreement to indemnify and hold harmless the Sales Agent
(including within the definition of Sales Agent, any member of
the Selected Dealer group) and each person, if any, who
controls the Sales Agent within the meaning of Section 15 of
the Act or under any other statute or at common law and will
reimburse the Sales Agent and each such person specified as
above for any legal or other expenses (including the cost of
any investigation and preparation) reasonably incurred by them
or any of them in connection with any litigation or claim
whether or not resulting in any liability, but only insofar as
such losses, claims, damages, liabilities or actions arise out
of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration
Statement or any amendment or supplement thereto or in any
preliminary or final Prospectus or any Blue Sky application or
arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be
stated therein necessary to make the statements therein not
misleading, all as of the date when the Registration Statement
or such post-effective amendment, or the filing of any such
Blue Sky application as the case may be, becomes effective or
any untrue statement or
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<PAGE>
alleged untrue statement of a material fact contained in any
preliminary prospectus or final prospectus (as amended or as
supplemented thereto), or arise out of or are based upon the
omission to state therein a material fact required to be
stated therein or necessary in order to make the statement
therein, not misleading; provided however, that the indemnity
agreement contained in this paragraph 0 shall not apply to
amounts paid in settlement of any such litigation if such
settlement is effected without the consent of the Company nor
shall it extend to any Sales Agent or any person controlling
the Sales Agent in respect of any such losses, claims,
damages, liabilities or actions arising out of, or based upon
any such untrue statement or omission was made in reliance
upon and in conformity with written information furnished to
the Company by the Sales Agent on behalf of such Sales Agent
specifically for use in connection with the preparation of the
Registration Statement, the Prospectus or any such amendment
thereof or supplement thereto or Blue Sky application.
13. Selected Dealer's Indemnification. The Selected Dealer agrees
to indemnify and hold harmless the Company, the Sales Agent,
each of the Company's officers and directors who signed the
Registration Statement, and each person, if any, who controls
the Company and the Sales Agent within the meaning of Section
15 of the Act, against any and all loss, liability, claim,
damage and expense (a) described in the indemnity contained in
paragraph 0 of this Agreement, but only with respect to untrue
statements or omissions or alleged untrue statements or
omissions, made in the Registration Statement or the
Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to
the Company by such Selected Dealer expressly for use in the
Registration Statement (or any amendment thereto) or the
Prospectus (or any amendment or supplement thereto) or (b)
based upon alleged misrepresentations or omission to state
material facts in connection with statements made by the
Selected Dealer or the Selected Dealer's salesmen orally or by
other means; and the Selected Dealer will reimburse the
Company, the Sales Agent, each of the Company's officers and
directors who signed the Registration Statement and each
person, if any, who controls the Company and the Sales Agent
within the meaning of Section 15 of the Act, for any legal or
other expenses reasonably incurred in connection with the
investigation of or the defending of any such action or claim;
or (c) for a violation of state securities or "Blue Sky" laws
for liability occasioned by reason of such Selected Dealer's
failure to have been registered as a broker/dealer or for
misrepresentations in or omission from oral representations
made by such Selected Dealer in connection with the sale of
such securities.
14. Required Notices and Claims. Each indemnified party is
required to give prompt notice to each indemnifying party of
any action commenced against it respect of which indemnity may
be sought hereunder, but failure to so notify an
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<PAGE>
indemnifying party shall not relieve it from any liability
which it may otherwise have because of the indemnification
provisions hereof. Any indemnifying party may participate at
its own expense in the defense of such action. If it so elects
within a reasonable time after receipt of such notice, and
indemnifying party, jointly with any other indemnifying
parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the
indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on
the ground that there may be legal defenses available to them
which are different from or in addition to those available to
such indemnifying parties and shall not be liable for any fees
and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall
the indemnifying parties be liable for the fees and expenses
of more than one counsel for all indemnified parties in
connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the
same general allegations or circumstances.
15. Expenses. No expenses will be charged to Selected Dealers. A
single transfer tax, if any, on the sale of the Shares by the
Selected Dealer to its customers will be paid when such Shares
are delivered to the Selected Dealer for delivery to its
customers. However, the Selected Dealer will pay its
proportionate unit of transfer tax or any other tax (other
than the single transfer tax described above) if any such tax
shall be from time to time assessed against the Sales Agent
and other Selected Dealers.
16. Communications. All communications to the Sales Agent should
be sent to the address shown on the first page of this
Agreement. Any notice to the Selected Dealer shall be properly
given if mailed or telephoned to the Selected Dealer. This
Agreement shall be construed according to the laws of the
State of Ohio.
17. Assignment and Termination. This Agreement may not be assigned
by the Selected Dealer without the Sales Agent's written
consent. This Agreement will terminate upon the termination of
the offering of the Shares except that either party may
terminate this Agreement at any time by giving written notice
to the other party.
Very truly yours,
BANC STOCK FINANCIAL SERVICES, INC.
By: ____________________________________
Anthony J. Reilly, President
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<PAGE>
(LETTER TO BE PLACED ON DEALER'S STATIONARY)
Date
MR. ANTHONY J. REILLY
PRESIDENT
BANC STOCK FINANCIAL SERVICES, INC.
1105 Schrock Road, Suite 437
Columbus, Ohio 43229
Dear Mr. Schmidt:
We hereby subscribe for ________________ Shares of Northern Star
Financial, Inc., in accordance with the terms and conditions stated in the
foregoing Selected Dealers Agreement. We hereby acknowledge receipt of the
Prospectus referred to in the Selected Dealers Agreement. We further state that
in purchasing said Shares we have relied upon said Prospectus and upon no other
statement whatsoever, whether written or oral. We confirm that we are a dealer
actually engaged in the investment banking or securities business and that we
are either (i) a member in good standing of the National Association of
Securities Dealers, Inc. (NASD); or (ii) a dealer with its principal place of
business located outside the United States, its territories and its possessions
and not registered as a broker or dealer under the Securities Exchange Act of
1934, as amended, who hereby agrees not to make any sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein. We hereby agree to comply with the provisions of
Rule 2740 of the Conduct Rules of the NASD, and if we are a foreign dealer and
not a member of the NASD, we also agree to comply with the NASD's interpretation
with respect to free-riding and withholding, to comply, as though we were a
member of the NASD, with provisions of Rules 2730 and 2750 of such Conduct
Rules, and to comply with Rule 2420 thereof as that Rule applies to non-member
foreign dealers.
Firm:
------------------------------------
Date: , 1998 By:
--------------------- --------------------------------------
(Name and position)
Address:
---------------------------------
Telephone No:
----------------------------
<PAGE>
EXHIBIT 2.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
NORTHERN STAR FINANCIAL, INC.
ARTICLE 1 - NAME
----------------
1.1) The name of the corporation shall be Northern Star Financial, Inc.
ARTICLE 2 - REGISTERED OFFICE
-----------------------------
2.1) The registered office of the corporation is located at 201 North
Broad Street, Mankato, Minnesota 56002-0550.
ARTICLE 3 - CAPITAL STOCK
-------------------------
3.1) Authorized Shares; Establishment of Classes and Series. The
aggregate number of shares the corporation has authority to issue shall be
20,000,000 shares, which shall have a par value of $.01 per share solely for the
purpose of a statute or regulation imposing a tax or fee based upon the
capitalization of the corporation, and which shall consist of 15,000,000 common
shares and 5,000,000 undesignated shares. The Board of Directors of the
corporation is authorized to establish from the undesignated shares, by
resolution adopted and filed in the manner provided by law, one or more classes
or series of shares, to designate each such class or series (which may include
but is not limited to designation as additional common shares), and to fix the
relative rights and preferences of each such class or series.
3.2) Issuance of Shares. The Board of Directors of the corporation is
authorized from time to time to accept subscriptions for, issue, sell and
deliver shares of any class or series of the corporation to such persons, at
such times and upon such terms and conditions as the Board shall determine,
establishing a price in money or other consideration, or a minimum price, or a
general formula or method by which the price will be determined.
3.3) Issuance of Rights to Purchase Shares. The Board of Directors is
further authorized from time to time to grant and issue rights to subscribe for,
purchase, exchange securities for, or convert securities into, shares of the
corporation of any class or series, and to fix the terms, provisions and
conditions of such rights, including the exchange or conversion basis or the
price at which such shares may be purchased or subscribed for.
3.4) Issuance of Shares to Holders of Another Class or Series. The Board
is further authorized to issue shares of one class or series to holders of that
class or series or to holders of another class or series to effectuate share
dividends or splits.
<PAGE>
ARTICLE 4 - RIGHTS OF SHAREHOLDERS
----------------------------------
4.1) No Preemptive Rights. No shares of any class or series of the
corporation shall entitle the holders to any preemptive rights to subscribe for
or purchase additional shares of that class or series or any other class or
series of the corporation now or hereafter authorized or issued.
4.2) No Cumulative Voting Rights. There shall be no cumulative voting by
the shareholders of the corporation.
ARTICLE 5 - MERGER, EXCHANGE, SALE OF ASSETS AND DISSOLUTION
------------------------------------------------------------
5.1) Where approval of shareholders is required by law, the affirmative
vote of the holders of at least a majority of the voting power of all shares
entitled to vote shall be required to authorize the corporation (i) to merge
into or with one or more other corporations, (ii) to exchange its shares for
shares of one or more other corporations, (iii) to sell, lease, transfer or
otherwise dispose of all or substantially all of its property and assets,
including its good will, or (iv) to commence voluntary dissolution.
ARTICLE 6 - AMENDMENT OF ARTICLES OF INCORPORATION
--------------------------------------------------
6.1) After the issuance of shares by the corporation, any provision
contained in these Articles of Incorporation may be amended, altered, changed or
repealed by the affirmative vote of the holders of at least a majority of the
voting power of the shares present and entitled to vote at a duly held meeting
or such greater percentage as may be otherwise prescribed by the laws of the
State of Minnesota.
ARTICLE 7 - LIMITATION OF DIRECTOR LIABILITY
--------------------------------------------
7.1) To the fullest extent permitted by Chapter 302A, Minnesota Statutes,
as the same exists or may hereafter be amended, a director of this corporation
shall not be personally liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
<PAGE>
AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION
OF NORTHERN STAR FINANCIAL, INC.
The Articles of Incorporation of Northern Star Financial, Inc. have been
amended and restated in their entirety to read as set forth on Exhibit A
attached hereto.
The Amendment and Restatement have been approved pursuant to Chapter 302A,
Minnesota Statutes.
I certify that I am authorized to execute this Amendment and Restatement
and I further certify that I understand that by signing this Amendment and
Restatement I am subject to the penalties of perjury as set forth in Section
609.48 as if I had signed this Amendment and Restatement under oath.
Dated: August 14, 1998.
/s/ Thomas P. Stienessen
--------------------------------------
Thomas P. Stienessen
President and Chief Executive Officer
<PAGE>
EXHIBIT 2.2
BYLAWS
OF
NORTHERN STAR FINANCIAL, INC.
ARTICLE 1.
OFFICES
1.1) Offices. The address of the registered office of the corporation
shall be designated in the Articles of Incorporation, as amended from time to
time. The principal executive office of the corporation shall initially be
located at 410 Jackson Street, Mankato, Minnesota, and the corporation may have
offices at such other places within or without the State of Minnesota as the
Board of Directors shall from time to time determine or the business of the
corporation requires.
ARTICLE 2.
MEETINGS OF SHAREHOLDERS
2.1) Regular Meetings. Regular meetings of the shareholders of the
corporation entitled to vote shall be held on an annual or other less frequent
basis as shall be determined by the Board of Directors or by the chief executive
officer; provided, that if a regular meeting has not been held during the
immediately preceding 15 months, a shareholder or shareholders holding three
percent (3%) or more of the voting power of all shares entitled to vote may
demand a regular meeting of shareholders by written notice of demand given to
the chief executive officer or chief financial officer of the corporation. At
each regular meeting, the shareholders, voting as provided in the Articles of
Incorporation and these Bylaws, shall elect qualified successors for directors
who serve for an indefinite term or for directors whose terms have expired or
are due to expire within six months after the date of the meeting, and shall
transact such other business as shall come before the meeting. No meeting shall
be considered a regular meeting unless specifically designated as such in the
notice of meeting or unless all the shareholders entitled to vote are present in
person or by proxy and none of them objects to such designation.
2.2) Special Meetings. Special meetings of the shareholders entitled to
vote may be called at any time by the Chairman of the Board, the chief executive
officer, the chief financial officer, two or more directors, or a shareholder or
shareholders holding ten percent (10%) or more of the voting power of all shares
entitled to vote who shall demand such special meeting by giving written notice
of demand to the chief executive officer or the chief financial officer
specifying the purposes of the meeting.
2.3) Meetings Held Upon Shareholder Demand. Within thirty (30) days after
receipt by the chief executive officer or the chief financial officer of a
demand from any shareholder or shareholders entitled to call a regular or
special meeting of shareholders, the Board of Directors shall cause such meeting
to be called and held on notice no later than ninety (90) days after receipt of
such demand. If the Board of Directors fails to cause such a meeting to be
called and held, the
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<PAGE>
shareholder or shareholders making the demand may call the meeting by giving
notice as provided in Section 2.5 hereof at the expense of the corporation.
2.4) Place of Meetings. Meetings of the shareholders shall be held at the
principal executive office of the corporation or at such other place, within or
without the State of Minnesota, as is designated by the Board of Directors,
except that a regular meeting called by or at the demand of a shareholder shall
be held in the county where the principal executive office of the corporation is
located.
2.5) Notice of Meetings. Except as otherwise specified in Section 2.6 or
required by law, a written notice setting out the place, date and hour of any
regular or special meeting shall be given to each holder of shares entitled to
vote not less than five days nor more than sixty (60) days prior to the date of
the meeting; provided, that notice of a meeting at which there is to be
considered a proposal (i) to dispose of all, or substantially all, of the
property and assets of the corporation or (ii) to dissolve the corporation shall
be given to all shareholders of record, whether or not entitled to vote; and
provided further, that notice of a meeting at which there is to be considered a
proposal to adopt a plan of merger or exchange shall be given to all
shareholders of record, whether or not entitled to vote, at least fourteen (14)
days prior thereto. Notice of any special meeting shall state the purpose or
purposes of the proposed meeting, and the business transacted at all special
meetings shall be confined to the purposes stated in the notice.
2.6) Waiver of Notice. A shareholder may waive notice of any meeting
before, at or after the meeting, in writing, orally or by attendance.
Attendance at a meeting by a shareholder is a waiver of notice of that meeting
unless the shareholder objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened,
or objects before a vote on an item of business because the item may not be
lawfully considered at such meeting and does not participate in the
consideration of the item at such meeting.
2.7) Quorum and Adjourned Meeting. The holders of a majority of the
voting power of the shares entitled to vote at a meeting, represented either in
person or by proxy, shall constitute a quorum for the transaction of business at
any regular or special meeting of shareholders. If a quorum is present when a
duly called or held meeting is convened, the shareholders present may continue
to transact business until adjournment, even though the withdrawal of a number
of shareholders originally present leaves less than the proportion or number
otherwise required for a quorum. In case a quorum is not present at any
meeting, those present shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until the requisite
number of shares entitled to vote shall be represented. At such adjourned
meeting at which the required amount of shares entitled to vote shall be
represented, any business may be transacted which might have been transacted at
the original meeting.
2.8) Voting. At each meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy duly
appointed by an instrument in writing subscribed by such shareholder. Each
shareholder shall have one (1) vote for each share having voting power standing
in each shareholder's name on the books of the corporation except as may be
otherwise provided in the terms of the share. Upon the demand of any
shareholder, the vote for
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<PAGE>
directors or the vote upon any question before the meeting shall be by ballot.
All elections shall be determined and all questions decided by a majority vote
of the number of shares entitled to vote and represented at any meeting at which
there is a quorum except in such cases as shall otherwise be required by statute
or the Articles of Incorporation.
2.9) Order of Business. The suggested order of business at any regular
meeting and, to the extent appropriate, at all other meetings of the
shareholders shall, unless modified by the presiding chairman, be:
1. Call of roll
2. Proof of due notice of meeting or waiver of notice
3. Determination of existence of quorum
4. Reading and disposal of any unapproved minutes
5. Reports of officers and committees
6. Election of directors
7. Unfinished business
8. New business
9. Adjournment.
ARTICLE 3.
DIRECTORS
3.1) General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors.
3.2) Number, Term and Qualifications. The Board of Directors shall
consist of one or more members. The number of members of the first Board (if
not named in the Articles of Incorporation) shall be determined by the
incorporators or shareholders. Thereafter, at each regular meeting, the
shareholders shall determine the number of directors; provided, that between
regular meetings the authorized number of directors may be increased or
decreased by the shareholders or increased by the Board of Directors. The terms
of office of directors shall be classified by dividing them into three classes,
with each class being as nearly equal in number as possible. The terms of
office of the directors initially classified as Class I shall expire at the
regular meeting of shareholders to be held in 1999; the terms of office of those
classified as Class II shall expire at the regular meeting of shareholders to be
held in 2000; and the terms of office of those classified as Class III shall
expire at the regular meeting of shareholders to be held in 2001. At each
regular meeting of shareholders after such initial classification, successors to
the class of directors whose term expires at that regular meeting shall be
elected for a three-year term. A director shall hold office until the regular
meeting for the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, or until his or her resignation or
removal from office.
3.3) Vacancies. Vacancies on the Board of Directors may be filled by the
affirmative vote of a majority of the remaining members of the Board, though
less than a quorum; provided, that newly created directorships resulting from an
increase in the authorized number of directors
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<PAGE>
shall be filled by the affirmative vote of a majority of the directors serving
at the time of such increase. Persons so elected shall be directors until their
successors are elected by the shareholders, who may make such election at the
next regular or special meeting of the shareholders.
3.4) Quorum and Voting. A majority of the directors currently holding
office shall constitute a quorum for the transaction of business. In the
absence of a quorum, a majority of the directors present may adjourn a meeting
from time to time until a quorum is present. If a quorum is present when a duly
called or held meeting is convened, the directors present may continue to
transact business until adjournment even though the withdrawal of a number of
directors originally present leaves less than the proportion or number otherwise
required for a quorum. Except as otherwise required by law or the Articles of
Incorporation, the acts of a majority of the directors present at a meeting at
which a quorum is present shall be the acts of the Board of Directors.
3.5) Board Meetings; Place and Notice. Meetings of the Board of Directors
may be held from time to time at any place within or without the State of
Minnesota that the Board of Directors may designate. In the absence of
designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the corporation, except as may be otherwise
unanimously agreed orally, or in writing, or by attendance. Any director may
call a Board meeting by giving twenty-four (24) hours notice to all directors of
the date and time of the meeting. The notice need not state the purpose of the
meeting, and may be given by mail, telephone, telegram, or in person. If a
meeting schedule is adopted by the Board, or if the date and time of a Board
meeting has been announced at a previous meeting, no notice is required.
3.6) Waiver of Notice. A director may waive notice of any meeting before,
at or after the meeting, in writing, orally or by attendance. Attendance at a
meeting by a director is a waiver of notice of that meeting unless the director
objects at the beginning of the meeting to the transaction of business because
the meeting is not lawfully called or convened and does not participate
thereafter in the meeting.
3.7) Absent Directors. A director may give advance written consent or
opposition to a proposal to be acted on at a Board meeting. If the director is
not present at the meeting, consent or opposition to a proposal does not
constitute presence for purposes of determining the existence of a quorum, but
consent or opposition shall be counted as a vote in favor of or against the
proposal and shall be entered in the minutes of the meeting, if the proposal
acted on at the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or objected.
3.8) Compensation. Directors who are not salaried officers of the
corporation shall receive such fixed sum and expenses per meeting attended or
such fixed annual sum or both as shall be determined from time to time by
resolution of the Board of Directors. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
3.9) Committees. The Board of Directors may, by resolution approved by
affirmative vote of a majority of the Board, establish committees having the
authority of the Board in the
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<PAGE>
management of the business of the corporation only to the extent provided in the
resolution. Committees may include a special litigation committee consisting of
one or more independent directors or other independent persons to consider legal
rights or remedies of the corporation and whether those rights and remedies
should be pursued. Each such committee shall consist of one or more natural
persons (who need not be directors) appointed by the affirmative vote of a
majority of the directors present, and shall, other than special litigation
committees, be subject at all times to the direction and control of the Board.
A majority of the members of a committee present at a meeting shall constitute a
quorum for the transaction of business.
3.10) Order of Business. The suggested order of business at any meeting
of the Board of Directors shall, to the extent appropriate and unless modified
by the presiding chairman, be:
1. Roll call
2. Proof of due notice of meeting or waiver of notice, or unanimous
presence and declaration by presiding chairman
3. Determination of existence of quorum
4. Reading and disposal of any unapproved minutes
5. Reports of officers and committees
6. Election of officers
7. Unfinished business
8. New business
9. Adjournment.
ARTICLE 4.
OFFICERS
4.1) Number and Designation. The corporation shall have one or more
natural persons exercising the functions of the offices of chief executive
officer and chief financial officer. The Board of Directors may elect or
appoint such other officers or agents as it deems necessary for the operation
and management of the corporation including, but not limited to, a Chairman of
the Board, a President, one or more Vice Presidents, a Secretary and a
Treasurer, each of whom shall have the powers, rights, duties and
responsibilities set forth in these Bylaws unless otherwise determined by the
Board. Any of the offices or functions of those offices may be held by the same
person.
4.2) Election, Term of Office and Qualification. At the first meeting of
the Board following each election of directors, the Board shall elect officers,
who shall hold office until the next election of officers or until their
successors are elected or appointed and qualify; provided, however, that any
officer may be removed with or without cause by the affirmative vote of a
majority of the Board of Directors present (without prejudice, however, to any
contract rights of such officer).
4.3) Resignation. Any officer may resign at any time by giving written
notice to the corporation. The resignation is effective when notice is given to
the corporation, unless a later date
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<PAGE>
is specified in the notice, and acceptance of the resignation shall not be
necessary to make it effective.
4.4) Vacancies in Office. If there be a vacancy in any office of the
corporation, by reason of death, resignation, removal or otherwise, such vacancy
may, or in the case of a vacancy in the office of chief executive officer or
chief financial officer shall, be filled for the unexpired term by the Board of
Directors.
4.5) Chief Executive Officer. Unless provided otherwise by a resolution
adopted by the Board of Directors, the chief executive officer (a) shall have
general active management of the business of the corporation; (b) shall, when
present and in the absence of the Chairman of the Board, preside at all meetings
of the shareholders and Board of Directors; (c) shall see that all orders and
resolutions of the Board are carried into effect; (d) shall sign and deliver in
the name of the corporation any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the corporation, except in cases in
which the authority to sign and deliver is required by law to be exercised by
another person or is expressly delegated by the Articles, these Bylaws or the
Board to some other officer or agent of the corporation; (e) may maintain
records of and certify proceedings of the Board and shareholders; and (f) shall
perform such other duties as may from time to time be assigned to the chief
executive officer by the Board.
4.6) Chief Financial Officer. Unless provided otherwise by a resolution
adopted by the Board of Directors, the chief financial officer (a) shall keep
accurate financial records for the corporation; (b) shall deposit all monies,
drafts and checks in the name of and to the credit of the corporation in such
banks and depositories as the Board of Directors shall designate from time to
time; (c) shall endorse for deposit all notes, checks and drafts received by the
corporation as ordered by the Board, making proper vouchers therefor; (d) shall
disburse corporate funds and issue checks and drafts in the name of the
corporation, as ordered by the Board; (e) shall render to the chief executive
officer and the Board of Directors, whenever requested, an account of all
transactions undertaken as chief financial officer and of the financial
condition of the corporation; and (f) shall perform such other duties as may be
prescribed by the Board of Directors or the chief executive officer from time to
time.
4.7) Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the shareholders and of the Board and shall exercise general
supervision and direction over the more significant matters of policy affecting
the affairs of the corporation, including particularly its financial and fiscal
affairs.
4.8) President. Unless otherwise determined by the Board, the President
shall be the chief executive officer. If an officer other than the President is
designated chief executive officer, the President shall perform such duties as
may from time to time be assigned to the President by the Board. If the office
of Chairman of the Board is not filled, the President shall also perform the
duties set forth in Section 4.7.
4.9) Vice President. Each Vice President shall have such powers and shall
perform such duties as may be specified in these Bylaws or prescribed by the
Board of Directors. In the event of
-6-
<PAGE>
absence or disability of the President, the Board of Directors may designate a
Vice President or Vice Presidents to succeed to the power and duties of the
President.
4.10) Secretary. The Secretary shall, unless otherwise determined by the
Board, be secretary of and attend all meetings of the shareholders and Board of
Directors, and may record the proceedings of such meetings in the minute book of
the corporation and, whenever necessary, certify such proceedings. The
Secretary shall give proper notice of meetings of shareholders and shall perform
such other duties as may be prescribed by the Board of Directors or the chief
executive officer from time to time.
4.11) Treasurer. Unless otherwise determined by the Board, the Treasurer
shall be the chief financial officer of the corporation. If an officer other
than the Treasurer is designated chief financial officer, the Treasurer shall
perform such duties as may be prescribed by the Board of Directors or the chief
executive officer from time to time.
4.12) Delegation. Unless prohibited by a resolution approved by the
affirmative vote of a majority of the directors present, an officer elected or
appointed by the Board may delegate in writing some or all of the duties and
powers of such officer to other persons.
ARTICLE 5.
INDEMNIFICATION
5.1) Indemnification. The corporation shall indemnify such persons, for
such expenses and liabilities, in such manner, under such circumstances, and to
such extent, as permitted by Minnesota Statutes, Section 302A.521, as now
enacted or hereafter amended.
ARTICLE 6.
SHARES AND THEIR TRANSFER
6.1) Certificate of Stock. Every owner of stock of the corporation shall
be entitled to a certificate, in such form as the Board of Directors may
prescribe, certifying the number of shares of stock of the corporation owned by
such shareholder. The certificates for such stock shall be numbered (separately
for each class) in the order in which they are issued and shall, unless
otherwise determined by the Board, be signed by the chief executive officer, the
chief financial officer, or any other officer of the corporation. A signature
upon a certificate may be a facsimile. Certificates on which a facsimile
signature of a former officer, transfer agent or registrar appears may be issued
with the same effect as if such person were such officer, transfer agent or
registrar on the date of issue.
6.2) Stock Record. As used in these Bylaws, the term "shareholder" shall
mean the person, firm or corporation in whose name outstanding shares of capital
stock of the corporation are currently registered on the stock record books of
the corporation. The corporation shall keep, at its principal executive office
or at another place or places within the United States determined by the
-7-
<PAGE>
Board, a share register not more than one year old containing the names and
addresses of the shareholders and the number and classes of shares held by each
shareholder. The corporation shall also keep at its principal executive office
or at another place or places within the United States determined by the Board,
a record of the dates on which certificates representing shares were issued.
Every certificate surrendered to the corporation for exchange or transfer shall
be cancelled and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled (except as provided for in Section 6.4 of this Article 6).
6.3) Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate
(or the shareholder's legal representative or duly authorized attorney-in-fact)
and upon surrender for cancellation of the certificate or certificates for such
shares. The shareholder in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof for all purposes as regards the
corporation; provided, that when any transfer of shares shall be made as
collateral security and not absolutely, such fact, if known to the corporation
or to the transfer agent, shall be so expressed in the entry of transfer; and
provided, further, that the Board of Directors may establish a procedure whereby
a shareholder may certify that all or a portion of the shares registered in the
name of the shareholder are held for the account of one or more beneficial
owners.
6.4) Lost Certificate. Any shareholder claiming a certificate of stock to
be lost or destroyed shall make an affidavit or affirmation of that fact in such
form as the Board of Directors may require, and shall, if the directors so
require, give the corporation a bond of indemnity in form and with one or more
sureties satisfactory to the Board of at least double the value, as determined
by the Board, of the stock represented by such certificate in order to indemnify
the corporation against any claim that may be made against it on account of the
alleged loss or destruction of such certificate, whereupon a new certificate may
be issued in the same tenor and for the same number of shares as the one alleged
to have been destroyed or lost.
ARTICLE 7.
GENERAL PROVISIONS
7.1) Record Dates. In order to determine the shareholders entitled to
notice of and to vote at a meeting, or entitled to receive payment of a dividend
or other distribution, the Board of Directors may fix a record date which shall
not be more than sixty (60) days preceding the date of such meeting or
distribution. In the absence of action by the Board, the record date for
determining shareholders entitled to notice of and to vote at a meeting shall be
at the close of business on the day preceding the day on which notice is given,
and the record date for determining shareholders entitled to receive a
distribution shall be at the close of business on the day on which the Board of
Directors authorizes such distribution.
7.2) Distributions; Acquisitions of Shares. Subject to the provisions of
law, the Board of Directors may authorize the acquisition of the corporation's
shares and may authorize distributions
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<PAGE>
whenever and in such amounts as, in its opinion, the condition of the affairs of
the corporation shall render it advisable.
7.3) Fiscal Year. The fiscal year of the corporation shall be established
by the Board of Directors.
7.4) Seal. The corporation shall have such corporate seal or no corporate
seal as the Board of Directors shall from time to time determine.
7.5) Securities of Other Corporations.
(a) Voting Securities Held by the Corporation. Unless otherwise
ordered by the Board of Directors, the chief executive officer shall have
full power and authority on behalf of the corporation (i) to attend and to
vote at any meeting of security holders of other companies in which the
corporation may hold securities; (ii) to execute any proxy for such meeting
on behalf of the corporation; and (iii) to execute a written action in lieu
of a meeting of such other company on behalf of this corporation. At such
meeting, by such proxy or by such writing in lieu of meeting, the chief
executive officer shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the corporation
might have possessed and exercised if it had been present. The Board of
Directors may from time to time confer like powers upon any other person or
persons.
(b) Purchase and Sale of Securities. Unless otherwise ordered by the
Board of Directors, the chief executive officer shall have full power and
authority on behalf of the corporation to purchase, sell, transfer or
encumber securities of any other company owned by the corporation which
represent not more than 10% of the outstanding securities of such issue,
and may execute and deliver such documents as may be necessary to
effectuate such purchase, sale, transfer or encumbrance. The Board of
Directors may from time to time confer like powers upon any other person or
persons.
ARTICLE 8.
MEETINGS
8.1) Telephone Meetings and Participation. A conference among directors
by any means of communication through which the directors may simultaneously
hear each other during the conference constitutes a Board meeting, if the same
notice is given of the conference as would be required for a meeting, and if the
number of directors participating in the conference would be sufficient to
constitute a quorum at a meeting. Participation in a meeting by that means
constitutes presence in person at the meeting. A director may participate in a
Board meeting not heretofore described in this paragraph, by any means of
communication through which the director, other directors so participating, and
all directors physically present at the meeting may simultaneously hear each
other during the meeting. Participation in a meeting by that means constitutes
presence in person at the meeting. The provisions of this section shall apply
to committees and members of committees to the same extent as they apply to the
Board and directors.
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<PAGE>
8.2) Authorization Without Meeting. Any action of the shareholders, the
Board of Directors, or any committee of the corporation which may be taken at a
meeting thereof, may be taken without a meeting if authorized by a writing
signed by all of the holders of shares who would be entitled to vote on such
action, by all of the directors (unless less than unanimous action is permitted
by the Articles of Incorporation), or by all of the members of such committee,
as the case may be.
ARTICLE 9.
AMENDMENTS OF BYLAWS
9.1) Amendments. Unless the Articles of Incorporation provide otherwise,
these Bylaws may be altered, amended, added to or repealed by the affirmative
vote of a majority of the members of the Board of Directors. Such authority in
the Board of Directors is subject to the power of the shareholders to change or
repeal such Bylaws, and the Board of Directors shall not make or alter any
Bylaws fixing a quorum for meetings of shareholders, prescribing procedures for
removing directors or filling vacancies on the Board, or fixing the number of
directors or their classifications, qualifications or terms of office, but the
Board may adopt or amend a Bylaw to increase the number of directors.
The undersigned, Frank L. Gazzola, Secretary of Northern Star Financial,
Inc. hereby certifies that the foregoing Bylaws were duly adopted as the Bylaws
of the corporation by its incorporator June 17, 1998.
/s/ Frank L. Gazzola
----------------------------------------
Frank L. Gazzola, Secretary
Attest:
/s/ Thomas P. Stienessen
- -----------------------------
President
-10-
<PAGE>
Exhibit 3.3
COUNTERSIGNED AND REGISTERED:
NORWEST BANK MINNESOTA, N.A.
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
COMMON STOCK COMMON STOCK
See reverse for
certain definitions
---------------------
| CUSIP XXXXXX XX X |
---------------------
NORTHERN STAR FINANCIAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR
VALUE OF $.01 PER SHARE, OF
NORTHERN STAR FINANCIAL, INC.
transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This
certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated:
[Signature] [Signature]
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
SECRETARY
<PAGE>
NORTHERN STAR FINANCIAL, INC.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED
BY THE CORPORATION, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF
THE BOARD OF DIRECTORS OF THE CORPORATION TO DETERMINE THE RELATIVE RIGHTS AND
PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
- -------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
_______ Custodian ________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN
- as joint tenants with right of survivorship and not as tenants in
common
Act ____________________
(State)
Additional abbreviations may also be used though not in the
above list.
- -------------------------------------------------------------------------------
For value received ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER
IDENTIFYING NUMBER OF
ASSIGNEE
--------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint __________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises
Dated -------------------------------------------
-------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED
<PAGE>
EXHIBIT 4.1
NORTHERN STAR FINANCIAL, INC.
STOCK ORDER FORM &
CERTIFICATION
NOTE: PLEASE READ THE STOCK ORDER FORM GUIDE AND INSTRUCTIONS ACCOMPANYING THIS
FORM, BEFORE COMPLETION.
- --------------------------------------------------------------------------------
DEADLINE: The Offering began September ____, 1998. A condition of the Offering
is that the Minimum Offering (sale of 157,000 shares of Common Stock) must be
completed on or before November ____, 1998, unless extended by the Board of
Directors for up to an additional 90 days, or the Offering will be terminated.
If the Minimum offering is consummated, the Offering will continue so long as
shares remain available or until 5:00 p.m. Local Time, on December ___, 1998,
whichever occurs first, unless terminated by the Company beforehand.
- --------------------------------------------------------------------------------
NUMBER OF SHARES
- --------------------------------------------------------------------------------
(1) Number of Shares Price Per Share (2) Total Amount Due
[_____________] x $10.00 = [$______________]
The minimum number of shares that may be subscribed for is 100. The maximum any
individual and their related party may subscribe for in the Offering is 13,600
shares. See the Section entitled "THE OFFERING - General" on page 12 of the
Prospectus dated September ____, 1998.
- --------------------------------------------------------------------------------
METHOD OF PAYMENT AND PURCHASE INFORMATION
- --------------------------------------------------------------------------------
(3) Enclosed is a check, bank draft or money order payable to: "Resource Trust
Company", Escrow Agent for Northern Star Financial, Inc. for $
- --------------------------------------------------------------------------------
BROKER DEALER NAME AND ADDRESS
- --------------------------------------------------------------------------------
(4) If purchased through a broker/dealer, please list the name, address, and
phone number in the space provided.
Company Name:______________________ City:______________________________________
Broker Name:_______________________ State:_______________ Zip Code:____________
Street Address:____________________ Phone Number:______________________________
- --------------------------------------------------------------------------------
STOCK REGISTRATION ONE OWNERSHIP PER STOCK ORDER FORM
- --------------------------------------------------------------------------------
(5) Form of stock ownership
<TABLE>
<S> <C> <C>
[ ] Individual [ ] Uniform Transfer to Minors [ ] Partnership
minors soc. sec # required
[ ] Joint Tenants [ ] Uniform Gift to Minors [ ] IRA (Custodian name &
signature required
[ ] Tenants in Common [ ] Corporation [ ] Fiduciary/Trust (Under
Agreement Dated _____)
</TABLE>
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------------------------------------
Name Daytime Telephone
- --------------------------------------------------------------------------------------------------------------
Street Address Evening Telephone
- --------------------------------------------------------------------------------------------------------------
City State Zip Code State of Residence
- --------------------------------------------------------------------------------------------------------------
</TABLE>
OFFICE USE Batch # _______
- --------------------------------------------------------------------------------
Date Rec'd ___/___/ Order #______________
Check #__________________ Category______
______
Amount $_________________ Initials_____________
- --------------------------------------------------------------------------------
<PAGE>
NASD AFFILIATION (This section only applies to those individuals who meet the
delineated criteria)
- --------------------------------------------------------------------------------
Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of the
immediate family of any such person to whose support such person contributes,
directly or indirectly, or the holder of an account in which an NASD member or
person associated with an NASD member has a beneficial interest. To comply with
conditions under which an exemption from the NASD's Interpretation with Respect
to Free-Riding and Withholding is available, you agree, if you have checked the
NASD affiliation box: (1) not to sell, transfer or hypothecate the shares
subscribed for herein for a period of three months following the issuance, and
(2) to report this subscription in writing to the applicable NASD member within
one day of the payment therefor.
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENTS
- --------------------------------------------------------------------------------
1. By signing below, I acknowledge receipt of the Prospectus dated September
___, 1998, and that I have reviewed all provisions therein. I understand
that I may not change or revoke my order once it is received by the
Company. I also certify that this stock order is for my account and there
is no agreement or understanding regarding any further sale or transfer of
these shares.
2. Under penalties of perjury, I further certify that:
(i) the social security number of taxpayer identification number given
herein is correct; and
(ii) I am not subject to backup withholding.
If you have been notified by the Internal Revenue Service that you are
subject to backup withholding because of under-reporting interest or
dividends on your tax return, you must cross out Item (ii) above.
3. By signing below, I also acknowledge that I have not waived any rights
under the Securities Act of 1933 and the Securities Exchange Act of 1934.
4. By signing below, I hereby represent to the Company that the purchase of
shares subscribed for complies with the "Purchase Limitations" set forth in
the Prospectus dated September ____, 1998.
5. By signing below, I certify that before purchasing the Common Stock of the
Company that I received a copy of the Prospectus dated, September ___,
1998, which discloses the nature of the Common Stock being offered thereby
and describes certain risks involved in an investment in the Common Stock
under the heading "Risk Factors" beginning on page 7 of the Offering
Circular.
6. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the Company
shall have the right to accept or reject this subscription in whole or in
part, for any reason whatsoever. The Company may reduce the number of
shares for which the Subscriber has subscribed, indicating acceptance of
less than all of the shares subscribed on the Company's written form of
acceptance.
7. RESIDENCE. The Subscriber represents and warrants that the Subscriber is a
bona fide resident (or if an entity is organized or incorporated under the
laws of, and is domiciled in) of the State indicated on the signature page
hereof.
THIS FORM MUST BE SIGNED AND DATED. THIS ORDER IS NOT VALID IF THE STOCK ORDER
FORM IS NOT SIGNED. YOUR ORDER WILL BE FILLED IN ACCORDANCE WITH THE PROVISIONS
OF THE PROSPECTUS.
When purchasing as a custodian, corporate officer, etc.; include your full
title.
SIGNATURE TITLE (IF APPLICABLE) DATE
- --------------------------------------------------------------------------------
1.
- --------------------------------------------------------------------------------
2.
- --------------------------------------------------------------------------------
3.
- --------------------------------------------------------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
RETURN THIS FORM TO:
Resource Trust Company
Attn: Evonne M. Costello
300 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402-3380
<PAGE>
EXHIBIT 6.1
LEASE AGREEMENT
THIS LEASE, made effective the 1st day of July, 1998, by and between
COLONIAL SQUARE PARTNERS, Lessor, and NORTHERN STAR BANK, Tenant;
Lessor does hereby lease to Tenant and Tenant hereby hires and takes of and
from Lessor those certain premises known and designated as Suite 106 containing
approximately 5,000 square feet of net rentable area, shown crosshatched in red
on the attached Exhibit A hereinafter referred to as the "Leased Premises" on
the first floor of that certain building located at and situated on the real
property commonly known as COLONIAL SQUARE, 1650 Madison Avenue, Mankato,
Minnesota (hereinafter referred to as the "Building"), said leasing and taking
being upon all of the terms, covenants and conditions herein contained.
A. THE PARTIES HERETO MUTUALLY AGREE AS FOLLOWS:
1. COMMENCEMENT OF TERM. The term of this Lease and payment of rent
shall commence on the date that Tenant is authorized to commence
operations as a Minnesota state-chartered bank, which the parties
estimate will be on or about October 1, 1998.
The Lessor hereby leases and lets to the Tenant the above-
described premises for a 10 year term commencing October 1, 1998,
or as soon thereafter as Tenant is authorized to commence
operations as Minnesota state-chartered bank, but in no event
later than January 1, 1999.
2. RENT. During the first 3 years of this Lease, the Tenant
convenants and agrees to pay monthly to the Lessor as rent for the
Leased Premises $6,041.67 (Base Rent) in advance on the first day
of each and every month for and during the full term of this
Lease, at the offices of Security Management & Realty, Inc. (SMR).
During the second 3 years of this Lease, the monthly Base Rent
shall be $6,250 and for the last 4 years, Base Rent shall be
$6458.33. In the event real estate taxes increase because of usage
of the property as a bank, Tenant shall, in addition to the rent
provided fore herein, pay that portion of the real estate tax
increase attributable to improvements made for Tenant.
3. RENEWAL OPTIONS. Lessor hereby grants to Tenant the option to
renew the Lease for two (2) additional terms of five (5) years
each upon written notice given to Lessor at least six (6) months
prior to the original expiration date of this Lease or the
<PAGE>
expiration of the extended term, all upon the same terms and
conditions herein contained except the Base Rent shall be
negotiated at the time of renewal.
4. CONTINGENCY OF AGREEMENT. Lessor and Tenant expressly agree that
all of the terms and conditions of this agreement and obligations
to perform hereunder are contingent upon the final regulatory
approvals of pending applications by the Tenant to establish a
banking facility in the demised premises. Regulatory agency
approvals include, but are not limited to those of the Minnesota
Department of Commerce (State Banking Commissioner) and the
Federal Deposit Insurance Corporation (FDIC). Unless such
applications are approved and all other regulatory compliance and
permits required to operate the banking office in a manner deemed
legal and operationally acceptable by the Tenant are obtained
within 120 days of this agreement, neither the Lessor nor the
Tenant are obligated to perform under any of the terms and
conditions of this agreement.
B. TENANT HEREBY AGREES AS FOLLOWS:
1. USE OF PREMISES. The Leased Premises shall be used for the purpose
of a bank or other business activities of Tenant and its
affiliates and/or associates as permitted by its supervisory
agencies. No other use shall be permitted without the express
written consent of the Lessor. No part of the Leased Premises
shall be used for any purpose which is illegal, offensive, termed
extra hazardous by insurance companies or which my make void or
voidable any insurance on the Building or which my increase the
premiums therefore, or which will interfere with the general
safety, comfort and convenience of the Lessor and tenants of the
Building. There shall be no commercial sale of food or beverages
by mobile facilities or by vending machines or equipment on the
leased premises without the written consent of the Lessor.
2. ACCEPTANCE OF PERMISES. Taking possession of the Leased Premises
by Tenant shall be conclusive evidence the Leased Premises were,
on that date, in good, clean ant tenantable condition and as
represented by Lessor.
3. RIGHT TO ASSIGN OR SUBLET. Tenant shall not assign this Lease or
sublet all or any portion of the Leased Premises without first
obtaining on each occasion the written consent of Lessor, such
consent not to be unreasonably withheld. Neither
2
<PAGE>
this Lease nor nay interest therein, nor any estate thereby
created, shall pass to any trustee or receiver in bankruptcy, or
any assignee for the benefit of creditors, or by operation of law.
4. SIGNS. Tenant may permit signs to be placed for the term of the
Lease and any renewals or extensions on the building over the main
entrance to include its logo and name as shown on attached Exhibit
B and other signage on the Leased Premises, and shall have the
right to letter the entrance to the Leased Premises providing the
size, style, text and color are first approved in writing by
Lessor, approval not to be unreasonably withheld by Lessor. Tenant
may allow other exterior signage to be placed for the tem of this
Lease and any renewals or extensions, except that their location,
shape, lighting, and other details must be approved by the City
and Lessor, approval not to be unreasonably withheld by Lessor.
Any sign or lettering not so approved may be removed by Lessor at
Tenant's expense. Lessor may provide exterior tenant directory at
the option of each Tenant and at Tenant's expense.
5. PARKING. In the event use of the parking area has to be restricted
by lessor, Tenant shall be allocated a portion thereof equal to
the proportion of the Building leased by Tenant. Bank shall be
guaranteed spaces convenient to the front entrance.
6. QUIET ENJOYMENT. Upon Tenant paying the rent reserved hereunder
and observing all of the convents, conditions and provisions on
Tenant's part to be observed hereunder, Tenant shall have quiet
possession of the Leased Premises for the entire term hereof,
subject to all provisions of this Lease.
7. RULES AND REGULATIONS. Tenant shall use the Leased Premises and
the public area in the Building in accordance with such rules and
regulations as may from time to time be made by Lessor for the
general safety, comfort and convenience of the owners, occupants
and tenants of the Building, and shall cause Tenant's customers,
employees and invitees to abide by such rules and regulations.
8. WASTE. Tenant shall conserve heat, air conditioning, water, and
electricity and shall use due care in the use of the Leased
Premises, and of the public areas in the Building, and without
qualifying for the foregoing, shall not neglect or misuse water
fixtures, electric lights and heating and air conditioning
apparatus. Tenant shall pay promptly to Lessor forthwith, upon
3
<PAGE>
demand, an amount equal to any cost incurred by Lessor in
repairing the Leased Premises or the Building where such repair
was made necessary by the negligence of, or misuse by Tenant or an
employee, customer or invitee of the Tenant, or by reason of any
open window in the Leased Premises.
9. RIGHT TO ENTER. Lessor, its agents and representatives may at any
and all reasonable times with advance notice to Tenant during the
day and night enter to view and inspect the Leased Premises, or to
clean and maintain the same, or to make repairs, or to make such
improvements or changes in the Leased Premises or the Building as
Lessor may deem proper. The right of entry reserved in the
immediately preceding sentence shall not be deemed to impose any
greater obligation of Lessor to claim, maintain, repair or change
the Leased Premises than is specifically provided in this Lease.
The Lessor, its agents or representatives may at any time in case
of emergency enter the Leased Premises and do such acts as Lessor
may deem proper with reasonable attempts to contact Tenant in
advance, if practical under the circumstances, in order to protect
the Leased Premises, the Building or any occupants of the
Building. There shall be no diminution of rent or liability on the
part of Lessor by reason of inconvenience, annoyance or injury to
business on account of any such entry or acts by Lessor, its
agents or representatives.
10. PERSONAL PROPERTY RISK. Lessor shall not be liable to Tenant, or
those claiming under Tenant for injury, death or property damage
occurring in, on or about the Building and appurtenances thereto
except in the case of gross negligence and wrongful acts, and
Tenant shall indemnify Lessor and hold it harmless from any claim
or damage occurring in, on or about the Leased Premises to Tenant
or an employee, customer or invitee of Tenant. Without limiting
Tenant's liability hereunder, Tenant agrees, at it own cost and
expense, to carry public liability insurance protecting Lessor and
Tenant in the amounts of One Hundred Thousand Dollars
($100,000.00) for personal injuries sustained by any one person,
Three Hundred Thousand Dollars ($300,000.00) for injuries
sustained by any one accident, and Fifty Thousand Dollars
($50,000.00) for property damage. All policies of insurance shall
name both Lessor and Tenant as insurers thereunder and shall
protect the interest of Lessor. Certificates of said insurance
providing for not less than fifteen (15) days notice to Lessor
prior to cancellation thereof shall be
4
<PAGE>
furnished to Lessor prior to Tenant taking possession of the
demised premises.
11. WAIVER OF SUBROGATION. Notwithstanding anything in this lease to
the contrary, if the Building is damaged, destroyed by fire, or an
extended coverage risk, Tenant, its agents, employees,
representatives and invitees are hereby released from any
liability by reason thereof to the extent of insurance proceeds
realized by Lessor as a result of such damage or destruction. In
no event shall any such release be applicable if to do so would
work in contravention of any requirement in a subrogation,
coverage is or may be void.
12. LIGHT AND AIR. Tenant has no right to light and air over any
premises adjoining the Building.
13. ALTERATIONS. Tenant will not make any alterations of or additions
to the Leased Premises without the written approval of Lessor and
all alterations, additions or changes which may be made by either
of the parties hereto upon the Leased Premises except moveable
office furnishings shall be the property of Lessor and shall
remain upon and be surrendered with the Leased Premises, as a part
thereof, at the termination of the Lease or any extension thereof.
In connection with any alterations, additions, improvements or
changes will be completed according to plan and will be paid for.
Tenant will not permit any mechanics', laborers', or materialmens'
liens to stand against the Leased Premises or the Building for any
labor or material furnished to, or for the account of, Tenant or
claimed to have been so furnished in connection with any work
performed or claimed to have been preformed in, on or about he
Leased Premises. Lessor may, at its option, discharge any such
lien, and the amount of the lien, together with costs and
reasonable attorney's fees, shall become additional rent due
immediately hereunder.
14. ATTORNMENT. Tenant shall, in the event any proceedings are brought
for the foreclosure of or in the event of exercise of the power of
sale under any mortgage made by Lessor covering the Leased
premises attorn to the purchaser upon any such foreclosure or sale
and recognize such purchaser as the Lessor under this Lease.
15. SUBORDINATION. Tenant agrees that this Lease shall, at the request
of the Lessor, be subordinate to nay mortgages or deeds
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of trust that may hereafter be placed on said premises and to any
and all advances to be made thereunder, and to the interest
thereon, and all renewals, replacements and extensions thereof,
provided the mortgagee or trustee named in siad mortgages or trust
deeds shall agree to recognize the Lease of Tenant in the event of
foreclosure if Tenant is not in default. Tenant also agrees that
any mortgagee or trustee may elect to have this Lease a prior lien
to its mortgages or deed of trust, and in the event of such
election and upon notification by such mortgagee or trustee to
Tenant to that effect, this Lease shall be deemed prior in lien to
the said mortgage or deed of trust, whether this Lease is dated
prior to or subsequent to the date of said mortgage or deed of
trust. Tenant agrees, that upon the request of Lessor, any
mortgagee or any trustee, it shall execute whatever instruments
may be required to carry out the intent of this section.
16. TENANT TO SURRENDER PREMISES. Upon the expiration or the
termination of term of the Lease, Tenant shall, at its expense:
a) Remove Tenant's goods and effects and those of all persons
claiming under Tenant.
b) Quit and deliver up the Leased Premises to Lessor peaceable
and quietly, in as good order and condition as the same were
in on the date the term of this Lease commenced or were
thereafter placed in by Lessor, reasonable wear and tear
excepted.
c) At Lessor's request, restore the Leased Premises to general
office standards adopted from time to time by Lessor for
general application throughout the Building. Any property
left in the Leased Premises after the expiration or
termination of the term of this Lease shall be deemed to have
been abandoned and the property of Lessor to dispose of as
Lessor deems expedient.
17. WAIVER OF COVENANTS. Failure of Lessor to insist, in any on or
more instances, upon strict performance of any term, covenant or
condition of this Lease, or to exercise any option herein
contained shall not be construed as a waiver, or a relinquishment
for the future, of such term, covenant, condition or option, but
the same shall continue and remain in full force and effect. The
receipt by Lessor of rents with knowledge of a
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breach in any of the terms, covenants or conditions of this Lease
to be kept or performed by Tenant shall not be deemed a waiver of
such breach, and Lessor shall not be deemed to have waived any
provision of this Lease unless expressed in writing and signed by
Lessor.
C. LESSOR HEREBY AGREES AS FOLLOWS:
1. HEATING AND AIR CONDITIONING. Lessor will furnish reasonable heat
and air conditioning during business hours and during the usual
and appropriate seasons at Lessor's expense.
2. UTILITIES AND SERVICE. Lessor will provide electricity to all
common areas, stairways, hallways, parking lots and the Leased
Premises. Tenant shall, at his own expense, be responsible for the
telephone service used in their leased premises.
3. JANITOR. Lessor will also provide janitor services Monday through
Friday, holidays excepted, for all common area.
4. BUSINESS HOURS. Usual business hours as used herein shall mean the
hours between 8:00 a.m. and 5:00 p.m. Monday through Friday,
holidays excepted. Premises during hours established by them for
their convenience.
5. TEMPORARY INTERRUPTION OF SERVICES. Lessor shall not be liable to
Tenant, its agents, employees, representatives, customers or
invitees for any inconvenience, loss or damage or for any injury
to any person or property caused by or resulting from any casual
ties, riots, strikes, picketing, accidents, breakdowns or any
cause beyond Lessor's reasonable control or from any temporary
failure or lack of such services and Tenant shall indemnify Lessor
and hold Lessor harmless from any claim or damage because of such
inconvenience, loss, damage or injury. No variation, interruption
or failure to such services incident to the making of repairs,
alterations or improvements or due to casualties, riots, strikes,
picketing, accidents, breakdowns, or any cause beyond Lessor's
reasonable control or temporary failure to lack of such services
shall be deemed an eviction of Tenant or relieve Tenant from any
of Tenant's obligations hereunder.
6. SNOW REMOVAL. That snow removal on all sidewalks surrounding or
adjacent to the Building and all parking lots
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used in connection therewith is the responsibility of the Lessor
and shall be accomplished within a reasonable time after a
snowfall.
7. NOTICES. A bill, statement, notice or communication which Lessor
desires or is required to give to Tenant, including any notice or
termination, shall be deemed sufficiently given or rendered if in
writing, delivered to Tenant personally, or sent by registered or
certified mail, addressed to Tenant at the Leased Premises or left
at the Leased Premises, addressed to Tenant, and the time of
rendition or giving shall be deemed to be the time when the same
is delivered to Tenant, or mailed or left at the Leased Premises
as herein provided. Any notice by Tenant to Lessor must be served
by registered or certified mail addressed to Lessor at the address
where the last previous rental hereunder was payable, or upon
notice given to Tenant, at such other place as Lessor designates.
8. EMINENT DOMAIN. If the entire Building is taken by eminent domain,
this Lease shall automatically terminate as of the date of taking.
If a portion of the Building is taken by eminent domain, Lessor
shall have the right to terminate this Lease by giving written
notice thereof to Tenant within ninety (90) days after the date of
taking. If a portion of the Leased Premises is taken by eminent
domain and this Lease is not thereby terminated, Lessor shall, at
it expense, restore the Leased Premises exclusive of any
improvements or other changes made to the premises by Tenant, to
as near the condition which existed immediately prior to the date
of taking as reasonable possible, and rent shall abate during such
period of time as the Leased Premises are untenantable, in the
proportion that the untenantable portion of the Leased Premises
bears to the entire Leased Premises. All damages awarded for a
taking under the power of eminent domain, whether for the whole or
a part of the Leased Premises, shall belong to, and be the
property of, Lessor, whether such damages shall be awarded as
compensation for diminution in value to the leasehold estate
hereby created or to the fee of the Leased Premises provided,
however, that Lessor shall not be entitled to any award made to
Tenant for loss of business, fair value of, and cost of removal of
stock and fixtures. The term "eminent domain" shall include the
exercise of any similar governmental power and any purchase or
other acquisition in lieu of condemnation.
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9. FIRE OR OTHER CASUALTY. In the event of a partial or total
destruction of the Leased Premises during the term hereof from any
cause, Lessor shall with reasonable diligence repair the same,
provided, however, that in the event Lessor in its sole and
absolute discretion determines it to be impractical to repair the
premises, it may terminate this Lease. In the event Lessor shall
elect to repair the premises, this Lease shall not terminate, but
Tenant shall be entitled to a reduction of rent during any period
of time that any significant portion of the Leased Premises are
untenantable, such reduction to be calculated in the proportion
that the untenantable portion of the Leased Premises bears to the
entire Leased Premises. Lessor shall not be responsible to Tenant
for damage to, or destruction of, any furniture, equipment,
improvements or other changes made by Tenant in, on or about the
Leased Premises regardless of the cause of the damage or
destruction.
10. TIME OF POSSESSION. If the Leased Premises shall, on the date of
commencement of the term of this Lease, be in the possession and
occupancy of any person not lawfully entitled thereto, Lessor
shall use due diligence to obtain possession thereof for Tenant.
If the Leased Premises shall not be ready for occupancy at said
time because construction has not yet been completed or by reason
of any building operations, repairing or remodeling to be done by
Lessor, Lessor shall use due diligence to complete such
construction, building operations, repairing or remodeling. It is
agreed that Lessor using due diligence shall not in any way be
liable for failure to obtain possession of the Leased Premises for
Tenant, or to deliver the possession thereof to Tenant with such
building construction, operations, repairing or remodeling
completed, except that the rentals hereunder shall be abated until
the Leased Premises shall, on Lessor's part, be ready for the
occupancy of Tenant, this Lease remaining in all other things in
full force and effect and the term of this Lease shall hereby be
extended by the period of such delay notwithstanding the above, if
the Leased Premises are not ready for occupancy within sixty (60)
days of the date Tenant gives notice it is ready to occupy Leased
Premises, the Tenant is not obligated to perform under any of the
terms of this agreement.
11. HOLDING OVER. Should Tenant continue to occupy the Leased
premises, or any part thereof, after the expiration or termination
of the term of this Lease, such tenancy shall be from month to
month, at the sole option of the Lessor, and at a rental of one
and one-half times the last rental charge stated in Article
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A.2., subject to all of the conditions, provisions and obligations
of this Lease, including, without limitation, the additional
rental described in Article A.2. insofar as the case is applicable
to a month-to-month Tenant.
12. LESSORS RIGHT TO CURE DEFAULT. If Tenant defaults in the
observance or performance of any of Tenant's covenants, agreements
or obligations hereunder wherein the default can be cured by the
expenditure of money, Lessor may, but without obligation and
without limiting any of the remedies which it may have by reason
of such default, cure the default, charge the cost thereof to
Tenant, and Tenant shall pay the same forthwith upon demand. (In
the event the same shall not be paid to Lessor within ten (10)
days from the date of billing, the same shall bear interest at the
rate of ten percent (10 ) per annum.) When any sum of money
hereunder becomes due to Lessor by Tenant, such sum shall be
deemed to be additional rent due hereunder.
13. DEFAULT. If Tenant shall default in the payment of any installment
of rent, or in the observance or performance of any of Tenant's
other covenants, agreements or obligations hereunder, or if any
proceeding is commenced by or against Tenant for the purpose of
subjecting the assets of Tenant to any law relating to bankruptcy
or insolvency or for an appointment of a receiver of Tenant or any
of Tenant's assets, or if Tenant makes a general assignment of
Tenant's assets for the benefit of creditors, then, in any such
event, Lessor may:
a) Without process, however, with advance notice to Tenant to
allow Tenant reasonable time to remove its books, records,
files, documents, computer records and all written records,
re-enter into the Leased Premises and remove all persons and
property therefrom and at its option annual and cancel this
Lease as to all future rights of Tenant, and have, regain,
repossess and enjoy the Leased Premises, anything herein to
the contrary notwithstanding, and Tenant hereby expressly
waives the service of any notice in writing of intention to
re-enter as aforesaid and also all right of restoration to
possession of the Leased Premises after re-entry or after
judgment for possession thereof. In case of any such
termination, Tenant will indemnify Lessor against all loss of
rents and other damages which it may incur by reason of such
termination during the residue of the Lease term, and also
against all attorney's fees and expenses incurred in
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enforcing any of the terms of this Lease; or at Lessor's sole
option,
b) Re-enter and take possession of the Leased Premises in the
manner provided in Subparagraph a) immediately above, without
such re-entry constituting a cancellation or termination of
this Lease or a forfeiture of the Base Rent and additional
rent to be paid or of the covenants, agreements and
conditions to be kept and performed by Tenant for and during
the remainder of the term hereof. Failure of Lessor to notify
Tenant in writing of its election hereof at the time it
re-enters and takes possession of the Leased Premises shall
indicate an election to re-enter and take possession without
terminating this Lease. Lessor shall not be deemed to be in
default under this Lease until Tenant has given Lessor
written notice specifying the nature of the default and
Lessor does not cure such default within thirty (30) days
after receipt of such notice or within such reasonable time
thereafter as may be necessary to cure such default if such
default is of such a character as to reasonable require more
than thirty (30) days to cure.
14. ADDITIONAL TERMS AND CONDITIONS. Lessor and Tenant agree that
without the written consent of any mortgagee or trustee holding a
mortgage or deed of trust with respect to the Leased Premises,
Lessor shall not:
a) Collect or accept payments of rent under this Lease more than
one month in advance;
b) Require of permit Tenant under this Lease to pay rent other
than in equal monthly installments payable in advance (other
than payments of percentage rent and security deposits, if
any);
c) Require or permit Tenant under this Lease to pay any
percentage or other rental based in whole or in part on such
Tenant's income or profits, as opposed to such Tenant's sales
or receipts;
d) Require or permit Tenant under this Lease to deduct taxes or
other operating expenses paid directly or indirectly by it
for purposes of computing the income on which percentage
rental is based;
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e) Agree with any Tenant to furnish to such Tenant any services
other than those provided for in the Lease, or to manage or
to operate such Tenant's leased Premises unless Lessor
provides mortgagee with an unqualified opinion of counsel
acceptable to mortgagee that the furnishing or rendering of
the services or management function in question would, if the
Tenant in question were a direct Tenant of mortgagee,
disqualify any of the mortgagee's income as "rents from real
property" under the terms of Sec. 856(d)(3) of the Internal
Revenue Code of 1954 or any amendments thereto.
f) Execute any lease or amendment thereto containing terms which
would, under the applicable provisions of the Internal
Revenue Code, if the lease in question were a lease between
mortgagee and Tenant in question, disqualify mortgagee as a
"real estate investment trust" or disqualify any of its
income as "rents from real property."
g) Notwithstanding any other provisions contained in this lease,
in the event (a) Lessee or its successors or assignees shall
become insolvent or bankrupt, or if it or their interests
under this Lease shall be levied upon or sold under execution
or other legal process, or (b) the depository institution
then operating on the Premises is closed, or is taken over by
any depository institution supervisory authority
("Authority"), Lessor may, in either such event, terminate
this Lease only with the concurrence of any Receiver or
Liquidator appointed by such Authority; provided, that in the
event this Lease is terminated by the Receiver or Liquidator,
the maximum claim of Lessor for rent, damages, or indemnity
for injury resulting from the termination, rejection, or
abandonment of the unexpired Lease shall by law in no event
be in an amount equal to all accrued and unpaid rent to the
date of termination."
15. TENANT. The word "Tenant" wherever used in this Lease shall be
construed to mean Tenants in all cases where there is more than
one Tenant; and the necessary grammatical changes required to make
the provisions hereof apply to corporations, partnerships or
individuals, men or women, shall in all cases be assumed as though
in each case fully expressed.
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16. RIGHT OF FIRST REFUSAL. It is understood between the parties that
other tenants occupy other office spaces within the Building.
Lessor grants to Tenant a Right of First Refusal to lease such
spaces as the same become available.
17. MISCELLANEOUS. Except for agreement regarding parking between the
parties herewith, there are no understandings or agreements not
incorporated in this Lease except as may be provided in a written
addendum signed and accepted by both parties. This is a Minnesota
contract and shall be construed accordingly to the laws of
Minnesota. The captions in this Lease are for convenience only and
ar not a part of this Lease. The covenants and agreements hereof
shall bind the heirs, executors, administrators, legal
representatives, successors and assigns of the parties hereto as
if they had been specifically mentioned in each of said covenants
and agreements. If any provision in this Lease should for any
reason be adjudged invalid or illegal, that provision shall be
deemed omitted herefrom and shall not invalidate any other
provision of this Lease and the remainder hereof shall remain in
full force and effect. The rider(s) and/or exhibit(s) attached to
this Lease, consisting of Exhibit A(1) page, Exhibit B, Exhibit
C1, Exhibit C2 are hereby declared to be a part of this Lease to
the same extent and in the same manner as if the provisions
thereof were actually embodied in this Lease.
In WITNESS THEREOF, Lessor and Tenant, respectively, have duly signed and
sealed these presents, the day and year first above written.
LESSOR: TENANT:
COLONIAL SQUARE PARTNERS NORTHERN STAR BANK
By: __________________________ By: _________________________
Its: __________________________ Its: _________________________
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EXHIBIT 6.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this _____day of __________. 199_, by and
between Northern Star (the "Bank".) and Thomas P. Stienessen (the "Employee")
WHEREAS, the Employee has heretofore been employed by the President/CEO and
is experienced in all phases of the business of the Bank; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
President/CEO of the Bank. The Employee shall render such administrative and
management services to the Bank and Northern Star Financial, Inc. ("Parent") as
are currently rendered and as are customarily performed by persons situated in a
similar executive capacity. The Employee shall also promote, by entertainment
or otherwise, as and to the extent permitted by law, the business of the Bank
and Parent. The Employee's other duties shall be such as the Board of Directors
for the Bank (the "Board of Directors") may from time to time reasonably direct,
including normal duties as an officer of the Bank.
2. Base Compensation. The Bank agrees to pay the Employee during the term
of this Agreement a salary at the rate of $100,000.00 per annum, payable in cash
not less frequently than monthly; provided, that the rate of such salary shall
be reviewed by the Board of Directors not less often than annually, and Employee
shall be entitled to receive annually an increase at such percentage or in such
an amount as the Board of Directors in its sole discretion may decide at such
time.
3. Discretionary Bonus. The Employee shall be entitled to participate in
an equitable manner with all other senior management employees of the Bank in
discretionary bonuses that may be authorized and declared by the Board of
Directors to its senior management employees from time to time. No other
compensation provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such discretionary bonuses when and as
declared by the Board of Directors.
4. (a) Participation in Retirement and Medical Plans. The Employee
shall be entitled to participate in any plan of the Bank relating to pension,
profit-sharing, or other retirement benefits and medical coverage or
reimbursement plans that the Bank may adopt for the benefit of its employees.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Bank's senior management employees, including by example, participation in any
stock option or incentive plans adopted by the Board of Directors of Bank or
Parent, club memberships, a
<PAGE>
reasonable expense account, and any other benefits which are commensurate with
the responsibilities and functions to be performed by the Employee under this
Agreement. The Bank shall reimburse Employee for all reasonable out-of-pocket
expenses which Employee shall incur in connection with his service for the Bank.
(c) Automobile. During the term of the Agreement, Executive shall be
provided with an automobile of comparable quality to that used by Executive at
the date hereof. Executive shall be reimbursed for all costs of licensing,
maintenance, repair and operation of the automobile.
5. Basic Term. (a) The term of employment of Employee under this Agreement
shall be for the period commencing on__________199__and ending 36 months
thereafter.
(b) Extension of Term. The 36 months period of employment shall
automatically be extended for an additional twelve full calendar months without
further action by the parties on the first anniversary of the commencement of
the term of this Agreement, and on each succeeding anniversary thereafter,
unless either party shall have served written notice upon the other prior to
such anniversary of his or its intention that this Agreement shall terminate at
the end of the 36 month period following such date of written notice.
6. Loyalty: Noncompetition.
(a) The Employee shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the Bank
or Parent.
(b) Nothing contained in this Paragraph 6 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Bank or Parent, or, solely as a
passive or minority investor, in any business.
7. Standards. The Employee shall perform his duties under this Agreement
in accordance with such reasonable standards expected of employees with
comparable positions in comparable organizations and as may be established from
time to time by the Board of Directors. The Bank will provide Employee with the
working facilities and staff customary for similar executives and necessary for
him to perform his duties.
8. Vacation and Sick leave. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, with all such voluntary absences to count as
vacation time; provided that:
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(a) The Employee shall be entitled to annual vacation leave in accordance
with the policies as are periodically established by the Board of Directors for
senior management employees of the bank.
(b) The Employee shall not be entitled to receive any additional
compensation from the Bank on account of his failure to take vacation leave and
Employee shall not be entitled to accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and legitimate reasons as the Board of Directors in its discretion may
determine. Further, the Board of Directors shall be entitled to grant to the
Employee a leave or leaves of absence with or without pay at such time or times
and upon such terms and conditions as the Board of Directors in its discretion
may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank. In the event that any sick leave benefit shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors for employees of the Bank.
9. Termination and Termination Pay.
The Employee's employment under this Agreement shall be terminated upon any
of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in which
event the Employee's estate shall be entitled to receive the compensation due
the Employee through the last day of the calendar month in which Employee's
death shall have occurred plus three months.
(b) The Board of Directors may terminate the Employee's employment at any
time, but any termination by the Board of Directors other than termination for
Just Cause, shall not prejudice the Employee's right to compensation or other
benefits under the Agreement. The Employee shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
Termination for "Just Cause" shall include termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses), or material breach of any provision of the Agreement.
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(c) Except as provided pursuant to Section 12 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee the salary provided pursuant to Section 2 herein, up to the date of
termination of the term (including any renewal term) of this Agreement and the
cost of Employee obtaining all health, life, disability, and other benefits
which the Employee would be eligible to participate in through such date based
upon the benefit levels substantially equal to those being provided Employee at
the date of termination of employment.
(d) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8 (e) (4) or 8 (g) (1), of the Federal Deposit Insurance Act ("FDIC")
(12 U.S.C. 1818 (e) (4) and (g) (1), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but the vested
rights of the parties shall not be affected.
(e) If the bank is in default (as defined in Section 3 (x) (1) of FDIC) all
obligations under this Agreement shall terminate as of the date of default, but
this paragraph shall not affect any vested rights of the contracting parties.
(f) All obligations under this Agreement shall be terminated, except to the
extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Commissioner of the Department of
Commerce, or his or her designee, at the time that the Federal Deposit Insurance
Corporation ("FDIC") enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c) of FDIA; or
that the Commissioner of the Department of Commerce or his or her designee, at
the time that the Commissioner of the Department of Commerce or his or her
designee approves a supervisory merger to resolve problems related to operation
of the Bank or when the Bank is determined by the Commissioner of the Department
of Commerce to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
(g) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 90 days written notice to the Board
of Directors, other than pursuant to Section 12(b), in which case the Employee
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
10. Suspension of Employment. If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8(e) (3) or (g) (1) of the FDIA (12 U.S.C. 1818
(e) (3) and (g) (1), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay the
Employee all or part of the compensation withheld while its
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contract obligations were suspended and (ii) reinstate any of its obligations
which were suspended.
11. Disability. If the Employee shall become disabled or incapacitated to
the extent that he/she is unable to perform his/her duties hereunder, by reason
of medically determinable physical or mental impairment, as determined by a
doctor engaged by the Board of Directors, Employee shall nevertheless continue
to receive the compensation and benefits which may be payable to Employee under
the provisions of disability insurance coverage in effect for Bank employees or
alternative provisions by the Board of Directors. Upon returning to active
full-time employment, the Employee's full compensation as set forth in this
Agreement shall be reinstated as of the date of commencement of such activities.
In the event that the Employee returns to active employment on other than a
full-time basis, then his/her compensation (as set forth in Paragraph 2 of this
Agreement) shall be reduced in proportion to the time spent in said employment,
or as shall otherwise be agreed to by the parties.
12. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event of
the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within twelve (12) months after, any
change in control of the Bank or Parent, Employee shall be paid an amount equal
to the product of 2.99 times the Employee's "base amount" as defined in Section
280G9b) (3) of the Internal Revenue Code of 1986, as amended (the "Code") and
regulations promulgated thereunder. Said sum shall be paid, at the option of
Employee, either in one (1) lump sum within thirty (30) days of such termination
discounted to the present value of such payment using as the discount rate the
three year treasury bill rate as published in the Wall Street Journal Eastern
Edition as of the date of such payment, or in periodic payments over the next 36
months or the remaining term of this Agreement whichever is less, as if
Employee's employment had not been terminated, and such payments shall be in
lieu of another future payments which the Employee would be otherwise entitled
to receive under Section 9 of this Agreement. The term "control" shall refer to
the ownership, holding or power to vote more than 25% of the Parent's or Bank's
voting stock, the control of the election of a majority of the Parent's or
Bank's directors, or the exercise of a controlling influence over the management
or policies of the Parent or Bank by any person or by persons acting as a group
within the meaning of Section 13(d) of the Securities Exchange Act of 1934. The
term "person" means an individual other than the Employee, or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the contrary,
Employee may voluntary terminate his/her employment under this Agreement within
twelve (12) months following a change in control of the Bank or Parent, and
Employee shall thereupon be entitled to receive the payment described in Section
12(a) of this
5
<PAGE>
Agreement, upon the occurrence, or within ninety (90) days thereafter, of any of
the following events, which have not been consented to in advance by the
Employee in writing: (i) if employee would be required to move his/her personal
residence or perform his/her principal executive functions more than thirty-five
(35) miles from the Employee's primary office as of the signing of this
Agreement; (ii) if in the organizational structure of the Bank or Parent,
Employee would be required to report to a person or persons other than the
Company's Board of Directors; (iii) if the Bank or Parent should fail to
maintain existing employee benefits plans, including material fringe benefit,
stock option and retirement plans; (iv) if Employee would be assigned duties and
responsibilities other than those normally associated with his/her position as
referenced at Section 1, herein; (v) if Employee would not be elected or
reelected to the Board of Directors of the Bank; or (vi) if Employee's
responsibilities or authority have in any way been materially diminished or
reduced.
(c) In the event any dispute shall arise between the Employee and the Bank
as to the terms or interpretation of this Agreement, including this Section 12,
whether instituted by formal legal proceedings or otherwise, including any
action taken by Employee to enforce the terms of this Section 12 or in defending
against any action taken by the Bank or Parent, the Bank or Parent shall
reimburse Employee for all costs and expenses, including reasonable attorneys'
fees, arising from such dispute, proceedings or actions, notwithstanding the
ultimate outcome thereof. Such reimbursement shall be paid within ten (10) days
of Employee furnishing to the Bank or Parent evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by Employee. Any such request for reimbursement by Employee shall be
made no more frequently than at sixty (6) day intervals.
13. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank or Parent which shall acquire, directly
or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal skills of the
Employee, the Employee shall be precluded from assigning or delegating his/her
rights or duties hereunder without first obtaining the written consent of the
bank.
14. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
15. Applicable Law. This Agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Minnesota, except to the extent that Federal law shall be
deemed to apply.
6
<PAGE>
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
first hereinabove written.
ATTEST: BY:
__________________________ __________________________________
Secretary Chairman of the Board
WITNESS:
__________________________ ____________________________________
Board Member Employee
7
<PAGE>
EXHBIT 6.3
SUBSCRIPTION AGREEMENT
Northern Star Financial, Inc.
410 Jackson Street, Suite 510
Mankato, MN 56001
Gentlemen:
For good and valuable consideration, the receipt and sufficiency which the
Subscriber and Company acknowledge, the undersigned hereby agrees to purchase
that number of shares of Common Stock, $1.00 par value (the "Shares"), of
Northern Star Financial, Inc., a Minnesota corporation (the "Company"), at a
price of $10.00 per share, as are set forth on the signature page of this
Subscription Agreement. I understand and agree that upon satisfaction of all
the conditions specified in Section 3, (i) I am legally bound to purchase the
Shares, and (ii) the total subscription amount will be due and payable to the
Company. By execution of this Subscription Agreement, the undersigned
acknowledges that the Company is relying upon the accuracy and completeness of
the representations contained herein in complying with its obligations under
applicable securities laws.
1. SUBSCRIBER'S REPRESENTATIONS. The undersigned acknowledges and
represents as follows:
(a) That the undersigned has received, reviewed and is familiar with
the Private Placement Memorandum dated December 1, 1997 (the "Memorandum").
(b) That the undersigned is familiar with the risks of the proposed
business of the Company and has had the opportunity to meet with the officers of
the Company and discuss the Memorandum, and has been given access to any other
information regarding the Company that he or she desires or that may be
necessary to verify the accuracy of information provided in the Memorandum.
(c) That the undersigned understands that a purchase of the Shares
involves a high degree of risk, but that the undersigned is in a financial
position to hold the Shares for an indefinite period of time and is able to bear
the economic risk and withstand a complete loss of the undersigned's investment
in the Shares;
(d) That the undersigned has obtained, to the extent the undersigned
deems necessary, the undersigned's own personal professional advice with respect
to the risks inherent in the investment in the Shares, and the suitability of an
investment in the Shares in light of the undersigned's financial condition and
investment needs.
(e) That the undersigned believes that the investment in the Shares is
suitable for the undersigned based upon the undersigned's investment objectives
and financial needs, and
<PAGE>
the undersigned has adequate means for providing for the undersigned's current
financial needs and personal contingencies and has no need for liquidity of
investment with respect to the Shares.
(f) That the undersigned has such knowledge and experience in financial
and business matters that the undersigned is capable of evaluating the merits
and risks of the prospective investment in the Shares and has the net worth to
undertake such risks;
(g) That the undersigned acknowledges that the projections attached to
the Memorandum are a reflection of the Company's objectives and cannot form the
basis for an investment in the Common Stock without a thorough review of the
Memorandum and that such projections, although based on what the Company
believes are reasonable assumptions, are merely estimates by the Company and
that the Company's operating results will vary from such projections and such
variations will likely be material; and
(h) That the undersigned realizes that (i) the purchase of the Shares
is a long-term investment; (ii) the Shares have not been registered under the
Securities Act of 1993, as amended (the "Act"), or under the securities laws of
any state; and (iii) the shares, when issued, will be restricted securities, and
may not be transferred unless sold pursuant to an effective registration
statement covering the Shares or an exemption from registration is available.
2. SUBSCRIBER'S RESIDENCY. The undersigned represents and warrants that
the undersigned is a bona fide resident of, is domiciled in and received the
offer and made the decision to invest in the Shares in the state set forth on
the signature page below under "Addresses" and that the Shares are being
purchased by the undersigned in the undersigned's name solely for the
undersigned's own beneficial interest and not as nominee for, or on behalf of,
or for the beneficial interest of, or with the intention to transfer to, any
other person, trust or organization.
3. CONDITIONS TO PERFORMANCE. The full subscription amount is due and
payable upon (i) receipt by the Company and its wholly-owned subsidiary,
Northern Star Bank (the "Bank") of all government approvals, including approvals
from the Minnesota Department of Commerce, FDIC and Board of Governors of the
Federal Reserve System, necessary for the Company to be a bank holding company
and the Bank to commence its banking operation. The consummation of the
purchase and sale of the Shares (the "Closing") shall occur on, but in no event
prior to, the date the Company and Bank receive all necessary government
approvals.
4. EXPIRATION DATE. Subscriptions will be received until 5:00 p.m.
Minnesota time, on June 30, 1998. The Company reserves the right to terminate
the offering earlier or extend the offering period without notice to
subscribers.
2
<PAGE>
SIGNATURES
(A) The Number of Shares of Common Stock of Northern Star Financial, Inc., that
I wish to Subscribe for:
________________________ _________________________________________
Number of Shares Total Price (410.00 x Number of Shares)
(B) Manner in which title to the Shares is to be held:
[ ] Individual [ ] Tenants in Common
[ ] Joint Tenant with right of [ ] Corporation
[ ] Survivorship
[ ] Partnership [ ] Trust
[ ] Other (Please describe) ________ [ ] IRA or Keogh (undersigned
________________________________ [ ] has investment power)
(C) Name in which title is to be held (Please Print - the certificate will be
issued in this name):
__________________________________________________________________________
(D) Address of Subscriber's Domicile and Bona Fide Residence:
__________________________________________________________________________
Street
__________________________________________________________________________
City, State and Zip Code
(E) Social Security or Tax ID Number (Both if Grantor trust or partnership:
__________________________________________________________________________
(F) Signatures:
(i) Individual Signatures (If you are purchasing as joint tenants or
tenants in common, both parties must sign):
X __________________________ X_______________________________
(ii) Corporate, Partnership and other Entities (Print Name of Equity and
form if unclear):
________________________________
(Name of entity)
By:_____________________________
Its:__________________________
Dated:______________, 1998
This Subscription Agreement is accepted as of_______, 1998
Northern Star Financial, Inc.
By:________________________
Its: President
<PAGE>
EXHIBIT 6.4
April 29, 1998
Northern Star Financial, Inc.
11 Marie Lane
Lake Emily
St. Peter, Minnesota 56082
Dear Gentlemen:
This will confirm our intent to act as the underwriter in connection
with the proposed public offering of securities (the "Offering") issued by
Northern Star Financial, Inc. (the "Company"). It is contemplated that the Banc
Stock Financial Services, Inc. ("BSFS") shall underwrite on a best efforts
basis, up to 450,000 common shares ("Shares") at an offering price of
approximately $10.00 per share for an aggregate public offering of approximately
$4,500,000 as set forth below.
1. The Company and BSFS shall agree upon a time table for the filing of
a Registration Statement, and Amendments thereto, Blue Sky filings and all other
steps necessary to effectuate the proposed public offering at a date acceptable
to BSFS. A Registration Statement, together with exhibits covering the Shares
proposed to be offered will be carefully prepared by the Company with the
cooperation of BSFS and filed with the United States Securities and Exchange
Commission ("SEC"). All financial statements contained in the Registration
Statement, as amended from time to time, will be in form and content
satisfactory to BSFS and to BSFS's counsel, and will have been prepared and
reported on by independent certified public accountants satisfactory to BSFS.
The proposed Registration Statement will be submitted to BSFS and to BSFS's
counsel as soon as possible but not later than 15 days before the Company
proposes to file such Registration Statement with the SEC. The content of any
oral comments and copies of all comment letters shall immediately be supplied to
BSFS and its counsel and all amendments to the Registration Statement shall be
submitted to BSFS and its counsel for its review prior to the time they are
filed with the SEC.
2. The Underwriting Agreement and Selected Dealer Agreement shall be
prepared by counsel to BSFS and such counsel shall make all required filings
with the National Association of Securities Dealers, Inc. All corporate
proceedings undertaken by the Company and any other legal matters which relate
to the public offering and other related transactions shall be satisfactory in
all material respects to counsel for BSFS.
3. It is understood that the proposed Underwriting Agreement will
provide for reciprocal indemnification between the Company and BSFS as to
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
4. It is understood and agreed between the Company and BSFS that all
documents and other information relating to the Company's affairs will be made
available upon request to BSFS and its attorneys at the offices of BSFS or at
the office of BSFS's attorney and copies of any such documents will be furnished
upon request to BSFS or its attorneys. Without limiting the generality of the
foregoing, the
<PAGE>
Northern Star Financial, Inc.
April 29, 1998
Page 2
following documents must be made available as soon as possible: articles of
incorporation and amendments, bylaws and amendments; minutes of meetings of the
company's incorporators, directors, committees, and shareholders; all financial
statements; and correct copies of all material contracts to which the Company is
a party. The Company will furnish BSFS at the earliest practicable date a
business plan showing projected cash flow (or deficiencies) covering a three
year period and reconcile to the proposed use of proceeds section of the
prospectus. In addition, the Company will provide BSFS with unaudited monthly
financial data concerning the Company from this date until termination of the
offering.
5. The properties owned or held under option by the Company, the
capital structure of the Company immediately preceding the public offering, the
contemplated dilution to the pubic investor, and the Company's business plan
shall be acceptable to BSFS.
6. It is understood and agreed between the Company and BSFS that it
shall be the obligation of the Company to qualify the sale of the Company's
Shares in such states as may reasonably be designated by BSFS. The officers,
directors and promoters of the Company will comply with applicable Blue Sky
escrow requirements, if any, including those pertaining to the escrow of Shares.
The cost of registration and fees of counsel in completing the applications and
in clearing the offering through the various state Blue Sky Commissions or
authorities will be paid by the Company.
7. The gross underwriting discounts and commission, i.e. "gross
spread," will be 6.5 percent of the total gross proceeds raised in the Offering,
subject to the following:
a. No commission shall be charged by BSFS on shares sold by the Company
directly to its officers and directors at the public offering price; and
b. A commission of 5.5% will be charged by BSFS on up to 100,000 shares
purchased by persons introduced to BSFS by the Company within 30 days of the
date of this letter.
In addition to the underwriting commission, BSFS shall be granted
warrants to purchase up to 40,000 shares at the public offering price, subject
to regulatory approval.
8. The Company will be responsible for paying all costs typically borne
by the issuer. These include, but are not limited to, the costs of preparing the
Registration Statement, all printing costs, filing and related expenses, the
costs of its attorneys and accountants, and all Blue Sky and related costs,
whether incurred by counsel to the Company or counsel to BSFS. In addition, the
Company will reimburse BSFS for its out-of-pocket expenses as discussed in
paragraph 9.
<PAGE>
Northern Star Financial, Inc.
April 29, 1998
Page 3
9. In addition to any fees that may be payable to BSFS hereunder and
the expenses to be borne by the Company pursuant to the foregoing and regardless
of whether the offering is consummated, the Company agrees to reimburse BSFS,
upon request, for its reasonable out-of- pocket expenses incurred in connection
with its engagement hereunder, including, without limitation, legal fees,
advertising, promotion, syndication, and travel expenses, provided, however,
that BSFS shall document such expenses to the reasonable satisfaction of the
Company and the Company shall approve all advertising and work. Unless approved
in writing by the Company, reimbursable underwriters legal fees and
disbursements related solely to the underwriting process will not exceed $20,000
for standard and customary legal counsel work and underwriters out-of-pocket
expenses will not exceed $15,000, of which $5,000 has been paid as of the date
hereof. Such approval shall not be unreasonably withheld by the Company.
Underwriters legal counsel's work, if for matters outside of the underwriting
such as for regulatory and other work, will be billed separately.
10. Until the Underwriting Agreement has been negotiated and signed,
either the Company or BSFS, may at any time terminate further participation in
the Offering, in which event no party shall have any liability hereunder, except
that the Company (a) will be responsible for the expenses and fees to be paid
and borne by the Company as provided above, and, (b) will reimburse BSFS for all
its out-of-pocket expenses, including, but not limited to, such costs as
telephone, fax, courier service, copying, accommodations, travel, direct
computer expenses, secretarial overtime and fees and disbursements of its legal
counsel. The Company shall reimburse BSFS within five days of such termination.
The Company's obligation under this paragraph shall survive the termination of
this agreement.
11. This Agreement shall be governed by the laws of the state of Ohio
without regard to any conflict of law provisions thereof, and may not be amended
or modified except in writing signed by each of the parties hereto. This Letter
Agreement shall be deemed made in Ohio. Any right to trial by jury with respect
to any claim or proceeding related to or arising from this engagement, or any
transaction or conduct in connection herewith, is waived. Any dispute arising
from the interpretation, validity or performance of this letter agreement or any
of its terms and provisions shall be submitted to binding arbitration in
Columbus, Ohio in accordance with the rules of the American Arbitration
Association or the National Association of Securities Dealers, Inc.
12. This Agreement and all rights and obligations thereunder shall be
binding upon and inure to the benefit of each party's successors, but may not be
assigned without the consent of each of the parties hereto, which consent shall
not be unreasonably withheld or delayed.
13. Pending completion of the Offering contemplated herein or the
earlier termination of this Agreement, the Company agrees that it will not
negotiate with any other underwriter or person relating to offerings of public
or private securities of the Company. The Company represents
and warrants
<PAGE>
Northern Star Financial, Inc.
April 29, 1998
Page 4
that, except as disclosed to BSFS, it has not granted any other person any right
to underwrite or register shares thereof or agreed to pay any finders or
financial services fees in connection with this Offering.
14. The Company will provide BSFS with the right of first refusal for
one year from the signing of the Underwriting Agreement to serve as a managing
underwriter on any public or private financing (debt or equity), or act as an
advisor on any merger, business combination, recapitalization or sale of some or
all of the equity or assets of the Company, (collectively, the "future
services"). In the event BSFS is engaged by the Company to provide such future
services, BSFS will be compensated as is reasonable and customary within the
industry.
Please confirm your agreement to the foregoing by signing and returning
to us the enclosed copy of this letter. We look forward to working with you.
Very truly yours,
BANC STOCK FINANCIAL SERVICES, INC.
By: /s/ Michael B. Guirlinger, V.P.
-------------------------------
Agreed to and accepted this 11th day of May, 1998:
NORTHERN STAR FINANCIAL, INC.
By: /s/ Thomas Stienessen
-------------------------------
<PAGE>
Exhibit 6.5
NORTHERN STAR FINANCIAL, INC.
1998 EQUITY INCENTIVE PLAN
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) "Committee" shall mean a Committee of two or more
directors who shall be appointed by and serve at the pleasure of the
Board. If the Company's securities are registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended, then, to the
extent necessary for compliance with Rule 16b-3, or any successor
provision, each of the members of the Committee shall be a
"non-employee director." Solely for purposes of this Section 1(a),
"non-employee director" shall have the same meaning as set forth in
Rule 16b-3, or any successor provision, as then in effect, of the
General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
(b) The "Company" shall mean Northern Star Financial, Inc., a
Minnesota corporation.
(c) "Fair Market Value" as of any day shall mean (i) if such
stock is reported by the Nasdaq National Market or Nasdaq SmallCap
Market or is listed upon an established stock exchange or exchanges,
the reported closing price of such stock by the Nasdaq National Market
or Nasdaq SmallCap Market or on such stock exchange or exchanges on
such date or, if no sale of such stock shall have occurred on such
date, on the next preceding day on which there was a sale of stock;
(ii) if such stock is not so reported by the Nasdaq National Market or
Nasdaq SmallCap Market or listed upon an established stock exchange,
the average of the closing "bid" and "asked" prices quoted by the
National Quotation Bureau, Inc. (or any comparable reporting service)
on such date or, if there are no quoted "bid" and "asked" prices on
such date, on the next preceding date for which there are such quotes;
or (iii) if such stock is not publicly traded as of such date, the per
share value as determined by the Board, or the Committee, in its sole
discretion by applying principles of valuation with respect to the
Company's Common Stock.
(d) The "Internal Revenue Code" is the Internal Revenue Code
of 1986, as amended from time to time.
(e) "Non-Employee Director" shall mean members of the Board
who are not employees of the Company or any Subsidiary.
(f) The "Participant" means (i) an employee of the Company or
any Subsidiary to whom an incentive stock option has been granted
pursuant to Section 9 and (ii) a consultant or advisor to or director
(including a Non-Employee Director), employee or officer of the Company
or any Subsidiary to whom a nonqualified stock option has been granted
pursuant to Section 10.
<PAGE>
(g) "Parent" shall mean any corporation which owns, directly
or indirectly in an unbroken chain, fifty percent (50%) or more of the
total voting power of the Company's outstanding stock.
(h) The "Plan" means the Northern Star Financial, Inc. 1998
Equity Incentive Plan, as amended hereafter from time to time,
including the form of Option Agreements as they may be modified by the
Board from time to time.
(i) "Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 12) reserved for incentive and
nonqualified stock options pursuant to this Plan.
(j) A "Subsidiary" shall mean any corporation of which fifty
percent (50%) or more of the total voting power of outstanding stock is
owned, directly or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
The Plan has been established to promote the interests of the Company,
its Subsidiaries and its stockholders by (i) attracting and retaining
exceptional employees and directors; (ii) motivating such employees and
directors by means of performance-related incentives to achieve long-range
performance goals; and (iii) enabling such employees and directors to
participate in the long-term growth and financial success of the Company.
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code, or any successor
provision, pursuant to Section 9 of this Plan and through the granting of
nonqualified stock options pursuant to Section 10 of this Plan. Adoption of this
Plan shall be and is expressly subject to the condition of approval by the
shareholders of the Company within 12 months before or after the adoption of the
Plan by the Board of Directors. Any incentive stock options granted after
adoption of the Plan by the Board of Directors shall be treated as nonqualified
stock options if shareholder approval is not obtained within such 12-month
period.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date of adoption by the Board of
Directors, subject to approval by the shareholders of the Company as required in
Section 2.
2
<PAGE>
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time (collectively referred to as the
"Administrator"). The Administrator shall have all of the powers vested in it
under the provisions of the Plan, including but not limited to exclusive
authority (where applicable and within the limitations described in the Plan) to
determine, in its sole discretion, whether an incentive stock option or
nonqualified stock option shall be granted, the individuals to whom, and the
time or times at which, options shall be granted, the number of shares subject
to each option, the option price, and terms and conditions of each option. The
Administrator shall have full power and authority to administer and interpret
the Plan, to make and amend rules, regulations and guidelines for administering
the Plan, to prescribe the form and conditions of the respective stock option
agreements (which may vary from Participant to Participant) evidencing each
option and to make all other determinations necessary or advisable for the
administration of the Plan. The Administrator's interpretation of the Plan, and
all actions taken and determinations made by the Administrator pursuant to the
power vested in it hereunder, shall be conclusive and binding on all parties
concerned.
No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith in connection with the administration
of the Plan. In the event the Board appoints a Committee as provided hereunder,
any action of the Committee with respect to the administration of the Plan shall
be taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Administrator shall from time to time, at its discretion and
without approval of the shareholders, designate those employees to whom
incentive stock options shall be granted pursuant to Section 9 of the Plan and
those employees, officers, directors (including Non-Employee Directors),
consultants, and advisors of the Company or of any Subsidiary to whom
nonqualified stock options shall be granted pursuant to Section 10 of the Plan;
provided, however, that consultants or advisors shall not be eligible to receive
stock options hereunder unless such consultant or advisor renders bona fide
services to the Company or Subsidiary and such services are not in connection
with the offer or sale of securities in a capital raising transaction. The
Administrator may grant additional incentive stock options and nonqualified
stock options under this Plan to some or all Participants then holding options
or may grant options solely or partially to new Participants. In designating
Participants, the Administrator shall also determine the number of shares to be
optioned to each such Participant. The Board may from time to time designate
individuals as being ineligible to participate in the Plan.
3
<PAGE>
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Stock. Forty-One Thousand Seven Hundred (41,700) shares
of Stock shall be reserved and available for stock options under the Plan;
provided, however, that the total number of shares of Stock reserved for options
under this Plan shall be subject to adjustment as provided in Section 12 of the
Plan. In the event that any outstanding stock option under the Plan for any
reason expires or is terminated prior to the exercise thereof, the shares of
Stock allocable to such portion of the option shall continue to be reserved for
stock options under the Plan and may be optioned hereunder.
SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the effective date as defined in
Section 3. Nonqualified stock options may be granted pursuant to the Plan from
time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Board. Any incentive stock option granted
during such ten-year period and any nonqualified stock option granted prior to
the termination of the Plan by the Board shall remain in full force and effect
until the expiration of the option as specified in the written stock option
agreement and shall remain subject to the terms and conditions of this Plan.
SECTION 8.
PAYMENT
Participants may pay for shares upon exercise of stock options granted
pursuant to this Plan with cash, personal check, certified check, Common Stock
of the Company valued at such Stock's then Fair Market Value, or such other form
of payment as may be authorized by the Administrator. The Administrator may, in
its sole discretion, limit the forms of payment available to the Participant and
may exercise such discretion any time prior to the termination of the option
granted to the Participant or upon any exercise of the option by the
Participant.
With respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Administrator and may vary from Participant to
4
<PAGE>
Participant; provided, however, that each Participant and each Option Agreement
shall comply with and be subject to the following terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement
shall state the total number of shares covered by the incentive stock
option. To the extent required to qualify the Option as an incentive
stock option under Section 422 of the Internal Revenue Code, or any
successor provision, the option price per share shall not be less than
one hundred percent (100%) of the Fair Market Value of the Common Stock
per share on the date the Administrator grants the option; provided,
however, that if a Participant owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or of its Parent or any Subsidiary, the option
price per share of an incentive stock option granted to such
Participant shall not be less than one hundred ten percent (110%) of
the Fair Market Value of the Common Stock per share on the date of the
grant of the option. The Administrator shall have full authority and
discretion in establishing the option price and shall be fully
protected in so doing.
(b) Term and Exercisability of Incentive Stock Option. The
term during which any incentive stock option granted under the Plan may
be exercised shall be established in each case by the Administrator. To
the extent required to qualify the Option as an incentive stock option
under Section 422 of the Internal Revenue Code, or any successor
provision, in no event shall any incentive stock option be exercisable
during a term of more than 10 years after the date on which it is
granted; provided, however, that if a Participant owns stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its parent or any Subsidiary, the
incentive stock option granted to such Participant shall be exercisable
during a term of not more than five years after the date on which it is
granted.
The Option Agreement shall state when the incentive
stock option becomes exercisable and shall also state the maximum term
during which the option may be exercised. In the event an incentive
stock option is exercisable immediately, the manner of exercise of the
option in the event it is not exercised in full immediately shall be
specified in the Option Agreement. The Administrator may accelerate the
exercisability of any incentive stock option granted hereunder which is
not immediately exercisable as of the date of grant.
(c) Nontransferability. No incentive stock option shall be
transferable, in whole or in part, by the Participant other than by
will or by the laws of descent and distribution. During the
Participant's lifetime, the incentive stock option may be exercised
only by the Participant. If the Participant shall attempt any transfer
of any incentive stock option granted under the Plan during the
Participant's lifetime, such transfer shall be void and the incentive
stock option, to the extent not fully exercised, shall terminate.
(d) No Rights as Shareholder. A Participant (or the
Participant's successor or successors) shall have no rights as a
shareholder with respect to any shares covered by an incentive stock
option until the date of the issuance of a stock certificate evidencing
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in
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cash, securities or other property), distributions or other rights for
which the record date is prior to the date such stock certificate is
actually issued (except as otherwise provided in Section 12 of the
Plan).
(e) Other Provisions. The Option Agreement authorized under
this Section 9 shall contain such other provisions as the Administrator
shall deem advisable. Any such Option Agreement shall contain such
limitations and restrictions upon the exercise of the option as shall
be necessary to ensure that such option will be considered an
"incentive stock option" as defined in Section 422 of the Internal
Revenue Code or to conform to any change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to this Section 10
shall be evidenced by a written Option Agreement. The Option Agreement shall be
in such form as may be approved from time to time by the Administrator and may
vary from Participant to Participant; provided, however, that each Participant
and each Option Agreement shall comply with and be subject to the following
terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement
shall state the total number of shares covered by the nonqualified
stock option. Unless otherwise determined by the Administrator, the
option price per share shall be one hundred percent (100%) of the Fair
Market Value of the Common Stock per share on the date the
Administrator grants the option; provided, however, that the option
price may not be less than eighty-five percent (85%) of the Fair Market
Value of the Common Stock per share on the date of grant.
(b) Term and Exercisability of Nonqualified Stock Option. The
term during which any nonqualified stock option granted under the Plan
may be exercised shall be established in each case by the
Administrator. The Option Agreement shall state when the nonqualified
stock option becomes exercisable and shall also state the maximum term
during which the option may be exercised. In the event a nonqualified
stock option is exercisable immediately, the manner of exercise of the
option in the event it is not exercised in full immediately shall be
specified in the Option Agreement. The Administrator may accelerate the
exercisability of any nonqualified stock option granted hereunder which
is not immediately exercisable as of the date of grant.
(c) Withholding. The Company or its Subsidiary shall be
entitled to withhold and deduct from future wages of the Participant
all legally required amounts necessary to satisfy any and all
withholding and employment-related taxes attributable to the
Participant's exercise of a nonqualified stock option. In the event the
Participant is required under the Option Agreement to pay the Company,
or make arrangements satisfactory to the Company respecting payment of,
such withholding and employment-related taxes, the Administrator may,
in its discretion and pursuant to such rules as it may adopt, permit
the
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Participant to satisfy such obligation, in whole or in part, by
electing to have the Company withhold shares of Common Stock otherwise
issuable to the Participant as a result of the option's exercise equal
to the amount required to be withheld for tax purposes. Any stock
elected to be withheld shall be valued at its Fair Market Value, as of
the date the amount of tax to be withheld is determined under
applicable tax law. The Participant's election to have shares withheld
for this purpose shall be made on or before the date the option is
exercised or, if later, the date that the amount of tax to be withheld
is determined under applicable tax law. Such election shall be approved
by the Administrator and otherwise comply with such rules as the
Administrator may adopt to assure compliance with Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.
(d) Transferability. The Administrator may, in its sole
discretion, permit the Participant to transfer any or all nonqualified
stock options to any member of the Participant's "immediate family" as
such term is defined in Rule 16a-1(e) promulgated under the Securities
Exchange Act of 1934, or any successor provision, or to one or more
trusts whose beneficiaries are members of such Participant's "immediate
family" or partnerships in which such family members are the only
partners; provided, however, that the Participant cannot receive any
consideration for the transfer and such transferred nonqualified stock
option shall continue to be subject to the same terms and conditions as
were applicable to such nonqualified stock option immediately prior to
its transfer.
(e) No Rights as Shareholder. A Participant (or the
Participant's successor or successors) shall have no rights as a
shareholder with respect to any shares covered by a nonqualified stock
option until the date of the issuance of a stock certificate evidencing
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the
date such stock certificate is actually issued (except as otherwise
provided in Section 12 of the Plan).
(f) Other Provisions. The Option Agreement authorized under
this Section 10 shall contain such other provisions as the
Administrator shall deem advisable.
SECTION 11.
GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Upon Joining Board. Each Non-Employee Director of the Company who
is a director of the Company at the time this Plan became effective, or
whose initial election or appointment to the Board of Directors occurs
on or after the date this Plan is approved by the Company's
shareholders shall, as of the date of such election, automatically be
granted an option to purchase 3,000 shares of the Common Stock at an
option price per share equal to 100% of the Fair Market Value of the
Common Stock on such date. Options granted pursuant to this subsection
(a) shall be immediately exercisable to the extent of 1,000 shares
subject to such option and to the extent of an additional 1,000 shares
on each of the two anniversaries of the date of grant.
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(b) Upon Re-election to Board. Each Non-Employee Director who, on and
after the date this Plan is approved by the Company's shareholders, is
re-elected as a director of the Company or whose term of office
continues after a meeting of shareholders at which directors are
elected shall, as of the date of such re-election or shareholder
meeting, automatically be granted an option to purchase 3,000 shares of
the Common Stock at an option price per share equal to 100% of the Fair
Market Value of the Common Stock on the date of such re-election or
shareholder meeting. Options granted pursuant to this subsection (b)
shall be immediately exercisable in full.
(c) General. No director shall receive more than one option pursuant to
subsection (b) of this Section 11 in any one fiscal year. All options
granted pursuant to this Section 11 shall be designated as nonqualified
options and shall be subject to the same terms and provisions as are
then in effect with respect to granting of nonqualified options to
officers and employees of the Company except that the option shall
expire on the earlier of (i) three months after the Optionee ceases to
be a director (except by death) and (ii) ten (10) years after the date
of grant. Notwithstanding the foregoing, in the event of the death of a
Non-Employee Director, any option granted to such Non-Employee Director
pursuant to this Section 11 may be exercised at any time within six
months of the death of such Non-Employee Director or on the date on
which the option, by its terms expires, whichever is earlier.
SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Stock reserved under Section 6 hereof and the number of
shares of Stock covered by each outstanding stock option and the price per share
thereof shall be adjusted by the Board to reflect such change. Additional shares
which may be credited pursuant to such adjustment shall be subject to the same
restrictions as are applicable to the shares with respect to which the
adjustment relates.
Unless otherwise provided in the Option Agreement, in the event of an
acquisition of the Company through the sale of substantially all of the
Company's assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture or liquidation of the Company (collectively referred to as
a "transaction"), all outstanding stock options shall become immediately
exercisable, whether or not such options had become exercisable prior to the
transaction; provided, however, that if the acquiring party seeks to have the
transaction accounted for on a "pooling of interests" basis and, in the opinion
of the Company's independent certified public accountants, the acceleration of
the exercisability of such options would preclude a pooling of interests under
generally accepted accounting principles, the exercisability of such options
shall not accelerate. In
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addition to the foregoing, or in the event a pooling of interests transaction
precludes the acceleration of the exercisability of outstanding options, the
Board may provide for one or more of the following:
(a) the complete termination of this Plan, the cancellation of
outstanding options not exercised prior to a date specified by the
Board (which date shall give Participants a reasonable period of time
in which to exercise the options prior to the effectiveness of such
transaction);
(b) that Participants holding outstanding stock options shall
receive, with respect to each share of Stock subject to such options,
as of the effective date of any such transaction, cash in an amount
equal to the excess of the Fair Market Value of such Stock on the date
immediately preceding the effective date of such transaction over the
option price per share of such options; provided that the Board may, in
lieu of such cash payment, distribute to such Participants shares of
stock of the Company or shares of stock of any corporation succeeding
the Company by reason of such transaction, such shares having a value
equal to the cash payment herein;
(c) the continuance of the Plan with respect to the exercise
of options which were outstanding as of the date of adoption by the
Board of such plan for such transaction and provide to Participants
holding such options the right to exercise their respective options as
to an equivalent number of shares of stock of the corporation
succeeding the Company by reason of such transaction.
The Board may restrict the rights of or the applicability of this Section 12 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Internal Revenue Code or any other applicable law or regulation.
The grant of an option pursuant to the Plan shall not limit in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 13.
SECURITIES LAW COMPLIANCE
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of Company's counsel, with
all applicable legal requirements, including without limitation, those relating
to securities laws and stock exchange listing requirements. As a condition to
the issuance of Stock to Participant, the Administrator may require Participant
to (i) represent that the shares of Stock are being acquired for investment and
not resale and to make such other representations as the Administrator shall
deem necessary or appropriate to qualify the issuance of the shares as exempt
from the Securities Act of 1933 and any other applicable securities laws, and
(ii) represent that Participant shall not dispose of the shares of Stock in
violation of the Securities Act of 1933 or any other applicable securities laws.
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<PAGE>
As a further condition to the grant of any stock option or the issuance
of Stock to Participant, Participant agrees to the following:
(a) In the event the Company advises Participant that it plans
an underwritten public offering of its Common Stock in compliance with
the Securities Act of 1933, as amended, and the underwriter(s) seek to
impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of
part or all of their stock purchase rights of the underlying Common
Stock, Participant will not, for a period not to exceed 180 days from
the prospectus, sell or contract to sell or grant an option to buy or
otherwise dispose of any stock option granted to Participant pursuant
to the Plan or any of the underlying shares of Common Stock without the
prior written consent of the underwriter(s) or its representative(s).
(b) In the event the Company makes any public offering of its
securities and determines in its sole discretion that it is necessary
to reduce the number of issued but unexercised stock purchase rights so
as to comply with any states securities or Blue Sky law limitations
with respect thereto, the Board of Directors of the Company shall have
the right (i) to accelerate the exercisability of any stock option and
the date on which such option must be exercised, provided that the
Company gives Participant prior written notice of such acceleration,
and (ii) to cancel any options or portions thereof which Participant
does not exercise prior to or contemporaneously with such public
offering.
(c) In the event of a transaction (as defined in Section 13 of
the Plan) which is treated as a "pooling of interests" under generally
accepted accounting principles, Participant will comply with Rule 145
of the Securities Act of 1933 and any other restrictions imposed under
other applicable legal or accounting principles if Participant is an
"affiliate" (as defined in such applicable legal and accounting
principles) at the time of the transaction, and Participant will
execute any documents necessary to ensure compliance with such rules.
The Company reserves the right to place a legend on any stock
certificate issued upon exercise of an option granted pursuant to the Plan to
assure compliance with this Section 13.
SECTION 14.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 12, shall
impair the terms and conditions of any stock option which is outstanding on the
date of such revision or amendment to the material detriment of the Participant
without the consent of the Participant. Notwithstanding the foregoing, no such
revision or amendment shall (i) materially increase the number of shares subject
to the Plan except as provided in Section 12 hereof, (ii) change the designation
of the class of employees eligible to receive stock options, (iii) decrease the
price at which options may be granted, or (iv) materially increase the benefits
accruing to Participants under the Plan without the approval of the
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shareholders of the Company if such approval is required for compliance with the
requirements of any applicable law or regulation. Furthermore, the Plan may not,
without the approval of the shareholders, be amended in any manner that will
cause incentive stock options to fail to meet the requirements of Section 422 of
the Internal Revenue Code.
SECTION 15.
NO OBLIGATION TO EXERCISE OPTION
The granting of a stock option shall impose no obligation upon the
Participant to exercise such option. Further, the granting of a stock option
hereunder shall not impose upon the Company or any Subsidiary any obligation to
retain the Participant in its employ for any period.
SECTION 16.
COMPLIANCE WITH OTHER LAWS
This Plan shall be administered in accordance with all applicable
federal or state laws, regulations and policies, including but not limited to
regulations or policies issued by the Federal Deposit Insurance Corporation from
time to time. In the event any provision of this Plan or any Option Agreement
conflicts with or is invalid under any such law, regulation or policy, such
provision shall be amended to the extent necessary to make such provision
enforceable under such law, regulation or policy, and shall be enforced as
amended. All other provisions shall remain enforceable according to their terms.
In addition to the foregoing, if the Company's capital decreases below
the minimum level required by the Company's state or primary federal regulator
and the Company's primary federal regulator so directs, the Administrator shall
cancel any outstanding incentive or nonqualified stock options not exercised
prior to the date specified by the Administrator, which date shall give the
Participants a reasonable period of time in which to exercise such options.
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INCENTIVE STOCK OPTION AGREEMENT
NORTHERN STAR FINANCIAL, INC.
1998 EQUITY INCENTIVE PLAN
THIS AGREEMENT, made effective as of this ____ day of _____________,
19____, by and between Northern Star Financial, Inc., a Minnesota corporation
(the "Company"), and ("Participant").
W I T N E S S E T H:
WHEREAS, Participant on the date hereof is a key employee or officer of
the Company or one of its Subsidiaries; and
WHEREAS, the Company wishes to grant an incentive stock option to
Participant to purchase shares of the Company's Common Stock pursuant to the
Company's 1998 Equity Incentive Plan (the "Plan"); and
WHEREAS, the Administrator of the Plan has authorized the grant of an
incentive stock option to Participant and has determined that, as of the
effective date of this Agreement, the fair market value of the Company's Common
Stock is $___ per share;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Participant on the
date set forth above (the "Date of Grant"), the right and option (the "Option")
to purchase all or portions of an aggregate of ________________________________
(______) shares of Common Stock at a per share price of $______ on the terms and
conditions set forth herein, and subject to adjustment pursuant to Section 12 of
the Plan. This Option is intended to be an incentive stock option within the
meaning of Section 422, or any successor provision, of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations thereunder, to the extent
permitted under Code Section 422(d).
2. DURATION AND EXERCISABILITY.
a. GENERAL. The term during which this Option may be exercised
shall terminate on _________, ____, except as otherwise provided in
Paragraphs 2(b) through 2(d) below. This Option shall become
exercisable according to the following schedule:
Vesting Date Cumulative
------------ Percentage of Shares
--------------------
First Anniversary of Date of Grant 33-1/3%
Second Anniversary of Date of Grant 66-2/3%
Third Anniversary of Date of Grant 100%
<PAGE>
Once the Option becomes exercisable to the extent of
one hundred percent (100%) of the aggregate number of shares specified
in Paragraph 1, Participant may continue to exercise this Option under
the terms and conditions of this Agreement until the termination of the
Option as provided herein. If Participant does not purchase upon an
exercise of this Option the full number of shares which Participant is
then entitled to purchase, Participant may purchase upon any subsequent
exercise prior to this Option's termination such previously unpurchased
shares in addition to those Participant is otherwise entitled to
purchase.
b. TERMINATION OF EMPLOYMENT (OTHER THAN DISABILITY OR DEATH).
If Participant's employment with the Company or any Subsidiary is
terminated for any reason other than disability or death, this Option
shall completely terminate on the earlier of (i) the close of business
on the three-month anniversary date of such termination of employment,
and (ii) the expiration date of this Option stated in Paragraph 2(a)
above. In such period following the termination of Participant's
employment, this Option shall be exercisable only to the extent the
Option was exercisable on the vesting date immediately preceding such
termination of employment, but had not previously been exercised. To
the extent this Option was not exercisable upon such termination of
employment, or if Participant does not exercise the Option within the
time specified in this Paragraph 2(b), all rights of Participant under
this Option shall be forfeited.
c. DISABILITY. If Participant's employment terminates because
of disability (as defined in Code Section 22(e), or any successor
provision), this Option shall terminate on the earlier of (i) the close
of business on the twelve-month anniversary date of the such
termination of employment, and (ii) the expiration date of this Option
stated in Paragraph 2(a) above. In such period following the
termination of Participant's employment, this Option shall be
exercisable only to the extent the Option was exercisable on the
vesting date immediately preceding such termination of employment, but
had not previously been exercised. To the extent this Option was not
exercisable upon such termination of employment, or if Participant does
not exercise the Option within the time specified in this Paragraph
2(c), all rights of Participant under this Option shall be forfeited.
d. DEATH. In the event of Participant's death, this Option
shall terminate on the earlier of (i) the close of business on the
twelve-month anniversary date of the date of Participant's death, and
(ii) the expiration date of this Option stated in Paragraph 2(a) above.
In such period following Participant's death, this Option shall be
exercisable by the person or persons to whom Participant's rights under
this Option shall have passed by Participant's will or by the laws of
descent and distribution only to the extent the Option was exercisable
on the vesting date immediately preceding the date of Participant's
death. To the extent this Option was not exercisable upon the date of
Participant's death, or if such person or persons do not exercise this
Option within the time specified in this Paragraph 2(d), all rights
under this Option shall be forfeited.
3. MANNER OF EXERCISE.
a. GENERAL. The Option may be exercised only by Participant
(or other proper party in the event of death or incapacity), subject to
the conditions of the Plan and subject to such
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other administrative rules as the Administrator may deem advisable, by
delivering within the Option Period written notice of exercise to the
Company at its principal office. The notice shall state the number of
shares as to which the Option is being exercised and shall be
accompanied by payment in full of the Option price for all shares
designated in the notice. The exercise of the Option shall be deemed
effective upon receipt of such notice by the Company and upon payment
that complies with the terms of the Plan and this Agreement. The Option
may be exercised with respect to any number or all of the shares as to
which it can then be exercised and, if partially exercised, may be so
exercised as to the unexercised shares any number of times during the
Option period as provided herein.
b. FORM OF PAYMENT. Subject to approval by the Administrator,
payment of the option price by Participant shall be in the form of
cash, personal check, certified check or previously acquired shares of
Common Stock of the Company, or any combination thereof. Any stock so
tendered as part of such payment shall be valued at its Fair Market
Value as provided in the Plan. For purposes of this Agreement,
"previously acquired shares of Common Stock" shall include shares of
Common Stock that are already owned by Participant at the time of
exercise.
c. STOCK TRANSFER RECORDS. As soon as practicable after the
effective exercise of all or any part of the Option, Participant shall
be recorded on the stock transfer books of the Company as the owner of
the shares purchased, and the Company shall deliver to Participant one
or more duly issued stock certificates evidencing such ownership. All
requisite original issue or transfer documentary stamp taxes shall be
paid by the Company.
4. MISCELLANEOUS.
a. EMPLOYMENT; RIGHTS AS SHAREHOLDER. This Agreement shall not
confer on Participant any right with respect to continuance of
employment by the Company or any of its Subsidiaries, nor will it
interfere in any way with the right of the Company to terminate such
employment. Participant shall have no rights as a shareholder with
respect to shares subject to this Option until such shares have been
issued to Participant upon exercise of this Option. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which
the record date is prior to the date such shares are issued, except as
provided in Section 12 of the Plan.
b. SECURITIES LAW COMPLIANCE. The exercise of all or any parts
of this Option shall only be effective at such time as counsel to the
Company shall have determined that the issuance and delivery of Common
Stock pursuant to such exercise will not violate any state or federal
securities or other laws. Participant may be required by the Company,
as a condition of the effectiveness of any exercise of this Option, to
agree in writing that all Common Stock to be acquired pursuant to such
exercise shall be held, until such time that such Common Stock is
registered and freely tradable under applicable state and federal
securities laws, for Participant's own account without a view to any
further distribution thereof, that the certificates for such shares
shall bear an appropriate legend to that effect and that such shares
will be not transferred or disposed of except in compliance with
applicable state and federal securities laws.
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c. MERGERS, RECAPITALIZATIONS, STOCK SPLITS, ETC. Pursuant and
subject to Section 12 of the Plan, certain changes in the number or
character of the Common Stock of the Company (through sale, merger,
consolidation, exchange, reorganization, divestiture (including a
spin-off), liquidation, recapitalization, stock split, stock dividend
or otherwise) shall result in an adjustment, reduction or enlargement,
as appropriate, in Participant's rights with respect to any unexercised
portion of the Option (i.e., Participant shall have such
"anti-dilution" rights under the Option with respect to such events,
but shall not have "preemptive" rights).
d. SHARES RESERVED. The Company shall at all times during the
option period reserve and keep available such number of shares as will
be sufficient to satisfy the requirements of this Agreement.
e. WITHHOLDING TAXES ON DISQUALIFYING DISPOSITION. In the
event of a disqualifying disposition of the shares acquired through the
exercise of this Option, Participant hereby agrees to inform the
Company of such disposition. Upon notice of a disqualifying
disposition, the Company may take such action as it deems appropriate
to insure that, if necessary to comply with all applicable federal or
state income tax laws or regulations, all applicable federal and state
payroll, income or other taxes are withheld from any amounts payable by
the Company to Participant. If the Company is unable to withhold such
federal and state taxes, for whatever reason, Participant hereby agrees
to pay to the Company an amount equal to the amount the Company would
otherwise be required to withhold under federal or state law.
Participant may, subject to the approval and discretion of the
Administrator or such administrative rules it may deem advisable, elect
to have all or a portion of such tax withholding obligations satisfied
by delivering shares of the Company's Common Stock having a fair market
value equal to such obligations.
f. NONTRANSFERABILITY. During the lifetime of Participant, the
accrued Option shall be exercisable only by Participant or by the
Participant's guardian or other legal representative, and shall not be
assignable or transferable by Participant, in whole or in part, other
than by will or by the laws of descent and distribution.
g. 1998 EQUITY INCENTIVE PLAN. The Option evidenced by this
Agreement is granted pursuant to the Plan, a copy of which Plan has
been made available to Participant and is hereby incorporated into this
Agreement. This Agreement is subject to and in all respects limited and
conditioned as provided in the Plan. The Plan governs this Option and,
in the event of any questions as to the construction of this Agreement
or in the event of a conflict between the Plan and this Agreement, the
Plan shall govern, except as the Plan otherwise provides.
h. LOCKUP PERIOD LIMITATION. Participant agrees that in the
event the Company advises Participant that it plans an underwritten
public offering of its Common Stock in compliance with the Securities
Act of 1933, as amended, and that the underwriter(s) seek to impose
restrictions under which certain shareholders may not sell or contract
to sell or grant any option to buy or otherwise dispose of part or all
of their stock purchase rights of the underlying Common Stock,
Participant hereby agrees that for a period not to exceed 180 days from
the prospectus,
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Participant will not sell or contract to sell or grant an option to buy
or otherwise dispose of this option or any of the underlying shares of
Common Stock without the prior written consent of the underwriter(s) or
its representative(s).
i. BLUE SKY LIMITATION. Notwithstanding anything in this
Agreement to the contrary, in the event the Company makes any public
offering of its securities and determines in its sole discretion that
it is necessary to reduce the number of issued but unexercised stock
purchase rights so as to comply with any state securities or Blue Sky
law limitations with respect thereto, the Board of Directors of the
Company shall have the right (i) to accelerate the exercisability of
this Option and the date on which this Option must be exercised,
provided that the Company gives Participant 15 days' prior written
notice of such acceleration, and (ii) to cancel any portion of this
Option or any other option granted to Participant pursuant to the Plan
which is not exercised prior to or contemporaneously with such public
offering. Notice shall be deemed given when delivered personally or
when deposited in the United States mail, first class postage prepaid
and addressed to Participant at the address of Participant on file with
the Company.
j. ACCOUNTING COMPLIANCE. Participant agrees that, if a
merger, reorganization, liquidation or other "transaction" as defined
in Section 12 of the Plan is treated as a "pooling of interests" under
generally accepted accounting principles and Participant is an
"affiliate" of the Company or any Subsidiary (as defined in applicable
legal and accounting principles) at the time of such transaction,
Participant will comply with all requirements of Rule 145 of the
Securities Act of 1933, as amended, and the requirements of such other
legal or accounting principles, and will execute any documents
necessary to ensure such compliance.
k. STOCK LEGEND. The Administrator may require that the
certificates for any shares of Common Stock purchased by Participant
(or, in the case of death, Participant's successors) bear an
appropriate legend to reflect the restrictions of Paragraphs 4(b) and
Paragraphs 4(h) through 4(j) of this Agreement.
l. FORFEITURE. Notwithstanding anything in this Agreement to
the contrary, if the Company's capital decreases below the minimum
level required by the Company's state or primary federal regulator and
the Company's primary federal regulator so directs, the Administrator
shall cancel any portion of this Option which either has not become
exercisable or which has not been exercised by Participant prior to the
date specified by the Administrator.
m. SCOPE OF AGREEMENT. This Agreement shall bind and inure to
the benefit of the Company and its successors and assigns and
Participant and any successor or successors of Participant permitted by
Paragraph 2 or Paragraph 4(f) above.
n. ARBITRATION. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between
the disputing parties in a good faith effort to arrive at a mutual
settlement of any such controversy. If, notwithstanding, such dispute
cannot be resolved, such dispute shall be settled by binding
arbitration. Judgment upon the award rendered by the arbitrator
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may be entered in any court having jurisdiction thereof. The arbitrator
shall be a retired state or federal judge or an attorney who has
practiced securities or business litigation for at least 10 years. If
the parties cannot agree on an arbitrator within 20 days, any party may
request that the chief judge of the District Court for Hennepin County,
Minnesota, select an arbitrator. Arbitration will be conducted pursuant
to the provisions of this Agreement, and the commercial arbitration
rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement. Limited civil
discovery shall be permitted for the production of documents and taking
of depositions. Unresolved discovery disputes may be brought to the
attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that
a court of this state could order or grant; provided, however, that
punitive or exemplary damages shall not be awarded. The arbitrator may
award to the prevailing party, if any, as determined by the arbitrator,
all of its costs and fees, including the arbitrator's fees,
administrative fees, travel expenses, out-of-pocket expenses and
reasonable attorneys' fees. Unless otherwise agreed by the parties, the
place of any arbitration proceedings shall be Hennepin County,
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above written.
NORTHERN STAR FINANCIAL, INC.
By:
------------------------------------
Its:
--------------------------------
---------------------------------------
Participant
6
<PAGE>
NONQUALIFIED STOCK OPTION AGREEMENT
NORTHERN STAR FINANCIAL, INC.
1998 EQUITY INCENTIVE PLAN
THIS AGREEMENT, made effective as of this day of ___________, 19__, by
and between Northern Star Financial, Inc., a Minnesota corporation (the
"Company"), and _________________ ("Participant").
W I T N E S S E T H:
WHEREAS, Participant on the date hereof is a key employee, officer or
nonemployee director of the Company or one of its Subsidiaries; and
WHEREAS, the Company wishes to grant a nonqualified stock option to
Participant to purchase shares of the Company's Common Stock pursuant to the
Company's 1998 Equity Incentive Plan (the "Plan"); and
WHEREAS, the Administrator has authorized the grant of a nonqualified
stock option to Participant and has determined that, as of the effective date of
this Agreement, the fair market value of the Company's Common Stock is $___ per
share;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Participant on the
date set forth above (the "Date of Grant"), the right and option (the "Option")
to purchase all or portions of an aggregate of _______________________ (_______)
shares of Common Stock at a per share price of $______ on the terms and
conditions set forth herein, and subject to adjustment pursuant to Section 12 of
the Plan. This Option is a nonqualified stock option and will not be treated as
an incentive stock option, as defined under Section 422, or any successor
provision, of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder.
2. DURATION AND EXERCISABILITY.
a. GENERAL. The term during which this Option may be exercised
shall terminate on ______________, _____, except as otherwise provided
in Paragraphs 2(b) through 2(d) below. This Option shall become
exercisable according to the following schedule:
Vesting Date Cumulative
------------ Percentage of Shares
--------------------
First Anniversary of Date of Grant 33-1/3%
Second Anniversary of Date of Grant 66-2/3%
Third Anniversary of Date of Grant 100%
<PAGE>
Once the Option becomes fully exercisable, Participant
may continue to exercise this Option under the terms and conditions of
this Agreement until the termination of the Option as provided herein.
If Participant does not purchase upon an exercise of this Option the
full number of shares which Participant is then entitled to purchase,
Participant may purchase upon any subsequent exercise prior to this
Option's termination such previously unpurchased shares in addition to
those Participant is otherwise entitled to purchase.
b. TERMINATION OF RELATIONSHIP (OTHER THAN DISABILITY OR
DEATH). If Participant ceases to be [an employee] [a nonemployee
director] of the Company or any Subsidiary for any reason other than
disability or death, this Option shall completely terminate on the
earlier of (i) the close of business on the three-month anniversary
date of the termination of such relationship, and (ii) the expiration
date of this Option stated in Paragraph 2(a) above. In such period
following such termination, this Option shall be exercisable only to
the extent the Option was exercisable on the vesting date immediately
preceding the date on which Participant's relationship with the Company
or Subsidiary has terminated, but had not previously been exercised. To
the extent this Option was not exercisable upon the termination of such
relationship, or if Participant does not exercise the Option within the
time specified in this Paragraph 2(b), all rights of Participant under
this Option shall be forfeited.
c. DISABILITY. If Participant ceases to be [an employee] [a
nonemployee director] of the Company or any Subsidiary because of
disability (as defined in Code Section 22(e), or any successor
provision), this Option shall completely terminate on the earlier of
(i) the close of business on the 12-month anniversary date of the
termination of all such relationships, and (ii) the expiration date of
this Option stated in Paragraph 2(a) above. In such period following
such termination, this Option shall be exercisable only to the extent
the Option was exercisable on the vesting date immediately preceding
the date on which all of Participant's relationships with the Company
or Subsidiary have terminated, but had not previously been exercised.
To the extent this Option was not exercisable upon the termination of
such relationship, or if Participant does not exercise the Option
within the time specified in this Paragraph 2(c), all rights of
Participant under this Option shall be forfeited.
d. DEATH. In the event of Participant's death, this Option
shall terminate on the earlier of (i) the close of business on the
twelve-month anniversary date of the date of Participant's death, and
(ii) the expiration date of this Option stated in Paragraph 2(a) above.
In such period following Participant's death, this Option may be
exercised by the person or persons to whom Participant's rights under
this Option shall have passed by Participant's will or by the laws of
descent and distribution only to the extent the Option was exercisable
on the vesting date immediately preceding the date of Participant's
death. To the extent this Option was not exercisable upon the date of
Participant's death, or if such person or persons fail to exercise this
Option within the time specified in this Paragraph 2(d), all rights
under this Option shall be forfeited.
2
<PAGE>
3. MANNER OF EXERCISE.
a. GENERAL. The Option may be exercised only by Participant
(or other proper party in the event of death or incapacity), subject to
the conditions of the Plan and subject to such other administrative
rules as the Administrator may deem advisable, by delivering within the
option period written notice of exercise to the Company at its
principal office. The notice shall state the number of shares as to
which the Option is being exercised and shall be accompanied by payment
in full of the option price for all shares designated in the notice.
The exercise of the Option shall be deemed effective upon receipt of
such notice by the Company and upon payment that complies with the
terms of the Plan and this Agreement. The Option may be exercised with
respect to any number or all of the shares as to which it can then be
exercised and, if partially exercised, may be exercised as to the
unexercised shares any number of times during the option period as
provided herein.
b. FORM OF PAYMENT. Subject to the approval of the
Administrator, payment of the option price by Participant shall be in
the form of cash, personal check, certified check or previously
acquired shares of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued
at its Fair Market Value as provided in the Plan. For purposes of this
Agreement, "previously acquired shares of Common Stock" shall include
shares of Common Stock that are already owned by Participant at the
time of exercise.
c. STOCK TRANSFER RECORDS. As soon as practicable after the
effective exercise of all or any part of the Option, Participant shall
be recorded on the stock transfer books of the Company as the owner of
the shares purchased, and the Company shall deliver to Participant one
or more duly issued stock certificates evidencing such ownership. All
requisite original issue or transfer documentary stamp taxes shall be
paid by the Company.
4. MISCELLANEOUS.
a. RIGHTS AS SHAREHOLDER. This Agreement shall not confer on
Participant any right with respect to the continuance of any
relationship with the Company or any of its Subsidiaries, nor will it
interfere in any way with the right of the Company to terminate any
such relationship. Participant shall have no rights as a shareholder
with respect to shares subject to this Option until such shares have
been issued to Participant upon exercise of this Option. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for
which the record date is prior to the date such shares are issued,
except as provided in Section 12 of the Plan.
b. SECURITIES LAW COMPLIANCE. The exercise of all or any parts
of this Option shall only be effective at such time as counsel to the
Company shall have determined that the issuance and delivery of Common
Stock pursuant to such exercise will not violate any state or federal
securities or other laws. Participant may be required by the Company,
as a condition of the effectiveness of any exercise of this Option, to
agree in writing that all Common Stock to be acquired pursuant to such
exercise shall be held, until such time that such Common Stock is
registered and freely tradable under applicable state and federal
securities laws, for Participant's
3
<PAGE>
own account without a view to any further distribution thereof and that
such shares will be not transferred or disposed of except in compliance
with applicable state and federal securities laws.
c. MERGERS, RECAPITALIZATIONS, STOCK SPLITS, ETC. Pursuant and
subject to Section 12 of the Plan, certain changes in the number or
character of the Common Stock of the Company (through sale, merger,
consolidation, exchange, reorganization, divestiture (including a
spin-off), liquidation, recapitalization, stock split, stock dividend
or otherwise) shall result in an adjustment, reduction or enlargement,
as appropriate, in Participant's rights with respect to any unexercised
portion of the Option (i.e., Participant shall have such
"anti-dilution" rights under the Option with respect to such events,
but shall not have "preemptive" rights).
d. SHARES RESERVED. The Company shall at all times during the
option period reserve and keep available such number of shares as will
be sufficient to satisfy the requirements of this Agreement.
e. WITHHOLDING TAXES. In order to permit the Company to comply
with all applicable federal or state income tax laws or regulations,
the Company may take such action as it deems appropriate to insure
that, if necessary, all applicable federal or state payroll, income or
other taxes are withheld from any amounts payable by the Company to
Participant. If the Company is unable to withhold such federal and
state taxes, for whatever reason, Participant hereby agrees to pay to
the Company an amount equal to the amount the Company would otherwise
be required to withhold under federal or state law. Participant may,
subject to the approval and discretion of the Administrator or such
administrative rules it may deem advisable, elect to have all or a
portion of such tax withholding obligations satisfied by delivering
shares of the Company's Common Stock having a fair market value equal
to such obligations.
f. NONTRANSFERABILITY. During the lifetime of Participant, the
accrued Option shall be exercisable only by Participant or by the
Participant's guardian or other legal representative, and shall not be
assignable or transferable by Participant, in whole or in part, other
than by will or by the laws of descent and distribution.
g. 1998 EQUITY INCENTIVE PLAN. The Option evidenced by this
Agreement is granted pursuant to the Plan, a copy of which Plan has
been made available to Participant and is hereby incorporated into this
Agreement. This Agreement is subject to and in all respects limited and
conditioned as provided in the Plan. All defined terms of the Plan
shall have the same meaning when used in this Agreement. The Plan
governs this Option and, in the event of any questions as to the
construction of this Agreement or in the event of a conflict between
the Plan and this Agreement, the Plan shall govern, except as the Plan
otherwise provides.
h. LOCKUP PERIOD LIMITATION. Participant agrees that in the
event the Company advises Participant that it plans an underwritten
public offering of its Common Stock in compliance with the Securities
Act of 1933, as amended, and that the underwriter(s) seek to impose
restrictions under which certain shareholders may not sell or contract
to sell or grant any option to buy or otherwise dispose of part or all
of their stock purchase rights of the underlying Common Stock,
Participant hereby agrees that for a period not to exceed 180 days from
the prospectus,
4
<PAGE>
Participant will not sell or contract to sell or grant an option to buy
or otherwise dispose of this option or any of the underlying shares of
Common Stock without the prior written consent of the underwriter(s) or
its representative(s).
i. BLUE SKY LIMITATION. Notwithstanding anything in this
Agreement to the contrary, in the event the Company makes any public
offering of its securities and determines in its sole discretion that
it is necessary to reduce the number of issued but unexercised stock
purchase rights so as to comply with any state securities or Blue Sky
law limitations with respect thereto, the Board of Directors of the
Company shall have the right (i) to accelerate the exercisability of
this Option and the date on which this Option must be exercised,
provided that the Company gives Participant 15 days' prior written
notice of such acceleration, and (ii) to cancel any portion of this
Option or any other option granted to Participant pursuant to the Plan
which is not exercised prior to or contemporaneously with such public
offering. Notice shall be deemed given when delivered personally or
when deposited in the United States mail, first class postage prepaid
and addressed to Participant at the address of Participant on file with
the Company.
j. ACCOUNTING COMPLIANCE. Participant agrees that, if a
merger, reorganization, liquidation or other "transaction" as defined
in Section 12 of the Plan is treated as a "pooling of interests" under
generally accepted accounting principles and Participant is an
"affiliate" of the Company or any Subsidiary (as defined in applicable
legal and accounting principles) at the time of such transaction,
Participant will comply with all requirements of Rule 145 of the
Securities Act of 1933, as amended, and the requirements of such other
legal or accounting principles, and will execute any documents
necessary to ensure such compliance.
k. STOCK LEGEND. The Administrator may require that the
certificates for any shares of Common Stock purchased by Participant
(or, in the case of death, Participant's successors) shall bear an
appropriate legend to reflect the restrictions of Paragraph 4(b) and
Paragraphs 4(h) through 4(j) of this Agreement.
l. FORFEITURE. Notwithstanding anything in this Agreement to
the contrary, if the Company's capital decreases below the minimum
level required by the Company's state or primary federal regulator and
the Company's primary federal regulator so directs, the Administrator
shall cancel any portion of this Option which either has not become
exercisable or which has not been exercised by Participant prior to the
date specified by the Administrator.
m. SCOPE OF AGREEMENT. This Agreement shall bind and inure to
the benefit of the Company and its successors and assigns and
Participant and any successor or successors of Participant permitted by
Paragraph 2 or Paragraph 4(f) above.
n. ARBITRATION. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between
the disputing parties in a good faith effort to arrive at a mutual
settlement of any such controversy. If, notwithstanding, such dispute
cannot be resolved, such dispute shall be settled by binding
arbitration. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitrator shall
be a retired state or
5
<PAGE>
federal judge or an attorney who has practiced securities or business
litigation for at least 10 years. If the parties cannot agree on an
arbitrator within 20 days, any party may request that the chief judge
of the District Court for Hennepin County, Minnesota, select an
arbitrator. Arbitration will be conducted pursuant to the provisions of
this Agreement, and the commercial arbitration rules of the American
Arbitration Association, unless such rules are inconsistent with the
provisions of this Agreement. Limited civil discovery shall be
permitted for the production of documents and taking of depositions.
Unresolved discovery disputes may be brought to the attention of the
arbitrator who may dispose of such dispute. The arbitrator shall have
the authority to award any remedy or relief that a court of this state
could order or grant; provided, however, that punitive or exemplary
damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its
costs and fees, including the arbitrator's fees, administrative fees,
travel expenses, out-of-pocket expenses and reasonable attorneys' fees.
Unless otherwise agreed by the parties, the place of any arbitration
proceedings shall be Hennepin County, Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above written.
NORTHERN STAR FINANCIAL, INC.
By:
-------------------------------
Its:
---------------------------
-----------------------------------
Participant
6
<PAGE>
NORTHERN STAR FINANCIAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made effective as of this day of August, 1998, by and
between NORTHERN STAR FINANCIAL, INC., a Minnesota corporation (the "Company"),
and ------------ ("Optionee").
W I T N E S S E T H:
WHEREAS, Optionee is one of the five organizers (the "Organizers") of
the Company and its wholly-owned subsidiary Northern Star Bank (the "Bank"); and
WHEREAS, the Optionee has subscribed to purchase shares of the
Company's Common Stock, at $10.00 per share pursuant to the Company's private
offering to the Organizers (the "Private Offering"). The Company conducted the
Private Offering in order to comply with the state of Minnesota, Department of
Commerce application requirements for a Minnesota State Charter. As a result of
the Optionee's participation in the Private Offering, instead of the Company's
proposed public offering, the Optionee will receive "restricted securities"
subject to the resale limitations of Rule 144 of the Securities Act of 1933, as
amended;
WHEREAS, in order to organize the Company and the Bank, the Organizers
agreed to pay the Company's and the Bank's organizational expenses pro rata in
proportion to each Organizers' respective proposed ownership;
WHEREAS, in consideration of the Optionee's participation in the
Private Offering, rather than the Company's proposed public offering, and for
taking the risks associated with financing Company's and Bank's organizational
expenses, the Company wishes to grant a nonqualified stock option to Optionee to
purchase shares of the Company's Common Stock, which option is granted outside
of any of the Company's current stock option plans; and
WHEREAS, the Board has authorized the grant of a nonqualified stock
option to Optionee and has determined that, as of the effective date of this
Agreement, the fair market value of the Company's Common Stock is $10.00 per
share.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), the right and option (the "Option") to
purchase all or portions of an aggregate of (____) shares of Common Stock at a
per share price of $10.00 (the "Option Exercise Price") on the terms and
conditions set forth herein, subject to the antidilution provisions of this
Option. This Option is not intended to be an incentive stock option
-1-
<PAGE>
within the meaning of Section 422, or any successor provision, of the Code, and
the regulations thereunder Option.
The shares which may be acquired upon exercise of this Option are referred to
herein as the "Option Shares." As used herein, the term "Common Stock" means and
includes the Company's presently authorized common stock, $.01 par value, and
shall also include any capital stock of any class of the Company hereafter
authorized which shall not be limited to a fixed sum or percentage in respect of
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution, or winding up of the Company; and the term "Convertible Securities"
means any stock or other securities convertible into, or exchangeable for,
Common Stock. .
2. DURATION AND EXERCISABILITY.
a. TERM AND VESTING SCHEDULE. The term during which this Option
may be exercised shall terminate on August 10, 2008. This Option shall vest and
become immediately exercisable, as of the effective date of this Agreement.
Optionee may continue to exercise this Option under the terms and conditions of
this Agreement until the termination of the Option as provided herein. If
Optionee does not purchase upon an exercise of this Option the full number of
shares which Optionee is then entitled to purchase, Optionee may purchase upon
any subsequent exercise prior to this Option's termination such previously
unpurchased shares in addition to those Optionee is otherwise entitled to
purchase.
3. MANNER OF EXERCISE.
a. GENERAL. The Option may be exercised by Optionee (or other
proper party) by delivering prior to the expiration of this option the attached
form ("Exercise Notice") to the Company at its principal office. The Exercise
Notice shall state the number of shares as to which the Option is being
exercised and shall be accompanied by payment in full of the Option price for
all shares designated in the notice. The exercise of the Option shall be deemed
effective upon receipt of such notice by the Company and upon payment that
complies with the terms of this Agreement. The Option may be exercised with
respect to any number or all of the shares as to which it can then be exercised
and, if partially exercised, may be so exercised as to the unexercised shares
any number of times prior to the expiration of this option as provided herein.
b. FORM OF PAYMENT. Payment of the Option price by Optionee shall
be in the form of cash, personal check, certified check or previously acquired
shares of Common Stock of the Company, or any combination thereof. Any stock so
tendered as part of such payment shall be valued at its Fair Market Value (as
defined in Paragraph 5(c) below) on the date of exercise of the Option. For
purposes of this Agreement, "previously acquired shares of Common Stock" shall
include shares of Common Stock that are already owned by Optionee at the time of
exercise.
c. ADDITIONAL RIGHT TO CONVERT OPTION.
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<PAGE>
(i) The Optionee shall have the right to require the Company to convert
this Option (the "Conversion Right") at any time, but prior to its expiration,
into shares of Company Common Stock as provided for in this Section 3(c). Upon
exercise of the Conversion Right, the Company shall deliver to the Optionee
(without payment by the Optionee of any Option Exercise Price) that number of
shares of Company Common Stock equal to the quotient obtained by dividing (x)
the value of the Option at the time the Conversion Right is exercised
(determined by subtracting the aggregate Option Exercise Price for the Option
Shares in effect immediately prior to the exercise of the Conversion Right from
the aggregate Fair Market Value for the Option Shares immediately prior to the
exercise of the Conversion Right) by (y) the Fair Market Value of one share of
Company Common Stock immediately prior to the exercise of the Conversion Right.
(ii) The Conversion Right may be exercised by the Optionee, at any time
or from time to time, prior to its expiration, on any business day by delivering
a written notice in the form attached hereto (the "Conversion Notice") to the
Company at the offices of the Company exercising the Conversion Right and
specifying (i) the total number of shares of Stock the Optionee will purchase
pursuant to such conversion and (ii) a place and date not less than one or more
than 20 business days from the date of the Conversion Notice for the closing of
such purchase.
(iii) At any closing under Section 3(c) hereof, (i) the Optionee will
surrender the Option and (ii) the Company will deliver to the Optionee a
certificate or certificates for the number of shares of Company Common stock
issuable upon such conversion, together with cash, in lieu of any fraction of a
share, and (iii) the Company will deliver to the Optionee a new warrant
representing the number of shares, if any, with respect to which the option
shall not have been exercised.
(iv) Fair Market Value of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System, then the average
closing or last sale prices, respectively, reported for the ten (10)
business days immediately preceding the Determination Date, and
(ii) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System but is traded on the
over-the-counter market, then the average closing bid and asked prices
reported for the ten (10) business days immediately preceding the
Determination Date.
d. STOCK TRANSFER RECORDS. As soon as practicable after the
effective exercise of all or any part of the Option, Optionee shall be recorded
on the stock transfer books of the Company as the owner of the shares purchased,
and the Company shall deliver to Optionee one or more duly issued stock
certificates evidencing such ownership. All requisite original issue or transfer
documentary stamp taxes shall be paid by the Company.
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<PAGE>
4. ANTIDILUTION ADJUSTMENTS. The provisions of this Option are subject
to adjustment as provided in this Section 5.
(a) The Option Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company payable
in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock into a
greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Option Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Option Exercise
Price, by (b) the total number of shares of Common Stock outstanding immediately
after such event (including the maximum number of shares of Common Stock
issuable in respect of any securities convertible into Common Stock), and the
resulting quotient shall be the adjusted Option Exercise Price per share. An
adjustment made pursuant to this Subsection shall become effective immediately
after the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made pursuant
to this Subsection, the Holder of any Option thereafter surrendered for exercise
shall become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive) shall determine the
allocation of the adjusted Option Exercise Price between or among shares of such
classes of capital stock or shares of Common Stock and other capital stock. All
calculations under this Subsection shall be made to the nearest cent or to the
nearest 1/100 of a share, as the case may be. In the event that at any time as a
result of an adjustment made pursuant to this Subsection, the holder of any
Option thereafter surrendered for exercise shall become entitled to receive any
shares of the Company other than shares of Common Stock, thereafter the Option
Exercise Price of such other shares so receivable upon exercise of any Option
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to Common Stock
contained in this Section.
(b) Upon each adjustment of the Option Exercise Price pursuant to
Section 4(a) above, the Holder of each Option shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Option Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Option (as adjusted as a
result of all adjustments in the Option Exercise Price in effect prior to such
adjustment) by the Option Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Option Exercise Price.
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<PAGE>
(c) In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment under
Subsection (a) of this Section above but the Holder of each Option then
outstanding shall have the right thereafter to convert such Option into the kind
and amount of shares of stock and other securities and property which he would
have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale, or conveyance had such Option
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section with respect to the rights and interests
thereafter of any Holders of the Option, to the end that the provisions set
forth in this Section shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the Option.
The provisions of this Subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Option Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Option Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Option, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
5. MISCELLANEOUS.
a. RIGHTS AS SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to shares subject to this Option until such shares have
been issued to Optionee upon exercise of this Option. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date such shares are issued, except as provided in Paragraph 4
above.
b. SECURITIES LAW COMPLIANCE; TRANSFERABILITY. The exercise of all
or any parts of this Option shall only be effective at such time as counsel to
the Company shall have determined that the issuance and delivery of Common Stock
pursuant to such exercise will not violate any state or federal securities or
other laws. Optionee may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held, until such
time that such Common Stock is registered and freely tradable under applicable
state and federal securities laws, for Optionee's own account without a view to
any further distribution thereof, that the certificates for such shares shall
bear an appropriate legend to that effect and that such shares will not be
transferred or disposed of except in compliance with applicable state and
federal securities laws.
-5-
<PAGE>
c. FAIR MARKET VALUE. "Fair Market Value" shall mean (i) if the
Company's Common Stock is reported by the Nasdaq National Market or Nasdaq
SmallCap Market or is listed upon an established stock exchange or exchanges,
the reported closing price of such stock by the Nasdaq National Market or Nasdaq
SmallCap Market or on such stock exchange or exchanges on a certain date or, if
no sale of such stock shall have occurred on such date, on the next preceding
day on which there was a sale of stock; (ii) if such stock is not so reported by
the Nasdaq National Market or Nasdaq SmallCap Market or listed upon an
established stock exchange, the average of the closing "bid" and "asked" prices
quoted by the National Quotation Bureau, Inc. (or any comparable reporting
service) on such date, or if there are no quoted "bid" and "asked" prices on
such date, on the next preceding date for which there are such quotes; or (iii)
if such stock is not publicly traded as of such date, the per share value as
determined by the Board, or the Committee, in its sole discretion by applying
principles of valuation with respect to all such stock.
d. WITHHOLDING TAXES. In order to permit the Company to receive a
tax deduction in connection with the exercise of this Option, the Optionee
agrees that as a condition to any exercise of this Option, the Optionee will
also pay to the Company, or make arrangements satisfactory to the Company or
make arrangements satisfactory to the Company regarding payment of, any federal,
state local or other taxes required by law to be withheld with respect to the
Option's exercise.
e. NONTRANSFERABILITY. During the lifetime of Optionee, the
accrued Option shall be exercisable only by Optionee or by the Optionee's
guardian or other legal representative, and shall not be assignable or
transferable by Optionee, in whole or in part, other than by will or by the laws
of descent and distribution.
f. LOCKUP PERIOD LIMITATION. Optionee agrees that in the event the
Company advises Optionee that it plans an underwritten public offering of its
Common Stock in compliance with the Securities Act of 1933, as amended, and that
the underwriter(s) seek to impose restrictions under which certain shareholders
may not sell or contract to sell or grant any option to buy or otherwise dispose
of part or all of their stock purchase rights of the underlying Common Stock,
Optionee hereby agrees that for a period not to exceed 180 days from the date of
the prospectus, Optionee will not sell or contract to sell or grant an option to
buy or otherwise dispose of this Option or any of the underlying shares of
Common Stock without the prior written consent of the underwriter(s) or its
representative(s).
g. FRACTIONAL SHARES. Fractional shares shall not be issued upon
the exercise of this Option, but in any case where the holder would, except for
the provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Option for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Option Exercise Price represented by such
fractional share, plus (b) the proportional part of the Option Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the last reported sale price or, if none, the average of the last reported
closing bid and asked prices on any national securities exchange or quoted in
the National Association of
-6-
<PAGE>
Securities Dealers, Inc.'s Automated Quotations System (NASDAQ), or if not
listed on a national securities exchange or quoted in NASDAQ, the average of the
last reported closing bid and asked prices as reported by Metro Data Company,
Inc. from quotations by market makers in such Common Stock on the
Minneapolis-St. Paul local over-the-counter market.
h. ACCOUNTING COMPLIANCE. Optionee agrees that, in the event a
"change of control transaction" of the Company is treated as a "pooling of
interests" under generally accepted accounting principles and Optionee is an
"affiliate" of the Company or any Subsidiary (as defined in applicable legal and
accounting principles) at the time of such change of control transaction,
Optionee will comply with all requirements of Rule 145 of the Securities Act of
1933, as amended, and the requirements of such other legal or accounting
principles, and will execute any documents necessary to ensure such compliance.
i. STOCK LEGEND. If applicable, the Company may put an appropriate
legend on the certificates for any shares of Common Stock purchased by Optionee
(or, in the case of death, Optionee's successors).
j. SCOPE OF AGREEMENT. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and Optionee and any
successor or successors of Optionee.
k. ARBITRATION. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least ten years. If
the parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota,
select an arbitrator. Arbitration will be conducted pursuant to the provisions
of this Agreement, and the commercial arbitration rules of the American
Arbitration Association, unless such rules are inconsistent with the provisions
of this Agreement. Limited civil discovery shall be permitted for the production
of documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys' fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
NORTHERN STAR FINANCIAL, INC.
By:_____________________________________
Thomas Stienessen
COMPANY
________________________________________
OPTIONEE
-8-
<PAGE>
OPTION EXERCISE FORM
--------------------
To: Northern Star Financial, Inc.
I hereby exercise stock options granted to purchase shares of Common
Stock of Northern Star Financial, Inc. (the "Company") as follows:
Date of Options Exercise Number of
Grant Awarded Price Shares Exercised
----- ------- ----- ----------------
As payment for the exercise of the above listed stock options and for
the amount of federal, state and local tax which the Company is required by law
or believes appropriate to withhold and the cost of any applicable state or
federal documentary tax stamps, I am enclosing and elect the following method of
payment (check appropriate box):
[ ] Check (cashier's, certified or personal) in the amount of $________________
[ ] Shares of the Company's Common Stock which have been held by me for at
least six months and which are valued at fair market value listed below.
Certificate No. Acquisition Date Number of Shares Fair Market Value
- --------------- ---------------- ---------------- -----------------
NOTE: All shares of Common Stock must be properly assigned to Northern Star
Financial, Inc.
[ ] Irrevocable instructions, a copy of which is attached hereto and is
subject to the Company's approval, to my broker who must be acceptable to
you to promptly deliver to the Company an amount sufficient to pay such
amounts from either (i) the proceeds of sale through the broker of a
sufficient number of shares purchased by me upon exercise of the Option as
set forth above or (ii) the loan proceeds from borrowings by me from the
broker, and the Company is hereby instructed to issue and deliver the shares
purchased by me upon exercise of the option as set forth above directly to
and in the name of the broker.
Unless the third payment option above is selected, in which case the shares
will be issued and delivered as described therein, please have _____
certificates issued in blocks of ________ shares per certificate registered as
follows:
Name___________________________________________________________________
Mailing Address________________________________________________________
________________________________________________________
Social Security Number_________________________________________________
Very truly yours,
__________________________________________
Signature of Optionee
__________________________________________
Printed Name of Optionee
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Option
pursuant to Section 3(c)
The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Option Certificate for, and to
purchase thereunder, ______________ shares of Common Stock, as provided for in
Section 3(c) therein.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name___________________________________
(Please print Name)
Address________________________________
_______________________________________
Tax Identification No. or Social
Security No._______________________
Signature______________________________
NOTE: The above signature should correspond exactly with the name on
the first page of this Option Certificate or with the name of the assignee
appearing on a duly executed assignment form.
And if said number of shares shall not be all the shares purchasable
under the within Option Certificate, a new Option Certificate is to be issued in
the name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
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<PAGE>
Exhibit 6.7
NO. BANC STOCK-1 10,000 WARRANTS
VOID AFTER EXPIRATION DATE
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
NORTHERN STAR FINANCIAL, INC.
THIS CERTIFIES THAT, FOR VALUE RECEIVED, Banc Stock Financial Services, Inc., an
Ohio corporation ("Banc Stock"), or registered assigns (the "Registered
Holder"), is the owner of 10,000 Warrants to Purchase Shares of Common Stock
(the "Warrants"). Each Warrant initially entitles the Registered Holder to
purchase, subject to the terms and conditions set forth in this Warrant
Certificate and the Agency Agreement dated __________, 1998 between Northern
Star Financial, Inc., a Minnesota corporation (the "Company"), and Banc Stock
(the "Agency Agreement"), one fully paid and nonassessable share of Common
Stock, $1.00 par value per share, of the Company, at any time from __________,
1998, through the Expiration Date (as defined below) upon the presentation and
surrender of this Warrant Certificate with the Subscription Form on the reverse
hereof duly executed, accompanied by payment of the Purchase Price (as
hereinafter defined) for such share of Common Stock, in lawful money of the
United States of America in cash, by wire transfer, certified check or by
banker's draft payable to the order of the Company.
This Warrant Certificate and each of the Warrants represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth herein and in the Agency Agreement. All capitalized terms
not otherwise defined herein are defined herein as in the Agency Agreement. In
the event of any inconsistency between the terms hereof and the terms of the
Agency Agreement, the terms of the Agency Agreement shall control. In the event
of certain contingencies provided for in the Agency Agreement, the Purchase
Price and the number of shares of Common Stock subject to purchase upon the
exercise of each Warrant represented hereby are subject to modification or
adjustment. Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. All fractional
interests shall be eliminated by rounding any fractions to the nearest whole
number of Warrants. In the case of the exercise of less than all of the Warrants
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate or
Warrant Certificates of like tenor for the balance of such Warrants.
The term "Expiration Date" means 5:00 P.M. (Eastern Standard time) on
__________, 2003. If such date shall in the State of Ohio be a holiday or a day
on which the banks are authorized to close, then the Expiration Date shall be
5:00 P.M. (Eastern Standard time) the next following day which in the State of
Ohio is not a holiday or a day on which banks are authorized to close. The term
"Purchase Price" means, with respect to each Warrant exercised and each share of
Common Stock purchased pursuant thereto, an amount, in lawful money of the
United States of America, equal to Ten Dollars and No/100 ($10.00).
The Company shall not be obligated to delivery any securities pursuant
to any exercise of the Warrants represented hereby unless a registration
statement under the Securities Act of 1933, as amended (the "Act"), and
applicable state securities laws, with respect to such securities is effective
or an exemption from such registration is available. The Warrants represented
hereby shall not be exercisable by a Registered Holder in any state where such
exercise would be unlawful. THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE ACT AND MAY NOT BE SOLD, ASSIGNED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO THE AGENCY AGREEMENT AND UNLESS THEY
HAVE BEEN REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS APPLICABLE.
This Warrant Certificate is exchangeable upon the surrender hereof by
the Registered Holder at the principal office of the Company, for a new Warrant
Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided herein and in the Agency Agreement.
Prior to the exercise of any of the Warrants represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein or in the
Agency Agreement. Prior to due presentment for registration of transfer thereof,
the Company may deem and treat the Registered Holder as the absolute owner
hereof and of each Warrant represented hereby. This Warrant Certificate shall be
governed by and construed in accordance with the laws of the State of Ohio
without giving effect to conflict of laws. This Warrant Certificate is not valid
unless it has been manually signed on behalf of the Company by its President and
its Secretary.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunder
duly authorized and its corporate seal to be imprinted hereon.
Dated:__________________________, 1998
[CORPORATE SEAL]
NORTHERN STAR FINANCIAL, INC.
a Minnesota corporation
By:_______________________________ By:____________________________________
President Secretary
<PAGE>
SUBSCRIPTION FORM
To be Executed by the Registered Holder in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
______________________________ Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
________________________________________________________________
________________________________________________________________
________________________________________________________________
(please print or type name, address and social security or taxpayer
identification number)
and be delivered to
________________________________________________________________________________
________________________________________________________________________________
______________________
________________________________________________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated:_________ ______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
Address
______________________________________________________________
Social Security or Taxpayer Identification Number
______________________________________________________________
Signature Guaranteed
______________________________________________________________
ASSIGNMENT
To Be Executed by the Registered Holder in Order to assign Warrants
FOR VALUE RECEIVED, _________________________________ hereby sells,
assigns and transfers unto
______________________________________________________________
______________________________________________________________
______________________________________________________________
(please print or type name, address and social security or taxpayer
identification number)
____ of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints
______________________________________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: ____________ x____________________________________________
Signature Guaranteed
________________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND THE SIGNATURE TO
THE ASSIGNMENT MUST BE GUARANTEED BY A BANK, TRUST COMPANY, CREDIT UNION,
SAVINGS ASSOCIATION OR BROKER THAT IS A MEMBER OF AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS APPLICABLE.
<PAGE>
EXHIBIT 9.1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "AGREEMENT") is entered into as of the __ day
of ________, 1998, by and among Northern Star Financial, Inc., a Minnesota
corporation (the "COMPANY"), Banc Stock Financial Services, Inc. (the "SALES
AGENT"), and Resource Trust Company (the "ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, the Company has accepted subscriptions for the purchase of 121,000
shares (the "PRIVATE SHARES") of common stock, $1.00 par value (the "COMMON
STOCK") at $10.00 per share pursuant to a private offering;
WHEREAS, the Company proposes to offer and sell up to 329,000 shares of
Common Stock (the "PUBLIC SHARES" and collectively with the Private Shares, the
"SHARES"), to investors at $10.00 per share pursuant to a registered public
offering (the "PUBLIC OFFERING");
WHEREAS, the Sales Agent intends to sell the Public Shares as the Company's
agent on a best efforts, all-or-none basis as to the first 157,000 Public Shares
and on a best efforts basis for the remaining Public Shares; and
WHEREAS, the Company desires to establish an escrow for funds forwarded by
subscribers for the Shares, and the Escrow Agent is willing to serve as Escrow
Agent upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEPOSIT WITH ESCROW AGENT.
(a) The Escrow Agent agrees that it will from time to time accept, in its
capacity as escrow agent, subscription funds for the Shares (the "ESCROWED
FUNDS") received by it from subscribers, the Sales Agent, or the Company when it
has received checks from subscribers. All checks shall be made payable to the
Escrow Agent. If any check does not clear normal banking channels in due
course, the Escrow Agent will promptly notify the Company and the Sales Agent.
Any check which does not clear normal banking channels and is returned by the
drawer's bank to Escrow Agent will be promptly turned over to the Sales Agent,
along with all other subscription documents relating to such check. Any check
received that is made payable to a party other than the Escrow Agent shall be
returned to the Sales Agent for return to the proper party. The Company in its
sole and absolute discretion may reject any subscription for Shares for any
reason and upon such rejection it shall notify and instruct the Escrow Agent in
writing to return the Escrowed Funds by check made payable to the subscriber.
If the Company rejects or cancels any subscription for any reason the Company
will retain any interest earned on the Escrowed Funds, subject to state law, to
help defray organizational costs.
(b) Subscription agreements for the Shares shall be reviewed for accuracy
by the Company or the Sales Agent and, immediately thereafter, the Company or
the Sales Agent shall deliver to the Escrow Agent the following information: (i)
the name and address of the subscriber; (ii) the number of
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<PAGE>
Shares subscribed for by such subscriber; (iii) the subscription price paid by
such subscriber; (iv) the subscriber's tax identification number certified by
such subscriber; and (v) a copy of the subscription agreement.
2. INVESTMENT OF ESCROWED FUNDS. Upon collection of each check by the
Escrow Agent, the Escrow Agent shall invest the funds in deposit accounts or
short-term certificates of deposit which are fully insured by the Federal
Deposit Insurance Corporation or another agency of the United States government,
short-term securities issued or fully guaranteed by the United States
government, federal funds, or such other investments as the Escrow Agent, the
Sales Agent, and the Company shall agree. The Company shall provide the Escrow
Agent with instructions from time to time concerning in which of the specific
investment instruments described above the Escrowed Funds shall be invested, and
the Escrow Agent shall adhere to such instructions. Unless and until otherwise
instructed by the Company, the Escrow Agent shall by means of a "sweep" or other
automatic investment program invest the Escrowed Funds in blocks of $10,000 in
federal funds. Interest and other earnings shall start accruing on such funds
as soon as such funds would be deemed to be available for access under
applicable banking laws and pursuant to the Escrow Agent's own banking policies.
3. DISTRIBUTION OF ESCROWED FUNDS. The Escrow Agent shall distribute the
Escrowed Funds in the amounts, at the times, and upon the conditions hereinafter
set forth in this Agreement.
(a) If at any time on or prior to the expiration date of the Public
Offering as described in the prospectus relating to the Public Offering, (the
"CLOSING DATE"), (i) the Escrow Agent has certified to the Company and the Sales
Agent in writing that the Escrow Agent has received at least $2,780,000 in
Escrowed Funds, and (ii) the Escrow Agent has received a certificate signed by
the Company and the Agent stating that all other conditions to the release of
funds as described in the Company's Registration Statement filed with the
Securities and Exchange Commission pertaining to the Public Offering have been
met, then the Escrow Agent shall deliver the Escrowed Funds to the Company to
the extent such Escrowed Funds are collected funds. If any portion of the
Escrowed Funds are not collected funds, then the Escrow Agent shall notify the
Company and the Sales Agent of such facts and shall distribute such funds to the
Company only after such funds become collected funds. For purposes of this
Agreement, "COLLECTED FUNDS" shall mean all funds received by the Escrow Agent
which have cleared normal banking channels. In all events, the Escrow Agent
shall deliver not less than $2,780,000 in collected funds to the Company, except
as provided in Paragraphs 3(b) and 3(c) hereof.
(b) In lieu of collected funds, the organizers of the Company may pay for
subscriptions by assigning to the Company any portion of any obligation of the
Company to repay any advances made by such organizers to the Company to fund
organizational or other expenses and delivering such assignment to the Escrow
Agent to be held hereunder.
(c) If the Escrowed Funds do not, on or prior to the Closing Date, become
deliverable to the Company based on failure to meet the conditions described in
Paragraph 3(a), or if the Company terminates the Public Offering at any time
prior to the Closing Date and delivers written notice to the Escrow Agent of
such termination (the "TERMINATION NOTICE"), the Escrow Agent shall return the
Escrowed Funds which are collected funds as directed in writing by the Company
and the Sales Agent to the respective subscribers in amounts equal to the
subscription amount paid by each of them. All uncleared checks representing
Escrowed Funds which are not collected funds as of the initial Closing Date
shall be collected by the Escrow Agent, and together with all related
subscription documents thereof shall be delivered to the Sales Agent by the
Escrow Agent, unless the Escrow Agent is otherwise
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<PAGE>
specifically directed in writing by the Company and the Sales Agent. The
Company is aware and understands that, until it becomes entitled to receive the
Escrowed Funds as described in Paragraph 3(a), it is not entitled to any
Escrowed Funds and that no amounts deposited in the Escrow Account shall become
the property of the Company or any other entity or be subject to the debts of
the Company or any other entity.
4. DISTRIBUTION OF INTEREST. Any interest earned on the Escrowed Funds
shall be retained by the Company, except interest earned on subscriptions from
persons who are residents of states the securities commissions of which require
the payment of interest.
5. FEES OF ESCROW AGENT. The Company shall pay the Escrow Agent a fee of
$1,000.00 for its services hereunder. Such fee is payable upon the release of
the Escrowed Funds, and the Escrow Agent is hereby authorized to deduct such
fees from the Escrowed Funds prior to any release thereof pursuant to Section 3
hereof.
6. LIABILITY OF ESCROW AGENT.
(a) In performing any of its duties under this Agreement, or upon the
claimed failure to perform its duties hereunder, the Escrow Agent shall not be
liable to anyone for any damages, losses or expenses which it may incur as a
result of the Escrow Agent so acting, or failing to act; provided, however, the
Escrow Agent shall be liable for damages arising out of its willful default or
misconduct or its negligence under this Agreement. Accordingly, the Escrow
Agent shall not incur any such liability with respect to (i) any action taken or
omitted to be taken in good faith upon advice of its counsel or counsel for the
Company which is given with respect to any questions relating to the duties and
responsibilities of the Escrow Agent hereunder; or (ii) any action taken or
omitted to be taken in reliance upon any document, including any written notice
or instructions provided for this Escrow Agreement, not only as to its due
execution and to the validity and effectiveness of its provisions but also as to
the truth and accuracy of any information contained therein, if the Escrow Agent
shall in good faith believe such document to be genuine, to have been signed or
presented by a proper person or persons, and to conform with the provisions of
this Agreement.
(b) The Company agrees to indemnify and hold harmless the Escrow Agent
against any and all losses, claims, damages, liabilities and expenses,
including, without limitation, reasonable costs of investigation and counsel
fees and disbursements which may be imposed by the Escrow Agent or incurred by
it in connection with its acceptance of this appointment as Escrow Agent
hereunder or the performance of its duties hereunder, including, without
limitation, any litigation arising from this Escrow Agreement or involving the
subject matter thereof; except, that if the Escrow Agent shall be found guilty
of willful misconduct or negligence under this Agreement, then, in that event,
the Escrow Agent shall bear all such losses, claims, damages and expenses.
(c) The Escrow Agent may resign at any time upon giving 30 days written
notice to the Company and the Sales Agent. If a successor escrow agent is not
appointed by Company within 30 days after notice of resignation, the Escrow
Agent may petition any court of competent jurisdiction to name a successor
escrow agent and the Escrow Agent herein shall be fully relieved of all
liability under this Agreement to any and all parties upon the transfer of the
Escrowed Funds and all related documentation thereto, including appropriate
information to assist the successor escrow agent with the reporting of earnings
of the Escrowed Funds to the appropriate state and federal agencies in
accordance with the applicable state and federal income tax laws, to the
successor escrow agent designated by the Company appointed by the court.
-3-
<PAGE>
7. APPOINTMENT OF SUCCESSOR. The Company and the Sales Agent may, upon
the delivery of 30 days written notice appointing a successor escrow agent to
the Escrow Agent, terminate the services of the Escrow Agent hereunder. In the
event of such termination, the Escrow Agent shall immediately deliver to the
successor escrow agent selected by the Company all documentation and Escrowed
Funds including interest earnings thereon in its possession, less any fees and
expenses due to the Escrow Agent or required to be paid by the Escrow Agent to a
third party pursuant to this Agreement.
8. NOTICE. All notices, requests, demands and other communications or
deliveries required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given three days after having been deposited
for mailing if sent by registered mail, or certified mail return receipt
requested, or delivery by courier, to the respective addresses set forth below:
IF TO THE SUBSCRIBERS FOR SHARES: To their respective addresses as specified in
their Subscription Agreements.
IF TO THE COMPANY:
Northern Star Financial, Inc.
410 Jackson Street, Suite 510
Mankato, Minnesota 56001
Attention: Thomas Stienessen
WITH A COPY TO:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Daniel A. Yarano, Esq.
IF TO THE ESCROW AGENT:
Resource Trust Company
300 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402-3380
Attention: Evonne Costello
IF TO THE SALES AGENT:
Banc Stock Financial Services, Inc.
1105 Schrock Road, Suite 437
Columbus, Ohio 43229
Attention: Edward Schmidt
WITH A COPY TO:
Howard & Howard
321 Liberty Street, Suite 200
Peoria, Illinois 61602
Attention: Theodore L. Eissfeldt, Esq.
9. REPRESENTATIONS OF THE COMPANY. The Company hereby acknowledges that
the status of the Escrow Agent with respect to the offering of the Shares is
that of agent only for the
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<PAGE>
limited purposes herein set forth, and hereby agrees it will not represent or
imply that the Escrow Agent, by serving as the Escrow Agent hereunder or
otherwise, has investigated the desirability or advisability in an investment in
the Shares, or has approved, endorsed or passed upon the merits of the Shares,
nor shall the Company use the name of the Escrow Agent in any manner whatsoever
in connection with the offer or sale of the Shares, other than by acknowledgment
that it has agreed to serve as Escrow Agent for the limited purposes herein set
forth.
10. GENERAL.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Minnesota without regard to its
conflict of laws provisions.
(b) The section headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.
(c) This Agreement sets forth the entire agreement and understanding of the
parties with regard to this escrow transaction and supersedes all prior
agreements, arrangements and understandings relating to the subject matter
hereof.
(d) This Agreement may be amended, modified, superseded or canceled, and
any of the terms or conditions hereof may be waived, only by a written
instrument executed by each party hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any part at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver in any one or more instances by
any part of any condition, or of the breach of any term contained in this
Agreement, whether by conduct or otherwise, shall be deemed to be, or construed
as, a further or continuing waiver of any such condition or breach, or a waiver
of any other condition or of the breach of any other terms of this Agreement.
(e) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) This Agreement shall inure to the benefit of the parties hereto and
their respective administrators, successors and assigns. The Escrow Agent shall
be bound only by the terms of this Escrow Agreement and shall not be bound by or
incur any liability with respect to any other agreement or understanding between
the parties except as herein expressly provided. The Escrow Agent shall not
have any duties hereunder except those specifically set forth herein.
(g) No interest in any part to this Agreement shall be assignable in the
absence of a written agreement by and between all the parties to this Agreement,
executed with the same formalities as this original Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as the
date first written above.
COMPANY: ESCROW AGENT:
NORTHERN STAR FINANCIAL, INC. RESOURCE TRUST COMPANY
By:_______________________________ By_______________________________
Name: Thomas Stienessen Name:
Title: Chief Executive Officer Title:
and President
SALES AGENT:
BANC STOCK FINANCIAL SERVICES, INC.
By_________________________________
Name:
Title:
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<PAGE>
EXHIBIT 10.2
To the Board of Directors
Northern Star Financial, Inc.
Mankato, Minnesota 56001
We consent to the use of our report dated July 29, 1998, relating to the balance
sheet as of June 30, 1998, and the related statements of operation, changes in
stockholder's equity, and cash flows from inception (January 22, 1998) to June
30, 1998 of Northern Star Financial, Inc. (a development stage company) and to
the use of our name under the caption of "Experts" in the Form SB-1 Registration
Statement and Prospectus of Northern Star Financial, Inc.
/s/ Bertram Cooper & Co., LLP
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Bertram Cooper & Co., LLP
August 13, 1998
<PAGE>
EXHIBIT 11.1
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402
August 14, 1998
Northern Star Financial, Inc.
410 Jackson Street, Suite 510
Mankato, Minnesota 56001
RE: REGISTRATION STATEMENT ON FORM SB-1 - EXHIBIT 11.1
Gentlemen:
We have acted as counsel for Northern Star Financial, Inc. (the "Company")
in connection with the Company's filing of a Registration Statement on Form SB-1
(the "Registration Statement") relating to the registration under the Securities
Act of 1933 (the "Act") of 329,000 shares of common stock (the "Common Stock").
In connection with rendering this opinion, we have reviewed the following:
1. The Company's Amended and Restated Articles of Incorporation;
2. The Company's Bylaws; and
3. Certain corporate resolutions, including resolutions of the Company's
Board of Directors pertaining to the issuance by the Company of the
Common Stock covered by the Registration Statement.
Based upon the foregoing and upon representations and information provided
by the Company, we are of the opinion that the Common Stock to be issued by the
Company as described in the Registration Statement have been duly authorized by
all requisite corporate action and, upon issuance, delivery and payment thereof
as described in the Registration Statement, will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" included in the Registration Statement and the related Prospectus.
Very truly yours,
FREDRIKSON & BYRON, P.A.
By /s/ Melodie R. Rose
Melodie R. Rose, Vice President
